John Lysaght Australia Limited T/As Lysaght Building Industries v Albert Edward Hunt [1994] ACTSC 18 (3 March 1994)

SUPREME COURT OF THE ACT

JOHN LYSAGHT AUSTRALIA LIMITED t/as LYSAGHT BUILDING INDUSTRIES v. ALBERT
EDWARD HUNT
No. SC711 of 1990
Number of pages - 2
Guarantee

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
MASTER A HOGAN

CATCHWORDS

Guarantee - Credit limit of principal debtor - Guarantee not limited - Guarantor in control of principal debtor - No independent legal advice - No unconscionable conduct - No issue of principle

HEARING

CANBERRA, 21 February 1994
3:3:1994

Counsel for the Plaintiff: B.J. SALMON QC

Instructing Solicitors: Higgins Solicitors

Counsel for the Defendant: In person

ORDER

THE COURT ORDERS THAT:
1. Judgment be entered for the plaintiff for $232,169.51.

2. The defendant pay the plaintiff's costs.

DECISION

MASTER A. HOGAN This is an action upon a guarantee said to have been entered into by the defendant, by which he promised to be responsible for the payment by a company called Morono Pty Ltd, trading as ABC Roofing Service, of debts incurred on an account that the company was conducting with the plaintiff company.

2. The guarantee was in writing, signed by the defendant, and the defendant agreed that it was in the form of which Exhibit A is a photocopy.

3. In its terms the defendant's promise was:
"to guarantee the due payment by the customer of any amount

whatsoever owing or at any time hereafter becoming owing in
respect of sales and/or delivery of goods supplied from you to the
customer."

4. Morono Pty Ltd was identified in the schedule as the customer.

5. The guarantee on which the plaintiff sued was dated 2 February 1987. During the hearing the defendant ultimately did not contest the fact that Morono Pty Ltd was indebted to the plaintiff in the sum claimed, and a finding to that effect would have been inevitable on the evidence in any event.

6. It would appear from the evidence that the defendant's company was overtaken by the classic cash flow problems of a sub-contractor which is expanding its business, without the capital resources necessary for an entity which is usually the last to receive payment. It is clear that as soon as problems became apparent the defendant took all proper steps to deal with the situation, and placed the company's affairs in the hands of accountants in an endeavour to save the company and pay all the creditors. However, their efforts could not avoid the inevitable.

7. He had, as ABC Roofing Service, originally opened an account with the plaintiff in 1981, and had signed a guarantee in similar terms to the document on which the plaintiff sues. Although the documant had not contained any limitation, his uncontradicted evidence was that the account had a limit of $10,000.

8. Later he had changed his method of operation, to that of Morono Pty Ltd trading as ABC Roofing Service, and in 1987 the plaintiff had sent the present document to him to be signed.

9. In 1989 his company's credit limit was changed to $40,000. At no time did he receive any legal advice about the guarantee that he signed.

10. Nor was there any specific authorisation by the plaintiff which allowed the customer company to exceed the credit limit of $40,000.

11. The defendant's defence, in effect, was that he would not have agreed to guarantee the obligations of Morono beyond the limit of $40,000. If the plaintiff chose to extend credit beyond that limit that was a commercial decision made by the plaintiff, and he should not be made responsible for it.

12. The document signed by the defendant was not limited in terms. There must be some doubt whether evidence would even have been admissible to vary those terms by importing a limit of $40,000.

13. But the defendant was in control of Morono's affairs. The plaintiff supplied goods to the Company on the Company's orders. The plaintiff did not mislead the defendant in any way about the effects of the document, or give him any reason to doubt that all Morono's liabilities would be covered by the guarantee even though the credit limit of $40,000 was suddenly exceeded.

14. In those circumstances the document operated according to its terms and was not limited to $40,000.

15. Dealing with the other matters formally raised by the Defence filed, it is clear that paragraphs 1(a) and (b) are not made out, as interest is not claimed as part of the amount claimed.

16. Paragraph 2(ii) is not made out, as the document signed by the defendant did create a legal obligation between him and the plaintiff to be answerable for the Company's debts.

17. Paragraphs 3 and 4 were not pressed.

18. Paragraph 5 is not made out, as there was no such relationship between the plaintiff and the defendant as made it necessary for the plaintiff to ensure that the defendant had independent legal or other advice before entering into the guarantee, or in order to understand its effects. The defendant was in control of the principal debtor and knew its financial position far better than the plaintiff. The plaintiff was not in any way in a superior bargaining position, so far as the evidence in this case discloses.

19. Paragraph 6 is not made out, as there is no evidence of any conduct of the plaintiff that was unconscionable, harsh or unjust.

20. Paragraph 7 is not made out, as the plaintiff made no representation to the defendant, nor was its conduct misleading in any way. It did not conceal from the defendant anything that it was under any obligation to disclose to him.

21. There will therefore be judgment for the plaintiff.

22. The amount due at 26 April 1990 was $147,533.68.

23. I award interest on that sum since that date in accordance with the practice direction as follows:-

26 April 1990 - 30 June 1990 21% $ 5,517.36
1 July 1990 - 31 December 1990 18% $13,314.41
1 January 1991 - 30 June 1991 16% $11,641.01
1 July 1991 - 30 June 1993 15% $44,260.10
1 July 1993 - 3 March 1993 10% $ 9,902.95
TOTAL INTEREST $84,635.83

24. I direct entry of judgment for the plaintiff for $232,169.51.

25. I order the defendant to pay the plaintiff's costs.