Crewe v State Bank of New South Wales & Anor [1995] QSC 32

~+~ se 95/o-:5~4 .• ~ ~-,.'~ State Reporting Bureau~--U.' ,.., TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION BYRNE J No 405 of 1991 COLIN CREWE and THE STATE BANK OF NEW SOUTH WALES and NATIONAL AUSTRALIA BANK LIMITED BRISBANE .. DATE 10/03/95 JUDGMENT REVISED COPIES ISSUED State Reporting Bureau / Date J Plaintiff First Defendant Second Defendant -- 1 of 11 -- 100395 lrb (Byrne J) HIS HONOUR: The action so far as it relates to the first defendant is dismissed. I publish my reasons. I order that the plaintiff pay the first defendant's costs of the action including reserved costs to be taxed. · JUDGMENT 2 10 20 30 40 50 60 -- 2 of 11 -- IN THE SUPREME COURT OF QUEENSLAND No. 405 of 1991 Brisbane Before Mr Justice Byme [Crewe v State Bank of NSW & Or] BETWEEN: COLIN CREWE Plaintiff AND: THE STATE BANK OF NEW SOUTH WALES First Defendant AND: NATIONAL AUSTRALIA BANK LIMITED Second Defendant REASONS FOR JUDGMENT - BYRNE J. Judgment delivered : 10/03/1995 CATCHWORDS: BANKING- Whether bank entitled to call up guarantee. Counsel: RV Hanson Q.C. for the Plaintiff R W Gotterson Q.C. and N.B. McGregor for the First Defendant Solicitors Watkins Stokes Templeton for the Plaintiff W alsh Halligan Douglas for the First Defendant Hearing Date: 9 February 1995 -- 3 of 11 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane Before Mr Justice Byrne [Crewe v State Bank of NSW & Or] BETWEEN: COLIN CREWE AND: THE STATE BANK OF NEW SOUTH WALES AND: NATIONAL AUSTRALIA BANK LIMITED REASONS FOR JUDGMENT- BYRNE J. Judgment delivered : 10/03/1995 No. 405 of 1991 Plaintiff First Defendant Second Defendant In 1991 the plaintiff was a customer of the National Australia Bank ("NAB"). At the plaintiff's request, the NAB gave to the State Bank of New South Wales ("State Bank") its written promise to pay $200,000 to the State Bank on receipt of a written demand. The "bank guarantee", as the document is styled, acknowledges in the usual way that "payment ... will be made to you without reference to ... (the plaintiff) and notwithstanding any notice given by (him) ... not to pay ... ". On 6 March 1991 the State Bank demanded, and the NAB paid, the $200,000. The plaintiff had arranged for the NAB to provide the guarantee. The NAB, as it -- 4 of 11 -- 2 was apparently entitled to do, debited $200,000 to the plaintiff's current account after honouring its guarantee by paying the State Bank. The plaintiff now claims $200,000 from the State Bank. His case is that the State Bank was not entitled to call upon the NAB to pay. The plaintiff contends that the State Bank must be taken to have received the guarantee on terms inconsistent with an entitlement to make demand on 6 March 1991. Other contentions were raised by the statement of claim but they are no longer pursued. The plaintiff entered into a written contract to buy land at the Gold Coast from Brian Woo Motors Pty Ltd. 1 The contract stipulated for a bank guarantee as the $200,000 deposit and for completion on 9 January 1991. The plaintiff, as I have said, arranged for the NAB to issue the guarantee. The document, addressed to "The State Bank of New South Wales", was headed "Re: COLIN CREWE". It began: "At the request of the abovenamed customer we have to inform you that National Australia Bank Limited ("the Bank") is holding at your disposal the sum of. ($200000----------) . . . in connection with Security Deposit for Contract of Sale between BRIAN WOO MOTORS PTY LTD and COLIN CREWE Expiry Date 9/1/91". The guarantee was dated 25 July 1990. It was delivered to the Southport branch of the State Bank with the plaintiff's solicitors' letter dated 27 July 1990. All this letter said was: "re: COLIN CREWE- BRIAN WOO MOTORS PTY. LTD. We refer to the above matter and enclose herewith Bank Guarantee from National Australia Bank dated the 25th July, 1990." Mr Woo called in at the Southport branch of the State Bank shortly after that letter and the accompanying guarantee were delivered. There he spoke to a senior interviewing 1 Neither the contract nor a copy is in evidence. The contract has not been stamped and no suitable undertaking was offered. No objection, however, was taken to secondary evidence of the contents of the document, and the evidence provides sufficient information concerning the material rights and obligations. -- 5 of 11 -- 3 officer, Mr Darnill. Mr Woo asked for an overdraft facility of $200,000 to provide working capital for his business. He said that he wanted the facility to be available until 9 January 1991, telling Mr Damill that completion of the sale of his home was due then. When the topic of security for the advance was broached, Mr Woo informed Mr Darnill that a guarantee from the NAB was available and offered an explanation of the circumstances in which the bank guarantee had come into existence. Mr Woo told Mr Darnill that the purchaser of the house, who was identified as the plaintiff, had been requested to make the $200,000 "deposit available" and had, in response to this request, to use the words Mr Damill wrote at about the time of the conversation, "provided a bank guarantee to enable finance to be sought for his (Woo's) continuing working capital." Mr Damill had not seen a guarantee from the NAB before and wanted to be sure that it was enforceable. Probably after some discussion with Mr Constable, Mr Darnill's superior at the branch, advice was sought from solicitors concerning the document. The advice was given orally on 2 August and confirmed in writing the next day. This was the written advice: "RE: COLIN CREWE We return herewith Bank Guarantee issued by the National Australia Bank and advise as follows: 1. The Guarantee should be addressed to the State Bank Limited as the State Bank of New South Wales as (sic) recently changed its name to same; 2. The State Bank Limited is entitled to call upon the Guarantee for payment of the $200,000.00 at any time it seeks up to and including January 9, 1991. It would appear from the advices given that it would be prudent to extend the expiry date so as to ensure that should the settlement referred to not come to completion that there exists sufficient time to call upon the National Australia Bank to pay the funds; -- 6 of 11 -- 4 3. A formal loan agreement should be executed by your customer specifically referring in such loan agreement that in addition to any other security the bank guarantee as provided for by the National Australia Bank is to be provided with the Bank being authorised to call upon such bank guarantee immediately that any default is made by the customer. Upon completion of these requirements, we would suggest that the State Bank Limited is adequately covered so far as being able to call upon the National Australia Bank to pay to the credit of the State Bank Limited the sum of $200,000.00 up to and including the expiry date as will appear on the face thereof. " Having received advice that the document took effect according to its plain tenor, Mr Darnill prepared a report for Mr Constable's consideration about Mr Woo's application. The report described the expiry date of the facility as 9 January 1991 and recorded that the proposal was "supported by bank guarantee from NAB". It described the "income source & date of repayment" as "settlement on sale of house" and, under the heading "Remarks", summarized the legal advice in this way: "Provided bank calls on the bank guarantee before the expiry date & our debt does not exceed the limit no loss can occur". Mr Darnill told Mr Woo of the changes required by the State Bank's solicitors to the form of guarantee from the NAB. After a few days, a new guarantee arrived with the required alterations. The "expiry date" had been extended to 16 January 1991. Except for the addition of "Limited" in the name of the State Bank, the guarantee was otherwise unchanged. In the meantime, Mr Woo had returned to the branch office to complete documents required to obtain the $200,000 facility. The "Standard Loan Details" form which he completed describes the term of the loan as being "on demand". Where provision was made for the description of security offered, there had been typed in "letter of offer supported by bank guarantee from National Australia Bank". At the foot of the page, immediately above a second signature by Mr Woo, these words were also typed in: "As noted in the loan details this letter of offer is supported by Bank G'tee provided by the NAB in favour of this Bank. This G'tee is to be provided -- 7 of 11 -- 5 to the Bank who is authorised to call upon such Bank G'tee immediately if any default is made by the customer." On 10 August the State Bank informed the NAB that "We will be calling on your Guarantee by 16 January 1991 should the debt not already be repaid" and sought an acknowledgment of that intention. The NAB replied by letter dated 20 August 1990 saying: "The Bank Guarantee is payable at anytime prior (sic) or on 16/1/91, by presentation to this branch, with a demand in writing, addressed to this Bank." The sale was not completed on 9 January 1991. Mr Woo sought and was granted an extension for one month. On 10 January, Woo's solicitor, Mr Gladstone, spoke to Mr Constable to arrange an extension of the overdraft facility until the new completion date. Mr Constable said that the State Bank would agree to this arrangement provided that the NAB extended its guarantee. Mr Gladstone told this to Woo, Woo spoke to the plaintiff, and the plaintiff instructed the NAB to provide a new guarantee expiring on the extended date for completion. The NAB provided a new guarantee on 10 January 1991. The only material difference between this form and the guarantee it replaced is that the new guarantee stipulates 9 February as the "expiry date". Shortly before 9 February Mr Woo asked Mr Gladstone to negotiate a 30 day extension for completion. On 5 February Mr Gladstone telephoned Mr Constable "seeking", as Mr Constable's diary note discloses, "extension for further 30 days". Mr Gladstone testified that he asked Mr Constable to extend the contracts, but this cannot be right. He may well have spoken to Mr Constable about extensions of completion dates. Mr Constable, however, could only negotiate for the State Bank. Mr Constable understood Mr Gladstone to be asking about an extension of the overdraft facility, and I am satisfied that that is what Mr Gladstone inquired about. Mr Gladstone was told that -- 8 of 11 -- 6 the State Bank would agree to the extension provided that a fresh guarantee was given by the NAB. On 7 February 1991 the NAB provided a new guarantee. It is materially the same as the guarantees dated 3 August 1990 and 10 January 1991, except that it specifies 9 March 1991 as the new "expiry date". The State Bank notified Mr Woo on 11 February 1991 that the overdraft facility had been extended until 6 March 1991, which, it seems, was the extended completion date for the plaintiff's purchase of Woo's company's house. On 6 March 1991 Mr Constable received a letter from the plaintiff's solicitors. The letter enclosed a copy of the special condition of the plaintiff's contract with Woo's company which required the bank guarantee and went on to contend that "As the bank guarantee serves as a deposit, it cannot, in our view, be called up unless our client is in default under the contract of sale . . . There is no such default. It follows that the (State Bank) is not entitled to call up the bank guarantee". Mr Constable then promptly made demand on the NAB for the $200,000. The money was credited in reduction of the overdraft which by then, with accumulated interest, exceeded $200,000. Woo's company did not, or could not, perform its obligations under the contract with the plaintiff. The contract was not completed on the extended completion date or at all. The plaintiff, however, has always been able and willing to perform his part of the bargain and the contract has gone off without his default. He contends that the State Bank must, in all the circumstances, be taken to have accepted the NAB guarantee on terms that it would not be availed of unless the plaintiff defaulted under his contract with Woo's company. The plaintiff's case is that the State Bank must be taken to have been aware from the terms of the guarantee and from the information given by Mr Woo that the plaintiff intended the guarantee to stand as security for the performance of his obligations as purchaser and that recourse could not be had to the guarantee other than -- 9 of 11 -- 7 upon his default. Particular reference was made to the words "in connection with Security Deposit for Contract of Sale between Brian Woo Motors Pty. Ltd. and Colin Crewe ... " found in the guarantees. The State Bank expected to be repaid by Mr Woo on completion of the sale of his company's property to the plaintiff. The guarantee was taken as security against such risks as that the contract might not be completed or that the State Bank might not be repaid by Woo despite completion by his company. In other words, it was taken in case Woo defaulted in performing his obligations to the State Bank under the loan agreement. No doubt there was an expectation on the part of the State Bank that the guarantee would be called on only if Woo's company's contract was not completed. But that expectation, and the reference in the guarantees to the plaintiff and his "security deposit", are not a satisfactory basis for concluding that the Bank ought to have appreciated that the guarantee was not to be called upon unless the plaintiff failed to perform his obligations to his vendor. Nothing in the words which stated the unconditional nature of the NAB's obligations under the guarantee suggested such a restriction. And the guarantee, it should be remembered, was taken in these circumstances: a. The plaintiff's own solicitors supplied the initial guarantee with a letter which did not suggest that the guarantee was hedged about with any restriction let alone that recourse could not be had to it unless the plaintiff failed to perform his obligations under the contract; b. Woo informed the State Bank that the initial guarantee was being made available by the plaintiff as security against the risk that Woo would fail to repay; and Woo acknowledged in writing that the State Bank was "authorised to call upon" the guarantee "immediately if any default is made" by him; c. The plaintiff's own bank advised the State Bank in writing in respect of the -- 10 of 11 -- 8 guarantee which expired on 16 January 1991 that the guarantee was payable at any time prior to that expiry date, and the NAB did not suggest that any condition other than written demand had to be met before it became obliged to pay. The plaintiff has not established the factual contention on which, as argued, his case depends. This conclusion makes it unnecessary either to analyze the claimed cause of action further or to consider the State Bank's, estoppel defence. The action was discontinued against the second defendant. The claim against the first defendant fails. The action, so far as it relates to that defendant, is dismissed. -- 11 of 11 --