Armitage & Armitage v Simpson & Simpson [1990] QSC 110

1 f, (~) \-) IN THE SUPREME COURT OF QUEENSLAND Before Mr. Justice Mackenzie BETWEEN: AND: CLIVE ANTHONY ARMITAGE and CONCEPCION ARMITAGE Plaintiffs JOHN CHRISTOPHER SIMPSON and MARIA DOROTHY SIMPSON Defendants JUDGMENT - MACKENZIE J. No. 222 of 1990 (Applicants) (Respondents) Delivered the 24th day of April, 1990. CATCHWORDS: Counsel: J. Muir Q.C. and Bland for plaintiffs (applicants) R. Bain for defendants (respondents) Solicitors: Conwell Kirby & Lilley for plaintiffs (applicants) Clarke & Kann for defendants (respondents) Hearing date: 5th April, 1990. -- 1 of 7 -- () ~--✓ ) ,_ / IN THE SUPREME COURT OF QUEENSLAND BETWEEN: AND: CLIVE ANTHONY ARMITAGE and CONCEPCION ARMITAGE Plaintiffs JOHN CHRISTOPHER SIMPSON and MARIA DOROTHY SIMPSON Defendants JUDGMENT - MACKENZIE J. No. 222 of 1990 (Applicants) (Respondents) Delivered the 24th day of April, 1990. The substantial relief sought on this motion is a declaration that an undated deed of indemnity executed by the respondents in favour of the applicants is valid and subsisting and a mandatory injunction requiring the defendants to pay to 1 :) Westpac Banking Corporation Limited ("Westpac") one-third of the ,,__) amount of the applicants' liability under certain guarantees entered into by the applicants. The claim is only in respect of ') "-"' transactions involving Westpac, although there are other financial arrangements with Australian Guarantee Corporation Limited ("A.G.C. "). The deed in question was entered into on or about 7th July, 1988. It was entered into when the respondents acquired an interest in a company N.F.T. Australia Limited ("N.F.T."). At that time N.F.T. had a bill discount line with a limit of . $550,000.00 with Westpac and a lease agreement entered into apparently in connection with a purchase of equipment valued at -- 2 of 7 -- 2 about $91,900. oo·. -Both -·of 'these- tran·sactions occurred in the latter half of 1987. There was also a personal guarantee by the applicants in connection_ with advances or accommodation granted or to be granted by Westpac to N.F.T. Recital A of the deed of indemnity refers to two kinds of transactions:- (a) the Arrangements; and (b) guarantees to better secure the Arrangements. This distinction is also made in cl. 1, the definition clause, in which "Arrangements" are described as "the leasing arrangement with Australian Guarantee Corporation Limited and the financial accommodation granted by Westpac Banking Corporation Limited to N.F.T." and "Guarantee" is defined as "the Guarantee executed by the Guarantors to better secure the Arrangements". The _..,,, ,' ,: "Guarantors" include the present applicants. Under cl. 3 the respondents agreed to indemnify the < - () guarantors from and against and in respect of one-third of any () "Claim". This obligation was to be operative until the respondents executed an "Additional Guarantee", that is, a guarantee to be executed by the respondents in favour of A.G.C. and Westpac in relation to the Arrangements. It does not appear from the evidence before me that the "Additional Guarantee" was ever executed. Clause 4.1 is in the following terms:- "Notwi thstanding anything to the contrary contained in this Indemnity in the event of any Claim being made of _any of the Guarantors then the Guarantor may by notice in· writing to the· Simpsons require the Simpsons to forthwith make payment of a contribution to any such Claim PROVIDED THAT ·the total contribution paid by the Simp~ons p~rsuant __ to notices by the Guarantors (_) -- 3 of 7 -- r • () 1) 3 .does not exceed.one-t;hird of any such.Claim due under the Arrangements." - This provision has two aspects. The first is that in the event of a claim being made on any of the guarantors the guarantor could require the respondents to make a contribution to such claim. The second is concerned with limiting the amount of the contribution. There was some criticism of the drafting of the clause to the extent that it referred to "any of the Guarantors" and then referred to "the Guarantor". However, it seems to me that the phrase "any of the Guarantors" is a singular phrase and therefore the use of the word "Guarantor".is grammatically correct. "Claim" is also defined and has two alternative aspects. The first is that there must be:- ' (a) a claim, notice or demand issuedi or ~ ,. ·.1 (b) action taken by Westpac under the arrangements (i.e. the financial accommodation granted by Westpac to N.F.T.). The second is that there must be damage, loss, cost or expense suffered by the .·-) guarantors under the guarantee. •~,' Thus, cl. 3.1 appears to make the respondents liable to indemnify the plaintiffs in respect of either of the events envisaged in the definition of "Claim". Clause 4.1 is concerned with requiring payment ·of a contribution to a claim in the event of a claim being made of any of the guarantors. The intention of this seems to be to allow the plaintiffs to obtain from the res.pondents money to b.e applied to defraying part of the expense involved as a res~lt of a claim,- notice.or demand being issued or action bei~; taken by -- 4 of 7 -- 4 Westpac. The only situati"ori in'which'the guarantors themselves could be the , subj'~ct of s'uch a claim would be in respect of - the obligations under the guarantee. The obligation _ under cl. 3. 1 in my view is that the respondents are obliged to indemnify the applicants in respect of claims made upon'them~ Under cl. 4 .1 the respondents - have ·an - obligation upon notice being given to them in: writing to make payment of a contribution to the claim. There remains a question of what is meant by "financial accommodation" in the definition of "Arrangements" in the deed. (~) That is so because a claim is defined by reference to one "under ·J ••• the Arrangements II • The meaning of "Arrangements" therefore ' . . . marks the limitsof the'defendants' obligations. It. i's- to he noted that the definition of "Arrangements" refers to a "leasing arrangement" with A.G.C. and the "financial accommodation" granted by Westpac. The fact that a leasing ,, arranc;fement has, been specifically referred to in respect of A.G.C. does not, in my view, have the· consequence that the failuie td ~ention it in relation to Westpac means that the term "financial accommodation" was not intended to include its lease agreement. I conclude that the term "financial accommodation" is intended to' be on~ of broad scope referring to the financial' arrangements that. had - be~n -made between N. F. T. - an:d Westpac at least. The question then arises whether the - guarantees were .. ' There · is 'no doubt that these guarantees were in force at the time when the deed wis entered ---· -----·----~---- -- 5 of 7 -- () I J 5 into. While the. issue of what was int:ended t9 be comprised in the term "financial accommodation" is raised in the affidavit of . - ' ' . ~ the male respondent who asserts that he and his wife did not intend to jndemnify the.applicants in respect of the personal guarantees given to Westpac, I have come to the conclusion that the deed itself makes it difficult to sustain. the proposition that the personal guarantees were not in contemplation at the time when it was executed .. The reference to the guarantors in the deed is, in my view, indicative of this, as is t~e provision that the indemnity given in the deed would cease to be of force and effect upon the respondents executing a. guaran~ee .. themselves. I. have therefore come to the conclusion that the term "financial accommodation" includes the guarantees given by the '·• .. r~-. J ~ <' ., ' 9-' , ·~ •• "··c.: .-,_,, :'" ~, '1' ., ,'\,:" .. ".'· , ··"•;r•, applicants. This is not . a case in which, in my opinion, extrinsic evidence is admissible to establish meaning of the deed .. That disposes of the question of substance in the ~otio~~ The applicants also asked for leave to amend the indorsement upon the writ to substitute claims for a declaration and a mandatory injunction in terms which I have summarised earlier in. lieu of the claim for specific performance or damages in lieu of specific performance or damages for breach of contract. I propose to give leave in this regard and further order that the resealing of the original writ of summons consequent upon such amendments be dispensed with and also order that the plaintiffs be allowed. to make such amendments upon the copy of the writ already filed. -- 6 of 7 -- 6 So far as the substantive relief is concerned, I am prepared to declare that the deed of indemnity executed by the respondents in favour of the applicants is valid and subsisting and that the obligation of the respondents thereunder is to pay to the applicants one-third of claims made upon the applicants under the bill discount line, the leasing agreement and the guarantee given by the applicants to Westpac. In his affidavit the male respondent has sworn that he and his wife are, and always have been, prepared to perform the deed of indemnity upon its true construction. The issue has been what the true construction of the deed is. In view of my declaration as to the true meaning of the deed and the willingness of the respondents to perform the deed upon its true construction, I am not persuaded that it is necessary to grant the injunction requested at this point. However, should the matter of payment of the contribution not be resolved in accordance with this judgment within a reasonable time, I will give the applicants liberty to apply for such further relief as may seem appropriate. , -. (J -- 7 of 7 --