Dan and Others v Barclays Australia Ltd

(1983) 46 ALR 487
(1983) 57 ALJR 442

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(Decision by: Mason J, Brennan J, Deane J)

Dan and Others
vBarclays Australia Ltd

Court:

Judges: Mason J
Wilson J
Brennan J
Deane J
Dawson J

Legislative References:
Supreme Court Act 1970 (NSW) - 95

Case References:
Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd - [1982] 1 QB 84
Morris v Baron and Co - [1918] AC 1
British and Beningtons Ltd v NW Cachar Tea Co - [1923] AC 48
Hawksley v Outram - [1892] 3 Ch 359
Ellis v Emmanuel - (1876) 1 Ex D 157
Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1956) - 98 CLR 93
George v Roach (1942) - 67 CLR 253

Hearing date: 12 April
Judgment date: 19 May 1983

Canberra

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Decision by:
Mason J
Brennan J
Deane J

By letter dated 9 October 1978, the respondent Barclays Australia Ltd (Barclays) offered a bill acceptance facility to Kallangur Supermarket Pty Ltd (the borrower). Barclays offered to accept bills to be drawn by the borrower to a maximum total face value at any one time of $2,000,000 maturing not later than 31 December 1981 upon terms and conditions set out in the letter. The offer was amended and the amended offer, still in the form of a letter dated 9 October 1978, was accepted by the borrower on 17 November 1978. The accepted offer is hereafter referred to as the letter of 9 October. By para 9 of the letter of 9 October, the borrower agreed to provide Barclays with security "for the obligations of the [borrower] under the facility or facilities provided hereunder". The borrower agreed to provide a registered first mortgage over the Kallangur Shopping Centre at Kallangur in Queensland, certain joint and several guarantees and, by para 9(iii), "The several guarantees for $500,000 plus interest and charges" to be given by guarantors who are the present appellants (the guarantors).

The guarantors executed a guarantee dated 15 December 1978. By cl 1 of the guarantee each guarantor, in consideration of Barclays giving facilities or accommodation to the borrower, guaranteed the payment to Barclays of "all sums of money ... which ... shall ... become owing by the borrower to Barclays and any other liabilities incurred by the borrower to Barclays or incurred by Barclays on account of the borrower ... arising out of ... bills ... accepted ... by Barclays ... for the borrower ... and ... all such further sums which Barclays may from time to time become liable to pay in respect of any bills ... for the benefit or accommodation of the borrower ... together with all interest costs and commission and other charges and expenses which may in the course of business be charged by Barclays against the borrower ...". The borrower having defaulted in circumstances presently to be mentioned, Barclays sued to enforce the guarantee against the several guarantors. Yeldham J, in the Supreme Court of New South Wales, gave judgment for Barclays against each of the guarantors in the sum of $1,224,582.68, the judgment to take effect on 16 December 1981 and the unpaid amount of the judgment to bear interest thereafter at the rate of 4 per cent per annum above the 180 day prime non-bank bill discount rate offered by Barclays from time to time. The Court of Appeal dismissed an appeal, and the guarantors appeal against that judgment. The judgments in the courts below turned upon cl 3 of the guarantee, the material part of which reads as follows:--

Notwithstanding anything else where herein contained, Barclays hereby acknowledges that the total liability of the guarantor under this guarantee shall not exceed the sum of $500,000 plus any interest and charges payable to Barclays under the terms of the facility made available by Barclays to the borrower pursuant to Barclays' letter to the borrower dated 9 October 1978.

The amount of the judgment entered against the several guarantors was made up of two amounts: $500,000 (which was held to be a sum for which the guarantors were severally liable under cl 1 and which was held to fall within cl 3 as "the sum of $500,000" therein mentioned) and the amount of $724,582.68. The latter amount consisted substantially, if not entirely, of interest payable upon the money which, upon default by the borrower on 30 April 1980, thereafter remained unpaid. It was held in the courts below that the latter sum fell within cl 3 as interest and charges of the kind therein mentioned. Before turning to the construction of cl 3, the course of dealing between the borrower and Barclays should be traced up to the borrower's default.

On or about 10 January 1979 the borrower, in accordance with the terms of the letter of 9 October, drew a bill for $2,000,000 and the bill was accepted by Barclays. The maturity date of the bill was 20 June 1979. The borrower discounted the accepted bill with Barclays. Discovering that it had not made provision for Barclays' discount charges, the borrower sought additional funds. Barclays offered to increase the maximum total face value of bills which it was to accept and which might remain current at any one time from $2,000,000 to $2,150,000. To provide for the increase, Barclays offered "replacement and additional clauses" to the letter of 9 October, those clauses being set out in a letter of 18 January. All other terms and conditions set out in the letter of 9 October were to remain unchanged. The replacement clauses substituted the sum of $2,150,000 for the sum of $2,000,000 in the paragraph (para 1) which specified the maximum total face value of bills which might be "offered for acceptance and remain current at any one time under this facility", substituted the sum of $537,500 for the sum of $500,000 in the sub-paragraph (para 9(iii)) which related to the provision of guarantees to be given by the guarantors, increased the figure appearing in a paragraph (para 11) relating to the valuation of the shopping centre and introduced a new paragraph requiring acceptance of "this offer" not later than 30 January 1979 or such extended date as might be mutually agreed. The borrower accepted the offer on 30 January 1979. The accepted offer is hereafter referred to as the letter of 18 January. Although the guarantors were requested to give new guarantees in conformity with the new provisions of para 9(iii), they did not agree to the request. In view of the guarantors' failure to agree to the request, Barclays, by letter of 11 July 1979, offered to delete $537,500 from para 9(iii) and insert the original amount, $500,000, in its place. The borrower accepted that offer. Other offers, immaterial for present purposes, to amend the agreement between the borrower and Barclays were made by Barclays and accepted by the borrower.

On 31 January the borrower drew a further bill for $150,000 and the bill was accepted by Barclays in accordance with the letter of 18 January. The maturity date of this bill was 30 July 1979. Each of the two bills was "rolled over" on maturity. Paragraph 4 of the letter of 9 October, which was not altered by the letter of 18 January, provided for rollover:--

... On maturity of any of the bills which have been discounted the company [ie, the borrower] shall pay by cheque drawn by the company payable to Barclays the total face value of any such bills then maturing and whether or not Barclays is a holder thereof. Such cheque shall be remitted to Barclays in time for Barclays to receive the cheque prior to 2.30 pm on the date of maturity of the bills.

(b) Rollover : On three (3) days notice the company may during the term of this facility request Barclays to accept new bills from time to time when current bills mature. Such new bills shall conform with the provisions appearing above so as to enable the company to utilize this facility for the term specified above.

Each of the bills was rolled over from time to time, prior to 26 October 1979. On each rollover the borrower drew a new bill for the same amount as the maturing bill and tendered it for acceptance by Barclays, Barclays accepted the bill and discounted it, and the borrower paid Barclays the difference between the face value of the maturing bill and the amount receivable on discount of the new bill, together with an acceptance commission at the rate of 1.5 per cent per annum calculated on the face value of the new bill for the term of that bill. A common maturity date came to be fixed for the bills, and on that date (26 October 1979) the rollover was effected by drawing a new bill for $2,150,000. That bill was rolled over from time to time. On 30 April 1980, a maturity date, the borrower defaulted in performance of its obligation to pay to Barclays $2,150,000, the face value of the bill. In consequence the borrower became liable to pay the interest specified in para 13 of the letter of 9 October which was not altered by the letter of 18 January:--

In the event that the company defaults in any payment under either facility the company shall pay to Barclays on the last day of each succeeding month interest on any money so remaining unpaid computed from date of default until payment in full at a rate of four per centum (4%) per annum above the 180 day prime non-bank bill discount rate offered by Barclays on the date of such default.

The default interest charged under this provision upon the sum of $2,150,000 represents the largest part, if not the whole, of the $724,582.68, the second component of the amount for which judgment was entered.

The grounds on which the guarantors contest their liability to pay either the amount of $500,000 or the amount of $724,582.68 included in the judgment depend entirely upon the construction of cl 3. They do not contend that the guarantee as expressed in cl 1 does not extend to the whole of the debt owing by the borrower to Barclays; they contend for a limitation upon their general liability under the guarantee in accordance with cl 3 (cf Ellis v Emmanuel (1876) 1 Ex D 157). Nor do they contend that they were released from their guarantee by reason of the alterations in the agreement between the borrower and Barclays made after the guarantee had been given. In this regard, it may be noted that cl 8 of the guarantee provides that the guarantee should not be affected or prejudiced by Barclays varying or increasing any credit facilities or accommodation to the borrower. The guarantors submit, however, that cl 3 upon its true construction so limits their liability as to exclude either of the amounts which together make up the amount of the judgment.

In the first place it is submitted that cl 3 excludes "the sum of $500,000" from the guarantors' liabilities unless it is "payable to Barclays under the terms of the facility made available by Barclays to the borrower pursuant to Barclays' letter to the borrower dated 9 October 1978" and the appellants advance arguments to show that the $500,000 included in the judgment does not answer the description of the qualifying phrase. Those arguments require consideration only if "the sum of $500,000" mentioned in cl 3 is qualified by that phrase. If that were the true construction, the general terms of cl 1 would bring within the ambit of the guarantee the borrower's liabilities therein specified while cl 3 would immediately exclude all of those liabilities which fell outside the qualifying phrase. Clause 3 would conflict with cl 1 and prevail over it, taking effect as a paramount inconsistent provision rather than as a qualifying provision. To the extent that the wide provisions of cl 1 include liabilities other than under the terms of the one identified facility, they would serve no purpose beyond introducing such inconsistency. A better construction of cl 3 -- and one which accords with its natural meaning -- is that accepted by the courts below, namely, that the qualifying phrase qualifies "interest and charges" but does not qualify "the sum of $500,000". That construction permits the clause to operate as a limitation upon the quantum of the guarantors' liability. Moreover, as Samuels JA pointed out in the Court of Appeal, there is nothing in the letter of 9 October or in any subsequent amendment thereof which provides for " the sum of $500,000" to be payable to Barclays under the terms of the facility. The only reference to the figure of $500,000 is to be found in para 9(iii) as that paragraph stood before the letter of 18 January and after the letter of 11 July 1979, and in that paragraph it relates to the terms of guarantees to be provided as security, not to a sum payable by the borrower to Barclays. The reference in that paragraph to the guarantees as security "for the obligations of the [borrower] under the facility or facilities provided hereunder" is not an adequate reason for attributing to cll 1 and 3 of the guarantee a meaning different from their natural construction. It follows that, as a matter of construction, the qualifying phrase does not relate to the amount of $500,000 included in the judgment. It is not suggested on behalf of the appellants that, if that be the correct construction of the guarantee, they are entitled to relief by way of an order for rectification. That being the case, the appeal in relation to $500,000 of the amount of the judgment fails and it is unnecessary to consider whether that amount answers the description contained in the qualifying phrase.

The balance of $724,582.68 included in the judgment is in respect of interest or charges owing by the borrower to Barclays. It is common ground that the appellants are only liable for that amount if the interest or charges in question answer the description in the qualifying phrase of being "payable to Barclays under the terms of the facility made available ... pursuant to" the letter of 9 October. It is conceded that, regardless of whether that amount includes any charge in addition to default interest accruing due after 30 April 1980, it is owing under the terms of the facility as it existed after the letter of 18 January. The guarantors submit that, that being so, the $724,582.68 is payable to Barclays not under the facility made available pursuant to the letter of 9 October but under a different facility made available pursuant to the letter of 18 January and that the $724,582.68 therefore falls outside the limits of the guarantee. Ultimately, the issue for determination resolves itself into the question whether, after the terms of the letterof 18 January became operative between the parties, the facility then made available by Barclays to the borrower was what cl 3 identifies as "the facility made available ... pursuant to Barclays' letter to the borrower dated 9 October 1978". That is not the same question as the question whether the contract pursuant to which the facility was made available was a different contract or whether the particular paragraphs dealing with default interest and other charges remained in the same form. What cl 3 requires is that any charges and interest in excess of the stipulated sum of $500,000 should have been payable under the terms of the specific identified "facility". Even though the contract may have retained its identity and the paragraphs dealing with default interest and charges remained unaltered, the question remains whether the facility under the varied contract is different from the facility under the terms of the original contract.

The original facility to which cl 3 of the guarantee refers was a facility to a maximum face value of $2,000,000 upon the terms and conditions contained in the letter of 9 October. After the agreement embodied in the letter of 18 January became operative, the current facility was to a face value of $2,150,000 upon the terms and conditions contained in the letters of 9 October and 18 January. Comparatively speaking, the alteration in the maximum face value of bills may not have been great; it was, however, significant. Other alterations in terms and conditions may have been consequential; however, they involved an alteration which, until subsequent further variation of the contract, made the guarantee which had been given by the guarantors inappropriate to satisfy the contractual obligations of the borrower to Barclays. The facility in a larger amount and on different terms and conditions was a different facility which was made available in substitution for the original facility. The difference between the old facility and the new is manifested by the rollover that occurred on 26 October 1979. That rollover could not have occurred if the old facility were on foot. When default was made by the borrower on 30 April 1980, there was but one paragraph which provided for default interest and one sum ($2,150,000) which bore that interest. It is immaterial that, if the original contract had remained on foot unaffected by the letter of 18 January, the facility made available pursuant to it may have retained its identity. But the original contract was superseded, and the facility made available pursuant to the letter of 18 January took the place of the facility made available pursuant to the letter of 9 October. It was a different facility.

It follows that the amount of $724,582.68, all of which accrued due under the terms of the new facility, does not satisfy the requirement of the qualifying phrase in cl 3 that it be payable under the terms of the facility made available by the letter of 9 October. It was, therefore, not recoverable under the terms of the guarantee. It is unnecessary to consider a further argument advanced on behalf of the guarantors that the $724,582.68 was, in any event, irrecoverable for the reason that certain of the terms and conditions contained in para 11 of the letter of 9 October had not been satisfied. That argument was rejected in the courts below and we do not suggest that that view was erroneous.

It was submitted on behalf of Barclays that, in the event that Barclays was not entitled to be paid the $724,582.68 under the terms of the guarantee, it was entitled to maintain the judgment in the full amount as a result of the operation of what was referred to as "conventional estoppel" (see Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] 1 QB 84). Such an estoppel was neither pleaded nor relied on in the courts below and would involve factual issues which have not been investigated. In the circumstances, Barclays should not be permitted to rely at this stage on such a suggested estoppel.

The appeal should be allowed and the judgment of the Court of Appeal should be set aside. In the judgment of Yeldham J the sum of $500,000 should be substituted for the sum of $1,224,582.68. His Honour's judgment also makes provision for interest pursuant to s 95 of the Supreme Court Act 1970 (NSW). The judgment appears to follow para 13 of the letter of 9 October, a provision which is not now capable of giving rise to a charge for default interest falling within cl 3 of the guarantee. The provision for interest may therefore require consideration. The making of the formal order of this court should be deferred in order to ascertain whether the parties are agreed on the order that should be made in the light of these reasons for judgment. In default of agreement, the question of interest will have to be remitted to the Court of Appeal. The appellants having failed as regards the sum of $500,000 but having succeeded as regards the excess over that sum, there should be no order as to costs either in this court or in the Court of Appeal.