AYOUB v BP AUSTRALIA LTD and ORS [1994] NSWCA 12

AYOUB v BP AUSTRALIA LTD and ORS

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GLEESON CJ, MAHONEY and CLARKE JJA 24 and 25 February 1994, 28 April 1994

[1994] NSWCA 12

BP Australia carries on the business of importing, refining and wholesaling petroleum products. From | July 1984, AJ Young Pty Ltd, the principal director of which was Mr Richard John Young, was BP's petroleum distributor in the Wollongong area. Young was responsible for paying BP for the petroleum products delivered to it and it in turn invoiced its own customers and was responsible for recovering the price of petroleum products sold by it to those customers. There was no contractual relationship between BP and Young's customers.

George Ayoub ("Ayoub") carried on business at the relevant times as fuel wholesaler under the name of "Marina Petrol". His brother, Michael Ayoub (the appellant) conducted a number of retail petroleum outlets and was also the principal director of Redray Pty Ltd which operated a second hand car yard operation.

Ayoub purchased petroleum products from Young and as at 21 June 1991, he owed Young about $6 million. Young in turn thus owed BP a similar amount of money. As a result of quite separate transactions the appellant owed Ayoub about $2.2 million.

Ayoub, Young and the appellant entered into a Deed of Covenant and Guarantee. The appellant did not personally sign the Deed. His brother Ayoub signed it under a power of attorney. The Deed provided for the payment of Ayoub's debt to Young and for the giving of securities in respect of that debt.

Ayoub entered into a Secret Agreement with Young on the same day. This document was executed before the Deed of Covenant. The effect of the Secret Agreement was to limit the securities available to Young, in the event of default by Ayoub, to only four of the securities appearing in the first schedule of the Deed of Covenant.