SECURITY PACIFIC GOLD LIMITED v BALDERSTON & ORS. [1999] NSWSC 755

New South Wales Supreme Court CITATION : SECURITY PACIFIC GOLD LIMITED v BALDERSTON & ORS. [1999] NSWSC 755 CURRENT JURISDICTION : COMMON LAW FILE NUMBER(S) : 11032/1992 HEARING DATE(S) : 28-29 June 1999 JUDGMENT DATE : 28 July 1999

PARTIES : SECURITY PACIFIC GOLD LIMITED v LEON RODNEY BALDERSTON & ORS. JUDGMENT OF : Master Malpass

COUNSEL : PLAINTIFF: MR P O'LOUGHLIN FIRST DEFENDANT: MR G McNALLY SOLICITORS : PLAINTIFF: GREAVES WANNAN & WILLIAMS FIRST DEFENDANT: DEACONS GRAHAM & JAMES CATCHWORDS : Construction of guarantee; guaranteed obligations referable to a lease at law only. ACTS CITED : N/A Chan & Anor v Cresdon Pty Limited (1989) 168 CLR 242. CASES CITED : Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337. Telado Pty Limited v Vincent (Court of Appeal 19 July 1996). DECISION : SEE PARAGRAPH 27.

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

MASTER MALPASS

WEDNESDAY 28 JULY 1999

11032/1992 SECURITY PACIFIC GOLD LIMITED v LEON RODNEY BALDERSTON & ORS JUDGMENT 1 The proceedings were commenced in 1992. The claim now propounded by the plaintiff is pleaded in the Second Further Amended Statement of Claim filed on 21 April 1998. It is a claim for judgment in a monetary sum. 2 The hearing commenced on 28 June 1999. The contest is between the plaintiff and the first defendant. The second and third defendants did not appear at the hearing. 3 The parties have relied on affidavit evidence. Messrs Selles, Whitley, Morrison, Collins and Procajlo have each sworn an affidavit for the plaintiff. The first defendant relies on his own affidavit. Save for Mr Whitley, each deponent has been cross-examined. There has been a tender of documentation. 4 At all material times, Sydney Cove Redevelopment Authority was the owner of premises known as the Clock Tower Building. A head lease was granted to CBD Investments Pty Limited (CBD). There was a sub-lease of part of the premises to the plaintiff. On 1 February 1991, there was a sub-lease of part of the premises from the plaintiff to Aust In Capital Corporation Limited (Aust In) for a term of more than 3 years. The sub-lease (although in registrable form) was not registered (there were delays and Mr Procajlo did not lodge it for registration because by that time Aust In had ceased its occupation). A copy is an annexure to the affidavit sworn by Mr Whitley. It contains a definition of "The Lease" (it means "The Lease of the demised premises"). It was common ground that the sub-lease was not now capable of being made the subject of an order for specific performance. 5 The date for commencement of the sub-lease was expressed to be 1 February 1991. Aust In was not permitted to move into occupation until a bank guarantee had been provided. The bank guarantee was a requirement of the sub-lease (clause 12.01). Aust In was desirous of entering into possession and had not been able at that stage to arrange a bank guarantee. As an interim measure, until the bank guarantee was arranged, Aust In was allowed into possession after a personal guarantee had been provided by its directors. It was provided in the form of a Deed of Guarantee made on 5 March 1991 (the Deed). The Deed was executed by the directors for Aust In (who are the defendants in these proceedings). 6 Although the first year of the sub-lease was rent free, Aust In was obliged to pay outgoings. Certain outgoings became outstanding. Aust In was required to both pay these outgoings and provide the bank guarantee. Whilst the outgoings were subsequently paid, the bank guarantee was never provided. 7 In early October 1991, the plaintiff came to the view that the sub-leased premises had been abandoned. On 11 October 1991, the plaintiff re-entered the premises. Thereafter, the plaintiff took steps to re-let the premises. On 30 March 1992, Aust In went into liquidation. On 21 August 1994, a new sub-lessee moved into occupation of the premises. On 5 December 1997, there was a voluntary liquidation of the plaintiff. 8 On 29 June 1999, after oral evidence from Mr Selles had been taken, the plaintiff made application to further amend its originating process. The Second Further Amended Statement of Claim pleads that on or about 10 October 1991, in breach of its obligations under the sub-lease Aust in abandoned the premises and thereby repudiated the sub-lease. The purport of the proposed amendment was to expand the allegations of breach by adding the allegations of failure to provide the bank guarantee and failure to pay certain outgoings. 9 The application to amend was opposed by the first defendant. Counsel for the first defendant informed the Court that he needed further time to consider the potential implications of any such amendment. That there was a need for such opportunity was not in dispute. It was common ground that if leave to amend was given it may be necessary to grant an adjournment of the proceedings. 10 A consensus then emerged between the parties as to the further conduct of the proceedings. Whilst the application remained on foot, further consideration of it was deferred. The course was then taken to complete the evidence and to then as a separate question hear submissions on a Defence raised by the defendant (it is raised in paragraphs 3 and 5 of the Second Amended Defence). This was a Defence founded on the judgment of the majority in the High Court decision of Chan & Anor v Cresdon Pty Limited (1989) 168 CLR 242. It was common ground that if the first defendant was successful on the Defence, the plaintiff's case must fail. 11 The plaintiff's case is founded on the Deed of Guarantee. A copy of the Deed is Annexure C to the Affidavit sworn by Whitley. Relevant provisions are inter alia the first recital and clause 1. The first recital is in the following terms:- "The Lessor has sub-let to Aust. in Capital Corporation Limited (hereinafter called 'the Lessee') certain premises known as part of Level 4, 55 Harrington Street, Sydney pursuant to a sub-lease dated the day of 1991 (hereinafter called 'the Lease')."