Taurus Trade Finance Pty Ltd v Jakob Mortensen & Ors [2009] NSWSC 1156

New South Wales Supreme Court

CITATION : Taurus Trade Finance Pty Ltd v Jakob Mortensen & Ors [2009] NSWSC 1156

HEARING DATE(S) : 26, 27 and 28 October 2009

JUDGMENT DATE : 3 November 2009

JURISDICTION : Commercial List

JUDGMENT OF : Bergin CJ in Eq

DECISION : Plaintiff entitled to entry of judgment

CATCHWORDS : [CONTRACTS] - Where guarantor related to principals of borrower - Where monies advanced in refinancing corporate business arrangements - Where outgoing lender requires payment out - Where guarantor provides guarantee limited to $650,000 - Whether guarantor's liability limited to debt to pay out outgoing lender - [CONSTRUCTION OF CONTRACTS] - Whether permissable to establish ambiguity in a document not otherwise ambiguous by utilising extrinsic evidence

Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 CASES CITED : Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234

Taurus Trade Finance Pty Ltd (Plaintiff) PARTIES : Jakob Mortensen (First Defendant) Tanya Therese Mortensen (Second Defendant) Tony Kahwajy (Third Defendant)

FILE NUMBER(S) : SC 50206 of 2008

COUNSEL : R Marshall (Plaintiff) J Giles (Defendants)

SOLICITORS : Gillis Delaney Lawyers (Plaintiff) Frederick Laws (Defendants)

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

BERGIN CJ in Eq

3 NOVEMBER 2009

50206 of 2008 TAURUS TRADE FINANCE PTY LIMITED v JAKOB MORTENSEN & ORS JUDGMENT 1 The plaintiff, Taurus Trade Finance Pty Limited, is a financier. It has settled these proceedings as against the first and second defendants, Jakob Mortensen and Tanya Therese Mortensen, who were the principals of the business operated by Lightmakers Australia Pty Limited (now in liquidation) (LMA). The only remaining issue is between the plaintiff and the third defendant, Tony Kahwajy, in respect of a guarantee he provided to the plaintiff. 2 LMA carried on the business of the importation and distribution of exclusive lighting products, mainly from European manufacturers. It suffered constraints on its cash flow because payment for container loads of products from Europe had to be made before they were shipped by the supplier. An initial limited financial facility was available through LMA's bankers but it was inadequate to meet all of its requirements. It needed a facility that provided for both payments to suppliers and invoice factoring to recover such costs prior to payment by customers. 3 LMA was originally financed by the Bank of Western Australia Ltd (BankWest) and Bamford Partners Pty Limited (Bamford). The Bamford facility was only temporary pending provision of a full facility by BankWest. However, for various reasons LMA approached the plaintiff for finance and on 14 August 2007 the plaintiff made a formal offer in which it advised that it had approved a Trade Finance Facility with a limit of $550,000 and an Invoice Discounting Finance Facility with a limit of $600,000. Conditions of such approval included the provision of Deeds of Guarantee and Indemnity by LMA and its associated companies and personal joint and several guarantees by the first and second defendants. That offer was accepted by LMA on 21 August 2007. 4 The plaintiff entered into a Trade Finance Agreement and an Invoice Discounting Agreement (the Facilities) with LMA on 25 September 2007. It is common ground that although the Facilities were signed in September 2007 there were negotiations between the plaintiff and Bamford in respect of the withdrawal of Bamford's fixed and floating charge over LMA's assets and the paying out of the debt due to Bamford by LMA. Bamford required payment out in full of the debt before discharge of the fixed and floating charge. 5 The debt owed to Bamford was $596,278.38 (the Bamford debt). As a condition of the plaintiff paying out the Bamford debt, it required additional security from LMA and/or its associated companies. It was at this time that the third defendant became involved. The third defendant is Mrs Mortensen's brother. 6 It is common ground that the third defendant agreed to provide a guarantee to the plaintiff secured by a mortgage over a number of home units in Church Street, Ashfield (the Ashfield properties). The third defendant executed a Deed of Limited Guarantee and Indemnity on 23 November 2007 (the Guarantee) in which he was identified as "Guarantor"; LMA was identified as the "Client"; and the plaintiff was identified as "Taurus". The Guarantee included the following: