Grenfell Securities Limited v Midland Montagu Securities Pty Limited [2010] NSWSC 529

New South Wales Supreme Court

CITATION : Grenfell Securities Limited v Midland Montagu Securities Pty Limited [2010] NSWSC 529

HEARING DATE(S) : 24 May 2010

JUDGMENT DATE : 24 May 2010

JURISDICTION : Equity Division

JUDGMENT OF : Windeyer AJ

EX TEMPORE JUDGMENT DATE : 24 May 2010

DECISION : Summons dismissed. Plaintiff to pay defendant's costs.

CATCHWORDS : CONTRACTS - construction and interpretation of contracts - commercial agreements

CATEGORY : Principal judgment

CASES CITED : Grey v Pearson (1857) 6 HL Cas 61; 10 ER 1216 Tutt v Doyle (1997) 42 NSWLR 10

PARTIES : Grenfell Securities Limited (Receivers and Managers Appointed) (Plaintiff) Midland Montagu Securities Pty Limited (Defendant)

FILE NUMBER(S) : SC 290579 of 2009

COUNSEL : I M Jackman SC with him D Klineberg (Plaintiff) S G Finch SC with him J S Tobin (Defendant)

SOLICITORS : Baker & McKenzie (Plaintiff) Watson Mangioni (Defendant)

- 7 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

Windeyer AJ

Monday 24 May 2010

290579/2009 Grenfell securities Limited (receivers and managers appointed) ACN 075 358 075 v Midland Montagu Securities Pty Limited ACN 072 022 818

JUDGMENT

1 HIS HONOUR: The question for decision in this case is whether certain clauses which appear in indemnity agreements mean what they clearly appear to say. The answer is that they do. The reasons are as follows. 2 The plaintiff company, Grenfell Securities Limited (Receivers and Managers appointed) (Grenfell) raised money on debentures pursuant to a registered prospectus. It then lent those moneys on mortgage secured generally on real estate. 3 The liability of the borrowers to pay the borrowed money was at times guaranteed by a third party who may or may not have given security to support the guarantee. 4 Grenfell entered into a management agreement with the defendant, Midland Montagu Securities Pty Limited (Midland) under which Midland was responsible to oversee the mortgages and, as the moneys secured by debentures were invested in three separate funds, it also was engaged to oversee the operation of those funds. Grenfell and Midland entered into agreements called indemnity agreements under which, for a fee, Midland indemnified Grenfell against certain losses which Grenfell might suffer as a result of default on the mortgage loans. There were four agreements in almost precisely the same terms, each of which covered a period of one year. These are referred to as the 2003 Indemnity, the 2004 Indemnity, the 2005 Indemnity and the 2006 Indemnity. There was a fifth agreement called the 2007 Indemnity in somewhat different terms. There was also a document described as the "2006 Indemnity Extension" which, if effective, extended the terms of the 2006 Indemnity for the period from 1 July 2007 to 30 June 2008. If it did come into operation then the 2007 Indemnity would be cancelled by it or would have to operate beside it. 5 On 31 October 2008, receivers and managers were appointed to Grenfell by Trust Company Fiduciary Services Limited, the trustee for the debenture holders. At the time of appointment the relevant funds had advanced approximately $60 million to approximately 25 borrowers on about 40 separate loans. It is not quite clear from the evidence whether or not the receivers and the managers were appointed to the funds or to the company, but it does not really matter. 6 There is, or was, a close connection between the parties. Mr David Ainsworth has been a director of the plaintiff since 1996 and was a director of the defendant from 1995 to 2007 and became a director again on 1 January 2009. Mr Colin Grady has been a director and secretary of the plaintiff since 1996 and was secretary of Midland from 1995 until 1 March 2009. 7 The indemnity agreements which I will number are as follows: