[2023] NSWSC 626

Naegeli v Dalton and Schaeffer as Executors of the Estate of the late John Herman Schaeffer (No 2)

Defendants’ liability to be joint and several; interest to accrue on terms specified in guarantee; first defendants to pay 80% of plaintiff’s costs; corporate defendants to pay plaintiff’s costs

Catchwords

GUARANTEE AND INDEMNITY – contract of guarantee – co-guarantors – joint and several liability – consequential orders on primary judgment COSTS – party/party – basis on which interest should accrue – compounding on daily rests – where plaintiff’s success against first defendants capped at $500,000 – where plaintiff otherwise successful

Cases cited

Naegeli v Dalton and Schaeffer as Executors of the Estate of the late John Herman Schaeffer[2023] NSWSC 466
Thallon Mole Group Pty Ltd v Morton[2022] QDC 224

Legislation cited

Australian Securities and Investments Commission Act 2001 (Cth)
Contracts Review Act 1980 (NSW)

Judgment

[1]
I gave judgment in this matter on 4 May 2023. [1] I shall use the same abbreviations here.
[2]
I held that:
[3]
Three further matters require determination.
[4]
The first is whether the liability of the executors of the late Mr Schaeffer’s estate should be joint or several with that of the corporate defendants.
[5]
Pursuant to cl 1.3 of the Guarantee, the obligation of each of the Guarantors was joint and several.
[6]
The only difference between the position of the Guarantors now, as a result of the judgment, is that by operation of the Contracts Review Act, the liability of the estate is to be “confined to repaying the principal of $500,000 with interest to accrue on that sum at the rate of 10% per annum”. [2]
[7]
As Mr O’Neill submitted for Mr Naegeli, the debt remains joint and several. The obligation imposed upon the corporate defendants to pay does not relieve the estate of its more limited obligation until such time as the principal debt repaid exceeds $6 million: that is the principal of $6.5 million less the $500,000 limit I have decided should be imposed on Mr Naegeli’s entitlement as against Mr Schaeffer’s executors.
[8]
The second issue relates to the basis on which interest should accrue. The Guarantee provided that each Guarantor would pay “default interest” of 10% per annum on all “Unpaid Sums” and that:
[9]
Consistent with the terms of the Guarantee, I have determined that interest will accrue at the rate of 10% rather than, for example, Court rates.
[10]
It must also follow that interest should be paid on the further basis specified in the Guarantee, namely “from day to day”, that is, upon daily rests.
[11]
That would impose on the Guarantors the obligation that they assumed when executing the Guarantee, there being a “clear agreement” in the Guarantee to this effect. [4]
[12]
Finally, as to costs, it was submitted on behalf of the executors that as they had achieved what was said to be a “substantial measure of success”, Mr Naegeli should pay half of their costs.
[13]
But the executors’ position during the hearing was that it had no liability at all to Mr Naegeli. They achieved some success but not in relation to most of the bases on which they sought to resist liability to Mr Naegeli.
[14]
They were not successful in relation to issues (a), (b) and (c) set out at [2] above, which issues occupied the bulk of the hearing time.
[15]
I see no basis on which I could award costs in favour of the executors against Mr Naegeli. However, I have concluded that some adjustment should be made to the costs recoverable by Mr Naegeli against the executors to reflect the limited success that they have achieved.
[16]
The appropriate order is that the executors pay 80% of Mr Naegeli’s costs of the proceedings.
[17]
There is no dispute that the corporate defendants should pay Mr Naegeli’s costs.
[18]
The parties should now bring in short minutes to give effect to these reasons and to finalise the matter.