Proving extra-contractual representations: Get it in writing

The Supreme Court of Queensland recently handed down its decision in Harburg Nominees Pty Ltd & Anor v Deen [2019] QSC 291. The case considered, amongst other things, whether the defendant could rely on an alleged representation made by the plaintiffs that a guarantee would not be enforced against the defendant.

Harburg Nominees and Harburg Investments (the plaintiffs) provided funding to Warapur Resources Pty Ltd (Warapur) – of which Mr Deen (the defendant) was the sole director – for the purposes of developing a large block of land in Queensland. The plaintiffs sought to rely on a document signed by Mr Deen, in which he guaranteed the due and proper performance by Warapur of a loan which the plaintiffs had provided to the company (the guarantee).

The defendant experienced problems progressing the development, which resulted in the plaintiffs seeking to enforce the terms of the guarantee. The defendant contended, however, that he was not liable under the guarantee, because a representative of the plaintiffs had represented in the course of a conversation with the defendant that they would not enforce it.

In assessing the evidence before the court regarding the alleged representations, Applegarth J referred to Watson v Foxman where McLelland CJ observed that:

Where conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances…

After considering the evidence, Applegarth J opined that neither the plaintiffs nor the defendant had a good recollection of the events surrounding the alleged representation. His Honour found that the plaintiffs did not have a good reason to lend money without a guarantee, especially as this was the usual course of business when dealing with development companies like Warapur.

His Honour further considered that the parties’ conduct after the alleged representation suggested that no such representation was ever made. Specifically, he noted that the defendant:

•   signed the guarantee after the plaintiffs had allegedly said that they would not enforce it;
•   did not disclose to its solicitor that the plaintiffs had made the alleged representation; and
•   made no mention of the alleged representations when he filed his defence, which His Honour stated, “undermines the reliability of his [the defendant’s] recollection that such representations were made [by the plaintiff]”.

Ultimately, the Court held that the defendant had not proved with a sufficient degree of precision that the representations were made, meaning the plaintiffs were free to enforce the terms of the guarantee.

This case provides a helpful reminder of the types of circumstances courts will look to determine whether representations were made, as well as the importance of writing down agreements, specifically those which may change the enforceability or operation of guarantees.

The full decision can be found here.