WANG & ASSOCIATES SOLICITORS - 英杰律师事务所, 澳大利亚律师, 悉尼律师, 澳洲律师,澳大利亚华人律师, 房屋买卖, 移民法, 刑法, 澳洲金融牌照与监管

Union Link International Pty Ltd v Evan Ji Pty Ltd [2011] NSWSC 1078

tt — Wed, 21 Sep 2011 05:32:04 +0000

Supreme Court New South Wales
Medium Neutral Citation
Union Link International Pty Ltd v Evan Ji Pty Ltd [2011] NSWSC 1078
Hearing Dates
08/09/2011
Decision Date
08/09/2011
Jurisdiction
Equity Division
Before
McDougall J
Decision
Plaintiff’s claim dismissed with costs. Judgment for cross-claimant on cross-claim with costs.

Catchwords
CONTRACT – contract for sale of business – construction of contract – whether contract was repudiated – whether specific performance available to vendor – no question of principle – COSTS – whether party entitled to indemnity costs where successful argument was introduced for the first time in submissions following close of evidence.
Cases Cited
Calderbank v Calderbank (1975) 3 All ER 333
Category
Principal judgment
Parties
Union Link International Pty Ltd (ACN 132 950 602) (Plaintiff)
Evan Ji Pty Ltd (ACN 144 898 340) (First Defendant)
Dabin Ji (Second Defendant)
Representation
Solicitors:
Haworth & Lexon (Plaintiff)
Wang & Associates (Defendants)Counsel:
D P O’Connor (Plaintiff)
N J Broadbent (Defendants)
File Number(s)
2011/239105

Judgment (EX TEMPORE)

1HIS HONOUR: On 28 July 2010, the plaintiff (Union Link) and the first defendant (Evan Ji) made an agreement for Union Link to sell to Evan Ji Union Link’s business at Leichhardt, known as the Amore Cafe Restaurant (the agreement).

2The restaurant business (as I shall call it) was one of two businesses then conducted by Union Link at Leichhardt. The other, known as Amore Gelato, was conducted from adjoining premises. That is of some significance in relation to a pre-contractual representation that was said to have been made.

3In these proceedings, Union Link seeks, among other things, an order that Evan Ji “do all things necessary to effect the transfer of lease [of the restaurant] as outlined in the document styled, deed of consent to assignment of lease”. It seeks a further order that the second defendant (Mr Ji, who is the principal of Evan Ji) “provide the necessary guarantee to allow for an assignment of lease from [sic] the plaintiff to the first defendant”. Other orders are sought, including a declaration that Evan Ji’s notice of rescission is invalid.

4Before the contract was made, Mr Ji discussed the proposed sale of the restaurant business with Mr Wen Cong Lin, the principal of Union Link. It is apparent that Messrs Lin and Ji reached an agreement in principle for Mr Ji to buy the restaurant business. Ultimately, as I have said, that transaction was effected through his company Evan Ji.

5In the course of those pre-contractual discussions, Mr Ji raised with Mr Lin what Mr Ji saw as the insufficiency of seating available to the restaurant business. According to Mr Ji, Mr Lin said that the restaurant could use otherwise unused seats in the adjacent gelato business to accommodate any overflow of customers. It is clear that this arrangement was perceived as being beneficial to all parties.

6As I have said, the agreement for sale that was struck orally was reduced to writing. Although the contract included a special condition, in the usual form, negating reliance on any pre-contractual statement etc that was not incorporated into the contract, that does not prevent me from finding, as I do, that discussions in relation to the use of the gelato bar’s seating occurred, substantially as alleged by Mr Ji in his affidavit.

7It will be apparent from what I have said that Union Link carried on the business pursuant to a lease. That lease had been assigned to Union Link when it commenced to operate the business.

8The contract contained a number of provisions that are of significance. I start by observing that, on the very first page, and before the details of the parties and the transaction are set out, the following words were contained in parentheses:

(A choice printed in BLOCK CAPITALS applies unless a different choice is marked)

9On the second page of the printed form of contract, there was a heading “Choices”. Each of the choices was followed by two boxes. One box had the word “NO” against it, in block capitals. The other box had the word “Yes” against it, in lower case print.

10One of the choices so indicated read:

Purchaser must provide suitable guarantee.

11Neither the “no” box nor the “yes” box was checked. Accordingly, the default position set out on the first page of the contract applied, and the answer “no” must be taken to apply.

12The reference to “suitable guarantee” might appear to be somewhat Delphic on its own. However, the contract made it clear that this “choice” was relevant to clause 27.2.3. That clause (again of the printed conditions) dealt with the situation that the premises from which the business was conducted were, or on completion would be, subject to a lease: that is to say, the facts of this case. Clause 27.2 imposed obligations on Evan Ji, as purchaser, in those circumstances:

27.2 The purchaser must -

27.2.1 supply references and other information reasonably required by the landlord to consider the application;

27.2.2 pay or bear the costs and expenses of the landlord (including the costs of a landlord’s mortgage) arising from any negotiations between the landlord and the purchaser for proposed changes to a lease disclosed in this contract, whether or not this contract is completed; and

27.2.3 if this contract says the purchaser must provide a suitable guarantee, provide any guarantee reasonably required by the landlord to support performance of the obligations of the tenant under the lease.

13Clause 29 of the printed conditions picked up the question of transfer of the lease. It read:

29. Transfer of existing lease

29.1 This clause applies only if -

29.1.1 the premises are subject to a lease; and

29.1.2 this contract does not say the sale is subject to the grant of a new lease.

29.2 The parties intend that the landlord is to consent to a transfer of the lease from the vendor to the purchaser .

29.3 The purchaser must serve the form of transfer at least 7 days before the completion date .

29.4 If the landlord does not consent to the transfer of the lease -

29.4.1 by the completion date , the purchaser can rescind; or

29.4.2 by the 90 th day after the contract date , a party can rescind.

29.5 A party cannot rescind under clause 29.4 after the other party has served notice of the consent of the landlord.

14The reference to rescission takes one back to clause 23 which, so far as it is relevant, read:

23.1 If this contract expressly gives a party a right to rescind, the party can exercise the right -

23.1.1 only by serving a notice before completion; and

23.1.2 in spite of any making of a claim or requisition, any attempt to satisfy a claim or requisition , any arbitration, litigation, mediation or negotiation or any giving or taking of possession.

15There were a number of special conditions. Special condition 3 required each party to do what was required “for the effective consummation of the transactions contemplated and/or stipulated by this contract”.

16Special conditions 12 and 17 dealt once more with the lease:

12. Condition precedent

Notwithstanding any other provision in this contract the sale of the business is subject to the lessor transferring the existing lease to the purchaser. Should the Landlord declines to give its consent to the transfer of lease, then the purchasers are entitled to rescind this contract ab initio and the vendor will refund and return to the purchaser their full deposit.

…

17. Completion

The completion of this contract is only conditional upon the Lessor consenting to transfer of the Vendor’s current lease to the Purchaser, the notification of such consent to the Purchaser, the Vendor and the Purchaser to sign all necessary transfer of lease documents and consent of settlement from the lessor.

17Special condition 27 dealt with transfer of the liquor licence:

27. TRANSFER OF LIQUOR LICENCE

Notwithstanding anything to the contrary, settlement of the sale of business is conditional upon the purchaser obtaining a provisional approval from the Department of Casino, Liquor & Gaming Control Authority. The Purchasers’ solicitors should submit to the Vendors’ solicitors the relevant documentations for the Vendors’ with SEVEN (7) days after exchange of contracts. Upon receipt of the executed documentations from the Vendors’ solicitors, the Purchasers should promptly submit the application without delay.

18There is no evidence that Evans Ji’s solicitors (in this case, in fact, conveyancers) did what was required to be done by the second sentence of that special condition.

19The existing lease, that had been assigned to Union Link, was annexed to the contract. That lease specified that a bank guarantee would be provided to cover three months’ rent and three months’ of the lessee’s proportion of outgoings. The requirement was elaborated in clause 16, which required delivery of an unconditional and irrevocable bank guarantee.

20There was also annexed to the contract the deed of consent to assignment of lease whereby the lease had been assigned (or agreed to be assigned) to Union Link. Mr Lin was named on the cover page of that document as “Guarantor”. Although he was not stated in the body of the deed to be a party, it is apparent that he signed it both in his capacity as director and secretary of Union Link and in his personal capacity.

21Mr Ji was cross-examined on the extent to which the various terms of the contract, and the documents annexed to it, have been drawn to his attention. He said, in substance, that he relied on his conveyancer, Mr Sherman Zhong, to explain matters to him; that he signed where Mr Zhong told him to sign; and that he read no more than the parts where he signed. I accept that evidence. It seems to me to be entirely consistent with the probabilities, including the evident fact that English was not Mr Ji’s first language, and that to the extent that he had capability in English, it is unlikely that he would have been familiar with legal documents.

22Mr Ji said also, in this context, that he told Mr Zhong that he did not wish to be a guarantor. That appears to relate to the possibility that a director of the purchaser would give a guarantee. That was covered by special condition 28, which condition was left incomplete. Mr Ji does not appear to have executed the contract in his personal capacity.

23The purchase price of $30,000 was paid on or before execution of the contract, and either Mr Ji or Evan Ji (it does not matter which) went into possession and ran the business. There is unfortunately a dearth of evidence as to what steps were performed during the course of the conveyancing transaction. It is apparent that the lessor of the premises was asked for its consent, and the licensor of some adjacent property (in respect of which Union Link held a licence, and which licence was to be assigned on completion of the contract) was asked for consent to assignment of the licence.

24Since there is some, although not particularly cogent, evidence that the licensor did give its consent before Evan Ji gave notice of termination of the contract, I will say no more about the licence.

25On 19 August 2010, the lessor’s solicitors wrote to Mr Zhong’s firm asking for information in relation to the proposed assignment. Three matters were raised:

1. The provisions of the Lease and in particular Clause 10 of the Lease, headed “Transfer and Sub-Lease”, will need to be satisfied in relation to the proposed assignment of the Lease to your client and the Lease provides that the proposed Assignee must provide the Lessor with certain information regarding the financial standing and business experience of the proposed Assignee.

2. In order for the Lessor to deal with the request for consent to the proposed assignment of the Lease, it will be necessary for your client to provide us with a completed Questionnaire and Statement of Assets and Liabilities, the form of which is attached . Such Statement is to be certified by your client’s accountant, and be provided to us together with any supporting documentation that your client wishes our clients to consider before making a decision in relation to the proposed assignment.

3. Please advise if the Lessee, Union Link International Pty Ltd, has furnished your client with a copy of the Disclosure Statement given to the Lessee in respect of the Lease (in accordance with the provisions of Clause 10.4 of the Lease), together with details of any changes that have occurred in respect of the information contained therein.

26It does not appear how, if at all, Mr Zhong replied. However, given that:

(1) on 22 October 2010, the lessor’s solicitors indicated that the lessor would consent to the assignment of the lease on certain conditions; and

(2) on 11 November 2010, Mr Zhong wrote to Union Link’s solicitors indicated that the (only) matter holding up completion was “the consent for Licence agreement”,

I would infer that the lessor’s solicitors received a reply, satisfactory to them and their client, to their letter of 19 August 2010.

27It should be noted that the letter of 19 August 2010, so far as it appears on the face of the document, did not ask for any information as to who might be prepared to guarantee Evan Ji’s obligations under the lease or what the standing and capacity of that person to meet his or her guarantee might be.

28It seems that the relationship between Messrs Ji and Lin broke down in late October 2010. At that time, according to Mr Ji, they had a conversation in the course of which, Mr Ji says, Mr Lin sought to change the basis on which the restaurant business could use the spare seating capacity of the gelato bar. According to Mr Ji, Mr Lin, when pressed to keep to his oral promise, said:

“Fine, I’m not selling the restaurant to you anymore.”

Mr Ji said that he replied:

“All right, would you return my $30,000.”

And that Mr Lin replied:

“You’ll get it”.

(Those conversations are set out in English in Mr Ji’s affidavit but, as he said, they took place in the Mandarin language.)

29Mr Lin disputes that the conversation was in the terms alleged. Specifically, he disputes that he said, “I’m not selling the restaurant to you any more” or that he agreed, on request made by Mr Ji, to return the $30,000.

30The conduct alleged is said to constitute a repudiation. It is said that the repudiation was accepted by Evan Ji when Mr Ji asked for the return of the money that he had paid.

31I am not prepared to find that a conversation took place in the terms alleged by Mr Ji. There are several factors that lead me to that view. The first is that there was no contemporary correspondence in which the alleged repudiation, and acceptance, were referred to. The parties do not appear thereafter to have proceeded on the basis that the contract was at an end. On the contrary, at least so far as Union Link’s solicitors and Evan Ji’s conveyancer were concerned, the contract was still on foot. It is, I think, particularly significant that (so far as one can tell, from the correspondence) Mr Zhong continued at least from time to time to do things directed towards settlement of the contract, presumably on the understanding that it was still on foot.

32Another matter that disinclines me to accept Mr Ji’s version of the conversation is that, I think, it was unlikely to have occurred. It is clear that Mr Lin was short of money at the time. It is clear that he could not afford to pay the rent on both premises and that he did not have the time or energy (at least on his view of the world) to run them both. In my view, it is less rather than more likely, in those circumstances, that he would have acted as Mr Ji says he did.

33There is a question of onus here. Since it is the defendants who allege repudiation, it is they who bear the evidentiary burden of proving it. The court needs to be satisfied, on balance, that the words alleged (more accurately, their Mandarin equivalent) were used. For the reasons that I have given, I am not satisfied that such words were used.

34I would add also that, when Mr Ji was questioned as to why he had not (as it seems he had not) told Mr Zhong of the alleged termination, occurring by accepted repudiation, the answer that he gave was not one that had any sensible content so far as I could discern.

35Thus, to the extent that the defendants rely on that alleged repudiation, their case cannot be upheld.

36That, however, is not the end of the matter. The notice of termination that was given on 30 May 2011 relied on the right given by clause 29.4.2 of the contract, in circumstances where (it was said) “90 days have passed since the contract date without the lessor’s consent”.

37Union Link relies on the fact that, on 22 October 2010, the lessor’s solicitors wrote to both parties (through their representatives) advising that the lessor would consent to assignment of the lease. Leaving aside formalities, that letter reads as follows:

We advise that the Lessor is prepared to consent to the Assignment of the Lease to your client on the following basis:

1. Execution and return to us of enclosed Deed of Consent to Assignment signed by all parties.

2. Provision of a new Bank Guarantee from the Assignee for an amount of $30,321.42.

3. Payment of Lessor’s costs of acting on the assignment of Lease in accordance with the invoice enclosed for $1,007.60.

4. Provision of a cheque for payment of the November rent.

5. Evidence of public liability insurance as required under the Lease.

Please advise when settlement of the sale is to take place.

38The draft deed of consent to assignment of lease described Mr Ji as “guarantor”. Further, and unlike the previous assignment, it actually named him as one of the parties between whom the deed was made. Clause 12 of that would constitute, on Mr Ji’s execution and delivery of the deed, an agreement by him to guarantee the obligations of Evan Ji under the lease and to indemnify the lessor in the event of default by Evan Ji.

39The question that is raised is whether the indication of consent that was given in the letter of 22 October 2010 is a sufficient consent for the purposes of clause 29 of the contract and (to the extent that they add anything) special conditions 12 and 17.

40It is clear, reading the letter with its attachment, that the lessor’s position was that it would consent to the assignment if the five conditions specified in the letter were met. One of those conditions required execution and delivery of the deed of consent. By necessary implication, the lessor was saying, among other things, that it required Mr Ji to execute the deed of consent in his own capacity as guarantor, and thus to give an offer of guarantee and indemnity in terms of clause 12 of that deed.

41The difficulty, with saying that Evan Ji was obliged to execute that draft deed, is that the requirement for Mr Ji to give a personal guarantee had been negated on the proper construction of the contract. I refer to what I have said as to the relevant “choice” in relation to a guarantee, the default selection of the answer “no” and thus the negation of the operation of clause 27.2.3.

42In circumstances where the contract did not require Evan Ji to procure Mr Ji to execute a guarantee of the lease, it seems to me that it could not be said that Evan Ji was required to procure him so to do, either by operation of special condition 13 or otherwise.

43Special condition 3 required the parties to do and “execute, acknowledge and deliver, all such further acts, documents or instruments as may be required for the effective consummation of the transactions contemplated and/or stipulated by this contract”. In the face of the matters to which I have referred as to the “choices” section of the contract, and the consequent negation of clause 27.2.3, it cannot be said that the execution of a deed of consent which did require Mr Ji to give his personal guarantee was something either contemplated or stipulated for by the contract. Thus, given that the requirement to do those things must be qualified by some implied obligation of reasonableness, it cannot be unreasonable for Evan Ji to have declined to do that which, on a proper view of the contract, it had said it would not do.

44In those circumstances, I conclude that the consent, or indication of consent, contained in the letter of 22 October 2010 was not an indication of consent sufficient to engage the relevant requirements of clause 29, or, for that matter, of special conditions 12 and 17.

45There was some question too as to the requirements of special condition 27, in relation to the transfer of liquor licence. Although there was no evidence that that condition had been satisfied, it is at least doubtful that Evans Ji could rely on this in circumstances where there is no evidence that its conveyancer, Mr Zhong, had complied with the second sentence of that condition.

46Thus, in my view, by the time 30 May 2011 rolled around, there was no consent as required by clause 29.4.2 of the contract and it was then open to Evan Ji to do as it did and rescind.

47There were other arguments raised. One related to misleading or deceptive conduct alleged against Mr Ji, apparently in working in the business allegedly knowing that he was required to give a guarantee, but not giving that guarantee and not advising Union Link that he would not do so. The short answer to that seems to me to be that, as I have said, on its proper construction the contract did not require him to give any guarantee (of the lease); on the contrary, it contemplated that he would not give such a guarantee.

48Another question raised related to alleged repudiatory conduct on the part of Union Link and Mr Lin, in offering the business for sale once the relationship between the parties had broken down following the events of October 2010. As I said in the course of argument, that evidence appears to me to be equivocal. If Union Link had acted in the manner alleged by Mr Ji, its further actions in seeking to sell the business were consistent. Equally, if Evan Ji had repudiated the contract by refusing to perform, Union Link’s actions in seeking to sell the business were consistent with its trying to mitigate its loss.

49The conclusions to which I have come as a matter of fact and on the proper construction of the contract, are sufficient to dispose of the proceedings. Before I turn to the cross-claim, I should, however, indicate that in my view there was a fundamental problem in the way that the case for Union Link was put. In essence, it was seeking specific performance of part only of a contract for sale. That is not consistent with the way that equity acts, in granting specific performance. It is usual that contracts for sale have interdependent obligations that are to be performed on completion. That is certainly the case with this contract. If there were to be the equivalent of specific performance, it would be of the whole contract to the extent that it remained to be performed.

50It is not appropriate to grant specific performance of an obligation in circumstances where, first, there is no evidence of readiness or willingness on the part of the party seeking specific performance to perform its own unperformed obligations, and, secondly, no offer (at least until the point was drawn to the attention of counsel in submissions) to perform.

51In those circumstances, even if I had been of the view that a case for relief had been made out, I would have refused relief of a discretionary kind and left Union Link to its case in damages at law (not under Lord Cairns’ Act).

52Evan Ji cross-claimed. It sought return of the deposit, alternatively damages and an indemnity against loss. On the view to which I have come, it is entitled to have the deposit refunded. There was no real evidence that it had suffered loss other than in relation to the deposit, and in circumstances where that is so I will do no more than reserve liberty to apply in respect of the prayer for damages if that is pressed.

53The result of all this is that the summons must be dismissed with costs, and I so order.

54On the cross summons, I direct entry of judgment in favour of the first cross-claimant against the cross-defendant in the sum of $30,000 together with interest from the date of payment of that amount to the date of judgment. I reserve liberty to apply in respect of damages; any such liberty is to be exercised by notice given to the other side and to my associate within 28 days of today’s date.

55I order the cross-defendant to pay the cross-claimant’s costs of the cross-claim.

(Counsel addressed.)

56Union Link seeks a variation of the costs orders that I have just made, to reflect the fact that the point on which I decided in favour of Evan Ji was raised only in submissions following the close of the evidence.

57Evan Ji seeks an order for costs on an indemnity basis from some time in August 2011. It does so on the basis of a letter that is said to have been sent in accordance with the principles in Calderbank v Calderbank (1975) 3 All ER 333.

58I do not propose to accede to either application.

59In relation to Union Link’s application, it chose to move for specific performance in circumstances where, on my view of the contract and the events that have happened, it could not possibly succeed. For the same reasons it could not possibly succeed either in its alternative claim for damages for breach or in its claim against Mr Ji personally for misleading or deceptive conduct.

60The general principle is that costs follow the event. The fact that what might be called the ‘killer point’ was referred to late in the day does not seem to me to be a sufficient reason to displace that principle.

61However, that fact is most relevant to the application for indemnity costs based on the so-called Calderbank letter.

62The Calderbank letter does not set out the reasons why it was appropriate for the parties to consider a “commercial outcome” except, of course, the obvious reason for saving costs. Specifically, in that context, there had been no flagging of the point in relation to clause 27.2.3. That point was not referred to until closing submissions. It had not even been referred to in the outline of the first and second defendants’ submissions that was provided to the court on 7 August 2011.

63In those circumstances, I think, the discretion to award costs on some basis other than the ordinary basis is not enlivened; or if it is enlivened, it should not be exercised in favour of the defendants.

64The orders are to be as I have indicated. The only outstanding matter is quantification of the amount to which the first cross-claimant is entitled, bearing in mind that the claim will carry interest from the date when the money was paid. I should go back I think on what I said in that regard because I indicated that interest should run from the date of payment. On reflection, I think, interest should run from the date of rescission, with interest before that date (if it is applicable) to be dealt with in accordance with the terms of the contract.

65Whether or not the defendants wish to press the claim for interest for what will only be a few months is a matter for them. I think that the best outcome is to stand the matter over for a day or so so that the parties can prepare short minutes of order to give effect for these reasons. If interest is claimed, I would expect it to be calculated by consent.

66I stand the matter over for orders at 9.30am on 16 September 2011 before me. I reserve liberty to apply in chambers in the event that the parties are agreed on the form of orders to be made.

Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2011] NSWCA 243

tt — Thu, 25 Aug 2011 07:16:13 +0000

Judgement

1CAMPBELL JA : I agree with Sackville AJA.

2HANDLEY AJA : I agree with Sackville AJA.

3SACKVILLE AJA: The application before this Court seeks orders, in effect, prohibiting the Industrial Court of New South Wales from continuing to hear a claim for relief brought by the second opponent (“ Mr Rose “). The Claimants (“ Meriton ” and “ Owners Corporation “, respectively) assert that the Industrial Court does not have jurisdiction to grant the relief sought by Mr Rose. By an amended summons filed on 24 June 2010, they seek orders in the nature of prerogative relief pursuant to s 69 of the Supreme Court Act 1970.

4The first opponent in this Court is the Industrial Court, which has filed a submitting appearance.

THE PROCEEDINGS IN THIS COURT

5Mr Rose’s claim for relief in the Industrial Court arose primarily out of a so-called Caretaker Agreement between Regis Towers Real Estate Pty Ltd (“ Regis Towers “) and Owners Corporation. Mr Rose, a non-practising solicitor, was a director of Regis Towers and held three of the four ordinary shares (his wife held the fourth). Meriton was the developer of an apartment complex located at Pitt and Castlereagh Streets, Sydney (“ the Complex “). Owners Corporation was created as a corporate entity when the strata scheme in respect of the Complex was registered. The Caretaker Agreement related to management of the Complex and conferred certain entitlements on Regis Towers in return for payments by Owners Corporation.

6Mr Rose’s summons in the Industrial Court sought relief under s 106(1) of the Industrial Relations Act 1996 (“ IR Act “), as follows:

“(1) A declaration that the contract (consisting of a Deed between [Meriton] and [Regis Towers] (now in administration, and formerly known as Cesscut Pty Limited), and additionally consisting of a contract or collateral arrangement between [Owners Corporation] and [Regis Towers] whereby [Mr Rose] performed work in an industry in and of New South Wales, was unfair, harsh or unconscionable or against the public interest.

(2) An order declaring the contract wholly or partly void, or varied, from the date of commencement or some later time, save for remuneration paid or payable to or on behalf of [Mr Rose].

(3) An order varying the terms of the contract (insofar as it consisted of a contract or a collateral arrangement between [Owners Corporation] and Regis Towers Real Estate Pty Limited (in administration), ‘the Caretaker Agreement’) to provide for … [express terms intended to establish mechanisms for increasing the remuneration payable to Regis Towers].”

7In addition, the summons sought an order pursuant to s 106(5) of the IR Act that the Claimants pay to Mr Rose a sum of money in connection with the contract “ so voided or varied ” by the Industrial Court. The particulars indicated that Mr Rose sought an amount equivalent to the sum he had personally invested “ on behalf of Regis Towers “, being $525,000. Mr Rose also sought the sum of $10 million “ representing the personal loss of financial benefit which [he] suffered by reason of the unfairness of the [Caretaker Agreement] “.

8The Claimants filed a motion in the Industrial Court seeking orders that Mr Rose’s summons be summarily dismissed. A Judge of that Court (Marks J) made an order for summary dismissal. His Honour held, among other things, that Mr Rose lacked standing to bring the proceedings under s 106(1) of the IR Act .

9Mr Rose succeeded in an appeal to the Full Bench of the Industrial Court. The Full Bench dismissed the Claimants’ motions, thus removing any barrier to Mr Rose’s claim for relief proceeding in the Industrial Court.

10The orders sought by the Claimants in this Court are as follows:

“1. An order prohibiting the [Industrial Court] from taking any further steps to exercise, or purporting to exercise, their power under section 106 Industrial Relations Act 1996 (NSW) in Industrial Court of New South Wales Proceedings Number 2131 of 2005 with respect to the contracts and arrangements described in the Summons for Relief filed on 27 March [sic: April] 2005.

2. An order that the judgment and orders of the Full Bench of the Industrial Court of New South Wales in Proceedings Number 2131 of 2005 delivered on 30 November 2007 concerning [Meriton's] motion filed on 23 February 2006 and [Owners Corporation's] motion filed on 2 March 2006 be called into this Court and quashed.”

LEGISLATION

11The relevant provisions of the IR Act are as follows:

“ 105 Definitions

In this Part:

contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument.

106 Power of Commission to declare contracts void or varied

(1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract.

…

(2A) A contract that is a related condition or collateral arrangement may be declared void even though it does not relate to the performance by a person of work in an industry, so long as:

(a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and

(b) the performance of work is a significant purpose of the contractual arrangements made by the person.

(3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time.

…

(5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case.

…

108 Who may apply for order

An order may be made under this Division on the application of:

(a) any party to the contract, or

(b) any person who, but for the making of such an order, would be a party to the contract, or

and not otherwise.

…

179 Finality of decisions

(1) A decision of the Commission (however constituted) is final and may not be appealed against, reviewed, quashed or called into question by any court or tribunal.

(2) Proceedings of the Commission (however constituted) may not be prevented from being brought, prevented from being continued, terminated or called into question by any court or tribunal.

(3) This section extends to proceedings brought in a court or tribunal in respect of a decision or proceedings of the Commission on an issue of fact or law.

(4) This section extends to proceedings brought in a court or tribunal in respect of a purported decision of the Commission on an issue of the jurisdiction of the Commission, but does not extend to any such purported decision of:

(a) the Full Bench of the Commission in Court Session, or

(b) the Commission in Court Session if the Full Bench refuses to give leave to appeal the decision.

(5) This section extends to proceedings brought in a court or tribunal for any relief or remedy, whether by order in the nature of prohibition, certiorari or mandamus, by injunction or declaration or otherwise.

(6) This section is subject to the exercise of a right of appeal to a Full Bench of the Commission conferred by this or any other Act or law.

(7) In this section:

decision includes any award or order.”

12For present purposes, three points should be noted about these provisions. First, ss 105-108 are contained in Pt 9 of Ch 2 of the IR Act. Proceedings instituted under Pt 9 of Ch 2 are to be heard and determined only by the Commission in Court Session: s 153(1)(c). The Commission in Court Session is the Commission constituted by a judicial member or members for the purpose of exercising the functions conferred by statute on the Commission in Court Session: s 151(1). The name of the Commission in Court Session is the Industrial Court of New South Wales: s 151A.

13Secondly, s 106(2A) of the IR Act was inserted by the Industrial Relations Amendment Act 2005 (“ 2005 Act “), which commenced on 9 December 2005. However, s 106(2A) was given retrospective effect: see Sch 1 to the 2005 Act .

14Thirdly, s 108 of the IR Act reproduces, with some variations, the language of s 88F(2C) of the Industrial Arbitration Act 1940, which was introduced by the Industrial Arbitration (Further Amendment) Act 1985. Prior to the 1985 amendment, the Industrial Arbitration Act did not specify who could bring an application under s 88F (broadly equivalent to s 106 of the IR Act). The words “ and not otherwise “, which now form part of s 108 of the IR Act, were part of the original s 88F(2C), introduced in 1985.

THE CARETAKER DEEDS

15Before considering the convoluted history of this litigation, it is convenient to explain the terms of the two deeds to which Regis Towers was a party. The first was a deed dated 20 April 1999 between Meriton and Regis Towers (“ April Deed “). The second was an agreement dated 6 August 1999 between Owners Corporation and Regis Towers (“ Caretaker Agreement “). The Caretaker Agreement was executed by Regis Towers by the affixation of its common seal. The seal was said to have been affixed in the presence of Mr Rose, whose signature appears on the document with the word “ Director ” written, presumably, in Mr Rose’s handwriting. I refer to both deeds together as the “ Caretaker Deeds “.

April Deed

16The April Deed recited that Regis Towers (referred to as the “ Caretaker “) had requested Meriton (referred to as the “ Developer “) to arrange for “ the Owners Corporation ” to grant to Regis Towers the caretaking and letting rights in respect of the Complex. The expression “ Owners Corporation ” was defined in the April Deed to mean the Owners Corporation which would come into existence on registration of the strata plan in respect of the Complex.

17Meriton was required to cause the Owners Corporation, as soon as practicable, to perform a number of acts. These included resolving to enter into a “ Caretaker-Management Agreement ” in respect of the Complex, the terms of which were set out in a schedule (cl 2.1(c)). Regis Towers warranted that it would apply for and obtain, within a specified period, either an “ On Site Property Manager’s Licence ” or a “ Restricted Real Estate Licence ” (cl 2.3).

18In consideration of Meriton using its best endeavours in accordance with cl 2 of the April Deed, Regis Towers agreed to pay Meriton $1,750,000 in accordance with a specified timetable (cl 3.1). The timetable provided for payment of:

a deposit of $131,250;
$1,017,500 on the completion of the “ Castlereagh Street Contract” ; and
$601,250 on the completion of the “ Campbell Street Contract “.

Each of the “ Castlereagh Street Contract ” and the “ Campbell Street Contract ” was defined to mean a contract between Meriton and Regis Towers whereby Regis Towers agreed to purchase from Meriton a specified lot in the Complex. The lots were identified as Lots 454 and 650, respectively.

19The amounts due to Regis Towers by the Owners Corporation under the Caretaker-Management Agreement were to be paid progressively as set out in the April Deed (cl 3.4). The sum of $365,000 was due on completion of the Castlereagh Street Contract and the first annual payment of $155,000 was due on settlement of the Campbell Street Contract.

20Regis Towers was to execute and return the Caretaker-Management Agreement to Meriton within five days of submission thereof (cl 5.1).

Caretaker Agreement

21Under the Caretaker Agreement, Owners Corporation agreed to engage Regis Towers to perform the duties set out in Sch 2 in a conscientious, expeditious and workmanlike manner, so as to maintain the common areas of the building and to permit them to be enjoyed to an appropriate standard. Regis Towers accepted the engagement (cl 1).

22The Caretaker Agreement was to subsist for an initial term of ten years, with Regis Towers having an option to renew the Agreement for three additional terms, each of five years (cl 8.1, 8.2). However, Regis Towers could terminate the Caretaker Agreement by giving three months written notice (cl 8.5.1). Owners Corporation could terminate the Caretaker Agreement in the event of certain breaches by Regis Towers or in other defined circumstances (cl 8.5.3).

23Regis Towers’ duties under the Caretaker Agreement included the following (cl 2, Sch 2):

“[Regis Towers] shall by its employees, contractors or agents:

(a) Maintain and care for the strata scheme and attend to the gardening, cleaning and building maintenance of the building and common property and any improvements thereon …

(b) Supervise the observance of the by-laws of the Owners Corporation by the proprietors and/or the occupiers including their guests and licensees for the time being of the lots in the said strata scheme. The Caretaker must serve notices on occupants in relation to breaches of by-laws and must Record all breaches for future reference.

…

(d) Reside, or if the Caretaker is a corporation, ensure that the principal person performing the duties of Caretaker pursuant to this Agreement resides in Lot 71 in the building and to permit its substitute from time to time to reside in that Unit.

…”

24Owners Corporation was required to pay Regis Towers an annual sum by fortnightly instalments for the performance of the latter’s duties specified in Sch 2 (cl 2). The annual sum was initially set at $676,000 (Sch 1, Item 2).

25Regis Towers was entitled to provide services as agent for lot owners, including collecting rents and buying, selling or leasing lots within the strata scheme. If Regis Towers performed these services, Owners Corporation incurred no liability to pay the remuneration for the services (cl 4).

26Regis Towers could conduct the business of providing the services referred to in cl 4 from Lots 454, 489 and 650, pursuant to the rights conferred on the owner of the “ Caretaker’s Lots ” by the terms of a proposed by-law set out in Sch 3 (cl 5). (The expression “Caretaker’s Lots ” was defined to mean Lots 454, 489 and 460.) Proposed by-law 36 prohibited the owner or occupier of every lot, except the three Caretaker’s Lots from performing the Caretaker’s duties as set out in proposed by-law 34 (which largely reflected the terms of Sch 2 to the Caretaker Agreement). It will be seen that two of the three Caretaker’s Lots were identified in the April Deed but the third (Lot 454) was not.

27In providing services under the Caretaker Agreement, Regis Towers was required to comply with the requirements of the Property, Stock and Business Agents Act 1941 and the regulations thereunder. Regis Towers was also obliged to treat all lot owners fairly (cl 7).

28The grounds on which Owners Corporation could terminate the Caretaker Agreement under cl 8.5.3 included the following:

“(e) the proprietor or one of the proprietors of the Caretaker’s lots, recorded on the folio of the Register comprising that lot, is not the Caretaker or any shareholder or principal of any Caretaker company … or is not an assignee under this Agreement …;

(f) The Caretaker does not hold any licence … or other qualification required for the lawful performance of its responsibilities or exercise of its rights under this Agreement.”

29In the event of termination pursuant to cl 8.5, cl 9(1) provided, somewhat ungrammatically, as follows:

“The Caretaker must sell or cause the owner(s) of the Caretaker’s Lots together with the Caretaker’s interest in this Agreement (‘the Caretaker-management rights’) to sell the Caretaker’s lots to a person nominated by the Owners Corporation.”

Owners Corporation was given the right to nominate a person to have the first right of refusal of the Caretaker’s Lots and the Caretaker-management rights at a price to be agreed or determined by a valuer (cl 9(2)).

30The Caretaker Agreement also included the following provisions:

“ Instructions

16. The Caretaker must ensure that its employees and agents have adequate instructions and supervision so as to permit discharge of its responsibilities to the appropriate standard.

…

Relationship

19. Nothing contained in this Agreement or inferred from it, of itself or with other circumstances, shall constitute a relationship of partnership or employer and employee between the parties. It is the express intention of the parties that any such relationship is denied.

Assignment

20. The Caretaker may not assign this Agreement without the consent under seal of the Owners Corporation which consent will not be unreasonably withheld. …

21.1 A change in the shareholding of the Caretaker which alters the effective control of the Caretaker shall constitute an assignment of this Agreement.

21.2 Upon assignment, the Caretaker must be released and discharged from any further liability under this Agreement but without prejudice to the rights and remedies of either party arising in respect of any matter or thing occurring prior to the date of assignment.

…

Caretaker-Manager a Corporation

27.1 If the Caretaker is a corporation, it will be the responsibility of the Caretaker to ensure at all reasonable times that an adequate number of its officers, managers, servants or agents are available on the complex to carry out the Caretaker’s duties and functions.

27.2 The persons used by the Caretaker to carry out the Caretaker’s duties and functions, who are not the principal shareholders or directors of the Caretaker, will require the prior approval in writing of the Executive Committee of the Owners Corporation, such approval not to be unreasonably withheld. The Caretaker must provide to the Executive Committee sufficient information concerning the persons involved to enable the Executive Committee to make a reasonable determination.”

31The Caretaker Agreement was varied on 17 October 2000 in a manner summarised by the Full Bench of the Industrial Court in its judgment (at [42.3], [52] below). Nothing turns on these variations.

HISTORY OF THE LITIGATION

Industrial Court Proceedings

32Mr Rose commenced proceedings in the Industrial Court on 27 April 2005. Mr Rose’s “ Matters of Fact and Law ” filed in the Industrial Court alleged that:

in early 1999, Mr Rose was a director of Regis Towers (para 3);
between February and March 1999, Mr Rose personally bought ten units in the Complex, which had been developed by Meriton (para 4);
on 20 April 1999, following “ certain representations ” made by Meriton to Mr Rose and others, Meriton executed a Deed with Regis Towers:

“whereby for consideration in the sum of $1,750,000.00, [Meriton] agreed inter alia , to procure a Caretaker Agreement between Regis Towers … and [Owners Corporation], whereby [Mr Rose] and others were to perform work in an industry in and of New South Wales … [Mr Rose] personally invested funds of $525,000.00, with the balance to be funded by way of a Vendor Finance arrangement with Meriton Finance Pty Limited.” (para 5);

in August 1999, by the hand of Mr Rose, Regis Towers executed the Caretaker Agreement, whereby work was performed in an industry in New South Wales (para 6);
contrary to Meriton’s representations, the standard of the strata scheme for the Complex was not satisfactory in that it did not comply with the Building Code of Australia :

“and consequently the remuneration payable under the Caretaker Agreement was insufficient to permit Regis Towers … and [Mr Rose] to discharge their duties under the Caretaker Agreement. Consequently, Regis Towers … and [Mr Rose] bore considerable expenses at their own loss” (para 7);

on 17 September 2004, Regis Towers and Mr Rose arranged for the appointment of a voluntary administrator to Regis Towers by reason of Meriton obtaining summary judgment against Regis Towers for $1,225,000 and Regis Towers not being able to service its debt because of the unprofitability of the Caretaker Agreement (para 9);
by reason of the unfairness of the contract brought about by Meriton’s misrepresentations, the conduct of the Claimants:

“and the terms of the Caretaker Agreement which failed to contain fair mechanisms for review of the remuneration …, [Mr Rose] suffered considerable personal loss and damage” (para 10);

at the date of the filing of the summons, Regis Towers continued to provide services to Owners Corporation (para 12); and

following the appointment of the Administrator to Regis Towers, Mr Rose commenced a contract of employment with the administrator, which terminated in February 2005 (para 13).

33Regis Towers was not a party to the proceedings in the Industrial Court. As Mr Rose’s summons in the Industrial Court indicated, Regis Towers was in administration at the time the proceedings were commenced. Although there was no evidence as to the subsequent fate of Regis Towers, this Court was informed from the bar table that the company had gone into liquidation long ago.

34On 21 June 2005, Mr Rose presented a debtor’s petition to the Official Receiver under s 55 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act “). By virtue of s 55(4A) he thereupon became bankrupt and his divisible property vested in his trustee in bankruptcy: s 58.

Motions in the Industrial Court

35On 14 February 2006, Owners Corporation filed a motion in the Industrial Court seeking orders that the proceedings be summarily dismissed or stayed. The grounds for the relief sought by Owners Corporation were, in summary, the following:

Mr Rose had become bankrupt on 21 June 2005;
Mr Rose’s trustee in bankruptcy subsequently purported to assign to Mr Rose the chose in action constituted by the Industrial Court proceedings;
the purported assignment was contrary to the policy of the Bankruptcy Act and was beyond the power of the trustee and void; and
in consequence, the proceedings were deemed by s 60(3) of the Bankruptcy Act to be abandoned by the trustee.

36On 23 February 2006, Meriton filed a motion seeking similar relief on much the same grounds. However, Meriton’s motion also asserted that Mr Rose lacked standing under s 108 of the IR Act to claim the relief sought in his summons. By a separate motion filed on 2 March 2006, Owners Corporation also raised the issue of Mr Rose’s standing.

37Mr Rose filed a motion on 6 September 2006 seeking leave to file an amended summons in the Industrial Court proceedings. The proposed amended summons sought the same relief as in Mr Rose’s original summons, but included claims for orders making Mr Rose a party to both “ the contract with [Meriton] ” and “ the contract with [Owners Corporation] “.

38The matters of law and fact in the proposed amended summons were identical to those in the original summons. However, the proposed summons incorporated “ Grounds and reasons ” that included the following:

“4. At all material times, it was agreed between [Regis Towers], [Mr Rose] and [the Claimants] that [Mr Rose] would personally perform the work of the caretaker under the [Caretaker Agreement].

5. At all material times, [Mr Rose] was a Director and Shareholder of Regis Towers …

6. The [April Deed] provided that Regis Towers … was required to pay to [Meriton] the sum of $1,750,000.00.

[Mr Rose] personally paid [Meriton] $525,000.00. The [April Deed] also required [Meriton] to cause the Owners Corporation, amongst other things, to pass Special By-Laws and to enter into the [Caretaker Agreement] with Regis Towers … At a General Meeting prior to 1 September 1999, [Owners Corporation] passed Special By-Laws. Regis Towers … purchased certain lots in the strata scheme number 56443 being lots 149, 454, 488 and 650 to give it exclusive rights to carry out certain services including Caretaking/Managing services. [Mr Rose] personally paid in excess of $300,000.00 towards the purchase of those lots.

7. [Mr Rose] personally performed the work as Caretaker/Manager from 1999.

8. The amounts claimed [in] the draft Amended Summons for Relief relate specifically to the personal losses, past and future, of [Mr Rose].

9. Accordingly, [Mr Rose] seeks leave to file the draft Amended Summons for Relief so as to obtain an order from this honourable Court making him a party to the [April Deed] and the [Caretaker Agreement].”

Judgment of Marks J

39The motions were heard by Marks J in the Industrial Court on 12 September 2006. His Honour delivered judgment on 31 October 2006:Rose v Meriton Apartments Pty Ltd [2006] NSWIRComm 298.

40Marks J held (at [58]-[59]) that Mr Rose had no standing under s 108 of the IR Act to commence the proceedings in his own name and thus the proceedings were a nullity. His Honour reasoned as follows (at [57]):

“It is clear … that only a party to the contract sought to be impugned under s 106 has the standing to commence proceedings. There can be no doubt, based on the manner in which the summons for relief is framed that there is no claim that the applicant is a party to any contract sought to be impugned in the proceedings. Accordingly, the applicant was not entitled to commence the proceedings in his name because of the operation of s 108(a). Nor, does it seem to me, that the applicant is entitled to rely in any way on the provisions of s 108(b)….

41Marks J also held (at [54]) that the purported assignment by the trustee in bankruptcy to Mr Rose of the chose in action was ineffective and that the trustee was deemed to have abandoned the proceedings. In his Honour’s view, this provided a separate reason for dismissing the proceedings (at [55]).

42Marks J expressed (at [62]) “ grave doubt ” as to whether the Industrial Court is entitled under s 106 of the IR Act to grant relief at the suit of a person who is not a party to a contract, so as to make that person a party to the contract. However, having found that the proceedings were a nullity, his Honour had no need to deal with Mr Rose’s application to amend the summons.

43His Honour dismissed Mr Rose’s application to amend his summons and dismissed the summons.

Full Bench of the Industrial Court

44Mr Rose sought leave to appeal to the Full Bench of the Industrial Court from the interlocutory decision of Marks J. In a judgment delivered on 30 November 2007, the Full Bench granted leave to appeal and allowed the appeal: Rose v Meriton Apartments Pty Ltd[2007] NSWIRComm 264. The Full Bench:

dismissed the motions filed by Meriton and Owners Corporation;
dismissed Mr Rose’s application to amend the summons; and
remitted the proceedings to a Judge of the Industrial Court to be dealt with in accordance with the Full Bench’s judgment.

45The Full Bench identified two broad issues. The first was whether Marks J was correct in holding that Mr Rose lacked standing to bring proceedings under the IR Act. The second was whether Marks J was correct in holding that the effect of the Bankruptcy Act was that Mr Rose’s trustee in bankruptcy was deemed to have abandoned the proceedings.

46On the first issue, the Full Bench considered (at [30]) that the fact that Mr Rose was “ not personally a party to the relevant contract , in a common law sense ” did not resolve the question of standing, as there was no requirement in the relevant standing provisions that the “ right to bring proceedings is restricted only to common law contractual parties “. The question was whether Mr Rose satisfied the requirements of s 108(a) of the IR Act.

47On that issue the Full Bench accepted (at [31]) that, in order for the proceedings to be validly commenced, Mr Rose was required to be a “ party to the contract “. If Mr Rose could not be so characterised, he would lack standing to initiate proceedings by virtue of s 108(a) of the IR Act and would also lack standing to have the proceedings amended by including an additional individual party to the relevant contracts.

48However, the Full Bench did not agree (at [32]):

“with the contention that [Mr Rose] is not a ‘party to the contract’, and thus lacks standing, because he is not specifically named as an individual contracting with either [claimant] in the relevant agreements. What is required is that [Mr Rose] is able to be characterised as a ‘party to the contract’, pursuant to s 108(a). In our opinion, [Mr Rose] may be so characterised. Although not identified as a party to a contractual agreement, in the conventional common law sense, we consider that [Mr Rose] is, nevertheless, a party to an ‘arrangement’, as that term is contemplated by s 105.”

49The Full Bench stated (at [33]) that the “ correct approach ” to the Claimants’ motions was to grant summary relief only if it was:

“plain that the invocation of the jurisdiction impugned [was] wholly misconceived or, upon analysis, lack[ed] an arguable legal foundation”

(quoting from Virtue v New South Wales Department of Education and Training (1999) 92 IR 428, at 447-448).

50The Full Bench noted (at [36]) “ for completeness ” that no threshold issue in relation to jurisdiction under s 106 of the IR Act had yet been raised in the proceedings.

51Their Honours considered (at [37]) it clear that the expression “ contract ” when used in s 108(a) of the IR Act bears the wider meaning given to that expression by s 105. Accordingly, the expression includes an “ arrangement “. This is not a term of art, but (at [39]):

“embraces transactions which do not give rise to contracts or obligations, that is to say, obligations enforceable at law … [It also] embraces a situation where there exist two or more separate contracts which, notwithstanding their separateness, are, given the facts, so sufficiently associated with each other in a practical sense as together to constitute an arrangement of which each contract is a part.”

(quoting from Custom Credit Corporation v Goldsmiths [1976] AR (NSW) 98, at 131).

52The Full Bench continued (at [40]-[47]) as follows:

“40 It can be seen that the reasoning above supports the finding of the arrangement in the current matter. Under the terms of the relevant arrangement, it is apparent that [Mr Rose] was to personally perform the work of caretaker, and was also closely associated with the execution of the relevant contract as principal director and shareholder of the corporate entity known as Regis Towers.

41 As we have stated, there has been no substantive examination of the relevant contractual arrangements and [Mr Rose's] connection with those arrangements. The material upon which we are able to rely at this stage of the proceedings includes the originating summons filed by the appellant on 27 April 2005, which provides a summation of the relevant contractual arrangement between the parties …

42 Further, the parties had admitted into evidence copies of the relevant contracts for the purpose of the interlocutory proceedings before Marks J. …

43 Notably, there is no evidence provided in relation to [Mr Rose's] connection with either Cesscut Pty Ltd or Regis Towers. The only oral submissions provided in relation to the nature of the relevant arrangement are those previously referred to as being provided by [Mr Rose].

Conclusion – Standing under s 108

44 Applying the principles enunciated in the relevant authorities, it is clear that s 108 of the IR Act should not be construed so as to confine the meaning of ‘contract’ in the sense contended by [Owners Corporation], or as contemplated by Marks J in the decision under appeal, and to effectively deny the appellant standing as a ‘party to the contract’. It is sufficient to establish that there is an ‘arrangement’ for the purpose of compliance with the standing requirement contained in s 108(a). The relevant contracts outlined above are part of an arrangement which meets the requirements of ss 105 and 108(a). As a party to that arrangement there is no requirement that [Mr Rose] needs to be an actual party to the common law contract(s).

45 We consider that where an applicant for relief performs personal services or work in order to fulfil relevant contractual obligations under the terms of an arrangement (although not the same as the relevant contracting entity/individual(s)), and is instrumentally involved in the formulation of a relevant contractual arrangement as the appellant appears to have been, in the capacity of principal director and shareholder of the relevant corporate entity which is a contractual party to the arrangement, prima facie that applicant is a party to the relevant arrangement, and thus a ‘party to the contract’ for the purpose of obtaining standing pursuant to s 108(a) of the IR Act.

46 Accordingly, taking the evidence, as it presently exists, at its highest and having regard to the relevant authorities to which we have referred, we find that [Mr Rose] is party to an arrangement involving the appellant and both respondents that is within the definition of contract in s 105 of the IR Act. A conclusion that [Mr Rose] has standing under s 108(a) is open on the facts as they have been provided at this stage in the proceedings. It therefore follows that there is no reason to dismiss the proceedings for lack of standing.

47 We propose, therefore, to dismiss the motion filed on 2 March 2006 by Owners Corporation and the motions filed on 23 February 2006 by Meriton and Owners Corporation, with respect to the applications to have the proceedings struck out or stayed. We also propose to dismiss the motion filed on 27 August 2006 by [Mr Rose] seeking that the proceedings be amended.” (Emphasis added.)

Federal Court

53On 27 March 2008, the Claimants filed an application in the original jurisdiction of the Federal Court seeking a declaration that the proceedings in the Industrial Court were deemed to be stayed or abandoned by the operation of s 60 of the Bankruptcy Act. The Claimants also sought orders quashing the orders made by the Full Bench of the Industrial Court on the ground that s 27 of the Bankruptcy Act conferred exclusive jurisdiction “ in bankruptcy ” on the Federal Court and the Federal Magistrates Court. The Claimants’ application was heard by a Full Court of the Federal Court.

54In a judgment delivered on 13 October 2008, the Full Court held, by majority, that the Industrial Court proceedings had not been stayed or abandoned under s 60(2) and (3) of the Bankruptcy Act and that the proceedings were not an impermissible intrusion into the exclusive jurisdiction conferred on federal courts by s 27 of the Bankruptcy Act . Accordingly, the Court dismissed the Claimants’ application: Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2008] FCAFC 172; 171 FCR 380 (Branson and Greenwood JJ; Perram J dissenting).

New South Wales Court of Appeal

55The “ next step in this saga ” (to use the words of Handley AJA) occurred when the Claimants filed a summons in this Court on 2 December 2008, seeking prerogative relief in the nature of prohibition in respect of the proceedings in the Industrial Court. Mr Rose, who had been discharged from bankruptcy in June 2008, filed a motion to strike out the Claimants’ summons. Mr Rose contended that the summons was an abuse of the Court’s process on the authority of Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589.

56An order was made that the issue of abuse of process be determined separately and the question be referred to this Court for determination. The separate question, as reformulated during the hearing in this Court, was as follows:

“Whether the issues, facts and outcomes of the Application to the Federal Court determined by the Full Court of the Federal Court including orders made on 13 October 2008 estop the [C]aimants from contending in this Court by the Summons filed on 2 December 2008 that the Full Bench of the Industrial Court of New South Wales erred in its summary application decision of the issue whether [Mr Rose] has standing to apply for relief raised before it arising under s. 108 of the Industrial Relations Act 1996 (NSW) for discretionary relief as framed in order (1) or alternatively whether it is an abuse of process.”

The Court answered the question “ No “: Meriton Apartments Pty Ltd v Industrial Court (NSW) [2009] NSWCA 434; 263 ALR 556.

High Court

57On 25 January 2010, Mr Rose applied for special leave to appeal to the High Court from the decision of this Court dismissing his motion. The High Court refused special leave on 28 May 2010.

The Amended Summons

58The last stage of the saga (so far) was formalised by the filing of the Claimants’ amended summons seeking the relief set out earlier ([10] above). The Claimants moved on the amended summons in this Court.

SUBMISSIONS

Claimants’ submissions

59The Claimants invoked the supervisory jurisdiction of the Supreme Court over decisions of the Full Bench of the Industrial Court, conferred by s 69 of the Supreme Court Act and preserved by s 179(4) of the IR Act. Mr Walker SC, who appeared with Mr Shields for the Claimants, submitted that this was a clear case of the Full Bench having exceeded the jurisdictional limits imposed by s 108 of the IR Act. It was therefore quintessentially a case in which this Court should grant orders in the nature of prerogative relief.

60Mr Walker accepted, without qualification, that the extended definition of “ contract ” in s 105 of the IR Act applies to s 106. He therefore accepted that the jurisdiction of the Industrial Court extends to declaring void or varying any contract or arrangement, or any related condition or collateral arrangement, whereby a person performs work in any industry, provided that the Industrial Court finds that any such contract, arrangement or condition is an “ unfair contract ” as defined in s 105. However, Mr Walker submitted that the language of s 108(a) of the IR Act was intractable, with the consequence that the Industrial Court could make an order under s 106 only on the application of a “ party to the contract “. He submitted that the Industrial Court has no jurisdiction to make an order on the application of someone who is not a party to the relevant contract or arrangements except in the circumstances specified in s 108(b) – (e), none of which applied to the present case.

61Mr Walker pointed out that Mr Rose’s amended summons in the Industrial Court sought relief in respect of the April Deed between Meriton and Regis Towers and in respect of a collateral arrangement alleged to be between Owners Corporation and Regis Towers. It had not been alleged that Mr Rose was a party either to the Caretaker Deeds or to the collateral arrangement identified in the amended summons. Nor did the summons allege any other arrangement to which Mr Rose was a party. It followed that the Full Bench was in error when it said (at [44]) that the contracts identified by it (at [42]) were “ part of an arrangement which meets the requirements of ss 105 and 108(a) “. No such arrangement had been identified or pleaded by Mr Rose.

62In his oral argument, Mr Walker accepted that it is not essential in all cases for the pleadings filed in the Industrial Court to identify precisely the contract or arrangement to which the applicant is said to be a party. He also accepted that if it appeared that the jurisdictional defect could be readily cured by an amendment to the pleadings or to the relief sought by the applicant, this Court might decide to withhold prerogative relief on discretionary grounds. However, Mr Walker submitted that the pleadings constituted the primary reference point on the jurisdictional question. Furthermore, Mr Rose had had ample opportunity to reformulate his claim so as to bring it within the jurisdiction of the Industrial Court, but had not done so.

63According to Mr Walker, there was nothing in either the April Deed or the Caretaker Agreement that obliged Mr Rose to perform any particular duties or even contemplated that the various duties would be performed by a particular person. Mr Walker also submitted that it was not to the point that Mr Rose was a director and shareholder of Regis Towers, nor that he had apparently caused the company to enter into the Caretaker Agreement. These circumstances did not establish that Mr Rose was a party to any contract or arrangement in respect of which the Industrial Court was asked to make an order. It followed that the jurisdictional requirement imposed by s 108(a) of the IR Act had not been satisfied.

Mr Rose’s submissions

64The oral submissions advanced on behalf of Mr Rose bore little relationship to the brief written submissions filed on his behalf. The written submissions argued that “ the true nature and substance of the contract ” relied on by Mr Rose was a contract of service to which he was “ clearly a party “. It was said that the express terms of the April Deed and the Caretaker Agreement did not prevent the Industrial Court finding, at a final hearing, that a contract was in place which warranted relief in the form sought by Mr Rose. The question of jurisdiction should be left until the Industrial Court had an opportunity to make findings in relation to the contract. In any event, any error made by the Full Bench of the Industrial Court was an error within jurisdiction and therefore could not provide the basis for prerogative relief.

65In his oral submissions Mr Street SC, who appeared with Ms Gleeson for Mr Rose, contended that the Claimants would succeed in their claim for prerogative relief only if there was no arguable basis on which the Industrial Court could exercise jurisdiction. This was said to follow from the Claimants’ summary dismissal motion in the Industrial Court which, on the authority of General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, could not succeed if Mr Rose’s case was arguable.

66Mr Street relied on evidence that Mr Rose had negotiated the Caretaker Deeds; signed the Deeds (albeit as a director of Regis Towers); been required to reside in a lot in the Complex; personally acquired lots from Meriton; and acquired the licence required by cl 2.3 of the April Deed. Mr Street also relied on conversations between Mr Rose and Mr Londy, a principal of a real estate agency, which took place in about February 1999. According to Mr Rose, Mr Londy encouraged him to purchase the caretaker-management rights for the Complex. Mr Londy advised Mr Rose to obtain a licence to conduct a real estate agency or to find a licensee who could carry out the property management elements of the contract that would be entered into with Meriton.

67According to Mr Street, when this evidence was taken at its highest, it was capable of supporting the Full Bench’s factual finding that there was an arrangement to which Mr Rose was a party. When pressed in oral argument to identify the nature of the arrangement that was supported by the evidence, Mr Street answered that the arrangement was that:

“there was going to be entered into, or provided, a caretaker management agreement under which Mr Rose was going [to] perform work in an industry and in order to do so had to acquire certain particular lots relating to the caretaker agreement and had to also reside in the premises and had to seek consent if the agreement was to be assigned in some way.”

68Mr Street submitted that, independently of s 108(a) of the IR Act, the Industrial Court has jurisdiction to deal with Mr Rose’s claim for relief because the proposed amended summons seeks orders making Mr Rose a party to each of the Caretaker Deeds. Such a claim, so Mr Street argued, satisfies s 108(b) of the IR Act because an application for an order that a person be made a party to an existing contract is an application made by a person “ who, but for the making of such an order, would be a party to the contract “. Mr Street said that the words in s 108(b) were intended to confer jurisdiction on the Industrial Court to make an order at the instance of a person who is not currently a party to a contract but who wishes to be added as a party.

69Next Mr Street submitted that Mr Rose could be regarded as a party to the Caretaker Deeds on the basis that both Deeds were intended for his benefit. He relied, without fully developing the submission, on principles of trust and agency whereby a person entitled to the benefit of a contractual promise is entitled, in certain circumstances, to enforce the promise against the promisor even though the person is not named as a party to the contract.

70If the Court rejected his principal submissions, Mr Street contended that the Court should nevertheless decline, in the exercise of its discretion, to make the orders sought by the Claimants. Mr Street relied on what he described as a delay of approximately 13 months between the finalisation of the Full Bench proceedings and the Claimants initiating proceedings in this Court seeking prerogative relief.

71It was put to Mr Street in the course of his oral submissions that it was very difficult to see how Mr Rose could obtain the relief sought in his Industrial Court summons in the absence of Regis Towers, a party to the Caretaker Agreement. Mr Street submitted in response that the absence of Regis Towers would not prevent the Industrial Court making an order declaring the Caretaker Agreement void or varying it, although he accepted that such an order would bind only the parties to the proceedings. If the absence of Regis Towers was a defect in the proceedings, it was not a jurisdictional error but merely a procedural matter which could be cured, if necessary, by an order joining Regis Towers.

REASONING

The Issues in this Court

72The Claimants seek orders in this Court pursuant to s 69 of the Supreme Court Act :

in the nature of prohibition preventing the Industrial Court from taking any further steps to exercise its power under s 106 of the IR Act with respect to the contracts and arrangements described in Mr Rose’s summons in the Industrial Court ; and
in the nature of certiorari quashing the judgment and orders of the Full Bench disposing of the Claimants’ motions.

73It was common ground that the privative clause in s 179(1) of the IR Act is no barrier to the relief sought by the Claimants in this Court. It was accepted by the parties that the decision of the Full Bench was within s 179(4) of the IR Act: see Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1; 239 CLR 531 (“ Kirk “), at 582 [103], per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ.

74As I have noted, Mr Street submitted that the Claimants’ application for prerogative relief was to be determined by this Court on the same principles applied by the Full Bench in dismissing the Claimants’ motions seeking to strike out or summarily dismiss Mr Rose’s summons in the Industrial Court. On this basis, he contended that this Court, like the Full Bench, should take the evidence at its highest and only grant prerogative relief if it was plain that the invocation of the jurisdiction lacked an arguable legal foundation.

75The issue on the Claimants’ application for prerogative relief is whether they have shown that the Industrial Court does not have jurisdiction to exercise the powers conferred on it by Pt 9 of Ch 2 of the IR Act . More specifically, the issue is whether they have shown that the Industrial Court does not have jurisdiction to make the orders sought by Mr Rose in the summons he filed in that Court.

76In Batterham v QSR Ltd [2006] HCA 23; 225 CLR 237, the joint judgment pointed out that there is a “real and radical difference between deciding that a point is arguable and deciding the point “: at 249 [28], per Gleeson CJ, Gummow, Hayne, Callinan and Crennan JJ. In that case, the Industrial Court rejected a summary dismissal application on the ground that the proceedings had not been shown to be “ unarguably beyond jurisdiction “. The High Court held that an application to the Court of Appeal for prohibition had not “ called in question ” the decision of the Industrial Court for the purposes of s 179(1) of the IR Act (the privative clause). (Section 179(4) was not then in force.) The High Court so held because the application for prohibition required the Court of Appeal to make a final determination as to whether the Industrial Court had jurisdiction to grant the relief sought in that Court and not merely to decide whether there was an arguable case that the Court had jurisdiction: Batterham v QSR , at 249 [28]; QSR Ltd v Industrial Relations Commission of New South Wales [2004] NSWCA 199; 208 ALR 368 (“ QSR v IRC “), at 383 [85], per Handley JA (with whom Mason P agreed).

77It may be that in a particular case, an application for prerogative relief is premature. For example, this Court may take the view that the claimant in the Industrial Court should have the opportunity to adduce further evidence relevant to the jurisdictional question or to amend the summons to assert that undisputed facts have a particular legal effect: QSR v IRC , at 378 [44], per Spigelman CJ; at 379 [58], per Handley JA: Mayne Nickless Ltd v Industrial Relations Commission of New South Wales [2004] NSWCA 359; 141 IR 1, at 11 [61], per Mason P (with whom Hodgson and McColl JJA agreed). Nonetheless, assuming that it is not premature to address the jurisdictional question, the Court must decide the point. Contrary to Mr Street’s submission, the principles to be applied are not those that govern an application in the Industrial Court for summary dismissal of the proceedings.

Jurisdictional Error and s 108 of the IR Act

78In Kirk, the judgment of six members of the Court stated, among others, the following important propositions (at 566 [55]):

“(f) A defining characteristic of State Supreme Courts is the power to confine inferior courts and tribunals within the limits of their authority to decide by granting relief in the nature of prohibition and mandamus, and, as explained further in these reasons, also certiorari, directed to inferior courts and tribunals on grounds of jurisdictional error. (g) If a court has limited powers and authority to decide issues of an identified kind, a privative provision does not negate those limits on that court’s authority. (h) A privative provision in State legislation, which purports to strip the Supreme Court of the State of its authority to confine inferior courts within the limits of their jurisdiction by granting relief on the ground of jurisdictional error, is beyond the powers of the State legislature. It is beyond power because it purports to remove a defining characteristic of the Supreme Court of the State.”

79The judgment in Kirk rejected the notion that there is a “ rigid taxonomy of jurisdictional error ” (at 574 [73]). However, their Honours endorsed (at 573-574 [72]) the observations by the High Court in Craig v South Australia [1995] HCA 58; 184 CLR 163, at 177, that an inferior court (or tribunal) falls into error if it mistakenly asserts the existence of jurisdiction and that jurisdictional error:

“is at its most obvious where the inferior court [or tribunal] purports to act wholly or partly outside the general area of its jurisdiction in the sense of entertaining a matter or making a decision or order of a kind which wholly or partly lies outside the theoretical limits of its functions and powers.”

The joint judgment in Kirk explained (at 574 [72]) that the reference to “ theoretical limits ” should not distract from the need to focus on the limits of the body’s functions and powers. Such limits are to be identified by the relevant statute.

80If Mr Rose’s reliance on s 108(b) of the IR Act is put to one side for the moment, the effect of s 108(a) is that the Industrial Court can make an order on Mr Rose’s application declaring void or varying a “contract” if Mr Rose is a “ party to the contract ” and not otherwise. Section 108 is an unequivocal statement by Parliament that the Industrial Court cannot make an order under s 106 of the IR Act declaring a contract wholly or partially void, or varying its terms, otherwise than on application by a party to the contract.

81While there is no bright line separating jurisdictional errors from errors within jurisdiction, there are some cases which clearly fall on one side of the line or the other: Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57; 204 CLR 82, at 141 [63], cited in Kirk , at 571 [66]. If the Industrial Court purports to make orders under s 106 of the IR Act in relation to a contract otherwise than on application by a party to the contract (assuming none of the other sub-paragraphs of s 108 is satisfied), it is doing something that it has no power to do. Accordingly, prerogative relief will ordinarily be available to a person adversely affected by the orders.

82In Batterham v QSR , the joint judgment applied (at 250 [28]) the principle stated in R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100, at 118-119, that prohibition:

“is a writ which goes as of right when the prosecutor is directly affected by the course pursued by a tribunal to which the writ lies and the prosecutor shows satisfactorily that the tribunal is about to act to his detriment in excess of its authority.”

In Batterham v QSR , the majority concluded that since there was a “ real likelihood ” that the Industrial Commission would make orders in excess of its jurisdiction, the Court of Appeal had rightly granted prerogative relief.

83If the Claimants can show that there is a real likelihood that the Industrial Court will make orders under s 106 of the IR Act otherwise than on the application (relevantly) of “ any party to the contract ” as required by s 108(a) of the IR Act, they will be entitled to prohibition, subject to any discretionary considerations.

An Excess of Jurisdiction?

84Whether the Industrial Court has jurisdiction to grant the relief sought by Mr Rose does not necessarily depend solely on the terms of his summons. Nonetheless, it is the summons that sets out the relief sought by Mr Rose in the Industrial Court and, in compliance with r 18A of the Industrial Relations Commission Rules 1996 (now repealed by the Industrial Relations Commission Rules 2009), summarises the Matters of Fact and Law which form the basis of the application for relief. The summons is therefore the appropriate starting point.

85The declaration and orders sought by Mr Rose (see [6] above) identify the “ contract ” in respect of which relief is sought as consisting of the April Deed and:

“additionally … a contract or collateral arrangement between (Owners Corporation] and [Regis Towers] whereby [Mr Rose] performed work in an industry …”

Despite the reference to “ collateral arrangement “, there is nothing in the prayers for relief to indicate that the relevant contract or arrangement between Owners Corporation and Regis Towers consists of anything other than the Caretaker Agreement. That conclusion is reinforced by the Matters of Fact and Law, which refer only to the April Deed and the Caretaker Agreement.

86It was common ground that an applicant may seek relief under s 106 of the IR Act in respect not only of a contract in the strict legal sense, but also in respect of an “ arrangement, or any related condition or collateral arrangement “, as contemplated by the definition of “ contract ” in s 105. In Fish v Solution 6 Holdings Ltd [2006] HCA 22; 225 CLR 180, it was pointed out that it is the arrangements, both contractual and non-contractual, whereby a person performs work in an industry that the Industrial Court may avoid or vary: at 195 [41], per Gleeson CJ, Gummow, Hayne, Callinan and Crennan JJ. As their Honours observed, while the notion of avoiding an unenforceable arrangement may be “ awkward “, determining that some new arrangement will obtain for the future “ presents no such awkward juxtaposition of ideas “. Thus Mr Rose, if the facts supported his claim, could have sought relief in respect of an “arrangement “. He also could have alleged that he was party to the arrangement, even though he was not a party to either of the Caretaker Deeds. What is necessary to demonstrate that an applicant is a party to an informal or tacit arrangement or one that is non-contractual need not be explored.

87Mr Rose’s summons does not refer either in the prayers for relief or the Matters of Fact and Law, to any contracts or arrangements other than the Caretaker Deeds. There is no reference, for example, to any agreement or arrangement which may have predated the Caretaker Deeds and to which Mr Rose may have been a party. Paragraphs 4 and 5 of the Matters of Fact and Law assert that Mr Rose personally bought units in the Complex and that “ certain representations ” were made by Meriton to Mr Rose, but these events are not said to be elements in any relevant arrangement.

88Nor does the summons allege that Mr Rose was a party to the Caretaker Deeds or to any collateral arrangement. The Matters of Fact and Law allege, somewhat obliquely, that the Caretaker Agreement was executed by the “ hand of [Mr Rose] “. But the Caretaker Agreement on its face shows that Mr Rose signed in his capacity as a director of Regis Towers for the purpose of witnessing the affixation of the company’s seal. Mr Street did not suggest that Mr Rose’s signature in this capacity of itself made him a party to the Caretaker Agreement.

89In some circumstances, it might be possible to infer from the critical contractual documents the existence of facts which satisfy the jurisdictional requirements of Pt 9 of Ch 2 of the IR Act. For example, in Mayne Nickless v IRC , the terms of a deed under which a company agreed to provide pathology services made it clear that the services were in fact to be provided by a particular qualified pathologist (a director of the company). This was sufficient to demonstrate that the deed was a contract whereby a person performed work in an industry and thus to satisfy the jurisdictional requirement in s 106 of the IR Act (at 9-10 [49]-[50], per Mason P).

90As I have noted, Mr Rose’s summons does not identify any contract or arrangement to which Mr Rose is said to have been a party. Moreover, the Caretaker Deeds contain nothing to suggest that they were components of a broader agreement or arrangement to which Mr Rose was a party, whereby he performed work in an industry. The Caretaker Agreement imposed duties on Regis Towers, which it was to perform “ by its employees, contractors or agents ” (cl 2, Sch 2). The Agreement did not require Mr Rose to perform any of the duties personally, although no doubt it was open to him to do so as an agent of the company. The Caretaker Agreement contemplated that Regis Towers could conduct its business from three nominated lots in the Complex, two of which had been purchased by Regis Towers as recorded in the April Deed. Regis Towers was required to sell or cause the Caretaker’s Lots to be sold if Owners Corporation terminated the Caretaker Agreement (cl 9(1)). The Agreement said nothing about Mr Rose personally acquiring lots in the Complex.

91The only provision in the Caretaker’s Agreement which appears to have contemplated that Mr Rose might carry out some of the duties imposed on Regis Towers was cl 27.2. This provided that the persons used by Regis Towers to carry out its duties, if they were not the principal directors or shareholders of the company, required approval from Owners Corporation. Whatever significance cl 27.2 might have for the purpose of satisfying s 106 of the IR Act, it does not suggest any antecedent or broader agreement or arrangement to which Mr Rose was a party.

92Mr Street relied on evidence that was before the Industrial Court to support what he said was the Full Bench’s factual finding that there was an arrangement to which Mr Rose was a party (see [67]-[69] above). The Full Bench appears to have concluded that on the material before it it was arguable on the General Steel standard that there was an arrangement pursuant to which Mr Rose was to personally perform the work of a caretaker and was also to be “ closely associated ” as principal director and shareholder of Regis Towers with the execution of the Caretaker Agreement (at [40]).

93The Full Bench also appears to have concluded that it was arguable that Mr Rose was a party to the arrangement (at [32]). In this respect the Full Bench emphasised the uncontentious proposition that a “ contract “, for the purposes of s 108 of the IR Act, is not limited to a “ contractual agreement, in the conventional common law sense “. Later their Honours said (at [45]) that if an applicant for relief performs personal services “ in order to fulfil relevant contractual obligations ” and is instrumentally involved in the formulation of the contractual arrangements as a principal director, prima facie the applicant is a party to the arrangement.

94One difficulty with the Full Bench’s approach, even on the General Steel standard, is that Mr Rose’s summons does not identify any arrangement, other than the Caretaker Deeds, in respect of which he seeks relief or to which he was a party. Perhaps for this reason, the Full Bench did not make findings, on an arguable basis or otherwise, as to the parties to the arrangement, the terms of any arrangement (except to assert that there was a term that Mr Rose would personally perform work as a Caretaker) or the circumstances in which the arrangement was entered into.

95A second difficulty is that the Full Bench relied only on Mr Rose’s summons and the terms of the Caretaker Deeds to reach its conclusions (at [41]-[42]). For the reasons already given, this material cannot support a conclusion that Mr Rose was a party to an agreement or arrangement antecedent to or outside the Caretaker Deeds. Their Honours’ reasoning (at [45]) seems to assume that if a company engages a director to perform services the company is contractually obliged to provide to a third party, there is an arrangement between the director and the third party whereby the director is to perform the services. It is difficult to see why, at least in the absence of additional facts, that assumption is correct: see Production Spray Painting & Panel Beating Pty Ltd v Newnham(1991) 27 NSWLR 644, at 657, per Priestley and Handley JJA. Similarly it is difficult to see why the fact that the director has negotiated the terms of a contract between the company and a third party is capable of itself of creating an arrangement between the director and the third party.

96Mr Street attempted to overcome these difficulties by referring to various pieces of evidence that might support a claim by Mr Rose to be party to an agreement or arrangement whereby he performed work in an industry (that is, by discharging duties as a caretaker in the Complex). But not only is any such arrangement not identified in the summons, any claim by Mr Rose based on such an arrangement has never been formulated with any precision. Despite Mr Street’s attempt to do so in oral argument (at [69] above), the terms of the arrangement, the parties to it and the circumstances in which it came into existence remain unclear. In my opinion, it is not enough to establish a sound jurisdictional basis for relief under Pt 9 of Ch 2 of the IR Act to point to evidence that might be relied on to support an as yet unformulated claim different to the claim currently being pursued.

97In any event, much of the evidence referred to by Mr Street is, at best, equivocal. For example, the conversations which Mr Rose said he had with Mr Londy, a real estate agent, seem to be no more than the usual interchanges between an agent eager to secure a sale and a potential purchaser rather than evidence of an arrangement. Mr Rose’s own evidence as to the discharge of the duties specified in the Caretaker Agreement was that:

“[t]he day-to-day running of Regis Towers and the duties associated with the obligations under [Sch 2 of the Caretaker Agreement] are and have been carried out primarily by … my wife [who is] a shareholder in [Regis Towers].”

98Mr Rose also appeared to acknowledge that all the Caretaker’s Lots were owned by Regis Towers, although he said that he had personally provided moneys for the acquisition. Indeed, Mr Rose said that he had entered into contracts to acquire units in the Complex, presumably in his own name, before execution of the April Deed on 20 April 1999. He did not say that he had acquired the units pursuant to an arrangement which led to the execution of the Caretaker Deeds.

99For these reasons, subject to the other arguments advanced by Mr Street, I consider that unless prerogative relief is granted, there is a real likelihood that the Industrial Court will respond to Mr Rose’s summons by making an order in excess of its jurisdiction.

Section 108(b) of the IR Act

100Section 108(b) of the IR Act provides that an order may be made under s 106 on the application of “ any person who, but for the making of such an order ” would be a party to the contract. Mr Street’s submission was that Mr Rose’s application to file an amended summons seeking orders to be made a party to the Caretaker Deeds satisfied the terms of s 108(b).

101Mr Street’s submission cannot be reconciled with the language of s 108(b). The language of s 108(b) assumes that the applicant is or has been a party to the contract but will not be a party if the order sought in the proceedings is made. The language is not apt to include an application by a person who has never been party to a contract but seeks to be added as a party.

102It may be that s 108(b) does not add anything to s 108(a). One possibility is that it was included out of an abundance of caution to ensure that the Industrial Court has jurisdiction to make orders removing an applicant as a party to a contract. Another possibility is that it is intended to cover the case where an order has already been made removing the applicant as a party to the contract and the applicant wishes to bring fresh proceedings in relation to the contract. Whether or not s 108(b) has any operation beyond that of s 108(a), it cannot assist Mr Rose in the present case.

Benefit of the Caretaker Deeds

103Mr Street’s submission that Mr Rose could be regarded as a party to the Caretaker Deeds for the purposes of s 108(a) of the IR Act. was not developed in the oral argument and was not adverted to in the written submissions. The starting point for the submission seemed to be that the terms of the Caretaker Deeds could be characterised as being for the benefit of Mr Rose. The basis for this contention was not made clear. None of the provisions in the Caretaker Deeds is expressed to be for Mr Rose’s benefit and there is nothing to suggest that Mr Rose, as distinct from Regis Towers, was to be entitled to enforce any of the promises made by Meriton or Owners Corporation.

104Even if there was a basis for concluding that Mr Rose was the beneficiary of contractual promises and was entitled to sue the Claimants as promisors, that would not convert him into a party to either or both of the Caretaker Deeds: Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; 165 CLR 107, at 112-113, 115, 123, per Mason CJ and Wilson J; at 165-`166, 172, per Toohey J; cf at 174, 175, per Gaudron J. Similarly, if Mr Rose could establish that Regis Towers was trustee of a contractual promise for his benefit, he would not become a party to the contract: Trident v McNiece , at 121, per Mason CJ and Wilson J; at 148, per Deane J; at 135, per Brennan J; Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd [1985] HCA 13; 155 CLR 541, at 546, per curiam .

105A person may enter into a contract on behalf of an undisclosed principal. In such circumstances the undisclosed principal is a party to the contract although not named as such: see, for example, Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (the “New York Star “) (1980) 144 CLR 300; [1980] 3 All ER 257. But no basis has been shown in the present case for treating Regis Towers as an agent for Mr Rose as undisclosed principal.

Orders

106In my opinion, it follows from what has been said that the Industrial Court does not have jurisdiction to hear and determine Mr Rose’s claim for relief in its present form. That is because the application for relief in respect of the Caretaker Deeds has not been made by a person within any of the categories identified in s 108 of the IR Act. As I have noted, the orders made by the Full Bench create a real likelihood that, unless prohibition is granted, the Industrial Court will make orders in excess of its jurisdiction.

107In my opinion, there is no discretionary reason to withhold relief from the Claimants. The “ delay ” on which Mr Street relied is almost wholly explained by the time taken to resolve the proceedings instituted by the Claimants in the Federal Court. It is true that this case has all the hallmarks of well resourced parties utilising all available avenues to thwart Mr Rose’s application in the Industrial Court. Nonetheless, the Federal Court proceedings raised serious and difficult issues, as demonstrated by the differing views expressed by members of the Court. The Claimants acted promptly to commence their Federal Court proceedings and, once those proceedings failed, promptly instituted the present claim for prerogative relief. The circumstances do not warrant withholding relief that otherwise should be granted.

108The conclusions I have reached do not necessarily mean that Mr Rose’s Industrial Court proceedings are doomed to fail. It may be that Mr Rose can reformulate his claims so as to allege a contract or arrangement to which he is a party (thereby satisfying s 108(a)) and which is a contract or arrangement “ whereby a person performs work in an industry ” (thereby satisfying s 106).

109A qualification is, however, necessary. As pointed out in oral argument, Regis Towers is not a party to the Industrial Court proceedings notwithstanding that Mr Rose seeks orders varying the Caretaker Deeds to which Regis Towers was a party. The absence of Regis Towers deprives the Industrial Court of jurisdiction to entertain a claim by Mr Rose for relief under s 106(1) of the IR Act to declare wholly or partly void or vary the Caretaker Deeds: Yim v Industrial Relations Commission of NSW [2007] NSWCA 77; 162 IR 62, at 80 [100]-[103], per Handley AJA (with whom Mason P agreed).

110In view of the orders that I propose, it is neither necessary nor appropriate to express a view as to whether Mr Rose can amend his application to formulate a claim for relief that is within the jurisdiction of the Industrial Court.

111The relief that this Court grants should be moulded to fit the circumstances of the case. It is appropriate to grant prohibition quo usqueso as to prevent the Industrial Court making the substantive order sought in Mr Rose’s summons in its present form: R v Australian Stevedoring Industry Board , at 118; QSR v IRC , at 383-384 [88]-[89] (an order upheld by the High Court: Batterham v QSR , at 250 [28]-[29]). Orders should be made quashing the Full Bench’s orders that the Claimants’ strike out motions be dismissed. The Full Bench’s order that the proceedings be remitted to a Judge of the Industrial Court should stand, but the order that the proceedings “ be dealt with in accordance with this Judgment ” should be quashed.

112I propose the following orders:

1. Order that the Industrial Court be prohibited from making orders 1, 2 and 3 as sought in Summons No IRC 2131 of 2005, filed on 27 April 2005 in this Court.

2. Call up orders 5, 6 and 8 made by the Full Bench of the Industrial Court on 30 November 2007 and quash orders 5 and 6 and so much of order 8 as directs that the remitted proceedings “ to be dealt with in accordance with this judgment “.

3. Mr Rose pay the Claimants’ costs of the proceedings in this Court, but have a certificate under the Suitors’ Fund Act 1951 for the costs of the proceedings in this Court.

Drive at a Speed Dangerous to the Public

admin — Wed, 24 Aug 2011 06:17:48 +0000

Drive at a Speed Dangerous to the Public (Dangerous Speeding)
The offence of drive in a speed dangerous to the public is legislated by section 42 of the Road Transport (Safety and Traffic Management) Act (NSW). There are serious penalties if you are convicted of this offence.

Penalties for driving at a speed dangerous to the public

The court has the discretion to impose a number of penalties for the charge of driving at a speed dangerous to the public. If you plead guilty (or are found guilty) the court has the discretion not to record a conviction against you and thus you will not be disqualified from driving. This is called a section 10 dismissal of the charge whereby you are found guilty but not convicted. The court will consider several factors in determining whether you are an appropriate candidate for a section 10 dismissal such as your driving record, your good character, your need for a drivers licence and your early plea of guilty.

If you plead guilty (or are found guilty by the court) and the court does not allow for a section 10 dismissal of the charge they must at least impose the minimum disqualification period which is 12 months for your first offence and 2 years for your second or subsequent offence. The court also has the discretion to impose fines, a gaol term and community service orders. The possible penalties are detailed in the following table:

Traffic Offense

admin — Wed, 24 Aug 2011 06:04:46 +0000

The laws in NSW relating to speeding offences have become significantly tougher in recent years. The possibility of having your drivers licence suspended or disqualified through the accumulation of demerit points has become much greater than in past years. Furthermore, licence suspension for a period of 3 months for infringements such as speeding by more than 30km/h can have a significant impact, not only on your ability to get around, but also your job.

Prime Lawyers has extensive expertise in representing people charged with traffic offences. We understand the serious consequences that can flow from not being able to drive. If you are facing suspension or disqualification of your driver’s licence, contact our traffic lawyers on (02) 9797 8688
Speeding Penalties in NSW?
If your vehicle is detected by a fixed speed camera, mobile speed camera or Police Officer and a penalty notice is issued, you will incur a fine and licence demerit points. P1 licence holders will have their licence suspended for at least 3 months for any speeding offence.

There are licence suspension periods, similar to the minimum disqualification periods applied by a court, for exceeding the speed limit by more than 30 km/h (3 months), and by more than 45 km/h (6 months).

If police catch you speeding by more than 45km/h over the limit you may have your licence immediately suspended and confiscated at the roadside fora period of 6 months. On 1 July 2009, a new demerit points scheme was introducted in NSW for certain offences.

The following table displays the fixed penalty notice fines and demerit points for speeding as at 13 July 2009.
FULL LICENCE – Pre 1 July 2010
Range Points Fine Suspension
1 to 10 1 $84
11 to 20 3 $197
21 to 30 4 $338
31 to 45 5 $647 3 months (min)
More than 45 km/h 6 $1,744 6 months (min)
FULL LICENCE – From 1 July 2010
Range Points Fine Suspension
1 to 10 1 $90
11 to 20 4 $211
21 to 30 4 $361
31 to 45 5 $692 3 months (min)
More than 45 km/h 6 $1,865 6 months (min)

P1 LICENCE – Pre 1 July 2010
Range Points Fine Suspension
1 to 10 4 $84 3 months
11 to 20 4 $197 3 months
21 to 30 4 $338 3 months
31 to 45 5 $647 6 months
More than 45 km/h 6 $1,744 9 months

P2 LICENCE – Pre 1 July 2010
Range Points Fine Suspension
1 to 10 4 $84
11 to 20 4 $197
21 to 30 4 $338
31 to 45 5 $647 3 months (min)
More than 45 km/h 6 $1,744 6 months (min)
LEARNERS LICENCE, P1 LICENCE, P2 LICENCE– Post 1 July 2010
Range Points Fine Suspension
1 to 10 4 $90 3 months (Learner, P1)
11 to 20 4 $211 3 months (Learner, P1)
21 to 30 4 $361 3 months (Learner, P1)
31 to 45 5 $692 6 months
More than 45 km/h 6 $1,865 9 months

Silverwater jail

admin — Wed, 24 Aug 2011 05:12:01 +0000

只能说2000年悉尼奥运会选的地方风水不咋样，以前悉尼奥林匹克公园是一个巨大的工业废墟，包括了8个垃圾处理厂，屠宰场，甚至包括澳洲皇家海军的军械库。不过这些似乎都不是什么问题，为了奥运会这些拆得拆，添的添，搬迁的搬迁。虽然看起来一切都掩饰的很好了，可惜这个奥运公园旁边最大的危险则是完全没动-悉尼奥林匹克公园一墙之隔的就是银水(silverwater)监狱。

这是悉尼最有名的监狱，倒不是因为它的安全系数有多高，这只是最低安全等级的监狱，而是因为它的地理位置。澳州当年一个议员的话“我不明白为什么银水监狱和奥运村的距离只有二三百米”，而就是这个和奥运村的距离，引发了一次又一次和奥运有关的越狱。

当年澳洲本身就是当作监狱的，所以对越狱并不陌生，但是就在距2000悉尼奥运开幕的一年前，银水监狱上演了澳洲历史上最有名的一次越狱，甚至可以说是全球监狱史里面最有激情，最感人，最能让现在追求刺激得小年轻们嗷嗷叫的一次越狱。
1999年，一个身上只有7澳元的图书管理员以观光悉尼奥运场地的名义租了一架轻型直升机，本来一切都很好，直升机到了奥运公园上空了，这位前苏联陆航指挥官的女儿也看了要看得景色了，就该交钱回家了吧。结果文静的图书管理员掏出了一把左轮（估计还时俄罗斯左轮），顶在了飞行员的头上，这可不是因为没钱交飞行费，她直接命令直升机迫降在银水监狱的空地上，准备劫狱。看来家庭因素还是挺大的，一般的“弱女子”可想不出来如何用直升机实施立体空降突袭，虽然在这位图书管理员的家里找出了几部以前美国的越狱电影，其中也有关于直升机劫狱的，但是如果没有一个前苏联在阿富汗见过血的功勋陆航指挥官老爹的言传，再怎么看估计也没办法搞出这一出。

直升机降落了，要救的情人呢则是看到直升机来了就直接冲出监狱奔向直升机，狱警先是目瞪口呆，不知所措，然后有几个明白的开始对直升机还有犯人扫射，似乎小口径手枪比不了当年阿富汗游击队的毒刺导弹，直升机没事，人也没事，直接飞出监狱奔向自由。

这个爱情够刺激的，不过还没完，图书管理员的爱人既然在银水蹲监狱自然也不是什么善主儿，这可是一个被判处十几年徒刑的多次持枪抢劫的江洋大盗，下了飞机又干起了老本行，直接用枪逼迫麦考利大学附近的一个可怜的出租车司机开车狂奔。按照这个司机的说法，他本来以为这两个不知道路了，要帮忙，刚摇下窗户准备开口，就看见手枪直接对着脑袋了。不过这对儿凶悍夫妇还挺人性，听说这司机上有八十老母，下有嗷嗷待哺的孩子，就没下狠手只是说了如果不好好表现就要打膝盖…反正不是头
中间这对亡命鸳鸯似乎有抢劫了几辆别的车，然后一路杀到墨尔本去度假去了。这两人玩了两天似乎觉得还不够刺激，又开车回了悉尼还顺便还从银水监狱门口溜达了一下，最后经过了6个星期惊险刺激的全澳通缉追捕，他们在悉尼附近一个景点的房车里面被抓获了。

如果说直升机越狱是一个比拟任何好莱坞悲剧爱情片的话，那么另一次的越狱就是带着国际纠纷的警匪片。这次是两个因为危险驾驶导致死亡的犯人，从银水监狱里面逃跑出来，直接劫持了一辆客车。很不幸，这车里面坐的是四个韩国奥运组委的官员。努努力，这个可以媲美1972年慕尼黑奥运了，还好这两个小贼没啥太大的深仇大恨，虽然想劫车逃跑，最后还是在警方的“劝告下”投向了，人质没事，这两人呢也顺便再回银水多蹲了几年。

如果大家下次再去悉尼的奥林匹克公园，别忘了顺路去银水监狱参观参观，运气好/不好的话，碰个什么事情之后，过几年就可以写书拍电影了。按照当年被劫直升机的老板的说法，他们年年被采访，天天有人想把这些事情拍成电影。

Wang & Associates Solicitors
英杰律师事务所
www.wangs.com.au

Goulbon jail

admin — Wed, 24 Aug 2011 05:10:20 +0000

“通过我，进入痛苦之城，通过我，进入永世凄苦之深坑，通过我，进入万劫不复之人群。抛弃一切希望吧，你们这些由此进入的人。”- 没有维吉尔的文采，当不了地狱的向导，但是还是可以给各位介绍一下澳洲的监狱。

看过越狱的都知道那个福克斯河州立监狱，也知道整个越狱第一季就是为了逃离那个不可逃离的监狱。很有可能大家都认为这种监狱是虚构的，或者只有美国才有，但是在澳洲，距离悉尼和堪培拉不远的高奔（Goulburn）就有一间完全可以比拟美国任何一间超级监狱的澳州监狱-高奔管教所。

千万别因为这个地方叫做管教所，就觉得这个地方没什么，高奔监狱是澳州地地道道的重犯云集的地方，这里面关押了除了阿瑟湾屠杀犯之外的几乎澳洲所有最臭名昭著的犯人。

澳洲2005年恐怖片狼溪里面的背囊杀手的原型就关押在高奔，这个背囊杀手比狼溪里面的还要恐怖，他被判蓄意谋杀7次，还有可能的30次因为证据不足而没有成立。其他的犯人还包括了比加女校杀人犯（Bega schoolgirl murders，被判两项无期徒刑外加155年徒刑），澳洲唯一一次政治刺杀案的犯人等等。

高奔监狱差不多是十九世纪八十年代成立，所以他的外表还有明显的后维多利亚时代建筑的风格，监狱主体是砂岩结构，主体建筑的顶部雕刻着维多利亚时代常见的华丽雕塑。当然为了与时俱进，这个监狱在差不多一百多年的历史里面也经过数次的升级，2001年的升级让这个监狱可以和美国任何一个超级监狱(supermax)比肩。

外面是高墙电网活动哨加”小狗”，里面则是一个个和药柜子一样的隔间，就是犯人想出去透气，也只能是一个一个地走进独立的笼子里面站着。每一个隔间除了钢筋水泥之外还是钢筋水泥，并且没有任何让人可以痛快自杀的梁梁角角，或者任何的杂物，犯人也就只有一个7厘米厚的垫子，当然如果表现良好还能享受到看电视的权利。

犯人的伙食也不能算很好，大部分时间是棕面包，曾经有犯人偷偷的递信到外界抱怨棕面包吃不习惯，这里面因为各种原因有些穆斯林犯人，一些没啥卡路里的肉还有足够的水果蔬菜，当然表现好的犯人每周可以买60块钱以内的额外配餐，只不过质量就不好说了。

犯人在有些情况下面还要带上手铐脚镣，不过作为最高监狱，他们手铐脚镣的戴法也不太一样，手铐脚镣连接在一起，而且还和腰部的绑带挂着，所以走起路来如同一群僵尸过界，只能直直的移动。除非是绝世高手不然挣脱十几斤的枷锁外加打倒4个荷枪实弹的牢头根本就是不可能的。

不仅仅严加看守，每一月这些囚犯还要轮换一下牢房，顺便做一次X-光避免私藏什么东西，不过就这样，09年这里面的两个犯人还偷偷的把手机偷带进去，并引发了一场不小的风波。

就像越狱一样，这个监狱也是犯人和看守斗智斗勇，2002年曾经出现过一次暴动，犯人拆了食堂的桌椅和看守互殴，结果就是30个犯人要多吃几年牢饭外加没吃饭的桌椅，7个看守送去医院，刺激程度不必越狱差多少。而探监的“家属“也不能算省心，过去的2年里面，各种各样的违禁物品都尝试着带到监狱里面，比如枪械，刀具，假证件，毒品，酒还，现金，手机等等，当然这些“家属”有不少也因为带这些东西被直接送进高奔陪犯人去了。

这就是澳洲最严监狱高奔“管教所”-也是很多人进去就出不来的地狱

Professional negligence

admin — Wed, 24 Aug 2011 05:08:03 +0000

Persons who hold themselves out to be professionals, such as solicitors, financial advisors/planners, doctors, have a duty under the law to exercise proper care and skill when providing services to their clients.

If a professional person fails to exercise a reasonable degree of care and skill, and as a result you suffer “loss” (whether financial loss or physical injury), you may be able to make a legal claim against them so as to recoup your losses.

An action may be brought under the common law of negligence and/or breach of contract law.

In establishing that the professional has been negligent, you must be able to establish the following (according to the law):

1. Negligence (Breach in Duty of Care). A service provider may be held negligent if they have provided a service that is below the reasonable standard of care required for someone of their skill and qualifications.
2. Causation. If the service provided was below the expected standard of care required by the law, you must then establish that this failure has caused or contributed to your loss or losses. Sometimes, the service or advice provided can be negligent, but if no harm, loss or damage has resulted, then you will NOT be entitled to any compensation.

Informed Consent

You may be able to make a claim if the professional failed to advise you on the possible unfavourable outcome of a proposed service, and if you had been advised that you would have declined the service, or sought advice and service from a more qualified practitioner. These cases can be very difficult to establish.

Compensation Awards

The purpose of compensation is to put the victim back into the position they would have been, had they not suffered negligence.

You can only be compensated for losses that are the result of the negligence.

Compensation may include the following:
• professional service expenses incurred as a result of the negligence, as well as any future expenses likely to be incurred
• past and future financial loss arising from the negligence
• interest
• legal costs.

In the case of medical negligence (negligent treatment, advice or diagnosis) by a medical practitioner, you may be entitled to medical and other out-of-pocket expenses, such as cost of pharmaceuticals, counselling, rehabilitation equipment, as well as loss of income and compensation for pain and suffering.

Time Limits

If you have suffered professional negligence, you have only a certain specified time period within which to bring legal action. Failure to bring action within the time specified by the law, will result in your claim becoming “statute-barred”, i.e you will be prevented from bringing action at all. Only in very exception circumstances can the court extend the time period. However, it is prudent to not wait until the end of the limitation period to bring legal action.
The usual time limit is 3 or 6 years from the date of the negligence (it varies from State to State). That is, in some States you have only 3 years to bring an action, and in other States you have 6 years. Your solicitor will be able to advise you of what the relevant time period is in your case.

Professional Negligence Actions are very complex and can be vigorously defended by professionals and their insurers, given that it is often the professionals reputation that is at stake (amongst other things).
Hence, it is important that you seek legal advice as soon as possible, if you think you may have a claim.

Not all bad professional service is “negligent”

A complaint about service provision, generally, is not professional negligence.
Although you might be dissatisfied with a number of aspects of your professional service and care including the cost, the attitude or manner of a provider or the way in which the service was delivered, most such complaints will not give rise to a claim in professional negligence.

While these things may be frustrating, infuriating and distressing, negligence claims are difficult to establish and unless you have actually suffered a loss quantifiable in legal terms, you are not able to make a claim.

Yu v Registrar-General of New South Wales

tt — Mon, 03 May 2010 00:23:59 +0000

our new case in the Supreme Court of NSW

NEW SOUTH WALES SUPREME COURT

CITATION:
Yu v Registrar-General of New South Wales [2010] NSWSC 353

JURISDICTION:
Equity

FILE NUMBER(S):
2010/67122

HEARING DATE(S):
15 April 2010

JUDGMENT DATE:
15 April 2010

EX TEMPORE DATE:
15 April 2010

PARTIES:
Plaintiff: Hengfeng Yu
1st Defendant: Registrar-General of New South Wales
2nd Defendant: Wun Cheung Chan
3rd Defendant: Council of the Law Society of New South Wales

JUDGMENT OF:
White J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable

COUNSEL:
Plaintiff: J Gormley
1st Defendant: n/a
2nd Defendant: n/a
3rd Defendant: Ms L Tang

SOLICITORS:
Plaintiff: Wang & Associate Solicitors
3rd Defendant: Law Society of NSW

CATCHWORDS:
PRACTICE AND PROCEDURE – service of originating process – whether court has power to dispense with service without substituted service – order for substituted service under rule 10.14 of Uniform Civil Procedure Rules – requirements for substituted service

LEGISLATION CITED:
Legal Profession Act 2004 (NSW)
Evidence Act 1995 (NSW)

CATEGORY:
Procedural and other rulings

CASES CITED:
Laurie v Carroll (1958) 98 CLR 310
White v Weston [1968] 2 QB 647
Porter v Freudenberg [1915] 1 KB 857
Chappell v Coyle (1985) 2 NSWLR 73

TEXTS CITED:
Dicey, Conflict of Law, 6th ed (1949)

DECISION:
Refer to paras 28 and 29 of judgment.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Thursday, 15 April 2010

2010/67122 Hengfeng Yu v Registrar-General of New South Wales & 2 Ors

JUDGMENT

1 HIS HONOUR: These proceedings were commenced on 16 March 2010. The plaintiff alleges, and has filed affidavits which unless contradicted would prove, that the second defendant, Mr Chan, defrauded the plaintiff and by forgery became registered as the proprietor of a property in Granville which is beneficially owned by the plaintiff.

2 The affidavits read by the plaintiff establish that the plaintiff retained Mr Chan as his solicitor to purchase the property, that the vendor of the property signed a contract with the plaintiff and executed a transfer of the property in favour of the plaintiff, that the plaintiff provided the purchase price, but Mr Chan registered himself as the owner of the property and forged a transfer for that to be done.

3 The plaintiff deposes that Mr Chan told him that he, Mr Chan, was required to hold the original contract for five years and that he did not know and was not told that the transfer was to be registered. He was unaware that the property for which he paid was registered in Mr Chan’s name. It appears that Mr Chan raised moneys on the security of the property by executing a mortgage in favour of Nationwide Capital Pty Limited. Mr Chan’s practising certificate has been suspended.

4 In October 2008 a manager was appointed to Mr Chan’s practice pursuant to s 623(2) of the Legal Profession Act 2004 (NSW). A claim has been made on the Fidelity Fund. The Fidelity Fund has paid the moneys necessary to discharge the mortgage.

5 The plaintiff’s current solicitor now holds the certificate of title to the property which is still registered in the name of Mr Chan. The plaintiff seeks orders for the cancellation of the certificate of title and the issue of a new certificate of title by the Registrar-General in his name.

6 The difficulty in the present application is that Mr Chan has not been served. The plaintiff did not know his whereabouts, or whether he was in Australia when proceedings were commenced. The manager appointed to Mr Chan’s practice, a Mr Collins, deposes that it appeared that Mr Chan had occupied part of the first floor of the office premises as his place of residence. It does not seem that he still resides there.

7 Mr Collins spoke to Mr Chan in May 2009 and arranged an appointment which Mr Chan was to attend. Mr Collins has had no further contact with Mr Chan since that conversation and has had no response to his correspondence. Mr Collins has advertised in the Law Society Journal seeking information as to Mr Chan’s whereabouts but has not received any reply from anyone to that advertisement.

8 The matter has been placed in the hands of the police. The plaintiff’s solicitor deposes that on 22 March 2010 he was told by a Detective Constable Williams that he was in the process of investigating Mr Chan’s whereabouts and would be knocking on some doors soon. Detective Constable Williams told the plaintiff’s solicitor that:

“We have an idea of who to ask but we can’t say where he is, he could be overseas by now.”

9 More recently, Detective Constable Williams has told another solicitor in the firm acting for the plaintiff that he has been told by the Department of Immigration that Mr Chan left the country on 13 August 2009 and his whereabouts are currently unknown. Detective Constable Williams said that he would try to find out from the Immigration Department which country Mr Chan is in at the moment, and once located he would talk to his supervisor about seeking an extradition order, but whether that would be practicable would depend on what country he was in.

10 I was told by the plaintiff’s solicitor that Detective Williams also conveyed that the Department of Immigration understood that Mr Chan had left Australia for Hong Kong.

11 No order has been made for substituted service. Today the plaintiff seeks the final substantive relief in the statement of claim and seeks an order that service on Mr Chan be dispensed with.

12 The first question is whether there is power to make such an order. The action between the plaintiff and Mr Chan is personal action. It is not an action in rem. In Laurie v Carroll (1958) 98 CLR 310 at 323-324, the High Court quoted with approval from Dicey, Conflict of Law, 6th ed (1949) at 172 that:

“The service of the writ or something equivalent thereto is absolutely essential as the foundation of the court’s jurisdiction. Where a writ cannot legally be served upon a defendant the Court can exercise no jurisdiction over him. In an action in personam the converse of this statement holds good and wherever a defendant can be legally served with the writ, there the court, on service of being effected, has jurisdiction to entertain an action against him. Hence in an action in personam the rules as to the legal service of a writ define the limits of the court’s jurisdiction. Now, a defendant who is in England can always, on the plaintiff’s taking proper steps, be legally served with a writ. The service should be personal, but if personal service cannot be effected the court may allow substituted or other service.”

13 No order for substituted service has been made. There is no direct evidence that Mr Chan was outside Australia when the proceedings were commenced. But pursuant to s 75 of the Evidence Act 1995 (NSW) I can act on the hearsay evidence to which I have referred.

14 The fact that Mr Chan was apparently outside Australia when proceedings were commenced does not deprive the Court of jurisdiction. Service could be effected outside Australia pursuant to r 11.2 and paragraph (j) of schedule 6 to the Uniform Civil Procedure Rules.

15 The question is whether I can make the orders sought when Mr Chan has not been served, and no order has been made for substituted service. It is submitted for the plaintiff that I could dispense with service pursuant to r 10.1 of the Uniform Civil Procedure Rules. That rule provides relevantly:
“10.1(1) Unless the court orders otherwise, a party that files a document must as soon as practicable serve copies of the document on each other active party.”

16 No authority was cited in support of the submission that that rule authorised the Court’s dispensing with service of the originating process. Any rule for dispensing with service of originating process is to be strictly construed. In White v Weston [1968] 2 QB 647, Sachs LJ said (at 660) that:

“… only an explicit and clear provision in a statute, or in rules having statutory force, can operate to deprive a citizen of this right to receive notice of the commencement of the process against him …”

17 Rule 10.1 is a general rule relating to service of documents in proceedings. It contemplates that at the time documents that have been filed are to be served there will be other active parties. Prior to service of the originating process the defendants could not be said to be active parties.

18 Other rules such as r 10.15 dealing with service of originating process in proceedings for possession of land make express provision for modifying the rules in relation to service of originating process. In my view, r 10.1(1) does not dispense with what is otherwise an essential requirement for the Court to have jurisdiction.

19 It seems to me that I do not have jurisdiction to make the orders sought unless and until an order is made for substituted service pursuant to r 10.14 and that order is complied with.

20 That rule provides:

“10.14 Substituted and informal service generally

(1) If a document that is required or permitted to be served on a person in connection with any proceedings:

(a) cannot practicably be served on the person, or

(b) cannot practicably be served on the person in the manner provided by law,

the court may, by order, direct that, instead of service, such steps be taken as are specified in the order for the purpose of bringing the document to the notice of the person concerned.

(2) An order under this rule may direct that the document be taken to have been served on the person concerned on the happening of a specified event or on the expiry of a specified time.

(3) If steps have been taken, otherwise than under an order under this rule, for the purpose of bringing the document to the notice of the person concerned, the court may, by order, direct that the document be taken to have been served on that person on a date specified in the order.

(4) Service in accordance with this rule is taken to constitute personal service.”

21 It was submitted for the plaintiff that I should make an order nunc pro tunc directing that service of the documents which has been effected on the Law Society and on the police be taken to be sufficient service under r 10.14(1).

22 It does not appear to me that service which has been effected on the Law Society and on the police was effected for the purpose of bringing these proceedings and the documents filed in them to the notice of Mr Chan. The Law Society is itself a defendant, as relief is claimed in the statement of claim against it in relation to orders the plaintiff sought pursuant to s 445 of the Legal Profession Act for indemnity in relation to costs.

23 It does not appear that the Law Society was asked to pass on the documents to Mr Chan, as distinct from passing them on to the manager of Mr Chan’s practice, Mr Collins. Nor is it at all probable that the police would be expected to pass on the documents to Mr Chan for whom they are still looking. Detective Constable Williams had said “Obviously I don’t want to call Bob Chan.”

24 I do not consider that the service which has already been effected on those persons could be construed as being service made for the purpose of bringing the documents to Mr Chan’s notice.

25 There is no doubt that r 10.14(1)(a) and (b) are both satisfied. There is authority that for substituted service to be permitted it must be clearly shown that the documents to be served are likely to reach the defendant or to come to his knowledge if the method of substituted service which is asked for by the plaintiff is adopted (Porter v Freudenberg [1915] 1 KB 857 at 888; Chappell v Coyle (1985) 2 NSWLR 73 at 76 ff).

26 However it is not a requirement of the rule that steps taken pursuant to an order made under r 10.14 be likely to bring the document to the notice of the person concerned before an order can be made directing that the person be taken to have been served. Rather, steps must be taken for the purpose of bringing the document to the notice of the person concerned.

27 There is no address known to the plaintiff at which documents could be left which might be thought would then come to the notice of Mr Chan. It is possible that advertisements in a national paper in Australia and in a major newspaper in Hong Kong would achieve that purpose.

28 Accordingly, pursuant to r 10.14, I direct that instead of service of the statement of claim and affidavits filed in these proceedings on the second defendant the plaintiff, within 28 days, advertise in The Australian newspaper and in the South China Morning Post in Hong Kong the fact that proceedings have been instituted by the plaintiff in the Supreme Court of New South Wales against the second defendant in which orders are sought that the Registrar-General cancel the certificate of title in the name of second defendant in respect of the land referred to in paragraph 2 of the statement of claim, and the Registrar-General issue a new certificate of title showing the plaintiff as the registered proprietor of that property, and also stating that information and documents in relation to the proceedings can be obtained from the plaintiff’s legal representative, Mr Jay Wang of Wang & Associate Solicitors and providing the contact details of Mr Wang. The advertisement should also state that the proceedings will be returnable before the Court on 20 May 2010 and if there is no appearance by Mr Chan or a person on his behalf at that time orders may be made in his absence.

29 Assuming that the order for substituted service is complied with, then the documents will be taken to have been personally served on Mr Chan and on the next occasion the Court would have jurisdiction to make the orders sought. If short minutes are handed up on that occasion they should include an order for the plaintiff to deliver the duplicate certificate of title presently held by him or his solicitor to the Registrar-General for cancellation.

******

LAST UPDATED:
28 April 2010

Zhang v Minister for Immigration and Citizenship & Anor [2010] HCATrans 61 (12 March 2010)

tt — Fri, 16 Apr 2010 02:24:27 +0000

Our new case in the High Court of Australia

[2010] HCATrans 061

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S283 of 2009

B e t w e e n -

KUANG LUN ZHANG

Applicant

and

MINISTER FOR IMMIGRATION AND CITIZENSHIP

First Respondent

ATTORNEY‑GENERAL FOR THE COMMONWEALTH OF AUSTRALIA

Second Respondent

Application for special leave to appeal

GUMMOW J

BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 MARCH 2010, AT 12.12 PM

MR G.C. LINDSAY, SC: May it please the Court, I appear for the applicant with MR J.F. GORMLY. (instructed by Wang and Associate Solicitors)

MR S B LLOYD, SC: Your Honour, I appear with MS A.M. MITCHELMORE for the Minister. (instructed by Australian Government Solicitor)

GUMMOW J: Yes, Mr Lindsay.

MR LINDSAY: May it please the Court. There are two classes of special leave question proposed for the Court’s consideration. The first relates to the question whether the Migration Act impliedly excluded the principles of procedural fairness from application to a decision under section 162 of the Act to cancel a criminal justice stay certificate, which had been given to a witness pursuant to section 147. The second class of question relates to whether section 162 required the Attorney-General, in deciding whether or not to cancel such a certificate, to form an independent judgment about whether the certificate was, to quote the section, “no longer required for the purposes for which it was given”. The legislation is conveniently extracted in the reasons for judgment of the federal magistrate in the application book at pages 32 and 33.

If I may turn to the first of the two classes of question, the applicant submits firstly that if the principles of procedural fairness were not excluded from the Act procedural fairness was on the facts of this case denied. That appears to have been the view taken by the court below in the application book at pages 58 to 59, paragraphs 70 to 72.

The second point we make is that in our submission, the Federal Magistrate was correct in his analysis of the case at pages 35 through to 39 of the application book. We submit further that the reasoning of Justice Merkel in Wasfi v the Commonwealth, upon which the Federal Magistrate relied ‑ ‑ ‑

GUMMOW J: Just interrupting you for a minute. The Court heard an appeal yesterday in the matter of Saeed v the Minister, which Mr Lloyd is up to speed on, which raises questions of the construction of the Migration Act, in particular, section 51A, is it not, and the general connection between the Migration Act and what one might call principles of national justice. There may be something to be said for standing over this application until we have decided Saeed. I do not know if you are familiar with Saeed.

MR LINDSAY: I am not, no.

GUMMOW J: Let me just ask Mr Lloyd.

MR LLOYD: I think I understand, your Honour, that there is potential overlap on some points, but we would say this is not a case affected by section 51A.

GUMMOW J: No, that is so. Remember there was some discussion generally in submissions as to what we mean when we talk about the rules of natural justice in this context of the Migration Act, and federal law generally.

MR LLOYD: I understand. I suppose all I would say in respect of that, given your Honour put it so broadly, that this is a case in which the court below found that there was this jurisdictional fact which had to be determined by section 162, whether or not the applicant was no longer required. The only evidence ‑ ‑ ‑

GUMMOW J: What was the actual source of the statutory decision?

MR LLOYD: Section 162.

GUMMOW J: Do we see that set out?

MR LLOYD: Yes, on page 33, at the bottom of the page, around about line 40. So a certificate having been granted, and we would say granted for the purposes of allowing his presence for the purposes of an investigation and potential prosecution – then there was evidence, and the only evidence that went to that point was a letter referring to the fact the DPP had said that he was no longer required for that investigation or prosecution. That is what led to the Attorney forming the view that section 162(1) was activated and then cancelling it.

GUMMOW J: The jurisdictional fact was the “no longer required”, if the presence is no longer required.

MR LLOYD: That is so, and perhaps if I put it this way. What I am saying is that even assuming, because the Court is looking at this natural justice issue, what we are saying is in this particular case, there would be futility because we argue that the only evidence before the court below was that he was not required. While he said he might have had a chance to go to tell the Attorney why he might have been a good witness or some such thing, we say it is not the Attorney’s role to decide those things. That is for the DPP or the investigator to decide. The Attorney is standing apart from that, so it is not within his scope of what he has to do. If the DPP say they do not want him, then they do not want him and that is the end of the matter and that defines reflection in the decision of the court below at ‑ ‑ ‑

GUMMOW J: You are saying, I think, that the jurisdictional fact here is one that is just not susceptible to a natural justice process.

MR LLOYD: That is so, yes. That is reflected in paragraphs 120 and 121 of the court below.

GUMMOW J: Yes.

MR LLOYD: Then the other matter which is raised in the special leave application is the fact that there is an allegation that ‑ ‑ ‑

GUMMOW J: I will put it another way. What would have to be controverted would be that he was required.

MR LLOYD: That is so.

GUMMOW J: “Required”, I suppose, means required by the authorities with the conduct of the proceeding.

MR LLOYD: Yes, and to be fair, the federal magistrate said he could have gone to the Attorney and said that he would have been a good witness, and he could add things. That is in the federal magistrate’s reasoning, for example, at paragraph 33 on page 37. He would have given more information about the investigation – those are things that he could have said. “He might have been able to point to information” – that is the kind of thing which a magistrate no doubt moots could have been said, and we say it was not the Attorney’s role in the scheme to decide that. It is either a fact that he was required or not. It is really for the DPP to decide, not for the Attorney to decide.

GUMMOW J: Thank you. Yes, Mr Lindsay.

MR LINDSAY: So far as it may be relevant, if the Court were minded to stand the application over until judgment is delivered in Saeed ‑ ‑ ‑

GUMMOW J: The question is whether it would be useful to do so.

MR LINDSAY: I cannot do more than say that if the Court were minded to do that, we would not stand in the way of that, but otherwise ‑ ‑ ‑

GUMMOW J: You had better develop your submissions.

MR LINDSAY: Thank you. If your Honours will just go to the application book at pages 32 and 33, your Honours will see that there is an interplay between section 162 which is reproduced ‑ ‑ ‑

GUMMOW J: What do you say your client would wish to have done, and what possible consequence could that have had for the operation of the ‑ ‑ ‑

MR LINDSAY: The material before the Court was to the effect that the applicant had been induced to co‑operate with the authorities as a witness for the purpose of assisting an investigation in relation to another party. This case factually is distinguished therefore from all the other cases where the issue has been considered because they all concern people who were either accused or convicted.

We submit that in considering what evaluative decision would be made for the purpose of section 162, which ties back to section 147, it would be appropriate to consider whether there were any inducements offered to a witness and it could not be said merely because a DPP – not the Attorney‑General, a DPP – had formed an unexplained view, a conclusion, if you like, that a witness was no longer required by him, that there were the grounds set out for section 162 to operate.

We have an unusual situation where a witness is approached by the Department of Immigration, made promises about the prospects of obtaining a permanent visa if there was co‑operation, the co‑operation is given and it is given for some four years, not six months as was initially anticipated. The Department of Immigration then sends a letter saying “You are no longer required because the DPP says you are no longer required”, and about the same time, the Department of Immigration sends a bare communication to the Attorney-General’s Department saying “This witness is no longer required. Please make arrangements to cancel the certificate”. The evidence is that with that bare request and nothing more – no inquiries, no further information provided – a delegate of the Attorney purported to effect a cancellation.

BELL J: The Attorney or his delegate was under an obligation in the event that the fact in section 162(1) was established, namely that the non‑citizen is no longer required. The determination was based on the communication with the Director of Public Prosecutions had so indicated. It is the function of the Director of Public Prosecutions to make such a determination, surely.

MR LINDSAY: In our submission, it is significant that in section 162, and also in section 147, the Act confers a power, a function, on the Attorney‑General – not on anybody else – on the Attorney‑General, and specifically in the context of the Act, not on the Department of Immigration. In our submission, a judgment about whether or not the section 162 fact exists has to be made by the Attorney.

In the formation of that judgment, in our submission, and on the case that we advance, it would be necessary for the Attorney or the Attorney’s delegate to turn attention to the facts underlying the grant of the certificate in order to make an evaluative decision about whether or not the witness was required.

In our submission, in the course of doing that, the Attorney could receive – perhaps should receive – any representations that are made about inducements that are, or were, held out to the witness in securing co‑operation. The difference between us is that on the respondent’s side of the record they say none of that is necessary. All that the Attorney needs to do is get a bare request from the Department of Immigration. Nothing more is required, and ‑ ‑ ‑

GUMMOW J: The Attorney‑General under the present system stands outside the activities of the DPP.

MR LINDSAY: The Attorney‑General – this is a statutory power and function conferred on the Attorney ‑ ‑ ‑

GUMMOW J: But in terms of the criminal prosecution. The statutory scheme in the Commonwealth is that the Attorney‑General stands outside.

MR LINDSAY: It is the Attorney, yes, which has the powers and the function, the duty, under section 162.

GUMMOW J: In effect, to put it pejoratively, does not meddle in what the DPP is doing.

MR LINDSAY: The statute confers a power and function on the Attorney‑General. It is not a power or function ‑ ‑ ‑

GUMMOW J: Under section 162 it imposes an obligation, actually. That is what Justice Bell was putting to you. Section 162 imposes an obligation on the Attorney in certain circumstances.

MR LINDSAY: Once the Attorney has formed the view, the judgment, that the fact exists. In our submission, in order to form that view, the Attorney needs to consider more than just a bare request from somebody in relation to what should be done, a mere request, and the evidence quite clearly suggests there was nothing more than that was done here. In those circumstances, adopting the reasoning of Justice Merkel, we say it could not be said that the principles of procedural fairness were excluded by the Act in relation to ‑ ‑ ‑

GUMMOW J: The question always is how would they apply?

MR LINDSAY: First of all ‑ ‑ ‑

GUMMOW J: What would happen? Natural justice is meant to be very practical.

MR LINDSAY: Yes. In practical terms, for a starting point the Attorney might have asked why is the request made? The Attorney might have asked what were the circumstances in which the witness was requested?

GUMMOW J: He might have been told, “It is none of your business”.

MR LINDSAY: The Attorney should then inquire, in our submission, how the co‑operation of the witness was required and that might properly be addressed, should be addressed, in our submission, as an invitation to the applicant. Had that invitation been made it is plain that the Attorney would have been told that a promise was made and it was a promise which requires consideration as to whether or not it should be honoured in all the circumstances in which it was made.

None of that happened in this case because the view was taken, a rather machine‑like decision, that it was sufficient to keep the applicant as a prospective witness hanging there and then simply to dismiss him without any further inquiry. The scheme of the legislation, in our submission, simply could not permit that. The Attorney‑General, on our case, as the holder of an office such as that has an obligation to superintend the administration of justice and in the course of doing that one of the matters that might be taken and, in our submission, should be taken very seriously is whether or not the co‑operation of a witness was secured by an inducement. In our submission that is a factor which would be highly material.

None of that happened. The applicant was not given an opportunity to bring those matters to the attention of the Attorney. The two different ways we put the case are first of all in relation to procedural fairness and as I commenced to say the case we make in terms of the legal reasoning is substantially as set out by Justice Merkel in Wasfi. In our submission the court below erred in refusing to follow that reasoning. It made that decision at appeal book page 64, paragraph 105.

In our submission the court below also erred in following some general observations about the operation of the Migration Act that were made by Justice French, as his Honour then was, in the case of Goldie and by Justice Lindgren in the case of Lee. Your Honours can see in short form what those observations are by turning to pages 63 and 64 of the application book. At page 63 in paragraph 99 Justice French is quoted as saying that on the face of it:

the rules of natural justice are excluded at every stage of the decision‑making process -

Justice Lindgren is paraphrased on page 64 of the application book as saying that:

references to investigation, prosecution and punishment in the definition of the “administration of criminal justice” in s 142 make it clear that the relevant perspective is that of the administrators of the criminal justice system.

Each of those statements was made in an entirely different context. They were made in a case where the person complaining of a denial of procedural fairness was the subject of investigation. One may well see that a different approach would be taken to such a person, and in our submission a different approach should be taken, to such a person when compared to a witness who is standing outside the system and who is the subject of an inducement.

The observations made by Justices French and Lindgren in our submission have been taken out of context. That context is important and in our submission when one is looking at the question whether the rules of natural justice and procedural fairness have been excluded impliedly by the legislation one needs to be quite cautious.

GUMMOW J: The question is whether they applied in the first place.

MR LINDSAY: That is right. That is true. This particular case in our submission, adopting what Justice Merkel said, focuses attention on the need for there to be a judgment, a view taken that has an evaluative nature about it. We say in those circumstances, whether one approaches it from the point of view of saying do the rules apply or have they been excluded, the point is reached by either route where in our submission the proper conclusion is that the principles of procedural fairness do apply.

The other side’s answer to our proposition is that there should be a blanket approach taken. All decisions made under this particular part of the Migration Act should all of them, at the outset, be the subject of some exclusion of procedural fairness. In our submission when one looks at the nature of the decisions that could be made under the Act, there is a full range of them, and it is necessary in our submission to have regard to the particular case and it is not the case that a blanket approach could or should be taken. That is a point of difference between us. That is a point that, in our submission, points towards a special leave grant being made.

When one comes to the second way the case is put, namely whether or not the Attorney had to form an independent view, we say that the legislation in fact is predicated upon the fact that the Attorney‑General is the guardian of the administration of justice and in those circumstances, to pick up an expression that was used by the federal magistrate – in our submission, he cannot act merely as a rubber stamp and the materials before the Court on this occasion show that that is what the Attorney or his delegate purported to do.

In our submission, whichever way one looks at it, on either of the two classes of ground the questions for determination would warrant a grant of special leave. Thank you.

GUMMOW J: We will take a short adjournment.

AT 12.36 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.43 PM:

GUMMOW J: We do not need to hear further from you, Mr Lloyd.

Section 162 of the Migration Act 1958 (Cth) is cast in terms which do not permit that intrusion into the operation of the system of investigation and prosecution in the criminal justice system, which would be the consequence of acceptance of the submissions of the applicant, in particular those made in paragraph 28 of the outline of argument. Special leave is refused with costs.

We will now adjourn to 2.15.

AT 12.43 PM THE MATTER WAS CONCLUDED

Bofinger v Kingsway Group Limited [2009] HCA 44

tt — Thu, 10 Dec 2009 05:08:06 +0000

Bofinger v Kingsway Group Limited [2009] HCA 44 (13 October 2009)

Last Updated: 13 October 2009

Guarantee and indemnity – Surety – Right to subrogation to securities – Three separate loans made to company, each secured by mortgage over company’s property – Appellants guarantors of each loan – Appellants sold personal properties and used proceeds to reduce first loan – First mortgagee exercised power of sale over company’s property to satisfy outstanding amounts owing under first loan and transferred surplus to second mortgagee – Whether appellants have right to subrogation to securities in priority to puisne mortgagees – Whether appellants’ right to subrogation excluded by terms of guarantees to puisne mortgagees – Whether rule in Otter v Lord Vaux (1856) 2 K & J 650 [1856] EngR 694; [69 ER 943] applied to prevent appellants from exercising right to subrogation or should be extended to so apply – Whether transfer of surplus required to be unconscionable for doctrine of subrogation to apply.

Equity – Remedies – Constructive trust – Nature of constructive trust – Surplus transferred by first mortgagee to second mortgagee – Whether first mortgagee constructive trustee of surplus – Whether obligation to account.

HIGH COURT OF AUSTRALIA

GUMMOW, HAYNE, HEYDON, KIEFEL AND BELL JJ

RONALD JOHN BOFINGER & ANOR APPELLANTS

AND

KINGSWAY GROUP LIMITED FORMERLY
WILLIS & BOWRING MORTGAGE INVESTMENTS
LIMITED & ORS RESPONDENTS

Bofinger v Kingsway Group Limited [2009] HCA 44
13 October 2009
S161/2009

ORDER

Appeal allowed.
Set aside order 1 of the orders of the Court of Appeal of the Supreme Court of New South Wales entered 29 December 2008 and the orders of the Court of Appeal entered 8 July 2009 and in place thereof order that:

(a) appeal allowed;

(b) orders 1 and 2 of the orders made by Young CJ in Eq, entered 18 February 2008 be set aside; and

(c) the separate question stated on 16 November 2006 be answered as follows:

Question: In the circumstances of the case, were the sums of $268,307.33 and $432,712.53 and the securities over Lots 1 and 14 SP75069 held by the second defendant in trust for the plaintiffs as at 8 February 2006?

Answer: In the absence of prior consent or release by Mr and Mrs Bofinger, on 8 February 2006 Kingsway Group Limited was obliged to account to Mr and Mrs Bofinger as a constructive trustee for any dealing by it with the moneys and securities identified in the question for decision in favour of any other party, and to pay equitable compensation to Mr and Mrs Bofinger in respect of the

denial or limitation by such dealing of recoupment from those moneys and securities of moneys paid by Mr and Mrs Bofinger to Kingsway Group Limited, in total $1,519,234.40, from the proceeds of sale of their properties at 407 Willarong Road, Caringbah and 2/41 Bulwarra Street, Caringbah.

The first, second, fifth, sixth, seventh and eighth respondents pay the appellants’ costs in this Court, in the Court of Appeal and of the proceedings to date in the Equity Division of the Supreme Court of New South Wales.

On appeal from the Supreme Court of New South Wales

Representation

G J McVay with A Tsekouras for the appellants (instructed by Warren McKeon Dickson Solicitors)

D R Sibtain with C K Amato for the first and eighth respondents (instructed by Watson Mangioni)

C M Harris SC with H P T Bevan for the second respondent (instructed by Bransgroves Lawyers)

R J H Darke SC with G K J Rich for the fifth to seventh respondents (instructed by Middletons Lawyers)

Submitting appearance for the third and fourth respondents

Notice: This copy of the Court’s Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

Statute of Frauds 1677, s 4.
Conveyancing Act 1919 (NSW), s 10.
Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 3.
Real Property Act 1900 (NSW), ss 57(1), 58.
Uniform Civil Procedure Rules 2005 (NSW), r 28.2.

GUMMOW, HAYNE, HEYDON, KIEFEL AND BELL JJ. The resolution of this appeal calls for application of “the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts”[1]. The nature of the present case and the particular facts engage the law respecting sureties, their obligation to indemnify the creditor and right to indemnity by the principal debtor, and the operation of the doctrine of equity associated with the term “subrogation”.
The appellants (Mr and Mrs Bofinger) are husband and wife. Mr Bofinger was a director of B & B Holdings Pty Ltd (“B & B Holdings”), which is now in liquidation. B & B Holdings borrowed consecutively from the first, second and third respondents (“first mortgagee”, “second mortgagee” and “third mortgagee” respectively) on the security of mortgages over the same real property of B & B Holdings. The appellants gave guarantees to the first, second and third mortgagees. The guarantees were supported in each case by a mortgage over real property of the appellants. The appellants sold these properties and applied the proceeds in reduction of the indebtedness of B & B Holdings to the first mortgagee.
Thereafter, the first mortgagee exercised its power of sale over certain of the properties mortgaged by B & B Holdings. After satisfying the balance of the indebtedness of B & B Holdings, the first mortgagee accounted to the second mortgagee by payment of the surplus sale proceeds and delivery of the certificates of title and discharges of the first mortgages over two unsold properties. The first mortgagee did not, as the appellants contend it should have done, account to them so that they might recoup what they had paid off the indebtedness of B & B Holdings.
The right of subrogation in favour of a surety recently was described by Sir Andrew Morritt V-C as follows[2]:

“The right operates so as to confer on the surety who has paid the debt in full the rights against the debtor formerly enjoyed by the creditor or by imposing on the creditor the obligation to account to the surety for any recovery in excess of the full amount of his debt.” (emphasis added)

That statement is important for this case because the indebtedness to the first mortgagee had been paid in full and the securities held by the first mortgagee discharged. The remedies equity provides must, as will appear, found upon the obligation of the first mortgagee to account.

Before proceeding it is convenient to consider further the relevant principles respecting subrogation and guarantees.

Subrogation and guarantees

In Orakpo v Manson Investments Ltd[3] Buckley LJ remarked that the relevant equitable considerations respecting a claim to subrogation may differ, for example, where the basis of subrogation is a contract of indemnity, or concerns ultra vires borrowings by a corporation, or the lending of funds to complete a purchase or pay off an existing mortgage. To that list may be added the subrogation of creditors of a trustee to the trustee’s lien over the trust property[4]. Therefore, if for no other reason, it is unhelpful to speak of subrogation as if it were a “cause of action” in the sense recognised at common law[5].
In its widest sense, that apparently used by Buckley LJ in Orakpo, an indemnity includes a contract obliging one person to make good the loss suffered by another, and contracts of guarantee and those of insurance fall within that description. The authorities dealing with the writing requirements of s 4 of the Statute of Frauds 1677 with respect to guarantees (but not indemnities) sought to distinguish between guarantees and indemnities by emphasising the secondary liability of the guarantor and the primary liability of the indemnifier. But as Mason CJ pointed out in Sunbird Plaza Pty Ltd v Maloney[6], there is in this distinction “an element of ambiguity … unless the reference to primary liability is understood to mean ultimate liability”. His Honour added[7]:

“Once default has occurred, the party having the benefit of the guarantee can call on the guarantor to honour his promise before calling on the principal contracting party to perform his obligation, but the guarantor, having honoured his promise, can hold the principal contracting party to account by virtue of the doctrine of subrogation.”

This notion of the ultimate liability of the principal provides a foundation for the application of subrogation in aid of the surety. Thus, where a claim to the benefit of securities held by the creditor is made by a surety, it was said by Turner V-C[8] that the equity for subrogation is derived from the obligation of the principal debtor to indemnify the surety[9]. There is “nothing hard” in the act of a court of equity in placing the surety in exactly the situation of the creditor with respect to those securities[10], because it would be unconscientious for the debtor to recover back the securities from the creditor while the debtor was obliged to indemnify the surety[11].
What then are the equities where the creditor holds a first mortgage and there are puisne mortgagees? The authorities hold that a second mortgagee cannot complain where the surety utilises by subrogation the security held by the first mortgagee. In Drew v Lockett[12] this was put on the basis that the second mortgagee took its interest with notice and by grant from the equity of redemption enjoyed by the principal debtor in its state remaining after giving full effect to the first mortgage. Thus, in de Colyar’s work on guarantees it was said that the surety was entitled to all the equities the creditor could have enforced, adding[13]:

“And this right prevails, not merely against the original creditor of the principal debtor, but also against all persons claiming under the latter[14]. A mortgaged his estate to C, and B became A’s surety for the debt. Afterwards A mortgaged the estate to D, who had notice of the first mortgage. The first mortgage was subsequently paid off, partly by B, the surety, but D got a transfer of the legal estate. It was held that the surety had still priority over D for the amount paid by him under the first mortgage, as surety for A[15]. Again, on a purchase of goods by a broker for an undisclosed principal, in a market according to the usage of which such a broker is personally liable in default of his principal, and is, therefore, a surety for the latter, the unpaid vendor’s lien will pass to the broker, on default made by his principal, even though the latter may have pledged his interest in the goods to the third persons, and indorsed the delivery order to them[16].”

The appellants in the present appeal relied, in particular, upon the statement of principle by Sir John Romilly MR in Drew v Lockett[17]:

“I am of opinion that a surety who pays off the debt for which he became surety must be entitled to all the equities which the creditor, whose debts he paid off, could have enforced, not merely against the principal debtor, but also as against all persons claiming under him. It is to be observed that the second and any subsequent mortgagee is in no respect prejudiced by the enforcement of this equity; when he advances his money he knows perfectly well that there is a prior charge on the property, and if he thinks fit to advance his money on such security, it is his own affair, and he cannot afterwards with justice complain. The amount being limited, it is a matter of indifference to him whether the first mortgagee or the surety is the prior claimant for that amount, and it would be, in my opinion, a violation of all principle if, when the surety pays off the debt, he were not to be entitled, as against the principal debtor and those who claim under him, to be paid the full amount due to him.” (emphasis added)

This statement is to be read with the earlier decision of the same judge in Gedye v Matson[18]. The immediate issue in that case was whether a foreclosure suit by a first mortgagee was defective for want of joinder of a surety who had paid off part of the mortgage. Sir John Romilly MR ruled that the surety “is entitled to stand in the place of the mortgagee, and is, therefore, interested in the equity of redemption … [and] might afterwards come and redeem”[19]. He also held that the surety was “in the situation of a subsequent incumbrancer, and as if the mortgagor had executed a second mortgage to him. As against the principal debtor, the surety is entitled to a charge on the estate.”[20]
More recently, in Aquilina Holdings Pty Ltd v Lynndell Pty Ltd[21] Daubney J remarked that an opposite result to that in authorities such as Gedye v Matson would tend to undermine the operation of the equitable doctrine of subrogation. His Honour also said that the equitable doctrine did not do violence to the principles of the Torrens system[22]. Rather, the doctrine accepts the state of the register but enforces against registered proprietors conscientious obligations imposed upon them[23]. Under the Torrens system, the charge or equitable lien of the surety would support a caveat on the subject property[24].

The present dispute

The respondents do not challenge these statements of principle. But by their Notices of Contention they submit that the statements do not speak to the circumstances of the present litigation. First, the debt secured by the first mortgage had been paid in full at the date when the entitlement of the appellant sureties was to be assessed and the first mortgage had been displaced on the register upon exercise of the power of sale of some of the lots and upon registration of discharges with respect to other lots. Secondly, surplus proceeds and assets had been distributed to the second mortgagee and thus had left the control of the first mortgagee. Thirdly, and unlike the situation in Drew v Lockett, the sureties also had guaranteed puisne mortgages and for that reason any entitlement they had in equity to the surplus would prejudice impermissibly the second and third mortgagees.
The appellants complain that in upholding the decision of the primary judge (Young CJ in Eq)[25] the New South Wales Court of Appeal (Giles JA, Handley AJA and Sackville AJA)[26] did not give any effect to their equity as guarantors to subrogation to the rights of the first mortgagee against B & B Holdings. This result was reached by an answer in the negative to a question posed for separate decision in a suit in the Equity Division of the Supreme Court.
The primary case of the appellants is that the first mortgagee had distributed the surplus in breach of the constructive trust in which the surplus was held for them as sureties. The reasons which follow lead to a conclusion which, without going to the length of accepting all of the appellants’ submissions, favours allowing the appeal.

The agreed facts

Something further now should be said respecting the agreed facts. These include attached documents and correspondence. There emerges what may be an incomplete account of events but it is upon this basis that the parties choose to present the question for separate determination.
Part 28 r 28.2 of the Uniform Civil Procedure Rules 2005 empowered the Supreme Court to make orders for the decision of any question before trial. In such a proceeding care is to be taken that agreed facts are stated with precision[27]. This is important, not the least because the parties to such a proceeding will be bound by the determination of the question and will not be at liberty subsequently in the same proceedings to advance argument or adduce further evidence directed to showing that the separate question was wrongly determined[28].
B & B Holdings carried on business as a real estate developer and on land (“the Enmore land”) in an inner suburb of Sydney constructed 17 town houses and one house. It was placed in liquidation by February 2006 and the joint liquidators are the fourth respondent in this Court. They have entered a submitting appearance.
To finance the purchase of the Enmore land and the construction of the buildings thereon, in 2003 B & B Holdings borrowed $7,062,000 from the first mortgagee, Kingsway Group Limited. The interest rate initially was nine percent per annum. Then, as the project proceeded, B & B Holdings borrowed $1,400,000 from Rekley Pty Limited, the second mortgagee, and finally $350,000 from Mr John Edward Skehan, the third mortgagee. The indebtedness under these arrangements was secured in each case by registered mortgages against the title to the Enmore land and a property of B & B Holdings at Nullaburra Road, Caringbah. (There also appears to have been a fixed and floating charge in favour of the first mortgagee over the assets of B & B Holdings, but nothing turns upon this.)
The fifth, sixth and seventh respondents (“the Solicitors”) carried on their practice at 575 Kingsway, Miranda under the name “Willis and Bowring Solicitors”. They acted for the first mortgagee and for the second mortgagee and, at least in February 2006, for the third mortgagee as well. The first mortgagee is Kingsway Group Limited but throughout this period was named “Willis and Bowring Mortgage Investments Limited” and carried on business also at 575 Kingsway. The fifth respondent, one of the Solicitors, was a director of the first mortgagee. The eighth respondent was an officer of the first mortgagee. The third mortgagee, the third respondent, entered a submitting appearance in this Court.
In this Court, counsel for the Solicitors, for the first mortgagee and eighth respondent, and for the second mortgagee presented essentially a united front and divided the oral argument between them.
The first, second and third mortgages were dated respectively 31 January 2003, 14 March 2003 and 28 April 2005. In addition, by an instrument of guarantee dated 31 January 2003 (the date of the first mortgage) the appellants guaranteed to the first mortgagee repayment of the amount owing from time to time under the first mortgage by B & B Holdings. The guarantee was supported by mortgages by the guarantors to the first mortgagee over residential premises at Caringbah (“the Willarong Road property”) and over a home unit in the same suburb (“the Bulwarra Street property”). Both properties were owned by the appellants. Thereafter, by instruments of guarantee dated respectively 14 March 2003 (the date of the second mortgage) and 28 April 2005 (the date of the third mortgage) the appellants guaranteed to the second and third mortgagees respectively repayment of the amounts from time to time owing to those parties by B & B Holdings. The guarantees given by the appellants to the second and third mortgagees also were secured by second and third mortgages over the Willarong Road property and the Bulwarra Street property. All three guarantees were relevantly in the same form.
The loan agreement between B & B Holdings and the first mortgagee had an expiry date of 1 February 2004. On 20 February 2004 the first mortgagee agreed to an increase in the loan amount to $8,288,000 with an increased interest rate and an extension to 1 October 2004. On 15 October 2004 it granted a further extension to 1 March 2005 and the loan amount was reduced to $8,278,000. On 23 March 2005, the first mortgagee agreed to a third extension to 1 October 2005, with a higher interest rate of 14.5 percent per annum; failure to pay the required interest amount by the 14th of each month would deprive the borrower of a lower interest rate of 9.5 percent and constitute an event of default.
Thereafter, on 28 April 2005, B & B Holdings entered into the loan agreement with the third mortgagee; this was secured by the third mortgage.
It is not clear when in this period B & B Holdings defaulted on the second mortgage. However, it defaulted on the first mortgage on 1 October 2005, and on the third mortgage on 28 October 2005.
In China and South Sea Bank Ltd v Tan Soon Gin (alias George Tan)[29] Lord Templeman observed that a surety, worried, for example, by the decline in value of securities held by the creditor from the principal debtor, may “bustle about”, pay off the debt and take over the benefit of the securities.
In July 2005, that is to say during the currency of the third extension by the first mortgagee and after the apparent defaults which had occasioned the grant of the third extension, the appellants sold the Willarong Road property. From the proceeds they paid a total of $894,044.14 to the first mortgagee in reduction of the amount which was then owing to the first mortgagee by B & B Holdings and secured by the first mortgage. Thereafter, the appellants sold the Bulwarra Street property and on 5 October 2005 paid to the first mortgagee $625,190.26. This gave a total in payments to the first mortgagee by the appellants of $1,519,234.40.
It is important to note that following the sales of the Willarong Road property and the Bulwarra Street property there were discharges of the mortgages over those properties which the appellants had given not only to the first but also to the second and third mortgagees. Thereafter the guarantees given by the appellants remained in force but were unsecured. This may be important for the final working out of liabilities between the appellants and the second and third mortgagees, and may emphasise the importance to the appellants of their claim against the Solicitors. But, given the limited framework of the case to date, these matters were not pursued in argument.
There had been no call by the first mortgagee upon the guarantees, and in that sense the payments by the appellants were initiated by them. However, this was in the circumstances of default by B & B Holdings described above. The first mortgagee, necessarily involved so as to clear the titles, knew of the sales of the two properties by the appellants and also knew of the payment of the proceeds in reduction of the indebtedness of B & B Holdings.
In November 2005 the first mortgagee went into possession of the Enmore land. On or about 2 February 2006, the first mortgagee completed the exercise of its power of sale of Lot 13 of the Enmore land. By 8 February 2006 the indebtedness of B & B Holdings to the first mortgagee had been satisfied. However, its indebtedness to the second and third mortgagees was $1,935,671.23 and $464,267.12 respectively.
On 7 February 2006, the Solicitors wrote a letter directed to the attention of the eighth respondent, Mr Hatheier, an officer of the first mortgagee. The letter said, with reference to security over the Enmore land:

“We advise that we act for the Second Mortgagee Rekley Pty Limited. This letter is to formally request possession of the 2 remaining unsold lots being lots 1 and 14 in the above development.
Please pay the balance proceeds of sale in relation to lot 13 and the total proceeds of sale in relation to lot 5 to Willis & Bowring Trust Account.”

On the next day, 8 February 2006, Mr Hatheier, describing himself as “Business Development Manager” of the first mortgagee, wrote to Willis and Bowring Solicitors, for the attention of Mr Tosolini, the fifth respondent:

“We acknowledge receipt of your letter dated 7th February.
We consent to your client Rekley Pty Limited taking possession.
We now enclose the following:-
1. Keys
2. Deeds and Discharges of Mortgage in relation to lots 1 and 14
We confirm that the balance proceeds of sale of lot 13 (after discharge of mortgage) and the proceeds of sale of lot 5 are to be paid to your trust account for the purpose of being disbursed to your client.” (emphasis added)

The discharges of these first mortgages were subsequently registered on or about 8 February 2006.

On 20 February 2006, Mr Hatheier, on behalf of the first mortgagee, wrote to one of the liquidators of B & B Holdings. He enclosed copies of the letters of 7 and 8 February and wrote that the Solicitors were acting on behalf of the second and third mortgagees. This presumably was in addition to their acting for his company as first mortgagee. The letter indicated that $268,307.30 had been provided to the second mortgagee at settlement. It attached a summary of receipts and payments of the first mortgagee as mortgagee in possession. This showed payments to the first mortgagee of $3,848,000 and to the second mortgagee of $268,307 and, significantly, made an allowance for the earlier receipt from the appellants of the proceeds of sale of their properties. On 21 February 2006, the whole of the proceeds of sale of Lot 5, $432,712.53, was paid to the Solicitors on behalf of the second mortgagee.
The upshot was that by about 21 February or shortly thereafter the titles to Lots 1, 5, 13 and 14 of the Enmore land no longer showed the first mortgages by B & B Holdings and the second mortgagee had received surplus proceeds of sale of Lot 13 and the whole of the proceeds of Lot 5. Hence, as indicated in the opening passages of these reasons, the importance of the obligation to account to the appellants and of its nature and scope.

Statutory provisions

All the lands the subject of the various mortgages were lands under the provisions of the Real Property Act 1900 (NSW) (“the RP Act“), and the mortgages were registered mortgages. Section 57(1) of the RP Act provides that a mortgage has effect as a security but does not operate as a transfer of land. Section 58(1) provides for the exercise of a statutory power of sale. Section 58(2) protects the purchaser by denying any obligation to see to the application of the purchase money. Section 58(3) states that the purchase money from the sale of land by a mortgagee in exercise of power of sale “shall be applied”, first in payment of the expenses of the sale, secondly in payment of the first mortgagee, thirdly in payment of subsequent mortgagees in order of priority and that any surplus is to be paid to the mortgagor. However, upon that first mortgagee equity may place requirements as to the disposition of the surplus purchase moneys.
Adams v Bank of New South Wales[30] is authority that s 58 is to be read in a manner consistent with the equitable duty of the first mortgagee to account to puisne mortgagees as a trustee for any surplus. The position in equity was described as follows by Kay J in Charles v Jones[31] as follows:

“I have never heard it doubted that where a mortgagee sells, and has a balance in his hands, he is a trustee of that balance for the persons beneficially interested. He takes his mortgage as a security for his debt, but, so soon as he has paid himself what is due, he has no right to be in possession of the estate, or of the balance of the purchase-money. He then holds them, to say the least, for the benefit of somebody else, of a second mortgagee, if there be one, or, if not, of the mortgagor. What, then, is he to do? Surely he has a duty cast upon him. His duty is to say, ‘I have paid my debt: this property which is pledged to me, and in respect of which I now hold this surplus in my hands, is not my property. I desire to get rid of this surplus, and hand it back to the person to whom it belongs.‘ … The duty of this mortgagee was at least to set this money apart in such a way as to be fruitful for the benefit of the persons beneficially entitled to it. To that extent and in that manner he was, according to my understanding of the law, in a fiduciary relation to the persons entitled to the money. It was so held in the case of Quarrell v Beckford[32], and so far as I know has always been so held, and although I quite agree that the Court is very reluctant to treat a mortgagee as being a trustee in any sense while any money is due to him, still when he has paid himself, and has money remaining in his hands which is no longer his property, how can he be treated as other than a trustee of such money?” (emphasis added)

The appellants sought to bring themselves, by reliance upon their subrogation rights, within the obligation of the first mortgagee to account to the person to whom the surplus belonged, and to place their rights in priority to any entitlement of the puisne mortgagees.
The appellants sought to support their case by reliance upon the provisions now made by s 3 of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW) respecting the entitlement of sureties to assignment of securities. Section 3 is the descendant in New South Wales of s 5 of the Mercantile Law Amendment Act 1856 (UK)[33]. The provisions confer upon sureties statutory rights and remedies which furnish a summary mode of carrying into effect those otherwise available in courts of equity[34]. The second mortgagee correctly submitted that if, as it contended, the appellants lacked an equity supporting subrogation, s 3 would not supply that deficiency.

The Supreme Court proceedings

By proceedings instituted in the Equity Division of the Supreme Court of New South Wales the appellants complained that in the circumstances they had an entitlement to recoupment of what they had paid as sureties and that this was in the nature of a trust binding the first mortgagee. They contended that in accounting to the second mortgagee in the manner described above, the first mortgagee had committed breaches of trust and that the second mortgagee had received trust property of the appellants. They sued the Solicitors as accountable under the principles associated with Barnes v Addy[35].
The separate question was:

“In the circumstances of the case, were the sums of $268,307.33 and $432,712.53 and the securities over Lots 1 and 14 SP75069 held by the second defendant in trust for the plaintiffs as at 8 February 2006?”

The sense of the separate question was to ask whether, given that by 8 February 2006 the first mortgagee had been paid in full, it followed that in respect of surplus moneys attributable to the sale of Lots 5 and 13 of the Enmore land and the first mortgages over Lots 1 and 14, the first mortgagee was trustee for the appellants up to so much thereof as would give effect to their subrogation rights.
There was an immediate difficulty respecting any trust by the first mortgagee over the mortgages to it of Lots 1 and 14. The discharges were registered on or about 8 February and thus the subject matter of such a trust no longer existed.
In the event, the primary judge answered the separate question wholly in the negative. The primary judge thereafter entered judgment for the defendants in the suit. The Court of Appeal dismissed an appeal and made a special costs order in favour of the Solicitors. In this Court, the appellants seek to have those orders set aside and to have an affirmative answer to the question.
The appellants refer to the acceptance by Hodgson J that if a first mortgagee exercises its power of sale, the surety is entitled at least to a charge over the balance of the proceeds[36]. The respondents counter that even if there were such a charge it bound the subject matter only while it was in the hands of the first mortgagee. Further, the charge would confer no more than a security interest, would not entail fiduciary obligations owed by the chargor to the appellants, and would not support a proprietary interest which persisted against a third party such as the second mortgagee. Once the discharges of the first mortgages over Lots 1 and 14 reached the hands of the second mortgagee for registration, and the cash surplus reached its hands without the need for retention in an identifiable separate fund, any such charge would be spent[37]. (There may have been grounds in these circumstances for an action at law by the appellants against the second mortgagee for money had and received, but this was not considered in submissions to this Court[38].)
The preferred position of the appellants remained the trust in their favour. The respondents pointed to what were said to be the burdensome administration and investment duties this would entail[39].

The appropriate equitable remedy

It is unnecessary to resolve all of these questions. The essential task is to identify the scope of equitable relief which, in the circumstances of this case, now adequately protects the position of the appellants that obtained on 8 February 2006, when the indebtedness of the first mortgagee had been satisfied.
Equitable intervention is sought by the appellants and this would have an impact upon the position of not just the first mortgagee but of the other respondents. Further, while there were proceeds of sale of Lots 5 and 13 it is not apparent from the agreed facts that they remain capable of separate identification and, in any event, the first mortgages over Lots 1 and 14 could not provide subject matter for any trust after registration of the discharges on or about 8 February 2006.
In this situation assistance is afforded by a point emphasised by four members of the Court in the joint reasons in Giumelli v Giumelli[40] when considering the constructive trust as a remedial response to a claim to equitable intervention. The point is that the term “constructive trust” may be used not with respect to the creation or recognition of a proprietary interest but to identify the imposition of a personal liability to account upon a defaulting fiduciary.
In Jones v Southall & Bourke Pty Ltd[41], after reviewing the authorities, Crennan J said that they:

“make plain [that] the term ‘constructive trust’ covers both trusts arising by operation of law and remedial trusts. Furthermore, a constructive trust may give rise to either an equitable proprietary remedy based on tracing or, whether based on or independently of tracing, an equitable personal remedy to redress unconscionable conduct. The equitable personal remedies include equitable lien or charge or a liability to account.”

Earlier in her reasons her Honour had noted that the term “constructive trust” had been applied to include the enforcement of the obligation of a defaulting fiduciary to make restitution by a personal rather than a proprietary remedy[42].

The obligation to account, here by a first mortgagee, is consistent with what was said by Kay J in Charles v Jones[43] in the passage set out earlier in these reasons. On 8 February 2006 the first mortgagee was obliged in good conscience both to account to the appellants for surplus moneys and securities it held and not to undertake or perform any competing engagement in that respect without prior release by the appellants[44]. These obligations were fiduciary in character. As indicated by the correspondence of 7, 8 and 20 February 2006, to which reference has been made, the first mortgagee entered into and performed a conflicting engagement with the second mortgagee. The result was to cause loss to the appellants by denial of enjoyment of their entitlement to recoupment from the surplus moneys with respect to the sale of Lots 5 and 13 and first mortgages over Lots 1 and 14.
In respect of its misapplication of the surplus moneys and securities and the consequent loss to the appellants the first mortgagee is to be treated as a constructive trustee to the extent that it must account to the appellants as a defaulting fiduciary. It is unnecessary to seek to determine upon the agreed facts whether the first mortgagee was a trustee in a fuller sense which afforded the appellants a beneficial interest in the assets in question.
Breach by the first mortgagee of its above described fiduciary obligation to the appellants would suffice to engage the principles associated with the “second limb” in Barnes v Addy[45], if at any further hearing the necessary further facts are established against other respondents. In Barnes v Addy itself, the two solicitors, Messrs Preston and Duffield, had not received any trust property; the question was whether their knowledge made them accountable as parties to the breach of trust by the trustee and bound to make good as constructive trustees the loss of the trust assets.

The answer by the respondents’ Notices of Contention

The respondents seek to outflank any conclusion such as that just expressed in several ways. A starting point is provided by The Equity Trustees Executors & Agency Co Ltd v New Zealand Loan & Mercantile Agency Co Ltd[46] where Lowe J said:

“When a guaranteed debt is paid by the surety he is entitled, unless the right is excluded by agreement or his conduct makes it inequitable to enforce it, in respect of the amount he has paid under his guarantee to the securities which the creditor holds for the debt guaranteed. This right arises not from any agreement between the surety and the creditor, though it may be excluded by agreement between them. It rests on equitable principles.” (emphasis added)

That statement of principle is plainly correct. The respondents, however, draw from the emphasised words two propositions of exception and rely upon them as an answer to any success the appellants’ submissions otherwise might enjoy. First, the respondents say any right of the appellants was excluded by agreement, in particular by the terms of their guarantee of the second mortgage. Secondly, the respondents contend that this and other circumstances rendered it inequitable as between the appellants and the first mortgagee to rely upon Drew v Lockett[47]. Thirdly, it is said to follow that there is no footing to attach liability upon the first mortgagee to account to the appellants in respect of the surplus and so no basis for any remedy against other respondents.

The terms of the guarantee of 14 March 2003 to the second mortgagee

It is convenient to turn first to the terms of the appellants’ guarantee given by deed on 14 March 2003 to the second mortgagee. The instrument is described on the cover sheet as a “Deed of Guarantee and Indemnity”. The settled principle in Australia governing the interpretation of contracts of guarantee and indemnity has been stated by this Court in authorities the most recent of which is found in the joint reasons in Andar Transport Pty Ltd v Brambles Ltd[48]. The principle is that a doubt as to the construction of a provision in such a contract should be resolved in favour of the surety or indemnifier. It is implicit in this that the doubt may arise not only from the uncertain meaning of a particular expression but from its apparent width of possible application.
Mr and Mrs Bofinger were each identified as “Guarantor”, the second mortgagee as “Lender” and B & B Holdings as “Borrower”. The “Mortgage” was the second mortgage by the Borrower, also dated 14 March 2003, and “Obligated Person” meant any of the Borrower, Guarantor, and any other person who was liable to the Lender for payment of the “Guaranteed Money”, being the subject of the guarantee and indemnity in cl 3 and cl 5 respectively.
Clause 3 stated:

“3.1 The Guarantors guarantee to the Lender:
(1) the performance of all the obligations of the Borrower under the Mortgage; and
(2) the payment of all damages suffered by the Lender (including interest costs and expenses) arising from any breach or termination of the Mortgage.
3.2 If the Borrower does not, on the date provided in the Mortgage, pay any amount payable to the Lender, the Guarantors must immediately pay that amount to the Lender.”

Taken by itself cl 3 does not contain a covenant by the Guarantor to ensure that B & B Holdings meets its obligations to the second mortgagee in priority to those owed to the first mortgagee. Such a priority structure would have been at odds with the sequence of the registered mortgages and the circumstances of the borrowings to finance the development of the Enmore land. It would have required clear terms in a multi-party priority agreement.
Clause 5 stated:

“5.1 If the Borrower is not bound by some or all of the Borrower’s obligations under the Mortgage, if for any other reason the guarantee is not effective, the Guarantors agree, by way of indemnity and principal obligation, to pay to the Lender the amount which would have been payable by the Guarantors to the Lender under the guarantee in clause 3 had the guarantee been effective and the Borrower been bound.”

The lengthy provisions of cl 6 are headed “Matters Not Affecting Guarantor’s Liability”. Clause 6.4 is headed “Waiver by Guarantor” and its provisions were relied on in particular in submissions by the second mortgagee. The sub-clause reads:

“Each Guarantor waives the Guarantor’s rights as surety whether legal, equitable, statutory or otherwise which may be inconsistent with the provisions of this deed or in any way restrict the Lender’s rights, remedies or recourse.”

Counsel for the second mortgagee submitted that cl 6.4 extended to the waiver by the appellants of any surety rights they might have in respect of another instrument, namely the first mortgage. This was said to be the effect of the general words “the Guarantor’s rights as surety”. But the critical words which follow are “inconsistent with the provisions of this deed”. They govern also the earlier words “Guarantor’s rights as surety”. The waiver effected by cl 6.4 is a waiver of such of the Guarantor’s rights as surety under the guarantee to the second mortgagee as may be inconsistent with the provisions of the guarantee to the second mortgagee. It is not a waiver of any of the Guarantor’s rights under the guarantee to the first mortgagee. This submission fails.
Counsel for the Solicitors sought to achieve a similar application to the first mortgage by reference to cl 3.1 and par (2) of cl 7.1. Clause 7.1 is headed “Guarantors Not To Claim Benefits Or Enforce Rights” and reads:

“Until the Guaranteed Money is paid in full and all obligations of the Borrower under the Mortgage are fully and finally discharged or released, a Guarantor must not in any way:
(1) claim the benefit or seek the transfer (in whole or in part) of any other guarantee, indemnity or security held or taken by the Lender;
(2) make a claim or enforce a right against any other Obligated Person or against the estate or any of the property of any of them (except for the benefit of the Lender); or
(3) raise or claim any set-off, counterclaim or defence available to any other Obligated Person in reduction of the Guarantor’s liability under this deed.”

Clause 7.1, as the opening words indicate, bars the Guarantor from taking any of the steps described in pars (1), (2) and (3) until two events have taken place. The first is the full payment of the moneys secured by the terms of the guarantee in cl 3; these are identified by reference only to the second mortgage by B & B Holdings. The second event is the discharge or release of all obligations of B & B Holdings under that mortgage. These events had not occurred at 8 February 2006, with the result that the restraints in pars (1), (2) and (3) were operative.
Paragraph (1) limits recourse to rights of the second mortgagee. Paragraph (3) is concerned with reduction of liability “under this deed”. As the Solicitors accepted, neither paragraph constrains the exercise of rights under a guarantee of the first mortgage.
However, the Solicitors contended that par (2), read with cl 3.1 and the definition of “Obligated Person”, manifested a particular intention by B & B Holdings, the appellants, and the second mortgagee. This was that the second mortgagee would “go first” in relation to the property of B & B Holdings and that the second mortgagee be protected from what otherwise might be prior claims by the appellants in reliance upon subrogation to the rights of the first mortgagee.
That submission also should be rejected. The Guarantor falls within the defined term “Obligated Person”, as also does B & B Holdings. In asserting subrogation to the rights of the first mortgagee against B & B Holdings as Borrower, is the Guarantor making a claim against “any other Obligated Person” within the meaning of par (2)? The answer is suggested by the opening words of cl 7.1. These suspend engagement in this activity until full payment of the moneys guaranteed by cl 3, namely those secured by the second mortgage. Paragraph (1) then is directed to claims by the Guarantor to rights of the Lender (the second mortgagee), par (3) deals with claims to set-off and the like in reduction of the liability of the Guarantor to the Lender under the second mortgage, and par (2) with such matters relating to the guarantee of the second mortgage as claims by the Guarantor for indemnity for obligations under that guarantee by the Borrower or for contribution by any co-sureties.
If there be any doubt respecting the construction of cl 7.1 in this way, then, as indicated earlier in these reasons, the doubt is to be resolved in favour of the Guarantor.
It follows that in asserting rights of subrogation with respect to the first mortgage, the appellants were not acting in breach of any restrictions binding them by reason of the terms of the guarantee of the second mortgage. It follows further that there was nothing inequitable as between the appellants and the first mortgagee and the Solicitors (not parties to that guarantee) in the appellants seeking the support of equity in the manner described earlier in these reasons.
In particular, contrary to the submission by the Solicitors, the appellants were not bound to do equity by offering to perform an obligation to “protect” the second mortgagee as the price of any equitable relief founded on their subrogation rights in respect of the first mortgage. In Langman v Handover[49] Rich and Dixon JJ said that the maxim that he who seeks equity must do equity “does not substitute moral for legal standards in the determination of the conditions of relief”. Rather, those who ask for the assistance of a court of equity must be willing to do justice by accepting terms which flow from the legal or equitable rights of the defendant to the suit.
The result is that the grounds in the Notices of Contention based upon the terms of the guarantee of the second mortgage fail.
The question for this Court then becomes whether the grounds of decision by the Court of Appeal should be sustained.

The reasoning of the Court of Appeal

The members of the Court of Appeal gave differing reasons for upholding the decision of the primary judge. Giles JA observed that it was important that the appellants had given guarantees not only to the first mortgagee but also to the second and third mortgagees. This distinguished the present case from Drew v Lockett[50]. As between the appellants and the second mortgagee the “plain intention” was that the second mortgagee was to have resort to its security after the first mortgagee but “prior to any entitlement [the appellants] might have with respect to that property”. The appellants had undertaken obligations to the second mortgagee “inconsistent” with the assertion of prior entitlement to subrogation and “the priority which would otherwise arise” was displaced.
However, for the reasons already explained when dealing with the Notices of Contention, the terms of the guarantee given to the second mortgagee do not manifest any such intention. There was no displacement of priority between the mortgagees and the giving of the consecutive guarantees produced no inconsistency. Each guarantee operated in accordance with its terms. There was nothing in the circumstances rendering it inequitable for the appellants to enjoy the rights of subrogation.
Handley AJA relied upon an application or extension of the rule in Otter v Lord Vaux[51]. Of that rule, his Honour said that it:

“prevents the mortgagor derogating from his grant and obtaining an advantage from his breach of contract. The mortgagee is estopped by his grant and contract from claiming priority over the second mortgage.”

Handley AJA said that the estoppel was an estoppel by convention and added:

“The position in the present case is substantially the same. The guarantors guaranteed each of the mortgages on the basis that one would be the first, another the second, and the other the third. The Principal Debtor could not have paid off the first and kept it alive for its own benefit. The guarantors, having guaranteed the second mortgage as a second mortgage, agreed in substance with the second mortgage[e] that once the first mortgagee was paid in full the second mortgagee would be paid next from one source or another before the guarantors got anything.”

There are several obscurities in this passage. The reference in the second sentence to “each of the mortgages”, when read with “[t]he Principal Debtor” in the next sentence, appears to be to the securities given by B & B Holdings not those given by the appellants in support of their guarantees. As things stood at 8 February 2006 there was no indebtedness remaining of B & B Holdings on its first mortgage and no occasion for B & B Holdings to pay it off and keep it alive for its benefit. Nor, as already indicated, was there any agreement, in substance or otherwise, between the appellants as guarantors and the second mortgagee that once the first mortgage had been paid in full (with the contribution made by the guarantors from the proceeds of sale of their two properties) the second mortgagee would be paid next and before the guarantors could recoup that contribution.
In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd[52] the Court said:

“Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying.”

The reference to an agreed or assumed state of facts (not of law) is significant. In any event, in the present case the agreed facts fall far short of what would be necessary to establish that the priority of the second mortgagee which is now asserted was the conventional basis of the transaction between it and the appellants as guarantors, so that the appellants had been estopped from asserting their right of subrogation.
Nor does the rule in Otter v Lord Vaux depend upon reasoning which supplies any analogy for resolution of the present appeal. The rule is concerned with the merger of charges (including mortgages) in estates; the mortgages by B & B Holdings were of land under the provisions of the RP Act and thus were “creatures of statute” to which the general law principles of destruction by merger did not apply[53].
The rule of the common law is that whenever a greater and a lesser estate meet in the same person, without any intermediate estate, the lesser is sunk or drowned in the greater. Accordingly, at common law, where a person entitled to land acquires a security over it, a merger is conclusively presumed; the security merges and disappears in the greater estate. However, equity gives effect to an intention of the parties that there be no merger[54]. But to that acceptance of intention as controlling the outcome there is an exception. This is identified as the rule in Otter v Lord Vaux. A mortgagor who has paid off an encumbrance thereafter cannot set it up in priority to a puisne mortgage which the mortgagor has granted. Why is this so? The answer, which has the support of Viscount Haldane LC[55] and Megarry J[56], is as follows[57]:

“a second mortgage, as between the parties, is a grant of the mortgagor’s entire interest in the property, saving only the rights of the prior incumbrancer, and the mortgagor cannot derogate from his grant by holding the first mortgage against the second mortgagee”.

The rule in Otter v Lord Vaux has been applied to securities over personal property[58]. But as indicated above, there was no question in the present case of any merger by operation of law, with a contrary intention to which equity would not give effect.

The preferred basis upon which Sackville AJA decided the appeal was that the conduct of the first mortgagee in accounting to the second mortgagee for the surplus proceeds was not “unconscionable”. His Honour answered in the negative the question he posed as follows:

“But in what way is the doctrine of subrogation needed to avoid an unconscionable result? Or, to put the question another way, what would be unjust or inequitable about the net surplus from the sale of the Principal Debtor’s assets going to the second mortgagee, as envisaged by s 58(3) of the [RP Act] …?”

The answer is that for the reasons already given the first mortgagee was required by equity to account for the net surplus to the appellants. That obligation was imposed upon the enjoyment by the second mortgagee of its entitlement under s 58(3) of the RP Act.
His Honour also said:

“The arrangements were plainly not intended to allow the appellants, by paying out the first mortgagee, to transform the second mortgagee from a secured creditor of [B & B Holdings] to an unsecured creditor presumably ranking equally with the other unsecured creditors of the appellants.”

There are difficulties with this passage. On the agreed facts the appellants had been able to sell their two properties and so raise the moneys paid by them in reduction of the indebtedness of B & B Holdings to the first mortgagee only because the three mortgagees had consented to the clearing of the title to those two properties. The second and third mortgagees had not, for example, protected their position by obtaining an agreement with the appellants and the first mortgagee expressly to deny to the appellants what otherwise would be their subrogation rights to the first mortgage over the assets of B & B Holdings.

Sackville AJA referred to the passage in Tanwar Enterprises Pty Ltd v Cauchi[59] where, after noting that the terms “unconscientious” and “unconscionable” are used across a broad range of equity jurisdiction, Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ continued:

“They describe in their various applications the formation and instruction of conscience by reference to well developed principles. Thus, it may be said that breaches of trust and abuses of fiduciary position manifest unconscientious conduct; but whether a particular case amounts to a breach of trust or abuse of fiduciary duty is determined by reference to well developed principles, both specific and flexible in character. It is to those principles that the court has first regard rather than entering into the case at that higher level of abstraction involved in notions of unconscientious conduct in some loose sense where all principles are at large.”

However, Sackville AJA appears to have proceeded, not in accordance with that passage, particularly its last sentence, but by asking whether and in what way the doctrine of subrogation was “needed to avoid an unconscionable result” and answering that there was nothing unconscionable or unjust in the first mortgagee applying the surplus proceeds of sale to the second mortgage. But this reasoning does not allow for the circumstance that the surplus was computed only after allowance for the payments which had been made by the appellants to reduce the secured indebtedness of B & B Holdings. These payments had enlivened the doctrine of subrogation, subject to the operation of which, and subject to contrary agreement or inequitable conduct, the parties were to be taken to have conducted their affairs.
Sackville AJA referred to the judgment of Kearney J in Cochrane v Cochrane[60]. This is often, and correctly, cited as containing an orthodox statement and application of principles respecting the interrelation between the doctrines of subrogation and contribution. The remedy of one co-mortgagor who pays off the mortgage in full is not of subrogation to the rights of the mortgagee against the other mortgagor, but to contribution from that mortgagor.
Kearney J also referred to the implied indemnity by the principal debtor which reflected the ultimate liability of that party in cases of suretyship[61]. It was that ultimate liability of B & B Holdings which in the present case founded the application of the doctrine of subrogation in favour of the appellants. Kearney J contrasted the right of subrogation with the right of contribution between those, such as the present appellants, who are subject to co-ordinate liabilities or common obligations. There equity is moved by concern that the common exposure of the contributors to the creditor and the equality of burden not be defeated by the accident or chance that the creditor select for recovery one or some rather than all of the contributors[62].

Unjust enrichment and the English decisions

The appeal to this Court in Friend v Brooker[63], which concerned the equitable doctrine of contribution, was correctly conducted on the footing that the concept of unjust enrichment was not a principle supplying a sufficient premise for direct application in a particular case. The same is true of the equitable doctrine of subrogation. The oral submissions for the Solicitors correctly recognised this.
In a passage in their reasons in David Securities Pty Ltd v Commonwealth Bank of Australia[64], Mason CJ, Deane, Toohey, Gaudron and McHugh JJ rejected the submissions that in Australian law unjust enrichment was more than “just a concept” and that it was “a definitive legal principle according to its own terms”. The use of the phrase “unifying legal concept” earlier in the joint reasons[65] must be understood with what was said in that later passage[66]. In the years which have followed the Court has reaffirmed this position[67] and all other Australian courts are bound accordingly.
A not dissimilar fate met the attempt to adopt “proximity” as the “unifying theme” of the categories of case recognising a duty to take reasonable care to avoid a reasonably foreseeable risk of injury to another[68].
The concept of unjust enrichment may provide a means for comparing and contrasting various categories of liability. Reference has been made to Cochrane v Cochrane[69] and this provides an example. Subrogation may be seen as preventing the unjust enrichment of the principal debtor who otherwise might escape carriage of ultimate liability and contribution prevents one of equal obligors bearing more than its share of the burden. The two doctrines do not let matters lie where they would fall if the carriage of risk between the various actors involved were to be left entirely to be worked out within the limits of their contractual obligations. But as Cochrane shows, and as explained above, the two doctrines have different foundations in equity and operate with different results.
The concept of unjust enrichment also may assist in the determination by the ordinary processes of legal reasoning of the recognition of obligations in a new or developing category of case[70]. An example is the conclusion reached in David Securities itself, that the vitiating factors which enliven the action for money had and received include mistakes of fact or law. But this appeal is not in that category. The principles of equity which govern the outcome are well developed and have the vitality to permit further development in an orthodox fashion.
Subrogation, like other equitable doctrines, is applicable to a variety of circumstances, as explained earlier in these reasons. One circumstance concerns sureties, another the paying off of an existing mortgage. But that is not to say that subrogation is a “tangled web”[71] in need of the imposition of the “top-down” reasoning which is a characteristic of some all-embracing theories of unjust enrichment[72].
Such all-embracing theories may conflict in a fundamental way with well-settled equitable doctrines and remedies. Reference was made in the opening paragraph of these reasons to the importance attached by equity to the fashioning of the particular remedy to meet the nature of the case. The administration of the remedies of injunction and specific performance provides perhaps the most obvious examples. So also the remedial constructive trust, as these reasons have sought to demonstrate.
Equity has been said to lack the necessary “exacting taxonomic mentality” when providing an appropriate remedy for unconscientious activity[73]. The better view is said to be that liability in “unjust enrichment” is strict, subject to particular defences[74], while “[t]he unreliability of conscience” offends the precept that like cases must be decided alike and not by “a private and intuitive evaluation”[75].
But the experience of the law does not suggest debilitation by absence of a sufficiently rigid taxonomy in the application of equitable doctrines and remedies. And legislatures have taken the same view in Australia, notably by calling upon equitable analogues in framing the remedial provisions laid out in Pt VI of the Trade Practices Act 1974 (Cth).
As these reasons have sought to show, the relevant principles of equity do not operate at large and in an idiosyncratic fashion. So it was that in Boscawen v Bajwa[76], Millett LJ, after denying that subrogation is a remedy which the court has a general discretion to impose whenever it thinks fit to do so, went on:

“The equity arises from the conduct of the parties on well settled principles and in defined circumstances which make it unconscionable for the defendant to deny the proprietary interest claimed by the plaintiff.”

That was said in 1995. In England matters appear now to stand differently[77].
Banque Financière de la Cité v Parc (Battersea) Ltd[78] concerned the application or extension of the reasoning in the authorities[79] allowing subrogation of a third party to securities paid off by that party. Counsel for the successful appellants had submitted no more than that, while there is “an inevitable link” between unjust enrichment and subrogation, “the two are not co-extensive”[80]. It may well be that the result in that case could have been arrived at by development of orthodox equitable principles of subrogation[81]. However, Lord Hoffmann, who gave the most detailed opinion, referred[82] to the use of the term “subrogation”:

“to describe an equitable remedy to reverse or prevent unjust enrichment which is not based upon any agreement or common intention of the party enriched and the party deprived”.

His Lordship then considered various cases in which securities were “kept alive” on the footing that a third party who paid off the security was presumed in equity to intend that it be so retained for the benefit of that party[83]. Lord Hoffmann concluded[84]:

“I think it should be recognised that one is here concerned with a restitutionary remedy and that the appropriate questions are therefore, first, whether the defendant would be enriched at the plaintiff’s expense; secondly, whether such enrichment would be unjust; and thirdly, whether there are nevertheless reasons of policy for denying a remedy.”

However, there is difficulty in identifying the “unjust” enrichment in subrogation cases, which necessarily involve multilateral, rather than bilateral, relationships[85]. Further, as Bryson J later explained, the reasoning of Lord Hoffmann in Banque Financière does not[86]:

“provide an explanation for the mortgagor’s being treated as bound, in equity, to treat the person who paid off the previous mortgage as entitled to security under it. Restitution would provide a basis for treating the mortgagor as obliged to restore to the person who paid it the amount which had been paid to the mortgagee: the concept is inadequate for also treating the mortgagor as obliged to hold the payer secured. This is particularly clear where, as in this case, and in other cases where subrogation has been held to exist, the mortgagor in fact had no dealings with the payer, or where the payer believed that he was getting security under arrangements in which the mortgagor was not in fact involved.”

In the present case, Giles JA described the understanding in Australia of the doctrinal basis of subrogation as “open to debate” by reason of the recent English authorities. However, for the above reasons, and contrary to the earlier suggestion in Highland v Exception Holdings Pty Ltd (In liq)[87], the doctrinal basis of equitable subrogation in Australian law is not unsettled. The respondents, led by counsel for the Solicitors, in this Court correctly eschewed any attempt to support the outcome in the Court of Appeal by application of reasoning in the recent English cases.

Orders

The appeal should be allowed. Order 1 of the orders of the Court of Appeal entered 29 December 2008 and the further orders entered 8 July 2009 should be set aside. In their place, it should be ordered that: (a) the appeal to the Court of Appeal be allowed; (b) orders 1 and 2 of the orders made by the primary judge and entered on 18 February 2008 should be set aside; (c) the separate question stated on 16 November 2006 should be answered as follows:

“In the absence of prior consent or release by Mr and Mrs Bofinger, on 8 February 2006 Kingsway Group Limited was obliged to account to Mr and Mrs Bofinger as a constructive trustee for any dealing by it with the moneys and securities identified in the question for decision in favour of any other party, and to pay equitable compensation to Mr and Mrs Bofinger in respect of the denial or limitation by such dealing of recoupment from those moneys and securities of moneys paid by Mr and Mrs Bofinger to Kingsway Group Limited, in total $1,519,234.40, from the proceeds of sale of their properties at 407 Willarong Road, Caringbah and 2/41 Bulwarra Street, Caringbah.”

The third and fourth respondents entered submitting appearances in this Court. The costs of the appellants in this Court, in the Court of Appeal and of the proceedings to date in the Equity Division of the Supreme Court, should be paid by the first, second, fifth, sixth, seventh and eighth respondents.

It will be for the appellants to take such steps as may be appropriate to restore the proceedings in the Equity Division for consideration of remaining issues. These will include the rate and nature of an interest component of the sum for which there is to be equitable compensation to the appellants[88].

[1] Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559; [1995] HCA 18.

[2] Liberty Mutual Insurance Co (UK) Ltd v HSBC Bank plc [2001] Lloyd’s Rep Bank 224 at 225; affd [2002] EWCA Civ 691. See Andrews and Millett, Law of Guarantees, 5th ed (2008), §11-028 and, with respect to insurance, the statement by Kitto, Taylor and Owen JJ in British Traders’ Insurance Co Ltd v Monson (1964) 111 CLR 86 at 94; [1964] HCA 24, that where there was no longer an outstanding right of action of the insured against a third party, “one might almost wish that some other word had been used as the label of a right which exists when it is too late for subrogation in the ordinary sense”.

[3] [1977] 1 WLR 347 at 357; [1977] 1 All ER 666 at 676; affd [1978] AC 95.

[4] Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367; [1979] HCA 61.

[5] Cf Boscawen v Bajwa [1996] 1 WLR 328 at 335; [1995] 4 All ER 769 at 777; Kation Pty Ltd v Lamru Pty Ltd (2009) 257 ALR 336 at 340-341.

[6] (1988) 166 CLR 245 at 254; [1988] HCA 11.

[7] (1988) 166 CLR 245 at 254.

[8] Yonge v Reynell [1852] EngR 655; (1852) 9 Hare 809 at 818-819 [68 ER 744 at 748-749].

[9] See also O’Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 at 223; [1933] HCA 37; Friend v Brooker [2009] HCA 21; (2009) 83 ALJR 724 at 735 [55]; 255 ALR 601 at 614; [2009] HCA 21.

[10] Duncan Fox & Co v North and South Wales Bank (1880) 6 App Cas 1 at 12.

[11] Andrews and Millett, Law of Guarantees, 5th ed (2008), §11-017.

[12] [1863] EngR 589; (1863) 32 Beav 499 [55 ER 196].

[13] De Colyar, A Treatise on the Law of Guarantees and of Principal and Surety, 3rd ed (1897) at 330-331. See also Rowlatt on Principal and Surety, 5th ed (1999) at 160; Andrews and Millett, Law of Guarantees, 5th ed (2008), §11-015.

[14] Drew v Lockett [1863] EngR 589; (1863) 32 Beav 499 [55 ER 196]; and see In re Kirkwood’s Estate (1878) 1 LR Ir 108.

[15] Drew v Lockett [1863] EngR 589; (1863) 32 Beav 499 [55 ER 196]; and see In re Kirkwood’s Estate (1878) 1 LR Ir 108. [See also Aylwin v Witty (1861) 30 LJ Ch 860.]

[16] Imperial Bank v London and St Katharine Docks Co (1877) 5 Ch D 195.

[17] [1863] EngR 589; (1863) 32 Beav 499 at 505-506 [55 ER 196 at 198]. See also In re Davison’s Estate (1893) 31 LR Ir 249 at 255.

[18] (1858) 25 Beav 310 [53 ER 655].

[19] [1858] EngR 477; (1858) 25 Beav 310 at 311 [53 ER 655 at 655].

[20] [1858] EngR 477; (1858) 25 Beav 310 at 312 [53 ER 655 at 656].

[21] [2008] QSC 57 at [74]; noted Young, “Recent cases”, (2008) 82 Australian Law Journal 760 at 762-763.

[22] [2008] QSC 57 at [53]. Cf Westfield Management Ltd v Perpetual Trustee Co Ltd (2007) 233 CLR 528 at 538-541 [35]-[45]; [2007] HCA 45.

[23] See, generally, Barry v Heider (1914) 19 CLR 197 at 213-214; [1914] HCA 79; Bahr v Nicolay [No 2] (1988) 164 CLR 604 at 613, 637-639, 653-655; [1988] HCA 16.

[24] Cochrane v Cochrane (1985) 3 NSWLR 403 at 404.

[25] Bofinger v Rekley Pty Ltd [2007] NSWSC 1138.

[26] Bofinger v Kingsway Group Pty Ltd (2008) 14 BPR 26,167.

[27] Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 357 [50]; [1999] HCA 9.

[28] O’Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 244-247, 260, 298; [1991] HCA 14.

[29] [1990] 1 AC 536 at 545.

[30] [1984] 1 NSWLR 285 at 299, 302.

[31] (1887) 35 Ch D 544 at 549-550. See also Banner v Berridge (1881) 18 Ch D 254 at 269-270; Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407 at 429-430; [1997] HCA 37; Lloyds Bank NZA Ltd v National Safety Council [1993] 2 VR 506 at 511, 514.

[32] (1816) 1 Madd 269 [56 ER 100].

[33] 19 & 20 Vict c 97.

[34] Embling v McEwan (1872) 3 VR (L) 52 at 53-54; Hardy v Johnston (1880) 6 VLR (L) 190 at 193.

[35] (1874) LR 9 Ch App 244.

[36] Russet Pty Ltd (In liq) v Bach unreported, Supreme Court of New South Wales, Equity Division, 23 June 1988 at 12.

[37] Cf Lord Napier and Ettrick v Hunter [1993] AC 713 at 738-739.

[38] Cf Lord Napier and Ettrick v Hunter [1993] AC 713 at 752.

[39] Cf Lord Napier and Ettrick v Hunter [1993] AC 713 at 738.

[40] (1999) 196 CLR 101 at 111-112 [2]-[4] per Gleeson CJ, McHugh, Gummow and Callinan JJ; [1999] HCA 10.

[41] (2004) 3 ABC (NS) 1 at 17. See also Giumelli v Giumelli (1999) 196 CLR 101 at 119-120 [31]-[32] and the form of the orders made at first instance by McLelland J in United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 at 820-822.

[42] (2004) 3 ABC (NS) 1 at 16.

[43] (1887) 35 Ch D 544 at 549-550.

[44] See Pilmer v Duke Group Ltd (In liq) (2001) 207 CLR 165 at 199 [78]; [2001] HCA 31; Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 at 393; Bristol and West Building Society v Mothew [1998] Ch 1 at 19; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 47; Finn, Fiduciary Obligations, (1977) at 253-254; Conaglen, “Fiduciary Regulation of Conflicts Between Duties”, (2009) 125 Law Quarterly Review 111 at 119-122.

[45] (1874) LR 9 Ch App 244. See Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 159-161 [159]-[165]; [2007] HCA 22.

[46] [1940] VLR 201 at 205.

[47] (1863) 32 Beav 499 [55 ER 196].

[48] (2004) 217 CLR 424 at 433-437 [17]-[23]; [2004] HCA 28.

[49] (1929) 43 CLR 334 at 351; [1929] HCA 42.

[50] [1863] EngR 589; (1863) 32 Beav 499 [55 ER 196].

[51] [1856] EngR 694; (1856) 2 K & J 650 [69 ER 943].

[52] (1986) 160 CLR 226 at 244; [1986] HCA 14.

[53] English Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302 at 322-323; [1937] HCA 6.

[54] Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd (1915) 21 CLR 69 at 87; [1915] HCA 91; Lewis v Keene (1936) 36 SR (NSW) 493 at 499. In New South Wales, s 10 of the Conveyancing Act 1919 (NSW) enacts that there shall be no “merger by operation of law only of any estate, the beneficial interest in which would not be deemed to be merged or extinguished in equity”.

[55] Whiteley v Delaney [1914] AC 132 at 144-145.

[56] Brunner v Greenslade [1971] Ch 993 at 1002.

[57] Waldock, The Law of Mortgages, 2nd ed (1950) at 437, quoted in Sussman v AGC Advances Ltd (1995) 37 NSWLR 37 at 51.

[58] In re W Tasker & Sons Ltd [1905] 2 Ch 587 at 599-600, 603, where the property was corporate debentures. The law was altered retrospectively by s 15 of the Companies Act 1907 (UK): In re New London and Suburban Omnibus Company [1908] 1 Ch 621 at 625-626; White and Tudor’s Leading Cases In Equity, 9th ed (1928), vol 2 at 34-35.

[59] (2003) 217 CLR 315 at 324 [20]; [2003] HCA 57.

[60] (1985) 3 NSWLR 403.

[61] (1985) 3 NSWLR 403 at 405.

[62] Friend v Brooker (2009) 83 ALJR 724 at 732 [38]; 255 ALR 601 at 609-610.

[63] (2009) 83 ALJR 724 at 728 [7]-[8]; [2009] HCA 21; 255 ALR 601 at 604.

[64] (1992) 175 CLR 353 at 378-379; [1992] HCA 48.

[65] (1992) 175 CLR 353 at 375.

[66] Cf Ford (by his tutor Watkinson) v Perpetual Trustees Victoria Ltd (2009) 257 ALR 658 at 684.

[67] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 156 [151] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ; Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 664-665 [83]-[85] per Gummow, Hayne, Crennan and Kiefel JJ; [2008] HCA 27.

[68] See Bryan v Maloney (1995) 182 CLR 609 at 619; [1995] HCA 17, and the later decisions collected in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 528-529 [18]; [2004] HCA 16.

[69] (1985) 3 NSWLR 403.

[70] Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 257; [1987] HCA 5; Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 665 [85].

[71] See Goff and Jones, The Law of Restitution, 4th ed (1993) at 592. This statement was removed from subsequent editions.

[72] See Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 156 [151].

[73] Birks, “Equity in the Modern Law: An Exercise in Taxonomy”, (1996) 26 University of Western Australia Law Review 1 at 16-17.

[74] Birks, “Equity in the Modern Law: An Exercise in Taxonomy”, (1996) 26 University of Western Australia Law Review 1 at 67-68.

[75] Birks, “Equity in the Modern Law: An Exercise in Taxonomy”, (1996) 26 University of Western Australia Law Review 1 at 17.

[76] [1996] 1 WLR 328 at 335; [1995] 4 All ER 769 at 777.

[77] The English authorities, of which the most recent was Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291, were analysed by Mr Tilley in his article “Restitution and the law of subrogation in England and Australia”, (2005) 79 Australian Law Journal 518.

[78] [1999] 1 AC 221.

[79] Notably, Ghana Commercial Bank v Chandiram [1960] AC 732.

[80] [1999] 1 AC 221 at 223.

[81] See the note by Jackman, “Restitution and subrogation”, (1999) 73 Australian Law Journal 110 at 112.

[82] [1999] 1 AC 221 at 231.

[83] [1998] UKHL 7; [1999] 1 AC 221 at 232-233.

[84] [1999] 1 AC 221 at 234.

[85] See Goff and Jones, The Law of Restitution, 7th ed (2007) at 132, where the learned authors write that by reason of the tripartite relationship of the parties “it is not always easy to determine whether it is B or C who has been enriched and why a court should conclude that the enrichment is an unjust enrichment”.

[86] Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 12 BPR 22,257 at 22,269.

[87] (2006) 60 ACSR 223 at 239.

[88] See Hermann v Charny [1976] 1 NSWLR 261 at 270; and the authorities collected in Victorian Workcover Authority v Esso Australia Ltd (2001) 207 CLR 520 at 531-532 [24]; [2001] HCA 53.