Adaz Nominees Pty Ltd (As Trustee for the Rado No 2 Trust) & Ors v Castleway Pty Ltd (As Trustee for the Castleway Trust) & Anor

Adaz Nominees Pty Ltd (as trustee for the Rado No 2 Trust) and others (the plaintiffs) brought proceedings against Castleway Pty Ltd (as trustee for the Castleway Trust) and another (the defendants) in the Supreme Court of New South Wales. The dispute concerned the interpretation and enforceability of a deed of covenant and indemnity entered into between the parties. The plaintiffs sought declarations that the deed was valid and binding, and that the defendants were liable to indemnify them for certain losses.

The central legal issue before Gleeson J was whether the deed of covenant and indemnity was effective to create legally binding obligations on the defendants to indemnify the plaintiffs. This involved determining whether the deed constituted a valid and enforceable contract, and if so, the scope of the indemnity provisions contained within it. The court also had to consider whether the plaintiffs had suffered losses that fell within the ambit of the indemnity.

Gleeson J reasoned that the deed, properly construed, created a legally binding obligation on the defendants to indemnify the plaintiffs. His Honour applied established principles of contract law, including the requirement for intention to create legal relations and consideration, finding that these elements were satisfied by the circumstances surrounding the execution of the deed. The court found that the language of the deed clearly evinced an intention by the defendants to assume responsibility for the plaintiffs' liabilities, and that the plaintiffs had provided good consideration for this promise. The court further determined that the losses claimed by the plaintiffs were covered by the indemnity provisions of the deed.

The court made declarations that the deed of covenant and indemnity was valid and binding on the defendants, and that the defendants were liable to indemnify the plaintiffs for the losses proven to have been suffered.