Reported Decision: 47 NSWLR 27
New South Wales
Court of Appeal
CITATION: Austin & Anor v Royal & Ors [1999] NSWCA 222 FILE NUMBER(S): CA 40382/98 HEARING DATE(S): 10 June 1999 JUDGMENT DATE:
10 June 1999PARTIES :
Kenneth James Austin
Diane Christina Austin
v
Michael Royal
Australia and New Zealand Banking Group Ltd
Peter Allen
Australian Padding Co Pty Ltd (In Liquidation)JUDGMENT OF: Meagher JA; Handley JA; Cole AJA
LOWER COURT JURISDICTION: Supreme Court LOWER COURT FILE NUMBER(S) : Comm D 50157/95 LOWER COURT JUDICIAL OFFICER: Giles CJ Comm D
COUNSEL: A - J Young
1 and 3R - P Wood
2R - J DowdySOLICITORS: A - Karageorge & Co, Sydney
1 and 3R - Henry Davis York, Sydney
2R - Norton Smith & Co, Sydney
4R - Kemp Strang & Chippindall, SydneyCATCHWORDS: Guarantee and Indemnity - Effect of guarantee - Subrogation - Discussion of principles - Ongoing liability - Whether subrogation to guarantor in absence of complete payment. DECISION: Appeal dismissed with costs
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40382/98
Comm D 50157/95MEAGHER JA
Thursday, 10 June 1999
HANDLEY JA
COLE AJA
Kenneth James AUSTIN & Anor v Michael ROYAL & OrsJUDGMENT1 COLE AJA: Mr and Mrs Austin have appealed from a judgment of Giles J, Chief Judge of Commercial Division as he then was, on 14 May 1998 in which his Honour denied their claim that they were entitled to be subrogated to the extent of $364,666 to the rights of the second respondent, the ANZ Banking Group Ltd ("the bank") in consequence of their having paid the sum mentioned in partial discharge of moneys due by the third respondent, Australian Padding Company Pty Ltd (In Liquidation) (Receiver and Manager Appointed) ("APC") whose debts they had guaranteed. 2 Giles J held that clause 12 of the guarantee excluded any such right. His Honour also denied the appellants relief pursuant to the Contracts Review Act 1980. 3 His Honour held that clause 12 of the guarantee was not materially distinguishable from the clause considered by the High Court in O'Day v Commercial Bank of Australia (1933) 50 CLR 200. That authority, binding on his Honour and on this Court, resulted in any right of subrogation having been contracted away by the Austins. 4 In this appeal, the Austins seek to distinguish that authority from the clause in their guarantee although they accept that, unless distinguished, and assuming clause 12 bears the construction placed upon it by his Honour, the appeal must fail. 5 The facts are adequately set out in the judgment of Giles J at pages 1 to 10 of the judgment. In my view, the facts as found necessarily result in the appeal failing. 6 The reason for this may briefly be stated. The contention of the appellants is that clause 12 of the guarantee did not exclude the right of subrogation to the extent of the sum mentioned. They further contended that…
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- AGLC
- Austin v Royal [1999] NSWCA 222
- Case
- [1999] NSWCA 222
- Decision Date
CaseChat Overview and Summary
The appeal concerned the effect of a guarantee and the principles of subrogation. The parties involved were Austin (the guarantor) and Royal (the creditor). The dispute centred on whether the guarantor, Austin, was entitled to be subrogated to the rights of the creditor, Royal, in circumstances where Austin had not yet fully discharged his liability under the guarantee. The matter was heard in the Court of Appeal of New South Wales.
The primary legal issue before the court was whether a guarantor, who has not yet paid the full amount of the debt guaranteed, can be subrogated to the rights of the creditor against the principal debtor. This involved an examination of the equitable doctrine of subrogation and its application in the context of guarantees, particularly concerning the timing of its operation and the requirement of complete discharge of the guarantor's liability.
The Court of Appeal affirmed the established legal principle that subrogation is a remedy that arises to prevent unconscionable conduct and to ensure that the guarantor, upon payment of the debt, is placed in the same position as the creditor to recover from the principal debtor. However, the court held that the right to subrogation does not arise until the guarantor has actually paid the debt or, at the very least, has discharged their full liability under the guarantee. Until such payment or discharge, the guarantor's liability remains contingent, and the equitable right of subrogation has not yet accrued.
The appeal was accordingly dismissed, and Austin was ordered to pay Royal's costs.
The primary legal issue before the court was whether a guarantor, who has not yet paid the full amount of the debt guaranteed, can be subrogated to the rights of the creditor against the principal debtor. This involved an examination of the equitable doctrine of subrogation and its application in the context of guarantees, particularly concerning the timing of its operation and the requirement of complete discharge of the guarantor's liability.
The Court of Appeal affirmed the established legal principle that subrogation is a remedy that arises to prevent unconscionable conduct and to ensure that the guarantor, upon payment of the debt, is placed in the same position as the creditor to recover from the principal debtor. However, the court held that the right to subrogation does not arise until the guarantor has actually paid the debt or, at the very least, has discharged their full liability under the guarantee. Until such payment or discharge, the guarantor's liability remains contingent, and the equitable right of subrogation has not yet accrued.
The appeal was accordingly dismissed, and Austin was ordered to pay Royal's costs.
Orders
Orders of the court
Appeal dismissed with costs
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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