Lang & Anor v Asemo Pty Limited

[1989] HCATrans 133

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M98 of 1988

B e t w e e n -

KENNETH FREDERICK LANG and

NICHOLAS POLITES

Applicants

and

ASEMO PTY LIMITED

Respondent

Application for special

leave to appeal

BRENNAN J
DAWSON J

McHUGH J

Lang
MR R.R. BOADEN:	May it please the Court, I appear for the

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 9 JUNE 1989, AT · 2. 35 PM

Copyright in the High Court of Australia

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applicant in this matter. (instructed by A. Lewenberg

& Associates)

MR R.W. DAVIS:  May it please the Court, I appear for the

respondent. (instructed by Adams Maguire & Sier)

MR BOADEN:  If the Court please, the matters out of which

this appeal is desired to be brought concern matters -
transactions which are entered into countless times

every day in every State of this country, and it is

really one of the interesting or fascinating anomalies

of the law of real property that matters such as this

still remain to be decided and can, indeed, be discussed

and debated.

What we are concerned with here is, as I said, a very common situation where someone enters into a

lease and someone else gives a guarantee of the

lessee's obligation and then subsequent to that, the

reversion is sold and transferred to a third person.

The essential question that is raised is whether the

assignee of the reversion can sue the guarantor with

whom he has no privity at this stage, no privity of

contract, but whether he can sue simply because the

covenant contained in the guarantee is one which
touches and therefore runs with the land.

It is a matter which has not been directly the subject of any decision in Australia and until

recently the law in Australia was taken to be the law
which one had to divine from two cases which - at

least one case which was not entirely on point. but

it is the case referred to in the application book, the

decision of this Court in CONSOLIDATED TRUST CO LTD V

NAYLOR, (1936) 55 CLR 423.

BRENNAN J: That case was not conclusive of the present point,

I think.

MR BOADEN:  Not at all, Your Honour, no, but simply leaving aside the result of that case which was the decision

that the transfer of a mortgage does not carry with it the transfer of the guarantor's obligations, the point of interest and the conceptual point which does

arise from the joint judgment of Mr Justice Dixon and

Mr Justice Evatt was this: at page 434 of

Their Honour's joint judgment Their Honours said:

A surety's obligation stands in a different

relation to the dealing -

the dealing being the mortgage -

His liability is introduced by way of

additional security. It is personal and,

except as a result of subrogation, does not

directly or indirectly affect the land.

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That, it is submitted, is a very helpful guide because it shows, as a matter of concept, whether

this obligation,and the surety's obligation of course

is always secondary, it shows that in deciding

whether any obligation is to be attached to the land,"

one looks to the principal obligation and then,

certainly as far as Sir Owen Dixon and Mr Justice Evatt

are concerned, the surety's obligation being

intrinsically a secondary obligation, Their Honours say

it is an additional security and it does not directly

or indirectly affect the land.

Then after that there was the decision of

Mr Justice Yeldham in New South Wales which, of course,

is directly in point but it did not raise this very

question which we have here, the question of whether
or not, by virtue of the covenant touching the land
itself, the assignee of the reversion could sue the

guarantor.

Then, as Your Honours will have seen, the matter

came before the Court of Appeal, Sir Nicholas Browne-

Wilkinson in 1987 and then the House of Lords in 1988.

The result of those two decisions was diametrically opposed to the indications which one had previously inferred from the two Australian decisions.

BRENNAN J: Mr Boaden, the point that you wish to agitate is

no doubt an interesting one. There is a problem,

however, as to whether this case is a suitable vehicle

for it because one could arrive at the conclusion

which is adverse to your client by, I suppose, a

number of means. One which was taken in the Full Court

is different from that which was taken at first

instance, and there are also questions of trusteeship
or agency that might fall for consideration. The

problem, as it seems to me in this case, is that if

we have a number of possible hypotheses that might

reach a conclusion adverse to your client, if we were to grant special leave, would this case go off on the

point that you wish to have agitated?

MR BOADEN:  As Your Honour will see from the draft notice of

appeal, the early points that are raised in the draft

notice do fairly and squarely raise the point to which I have been addressing the Court and the concern which Your Honour Mr Justice Brennan raises could perhaps

be dealt with by granting special leave but perhaps

expunging some of those point which appear later on

in the draft notice of appeal.

BRENNAN J: Rather the problem does not lie within your control.

In other words, you may wish to have it restricted to

this point so that if you succeed on this, you will

succeed in the action. But your opponent may

wish to say, well, even if I do not succeed on this, I have other strings to my bow. and how can you shut him out from those other strings?

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MR BOADEN:  Yes, certainly, Your Honour, I cannot do that.

But could I say this -

BRENNAN J: Must you not address that problem?

MR BOADEN:	Could I say this, Your Honour, that by the nature of this sort of transaction, the difficulties to which
Your Honour has adverted are difficulties which I think would probably arise in any case which was
taken before the High Court to have this point resolved because, after all, any case is going to involved questions of construction of the guarantee; it is going to involve the facts itself, and whilst, as I said, I cannot do anything other than agree that
there are those other limbs to the respondent's bow,
at least, it is my submission that the essential point
that is raised by this case is clearly and quite overtly raised.

I think that is really as far as I can take the

point, Your Honour. It is, like all appeals, capable

of being diverted down a track which is perhaps less

interesting but likely to be conclusive of the facts

inter partes and so therefore perhaps of less interest

to the lawyers and this appeal, like all such appeals,

suffers from that potential.

The point that I was going to go on to make, Your Honours, was this, that there really is a very

fundamental potential, at least, difference of concept

between the Australian decisions and the two English
decisions and one sees that when one juxtaposes

Mr Justice Dixon's and Mr Justice Evatt's statement that the guarantee is really quite apart from and

unrelated to the mortgage transaction in that case

and then one sees perhaps the high-water mark of the
way to which the English authorities have arrived,
when one looks at Lord Templeman's judgment in the

SWIFT INVESTMENTS case and in a very apt analogy at the present Lord Templeman described a surety for a tenant as being a quasi tenant and His Lordship goes

on and he says that this quasi tenant -

volunteers to be a substitute or twelfth
man for the tenant's team and is subject to

the same rules and regulations as the player

he replaces.

Now, as I said, juxtaposing just those two dicta

really shows a fundamental divergence in the

conceptual analysis of whether a covenant is touching and concerning the land or whether it is simply going

to colateral circumstances. Whilst the English

authority goes down that road and whilst we have the

earlier decision of the High Court and Mr Justice Yeldham

in New South Wales, we do have a very practical

problem which, as I said, is one which is potentially

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going to be enlivened in very many transactions

which are entered into as a matter of course

every business day in every State of this country.

So it is that difficulty which, in my

submission, does make the appeal one worthy of

special leave and we have now the Full Court of

the Supreme Court of Victoria which has followed the

dicta in the House of Lords and Sir Nicholas Browne-

Wilkinson and we do have this conflict and it is a

live, a real conflict between the Full Court in its

present decision and the concepts, the inferences

which one draws from the joint judgment in the

High Court and from the express decision of

Mr Justice Yeldham, albeit this particular point was

not debated before His Honour in New South Wales.

So it is with those points and in order to

reconcile those points and those divergences that it

is submitted that this is an application worthy of

special appeal. Beyond that, if it would assist Your Honours-, I can take Your Honours to further details and discrepancies between the two judgments

or between the two lines of judgments, but that is

the essential point of the appeal.

BRENNAN J: Thank you, Mr Boaden.

We need not trouble you, Mr Davis.

The courts below respectively arrived at a

conclusion in favour of the assignee of the lease

in this case by differing routes. There are

moreover other arguable ways in which one might

arrive at the same result. The question which the
appeallants wish to agitate, namely whether a surety

covenant runs with the reversion, is an important

question but it is by no means clear that if special

leave were granted, the case would be determined by

reference to that question. The case is not therefore

a suitable vehicle for raising it. Moreoever the

result arrived at in the courts below does not appear

to be an unjust one.

In those circumstances, special leave will be

refused.

MR DAVIS:	I ask for costs.
MR BOADEN:	I have nothing to say, Your Honours.

BRENNAN J: With costs.

AT 2.45 PM THE MATTER WAS ADJOURNED SINE DIE

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