MMI General v Copeland

[2000] NSWSC 317

CITATION:	MMI General v Copeland [2000] NSWSC 317
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50120/98
HEARING DATE(S):	12/04/00
JUDGMENT DATE:	14 April 2000
PARTIES :	MMI General Insurance Limited - Plaintiff Kenneth William Copeland - First Defendant/Cross-Claimant Lynette McPhee - Second Defendant Donald Ian David Booker - Cross-Claimant/Cross-Defendant Laurence Whistler Street - Cross-Claimant/Cross Defendant
JUDGMENT OF:	Rolfe J

COUNSEL :	Mr J.W. Stevenon - Plaintiff Mr S.T. White/Ms C. Parry - Donald Ian David Booker Mr A.J. Meagher SC/Mr D. Limberger - Laurence Whistler Street
SOLICITORS:	Phillips Fox - Plaintiff Eakin McCaffery Cox - Donald Ian David Booker Allen Allen & Hemsley - Laurence Whistler Street
CATCHWORDS:	Claim for contribution and indemnity - Question as to appropriate relief in the circumstances.
CASES CITED:	Dunlop Pneumatic Tyre Company Limited v Selfridge & Company Limited [1915] AC 847 at p.853 Coulls v Bagot's Executor & Trustee Co Limited (1967) 119 CLR 460 at pp.478-9 and p.494 Woolmington v Bronze Lamp Restaurant Pty Limited (1984) 2 NSWLR 242 Thomas v Nottingham Incorporated Football Club Limited [1972] Ch 596 Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 at p.596 Mahoney v McManus (1981) 55 ALJR 673 at p.675 Morgan Equipment Company & Ors v Rogers (No 2) (1993) 32 NSWLR 467 at pp.476-477 The Modern Contract of Guarantee (2nd Edition)
DECISION:	Orders attached

Orders

1    I order and declare that:-

1. In the proceedings by the plaintiff against Mr Copeland:-
(a) Upon noting the undertaking of Rebecca Monica Grace Lynch given to the Court in the document dated 12 April 2000, which will remain with the papers, judgment for the plaintiff against the first defendant, Kenneth William Copeland, in the sum of $2,697,512.20.
(b) The first defendant, Kenneth William Copeland, pay the plaintiff’s costs of the proceedings.
2. In the proceedings brought by way of Cross-Claim against Mr Booker and Sir Laurence Street:-
(a) The Cross-Claim of Kenneth William Copeland against each of Donald Ian David Booker and Laurence Whistler Street be dismissed and Kenneth William Copeland pay the costs of each of Donald Ian David Booker and Laurence Whistler Street of the Cross-Claim.
3. In the proceedings brought by way of Cross-Claim by Laurence Whistler Street against Kenneth William Copeland:-
(a) Declare that the cross-claimant, Laurence Whistler Street, is entitled to be indemnified by the cross-defendant, Kenneth William Copeland, against his liability to the plaintiff arising under the Deed of Settlement dated 8 December 1998 made between the said Laurence Whistler Street and the plaintiff;
(b) Judgment for the cross-claimant, Laurence Whistler Street, against Kenneth William Copeland in the sum of $1,105,082.54;
(c) Order that the cross-claimant, Laurence Whistler Street, have liberty to apply for further relief against Kenneth William Copeland in the event that Kenneth William Copeland does not forthwith indemnify Laurence Whistler Street in respect of any further payments made by Laurence Whistler Street to the plaintiff under the Deed of Settlement between him and the plaintiff dated 8 December 1998;
(d) the cross-defendant, Kenneth William Copeland, pay the cross-claimant’s, Laurence Whistler Street’s, costs of the Amended Second Cross-Claim.
4. In the proceedings brought by way of Cross-Claim by Donald Ian David Booker against Kenneth William Copeland:-
(a) Declare that the cross-claimant, Donald Ian David Booker, is entitled to be indemnified by the cross-defendant, Kenneth William Copeland, to the extent of 75 per cent of any amount paid by the said Donald Ian David Booker to the plaintiff, which exceeds ten per cent of the total debt owed to the plaintiff of $3,963,000;
(b) Order that the cross-claimant, Donald Ian David Booker, have liberty to apply to the Court for further relief against Kenneth William Copeland in the event that Kenneth William Copeland does not forthwith indemnify Donald Ian David Booker in respect of any further payments made by Donald Ian David Booker to the plaintiff under the Deed of Settlement between him and the plaintiff dated 8 January 1999;
(c) The cross-defendant, Kenneth William Copeland, pay the cross-claimant’s, Donald Ian David Booker’s, costs of the Cross-Claim.

I N D E X

Page

Introduction 1
(a) The Plaintiff’s Proceedings 1
(b) Mr Copeland’s Defence 3
(c) The Cross-Claims 5
(d) Mr Booker’s Defence To Mr Copeland’s Cross-Claim 6
(e) Sir Laurence Street’s Defence To Mr Copeland’s 7
Cross-Claim
(f) Sir Laurence Street’s Cross-Claim 8
(g) Mr Booker’s Claim Against Mr Copeland 9

The Plaintiff’s Case 9

The Cross-Claim Of Sir Laurence Street 10

Mr Booker’s Case Against Mr Copeland 21

Orders 24

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

ROLFE J

FRIDAY, 14 APRIL 2000

50120/1998 - MMI GENERAL INSURANCE LIMITED v COPELAND & ANOR

JUDGMENT

HIS HONOUR:

Introduction

(a) The Plaintiff’s Proceedings

2    By a Summons issued on 14 October 1998 the plaintiff sued the first defendant, Mr Kenneth William Copeland, (“Mr Copeland”), and the second defendant, Ms Lynette McPhee, (“Ms McPhee”), seeking to recover $3,528,478, interest thereon and ancillary relief. The matter was first mentioned before me on 30 October 1998 when I granted the plaintiff leave to enter judgment against Ms McPhee, who, I was informed, is now a bankrupt and played no part in the proceedings.

3    The plaintiff’s claim, which proceeded against Mr Copeland, was that by a written agreement dated 3 October 1997, (“the First Deed of Indemnity”), between it, on the one hand, and Mr Copeland, Ms McPhee, Legalcare Australia Pty Limited and Mr Donald Ian David Booker, on the other, (“the Indemnifiers”), the Indemnifiers jointly and severally indemnified the plaintiff and agreed to pay it on demand amounts it paid under bonds issued at their request.

4    The plaintiff further alleged that by a written agreement dated 26 November 1997, (“the Second Deed of Indemnity”), between it, on the one hand, and Mr Copeland, Ms McPhee, Australasian Executive Consultants Pty Limited, Sir Laurence Whistler Street and Mr Donald Ian David Booker, on the other, (“the Indemnifiers”), the Indemnifiers jointly and severally indemnified it and agreed to pay to it on demand amounts paid by it under bonds issued at their request.

5    The plaintiff proceeded only against Mr Copeland and Ms McPhee because, I assume, shortly after the Summons was filed it reached a settlement with Mr Booker and Sir Laurence Street.

6    Mr Copeland admitted his execution of both Deeds of Indemnity.

7    The plaintiff alleged that on 1 December 1997, at the request of the Indemnifiers under the Second Deed of Indemnity, it issued a Performance Bond in favour of St George Bank Limited, (“the Bank”), undertaking to pay it $2m on written demand by it and, on 9 April 1998, at the request of the Indemnifiers under the First Deed of Indemnity, it issued a Performance Bond in favour of the Bank undertaking to pay it $1,500,000 on written demand by it. It further alleged that on 6 July 1998 the Bank made written demands on it under both bonds, and that on 15 July 1998 it paid the amounts of $2m and $1,500,000 to the Bank pursuant to those bonds. It alleged that on 10 August 1998, $3,528,478 was owed by Mr Copeland and Ms McPhee to it, and that on that date it made a written demand on them for such payment, which was not met.

(b) Mr Copeland’s Defence

8    By his Defence, which was filed on 1 December 1998, Mr Copeland put in issue various matters relating to the provision of the bonds and the making of payments by not admitting them and, in answer to paragraph 12 of the Summons in which the plaintiff asserted that $3,528,478 was owing by him to it, he denied the allegation.

9 In paragraphs 12 to 17 inclusive Mr Copeland raised a number of matters on the basis of which he sought to assert that he was not liable under either Deed of Indemnity. Put generally, but sufficiently for present purposes, he pleaded that he was not legally qualified and had limited comprehension of legal documents, he was misled by various parties as to the nature of the Deeds, and that the circumstances in which the First Deed of Indemnity was executed by him were unjust, at the time it was done, pursuant to s.7(1) of the Contracts Review Act 1980. In relation to the Second Deed of Indemnity he made similar allegations and added that the circumstances in which it was executed, together with the plaintiff’s conduct, were unconscionable such that it should be set aside in equity.

10    When the matter was called on for hearing on 12 April 2000, the hearing date having been fixed on 15 October 1999 and he having been advised of that fact, on his own admission, on 19 October 1999, an application was made on his behalf for an adjournment. That was refused for the reasons I gave, whereupon Counsel, who had announced his appearance solely for the purpose of applying for the adjournment, sought and was granted leave to withdraw. A Notice of Ceasing to Act was filed by his instructing solicitor. In the result, as between the plaintiff and Mr Copeland, the only matters it was necessary for the plaintiff to prove were the Deeds of Indemnity, the requests for the issue of the Performance Bonds, their issue, the demand by the Bank for payment pursuant to them, the payment, and the amount due.

11    The plaintiff proved these matters through the affidavits of Mr Rino Criola sworn 5 July 1999 and Mr Mohinder Kumar sworn 12 April 2000. Counsel for the plaintiff drew to my attention that the Deeds of Indemnity had not been stamped. I permitted reliance on them upon the solicitor for the plaintiff, Ms Rebecca Monica Grace Lynch, giving to the Court an undertaking that the Deeds will be presented for stamping and any stamp duty will be paid. The written undertaking will remain with the papers, and I will refer to it in the orders I make. I should note that Mr Copeland did not raise in his Defence the failure to stamp the Deeds.

(c) The Cross-Claims

12    On 21 December 1998 Mr Copeland brought Cross-Claims against Mr Booker, as first cross-defendant, and Sir Laurence Street, as second cross-defendant. As against Mr Booker he referred to the claim made on him by the plaintiff and to the execution of the Deeds of Indemnity. He pleaded that he defended the plaintiff’s claim on the grounds set out in his Defence, and that if he was ordered to pay damages to the plaintiff in any amount he was entitled to an indemnity and contribution from Mr Booker “being jointly and severally liable together with the cross-claimant under both the First and Second Deed of Indemnity”.

13    As against Sir Laurence, Mr Copeland pleaded the claim made against him by the plaintiff, the execution of the Second Deed of Indemnity, his defence to the plaintiff’s claim, and claimed that if he was ordered to pay damages to the plaintiff in any amount he was entitled to an indemnity and contribution from Sir Laurence on a joint and several basis.

(d) Mr Booker’s Defence To Mr Copeland’s Cross-Claim

14    Mr Booker defended the Cross-Claim. He denied Mr Copeland’s entitlement to indemnity or contribution from him essentially on the basis that there was an agreement between the shareholders of the Legalcare Group of Companies, namely Mr Copeland, Sir Laurence Street, Ms McPhee and himself, that his liability to the plaintiff was limited to ten per cent of the total liability of the shareholders. He particularised the agreement as partly oral and partly implied, the oral portion being discussions on various dates prior to and including on or about 29 and 30 November 1997 in Sydney when it was agreed that his liability to the plaintiff was limited “to 10% of the total liability”.

15    He particularised the implied portions as arising from Minutes of the meeting of the Board of Directors of Legalcare dated 1 December 1997 and 19 March 1998, a letter between the shareholders and Sir Laurence Street dated 19 March 1998 and a letter from Australasian Executive Consultants Pty Limited to Sir Laurence Street dated 20 November 1997.

16    The pleading continued that pursuant to a Deed of Settlement dated 8 January 1999 between Mr Booker and the plaintiff, he had paid it $250,000, (the amount now having increased to $350,000), and had agreed to pay it further amounts totalling $850,000 on certain terms and conditions, and that by reason of those matters Mr Copeland is not entitled to any indemnity or contribution from him or, alternatively, any amount of contribution to which Mr Copeland is entitled must be reduced by Mr Booker’s payment to the plaintiff under the Deed of Settlement.

17    There was further pleading to which it is not necessary to refer.

(e) Sir Laurence Street’s Defence To Mr Copeland’s Cross-Claim

18    Sir Laurence Street denied the entitlement of Mr Copeland to an indemnity or contribution from him pleading that in consideration of his agreeing to execute the Second Deed of Indemnity, each of Mr Copeland, Ms McPhee and Mr Booker agreed to indemnify him against any claim which may at any time be made against him arising out of his agreement to be an indemnifier to the plaintiff. He pleaded that the agreement was in the form of a letter dated 20 November 1997 addressed to him and signed by each of those parties.

19    He pleaded that pursuant to a Deed of Settlement dated 8 December 1998 between himself and the plaintiff, he has paid and agreed to pay the plaintiff certain moneys on certain terms and conditions in respect of his liability under the Second Deed of Indemnity and, by reason of that fact, Mr Copeland is not entitled to any contribution from him or, alternatively, any amount of contribution to which Mr Copeland is entitled must be reduced by his liability under that Deed of Settlement.

(f) Sir Laurence Street’s Cross-Claim

20    By an Amended Second Cross-Claim Sir Laurence sought relief against Mr Copeland and Mr Booker. The proceedings between Mr Booker and him have been settled. The essential allegation he made was that in consideration of his agreeing to execute the Second Deed of Indemnity, Messrs Copeland and Booker and Ms McPhee agreed jointly and severally to indemnify him against any claim of whatever nature or kind, which may at any time be made against him arising out of his execution of the Second Deed of Indemnity, and he relied on the letter dated 20 December 1997.

21    In the alternative he pleaded reliance on a letter of 19 March 1998, although on the hearing this claim was not pursued, the submission on his behalf being that it had no legal effect and certainly did not affect the efficacy of the letter dated 20 November 1997. He set forth the payments made pursuant to the Deed of Settlement into which he had entered with the plaintiff.

22    Mr Copeland filed a Defence, putting in issue the various matters alleged.

(g) Mr Booker’s Claim Against Mr Copeland

23    Mr Booker brought a Third Cross-Claim against Mr Copeland in which he sought a declaration that his liability to Mr Copeland was limited to ten per cent of the maximum liability of all parties to the plaintiff and for consequential relief. He repeated, in substance, the matters in his Defence to Mr Copeland’s Cross-Claim. Mr Copeland filed a Defence in which he put in issue the matters alleged by Mr Booker.

The Plaintiff’s Case

24    In his affidavit of 5 July 1999 Mr Criola proved the two Deeds, the issue of the Bonds under them, the call by the Bank on the Bonds and the plaintiff’s payment of those amounts.

25 In his affidavit of 12 April 2000 Mr Kumar set out that to date Sir Laurence has paid $916,667 to the plaintiff pursuant to the terms of settlement, and Mr Booker has paid $350,000 pursuant to his terms of settlement, making a total of $1,266,667. He deposed that as at 12 April 2000 the amount owing to the plaintiff by Mr Copeland is $2,696,334.90, which includes interest pursuant to s.94 of the Supreme Court Act 1970, and, in paragraph 6, he stated that interest was accruing at the rate of $588.69 per day.

26    Neither Mr Criola nor Mr Kumar was required for cross-examination and the plaintiff’s case was thus proved and it is entitled to judgment against Mr Copeland in the sum of $2,696,334.90 being, save for seven cents, the sum of $2,261.811 for principal and $434,523.97 for interest. To that amount interest at the rate of $588.69 per day to the date of judgment will have to be added.

27    As Mr Copeland did not contest the proceedings there was no attempt to prove the matters alleged in his Defence as disentitling the plaintiff to recover the full amount. Further, as his Cross-Claims against Sir Laurence Street and Mr Booker were not prosecuted they will be dismissed, that being the order sought by each.

The Cross-Claim Of Sir Laurence Street

28    On 25 November 1997, Messrs Copeland and Booker and Ms McPhee signed a letter to Sir Laurence Street on the letterhead of Australasian Executive Consultants Pty Limited and bearing date 20 November 1997, which stated:-

“The Performance Bond - AON Risk Services/MMI Insurance Group
We the undersigned HEREBY each severally and jointly indemnify you, and agree to hold you indemnified, against any claim of whatsoever nature or kind which may at any time be made against you arising out of your agreement to be an Indemnifier to MMI Insurance Group in respect of a Performance Guarantee Bond to be issued by that company at the request of the Australasian Executive Consultants Pty Limited.”

That Deed, which is annexed to the witness statement of Sir Laurence, Exhibit 3D1, was executed on 26 November 1997.

29    The circumstances in which it came to be executed are set forth in that statement and were not the subject of challenge. In his statement Sir Laurence traced the various commercial arrangements in which the parties became involved and referred to conversations with Mr Copeland in which he told him that he was not prepared to make any financial contribution to the venture. He said Mr Copeland told him that he would not be expected to do so. Sir Laurence set forth various reasons which, as a matter of probability, would support the view that he would not have agreed to make any financial contribution either directly or by way of guarantee or indemnity.

30    In paragraph 14 of his witness statement Sir Laurence referred to a conversation in which Mr Copeland told him that the plaintiff was insisting that he should join as a guarantor. Sir Laurence said he was extremely reluctant to agree to that for reasons he explained, but Mr Copeland insisted that it was essential and:-

“Our personal indemnities will amply protect you against your liability under MMI’s Deed”.

Sir Laurence said that he replied:-
“All right, I will execute the Deed of Indemnity but only on the basis that you and the other directors agree to indemnify me”,

to which Mr Copeland replied:-
“Yes, we will all agree to that”.

31    Sir Laurence said that the letter of 20 November 1997 was signed by Messrs Copeland and Booker and Ms McPhee and handed to him prior to his signing the Second Deed of Indemnity.

32    He then dealt with the further letter of 19 March 1998, which is no longer relevant to his cross-claim.

33    Sir Laurence has, thus far, paid the plaintiff $916,667. He is obliged, under the Deed of Settlement, to make further payments.

34    As Sir Laurence’s case proceeded essentially ex parte it is desirable to consider the reasons why, in addition to the absence of any challenge, it should be accepted. First, Sir Laurence was not a party to the first Deed. According to his statement there were compelling reasons why he would not become financially liable. Secondly, although he initially refused to enter into the Second Deed for the same reasons, his agreement to do so was made solely on the basis that the others indemnified him. Thirdly, the chronology is that the letter was typed on 20 November and signed on 25 November, the day before the second Deed was executed. This supports the fact that Sir Laurence was not prepared to sign that Deed until the letter was executed. Fourthly, although Mr Copeland did not defend the Cross-Claim by reason of his non-appearance, Mr Booker had a very real interest in doing so and establishing the contrary of the facts alleged by Sir Laurence. In the end he settled the proceedings brought by Sir Laurence against him on the terms of the Short Minutes of Order, which are with the papers. Although the amount is not disclosed, there is an agreement that Mr Booker will pay money to Sir Laurence. Mr Booker’s liability to Sir Laurence arose in the same circumstances as that of Mr Copeland.

35 Senior Counsel for Sir Laurence argued that there was consideration for the giving of the letter dated 20 November 1997. It was submitted that it is established that consideration must move from the promisee: Dunlop Pneumatic Tyre Company Limited v Selfridge & Company Limited [1915] AC 847 at p.853 and Coulls v Bagot’s Executor & Trustee Co Limited (1967) 119 CLR 460 at pp.478-479 and p.494, and that in this case Sir Laurence, by agreeing to execute the Second Deed of Indemnity at the request of Messrs Copeland and Booker and Ms McPhee, provided consideration to each for the promises contained in the letter. The submission continued that whilst consideration must move from the promisee it need not move to the promisor, and that the letter dated 20 November 1997 was not superseded by that dated 19 March 1998 because that letter did not vary or extinguish that of 20 November 1997 as there was no consideration for it and therefore no binding agreement, which could either vary or extinguish that of 20 November 1997.

36    In my opinion each of these submissions is correct.

37    In Dunlop Pneumatic at p.853 Viscount Haldane LC said:-

“A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor’s request.”

38    The evidence makes it clear that Sir Laurence would not have signed the Second Deed of Indemnity unless he was, in turn, indemnified jointly and severally by Messrs Copeland and Booker and Ms McPhee. Thus, in consideration of their promise to indemnify him jointly and severally, he executed that Deed.

39    The letter of 19 March 1998 came into existence because shortly before that date Sir Laurence was unable to find the letter dated 20 November 1997. He raised the matter at the Board Meeting on 19 March 1998 and requested the other directors to sign another indemnity in a similar form to the first one. He was told by Mr Booker and Ms McPhee that they were only prepared to sign another indemnity if it limited their liability in proportion with their interest in the company being respectively ten per cent and fifteen per cent, and that Mr Copeland said that he “will cover the remaining 75 per cent”.

40    The submission was that there could be no consideration for that letter because it would be past consideration as Sir Laurence had already agreed to be and had become an indemnifier on 26 November 1997. Accordingly, there was no consideration moving from him with respect to the promises in the letter of 19 March 1998. The submission was also made that there was no consideration moving from Messrs Copeland and Booker or Ms McPhee, because each promised to do something which he or she was already bound to do by virtue of the letter dated 20 November 1997. I am satisfied each of these submissions is correct.

41    Against this background it was submitted that the indemnity given in the letter dated 20 November 1997 is and has been at all times binding, thereby affording Sir Laurence a joint and several indemnity from Mr Copeland, Mr Booker and Ms McPhee in respect of his liability to the plaintiff. As I have said, I consider this submission is correct. Thus there can be no doubt that he is entitled to recover the amounts he has paid, the next question being whether he is entitled to recover the further amounts he is obliged to pay, if he makes those payments. There is no reason to suppose that he will not.

42 It was submitted on behalf of Sir Laurence that in addition to judgment for the moneys he has paid already, he is entitled to an order granting him liberty to apply for further relief if Mr Copeland does not forthwith indemnify him in respect of further payments made. In The Modern Contract of Guarantee (2nd Edition) the authors state, at p.487:-

“ Quia timet relief will be tailored to the particular circumstances of each case so as to protect the guarantor as far as possible from being required to pay. But unless there is plain evidence before the Court that the principal debtor clearly has the means to pay the debt the Court may merely make a general declaration exonerating the guarantor and grant him liberty to apply for further relief if the debtor fails to discharge the principal debt. The Court will not make a specific order enforcing the plaintiff’s claim to quia timet relief but it will make a declaration and grant liberty to apply. On an application for further relief at a later date, the Court can consider all the circumstances of the case, (particularly the defendant’s position) before making a specific order.”

43    At p.482, the authors posed the question as to when quia timet relief is available and answered it thus:-

“A guarantor is entitled to this form of equitable relief as soon as the principal debt becomes due and the guarantor owes the creditor a definite sum, even if he has not paid that amount. Relief is available when the account between the creditor and the principal debtor is closed and the guarantor incurs an actual accrued or absolute liability giving the creditor a right to immediate payment. Quia timet relief will not be granted where the surety’s liability is not yet established. It is not sufficient, therefore, that a demand has been made on the guarantor and that, upon the taking of accounts, a debt might become due to the creditor.” (The authors’ emphasis.)

44    In the present case the situation, at least as between Sir Laurence and Mr Copeland, is slightly different. Whilst Sir Laurence guaranteed payment to the plaintiff, Mr Copeland guaranteed payment to him. However, it seems to me that as the relief may be tailored to the particular circumstances of each case for the protection of the guarantor, it is appropriate to apply the principles to which I have referred.

45 In the passage at p.487 the footnote refers, inter alia, to the decision of Needham J in Woolmington v Bronze Lamp Restaurant Pty Limited (1984) 2 NSWLR 242.

46    At p.243 his Honour, having traced the particular factual situation, said:-

“At first sight the plaintiff would seem to be plainly entitled to the declaration but the order sought certainly aroused some interest when it was first put to me by counsel. It is in effect an order that one of the defendants, as a principal debtor, pay forthwith to another defendant, as credit, the amount of the debt owed by the principal debtor to the creditor. However the application is not by any means unique, and such orders have been made in the United Kingdom on a number of occasions.”

47 His Honour referred to the decisions in Watt v Mortlock [1964] Ch 84 in which whilst as between the creditor and the debtors, the debtors were principal debtors, as between themselves one debtor was the principal debtor and the other was a surety. Wilberforce J expressed some doubt as to the extent to which he could make the order sought, although he did make an order and granted liberty to apply.

48 His Honour also referred to Thomas v Nottingham Incorporated Football Club Limited [1972] Ch 596 in which it was held that a guarantor had a right in equity, where a liability had accrued, to require the principal debtor to exonerate him from his liability by paying off the creditor. An order was made that the defendants pay certain amounts and liberty to apply was granted.

49    Whilst his Honour was unable to find any decisions in this country “precisely in point” he was of the view that it was proper to make orders of the type made in the Chancery Division. It seems to me, if I may say so with respect, that these decisions establish that the Court may mould an order which, in all the circumstances, is appropriate.

50 Nextly it was submitted that as Sir Laurence is entitled to a full indemnity from Mr Copeland, Mr Copeland’s claim against him for contribution must fail for circuity. Reliance was placed upon the decision in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 at p.596. Gibbs CJ, Mason and Aicken JJ said:-

“At common law the existence of an indemnity is a defence to an action in respect of the liability to which the indemnity relates ( Bullen & Leake , 3rd Edition (1868) p.604; Cutler v Southern ). Section 24(1)(c) of the Wrongs Act specifically excludes the right of one tortfeasor to recover contribution from another tortfeasor given by the section where the tortfeasor against whom recovery is sought is entitled to be indemnified by the tortfeasor seeking to recover contribution in respect of the liability in question. It follows that the indemnity, had it been pleaded and proved, would have been an answer to Anshun’s claim for contribution against the Authority.”

51 Nextly it was submitted on behalf of Sir Laurence that Mr Copeland’s claim against him must fail because Mr Copeland has paid nothing in reduction of the principal debt due to the plaintiff, and there is no likelihood that he will pay more than his share, whereas Sir Laurence has paid $916,667. In Mahoney v McManus (1981) 55 ALJR 673 at p.675 Gibbs CJ said that there was no contest as to the legal principles applicable to the main question that arose in that case. He continued:-

“A surety is entitled to contribution from his co-sureties so that the common burden is borne equally and so that no surety is required as between himself and his co-sureties to pay more than his due share. The right arises where the sureties are bound jointly, jointly and severally, or severally, and whether by the same or different instruments, and whether or not the sureties knew of each other’s existence, provided that they are liable in respect of the same debt. The right to contribution arises when a surety has paid or provided more than his proper share of the principal debt, it may also be enforced by a surety who has not made payment; the circumstances in which a surety who has not made payment may enforce a claim to contribution have not been precisely defined, but it appears that he may at least do so as soon as the creditor has acquired a right to immediate payment from him.”

52    At p.680 Brennan J stated the circumstances in which the right to contribution would arise, and continued:-

“That is not to say that the right to contribution arises only when the creditor sues or otherwise takes an initiative to obtain payment. A payment by a surety of more than his just proportion in discharge of a liability resting upon him and his co-sureties suffices. The guarantor who relies upon a payment as entitling him to contribution from his co-sureties must show that the payment discharged ‘the burden imposed on him by his guarantee and to a greater extent than is just’ (per Rich J, in McLean’s case , supra, at p.339). But if payment is made not in discharge of the surety’s liability but simply in discharge of the debtor’s liability, there is no question of the creditor’s rights against co-sureties being enforced or satisfied inequitably: those rights are extinguished by the discharge of the principal debtor’s liability.”

53 It was finally submitted on behalf of Sir Laurence that in any event Mr Copeland would not be entitled to equal contribution from him, because even if there had been no express agreement, the evidence demonstrated that the common intention of those parties was that Mr Copeland would recover no contribution from Sir Laurence but, on the contrary, was to provide him with an indemnity of at least 75 per cent. Reference was made to the decision of Giles J in Morgan Equipment Company & Ors v Rogers (No 2) (1993) 32 NSWLR 467 at pp.476-477:-

“The parties were in agreement that the general rule that there be equal contribution between co-guarantors may be modified or excluded by a common intention of the guarantors short of an express or implied agreement: see Coulls …; Muschinski v Dodds (1985) 160 CLR 583 at 597, 617; Robinson v Campbell (No 2) (1992) 30 NSWLR 503. While equal sharing should not be lightly departed from, where the rationale for equal sharing is that the parties are taken to have intended to share equally then a contrary intention must suffice to displace the general rule.”

54    In my opinion, on the facts I have found, there can be no doubt that the general rule had been displaced.

55    In the result I consider that Sir Laurence is entitled to succeed against Mr Copeland.

Mr Booker’s Case Against Mr Copeland

56    In his witness statement, Exhibit 4D1, Mr Booker traced his relationship with, amongst others, Mr Copeland and Ms McPhee. He is an insurance broker. He became a director of Legalcare on 14 March 1997. He said that at a meeting on 5 March 1997 he told Mr Copeland that whilst he was prepared to become a director he could not and would not put any capital into the company or provide any guarantees. He did agree to provide one guarantee for a short period.

57    In about October 1997 Mr Copeland arranged for a change of shareholding and Mr Booker became a ten per cent shareholder in Legalcare and, on or about 3 October 1997, he signed the First Deed of Indemnity. Prior to doing that Mr Copeland told him that Sir Laurence had advised him that he “cannot guarantee anything”. Mr Booker replied that he would not guarantee anything and “more importantly, I will not guarantee Street, with 25 per cent of the company, where is the logic, he is an ex-Chief Justice, Chairman of Fairfax etc. You guarantee him”.

58    He said Mr Copeland replied:-

“I will guarantee Street’s share of the indemnity making my share 75 per cent. McPhee has already agreed to guarantee her 15 per cent, I need you to guarantee your 10 per cent.”

59    Mr Booker said he signed the Deed but, before doing so, he did not read it or take legal advice on it and assumed that he was guaranteeing ten per cent of Legalcare’s debts to the plaintiff, which would have been in his view consistent with his ten per cent “gifted equity in Legalcare”.

60    Mr Booker also complained about signing the Second Deed of Indemnity, although he did so and he also signed the letter dated 20 November 1997.

61    Mr Booker referred to a meeting on 19 March 1998 when the letter of that date was signed and when he said, following statements by Sir Laurence Street as to his ability to meet any indebtedness that he, Mr Booker, could not afford to be a guarantor “but so long as it is in proportion to my shareholding, I’ll sign it with no counter indemnity to anyone. You (Copeland) have to guarantee 75 per cent of the debt which includes Street”.

62    Mr Booker continued that Mr Copeland said:-

“I agree”,

whereupon the letter of 19 March 1998 was prepared. It was addressed to Sir Laurence and stated, using the same heading as in the letter dated 20 November 1997:-

We the undersigned HEREBY severally in the proportions of 75% to Copeland, 15% to L.K. McPhee and 10% to D.I.D. Booker indemnify you, and agree to hold you indemnified against any claim of whatsoever nature or kind which may at any time be made against you arising out of your agreement to be an Indemnifier to MMI Insurance Group in respect of Performance Guarantee Bonds issued by that company at the request of Australasian Executive Consultants Pty Limited.”

63    Whilst, for the reasons I have given, the letter, which was signed by Messrs Copeland and Booker and Ms McPhee, lacked legal efficacy, it none-the-less was strongly corroborative of the agreement to which Mr Booker asserted he came with Mr Copeland.

64    On behalf of Mr Booker it was submitted that he assumed ten per cent of the liability for the debt owing to the plaintiff and that Mr Copeland assumed 75 per cent of that liability.

65    It was submitted that as the affidavit of Mr Kumar showed that the total debt is $3,963,000, pursuant to the agreement between Mr Booker and Mr Copeland the former is liable to pay the plaintiff $396,300 being ten per cent of the total debt. The evidence is that he has already paid $350,000 pursuant to the terms of the Deed of Settlement into which he entered and, as a consequence, has not as yet paid the full ten per cent. However, he is obliged to pay further sums, which will result in his contributing more than ten per cent of the total liability.

66    In my opinion Mr Booker has established that there was such an agreement between him and Mr Copeland. In the result he is entitled to succeed on his Cross-Claim.

Orders

67    I order and declare that:-

1. In the proceedings by the plaintiff against Mr Copeland:-
(a) Upon noting the undertaking of Rebecca Monica Grace Lynch given to the Court in the document dated 12 April 2000, which will remain with the papers, judgment for the plaintiff against the first defendant, Kenneth William Copeland, in the sum of $2,697,512.20.
(b) The first defendant, Kenneth William Copeland, pay the plaintiff’s costs of the proceedings.
2. In the proceedings brought by way of Cross-Claim against Mr Booker and Sir Laurence Street:-
(a) The Cross-Claim of Kenneth William Copeland against each of Donald Ian David Booker and Laurence Whistler Street be dismissed and Kenneth William Copeland pay the costs of each of Donald Ian David Booker and Laurence Whistler Street of the Cross-Claim.
3. In the proceedings brought by way of Cross-Claim by Laurence Whistler Street against Kenneth William Copeland:-
(a) Declare that the cross-claimant, Laurence Whistler Street, is entitled to be indemnified by the cross-defendant, Kenneth William Copeland, against his liability to the plaintiff arising under the Deed of Settlement dated 8 December 1998 made between the said Laurence Whistler Street and the plaintiff;
(b) Judgment for the cross-claimant, Laurence Whistler Street, against Kenneth William Copeland in the sum of $1,105,082.54;
(c) Order that the cross-claimant, Laurence Whistler Street, have liberty to apply for further relief against Kenneth William Copeland in the event that Kenneth William Copeland does not forthwith indemnify Laurence Whistler Street in respect of any further payments made by Laurence Whistler Street to the plaintiff under the Deed of Settlement between him and the plaintiff dated 8 December 1998;
(d) the cross-defendant, Kenneth William Copeland, pay the cross-claimant’s, Laurence Whistler Street’s, costs of the Amended Second Cross-Claim.
4. In the proceedings brought by way of Cross-Claim by Donald Ian David Booker against Kenneth William Copeland:-
(a) Declare that the cross-claimant, Donald Ian David Booker, is entitled to be indemnified by the cross-defendant, Kenneth William Copeland, to the extent of 75 per cent of any amount paid by the said Donald Ian David Booker to the plaintiff, which exceeds ten per cent of the total debt owed to the plaintiff of $3,963,000;
(b) Order that the cross-claimant, Donald Ian David Booker, have liberty to apply to the Court for further relief against Kenneth William Copeland in the event that Kenneth William Copeland does not forthwith indemnify Donald Ian David Booker in respect of any further payments made by Donald Ian David Booker to the plaintiff under the Deed of Settlement between him and the plaintiff dated 8 January 1999;
(c) The cross-defendant, Kenneth William Copeland, pay the cross-claimant’s, Donald Ian David Booker’s, costs of the Cross-Claim.
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Last Modified: 09/25/2000