Paterson v Pongrass Group Operations Pty Ltd - [2011] NSWSC 1588

Supreme Court

New South Wales

Medium Neutral Citation: Paterson v Pongrass Group Operations Pty Ltd [2011] NSWSC 1588
Hearing dates: 7 and 8 April 2011
Decision date: 20 December 2011
Jurisdiction: Equity Division
Before: White J
Decision:
Refer to para [97] of judgment.

Catchwords:
GUARANTEE AND INDEMNITY - enforcement of indemnity - whether court should refuse to enforce indemnity on grounds of public policy - where parties conspired to attempt to obtain financial advantage by deception - cause of action grounded on deed of indemnity and deed not itself part of intended deception - not in public interest to refuse to enforce indemnity

GUARANTEE AND INDEMNITY - enforcement of indemnity - liability of indemnifier before payment - whether indemnity merely requires indemnifier to compensate indemnified party for what he has paid towards liability or requires indemnifier to relieve indemnified party of burden of liability - obligation of indemnifier depends on terms of contract between indemnifier and indemnified - Wren v Mahoney [1972] HCA 47; (1972) 126 CLR 212 distinguished - indemnity not limited to compensate indemnified for amounts paid - indemnity required indemnifier to relieve indemnified party of burden of liability

GUARANTEE AND INDEMNITY - enforcement of indemnity - whether plaintiff's action at law for damages or in equity for specific performance - assessment of damage for breach of contract for indemnity where promise is to relieve indemnified party of burden of liability uncertain - damages not adequate remedy - damages fall for assessment only if specific performance not available

EQUITY - equitable remedies - specific performance - whether sufficient consideration - where consideration provided for in deed incorrect - party estopped by recitals to deed from denying that consideration provided - consideration provided by implied promise
GUARANTEE AND INDEMNITY - enforcement of indemnity - where indemnity requires indemnifier to relieve indemnified party from burden of liability - appropriate remedy - where creditor not a party - order payment to person entitled to indemnity even though have not yet paid creditor on undertaking to apply payment forthwith to discharge liability
Legislation Cited: Crimes Act 1900
Cases Cited: Codelfa Constructions v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337
Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538
Beresford v Royal Insurance Co Limited [1938] AC 586
Carantinos v Magafas [2008] NSWCA 304
Ranelaugh v Hayes (1683) 1 Vern 189
Nisbet v Smith (1789) 2 Bro. C.C. 579
Ascherson v Tredegar Dry Dock & Wharf Co Limited [1909] 2 Ch 401
Watt v Mortlock [1964] Ch 84
Thomas v Nottingham Incorporated Football Club Limited [1972] Ch 596
Woolmington v Bronze Lamp Restaurant Pty Ltd [1984] 2 NSWLR 242
Abigroup Limited v Abignano (1992) 39 FCR 74
McIntosh v Dalwood (No. 4) (1930) 30 SR (NSW) 415
Wren v Mahoney [1972] HCA 47; (1972) 126 CLR 212
BNP Paribas v Pacific Carriers Limited [2005] NSWCA 72
In re Richardson; ex parte Governors of St Thomas's Hospital [1911] 2 KB 705
Loosemore v Radford…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2011] NSWSC 1588
Decision Date: 20 December 2011

CaseChat Overview and Summary

The case of Paterson v Pongrass Group Operations Pty Ltd involved the enforcement of an indemnity agreement between the parties. The dispute arose when the defendant was required to indemnify the plaintiff for certain liabilities. The plaintiff sought to enforce the indemnity against the defendant. The court had to determine several legal issues, including whether the court should enforce the indemnity on grounds of public policy, the nature of the indemnifier's obligation, and the appropriate remedy for enforcement. The High Court of Australia provided the final decision on these matters.

The first legal issue was whether the court should refuse to enforce the indemnity on grounds of public policy. The court found that the cause of action was not part of the intended deception, and it was not in the public interest to refuse enforcement. The second issue was the nature of the indemnifier's obligation. The court held that the obligation of the indemnifier was to relieve the indemnified party of the burden of liability, rather than merely compensating the indemnified party for what they had paid towards the liability. This was based on the terms of the contract between the parties and distinguished the case from Wren v Mahoney. The third issue was the appropriate remedy for enforcing the indemnity. The court found that because damages would not adequately compensate the plaintiff, specific performance was the appropriate remedy.

The court further considered whether the plaintiff's action was at law for damages or in equity for specific performance. The court held that since damages would not adequately compensate the plaintiff for the breach of contract, specific performance was the appropriate remedy. The court also considered the issue of consideration and found that the party was estopped from denying that consideration was provided, and the consideration was provided by an implied promise. Finally, the court considered the appropriate remedy and held that an order for payment to the person entitled to the indemnity was appropriate, even though the payment had not yet been made to the creditor, on the undertaking to apply the payment forthwith to discharge the liability. The court made an order for specific performance of the indemnity agreement.

Orders