Perton v Walters

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2023 0124

JANE ELIZABETH PERTON (IN HER CAPACITY AS THE EXECUTRIX OF THE WILL AND TRUSTEE OF THE ESTATE OF DONALD GRAEME WARRING, DECEASED)	Applicant
V
LYNNE MARGARET WALTERS	Respondent
S EAPCI 2023 0125
JANE ELIZABETH PERTON (IN HER PERSONAL CAPACITY, AS TRUSTEE OF THE PORT EAGLE INVESTMENT TRUST AND EXECUTRIX OF THE WILL AND TRUSTEE OF THE ESTATE OF DONALD GRAEME WARRING, DECEASED)	Applicant
v
LYNNE MARGARET WALTERS	Respondent

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JUDGES:	BOYCE, ORR and KENNY JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	27 November 2024
DATE OF JUDGMENT:	13 June 2025
MEDIUM NEUTRAL CITATION:	[2025] VSCA 133
JUDGMENT APPEALED FROM:	[2023] VSC 37 (Forbes J) [2023] VSC 335 (Forbes J)

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ADMINISTRATION AND PROBATE – Testators Family Maintenance – Whether mortgage security for guarantee so encumbered real estate as to prevent provision – Trial judge found real estate unencumbered because no contingent liability existed at time of guarantor’s death – Trial judge ordered further provision for respondent under Part IV of the Administration and Probate Act 1958 – Real property from which provision to be made no longer asset of estate – Trial judge held applicant personally liable for provision.

Administration and Probate Act 1958, ss 40, 91.

PRACTICE AND PROCEDURE – Whether argument that mortgage separate source of liability from guarantee was new argument – Whether same argument in closing submissions at trial – No leave sought to amend pleadings at trial – Whether case may have been run differently if new argument raised earlier – Whether argument had real prospect of success – Leave to appeal refused.

Water Board v Moustakas (1988) 180 CLR 491; Bird v DP (a pseudonym) (2024) 98 ALJR 1349, applied.

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Counsel
Applicant:		Dr KP Hanscombe KC with Ms L Mills
Respondent:		Mr RM Garratt KC
Solicitors
Applicant:	Darrer Muir Fleiter
Respondent:	Nedovic Lawyers

BOYCE JA
ORR JA
KENNY JA:

Introduction

There are two applications for leave to appeal before the Court. They are made in related proceedings.
The applicant (Ms Perton, the defendant at trial) seeks leave to appeal from a declaratory order made by the trial judge on 29 August 2023 in proceeding S ECI 2018 0225 (the ‘TEP Proceeding’).[1] This declaration was that:
The property known as 80–82 Bell St, Heidelberg Heights, Victoria, 3081 being the land more particularly described in Certificate of Title volume 10357 Folio 769, formed part of the Estate of Donald Graeme Warring at its unencumbered value as at the date of Donald Graeme Warring’s death.
The parties have referred to the property at 80–82 Bell Street, Heidelberg Heights as the ‘Bell St Property’.
[1]A TEP proceeding is a proceeding in the Court’s Trusts, Equity and Probate List.
The TEP Proceeding was heard concurrently with proceeding S CI 2017 02159 (the ‘Part IV Proceeding’). In the Part IV Proceeding, the respondent (Ms Walters, the plaintiff at trial) sought further provision from the estate of Donald Graeme Warring (the ‘Estate’) pursuant to s 91 of the Administration and Probate Act 1958 (the ‘Act’). In the Part IV Proceeding, the trial judge relevantly ordered:
1.Provision of a pecuniary legacy in the sum of $1,540,560 be made out of the deceased’s estate (the Estate) for the proper maintenance and support of the Plaintiff pursuant to s 91 of the Administration and Probate Act 1958 (Vic).
2.The defendant, in her personal capacity, is responsible for payment of the provision that would be raised against the Bell St property in satisfaction of the Estate’s liability.
3.The defendant must pay the provision on the date of authentication of this order.
…
In support of her application for leave to appeal in the TEP Proceeding, Ms Perton proposed seven grounds of appeal. These grounds were as follows:
1.The primary judge erred in determining that at the date of death the Bell St Property was unencumbered by the Deceased’s Mortgage.
2.The primary judge should have determined that at the date of death, the Bell St Property was encumbered by the Deceased’s Mortgage.
3.The primary judge erred in taking into account that at the date of death, the Mortgagor had not made a demand pursuant to the guarantee given by the Deceased which was secured by the Deceased’s Mortgage.
4.The primary judge should have held that the only relevant date for determining whether or not the Bell St Property was encumbered was the date of the Deceased’s death.
5.The primary judge erred in holding that the effect of the applicant granting a mortgage to herself over the Bell St Property after the death of the Deceased meant that the applicant took the Bell St Property under the will free of any charge and so s 40 of the Administration and Probate Act 1958 does not apply.
6The primary judge should have determined that the applicant took the Bell St Property under the Will of the Deceased encumbered by the Deceased’s Mortgage.
7.The primary judge should have, but failed to, determine an issue in the trial of the TEP Proceeding, which was whether the applicant was entitled to be indemnified out of the Estate for the liabilities to NAB under the Applicant’s Mortgage, to the extent of any discharge of the Deceased’s Mortgage effected by the Applicant’s Mortgage.
Ms Perton also seeks leave to appeal from the whole of the judgment in the Part IV Proceeding. She relied on eight proposed grounds of appeal, each of which depended for its success upon success in the application for leave to appeal in the TEP Proceeding. It suffices to refer only to grounds 1 and 2. They are as follows:
1.The primary judge erred in determining that further provision could be ordered pursuant to s 91(1) of the Administration and Probate Act 1958 (Vic) … based on her Honour’s earlier finding that the Bell St Property was unencumbered at death.
2.The primary judge should have determined that at the date of death the estate had no value from which provision could be ordered pursuant to s 91(1) of the Act, because at that date the Bell St Property was fully encumbered.
For the following reasons, we would refuse both applications for leave to appeal.

Factual background

The circumstances giving rise to the relevant dispute between the parties are as follows.
Donald Graeme Warring (‘Mr Warring’) died on 4 February 2017, at 80 years of age. Ms Perton is Mr Warring’s daughter and the executor of his will and trustee of the Estate.
Ms Walters met Mr Warring in 1996 and was his domestic partner for approximately 20 years up until his death. Ms Walters was 73 years of age when Mr Warring died.
From 1979, Mr Warring conducted a telecommunications business called Mobile Communications Systems (the ‘Business’). He established Mobile Communication Systems Pty Ltd (‘MCS’) for the purpose of conducting the Business in 1985. Relevantly for these applications, he purchased the Bell St Property in October 1989. A building was built on the Bell St Property, with a telecommunications tower that is located on one of the highest points in Melbourne. The building is the hub of the communications network operated by MCS, which is used by utilities providers, emergency services and others who provide critical communications. The Bell St Property is therefore critical to the operation of MCS.
Ms Perton worked at MCS for a few months in 1994 and returned to work there again from 1996. She described her role from 1996 as MCS’s managing director and chief financial officer. Since 1997, she has been a director and, since 3 February 2014, the sole director of MCS.
Ms Walters and Mr Warring were living in New Zealand when they met in 1996. In or around June/July 2002, however, Mr Warring thought about moving to Melbourne to have an increased involvement in the Business. In September 2002, he and Ms Walters relocated to Melbourne.[2] In the Part IV Proceeding, the trial judge found that:
In Melbourne, Don [Warring] organised the purchase of a house in Odenwald Rd, Eaglemont (the Eaglemont property) intended to be their family home. Don and Lynne [Walters] lived there from purchase until Don’s death. The registered proprietor of the Eaglemont property is and was the Port Eagle Investment Trust (PEI Trust).[3]
[2]Walters v Perton [2023] VSC 37, [4] (‘Reasons No 1’).
[3]Reasons No 1, [4].
In 2011, the Bell St Property was taken out of the Warring Superannuation Fund (where it had been since 2007) and title was transferred back to Mr Warring in his personal capacity. He used the Bell St Property to secure company borrowings of $1.1 million from the National Australia Bank (‘NAB’) for expenditure relating to a contract obtained by MCS (the ‘NAB loan facility’). At the end of 2011, at the age of 75, Mr Warring retired from the Business, although he remained a director of MCS until 3 February 2014.
Mr Warring leased the Bell St Property to MCS for a period of five years from 1 January 2014. MCS’s borrowings subsequently increased to meet its working capital needs and by 2017 MCS’s borrowings against the NAB loan facility totalled $2.8 million.
These borrowings (‘NAB borrowings’) were secured by guarantees given by the owners of: the Bell St Property (Mr Warring), the Eaglemont property[4] (Ms Perton, as trustee of the PEI Trust), and what the parties referred to as the Ferny Creek property[5] (Warring Pty Ltd). The NAB borrowings were also supported by mortgages over real estate belonging to each guarantor. Collectively, the parties referred to these securities as the ‘NAB securities’.[6]
[4]See [12] above.
[5]This property was owned by Warring Pty Ltd: see Reasons No 1, [28], [297].
[6]See Reasons No 1, [25].
At the time of his death, Mr Warring was the registered proprietor of the Bell St Property, which was subject to a 2012 mortgage to the NAB (the ‘2012 mortgage’). The 2012 mortgage was an ‘all monies’ mortgage which, together with other hypothecated assets and guarantees, secured the NAB borrowings. Mr Warring signed a number of times as guarantor of the NAB loan facility, lastly on 27 September 2016. This last guarantee is referred to below as the ‘September 2016 guarantee’. By that time, the secured financial accommodation amounted to $2,851,000. As at the time of Mr Warring’s death, the Bell St Property had an indicative value of $1.75 million. There had been no call on Mr Warring under the September 2016 guarantee.[7]
[7]Reasons No 1, [108].
Mr Warring’s will was dated 20 October 2015 (the ‘Will’). The Will was admitted to probate on 28 March 2017. By cl 5 of the Will, the deceased devised the Bell St Property to Ms Perton. He bequeathed the sum of $200,000 to Ms Walters.[8]
[8]Reasons No 1, [6].
On 2 May 2017, Ms Walters notified her intention to apply for further provision under Part IV of the Act. Ms Perton was informed of this that day. On 3 May 2017, Ms Perton transferred the Bell St Property to herself as executor and thereafter to herself in her own right as beneficiary. On 17 May 2017, a mortgage granted by Ms Perton was registered over the Bell St Property in favour of the NAB (‘Ms Perton’s 2017 mortgage’).

Proceedings before the trial judge

By an originating motion filed on 5 June 2017, Ms Walters applied for further provision from the Estate on the basis that the Will had not made adequate provision for her. On 6 July 2018, she commenced the TEP Proceeding against Ms Perton as executor and trustee of the Estate.[9]
[9]And also as trustee of the PEI Trust. The details of the PEI Trust are not presently relevant.
It was common ground in the TEP Proceeding that the Bell St Property was part of the Estate at Mr Warring’s death and that, as at that date, the property was the subject of the 2012 mortgage, granted by him to the NAB to secure the NAB borrowings. Ms Walters sought a declaration in that proceeding that the Bell St Property was, at the time of death, unencumbered by any liability of the deceased. In opposition, Ms Perton contended at trial that, at the time of Mr Warring’s death, the Bell St Property was encumbered by the 2012 mortgage given by him as a guarantor of the NAB borrowings; and that the encumbrance reduced the value of the property to the Estate to nil. The parties did not dispute that, at the time of his death, the amount of MCS’s debt exceeded the value of the property, but they disagreed about the effect of the 2012 mortgage and the September 2016 guarantee on the value of the property to the Estate.
Regarding the Part IV Proceeding, the trial judge recognised that to determine the size of the Estate as at the date of death, it was necessary to determine whether the Bell St Property was encumbered by any liability of Mr Warring as at his death.[10] The parties agreed before us that the quantum of further provision ordered by the trial judge was not in contention unless we determined that the Bell St Property was of no net value to the Estate.
[10]Reasons No 1, [132(e)].
The trial judge delivered four judgments, with reasons, in connection with the TEP Proceeding and the Part IV Proceeding.[11] We put aside the issues that do not fall for consideration on the leave applications before us. We focus only on those issues that the parties have identified as germane to the present applications.

The trial judge’s findings and conclusions in the TEP Proceeding regarding the Bell St Property

[11]Reasons No 1; Walters v Perton (No 2) [2023] VSC 335 (‘Reasons No 2’); Walters v Perton (Costs) [2023] VSC 380 (‘Costs Reasons No 1’); Walters v Perton (Costs No 2) [2023] VSC 785.

Towards the end of her careful and detailed reasons in the TEP Proceeding, the trial judge summarised her conclusions. Relevantly, her Honour found that the Bell St Property formed part of the Estate.[12] Her Honour also held that the September 2016 guarantee, which was supported by the 2012 mortgage, came to an end when the NAB was given notice of Mr Warring’s death.[13] Her Honour rejected Ms Perton’s submission that, on its terms, the guarantee continued after her father’s death.[14] Further, in relation to the guarantee, her Honour held that:
In the absence of any evidence that MCS had, prior to Don [Warring]’s death, been in default of its obligations to NAB, there has been no demand made for Don to pay pursuant to his obligation as guarantor. Absent any past demand for which Don might be liable, there is no contingent liability existing at the time of his death.[15]
[12]Reasons No 1, [262].
[13]Reasons No 1, [252].
[14]Reasons No 1, [254].
[15]Reasons No 1, [256].
While the trial judge accepted that the 2012 mortgage had not been discharged, her Honour found that the NAB had subsequently registered Ms Perton’s 2017 mortgage ‘following transfer of the property to Jane [Perton] absolutely on 3 May 2017’.[16] Her Honour observed that:
To the extent that the earlier mortgage by Don [Warring] secured a guarantee for which no past or future amount is owing, it is difficult to see why that mortgage was not discharged at the time of the new NAB mortgage, or otherwise should not be discharged. NAB has formally confirmed that there is no longer a guarantee and indemnity in place given by Don.[17]
[16]As noted above, in the Will, Mr Warring devised the Bell St Property to Ms Perton: see Reasons No 1, [6].
[17]Reasons No 1, [257], citing The National Bank of Australasia Ltd v Mason (1975) 133 CLR 191; [1975] HCA 56 (‘The National Bank of Australasia Ltd’).
This led her Honour to conclude that Ms Perton took the Bell St Property under the Will free of any charge and, accordingly, that s 40 of the Act, pursuant to which Ms Perton claimed to be entitled to contribution or indemnity in respect of the amount of the September 2016 guarantee from the Estate, did not apply.[18] Her Honour added that Ms Perton’s decision to give the NAB another mortgage was ‘an independent decision to encumber that property and did not arise from the assumption of any charge remaining over Don [Warring]’s estate’.[19]

The trial judge’s findings and conclusions in the Part IV Proceeding relevant to the Bell St Property

[18]Reasons No 1, [258]. Section 40 of the Act has the effect that, as between persons entitled to property of the deceased which is subject to a charge, the property is to be the primary fund for the payment of the charge: Re Leys [2000] VSC 164, [26]–[28] (McDonald J); Central Murray Credit Union Ltd v Cochrane (2022) 68 VR 612, 617–8 [29]–[30] (Hetyey AsJ); [2022] VSC 647.

[19]Reasons No 1, [261].

In the Part IV Proceeding, the trial judge held that the provision in the Will for Ms Walters was not adequate for her proper maintenance and support.[20] Her Honour subsequently assessed the quantum of further provision on the basis that such provision and reasonable costs could have been met by the Estate at the time of Mr Warring’s death. With the removal of the Bell St Property from the Estate by Ms Perton, this ceased to be the case.[21]
[20]Reasons No 1, [285]–[304], [337].
[21]Reasons No 2, [6].
Her Honour found that the Bell St Property was unencumbered and should be considered part of the Estate notwithstanding its transfer to Ms Perton in May 2017. The Estate could not, however, meet the judgment sum awarded to Ms Walters in the Part IV Proceeding. The transfer of the Bell St property having occurred within six months of the grant of probate,[22] her Honour held that Ms Perton as executor was personally liable for the payment of further provision to Ms Walters in the sum of $1,540,560 for her proper maintenance and support.[23]
[22]Reasons No 2, [53]–[58]. Section 99A(3) of the Act provides an executor with statutory protection against claims made by reason of the executor distributing any part of the estate after six months from the grant of probate. In Younan v Younan (No 2) [2015] VSC 549, Bell J stated that ‘[i]t is well established that executors who carry out early distribution of an estate, especially with notice of an intended application for family provision, are at risk of personal liability to a successful applicant’: at [9].
[23]Reasons No 2, [7]–[8].
Before leaving her Honour’s reasons in the Part IV Proceeding, we note that Ms Perton deposed to an inventory of the Estate on 17 March 2017, in which the Bell St Property was listed, unencumbered, at a value of $1.75 million. A subsequent updated inventory was to the same effect. The trial judge rejected Ms Perton’s evidence that the omission from the inventory of any secured liability to the NAB was inadvertent.[24]
[24]Reasons No 1, [264]–[265], [270].

The parties’ submissions

Ms Perton’s submissions

Ms Perton submitted, in her written case and at the hearing, that the ‘amount owing’ under the 2012 mortgage ($2.8 million) significantly exceeded the value of the Bell St Property ($1.75 million). She contended that the trial judge should have found that the 2012 mortgage fully encumbered the Bell St Property as at the date of Mr Warring’s death, and that this was ‘independent of whether the Deceased’s Guarantee was of itself a liability that encumbered the Bell St Property’.
In writing, Ms Perton submitted that:

At trial, [she] pleaded that from November 2012, the Bell St Property was continuously mortgaged as security for the debts of MCS in an amount substantially in excess of $2 million and as at the date of the Deceased’s death the Bell St Property remained so mortgaged.[25]
[25]Citing Third Further Amended Defence and Counterclaim, [36A(a)].

At the hearing, senior counsel for Ms Perton, Dr Hanscombe KC, augmented this submission by reference to portions of Ms Perton’s written opening submissions, her Third Further Amended Defence and Counterclaim, and her written closing submissions.

In writing and at the hearing, Ms Perton contended that it was irrelevant: that there was no contingent liability arising from Mr Warring’s guarantee at the time of his death; that the NAB had made no demand for payment; and that MCS was not in default under the NAB loan facility. In her submission, this was because it was not open to Mr Warring (or the trustee of the Estate) to require the NAB to release the Bell St Property from the 2012 mortgage unless and until there was a nil ‘amount owing’ or the NAB consented to the release.[26] In her submission, the material fact was that the NAB could at any time call on the mortgage for the entire ‘amount owing’[27] irrespective of whether MCS was in default of its obligations. Dr Hanscombe KC described the guarantees as ‘a distraction’. She submitted that, if the trial judge erred as contended, then her Honour ought not to have made an order for further provision under the Act in the Part IV Proceeding because the Estate had no value.[28]

Ms Walters’ submissions

[26]Cf Reasons No 1, [256].

[27]That is, the whole of the NAB borrowings.

[28]This was the issue raised in the proposed appeal grounds in the Part IV Proceeding. See [5] above.

Ms Walters did not dispute that the Bell St Property was ‘encumbered’ by the 2012 mortgage in the sense that the mortgage was registered on title. Ms Walters submitted that her case at trial was that the mortgage did not, and could not in the future, secure any debt payable by the deceased, because her case had been and remained that ‘Don [Warring]’s liability arose under the terms of the guarantee given by Don’. As Mr Garratt KC, for Ms Walters, put it, her case was that ‘the liability secured by the mortgage was the liability of the surety, it was a guaranteed liability [ie, the liability of the guarantor under the September 2016 guarantee]’. On the facts, at the time of Mr Warring’s death, nothing was owing under that guarantee. Since Mr Warring’s liability under the guarantee ended with his death, no amount owing could arise at a future date. Mr Garratt KC contended that ‘the defence [Ms Perton] pleaded was, on the proper construction of the guarantee, we were wrong’. He submitted that the trial was run on this basis. He added that, when it came to closing submissions:
Her Honour then … [was] asked to and [did] direct the filing of written submissions. We file[d] written submissions addressed to the case as it had been pleaded, opened and run, which was that there was a debt owing under the guarantee.
The direction … required … Ms Walters to file her written submissions first, so you will not find any reference in our written submissions to these [new] points. They weren’t part of the case pleaded, opened or run. But what then happens is, two weeks later, when our learned friends file their written submissions, they make an argument. … ‘Oh, well, liability arises under the mortgage directly. Don’t worry about the guarantee, it arises under the mortgage directly’.
… [T]hat’s a matter that should have been the subject of an application for leave to amend below. It wasn’t. It’s not a matter in this court that has been the subject of an application for leave to amend, to make the point alive in this appeal. … If an application had been made there are well-established principles that apply, you don’t, even if it’s a matter of law, ordinarily get leave to bring a new point in on appeal. … [T]he argument’s wrong in any event … because when you look at the mortgage, it says the undertaking, the basic assurance in the language of [the] mortgage given by the mortgagor is to pay whatever is payable under any arrangement as agreed.
The only arrangement as agreed was the guarantee, and the guarantee is not the subject of appeal in this court, there was no liability of Don [Warring] under that guarantee. So ultimately, even if we get through all those steps, these applications should be dismissed.
Mr Garratt KC submitted that there could be no error on the part of the trial judge in failing to address a case that was not put to her.

Mr Garratt KC contended that Ms Perton’s argument that Mr Warring’s liability under the 2012 mortgage was separate from the September 2016 guarantee was neither pleaded nor opened at the trial. He submitted that the claim on which the parties went to trial was to the effect that the obligations secured by the 2012 mortgage were those arising under the guarantee, that those obligations had not been enlivened, and that the Bell St Property formed part of the Estate at its unencumbered value.[29] Ms Perton had denied these allegations.[30] Mr Garratt KC submitted that, in her opening submissions, Ms Perton’s case was ‘that Don [Warring] was indebted to NAB under a sequence of guarantees up to the date of his death’, and that ‘[n]o mention [was] made of liability arising independently under the terms of the 2012 mortgage’. In his submission, it was not until closing submissions were filed on 16 March 2022 that Ms Perton alleged that Mr Warring’s liability arose directly under the terms of the mortgage. Mr Garratt KC described Ms Perton’s position at this point as follows:

The unpleaded contention was that the promises by MCS to NAB fell within the definition of amount owing under clause 2.1(a) to (c) of the [Memorandum of Common Provisions for the 2012 mortgage] … because they represented amounts, it was said that NAB had advanced at Don [Warring]’s express or implicit request, were amounts that Don was or might actually or contingently become liable to pay for any reason, or amounts then owing by Don to NAB and unpaid, or payable in the future.

[29]Referring to the Fourth Further Amended Statement of Claim, [48]–[49].

[30]Third Further Amended Defence and Counterclaim, [48.3]–[48.4].

Mr Garratt KC, who had appeared for Ms Walters at the subsequent hearing at which oral closing submissions were made on 4 April 2022, maintained before us that, at that hearing, he drew attention to the fact that Ms Perton’s argument was new. Further, he maintained that he had submitted that this new argument depended on matters ‘for which evidence had not been adduced, namely that Don [Warring] had asked NAB to make certain advances, or that there was in fact an amount owing to NAB at the date of Don’s death’.

At the hearing before us, Mr Garratt KC submitted that in spite of his submissions at the hearing on 4 April 2022, ‘no application was made by Jane [Perton] to amend the pleadings or rely on a new argument’. He submitted that ‘[t]he only inference … is that Jane [Perton] had abandoned what had been an afterthought not run during the trial about liability arising independently because of the terms of the mortgage’. In substance, so he submitted, the trial judge did not err in failing to address an abandoned afterthought.

Also before us, Mr Garratt KC contended that the closing submissions made on Ms Perton’s behalf at the hearing on 4 April 2022 did not ‘develop the new argument now to be found in [Ms Perton’s] written case’.[31] He submitted that Ms Perton’s submissions at the hearing before us expanded on her 4 April 2022 submissions to make a new argument that ‘the mere existence of a mortgage securing nothing was enough to prevent a court ordering further provision’.
[31]Referring to [26], especially subparagraphs (c), (e), (f) and (h), of Ms Perton’s written case in the TEP Proceeding and Dr Hanscombe KC’s oral submissions to the same effect.
Mr Garratt KC contended that, as a matter of discretion, we should not entertain Ms Perton’s new argument on an appeal since it was not advanced at trial. He contended that the argument would have necessitated findings of fact not sought at trial, including that MCS would have been unable to repay its debt to the NAB, with the consequence that Mr Warring, as one of the guarantors, would have been obliged to bear all or some of the liability. He added that there was also the possibility, not explored at the trial, that Mr Warring might have sought contribution from the other guarantors.[32] Mr Garratt KC contended ‘it’s not sufficient for Jane [Perton] now to contend that the 2012 mortgage imposed a direct liability on Don [Warring] for the debts owed … by MCS to NAB, without also showing that MCS could not have indemnified Don if NAB had called upon Don to pay those debts’. He contended that there was no evidence presented by Ms Perton about these critical facts, most of which were within her particular knowledge as the sole director of MCS, such that it would have been for her to give evidence about them. In any event, even if Ms Walters bore an evidentiary burden as to MCS’s capacity to repay its debt to the NAB, there was, so he submitted, ample evidence that MCS could discharge its debts to the NAB.
[32]See [15] above.
Also, in opposing the grant of leave, Mr Garratt KC noted that, with respect to the conduct of the litigation, the trial judge ‘was excoriating of the behaviour of Jane [Perton]’.[33]
[33]Referring to Costs Reasons No 1, [105]–[122].
Finally on this issue, Mr Garratt KC submitted that Ms Perton’s argument based on her construction of the 2012 mortgage was untenable. He submitted that there was no evidence below and no finding had been sought that Mr Warring ‘expressly or implicitly requested NAB to advance any amount’ and that the new argument would not lead to a different outcome. He noted that Mr Warring resigned as a director of MCS in 2014, and Ms Perton claimed to have occupied the role of managing director and chief financial officer from 1996. In his submission, at most the 2012 mortgage secured a contingent liability, being a liability that ‘could have resulted if MCS had defaulted and then demand had been made under the [mortgage]’. He contended that, until this point, ‘there was no debt secured by this mortgage’. He contended that the applicant’s argument was misconceived because ‘the basic assurance in the language of [the] mortgage given by the mortgagor is to pay whatever is payable under any arrangement as agreed’, and the only arrangement between NAB and Mr Warring was that agreed in the September 2016 guarantee. As no liability to pay had arisen under the guarantee at the date of Mr Warring’s death, then as at that date, there was no liability in respect of monies owing under the mortgage. In his submission, the proper course for an executor in this circumstance was to request the NAB to discharge the 2012 mortgage, and for the NAB to do so.
Mr Garratt KC submitted that the trial judge therefore did not err as Ms Perton maintained, but if there was error, then he relied on Ms Walters’ notice of contention. By her notice of contention, as noted in the agreed summary of issues before this Court, Ms Walters maintained that the judgment below should be affirmed because MCS ‘was always obliged to indemnify or exonerate Don [Warring] in respect of the indebtedness of MCS to NAB, which … MCS was able to do’. Ms Perton denied this contention.

Ms Perton’s reply

In reply, Dr Hanscombe KC, who had not appeared for Ms Perton at the trial, submitted that there was no ‘new argument’ in Ms Perton’s closing submissions of the kind suggested by Mr Garratt KC. She submitted that although ‘a great deal of focus was given to the guarantees rather than the mortgage’, the pleadings showed that the 2012 mortgage was in fact part of Ms Perton’s case. She referred to the fact that the provisions of the 2012 mortgage were in evidence, and submitted that:
[I]t’s plain on the terms of the document itself that it was an all [monies] mortgage which caught any indebtedness owing to the [NAB] under the facilities and secured against that property.
Senior counsel submitted that, in any event, Ms Walters would not have run her case any differently and that the construction of the mortgage that she advanced was not, as Mr Garratt KC maintained, dependent for its operation on facts that had not been the subject of evidence at the trial. Dr Hanscombe KC submitted that the Court:
… should make a determination which is in accordance with the fact and the law and that there is no unfairness in doing so, because this is purely a matter of law; was this property encumbered?
Dr Hanscombe KC contended that Ms Walters’ construction of the 2012 mortgage should not be accepted; and the 2012 mortgage could not be discharged if there was an ‘amount owing’. In this context, she submitted that there was a critical difference between the ‘amount owing’ (as defined) and the debt that was payable to the NAB. She submitted that ‘[t]he only question’ for the trial judge was whether there was ‘an amount owing within the meaning of the mortgage’.
As to Mr Garratt’s submission, in support of Ms Walter’s notice of contention, that MCS was ‘good for the money’, Dr Hanscombe KC relied on paragraph 378 of Ms Perton’s closing submissions at trial, in which it was said that this proposition was never put to Ms Perton and that Ms Walters had made no attempt to prove it. Dr Hanscombe KC reiterated that s 40 of the Act applied because the mortgage imposed a primary liability on Mr Warring as mortgagor.

Consideration

Is Ms Perton’s argument that the 2012 mortgage created a liability apart from the September 2016 guarantee relevantly ‘new’?

In Bird v DP (a pseudonym) (‘Bird’),[34] Gageler CJ, Gordon, Edelman, Steward and Beech-Jones JJ restated the principles that guide an appellate court when a party seeks to raise an argument that was not raised and addressed at the trial:
As a general rule, all substantial issues between parties should be settled at trial and new issues should not be raised on appeal. That rule, however, is not absolute. A party will generally be refused permission to rely on a point not taken below, among other grounds, where a party seeks to raise a case which did not arise on the pleadings; where if the issue had been raised at the trial, it might have been the subject of evidence; or where the issue requires a fresh consideration of facts that are neither admitted nor beyond controversy. A party may be permitted to rely upon a point not taken below, however, if the other party concedes that its case would not have been presented differently if the point had been taken below.[35]
These principles are not new, and have been recognised for many years.[36]
[34](2024) 98 ALJR 1349; [2024] HCA 41 (‘Bird’).
[35]Ibid 1360–1 [39] (Gageler CJ, Gordon, Edelman, Steward and Beech-Jones JJ) (citations omitted); [2024] HCA 41.
[36]Coulton v Holcombe (1986) 162 CLR 1, 7–8 (Gibbs CJ, Wilson, Brennan and Dawson JJ); [1986] HCA 33. See also Water Board v Moustakas (1988) 180 CLR 491, 497 (Mason CJ, Wilson, Brennan and Dawson JJ); [1988] HCA 12.
As Mason CJ, Wilson, Brennan, Dawson JJ said in Water Board v Moustakas, in order to determine whether an issue was taken at trial, it is necessary to examine the actual conduct of the proceedings.[37] In this case, the trial was conducted over five days in mid‑February 2022, although closing submissions were not made until 4 April 2022. It is perhaps also worth noting at this point that there was a pleading amendment hearing on 2 May 2022, and an application to reopen on 10 November 2022. The last‑mentioned hearing related to matters that do not concern us here. We return to the pleading amendment hearing hereafter.
[37](1988) 180 CLR 491, 497 (Mason CJ, Wilson, Brennan and Dawson JJ); [1988] HCA 12.
We begin by noting that there are two aspects to the present inquiry. First, did Ms Perton introduce a new argument in closing submissions before the trial judge that had not been advanced at the trial? We simply note at this point that the trial judge did not address the argument in her reasons for judgment.[38] Second, is the argument advanced by Dr Hanscombe KC, for Ms Perton, a fresh version of this new argument? Even if relevantly ‘new’, should this Court consider the argument because it turns only on the construction of the relevant instruments, that is, the 2012 mortgage and the September 2016 guarantee? Or does it depend on facts that were not found by the trial judge and were not the subject of evidence at trial? Or does it call for ‘a fresh consideration of facts that are neither admitted nor beyond controversy’?[39] To answer the first aspect of the present inquiry, we turn to the parties’ opening and closing submissions and their pleadings at and immediately after trial.
[38]See Reasons No 1, [244], where the trial judge focused attention on the terms of the September 2016 guarantee, which were relevant because ‘[i]t is accepted by the parties that during his lifetime Don [Warring] was bound by the guarantee that he had given and that he had granted NAB a mortgage over the Bell St [P]roperty as surety for his guarantee. Whether that continues after his death therefore begins with the terms of the guarantee document’.
[39]Bird (2024) 98 ALJR 1349, 1360–1 [39] (Gageler CJ, Gordon, Edelman, Steward and Beech‑Jones JJ); [2024] HCA 41.
In her written opening submissions, Ms Walters submitted that the Bell St Property was part of the Estate, ‘at its unencumbered value, as was recognised in Jane [Perton’s] probate affidavit and in the Updated Inventory’.[40] While acknowledging that the property was encumbered by the 2012 mortgage, Ms Walters’ central contention was plainly stated: that is, ‘the only liability secured [by the 2012 mortgage] was [Don Warring’s] liability as guarantor of the accommodation extended by NAB to MCS, which was contingent on NAB serving a demand on [him] which it never did’.
[40]Ms Perton’s written opening submissions, [27]; See also [28] above.
Ms Walters’ opening submissions went on to contend that:
Had a demand been served, Don [Warring] had an equitable right to require MCS to exonerate him from liability in respect of the demand, and if he paid, Don had the right to be indemnified in respect of the amount paid. Jane [Perton] has never suggested that MCS was not good for the money and NAB has continued MCS’s facilities and never needed to make a demand for payment (on MCS or anyone else). Jane is best placed to adduce evidence of any incapacity on the part of MCS to service and repay NAB accommodation …
Section 40 [of the Act] has no application in this case … The Bell St property was not charged with the payment of any money as at 4 February 2017; it was exposed only to a contingent liability which never crystallised.[41]
[41]Ms Perton’s written opening submissions, [28]–[34] (citations omitted).
These propositions remained at the heart of Ms Walters’ case throughout the TEP Proceeding. Her pleadings at trial were consistent with them.
Ms Walters went to trial on her Second Further Amended Statement of Claim dated 4 November 2020; although this pleading was amended pursuant to orders made by the trial judge on 19 April 2022 (after hearing closing submissions). The amended pleading became the Third Further Amended Statement of Claim. Her Honour granted further leave to amend on 2 May 2022, resulting in the Fourth Amended Statement of Claim.
Ms Walters’ Second Further Amended Statement of Claim relevantly included paragraphs 36A(a), 47 and 49. Paragraph 36A(a) related to Ms Perton’s 2017 mortgage, which was given after Mr Warring’s death and, for this reason, is not directly relevant. The Third and Fourth Further Amended Statements of Claim introduced no relevant change to this paragraph.
Paragraphs 47 and 49 of the Second Further Amended Statement of Claim (and the Third and Fourth Further Amended Statements of Claim) were as follows:
[47]The Bell Street property is registered as encumbered by:
(a)mortgage AK057846M granted by the deceased and registered on 3 December 2012 (which in fact secures no liability of the deceased to NAB); and
(b)mortgage AN832933V granted by the Defendant and registered on 16 May 2017 (which in fact secures only liability of the Defendant as guarantor of liability of MCS to NAB in accordance with the terms of the instrument of guarantee referred to in paragraph 36A hereof, which liability MCS and the Defendant have the means to discharge).
…
[49]The Bell St property forms part of the estate of the deceased, and its value as such is its unencumbered market value.
Particulars
The Bell St [P]roperty is to be included at its unencumbered market value because MCS is the primary obligor in respect of the obligations to NAB secured over Bell St, because it is the obligation at law of the primary obligor to indemnify a surety in respect of liability incurred in respect of the primary obligor’s obligations, and because the primary obligor has the means to do so.

We consider it plain enough that Ms Walters’ Second Further Amended Statement of Claim identified the principal issues, which on her case, if determined in her favour, led to the result that the 2012 mortgage did not diminish the value of the Bell St Property. All her subsequent pleadings were, relevantly, to the same effect.
We conclude therefore that Ms Walters had made her case at trial clear both in her opening submissions and in her pleadings, and her case has in substance remained the same at trial and on these applications for leave to appeal.
We turn to Ms Perton’s written opening submissions. Relevantly, Ms Perton addressed the present issue as follows:
[361] … [Ms] Perton will submit:
(a)that the Bell Street property was continuously mortgaged as security for, inter alia, the debts of MCS in an amount substantially in excess of $2 million from November 2012 until the date of the deceased’s death and as at the date of the deceased’s death the Bell Street property remained so mortgaged;
(b)that at the date of his death, the deceased remained liable under his personal guarantee for such debts, secured by the Bell Street property;
(c)the contention that [Mr] Warring’s liability under the guarantee was “contingent” and therefore the Bell Street property was unencumbered at the date of [Mr] Warring’s death is completely artificial. [Mr] Warring’s death was a change in capacity under the guarantee which gave NAB the right to call on the guarantee. NAB had made it clear to [Ms] Perton in April 2017 that if she did not transfer the Bell Street property to herself and then mortgage it in favour of NAB, NAB would not continue to support the facilities of MCS …
These submissions apparently accepted that the 2012 mortgage secured Mr Warring’s liability under the September 2016 guarantee. The principal disagreement identified in these submissions was the quantum of the liability arising under the combined operation of the 2012 mortgage and September 2016 guarantee, with Ms Perton asserting that under the guarantee Mr Warring was liable for all the NAB borrowings and that this liability was secured by the 2012 mortgage. Plainly enough, this is a different argument from that now being advanced.
The oral submissions made to the trial judge by Mr Farrands KC, for Ms Perton, at the commencement of the trial on 10 February 2022 were to the same effect. He did not contest that the 2012 mortgage and the September 2016 guarantee operated together as Ms Walters had submitted. Rather, he submitted that the September 2016 guarantee was ‘a top-end NAB rigorous guarantee in which [Mr Warring] was totally on the hook for the liabilities to the NAB’. As he put it, Mr Warring ‘could be called on as guarantor just as MCS could have been called on. … His liability was as rich as the principal debtor, MCS’.
Again, it might reasonably have been inferred from Mr Farrands’ opening submissions that Ms Perton did not dispute that the 2012 mortgage was security for Mr Warring’s liability under the September 2016 guarantee. This inference is all the stronger, since nothing was said to the contrary. Rather, as previously stated, the principal dispute was as to the amount secured under the mortgage pursuant to the guarantee. As we shall see, the pleadings indicate that this dispute involved an argument about the contingent nature of the liability under the guarantee and whether, on Mr Warring’s death, the NAB had a right to demand payment in full of the debt owed to it by MCS (that is, the whole of the NAB borrowings).
Ms Perton went to trial on her Second Further Amended Defence and Counterclaim dated 27 November 2020. This pleading was amended after the hearing of closing submissions, pursuant to orders made by the trial judge on 2 May 2022. The result was the Third Further Amended Defence and Counterclaim. We have not been directed to any subsequent amendment to this pleading, and there would appear to have been none.
Ms Perton’s Second Further Amended Defence and Counterclaim relevantly included paragraph 36A(a). In this paragraph, Ms Perton denied the equivalent paragraph in Ms Walters’ Second Further Amended Statement of Claim (concerning Ms Perton’s 2017 mortgage)[42] and further pleaded that that she would contend that:
[T]he Bell Street [P]roperty was continuously mortgaged as security for, inter alia, the debts of MCS in an amount substantially in excess of $2 million from November 2012 until the date of the deceased’s death and as at the date of the deceased’s death the Bell Street [P]roperty remained so mortgaged and the deceased remained liable under his personal guarantee for such debts.
[42]See [53] above.
In view of Ms Walters’ pleading and absent any contrary indication, it might reasonably be inferred from this paragraph that Ms Perton was also proceeding on the basis that the 2012 mortgage operated with the September 2016 guarantee to impose the relevant liability on Mr Warring. Subsequent paragraphs in the pleading were consistent with this. Others were more equivocal although not necessarily inconsistent with this understanding.[43]
[43]See, eg, Second Further Amended Defence and Counterclaim, [46.2.1], [46.2.4]–‍[46.2.5], [47.3]–‍[47.5], [48.5].
Broadly speaking, paragraphs 47.3 and 47.4 of Ms Perton’s pleading were also consistent with the proposition that the 2012 mortgage operated with the September 2016 guarantee to impose the relevant liability on Mr Warring. Paragraphs 47.3 and 47.4 were as follows:
[T]he Executrix will contend at trial of the proceeding herein the 3 December 2012 mortgage registered on the title to the Bell Street property secured a debt of $2,283,000 owed to NAB by MCS which loan was procured for MCS by the deceased and the defendant with the full knowledge and consent of the deceased and which loan was guaranteed by the defendant by a guarantee in writing to NAB dated 13 December 2012.
Further to the preceding sub-paragraph hereof the Bell Street [P]roperty continued to secure, inter alia, borrowings of MCS in excess of $2 million guaranteed by the deceased up to the date of the deceased’s death on 4 February 2017.
The Third Further Amended Defence and Counterclaim did not relevantly amend paragraphs 36A(a), 47.3 or 47.4.
The fundamental difficulty with Ms Perton’s pleading was that it did not specifically address, by denial or otherwise, the gravamen of Ms Walters’ case, namely, that the only relevant liability incurred by Mr Warring under the 2012 mortgage was a liability arising in conjunction with the September 2016 guarantee. Further, Ms Perton did not identify in her pleadings, either by reference to the terms of the guarantee or the terms of the 2012 mortgage how it was, in the circumstances of the case: that Mr Warring assumed liability for the whole of the NAB borrowings; that this liability did not depend on a demand being made under the September 2016 guarantee; and that such liability continued after Mr Warring’s death under the mortgage. To make this case, Ms Perton would have been required to plead the terms of the mortgage that brought about such a result, as well as the fact or facts that engaged these terms. Ms Perton’s pleadings did not do any such thing.
Nonetheless, the parties’ opening submissions were clear enough. As a result, when the trial commenced, the parties’ pleadings and openings would have led Ms Walters and the trial judge reasonably to conclude that it was common ground that any relevant liability under the 2012 mortgage arose only if, at the time of his death, Mr Warring had an existing and unperformed obligation to pay the NAB under the September 2016 guarantee. There was nothing in Ms Perton’s pleadings or otherwise to indicate that Ms Perton relied on any particular terms of the 2012 mortgage in support of a contrary conclusion. There was also nothing to indicate that she intended to show, by reference to any particular facts established at trial, that the 2012 mortgage gave rise to a liability that was separate from Mr Warring’s liability under the September 2016 guarantee.

Parties’ closing submissions

It was only in Ms Perton’s written closing submissions that she presented the argument that the 2012 mortgage gave rise to a liability independently of the September 2016 guarantee. The argument commenced at paragraph 367 of these submissions. This paragraph and the two subsequent paragraphs read as follows:
[367]… the mortgage over the Bell Street property was a separate security from the guarantee. Contrary, to [Ms Walters’] pleaded case, that mortgage itself imposed a primary liability on [Mr] Warring. In particular, under the mortgage terms, contained in a Memorandum of Common Provisions:
(a)[Mr] Warring as mortgagor agreed to pay the “amount owing” as agreed or on demand by NAB: cl 2.1;
(b)the “amount owing” included all amounts advanced by NAB at [Mr] Warring’s express or implied request. These clearly included advances to MCS over time;
(c)the “amount owing” also included all amounts that [Mr] Warring was actually or contingently liable to pay to NAB including under a guarantee held by NAB as a result of any transaction entered into by NAB for, or on behalf of, or at [Mr] Warring’s express or implied request. Again, these clearly included advances to MCS over time;
(d)the “amount owing” also included all amounts at any time which were owing and unpaid, or owing but not presently payable, or owing on a contingency, by [Mr] Warring to NAB for any reason. This clearly included [Mr] Warring’s obligations under the guarantees he had given;
(e)[Mr] Warring would be in default of the mortgage if, inter alia, he did not pay any amount owing on time [(cl 15(a))], or if a debtor (MCS) or guarantor ([Mr] Warring or [Ms] Perton or Warring Pty Ltd) was in breach of any agreement they had with NAB [(cl 15(c))];
(f)the rights of NAB under the mortgage did not merge with and were not adversely affected by, inter alia, any guarantee or right or remedy to which NAB was entitled [(cl 26.2(a))];
(g)the rights of NAB under the mortgage did not merge with and were not adversely affected by, inter alia, any other rights, powers or remedies that NAB was at any time entitled to exercise [(cl 26.2(c))];
(h)the provisions set-out in (f) and (g) above survived the termination of any arrangement (including a guarantee) with NAB [(cl 26.3)]. It follows that later guarantees entered into by [Mr] Warring did not affect those provisions.
[368]In short, [Mr] Warring was on the hook for MCS’s indebtedness to NAB, directly as mortgagor, separate from his guarantee obligations.
[369]By the terms of the mortgage, MCS did not have to be in default of its obligations to NAB – NAB could require payment from [Mr] Warring at any time and [Mr] Warring was required to pay it otherwise NAB could exercise its rights as mortgagee including by selling the Bell Street property in order to satisfy the indebtedness of MCS to NAB.
At the subsequent hearing for oral closing submissions on 4 April 2022, Mr Garratt KC, for Ms Walters, submitted that the proposition at paragraph 367 was ‘new’. In substance, he submitted that the new contention was that at the time of Mr Warring’s death, the 2012 mortgage, on its terms, gave rise to a liability to pay the entirety of the debt owed by MCS to the NAB. He submitted that this proposition:
wasn’t advanced in opening and it was not pleaded, and it’s that the mortgage, the provisions of the mortgages granted by [Mr Warring] to NAB in 2012, that those provisions imposed a primary liability on [him]. …
Just staying at the moment with all amounts advanced by NAB at [Mr Warring’s] express or implied request, there is no evidence that [he] expressly or impliedly asked NAB to advance any amount. … And we say the evidence is to the contrary. …
[T]he notion that [Mr Warring], who has retired, is expressly asking NAB to make advances … is strained at best, but it ought to have been the subject of evidence if there was any.
Having regard to the parties’ pleadings, their opening submissions, and that they apparently conducted the trial in conformity with these submissions, we accept that this was a ‘new’ argument. There are a number of specific factors that support this conclusion.
First, Ms Walters’ case was clear and unambiguously stated in her opening submissions and in her pleading. Ms Perton’s opening submissions were evidently designed to meet that case. This was, therefore, the case that Ms Walters advanced at trial, Ms Perton apparently addressed, and the trial judge undertook to decide.
Second, it is clear that Ms Perton’s pleadings did not fulfil their proper function. They were confused and confusing. They did not state her case with sufficient clarity. They contained no clear denial of the case that Ms Walters had pleaded, including that the 2012 mortgage secured the liability of Mr Warring under the September 2016 guarantee. Rather, as we have seen, parts of her pleading seemingly accepted this proposition. Other parts of her pleading were a study in obfuscation.
Third, Dr Hanscombe’s submission to the effect that Ms Perton’s pleading allowed her to make the case that she advanced in closing is untenable. The most that can be said is that it is possible to identify parts of the pleading that might have supported such a case. Read in their entirety, however, the pleadings do not properly (that is, with adequate clarity) make out such a case. Further, as we have seen, this was not the case that Ms Perton opened. In reality, Ms Perton’s new contention that, at the time of Mr Warring’s death, the 2012 mortgage, on its terms, gave rise to a liability to pay the entirety of the debt owed by MCS to the NAB was a new case. Her pleadings were insufficiently clear to put Ms Walters on notice that this was to be her case at trial, and her opening submissions did not remedy the deficiency.
Fourth, we have not been directed to any pleading by Ms Perton to the clear and express effect that, on the facts of the case, the 2012 mortgage given by Mr Warring gave rise to a pecuniary liability at the time of death that was separate and distinct from any liability arising under the September 2016 guarantee.
Fifth, as a result, neither Ms Walters nor the trial judge were put on notice before closing submissions that Ms Perton was seeking to advance a case in the terms of paragraphs 367 to 369 of those submissions. It was reasonable for both Ms Walters and the trial judge to have considered this to be a new case, which had not been advanced at the trial. As Mason CJ and Gaudron J said in Banque Commerciale SA (in liq) v Akhil Holdings Ltd:
Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.[44]
[44](1990) 169 CLR 279, 287 (Mason CJ and Gaudron J); [1990] HCA 11. See also Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490, 517 (Isaacs and Rich JJ); [1916] HCA 81; David Syme & Co Ltd v Hore-Lacey (2000) 1 VR 667, 673–4 [17] (Ormiston JA); [2000] VSCA 24.
Ms Walters did not acquiesce to this change in Ms Perton’s defence. Rather, at the hearing on 4 April 2022, her senior counsel took strong objection to Ms Perton’s attempt to rely on her new argument.
Further, we accept that, as Mr Garratt KC submitted, Ms Perton ought to have sought leave to amend her pleading if she intended to pursue her new argument. Had she done so, then it would have been for the trial judge to decide on the proper outcome, based on her Honour’s immediate knowledge of the conduct of the trial. It cannot be said that there was no opportunity for her to do so. As late as 2 May 2022, after closing submissions had been made, the trial judge conducted a contested pleading amendment hearing, following which her Honour granted Ms Walters leave to amend her Third Further Statement of Claim, which became the Fourth Further Amended Statement of Claim.[45] At the same time, her Honour ordered that Ms Perton file and serve any amended defence. This allowed Ms Perton to file and serve her Third Further Amended Defence and Counterclaim. Significantly, however, Ms Perton did not seek to amend her pleading to provide a basis for paragraphs 367 to 369 of her closing submissions.
[45]On 19 April 2022, the Court had granted Ms Walters leave to file and serve her Third Amended Statement of Claim.
In these circumstances, it is unsurprising that the trial judge, who had the benefit of hearing all the evidence and being taken to all the relevant documents at the trial, did not address Ms Perton’s late argument, which found no clear foundation in her pleadings or in her case as opened and conducted, and had been the subject of vigorous objection by senior counsel for Ms Walters in closing submissions. Her Honour approached the matter consistently with the parties’ pleadings, including as amended from time to time, on the basis that the September 2016 guarantee and the 2012 mortgage operated together.[46] This was the case as pleaded, opened and conducted by the parties. In the absence of any relevant pleading amendment, we accept that, as Mr Garratt KC submitted, the trial judge could properly conclude Ms Perton had ‘abandoned what had been an afterthought not run during the trial’ and exclude this from her consideration, as she in fact did.

Does Ms Perton seek to raise the ‘new’ argument again in support of her leave application in the TEP Proceeding?

[46]Reasons No 1, [256]–[258].

We turn now to the case that Dr Hanscombe KC sought to make in support of Ms Perton’s application for leave to appeal in the TEP Proceeding. As the High Court said in Water Board v Moustakas, in order to determine whether an argument was or was not taken at trial, it is necessary to look at the actual conduct of the proceedings.[47] This is evidently the case here. If the argument advanced in support of Ms Perton’s leave application is, in substance, the same ‘new’ argument raised unsuccessfully in closing submissions below, then it seems to us that the principles in Bird are applicable. This is because that argument was not part of the case run at the trial and, in the circumstances already outlined, the trial judge did not address it.

Is the new argument just a matter of construction?

[47](1988) 180 CLR 491, 497 (Mason CJ, Wilson, Brennan and Dawson JJ); [1988] HCA 12.

As already noted, Dr Hanscombe KC’s fundamental submissions were that the Bell St Property was encumbered by the 2012 mortgage, and that the mortgage secured the NAB borrowings. The amount of the NAB borrowings (around $2.8 million) was, in her submission, the ‘amount owing’ as defined in the 2012 mortgage; and the 2012 mortgage could not be discharged until the ‘amount owing’ was fully repaid to the NAB. In the meantime, the Bell St Property was fully encumbered and not an available asset from which further provision for Ms Walters could be made. Her argument was not referrable to the September 2016 guarantee. It is, we consider, plain enough that her argument is substantially the same as the case that Ms Perton sought to raise for the first time in closing submissions at the trial. In our view, this argument attracts the principles recently restated in Bird.
Dr Hanscombe KC submitted that, in accepting Ms Walters’ argument about the 2012 mortgage and the September 2016 guarantee, the trial judge misconstrued the mortgage, and that the error was just a matter of construction. Senior counsel argued that the construction of the Memorandum of Common Provisions should begin with clause 1.2. Mr Garratt KC, for Ms Walters, chose to begin with clause 2.1. The two clauses read as follows:
1.2 You may require NAB to release the land from this mortgage when there is no amount owing. Even if the amount owing is repaid, the land remains charged to NAB until released from this mortgage.
…
2.1You agree to carry out on time, or promptly if no time is specified, all your obligations to NAB under every arrangement including to pay the amount owing as agreed or where there is no agreement on demand.
(original emphasis)

As will be seen, clause 1.2 focuses on the ‘amount owing’, a term defined under the heading ‘Key Words’ as follows:
amount owing means, at any time, subject to clause 28,[48] all amounts:
[48]This clause is not relevant here.
(a)which at that time NAB has advanced or paid, or have become liable to advance or pay, for any reason:
(i)to or on behalf of you;
(ii)at your express or implied request;
(iii)because of any act or omission of you; or
(iv)because of any act or omission of NAB at your express or implied request;
(b)for which at that time you are or may become actually or contingently liable to NAB for any reason including all amounts for which you are or may become liable to NAB in respect of any orders, drafts, cheques, promissory notes, bills of exchange, letters of credit, guarantees, indemnities, bonds, any other instruments or engagements (whether negotiable or not and whether matured or not) which:
(i)have been drawn, issued, accepted, endorsed, discounted or paid by NAB; or
(ii)are held by NAB as a result of any transaction entered into by NAB for, or on behalf of, or at your express or implied request;
(c)which at that time are owing and unpaid, or owing but not presently payable, or owing on a contingency, by you to NAB for any reason;
(d)which at that time NAB is entitled to recover or claim from you for any reason (including under any assignment, transfer or disposition by any person to NAB of the land);
(e)which at that time you owe, or are liable for, to any assignee of NAB because the assignee performs an agreement or exercises a right NAB had before the time of the assignment;
(f)referred to in other provisions of this mortgage as being part of the amount owing or as being payable by you;
(g)of interest on or included in any amounts referred to in paragraphs (a) to (f) (inclusive);
(h)which would be included in paragraphs (a) through (g) (inclusive) if each reference to you were also a reference to any other person whose indebtedness or liability to NAB is intended to be secured by this mortgage; and which are foreseeable at that time as reasonably likely to become at a future time amounts within any of the descriptions above.
(original emphasis)
Clause 2.1 focuses attention on the word ‘arrangement’, which is also defined under the heading ‘Key Words’. This definition was relied on by Mr Garratt KC.
arrangement means:
(a)an arrangement (including a request, bill of exchange, agreement, guarantee, or a security) by or with you under which obligations are or could in the future be owed to NAB which you acknowledge to be an arrangement secured by this mortgage; or
(b)any agreement between you and NAB which imposes an obligation to pay any part of the amount owing, except to the extent that consumer credit legislation applies to the agreement and the relevant requirements under that legislation for the mortgage to secure that agreement have not been satisfied; or
(c)any agreement which varies an arrangement or agreement described in paragraphs (a) or (b).
(original emphasis)
Dr Hanscombe KC argued that the undertaking by MCS to repay the NAB borrowings fell within the definition of ‘amount owing’ because the borrowings were advanced to MCS at Mr Warring’s express or implied request. The undertaking by MCS was therefore the ‘amount owing’ referred to in clause 1.2. We interpolate here that this was not a clearly pleaded part of Ms Perton’s case. Further, we were not directed to any part of her opening submissions that indicated that she would rely at trial on this proposition (or even referred to paragraph (a)(ii) of the definition of ‘amount owing’ in the Memorandum of Common Provisions).
Whether the NAB borrowings were advanced at Mr Warring’s express or implied request was essentially a matter of fact. There had to be some factual basis to support this proposition, including some evidence that Mr Warring had requested the NAB to advance the NAB borrowings to MCS. We have not, however, been directed to any evidence adduced at trial that might have supported such a finding of fact. As Mr Garratt KC submitted, the uncontested facts tended against this. That is, the parties accepted that Mr Warring had retired from the Business in 2011, a year prior to granting the 2012 mortgage and four years prior to giving the September 2016 guarantee. Ms Perton, on the other hand, was a director and chief financial officer of MCS throughout the relevant period, and the company’s sole director from February 2014.
We consider that Dr Hanscombe’s argument therefore does not turn, as she submitted, solely on a matter of construction, but instead requires an evidentiary foundation.

Could Ms Walters have presented her case differently in response to the new argument?

The first consideration tending against permitting this new argument to be raised on appeal is the possibility that Ms Walters would have run her case differently had the argument been made prior to the closing submissions.
We accept that if Ms Walters had been on notice prior to trial that Ms Perton’s case was that, quite apart from the September 2016 guarantee, the 2012 mortgage operated in terms to render Mr Warring liable for the whole of the NAB borrowings, and that this was the outstanding liability that diminished the value of the Bell St Property, then Ms Walters may have run her case differently.
Had Ms Perton pleaded that Mr Warring’s liability arose from the 2012 mortgage alone, then her pleading should also have identified the terms of the mortgage that led to this result, including paragraph (a)(ii) of the definition of ‘amount owing’. This would in turn have disclosed that her argument depended on proof of the facts necessary to engage this part of the definition; that is, that Mr Warring had expressly or implicitly requested the NAB to advance the NAB borrowings. It is possible, if not probable, that this would have resulted in Ms Walters taking a different approach to the conduct of her case, whether with regard to the evidence she led, the nature and extent of her cross‑examination, or otherwise.[49]
[49]Cf Water Board v Moustakas (1988) 180 CLR 491, 498 (Mason CJ, Wilson, Brennan and Dawson JJ); [1988] HCA 12.
It is possible, even probable, that, as Mr Garratt KC submitted, Ms Perton’s new case would have called for particular findings of fact not sought at trial, including as to the capacity of MCS to repay the NAB borrowings; and also that contribution would have been sought from the other two guarantors, Ms Perton and Warring Pty Ltd, since they too were jointly and severally liable[50] for the amounts that MCS owed the NAB.[51]

Does the new argument have a real prospect of success?

[50]September 2016 guarantee, cl 4.

[51]This was described as a continuing obligation: September 2016 guarantee, cl 14.1.

A further consideration militating against permitting the new argument to be raised on appeal, is the lack of any real prospect that that the argument would succeed.
As previously noted, Dr Hanscombe KC specifically argued that there was a critical difference between the expression ‘amount owing’ and ‘the debt which is payable’, relying on clause 1.2 of the Memorandum of Common Provisions governing the 2012 mortgage.[52] On closer examination, however, this argument does not pay sufficient attention to the September 2016 guarantee.
[52]See [81] above.
It is clear on the face of that guarantee,[53] that the three guarantors (Ms Perton, Mr Warring and Warring Pty Ltd) had each agreed to indemnify the NAB in the event that MCS did not pay ‘all the amounts which the customer [MCS] owes NAB at any time’. That is, pursuant to clause 6.2, the guarantors agreed that ‘[i]f the customer [MCS] does not pay an amount when due, [the guarantor] agree[s] to pay that amount to NAB when NAB demands it’.
[53]See clauses 6.1–6.2.
Further, under clause 12 of the September 2016 guarantee, a security interest (in the form of a mortgage over land) was given by each of the guarantors to the NAB in the event of the guarantor’s default. In Mr Warring’s case, the 2012 mortgage was, therefore, security for his obligations under successive guarantees, concluding with the September 2016 guarantee.
We accept, moreover, that, as Mr Garratt KC submitted, an ‘arrangement’ is another ‘agreement’ to which the mortgagor and the NAB are parties, ‘apart from the hypothecation in the mortgage itself’. As Mr Garratt observed, the only agreement identified at the trial other than the 2012 mortgage itself was the September 2016 guarantee.
Each element of the definition of ‘amount owing’ in the Memorandum of Common Provisions requires that an amount must eventuate as owing, whether presently or contingently or in the future. Further, the words ‘as agreed’ in clause 2.1 of the Memorandum of Common Provisions contemplate that the obligation to pay the particular amount and the time at which payment is required would be set out in a separate agreement, here the September 2016 guarantee. That is, the ‘amount owing’ is the amount that the mortgagor had to pay at the time ‘as agreed’ in the September 2016 guarantee. Dr Hanscombe’s argument therefore cannot succeed because it requires the terms of the 2012 mortgage to be read in isolation from the September 2016 guarantee.
As it happened, Mr Warring died before incurring any obligation to pay any amount to the NAB at any time ‘as agreed’ under the September 2016 guarantee. The parties properly did not contest the trial judge’s statement that:
The ordinary rule is that notice to the creditor of the death of the guarantor will determine a continuing guarantee. The guarantee cannot operate in respect of future advances unless a contrary stipulation is expressly provided for. NAB was on notice of the guarantor’s death as provided by Jane [Perton]. No submission was made that there was such an express contrary stipulation within the guarantee document.[54]
[54]Reasons No 1, [252], citing Coulthart v Clementson [1897] 5 QBD 42 and Ronan v Australia & New Zealand Banking Group (2000) 2 VR 531, 550 [52] (Ormiston and Batt JJA); [2000] VSCA 77.
In view of this, we can discern no error in the trial judge’s analysis of the operation of the mortgage and guarantee. Her Honour stated:
[W]hen one looks at the obligation secured by the mortgage [,] [i]t is a guarantee that MCS will pay amounts of indebtedness and that, if MCS does not do so, the guarantor will pay amounts that the customer fails to pay, on demand by NAB. … It is clear that the guarantee may be enforced by NAB upon default by MCS. In the absence of any evidence that MCS had, prior to [Mr Warring’s] death, been in default of its obligations to NAB, there has been no demand made for [him] to pay pursuant to his obligation as guarantor. Absent any past demand for which [Mr Warring] might be liable, there is no contingent liability existing at the time of death.[55]
[55]Reasons No 1, [256].
Accordingly, we can discern no real prospect that Ms Perton’s new argument would succeed on an appeal.
We note that Dr Hanscombe KC advanced an alternative argument that the mortgage was an encumbrance that diminished the value of the Bell St Property even if, at the date of Mr Warring’s death, Mr Warring was under no present obligation under the September 2016 guarantee to pay anything to the NAB, simply because the mortgage was registered on title and would remain there until discharged. We doubt that this argument was advanced before the trial judge. In any event, we reject the submission. If, as the trial judge found, the 2012 mortgage was designed to secure Mr Warring’s liability as guarantor under the September 2016 guarantee, but upon his death no such liability could thereafter arise, then it seems to us that the executor could have insisted on the discharge of the 2012 mortgage,[56] without any diminishment in the value of the property subject to it.
[56]The National Bank of Australasia Ltd (1975) 133 CLR 191, 206 (Stephen J); [1975] HCA 56.

One final matter

In preparing these reasons, the Court became aware that there were pleadings filed, orders made and a transcript produced in the proceedings below which were not included in the Application Book but appeared to bear on issues presented by the applications for leave to appeal. The Registry advised the parties of this by an email dated 26 February 2025, and requested the parties to let the Registry know if they had any objection to these documents being before the Court and if they wished to make submissions in relation to the material within the nominated timeframe.
The documents in question were as follows:
(a)Second Further Amended Statement of Claim dated 5 November 2020;
(b)Second Further Amended Defence and Counterclaim dated 27 November 2020;
(c)Orders of the trial judge made on 19 April 2022, granting the plaintiff leave to file and serve a third further amended statement of claim;
(d)Third Further Amended Statement of Claim dated 20 April 2022;
(e)Orders of the trial judge made on 2 May 2022, concerning amendments to the plaintiff’s proposed fourth further amended statement of claim; and
(f)Transcript of contested pleading amendment hearing dated 2 May 2022.
We refer to these documents as the ‘additional material’.
Ms Walters’ legal representatives advised the Registry by email of 28 February 2025 that Ms Walters had no objection to the additional material being before the Court and did not wish to make any further submissions.
Ms Perton was granted an extension of time in which to file submissions, which she did on 11 March 2025. In these submissions, Ms Perton did not expressly object to the Court having regard to the additional material, but sought to place further additional material before the Court. By email of 13 March 2025, Ms Walters’ legal representatives objected to the Court receiving this further additional material.
On 24 March 2025, the Registry sent an email to the parties, informing them that the Court did not consider that Ms Perton’s submissions filed on 11 March 2025 (with the further additional material) were responsive to its email of 26 February 2025, and that Ms Perton should seek leave if she wished to rely on them. By email of 1 April 2025, Ms Perton’s legal representatives advised that Ms Perton did not seek leave to rely on those submissions (with the further additional material) and that, subject to correcting a transcript error,[57] Ms Perton did not object to the Court considering the additional material. In these circumstances, the Court has had regard to the additional material.
[57]This was in relation to the transcript of the hearing on 2 May 2022 before the trial judge. The parties agreed about the nature of the transcription error. Nothing presently turns on this.

Conclusion

For the reasons we have stated, we would refuse Ms Perton leave to appeal in the TEP Proceeding and, for this reason, we would also refuse her leave to appeal in the Part IV Proceeding. It is unnecessary to determine Ms Walters’ notice of contention.
Our preliminary view, subject to hearing from the parties, is that the applicant should pay the respondent’s costs of the two proceedings.
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[2025] VSCA 133

13 June 2025