Rothwells Limited (In Liquidation) v Capita Financial Group Limited

[1993] HCATrans 322

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S98 of 1993

B.e tween -

ROTHWELLS LIMITED

(In Liquidation)

Applicant

and

CAPITA FINANCIAL GROUP LIMITED

Respondent

Application for special leave

to appeal

MASON CJ DAWSON J TOOHEY J

Rothwells 1 26/10/93

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 26 OCTOBER 1993, AT 10.30 AM

Copyright in the High Court of Australia

MR R.J. BAINTON, QC: If the Court pleases, I appear with my

learned friend, MR J.L.B. ALLSOP, for the

applicant. (instructed by Holman Webb)

MR D.F. JACKSON, QC: If the Court pleases, I appear with my

learned friend, MS R.S. McCOLL, for the respondent.

(instructed by Allen Allen & Hemsley)

MASON CJ: Yes, Mr Bainton.

MR BAINTON:	If the Court pleases, we have taken the course of putting our submissions and outline, or perhaps
a little bit more than an outline, on paper. Could
I hand up copies?
MASON CJ: Thank you.	I see at the foot of page 1 you use

the word "concurrent".	The word generally used is
"co-ordinate".

MR BAINTON: Generally yes, but not invariably.

MASON CJ:  Is there any significance in your choice of the

word "concurrent?

MR BAINTON:  No.

MASON CJ: Yes.

MR BAINTON:  Your Honours, so far as our researches have

been able to reveal, when this principle of the

obligation to contribute between people with

co-ordinate obligations has arisen, it has always

been a case where more than one person is liable to

pay 100 per cent of some fixed sum of money.	The
common illustration, of course, is a guarantee.
The less common, but not entirely infrequent, illustration is the one that arose in Albion

Insurance in this Court where you have two separate

policies which in fact, though differently worded,

cover exactly the same loss and the same amount
could have been claimed under either of them.	So
that, when the claim is made in one that one is
entitled to contribution from the other.

The factual situation in this matter, in our submission, is very far removed from that sort of

situation and we have sought to outline the

possible courses that either party were entitled to

take under its letter of undertaking in the

document that has been given to Your Honours.

If the principle that the Court of Appeal

applied in this case is properly applicable, then

instead of working the justice that it is said to

work and which is said to be the rationale for it,

it could have the very opposite effect. And let me

Rothwells 26/10/93

just advance one fairly simple illustration:

Capita, as it turned out, provided approximately

$6.9 million. The precise sum is a little less

than that, but the precise amount does not matter.

It could have taken up units in one or other of

those unit trusts.

Had it elected to do that, in respect of

either of them, the situation that would have

arisen, because in the light of things that had happened units turned out to be one cent units,

Capita would have ended up with a very substantial majority of the number of units on issue, a

controlling majority. Rothwells, if it had to

reimburse on the theory that the Court of Appeal

has enunciated, would have ended up with what was

in fact a smaller parcel, simply because Capita

already had some of the units, Rothwells did not,

and it would have been in a minority situation

without the ability that Capita would have had to

thereafter control the affairs of the enterprise of

which the Perth Surgicentre was at the bottom.

One, in our submission, would have to have

some doubts on the correctness of the application

of principle if it was capable of bringing about

that result. The Court of Appeal, Your Honours,

seems to have got there by looking primarily at

what appears in paragraph 1006 of the third edition

of Meagher, Gummow and Lehane. It is set out

virtually in full in their judgment at page 96 of

the application book. It begins with a reference
to Smith v Cock, (1911) AC, and then goes on, in

effect, to say, after referring to Albion

Insurance, that "contributors" to whom the

principle apply are those:

bearing 'co-ordinate' liabilities to make good

the one loss -

questions which can arise under that that are not and they go on to point out that there are	the subject of judicial determination at the time
the authors put pen to paper. Now, that is not the
situation that was facing Rothwells and Capita in
the relevant case. There was no question - - -

DAWSON J: Assuming that Capita's contributions, one way and

another, kept Lucky Bay solvent, and then there was

an action against Rothwells based upon the

undertaking, it would be a defence to say that

Capita had performed its obligations, would it not?

MR BAINTON: Well, it depends on the facts. It may well be

that if Capita performed the entirety of its

obligations, there may well have been nothing left

Rothwells 26/10/93

for Rothwells to perform, and I quite appreciate

the reason why Your Honour puts that - - -

DAWSON J: Yes, and if it was sued under the undertaking for

performance of the undertaking, it would be a

defence to say that there was no occasion, because

of what Capita had done.

MR BAINTON:  If Capita had in fact made it solvent again,

that may well be so.	I appreciate the effect of
what Your Honour is putting to me.	But none the
less - - -

DAWSON J:  Why then are there not co-ordinate obligations on

the part of Capita and Rothwells?

MR BAINTON: Co-ordinate obligations have always been put on

the basis, thus far, that they are obligations of

more than one person to pay a particular sum of

money to a third person. This situation differs

from that in several respects. The promisee is

Capita, but there was no promise by anybody to

pay anything to Capita, in this case. This was a

promise exacted by Capita, really, for the benefit

of a third party. That is one significant

difference, in our submission, from the situation

Your Honour has just put. The second is that each

party had a choice as to how it would perform

whatever obligation it was it undertook. In point

of fact, I tried to point out in my note, Capita

had six choices under its document at least;

Rothwells had at least four.

To apply the principle of co-ordinate

liability in that situation is to say that a party

who chooses to perform one way can force another

party who has not contracted to perform that way -

it is simply one of the possibilities - who has not

promised to perform precisely that way, and who

does not wish to perform that way, to participate

in the performance that way, which is another, in

our submission, quite significant difference from	the simply situation that all of the previous
authorities have envisaged. What its result is to
be may be another question. But thus far, so far
as our researches have been able to indicate, the
principle has only ever been discussed in
situations where two or more persons undertake a common liability to pay a fixed sum of money to somebody else. And by "fixed" I do not necessarily
mean the exact amount that is in the document. It
could be fixed by a formula, but it could be an
amount on which interest is running. But it is either fixed by the document, or quantifiable by
arithmetic of some sort.

Rothwells 26/10/93

There is only one way to pay money; you pay

money. It is not a situation there where there is

any diversity of choices available to, or perhaps,
in our submission, more importantly, contracted for

by both of the parties who enter into relevant

promises. Not only, in our submission, is there no

authority or, at least, should I more accurately

say we have not been able to find any that is

precisely in point.

MASON CJ:	One is concerned with principle then.
MR BAINTON:	One is concerned with principle.
MASON CJ:	You were saying that the Court of Appeal drew too

much from what appeared in Meagher, Gummow and

Lehane.

MR BAINTON:	Yes.
MASON CJ:	Now, I had not understood from what you were

putting, in what respect they drew too much from

that long passage that is quoted on pages 96

and 97.

MR BAINTON:  What that passage is talking about is

contributors, just below the reference to Albion

ttbearing 'co-ordinate' liabilities to make good the

one losstt, and then they go on to discuss that.

Now, what they say about that, in our submission,

is quite irrelevant to a matter that they had to

consider in this case. First, because it is not

right to describe anything as one loss, the concept

that parties contracted with reference to is

maintaining someone's commercial solvency, which is

a fairly inexact term. It was held to be capable

of being contractual and we have not sought to

dispute that, but whatever it means it is something

quite different from making good the one loss,

which this passage goes on to discuss.

MASON CJ: But the important sentence in the passage quoted

is the last sentence in the quote, at page 97.

MR BAINTON: Well, that is what we have relied on.

MASON CJ: Yes, now what is wrong with that?

MR BAINTON: Well, in the context of more than one party

making good one loss, nothing. We do not quarrel

with it. But Their Honours in the court below have
taken it from the context in which it is put and

applied it to a completely different situation, for

which, in our submission, there is no

justification. Indeed, if Their Honours had turned

over a few pages they would have found that not

only did the author of this book, but also the

Rothwells 26/10/93

authors of the current edition of Rowlatt on

Sureties, in effect, say the law is as I have just

endeavoured to submit it to Your Honours.

The two passages - the fourth edition of

Rowlatt, at page 153, we have, in fact set out the

very short extract in the affidavit seeking leave,

but Your Honours might prefer to look at the

paragraph as a whole. It is the section talking
about contribution between co-sureties. There is a

paragraph headed, "Contributing co-sureties must be

sureties in the same degree". They say:

The equity depends upon the creditor's

original ability (apart from any equity
preventing him from doing so) to charge the

co-surety from whom contribution is sought as

much as the co-surety seeking contribution.

Where this could not have been done there is

no inequity to be remedied and no

contribution.

And they go on to cite some old cases to that

effect. So probably the clearest of them is where

there is a surety for a debt, or two sureties for a

debt, and then a third surety for one of the

sureties. That third surety has never been held to

be liable to contribute with the other two for the

full amount of the debt. He simply contributes for

the second of the two to the extent to which he is

guaranteed that one. The authors of Meagher,

Gummow and Lehane, at paragraph 1013 say much the

same. One probably begins at 1012 because they are

taking up this concept of the one loss that is

discussed in the earlier paragraph. The principle,

they say, goes back to Pendlebury v Walker in 1841.

MASON CJ: But they are basically cases where the guarantors

are guaranteeing separate portions of the one debt.

MR BAINTON:  Yes, they are. They are not cases where each

person has promised to perform in the same way, for

the reason Your Honour the Chief Justice just put

to me. Our submission is that when one looks at

the relevant letters here, neither party has

promised to perform in any particular way.

MASON CJ:  No, they were given a choice.

MR BAINTON:  Each has kept a choice to himself. May I then

take up again what Your Honour Justice Dawson put

to me. It was no part of the evidence at the trial

to prove that what Capita did did maintain the

solvency of the Surgicentre. It simply said that

it had taken this step and sued for contribution.

Secondly, it is not uncommon these days in commerce

that letters of undertaking and letters of comfort

Rothwells 6 26/10/93

and things be written in language that is something

short of legal precision.

If it be that the arrangement that Capita entered into or if the boot was on the other foot,

that Rothwells entered into, was enforced against

Capita in the one case, or Rothwells in the other,

and neither had a right to contribution from the

other, then that flows from the contract that each

chose to make. It may well have been that each

could have guaranteed some debt that the Surgicentre or one of the structures had

undertaken, in which case performance by one would

have had predictable results; but they did not.

The question, in our submission, is: what is

the effect of the arrangements that they

deliberately chose to enter into? The answer, in

our submission, is that neither would be entitled,

under the theory that is propounded by the Court of

Appeal, or any other, to force upon the other one

performance in the same way when that other one had

not made itself liable to perform in that way.

DAWSON J: Well, it was an agreement to keep a company

solvent, and in the end that can only be done by

the provision of money. True it is that there was a choice as to the way in which the money would be

provided, but if one of them provided the money,

why should he not receive a contribution from the

other?

MR BAINTON:  Because, if he had wanted to put himself in

that position he could have done it in one of two

ways: he could have done it by, in effect,

guaranteeing, and if called upon the guarantee to

one of the creditors he would have had clear

rights; or, alternatively, he could have required a

provision between the two parties, in effect,

saying that if either contributed, or was forced to

contribute in one of the promised ways, the other

one would either match it, or indemnify him as to

half, or whatever arrangements they saw fit to make

between them. They did not do it.

DAWSON J:  Was there any difficulty about the observation, I

think it was, of the court that once Rothwells had

made its contribution it would be entitled to a

transfer of half the units that had been received

by Capita?

MR BAINTON: 

One of the matters that was debated was what

would be the effect of making an order for
contribution in the light of the course that Capita
took. Capita said that in that event it would hold
the debt and the mortgage as to 50 per cent

interest on trust for Rothwells. There were a few

Rothwells 

26/10/93

units earlier of quite a small amount, and they

made the same concession as to that. I had not

mentioned those specifically.

DAWSON J:  So this was by way of concession?

MR BAINTON: That was by way of concession.

DAWSON J: There was no concession - - -

MR BAINTON: If there was no concession - well, the answer

to that must depend upon the answer to the earlier

question. If the answer to the earlier question is

they must meet the contribution, one would have
thought justice would require an order in terms of
the concession if the concession had not been

forthcoming. If justice does not require the contribution then that ends the question. It

really goes back to what, in our submission, I was

putting to Your Honour a while ago.

The parties deliberately entered into this

arrangement. They avoided entering into an

arrangement which, as a matter of well settled law

would have entitled one to contribution from the

other and they did not make any contractual

arrangements between themselves as to what should

happen if one was called and performed and the

other did not, and it is not for the law to replace

that omission unless it falls within some already

established legal principle. The argument below,

of course, that found favour with the Court of

Appeal, is that the relevant principle is

co-ordinate liabilities, but to describe the

liabilities of these parties as co-ordinate, in our

submission, is a considerable misdescription of

them.

What has to be co-ordinate, in our submission,

is the mode of performance.	It does not matter how
the promise arises, it is what the promise requires

to be done, and there was such a degree of choice

here that we would submit it simply cannot be

described as co-ordinate.

MASON CJ: But I do not follow that. Why does one focus on

what is actually done, rather than the terms of the

promise that is given in each instance, that is the

liability? The liability is identical. There can

only be a difference because the promiser chooses

to perform his obligation in a particular way,

having regard to the choice that he makes, but the

liability under the promise before the choice is

made is the same.

MR BAINTON: Well, Your Honour, that is putting, with the

greatest respect, a wide definition of the word

Rothwells 8 26/10/93

"liability". What was undertaken in either of

these letters was to do this, this, this or that,

to the extent - or, I suppose, some combination of

them - that measures the amount of performance, not

the nature of performance, and that situation, in

our submission, is not really different in

principle from the ordinary situation of, say,

co-guarantors. What entitles contribution is not

just the fact that there are two promises, it is

the fact that one party has performed to an extent
greater than the other party that entitles
contribution to equality. It is the performance

that determines the entitlement to contribution or

the performance by one and the non-performance by

the other, I suppose.

The basis, or the terms, of the promise, if it

is a guarantee, do not matter. You could have

guarantees with very different terms guaranteeing

the same amount. It is what you do when you are

called upon that determines the entitlement to

contribution, in our submission.

MASON CJ:  You would say the contribution could not apply as

between two joint and several promisors who agreed

to make a financial contribution in a particular

amount with a provision that, in the case of each

of the promisors, the transfer of shares in a

particular company, a particular number of shares,

would be accepted by the beneficiary of the

promise as a sufficient performance?

MR BAINTON:  Your Honour, if both made that promise, and one

performed and the other did not, I would have to

answer, no, that I would not contend that. But

that is really bringing the situation back very

close to the ordinary guarantee situation. You are

assuming that each party promises to do the same

thing, one does and the other does not.	Had that
occurred, I would not be here.

DAWSON J: They are given alternatives and one performs a

promise by providing shares, and the other says,

"Well, I wouldn't have done it that way,

I would've provided money". On your argument he

should be able to say, "Well, I am not" - - -

MR BAINTON: Well, I am sorry. I thought His Honour the

Chief Justice put to me that that was the promise that each of them made, so that it was an identical

promise.

DAWSON J: Yes, but it meant that each was given an

alternative.

MR BAINTON: But the same alternative.

Rothwells 9 26/10/93

MASON CJ: Yes, same alternative.

MR BAINTON: Well then, they made a common promise.

DAWSON J:	You say the alternatives were not the same here?
MR BAINTON:	No, they are not.
DAWSON J:	How did they differ?

MASON CJ: Well, if you look at page 92, where

Mr Justice Priestley sets out the Capita letter of undertaking, and he italicizes - - -

MR BAINTON:	He does.
MASON CJ:	- - - the presence of words in the Capita letter

of undertaking which were not present in the the only differences, as I understand it, is that

right?

MR BAINTON: Yes.

MASON CJ: Well, one need not worry about the first one

either. That is purely grammatical. So that

brings you down to the italicized words between

lines 16, 17 and 20.

MR BAINTON:  Yes. That was the third alternative that is

described very broadly.	And that is the one that
Capita performed.	What he did was to buy out the

mortgage, which is neither of the first two.

Rothwells did not make a corresponding promise.

DAWSON J: It is a funny wording:

in the form of either financial
accommodation ..... or to arrange other

financial accommodation.

The words "other financial accommodation" do not

really add anything do they?

MR BAINTON: Well, as I think I said earlier, these letters

are not commonly drafted by lawyers, which is one

of the problems that arises. But if one goes back

to the earlier paragraph, there was an amount on

them both to be made available:

on the basis that the Grantor either makes a

capital contribution or advances financial
accommodation or arranges alternative

financial accommodation to Lucky Bay in order

that Lucky Bay may continue to meet its

obligations to Trans City -

Rothwells 10 26/10/93

Now, what was intended to be added in the Rothwells

letter is probably extremely broad, and you would

have to look at particular instances to see whether

it came in or it came out of it.

DAWSON J: Nothing broader than providing financial

accommodation. I mean, financial accommodation is

other financial accommodation.

MR BAINTON: Well, if Your Honour is suggesting you ignore

the words as adding nothing, the parties must have

thought they were adding something.

MASON CJ: Is there any discussion in the judgments of this

difference, .or the significance of it?

MR BAINTON:  No, not that this matter was not put to the

Court of Appeal, but the judgment does not deal with it. Again, one has to come back to what, in

our submission, was the fundamental justification

for the rule. If two people promise to pay the

same amount of money to a third, one performs and

the other does not, the law has told us for a long

while that there is a right of contribution. That

is because both promised to do precisely the same

thing, one does and the other does not.

Where the situation is that each gives itself

a wide range of options as to how it should perform

if called upon, it, in our submission, simply does

not follow as a matter of applying pre-existing law

that one party who performs first or, if he is the

only who performs, can compel the other to

contribute to the same performance as to 50 per

cent.

DAWSON J: Well, it is a very short point, that you cannot

compel a co-surety to contribute in a way in which
he could not have been compelled to contribute if

he had been called on first, that is it.

MR BAINTON:  Yes, well really, it comes down to that short

point.	Now, our submission is the law so far has
not said so.	If this Court is used to say so, as a

matter of principle, it has never said it yet.

Nor, so far as we have been able to ascertain, has

any other court said it. It arises, we think, for

the first time, and it arises in a situation where
this sort of thing, and I do not mean in exactly

these terms, has become not uncommon in commercial

life. One strikes letters of undertaking and

letters of guarantee, whatever name the parties

choose to give them, written by the parties and not

by their lawyers, by no means infrequently these

days.

Rothwells 11 26/10/93

There is one final point. The judge at first

instance was asked to determine - perhaps I should

say it was submitted to him that, in any event,
Capita must fail because having bought out the

Trans City mortgage it relieved the principal debtor of the obligation to pay any interest under

it. Now, if it be correct that Rothwells is liable

to pay half of what Capita paid to acquire this

mortgage, and if Capita is the assignee of the
mortgage, them being the principal creditor, has

relieved the principal debtor of the obligation to

pay interest, as it did, then the ordinary
principles would say that the co-surety is relieved

from liability because he has lost the right to

interest on the principal that he is being asked to

pay half for.

The Court of Appeal dealt with that terribly

cursorily - if I may be permitted to say that.

That is at page 103, and it devotes lines 1 to 15

to the question. The Court of Appeal simply said

that as the right to contribution had arisen at the

time the obligation to pay interest was released

that was not any justification for Rothwells not

contributing. That would mean that if a principal creditor alters the arrangement with the principal

debtor by relieving him of interest, a person who

has guaranteed it is not relieved from his

guarantee. That is the very question that this

Court decisively answered the other way in Ankar.

Now, it should not matter that that happened

after the contribution had been sought.	If it has
happened before, one would have thought,	any time
before judgment, or before making of the
contribution, it would be sufficient to relieve	the
co-surety from his obligation. It is basic, in	our
submission, and it is independent completely of	the
first point.
To put it this way: day one the right to contribution accrues, nothing happens; day two, the

principal creditor relieves the principal debtor of

any liability to pay interest; day three, he sues

the co-surety. He must fail. If you alter that

sequence of event and provide that the co-surety is

released at any time before judgment, one would

have thought there would be leave to amend any

pleadings to raise the question. I guess it is

simply fundamental to the law of suretyship.

For those reasons, in our submission, this is

a suitable matter for granting leave. As to the

first matter it is a matter of some considerable
general interest, and the point is not the subject

of any decision that we have been able to track

down, it is directly in point. As to the second

Rothwells 12 26/10/93

point, it is, in our submission, a very clear error

on the part of the Court of Appeal.

MASON CJ:  Mr Jackson, we need not trouble you on the main

point that Mr Bainton has argued, but what about

this second point?

MR JACKSON:  Your Honours, could I just say these things

about it. Our submission would be that the issue,

admittedly, is one said not to be of general

importance; the question then arises whether, in a

sense, an injustice has been done by the approach

that has been taken in the Court of Appeal.	We
would submit that the approach taken by the

Court of Appeal was correct, and may I indicate

very briefly, the bases upon which we would make

those submissions.

The essence of the applicant's case in that

regard is that the respondent became a creditor as well as an obliger and that, as a creditor, it did not charge interest, therefore it is said, the

applicant is discharged.

DAWSON J:  If he took an assignment of the debt and the

mortgage.

MR JACKSON:  Yes. Your Honour, could I just say one thing

before moving on, and it is this - - -

DAWSON J: Just to satisfy myself: it would cease to be a

surety then, would it not, surely?

MR JACKSON:  Your Honour, assuming that be so, the

position - and I will come to this in just a

moment - was that one is not really talking about

all sums of money which became due to it on the co-

ordinate liability issue, all at the one moment,

one is talking about sums of money, some of which

were in the past, but may I come to that in just a

moment, Your Honour.

Your Honour, the point I was going to

interpolate was this, that the situation which had

obtained, in our submission, at the trial, was that the question whether we did or did not agree not to
charge interest, was one that has not yet been

resolved. That appears at page 76. Your Honours

will see, at the top of the page, the primary judge

recording the argument that was advanced on our

behalf on that regard. Then you will see on the

next page at page 77, about line 6, that he
expressed no view on the question, and it was one

which it was unnecessary for the Court of Appeal to

deal with.

Rothwells 13 26/10/93

Now, Your Honours, corning back then to the

main theme, what the argument on behalf of our

learned friends leaves out of account, in our

submission, is the fact that there were accrued

obligations to us as co-obliger. And may I seek to

indicate very briefly what I mean by that. At

page 92, Your Honours will see, in the operative

passage of the letters of undertaking, at about

half-way between lines 15 and 20, that the

obligation was:

to make financial contributions -

plural -

when and as required -

again contemplating that events may happen from

time to time -

either to -

do one of those things.

Now, Your Honours will see that that is what

happened, in fact, and that appears at page 93.

And you will see listed, in the subparagraphs (a)

to (e), the various events which occurred over the

period July 1987 through to May 1988, and apart

from the item that is referred to in (c), where it

was held that in fact the payment had been made by

Rothwells, that in respect of each of those, the

events had occurred which gave rise to an

entitlement to contribution. Now in respect of

each of those circumstances, one had a situation

where it is submitted that the Court of Appeal, per

Mr Justice Priestley, was correct we would say in,

as he said at page 103 between lines 5 to 10,

saying:

So far as I can see, the matters relied on

were matters that occurred -

and that is the reliance by my learned friends -

after the right to contribution had already

arisen.

And he goes on in the next paragraph to say much

the same thing.

Your Honours, could I just say in that regard,

that there is nothing unusual at all in there being

circumstances where, a right to contribution

already having arisen, that right is not affected

by some event which would discharge an entitlement

to contribution in the future.

Rothwells 14 26/10/93

MASON CJ: That is a fairly common matter, is it not, in

relation to co-sureties, for example, where one

pays out and then requires an assignment of the

principal creditors' rights in relation to

recovery?

MR JACKSON:  Yes. Well, Your Honour, it happens really

quite frequently, of course, in relation to the

ordinary debtor/creditor surety relationship, where

one has the surety being surety for payment, for

example, for shipment of goods and where the right

arises in respect of each shipment. Now,

Your Honours, it is true to say that one does not

see very many cases upon it, but could I just say

two things: the first is this, that if our learned

friends' submission be correct, what it means is

that discharge by agreement ultimately with the

creditor not only has the effect of operating in

futuro but has the effect of operating ab initio.

And, Your Honours, there is not, in our submission
with respect, any authority which supports that view of it and it is certainly not supported by Ankar and is not a matter that was in issue,

indeed, in Ankar.

Your Honours, could we also submit in relation

to it that whilst it is perhaps not an uncommon

theme for in fact the effect of discharge to be

something that does operate in effect ab initio,

because, as well as in futuro, that only happens
because of the fact that so many obligations of

this kind are obligations which would require the

making of only one payment, but, Your Honours, we

would submit the general proposition is, as we have

submitted. Your Honours, could I give one

indication. If I could give Your Honours a copy of

a paragraph in the English Halsbury, volume 20, to

which I wish to refer. In paragraph 253, at the

top of page 138, which is the second page of the

extract, what Your Honours will see is this:

The general rule is subject to one

qualification: where the guarantee is for the

performance of several and distinct contracts

or duties, a change in one of those contracts

or duties will not affect the surety's

liability as to the rest.

Could I pause at that point to say, Your Honours,

the first two cases there referred to in note 10
are cases where there is one instrument, but
covering a number of obligations. And then, the

authors say, correct in our submission:

Hence a surety may be liable for a default

which occurred before the variation of the

principal contract.

Rothwells 15 26/10/93

Your Honours, that, in our submission, represents

the true situation.

So, what we would submit, Your Honours, is that the result arrived at by the Court of Appeal

on this issue, we would submit, is the correct

result, or is sufficiently arguably the correct

result, for the Court not to grant special leave.

We would also submit that it is an appropriate

matter for the Court to bear in mind in relation to

this issue, that it does depend on a substratum of

fact which has not yet been found in favour of the

applicant.

MASON CJ: Thank you; Mr Jackson. Mr Bainton.

MR BAINTON:  The second point was taken only in respect of

item (e) on page 93. Rothwells did match the

payment in (c); it did not match (a), (b) and (d)

and the second point has got nothing to do with

those at all. It is taken only with reference to

the matter in (e), which is the Trans City loan

that was assigned. The findings of fact in respect

of that will be found at pages 41 and 42 and it

ends with a citation from the letter from Capita.

It is a plain confession, but all that is left due

was "repayments of capital". That was, of course,

in terms of date, later than the assignment.

If the assignment gave rise to a right of

contribution, it is quite true, as Mr Justice

Priestley said, that the event occurred after the

entitlement to contribution arose, but before

contribution is made or before any judgment in

respect of it is given; indeed, before the

commencement of these proceedings. So, in our

submission, the point remains a good one, that in

respect of that amount the relationship between the

principal debtor and the principal creditor has
been altered to the detriment of the guarantor, who

no longer is entitled - if he pays up and gets by

subrogation the right to the principal he is no

longer entitled to interest on that principal.

MASON CJ:  Two points have been argued in support of this

application for special leave to appeal: the first

is that the Court of Appeal was in error in

applying the doctrine of contribution. We are not

persuaded that in that respect there was any error

of principle on the part of the Court of Appeal.

The second point argued related to a matter of

interest. In relation to that question, in the

view of the Court, the decision of the Court

of Appeal is not attended with sufficient doubt to justify the grant of special leave to appeal. The

application is therefore refused.

Rothwells 16 26/10/93

MR JACKSON:	We ask for costs of the application.
MASON CJ:	You do not oppose an order for costs, Mr Bainton?

The application is refused with costs.

AT 11.20 AM THE MATTER WAS ADJOURNED SINE DIE

Rothwells 17 26/10/93