Warwick Entertainment Centre Pty Ltd (Receivers and Managers Appointed) atf the Warwick Entertainment Centre Unit Trust v Silkchime Pty Ltd (Receivers and Managers Appointed) atf the Silkchime Unit Trust [No 4]
[2018] WASC 120
•20 APRIL 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: WARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) atf THE WARWICK ENTERTAINMENT CENTRE UNIT TRUST -v- SILKCHIME PTY LTD (RECEIVERS AND MANAGERS APPOINTED) atf THE SILKCHIME UNIT TRUST [No 4] [2018] WASC 120
CORAM: TOTTLE J
HEARD: 19 & 20 JUNE, 20 JULY 2017
DELIVERED : 20 APRIL 2018
FILE NO/S: CIV 1094 of 2008
BETWEEN: WARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) atf THE WARWICK ENTERTAINMENT CENTRE UNIT TRUST
Plaintiff
AND
SILKCHIME PTY LTD (RECEIVERS AND MANAGERS APPOINTED) atf THE SILKCHIME UNIT TRUST
Defendant
EARLMIST PTY LTD
Third Party
Catchwords:
Corporations - Insolvency - Judgment debt owned beneficially by secured creditor of judgment creditor - Whether judgment debtor can set off debt due by judgment creditor assigned to judgment debtor - No mutuality of beneficial interest - Set off not permitted in absence of beneficial mutuality - Equitable set-off not raised
Practice and procedure - Judgments and orders - Enforcement - Suspension of Property Seizure and Sale Order - Whether special circumstances exist justifying suspension - Existence of cross claim not a special circumstance
Practice and procedure - Where asset cannot be conveniently appropriated and realised - Where order required to facilitate appropriation of asset - Application under Civil Judgments Enforcement Act 2004 (WA), s 86
Limitation of actions -Where confirmation of cause of action under Limitation Act 2005 (WA)
Subrogation - Limitation period applicable to claims sought to be enforced by subrogation to securities held by principal creditor - Limitation period applicable to causes of action based on subrogated security applies to claims sought to be enforced by subrogation
Subrogation - Subrogated party's entitlement to interest - Subrogated party not entitled to benefit of covenant to pay interest contained in security - Entitlement to interest founded in part on contractual rights and in part on equitable principles - Entitlement to interest at commercial rates not established - Interest at agreed trustee rate awarded
Guarantor's right of indemnity against principal debtor where guarantee given at the request of principal debtor - Whether cause of action contractual or based on restitutionary principles - Cause of actual contractual in nature
Legislation:
Civil Judgments Enforcement Act 2004 (WA), s 15, s 59, s 86
Limitation Act 2005 (WA), s 13, s 18, s 20, s 21, s 27, s 46, s 47, s 49, s 50
Mercantile Law Amendment Act 1856 (Imp)
Supreme Court Act 1935 (WA), s 32
Transfer of Land Act 1893 (WA), s 83
Result:
Application successful in part
Category: A
Representation:
Counsel:
| Plaintiff | : | Mr J A Thomson SC & Mr S Wilson |
| Defendant | : | Mr S Penglis |
| Third Party | : | Mr S Penglis |
Solicitors:
| Plaintiff | : | Corrs Chambers Westgarth |
| Defendant | : | Coulson Legal |
| Third Party | : | Coulson Legal |
Case(s) referred to in decision(s):
Anson v Anson [1953] 1 QB 636
Attorney-General of Canada v Nalleweg (1998) 165 DLR (4th) 606 (Alberta CA)
Batard v Hawes 2 El & Bl 287
Belgravia Nominees Pty Ltd v Lowe Pty Ltd [2017] WASCA 127; (2017) 51 WAR 341
Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 129
Boscawen v Bajwa [1996] 1 WLR 328
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Brook's Wharf and Bull Wharf Ltd v Goodman Brothers [1937] 1 KB 534
Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291
Collinge v Heywood (1839) 112 ER 1352
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Filby v Mortgage Express (No 2) Ltd [2004] EWCA Civ 759
Gedye v Matson (1858) 53 ER 655
Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125
Israel v Foreshore Properties Pty Ltd (1980) 30 ALR 631
Ladong Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203
Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162
Lang v Le Boursicot (1993) 5 BPR 11,782
McColl's Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365
New Resource Holdings Pty Ltd v Lunt (No 3) [2008] WASC 221
NW Robbie & Co Ltd v Witney Warehouse Co Ltd [1963] 1 WLR 1324
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221
Re a Debtor [1937] Ch 156
Silkchime Pty Ltd v Warwick Entertainment Centre Pty Ltd [No 2] [2013] WASCA 224
State Bank of Victoria v Parry [1989] WAR 240
Titles Strata Management Pty Ltd v Nirta [2015] VSC 187
Warman International Ltd v Dwyer (1995) 182 CLR 544
Warwick Entertainment Centre Pty Ltd (receivers and managers appointed) atf the Warwick Entertainment Centre Unit Trust v Silkchime Pty Ltd (receivers and managers appointed) atf the Silkchime Unit Trust [No 2] [2012] WASC 275
Table of Contents
Introduction
The issues
Structure of reasons
Preliminary
Overview
Section 86 of the Act
The orders sought by WEC
The evidence
Silkchime's set-off claim
An overview of the parties' positions
The set-off debts due to Rompride (Erley Pty Ltd) and Greenleaf
Accrual of interest on the Erley/Rompride and Greenleaf debts
The assignments
Conclusion on Silkchime's set‑off claim
Silkchime's suspension submissions
Earlmist's claims
Factual overview
Earlmist's indemnity and contribution claims
Subrogation, assignment and transfer – applicable principles
The parties' submissions on the limitation issue
WEC's submissions
Earlmist's submissions
Limitation periods and subrogated claims
Summary of conclusions on limitation issue
Silkchime confirmed Earlmist's rights
Limitation periods applicable to the Silkchime Mortgages govern the subrogated claims
The limitation period applicable to Earlmist's Indemnity Claim
The limitation period applicable to Earlmist's Contribution Claim
The Contribution Claim quantum issue
The interest issues
Earlmist's case on interest
The authorities on a subrogated party's entitlement to interest
Conclusions on interest
TOTTLE J:
Introduction
This matter arises from the collapse of the Westpoint Group of companies in 2006. It involves a contest between a judgment creditor seeking to enforce a Property Seizure and Sale Order (PSSO) against land and a surety subrogated to securities over the land to aid in the enforcement of rights of indemnity and contribution against the judgment debtor. The plaintiff, Warwick Entertainment Centre (WEC) is the judgment creditor, Silkchime is the judgment debtor and the third party Earlmist is the subrogated party. Each of the companies is a Westpoint Group company. The land is situated in the Perth suburb of Warwick and I will refer to it as 'the Warwick land'.
The issues
The issues between the parties come before the court by way of an application brought under s 86 of the Civil Judgments Enforcement Act 2004 (WA) (the Act) and are as follows:
(i) Is Silkchime entitled to set off debts assigned to it by creditors of WEC? Silkchime claims the assigned debts exceed the amount of the judgment debt and thus there is no judgment debt for the PSSO to enforce.
(ii) If Silkchime's set-off argument does not succeed, should the PSSO be suspended pending the determination of other proceedings in this court (COR 223 of 2009)?
(iii) Are Earlmist's claims against WEC statute barred with the result that it has no rights to enforce by way of subrogation (the limitation issue)? [i]
(iv) What is the quantum of Earlmist's contribution claim (the contribution claim quantum issue)?
(v) If Earlmist's claims are not statute barred, on what basis is it entitled to interest on the amounts claimed and from what date is interest to be calculated? In particular, do Earlmist's rights of subrogation entitle it to the benefit of the interest covenant in the securities to which it is subrogated (the interest issues)?
Structure of reasons
The structure of these reasons is as follows:
(i) Preliminary matters: overview, s 86 of the Act, the orders sought and the evidence.
(ii) Silkchime's set-off claim.
(iii) Silkchime's suspension submissions.
(iv) Earlmist's claims:
•The factual background
•The limitation issue
•The contribution claim quantum issue
•The interest issues.
Preliminary
Overview
Mr Norman Carey is one of three directors of Silkchime. The other directors are Mr Ping Kuen Ho and Mr Peng Phui Ho, both of whom reside in Singapore. Mr Carey is the sole director of Earlmist.
WEC has been in receivership since 24 January 2006.[ii] The receivers were appointed by Perpetual Nominees Ltd pursuant to a fixed and floating charge granted on 28 September 2005. In COR 223 of 2009 questions as to whether the receivers of WEC should have retired and, if so, at what date, are being litigated. Silkchime is a plaintiff in those proceedings. I explain the relevance of those proceedings later in these reasons.
On 9 August 2012, WEC obtained judgment against Silkchime in the sum of $11,560,695 together with interest at 6% per annum from 1 February 2006.[iii] As at 10 August 2012 (the day after judgment) the total amount due from Silkchime to WEC as a judgment debt was $16,071,105. By 1 December 2015 the judgment debt had increased to $18,381,188.
The judgment gave effect to reasons for the decision published by Le Miere J on 1 August 2012 following a four‑week trial of the action.[iv] WEC's claim was to recover debts due by Silkchime to it as recorded in WEC's books and records. It is common ground that the debts had accrued before the appointment of receivers to WEC.
Between 29 March 2006 and 14 March 2011, St George Bank Ltd made a limited appointment of receivers over the Warwick land. This was to secure repayment of amounts owing by Silkchime to St George Bank pursuant to a finance facility.
The Warwick land is Silkchime's major asset.
On 18 September 2014, WEC obtained the PSSO authorising the sheriff to seize and sell the saleable interest in property held by Silkchime to satisfy the judgment debt in whole or in part.[v] On 2 June 2015 the sheriff informed WEC's solicitors that Earlmist claimed an interest in the Warwick land pursuant to a mortgage and that the amount Earlmist contended was owing to it was just under $10 million.[vi] The sheriff said that if the Warwick land was worth less than the amount claimed by all of Silkchime's creditors - which was a total amount of $10.2 million ‑ then WEC would not have a saleable interest.
The sheriff cannot appropriate or realise the Warwick land until it is decided whether Earlmist has an interest as mortgagee in the Warwick land and the extent of that interest is determined. As a result, Earlmist was joined as a third party to the present application.
Section 86 of the Act
Part 4 of the Act governs the enforcement of monetary judgments. Division 7 of pt 4 in which s 86 is found is entitled 'Receivers and special remedies'. Section 86 states:
(1)If an available asset of a judgment debtor cannot be conveniently appropriated or realised under this Part for the purposes of recovering a judgment debt, whether due to acts or omissions of the judgment debtor or otherwise, the judgment creditor may apply to the court for any or all of the following -
(a)an order that determines the nature and extent of the asset;
(b)an order that appoints a receiver of the asset;
(c)an order that the judgment debtor or any person in possession or control of the asset -
(i)deliver the asset to a person named in the order;
(ii)do, not do, or cease from doing, any act that relates to the asset and that is specified in the order;
(d)an order that prohibits the judgment debtor or any other person from disposing of or otherwise dealing with the asset;
(e)an order that facilitates the appropriation or realisation of the asset.
(2)The court may make any such order, subject to section 87.
(3)The court may make any such order even if no other proceedings have been taken to enforce the monetary judgment concerned.
'Available asset' in relation to a judgment debtor means:[vii]
(a)the judgment debtor's legal or equitable estate or interest in any real or personal property; or
(b)the judgment debtor's interest in the property or profits of a partnership of which the debtor is a partner or in any other money that may be coming to the judgment debtor in respect of the partnership,
irrespective of whether the interest is held jointly or in common with another or others.
WEC relies on s 86(1)(a), alternatively s 86(1)(e), on the basis that the Warwick land is an available asset of Silkchime that cannot be conveniently appropriated and realised under pt 4 of the Act without an order that determines the nature and extent of Earlmist's interest in the Warwick land, alternatively such an order is necessary to facilitate the appropriation or realisation of the Warwick land.
Subject to Silkchime's set-off contentions it is accepted that WEC is a judgment creditor and that Silkchime is a judgment debtor for the purposes of the Act.
Counsel for Silkchime and Earlmist did not contend that it was not open to WEC to bring its application under s 86 but suggested that the issues should have been resolved by interpleader proceedings. It is difficult to see how that could be so. Section 84(2) provides that the sheriff may apply for interpleader relief if a judgment creditor does not admit a claim made by a third party to an interest in real or personal property or the proceeds of real and personal property. It is not, however, open to a judgment creditor to apply for interpleader relief under s 84(2). Further, the present circumstances are not circumstances in which an application for interpleader relief under O 17 of the Rules of the Supreme Court 1971 (WA) could be made. In my view s 86 provides a procedural mechanism for resolving issues of the nature presented in this case.
The orders sought by WEC
In its statement of facts, matters and contentions WEC sought the following orders:
A.A declaration that no amount is presently due from Silkchime Pty Ltd to Earlmist Pty Ltd.
B.A declaration that no demand may now be made by Earlmist Pty Ltd to Silkchime Pty Ltd.
C.A declaration that the extent of the interest of Earlmist Pty Ltd which is secured by mortgages F956399 and H215997 over 'Land' registered in the name of Silkchime Pty Ltd is $0.
D.Alternatively, if a demand can still be made by Earlmist Pty Ltd, a declaration that the extent of the interest of Earlmist Pty Ltd which is secured by mortgages F956399 and H215997 over 'Land' registered in the name of Silkchime Pty Ltd is $2,512,199.36 plus interest damages from the time that demand is made and not satisfied.
E.A declaration that the interest referred to in Relief D is to be calculated at the rate of 6% per annum at simple interest beginning from the time that demand is made and not satisfied.
F.Further, a declaration that the interest claimed in caveat L706028 by Earlmist Pty Ltd over 'Land' registered in the name of Silkchime Pty Ltd does not exist.
The evidence
WEC read and relied upon the following affidavits:
(i) the affidavit of Samuel Wilson sworn 13 June 2017;[viii]
(ii) the affidavit of Russell Harry Morgan sworn 21 July 2015;[ix]
(iii) the affidavit of Alice Nagel dated 11 August 2015;[x]
(iv)the affidavit of Andrew John Gilmour sworn 9 September 2016;[xi] and
(v) the two affidavits of Russell Harry Morgan sworn 9 September 2016.[xii]
Silkchime and Earlmist relied upon affidavits sworn by Mr Carey on 21 October 2016 and 21 November 2016.[xiii] Mr Carey's affidavit evidence was supplemented by oral evidence given in chief.
Mr Morgan and Mr Carey were each cross examined.
A book of documents was tendered.[xiv]
Silkchime's set-off claim
An overview of the parties' positions
Silkchime claims that WEC owed certain debts to two companies controlled by Mr Carey, Rompride Pty Ltd and Greenleaf Pty Ltd. Silkchime contends that on 9 August 2012 - the day judgment was entered against Silkchime - Rompride and Greenleaf assigned debts (which in aggregate exceeded the amount of the judgment debt in WEC's favour) to Silkchime. Silkchime contends that it is entitled to set off those assigned debts against the judgment debt and on that basis no money is due to WEC.
In response to Silkchime's set-off claims WEC contends that:
(i) No right of set-off exists as there is no mutuality between the judgment debt and any debt claimed by Silkchime, because the judgment debt is owned beneficially by WEC's secured creditor and not by WEC.
(ii) Silkchime did not give notice to WEC that it was exercising any right of set-off prior to WEC obtaining the PSSO and seeking to enforce the judgment debt.
(iii) The evidence only establishes, at most, a right of set-off of $11,402,857.
The set-off debts due to Rompride (Erley Pty Ltd) and Greenleaf
In his judgment Le Miere J summarised the genesis of the relationship between WEC, Erley and Greenleaf as follows:[xv]
In 1991 Erley Pty Ltd, a company associated with Mr Carey, purchased land near the Warwick Shopping Centre (the Warwick Entertainment Centre land). Mr Carey drew a development proposal to undertake a project known as Warwick Entertainment Centre to build a cinema complex on that land. In about 1992 Mr Carey proposed to the Ho brothers that they invest in the Warwick Entertainment Centre. The Ho brothers agreed. In April 1992 Erley, Greenleaf Holdings Pty Ltd, a company controlled by the Ho brothers, and Warwick, which was to be the joint venture vehicle, entered into a joint venture agreement. Warwick is the trustee of the Warwick Entertainment Unit Trust. Erley and Greenleaf agreed to join in a joint venture for the purpose of acquiring the beneficial interest in the land and developing it. Erley and Greenleaf were each to hold 50% of the units in the unit trust. The Warwick Entertainment Centre development was completed in September 1993.
The Warwick Entertainment Centre land was next to the Warwick land. Le Miere J went on to say:[xvi]
Mr Carey became aware that land adjoining the Warwick Entertainment Centre land (the Warwick land) might be available for sale. Forestview Nominees Pty Ltd, a company associated with Mr Carey, acquired an option to purchase the land. Mr Carey worked up a plan for the development of the land. This development became known as the Warwick Commercial Park. In 1994 Mr Carey proposed to the Ho brothers that they should acquire an interest in the Warwick land and become involved in its development. The Ho brothers agreed to this proposal and Silkchime was incorporated to act as the vehicle for the project. The land was transferred to Silkchime in a two-step transaction, which occurred on 27 January 1995. The original owner, National Mutual Life Association of Australia Ltd, transferred the land to Forestview. Immediately after this transfer, Forestview transferred the land to Silkchime. The purchase price was $3.6 million. Silkchime held the land as trustee for the Silkchime Unit Trust. This unit trust was created on 6 December 1994. Erley and Greenleaf each held 20 units in the Silkchime Unit Trust.
Mr Carey's affidavit evidence was to the effect that: [xvii]
(i) initially, it was proposed that Erley and Greenleaf would finance the development of the Warwick land by injecting equity into WEC, but instead they made loans to WEC;
(ii) there were two loan agreements which were entered into on 11 December 1993; one between Erley and WEC, and the other between Greenleaf and WEC;
(iii) only three pages of the Greenleaf loan agreement can be located and those three pages include a schedule, which shows that the term of the loan was for five years between 18 December 1993 and 18 December 1998; and,
(iv) the Erley loan agreement cannot be located.
Erley Pty Ltd was the trustee of the Erley Unit Trust and Greenleaf Pty Ltd was the trustee of the Greenleaf Unit Trust. Erley was replaced by Rompride Pty Ltd as the trustee of the Erley Unit Trust.
It is common ground that as at 23 January 2006 the books and records of WEC recorded debts due to Rompride and Greenleaf by WEC in the amounts of $4,910,467.03 and $6,492,390 respectively.
Accrual of interest on the Erley/Rompride and Greenleaf debts
By the time of the hearing it was common ground that no interest was accrued on the debts between 18 December 1998 and 23 January 2006.
At an earlier stage in the course of the application Silkchime contended that interest accrued on the debts from 1 July 1995 onwards on a continuous basis with the result that by 8 August 2012 the combined debt due by WEC was $40,395,623.95.[xviii]
By the time of the hearing Silkchime had changed its position and contended that Erley and Greenleaf waived WEC's obligation to pay interest in the 2000, 2001, 2002, 2003 and 2004 financial years but that interest started to accrue again on 1 July 2005.[xix]
Mr Carey calculated the outstanding balances as at 12 August 2012 as $14,913,160.69 due to Rompride and $17,269,170.63 due to Greenleaf.[xx] These calculations were undertaken by Mr Carey on the basis of an interest rate of 17% per annum compounded weekly in respect of the Rompride debt and an interest rate of 15% per annum compounded daily in respect of the Greenleaf debt. Mr Carey gave evidence in support of his interest calculations and was cross‑examined about the basis upon which interest was claimed.
WEC contends that it should be inferred that the parties treated the loan agreements as having expired on 18 December 1998 and as no longer governing the outstanding balances between WEC and Rompride and Greenleaf. It contends no interest accrued after 18 December 1998. On that basis it argues that any amount owing by WEC at the date of the judgment could not exceed a total of $11,402,857.03, being the aggregate of the amounts of the debts in question as recorded in its books, that is, $4,910,467.03 and $6,492,390.
For reasons I explain at [39] - [46] I have reached the conclusion that it is not open to Silkchime to set off the Rompride and Greenleaf debts. Thus it has not been necessary for me to determine the factual issues on which the alleged entitlement to interest depends.
The assignments
On 9 August 2012:
(i) Greenleaf and Silkchime executed a deed of assignment which recited that WEC owed Greenleaf $12,772,105 (defined as the Debt) and which recorded that Greenleaf agreed to 'assign the Debt to the extent of $12,000,000 to [Silkchime]'.[xxi]
(ii) Rompride and Silkchime executed a deed of assignment in materially identical terms to the Greenleaf and Silkchime deed of assignment. The 'Debt' recited as due from WEC was $10,006,780 and the deed recorded that Rompride assigned the Debt to Silkchime to the extent of $6,500,000.[xxii]
(iii) Rompride and Earlmist executed a deed of assignment in materially identical terms to the other deeds of assignment. The 'Debt' recited as due from WEC was $10,006,780 and the deed recorded that Rompride assigned the Debt to Silkchime to the extent of $3,000,000.[xxiii]
Notices of assignments to Silkchime were given under cover of a letter from Silkchime's solicitors to WEC's solicitors dated 10 August 2012.[xxiv] In the letter Silkchime's solicitors asked:
In light of the assignments will your client consent to an order to suspend enforcement of the judgment entered in CIV 1094 of 2008 in accordance with section 15 of the Civil Judgments Enforcement Act 2004?
Notice of the assignment by Rompride to Earlmist was given under cover of a letter dated 12 September 2012.[xxv]
WEC made a number of submissions as to why the assignments were not effective but in the light of the conclusion I have reached on the set‑off issue it is not necessary to deal with those submissions.
Conclusion on Silkchime's set‑off claim
For the reasons explained in the following paragraphs I have decided that Silkchime is not entitled to set off the assigned debts.
As a preliminary matter I note that Perpetual's fixed and floating charge over all of WEC's property and present and future undertakings was not in dispute. Neither was the appointment of the receivers nor the conversion of the floating charge into a fixed charge on the appointment of the receivers in dispute.[xxvi]
In support of its submission that Silkchime has no right to set off the Greenleaf and Rompride debts against the judgment debt because of a lack of beneficial mutuality, WEC relies on the authority of NW Robbie & Co Ltd v Witney Warehouse Co Ltd.[xxvii]
NW Robbie & Co Ltd is a case considered at some length in Meagher, Gummow & Lehane's Equity: Doctrines & Remedies from which the following summary of the case is derived.[xxviii]The plaintiff company executed a floating charge in favour of its bankers. Upon default the bankers appointed a receiver and the charge crystallised. After the receiver's appointment the defendant bought goods from the plaintiff and became indebted to it for the price. The defendant then took from a creditor of the plaintiff an assignment of its debt. The assigned debt had arisen prior to the appointment of the receiver. The majority of the Court of Appeal (Sellers and Russell LJJ) held that in an action by the plaintiff brought by the receiver to recover the price of the goods the defendant could not set off its claim for the assigned debt against the plaintiff's claim. The claim for the assigned debt had arisen before the receivership and was enforceable only as an unsecured claim against the plaintiff. The obligation to pay the price of the goods, though, incurred under a contract with the receiver as the plaintiff's agent was a debt due, in equity, to the bankers. Donovan LJ dissented on the ground that as a matter of construction, the charge did not attach to the property acquired by the plaintiff after the charge had crystallised.
The learned editors of Meagher, Gummow & Lehane's Equity: Doctrines & Remedies express the view that NW Robbie & Co Ltd was rightly decided on its facts but caution against reading the decision as authority for the proposition that a lack of beneficial mutuality will always defeat a set-off, observing that many equitable set-offs lack mutuality. The following observations are made:[xxix]
It is submitted that NW Robbie & Co Ltd v Witney Warehouse Co Ltd is correctly decided, in the sense that the court arrived at the right conclusion on the facts of the case. But the majority enunciated their reasons in dangerously wide language. A casual reading of the case would leave the impression that the sole reason why no set-off was there allowed was that there was no beneficial mutuality between the claims respectively asserted by the plaintiff and the defendant. If this were so, there would be a rule that in no situation where there exists a lack of mutuality will a set-off be allowed. This is clearly not so in many cases of equitable set-off. Lack of mutuality may, in some circumstances, furnish grounds for refusing to recognise that a claim amounts to an equitable set-off, but, since many equitable set-offs lack mutuality, its absence is not necessarily fatal.
It is even more important, for a proper appreciation of Robbie's case, to realise that it did not strictly involve the question whether a set-off existed. A legal set-off is one which exists at law as distinct from in equity. An equitable set-off is a claim (whether legal or equitable) which a court of equity would recognise as rebutting the plaintiff's claim, even though a court of law would not do so. In Robbie's case the defendant had a perfectly good legal set-off. It had bought goods from the company and the company owed money to it. They were two liquidated mutual demands. No question, therefore, arose as to whether there existed a good equitable set-off. That question could arise only if no legal set-off could be pleaded. What Robbie's case really decided was not that the defendant had no valid set-off at law (obviously, it had), much less that its claim was not one which equity would recognise as a set-off, but that in the circumstances it was inequitable for the defendant to rely on an undoubted legal set-off. To permit it to do so would be unconscionable both because it would involve unjustly impoverishing the plaintiff's secured creditor (the banker as chargee) in favour of an unsecured creditor and because to permit a company's debtors to take assignments of its debts and plead them in purported rebuttal of their indebtedness would be to permit some unsecured creditors inequitably to obtain a preference over others. To put the matter in terms of pre-Judicature Act pleadings, Robbie's case did not involve the refusal of the court to recognise a plea on equitable grounds, but did involve the upholding of a replication on equitable grounds (or the granting of a common injunction restraining a defendant at law from pursuing an unconscionable plea). The court was doing exactly what the Court of Chancery anciently did when it refused to recognise a valid plea of set-off if either the plaintiff's or the defendant's claim were held, not beneficially, but on trust; not simply because there was no beneficial mutuality, but because in the circumstances the absence of it rendered the set-off unconscionable. It follows that, were there no unconscionable features such as those alluded to, there would have been no equity to repel the legal set-off, even in the absence of mutuality.
Counsel for Silkchime accepted that NW Robbie & Co has been followed in Australia and that the reasoning of the majority presented an 'insuperable obstacle' to the set-off issue being resolved in favour of Silkchime.[xxx] Silkchime's counsel also accepted that Donovan LJ's reasoning relied on the fact that the debts due by the defendant to the plaintiff, against which it was sought to set off the assigned debt, were incurred after the receiver was appointed, and the debts due by Silkchime, which gave rise to the judgment debt due by it to WEC, were incurred prior to the appointment of the receivers. Silkchime's counsel accepted that this was a basis for distinguishing NW Robbie & Co Ltd from the present case.
I would add that a further ground on which the reasoning of Donovan LJ may be distinguished is that it rested primarily on his Lordship's conclusion that the charging clause in the debenture did not extend to cover new debts incurred after the appointment of the receiver and that, in his Lordship's view, this was why the plaintiff's bankers did not acquire an interest in the post-receivership debts.
In this case it is clear that there is no mutuality of beneficial interest. The judgment debt is owned beneficially by Perpetual and not WEC. Thus, Silkchime cannot set off the Greenleaf and Rompride debts against the judgment debt. It was not argued that the set-off was an equitable set-off in respect of which an absence of mutuality of beneficial interest may not always be fatal.
Silkchime's suspension submissions
I have decided that Silkchime is not entitled to a suspension of enforcement of the PSSO.
Section 15(1) of the Act provides that a person against whom a judgment is given may apply for an order suspending the enforcement of all or part of the judgment. Section 15(3) provides that the court may only make a suspension order if there are special circumstances that justify doing so. The principles that govern the exercise of the discretion under s 15 are not materially different from those which applied to an application for a stay of execution before the introduction of the Act.[xxxi] For these purposes those principles are, first, that the successful litigant will ordinarily be entitled to enforce the judgment. Secondly, it is for the applicant to move the court to a favourable exercise of its discretion. Thirdly, the court will not exercise its discretion unless special circumstances are shown which justify departure from the ordinary rule.[xxxii]
Silkchime has not applied for a suspension order but it submits one should be made for the following reasons:[xxxiii]
(i) WEC accepts that the amounts owed by WEC to Erley and Greenleaf on 9 August 2012 were $4,910,467.03 and $6,492,390 respectively.
(ii) Silkchime has made out a good arguable case as to interest which, if successful, would take the amount of the debts allegedly assigned to Silkchime over the amount of the judgment debt inclusive of pre and post judgment interest.
(iii)WEC ought not to be allowed to enforce the PSSO and cause real property to be sold until the issue concerning the retirement of the receivers has been heard and determined. Shortly stated the retirement issue turns on whether the money secured by Perpetual's charge had been repaid. There are three steps to this aspect of Silkshime's submission. The first step is that Silkchime and other related companies contend that the money secured by the charge had been repaid by 23 July 2007, 23 January 2008 or 7 May 2009 or such later date (but before 10 August 2012) as may be determined by the court and that the receivers should have retired. A finding to that effect would necessarily encompass a finding that the debt due to Perpetual secured by the charge had been redeemed by the date of the assignment to Silkchime of the Greenleaf and Rompride debts. The second step is that if such a finding is made it would follow that beneficial title to the debts upon which the judgment debt was founded had reverted to WEC by the time of the assignment. The third step is that in those circumstances the set-off would not be defeated by lack of beneficial mutuality. Thus, Silkchime argues that enforcement of the judgment should be suspended until the retirement issue is determined because otherwise the Warwick land may be sold to enforce a judgment that ultimately Silkchime might be able to defeat by its set-off. Silkchime contends that damages would not be an adequate remedy if the Warwick land was sold and it was ultimately found that the judgment debt was satisfied by the set‑off.
In outline, WEC's submissions in response are to the effect that Silkchime has not shown special circumstances justifying a suspension of the PSSO. It contends that the existence of an arguable right of set‑off is not a reason for staying the enforcement of the judgment against Silkchime, which WEC emphasises was obtained after a four‑week trial and was upheld on appeal.[xxxiv]
In my view WEC's entitlement to enforce its judgment is not outweighed by the circumstances relied upon by Silkchime. The distillation of those circumstances is that Silkchime has a cross‑claim, which, if it is successful in COR 223 of 2009, it may be able to set off against the judgment debt and thereby discharge it. A cross‑claim will not ordinarily constitute a special circumstance warranting a suspension order.[xxxv] It is apparent from the amended substituted statement of claim in COR 223 of 2009 that the issues in those proceedings are complex and detailed.[xxxvi] No evidence was adduced by Silkchime to demonstrate the strength of Silkchime's claim that the receivers should have retired before 10 August 2012. Given the apparent complexity of the issues, this was not surprising. Thus, it is not possible to make an assessment of the strength of Silkchime's cross‑claim. I am unable to conclude that these matters warrant denying WEC its entitlement to enforce the judgment.
Further, although Silkchime submits that 'by definition' if the Warwick land is sold under the PSSO and it is subsequently found that Silkchime was entitled to a set‑off that extinguished the judgment debt, damages would not be an adequate remedy, there was no elaboration of that submission. I acknowledge that it might be difficult to determine the quantum of damages for the wrongful sale of development land but I do not accept that damages would not be an adequate remedy. This is not a situation that may be equated to an application for a stay pending an appeal where the stay is necessary to preserve the subject matter of the litigation.
Earlmist's claims
Factual overview
Earlmist owned land in Warnbro (the Warnbro land).
In August 1999 Silkchime accepted an offer of a finance facility from St George Bank made by letter dated 18 August 1999 (the Silkchime Finance Facility). The Silkchime Finance Facility was for $2.651 million and its purpose was to assist Silkchime to refinance existing debt with Challenge Bank and to assist with working capital requirements. The Silkchime Finance Facility was varied from time to time but details of the variations are not relevant.
The debt to the Challenge Bank was secured by a mortgage granted on 20 July 1995 by Silkchime to the Challenge Bank over the Warwick land (the First Silkchime Mortgage).
On around 3 September 1999 Silkchime executed a registered mortgage over the Warwick land in favour of St George Bank (the Second Silkchime Mortgage) as security for the Silkchime Finance Facility.[xxxvii]
On 6 September 1999 the First Silkchime Mortgage was transferred to St George Bank.
On 21 January 2000 Earlmist granted a mortgage in favour of St George Bank over the Warnbro land.
On 3 December 2001 Mr Carey, Silkchime, Earlmist, Rompride, and five other companies within the Westpoint Group (including Westpoint Corporation Pty Ltd and Westpoint Constructions Pty Ltd) as covenantors, entered into a Cross Deed of Covenant with St George Bank in which they covenanted with St George Bank to pay on demand the whole of the 'Moneys Secured' (the Cross Deed of Covenant).[xxxviii] 'Moneys Secured' was defined in cl 1.1 of the Cross Deed of Covenant as being all debts and monetary liabilities of any of the covenantors pursuant to various securities defined as 'Collateral Securities' listed in a schedule to the deed. The 'Collateral Securities' included the Silkchime Finance Facility as varied from time to time and the Second Silkchime Mortgage. The relevant consequence of the Cross Deed of Covenant is that Earlmist became liable to pay St George Bank any amounts owed to it by Silkchime.
On 29 March 2006 St George Bank appointed Messrs Mark Korda, David Winterbottom and Oren Zohar as receivers and managers of, amongst other property of Earlmist, the Warnbro land.
On 29 September 2006 St George Bank Ltd sold the Warnbro land in its capacity as a mortgagee in possession.
At settlement of the Warnbro land, St George Bank Ltd received $4,963,463.59 (Warnbro Sale Proceeds).
It is common ground that the Warnbro Sale Proceeds were used to pay two amounts:
(i) an amount for which Silkchime was primarily liable, being $2,512,199.36; and,
(ii) an amount of $432,291.89 for which Silkchime was liable as a co-surety with Earlmist (Silkchime's share of which was $108,073),
making the total amount paid by Earlmist on Silkchime's behalf $2,620,272.[xxxix]
There is a dispute between the parties about whether the Warnbro Sale Proceeds were also used to discharge liabilities of Westpoint Corporation and Westpoint Constructions under various guarantee facilities with the St George Bank. If the Warnbro Sale Proceeds were used for this purpose then Earlmist's entitlement to a contribution from Silkchime is increased by $127,129.44.
On 12 August 2011 Earlmist registered a caveat over the Warwick land with Landgate. By the caveat Earlmist asserted an equitable interest in the Warwick land as an equitable mortgagee pursuant to s 5 of the Mercantile Law Amendment Act.
On 17 July 2012 Silkchime, Earlmist, Mr Carey and Messrs P K Ho and P P Ho entered into a deed entitled Deed of Assignment, Release and Indemnity with Westpac Banking Corporation (as the successor to St George Bank with effect from 1 March 2010). Earlmist placed considerable reliance on this document and I refer to its terms in more detail later.
On 17 July 2012 Westpac transferred the First Silkchime Mortgage and the Second Silkchime Mortgage (collectively 'the Silkchime Mortgages') to Earlmist. The transfers were effected by formal instruments of transfer pursuant to the Transfer of Land Act 1893 (WA). The transfers were registered on 27 August 2012. When transferred, no amounts were owing under the mortgages to Westpac because Westpac had released Silkchime in respect of all aspects of the facilities by way of the Deed of Assignment, Release and Indemnity.
Earlmist's indemnity and contribution claims
It is common ground that upon payment of $2,512,199.36 out of the Warnbro Sale Proceeds in satisfaction of Silkchime's liabilities to St George Bank, Earlmist acquired a right to be indemnified by Silkchime in respect of that payment (the Indemnity Claim). There is an issue between the parties as to whether the right to be indemnified arises as a matter of contract law or whether it is imposed by the law of restitution.
It is also common ground that upon payment of $432,291.89 out of the Warnbro Sale Proceeds in satisfaction of amounts for which Silkchime was liable as surety, Earlmist acquired a right to claim a contribution from Silkchime in the latter's capacity as co-surety (the Contribution Claim). It is common ground that the foundation for this claim is the equitable doctrine of contribution.
WEC submits Earlmist has no claims that can be enforced by exercising rights of subrogation because the Indemnity Claim and the Contribution Claim are statute barred. Before outlining the parties' submissions on the limitation issue it is convenient to make a brief reference to the principles applicable to the remedy of subrogation.
Subrogation, assignment and transfer – applicable principles
Subrogation is an equitable remedy. It is founded upon an equity that arises from the conduct of the parties. It operates according to well settled principles and in defined circumstances which make it unconscionable for the defendant to deny the proprietary interest claimed by the plaintiff,[xl] though a party may be subrogated to personal rights in addition to proprietary rights.[xli]
A surety who has paid the debt owed by the principal debtor to the secured creditor is thereby entitled to be subrogated to the benefit of the securities that were held by the creditor immediately before the surety's discharge of the debt. [xlii]
In this case upon the payment of all monies due to St George Bank's successor, Westpac, Earlmist was entitled in equity to be subrogated to the Silkchime Mortgages. Subrogation entitled Earlmist 'to stand in the place of [Westpac], and to have the benefit of all the remedies and advantages which [Westpac] had against [Silkchime]'.[xliii]
It is common ground that Earlmist was entitled to call for the assignment of the securities pursuant to s 5 of the Mercantile Law Amendment Act. That provision is as follows:
5.A surety who discharges the liability to be entitled to assignment of all securities held by the creditor
Every person who, being surety for the debt of duty of another, or being liable with another for any debt or duty, shall pay such debt or perform such duty, shall be entitled to have assigned to him, or to a trustee for him, every judgment , specialty, or other security which shall be held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security shall or shall not be deemed at law to have been satisfied by the payment of the debt or performance of the duty, and such person shall be entitled to stand in the place of the creditor, and to use all the remedies and, if need be, and upon a proper indemnity, to use the name of the creditor, in any action or other proceeding, at law or in equity, in order to obtain from the principal debtor, or any co-surety, co-contractor, or co-debtor, as the case may be, indemnification for the advances made and loss sustained by the person who shall have so paid such debt or performed such duty, and such payment or performance so made by such surety shall not be pleadable in bar of any such action or other proceeding by him:
Provided always, that no co-surety, co-contractor, or co-debtor shall be entitled to recover from any other co-surety, co‑contractor, or co-debtor, by the means aforesaid, more than the just proportion to which, as between those parties themselves, such last-mentioned person shall be justly liable.
As noted earlier, on 17 July 2012 the Silkchime Mortgages were transferred to Earlmist pursuant to s 82 of the Transfer of Land Act 1893 (WA). A transfer of a mortgage confers on a transferee the right to sue upon the mortgage to recover a debt due thereunder and any interest on the debt.[xliv] As is apparent from the terms of the Deed of Assignment, Release and Indemnity to which I refer later in these reasons, the Silkchime Mortgages were transferred in recognition of Earlmist's rights of subrogation. No money was due to Westpac at the time of the transfers and, at the risk of stating the obvious, the purpose of the transfer was not to confer on Earlmist any right to recover money that might otherwise have been due to Westpac under the mortgages.
The parties' submissions on the limitation issue
WEC's submissions
The central proposition developed by WEC was that for each claim the applicable limitation period was six years and the period expired no later than September 2012.
In its statement of facts, matters and contentions[xlv] and in its opening written submissions[xlvi] WEC characterised Earlmist's right of indemnity as being contractual in nature, but in oral submissions and in written closing submissions WEC's senior counsel developed the proposition that the right of indemnity was restitutionary rather than contractual in nature.[xlvii]
WEC's argument that the source of the right of indemnity was contractual in nature was based on the proposition that the effect at law of the parties entering into the Cross Deed of Covenant was that a separate agreement was immediately formed between Earlmist and Silkchime by which Silkchime was obliged to indemnify Earlmist for any payments made by Earlmist to St George Bank in reduction of Silkchime's debt. This proposition was derived from what was described by Powell J in McColl's Wholesale Pty Ltd v State Bank of New South Wales as the orthodox view 'that the surety's right to be indemnified is based on an implied contract on the part of the principal debtor'.[xlviii]
In oral submissions WEC's senior counsel developed the argument that references to an 'implied contract' in McColl's Wholesale v State Bank of New South Wales, and in the cases cited by Powell J as establishing the 'orthodox view', reflect the old language for a restitutionary obligation, an obligation the law imposes rather than a true implied contract. I refer to the authorities in more detail later.
It was common ground that for limitation purposes damage is suffered by the surety when it makes the payment in respect of which the right of indemnity arises and that is when the limitation period commences.[xlix] WEC submits that the limitation period is 6 years.[l] Earlmist made the payments in discharge of Silkchime's debts at the latest in September 2006 and thus, on WEC's case, the limitation period in respect of Earlmist's Indemnity Claim expired in September 2012.
WEC contends that if its restitutionary analysis is not accepted then the separate agreement formed when the Cross Deed of Covenant was executed was a simple contract for which the limitation period is six years.[li] Once again it is contended that the limitation period begins to run from the date of the payment and it therefore expired in 2012.
In relation to Earlmist's Contribution Claim WEC argues that as Earlmist relies on the equitable doctrine of contribution,[lii] Earlmist's claim is thus based on an equitable cause of action and the limitation period is six years from the date the payment was made in discharge of Silkchime's liability as a co-surety, again at the latest, September 2006.[liii]
Earlmist's submissions
Earlmist contends that WEC's argument that its claims are statute barred is fallacious for one or more of the following reasons:
(i) Whether or not an action at common law or equity may be statute barred, a claim to recover the secured debt (excluding interest) is an action governed by s 20 of the Limitation Act2005 (WA) which provides for a period of 12 years from when the cause of action first accrued.
(ii) Any action to recover the secured interest is an action governed by s 21 of the Limitation Act which does not bar any action for interest in respect of a period being six years from the date the action is commenced.
(iii)A statute barred cause of action does not operate to extinguish the existence of, for example, the underlying debt. Rather, it simply provides the debtor with a defence to any action commenced in respect of a statute-barred cause of action.
(iv)The implied agreement by Silkchime to repay Earlmist any of Earlmist's money (as surety) used to repay any part of Silkchime's debt should be by way of the implication of such a term in the Cross Deed of Covenant (as opposed to a separate implied/inferred agreement as contended for by WEC). The relevant limitation period is thus 12 years.[liv] The common law claim is not statute barred.
(v) By reason of the operation of Div 5 of the Limitation Act, the period preceding the execution by Silkchime and Earlmist of the Deed of Assignment, Release and Indemnity is to be excluded in the reckoning of the limitation period for any claim by Earlmist against Silkchime arising from the fact that part of the proceeds of sale of the Warnbro land were applied by St George Bank to pay the debt then owing by Silkchime to St George Bank under the relevant facilities between Silkchime and St George Bank.
Limitation periods and subrogated claims
There is very limited authority on how the statutory limitation periods apply to claims brought by way of subrogation. Writing of the position in England in Subrogation Law and Practice, Professor Mitchell and Dr Watterson identify two approaches:[lv]
(i) a 'parasitic approach' in which the enforceability of the claimant's subrogation rights is governed by the limitation rules applicable to the creditor's right of action, which the claimant discharged; and
(ii) an 'autonomous' approach, in which the limitation rules applicable to the subrogation claimant's subrogation rights are those applicable to the claimant's direct personal rights.
Two decisions are cited by Professor Mitchell and Dr Watterson as intuitively accepting the parasitic approach. The first of these is Attorney-General of Canada v Nalleweg.[lvi] The facts are as follows: the Canadian government had guaranteed the repayment of student loans. Following default by the student in November 1988, the government paid off the outstanding debt in April 1989 pursuant to its obligations as guarantor. Subsequently, in April 1995, it brought an action against the student in Alberta, to recover the moneys paid out on his behalf. The court held that under the applicable provincial law, the government's only entitlement was to be subrogated to the creditor‑bank's rights against the student; it had no independent cause of action against the student for reimbursement. On that basis, the government's action failed. The applicable six-year limitation period ran from the time when the creditor-bank's cause of action arose, which was the time of default by the student on the loan, and not from the later date when the government, as guarantor, paid the creditor-bank. Likewise, the government's subrogated claim was barred at the time that the creditor-bank's claim would be extinguished.
Clark J (with whom Bracco and Conrad JJ agreed) explained:[lvii]
If the rights of the Government to recover the debt from [the student] are limited to the subrogated rights of the Bank, then the limitation period starts to run at the time of the default on the loan. The Government's subrogated claim is extinguished at the same time that the Bank's claim is extinguished. As Goff and Jones state: '[i]f a claimant is subrogated to another's right of action against a third party he can be in no better position than the other; so that if that other's right of action is barred, the claimant will also be barred'. (citations omitted)
The second decision cited as an example of the parasitic approach was Lang v Le Boursicot.[lviii]
In Lang v Le Boursicot the plaintiffs were sureties, one of whom (Ravenscar Pty Ltd) had paid all the debts owing by the principal debtor to a lessor under an equipment and furniture leases. The defendants were also sureties but they had made no payments in respect of any of the debts. Ravenscar advanced its claims against the defendants on two bases: first, 'on the principle of proportionality of burden as between co-guarantors, founding a right of contribution by the guarantor who has paid more than its proportionate share of the guaranteed liability directly against the co-guarantor who has paid less than its proportionate share'; and secondly, on the principle of subrogation. A limitation issue was raised. McLelland J drew a distinction between the limitation period applicable to the 'direct contribution' claim and the limitation period applicable to the 'claim for contribution by subrogation' and stated:
A claim for contribution, although based on equitable principles, is in my opinion a cause of action to which the limitation period of six years prescribed by s14(1)(a) of the Limitation Act 1969 applies by analogy. Where such a claim arises between coguarantors under the same instrument such a claim may properly be brought as a claim at law for a simple contract debt in quasi contract. The decision in Copis v Middleton which relates to the analogous claim by a guarantor for indemnity from the principal debtor, demonstrates that it is immaterial for limitation purposes that the relevant obligations to the principal creditor arose under deeds. These cases sufficiently illustrate the nature of a claim for contribution between guarantors for limitation purposes, even though in the present case Ravenscar's guarantee in relation to the lease of 2 September 1983, and the other guarantees, arose under separate instruments. It follows that the claim for direct contribution by Ravenscar in respect of the lease of 2 September 1983 is statute barred. It is otherwise however in relation to Ravenscar's claim by way of subrogation. Since that is a claim in which Ravenscar seeks to enforce the principal creditor's remedies against Mr and Mrs Le Boursicot, and those remedies arose under a deed, that claim is, or is analogous to, a 'cause of action founded on a deed' within the meaning of ss 14(1)(a) and 16 of the Limitation Act 1969, to which a limitation period of 12 years applies. (emphasis added) (citations omitted)
I interpolate that both WEC and Earlmist argued that the decision in Lang v Le Boursicot supported their positions. WEC's senior counsel relied on McLelland J's observations about the limitation period applicable to the direct contribution claim. Counsel for Earlmist relied upon his Honour's observations about the limitation period applicable to the contribution by subrogation claim.
Professor Mitchell and Dr Watterson identify a number of problems with the parasitic approach to limitation periods and express the view that the courts should give serious consideration to the adoption of the autonomous approach.[lix]
In explaining the conclusions I have reached on the limitation issue I will adopt Professor Mitchell and Dr Watterson's terminology of 'parasitic' and 'autonomous' to describe the alternative approaches to the limitation issue. Although the terms of 'parasitic' and 'autonomous' as defined by Professor Mitchell and Dr Watterson were not used by the parties they encapsulate the essence of the opposing arguments.
Summary of conclusions on limitation issue
First, Silkchime acknowledged Earlmist's right to an indemnity and its right to a contribution in the Deed of Assignment, Release and Indemnity. This constituted a confirmation for the purposes of s 46 of the Limitation Act. As a consequence, the limitation periods started to run again from 17 July 2012 and neither claim is statute barred.
Secondly, (and even though it is strictly unnecessary for me to reach a conclusion on this issue) in my view, the limitation period applicable to Earlmist's subrogated claims is that applicable to the Silkchime Mortgages, that is 12 years.[lx] In reaching this conclusion I have preferred the 'parasitic' approach to the application of limitation periods to subrogated claims. I have done so because the parasitic approach is supported by authority and it aligns most closely with the principles that guide the application of the remedy of subrogation.
Thirdly, and if contrary to my second conclusion, the relevant limitation period is that applicable to Earlmist's Indemnity Claim, then that limitation period is 12 years. This is because the Indemnity Claim arises from a contract constituted by the Cross Deed of Covenant. It is a claim founded in contract and not in the law of restitution. As the relevant contract is a deed, the applicable limitation period is 12 years. In other words, even if the autonomous approach to limitation periods was applied, the applicable limitation period had not expired.
Fourthly, and again if contrary to my second conclusion, the relevant limitation period applicable to Earlmist's Contribution Claim is six years, (being the period governing equitable actions)[lxi] then although the limitation period expired in 2012, this does not mean that the rights of subrogation are of no value to Earlmist. Earlmist would be entitled to enforce its Contribution Claim by relying on remedies, other than the commencement of an action, provided for in the Silkchime Mortgages.
I explain my reasons for reaching those four conclusions in more detail in the paragraphs that follow.
Silkchime confirmed Earlmist's rights
Division 5 of pt 3 of the Limitation Act provides for the extension of limitation periods by 'confirmation'. The provisions relevantly operate as follows. A person confirms a cause of action if the person acknowledges to a person having a cause of action (person A), person A's right or title, even though the acknowledgment does not disclose a promise to pay.[lxii] Section 47 of the Limitation Act provides that the limitation period is extended if a person confirms the cause of action:
If a cause of action lies against a person (either solely or with other persons) and the person confirms the cause of action -
(a)after the limitation period provided for under this Act for the cause of action begins to run; and
(b)before that limitation period expires,
the time during which the limitation period runs before the confirmation is made does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation.
A person has the benefit of a confirmation if the confirmation is made to that person or to a person through whom that person claims.[lxiii] A person is bound by a confirmation if that person is the maker of it.[lxiv]
A concise summary of the law as to what constitutes an acknowledgement is provided by Professor Dal Pont in Law of Limitation:[lxv]
What amounts to an acknowledgment is ultimately a question of construction of the written words in each case; the words may be express, or an intention to acknowledge may be gleaned by way of inference. Ultimately, it is a question informed by the context in which it arises. So much so that the decided cases are seemingly of little value as precedents, Lord Sumner remarking that 'everybody agrees that comparison with the words of the debtors is of little use'. Illustrations in the case law can accordingly convey no more than a flavour of what amounts to an acknowledgment in this context. The simplest scenario is an unqualified IOU, which represents an evident admission of an existing debt and, under the earlier law, was sufficient to support an unconditional promise to pay. (footnotes omitted)
The Deed of Assignment, Release and Indemnity:
(i) Recited the sale of the Warnbro Land and the application of part of the Warnbro Proceeds of Sale in reduction of debts due by Silkchime and Westpoint Corporation Pty Ltd to St George Bank or Westpac under various finance facilities.
(ii)Recited that Perpetual asserted that St George Bank was not entitled to set off amounts owed to it by Westpoint Corporation Pty Ltd and Westpoint Constructions Pty Ltd against $656,453 held on deposit with St George Bank on the basis that the deposit was subject to a fixed and floating charge in favour of Perpetual (defined as the Perpetual Set-Off Claim) and recorded that $656,000 had been paid by St George to Perpetual in settlement of the Perpetual Set-Off Claim (defined as the Perpetual Set-Off Amount).
(iii)Recited that $340,951.26, defined as the Demand Amount, remained owing to Westpac by Silkchime and one other Westpoint Group company.
(iv)Recited that Mr Carey had threatened legal proceedings.
(v)Recited that Westpac had agreed to forgive the debt constituted by the Demand Amount.
(vi) Recited, in recital R, that:
In consideration of the application of some of the Warnbro Land in reduction of that part of the Debt constituted by Silkchime's and Corporation's Facilities, and in accordance with Earlmist's rights by way of subrogation, Earlmist has requested and Westpac has agreed to, the transfer and assignment to Earlmist of Westpac's interest in the Assigned Securities.[lxvi]
(vii) Recorded that Earlmist, Silkchime, Mr Carey and Messrs Ping Kuen Ho and Peng Phui Ho acknowledged and agreed:
2.1.1At the date of settlement of the sale of the Warnbro Land, the Debt owing by the Borrowers under the Facilities and the Securities was in the amount of $3,721,660.30 and St George was entitled, by virtue of the Facilities and the Securities, to effect the sale of the Warnbro Land and to deduct and to apply the full proceeds of sale in reduction of the Debt.
2.1.2No other Borrower or Guarantor has contributed to the reduction of any part of the Debt relating to Silkchime's or Corporation's Facilities.
…
2.1.4At all times since proceeds from the sale of the Warnbro Land were applied in reduction of that part of the Debt constituted by Silkchime's and Corporation's Facilities:
(a)Earlmist was entitled to request by way of subrogation the transfer and assignment to Earlmist of Westpac's interest in the Assigned Securities; and
(b)Westpac was permitted to agree to any request by Earlmist to the transfer and assignment to Earlmist of Westpac's interest in the Assigned Securities.
The Deed of Assignment, Release and Indemnity does not refer to Earlmist's rights of indemnity and rights of subrogation expressly. In my view, however, it may be inferred from the provisions to which I have referred that the parties intended to acknowledge Earlmist's rights of indemnity and its rights of contribution and those provisions do so impliedly.
I reach this conclusion on the basis of the language used in recital R and cl 2.1.4 and matters of context. It is convenient to deal with the context first. The recitals record the sale of the Warnbro land (owned by Earlmist) and the application of the proceeds of sale in reduction of that part of the 'Debt' (as defined) relating to Silkchime's and Westpoint Corporation's respective facilities. Clause 2.1.2 contains an agreement and acknowledgment that no one other than Earlmist has contributed to the reduction in the Debt relating to Silkchime's or Westpoint Corporation's facilities. The recitals record that on the execution of the deed the parties will have no residual liability to Westpac. These provisions are acknowledgments of the facts upon which Earlmist's rights of indemnity and contribution and its rights of subrogation are based. This is the context in which the reference to 'Earlmist's rights by way of subrogation' in recital R and Earlmist's entitlement 'to request by way of subrogation' are to be construed. Read in context it is clear that these phrases subsume Earlmist's rights of indemnity and contribution. They are the only rights that it is open to Earlmist to enforce by way of subrogation. In the context of this deed the express acknowledgment of the right of subrogation necessarily implies an acknowledgment of the underlying rights of indemnity and contribution.
Accordingly for these reasons I conclude that the provisions of the Deed of Assignment, Release and Indemnity constitute a confirmation of Earlmist's causes of action in respect of its rights of indemnity and contribution. On that basis the time during which the limitation period runs before 17 July 2012 does not count in the reckoning of the limitation period for the purposes of those causes of action.
Limitation periods applicable to the Silkchime Mortgages govern the subrogated claims
The authority of Lang v Le Boursicot supports the proposition that when a party seeking to enforce an equitable right of contribution is subrogated to a security in the form of a deed, then for limitation purposes the claim is treated as if it was founded on the deed. This decision provides support for the parasitic approach to limitation issues that arise in the context of subrogated claims. The approach is also supported by Attorney-General of Canada v Nalleweg, though it might be said that the support derived from that case is limited - the absence of an independent claim on the part of the government meant there was not a choice between different limitation periods.
As I have decided the limitation issue on the basis that Silkchime acknowledged Earlmist's rights, this case does not provide the occasion to consider the problems inherent in the parasitic approach identified by Professor Mitchell and Dr Watterson. In my view, however, to adopt the 'autonomous' approach and to hold that the applicable limitation period is the one that applies to the subrogated party's independent cause of action would deny the subrogated party the full benefits conferred by subrogation. This outcome would not align with the principles that underpin the remedy of subrogation, namely that subject to 'the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts',[lxvii] the subrogated party is entitled to all the remedies and advantages that the principal creditor had against the principal debtor. These advantages include, when the facts of the case permit, the advantage of the limitation period under the subrogated security. This is the corollary of the proposition that the subrogated party can be in no better position than the creditor to whose rights it is subrogated.
Before leaving this aspect of the matter I need to deal with a question raised by WEC. This concerned the meaning of the term 'principal money' in s 20 of the Limitation Act. The section is concerned with '[a]n action to recover principal money secured by a mortgage of real and personal property'.
WEC made two points: first it submitted that the monies claimed by way of Earlmist's Indemnity and Contribution Claims are not the 'principal money' secured by the Silkchime Mortgages. The principal money secured by the Silkchime Mortgages was constituted by the advances made by St George Bank.
Secondly, WEC referred to the definition of the term 'principal money' in s 3 of the Limitation Act which is as follows:
[I]n relation to a mortgage, means all money secured by the mortgage, including arrears of interest lawfully treated as principal, but does not include other interest.
WEC submitted that if the term 'principal money' means money secured by a mortgage due to the operation of equity or the Mercantile Law Amendment Act the construction must rest on the foundation that the 'charge has been kept alive'.[lxviii] It would mean that Earlmist is effectively bound by the limitation period which applied to St George Bank. WEC submits that to take this approach would involve construing the Limitation Act as meaning that a limitation period which applied between different parties and in relation to an amount due upon a different basis is to be applied to Earlmist.
In my view the words 'all money secured by the mortgage' as they appear in the definition of 'principal money' should be construed as including money secured by way of a subrogated claim. There are no words of limitation in the definition that justify a more restrictive construction.
Further, it is implicit in the observations I have made earlier in this section of the reasons that adopting the parasitic approach to limitation periods in the context of subrogation involves applying a limitation period to subrogated claims that applied to different parties in relation to a different claim. This does not stand in the way of the construction of the term 'principal money' favoured by me.
The limitation period applicable to Earlmist's Indemnity Claim
In this section of the reasons I consider the limitation period applicable to Earlmist's Indemnity Claim considered as an independent claim. My approach to this issue is as follows:
(i) First, I review the authorities and explain why I consider that they support the proposition that where a debtor requests a surety to provide a guarantee the source of the right of indemnity is contractual rather than restitutionary.
(ii)Second, I make a factual finding that Silkchime did request Earlmist to provide a guarantee to St George Bank with the result that a contract was formed between Silkchime and Earlmist.
(iii) Third, I explain why I consider that a term should be implied into the contract so formed obliging Silkchime to indemnify Earlmist in respect of sums paid by Earlmist in discharge of Silkchime's debts.
The authorities
In Re a Debtor the Court of Appeal (Slesser, Romer and Greene LJJ) had to consider the origin and essential nature of the principal debtor's obligation to indemnify a surety arising from the payment of the debt to the creditor.[lxix] In that case, the issue was whether the obligation to reimburse arose in 1933, before the Law Reform (Married Women and Tortfeasors) Act 1935 came into operation or in 1936. The debtor was a married woman. Before the Law Reform Act came into operation a married woman could only be made bankrupt if she was carrying on a trade or business. After the Law Reform Act came into operation a married woman could be made bankrupt but not on the basis of a judgment entered against her in respect of a contract entered into or a debt or obligation incurred before the passing of the Law Reform Act.[lxx] The guarantee was given in 1933 at the request of the debtor and the surety was called upon to pay the guaranteed debt in 1936. The question to be determined by the Court of Appeal was whether the judgment entered against the debtor, which was the subject of a bankruptcy notice, was in respect of a contract, debt or obligation incurred before the passing of the Law Reform Act.
Slesser LJ concluded that the implied undertaking of the principal debtor to repay the money paid on her behalf arose at the time of the guarantee and therefore 'the contract or obligation' existed before the passing of the Law Reform Act. His Lordship did not deal with the question of whether the obligation arose out of a genuine but implied contract between the parties or whether the obligation was imposed by law.
Greene LJ (with whose reasons Romer LJ agreed) analysed the source of the obligation in more detail. His Lordship referred to the judgment of Lord Campbell CJ in Batard v Hawes[lxxi] in which it was held that one of 12 co-guarantors was entitled to a contribution of one twelfth of the debt from each of the co-guarantors or their estates (two of the co‑guarantors having died by the time the plaintiff paid the principal debt) on the basis that the liability of the co-guarantors was to be determined at the time they entered the engagement to be sureties and not at the time the payment of the principal debt was made. His Lordship observed that although Batard v Hawes was a case at law, equitable principles governed the rights of contribution between co‑sureties and then stated:[lxxii]
But the case is in my opinion still an authority for the proposition that where an obligation is entered into on request, the ultimate payment made in pursuance of that obligation is to be referred to the original request and the rights of the parties determined accordingly. The position of co-sureties inter se and the position of a single surety giving a guarantee at the request of the principal debtor are treated in the case as being the same from the point of view of the contractual obligations to be implied from the entry into the obligation.
Greene LJ then referred to the possibility that the surety's claim could have been advanced as a (restitutionary) 'money paid' claim by pleading an action in indebitatus assumpsit. Having raised a restitutionary foundation for the claim as a possibility, his Lordship went on to emphasise the contractual foundation for the claim stating:[lxxiii]
Now where, as in the present case, the implied request for payment is referrable to a request to give a guarantee, the contractual basis of the action is apparent, and the difference between the old form of action of indebitatus assumpsit and an action on the special contract to indemnify disappears for all practical purposes. … A question may arise as to the application of the sub-section in a case where a guarantee is given without any antecedent request on the part of the debtor. That case is merely one example of a number of cases where the law raises an obligation to indemnify irrespective of any actual antecedent contractual relationship between the parties. A quite recent example of a case where the law raises such an obligation irrespective of antecedent contract is to be found in a case decided in this Court of Brook's Wharf and Bull Wharf Ltd. v. Goodman Brothers. Where a guarantee of a married woman's debt is given before the Act without any request from her, and the payment which gives rise to the obligation to indemnify is made after the Act, it might be argued that the obligation was not incurred before the passing of the Act. But that is not this case, and I express no opinion upon it. In this case the guarantee having been given at the request of the debtor, I am clear that the judgment was one in respect of a contract entered into and an obligation incurred before the passing of the Act, and I agree that the appeal should be dismissed with costs.
In Anson v Anson[lxxiv] Pearson J considered the reasoning of the court of Appeal in Re a Debtor and after noting that the court had held that the right of reimbursement was of a contractual character contract made these observations:[lxxv]
It appears therefore that the right can be placed on that basis of presumed contract or implied contract or, I am tempted to say, actual contract, because in the normal case what occurs, expressly or impliedly, is that A, who wishes to overdraw, or has an existing overdraft, says to B: 'Will you please give a bank guarantee of my overdraft?', and B says: 'Yes, I will,' and proceeds to do so. That is an agreement between the two of them, the terms of which can be worked out on ordinary contractual lines, applying the principles with regard to implied terms. The intention as between the two of them normally is that the principal debtor shall remain the principal debtor; it is his debt and his obligation and he is expected to pay it. If the surety is called upon to pay and does pay, that for the time being defeats the intention of the parties that the debt shall be and remain that of the principal debtor. In order to put that position right, and to restore it to the position intended between the two of them by their original contractual intention, it is necessary that the right of reimbursement should be read into the contract or inferred to be one of the terms of the contract. The essence of the matter is that the principal debt is primarily the obligation of the principal debtor, while the liability of the surety is only a secondary liability, and it is the intention as between the two parties to the transaction as well as against the third party that that position should be preserved. That is the explanation on contractual lines of this implied term which confers the right of reimbursement. (emphasis supplied)
Pearson J then referred to the passage from the judgment of Greene LJ in which his Lordship referred to Brook's Wharf and Bull Wharf Ltd v Goodman Brothers.[lxxvi]In Brook's Wharf the right of reimbursement of bonded warehousemen, who had paid duty on behalf of importers without any prior request from the importers, was held not to rest on any ground of implied contract or of constructive or notional contract but on an obligation imposed 'by the court simply under the circumstances of the case and on what the court decides is just and reasonable, having regard to the relationship of the parties'. Pearson J described this basis of recovery in the following terms:[lxxvii]
That is a possible alternative basis of the right of reimbursement, and I think [it] is of interest as tending to confirm the explanation which I have sought to give of the way the relations of the parties is worked out on a contractual basis.
In McColl's Wholesale Pty Ltd v State Bank of New South Wales Powell J, referring to a surety's rights to be indemnified by the principal debtor, said: [lxxviii]
[T]he orthodox view is that the surety's right to be indemnified is based upon an implied contract on the part of the principal debtor (see for example, Re A Debtor; Anson v Anson) which implied contract will not be denied even though, had the surety refused to pay the creditor, the latter would have been unable to enforce the guarantee for some reason, as, for example, for lack of writing. (citations omitted)
The use of the term 'implied contract' in Re a Debtor, Anson v Anson and McColl's Wholesale Pty Ltd v State Bank of New South Wales is potentially ambiguous because, as explained by Edelman J in Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3],[lxxix] it may refer to a genuine contract which arises by implication or inference rather than the express declarations of the parties, or it may be a reference to the fiction of an implied contract that formed the basis of restitutionary claims prior to the High Court's decision in Pavey & Matthews Pty Ltd v Paul.[lxxx] That said, I consider it clear from Greene LJ's judgment in Re a Debtor that he considered the foundation of the right of reimbursement in that case to be a genuine contract rather than a case in which the law imposed the obligation in the absence of a contract. In Anson v Anson Pearson J followed Greene LJ's reasoning and expressly stated that in the 'normal case' (where a guarantee is given at the express or implied request of the debtor) the position of the parties was to be 'worked out' on 'ordinary contractual lines, applying the principles with regard to implied terms'.[lxxxi]
In Israel v Foreshore Properties Pty Ltd Aickin J (with whose reasons Gibbs, Stephen, Murphy and Wilson JJ agreed) said:[lxxxii]
Whether a right to indemnity in circumstances in which one party makes a payment or incurs an obligation at the request of another party without consideration depends upon the common law, general equitable principles or upon an implied contract, or an implied term in a contract, will depend upon all the circumstances. It is not necessary in this case to decide which is the appropriate though it appears generally to be regarded as based on an implied term. (emphasis supplied)
Ultimately, however, Aickin J determined liability in Israel v Foreshore Properties Pty Ltd by reference to restitutionary principles. After referring to the fact that the plaintiff had undertaken the obligation of security at the request of the debtors Aickin J said:[lxxxiii]
A person who acts on such a request to pay, or who accepts the role of surety in that manner and who pays the debt, is entitled to an indemnity from those who made the request to pay or to act as surety. This is trite law, as appears from Rowlatt on Principal and Surety and the cases there cited. As long ago as 1799 Lord Kenyon CJ said in Exall v Partridge: 'I admit that where one person is surety for another, and compellable to pay the whole debt, and he is called upon to pay, it is money paid to the use of the principal debtor, and may be recovered in an action against him for money paid, even though the surety did not pay the debt by the desire of the principal … .' The same general principle applies to a case of money paid by one party at the request and for the benefit of another. (citations omitted)
Senior counsel for WEC relied on this passage to support WEC's argument that restitutionary principles and not contractual principles form the foundation of a surety's right of reimbursement. The passage must, however, be considered in the light of Aickin J's earlier observations that the right of reimbursement appears generally to be based on an implied term and that it was not necessary to decide 'the appropriate basis' of the right of reimbursement. When the passage is considered in that light it is clear that his Honour was not making a statement of principle of universal application that the foundation for the surety's right of reimbursement was restitutionary rather than contractual in nature.
Earlmist entered the Cross Deed of Covenant at Silkchime's request
There were nine parties who collectively constituted the 'Covenantor' under the Cross Deed of Covenant. Mr Carey in his personal capacity was one of the covenantors. Each of the other covenantors was a company of which Mr Carey and Mr Graham Rundle were directors. Mr Carey and Mr Rundle witnessed the affixation of the corporate seals of each of the companies to the Cross Deed of Covenant. In those circumstances an express request was unlikely and there was no evidence of an express request. I infer, however, that each covenantor entered into the Cross Deed of Covenant at the implied request of each of the other covenantors as part of the collective financing of the Westpoint Group.
Implication of a term conferring a right of indemnity
The Cross Deed of Covenant did not expressly confer on each covenantor a right of indemnity from another covenantor if the first covenantor paid the debts of the second covenantor but, having regard to the authorities, in my judgment, a term conferring a right of indemnity is to be implied into the Cross Deed of Covenant as a matter of law.[lxxxiv] If not, then I consider that a term to that effect would satisfy the BP Refinery criteria for the implication of a term on an ad hoc basis.[lxxxv] On this basis Earlmist's right to an indemnity from Silkchime for the amount paid by Earlmist in discharge of Silkchime's debts to the St George Bank is contractual in nature and is founded on a deed. The limitation period is 12 years.[lxxxvi]
The limitation period applicable to Earlmist's Contribution Claim
If I am wrong in the first and second conclusions I have reached on the limitation issue ([92] and [93] above) then the limitation period in relation to Earlmist's Contribution Claim is six years and that period has expired. This does not mean, however, that Earlmist is without remedy. Save as expressly provided the statutory limitation periods contained in the Limitation Act bar the remedy, that is the remedy of commencing an action, not the right.[lxxxvii] Earlmist was not confined to enforcing its rights against Silkchime by commencing an action.
The remedies and advantages conferred by subrogation include the remedies of taking possession, selling the Warwick land and appointing a receiver.[lxxxviii] These remedies provided for in the Silkchime Mortgages are available to Earlmist to enable it to recoup its money which was used to defray Silkchime's debts to St George Bank or Silkchime's proportion of the liabilities of the Westpoint companies.
The Contribution Claim quantum issue
As noted earlier, Earlmist claims that Silkchime is liable under the doctrine of contribution for an amount of $127,129.44 over and above the amount accepted by WEC on the basis that some of the proceeds of sale of the Warnbro land were used to pay out bank guarantees issued by St George Bank at the request of Westpoint Corporation and Westpoint Construction.
The total amount due to St George Bank in respect of the guarantees was $508,517.77 for which Earlmist claims a contribution from Silkchime of 25%.[lxxxix] WEC argues that the funds used to pay the bank guarantees came from a set-off account maintained by one or both of Westpoint Corporation and Westpoint Constructions with St George Bank.[xc]
The evidence establishes the following:
(i) The finance facilities made available by St George Bank to Earlmist, Silkchime, Westpoint Corporation and Westpoint Contructions were varied by acceptance of a 'Facility Variation Offer' made on 13 July 2004. Amongst other matters the variation provided that, 'Westpoint Corporation Pty Ltd and/or Westpoint Constructions Pty Ltd' would provide additional security in the form of an authority to set off over deposits held in an account numbered 552 006 371 for not less than $1,263,500.[xci]
(ii) St George Bank issued guarantees on behalf of Westpoint Corporation and Westpoint Constructions as follows:[xcii]
Entity
Bank Guarantee reference/facility
Amount
Westpoint Constructions
552 445 614
$25,000.00
Westpoint Corporation
552 346 042
$55,562.97
Westpoint Corporation
551 929 529
$94,006.38
Westpoint Corporation
552 445 622
$336,212.97
Westpoint Corporation
552 022 726
$11,445.00
(iii) Westpoint Corporation maintained an account with St George Bank numbered 552 006 371 which had a credit balance of $667,834.49 as at 31 January 2006.[xciii]
(iv) On 3 February 2006 the solicitors for St George Bank served a notice of demand on, amongst others, Silkchime and Earlmist, (the notice of demand was not served on Westpoint Corporation or Westpoint Constructions).[xciv] The notice of demand recited that:
1.16
As at 31 January 2006, the amounts due and payable on Corporation and Constructions' Facilities were as follows:
1.16.1
Loan Facility - Account number 5518 62141
$175,799.95
1.16.2
Guarantee Facility number 5519 29529
$ 94,008.38
1.16.3
Guarantee Facility number 5523 46042
$ 55,582.97
1.16.4
Guarantee Facility number 5524 45622
$336,212.97
1.16.5
Guarantee Facility number 5520 22726
$ 11,445.00
1.16.6
Guarantee Facility number 5520 62330
$ 94,000.00
1.16.7
Guarantee Facility number 5521 70366
$ 20,000.00
1.16.8
Guarantee Facility number 5524 45614
$ 13,709.55
TOTAL
$800,736.82
(v) Following the sale of the Warnbro land Westpac produced a document entitled 'Westpoint Reconciliation'.[xcv] The document has been reproduced in its entirety at Appendix A.
Neither Mr Morgan nor Mr Carey was able to give evidence that assisted in a material way in understanding the 'Westpoint Reconciliation' statement. This is not a criticism as it is not a document that either of them prepared. Mr Carey was, however, emphatic in his evidence that the funds in the set-off account had not been used to meet the bank guarantee liabilities and that those funds had been applied for the purposes of the 'ING receivership'.[xcvi]
WEC submitted that the contents of the third and fourth tables in the 'Westpoint Reconciliation' statement record that the bank guarantee liabilities were discharged by drawing on funds in the Westpoint Corporation's account numbered 552 006 371 on the dates shown in the left hand column of the fourth table. WEC supported this submission by pointing to the fact that the notice of demand issued on 3 February 2006 identified the sum of $13,709.55 as due in respect of the guarantee numbered 552 445 614, issued to secure $25,000, which is consistent with what is recorded in the Westpoint Reconciliation statement, namely that $11,290.45 of the $25,000 liability was 'set off' from the account on 25 January 2006.
Earlmist argues that the contents of the 'Westpoint Reconciliation' must be considered in the context of the opening paragraph of the document which it submitted showed that the statement was intended as a reconciliation of the application of the proceeds of the Warnbro land and that all the tables should be considered with that context in mind.
Earlmist also argued that if St George Bank intended to enforce its authority to set off it would not have made demand for the full amount of the bank guarantee liabilities in the notice of demand served on 3 February 2006, rather it would simply have set off the bank guarantee liabilities against the funds in the set‑off account.
Earlmist's primary submission, however, was based on the terms of the Deed of Assignment, Release and Indemnity and in particular cl 2.1.2. Earlmist submitted this clause constituted an acknowledgment and agreement on the part of Silkchime that the only entity that contributed to the discharge of Silkchime's and Westpoint Corporation's facilities (and these included the 'guarantee facilities') was Earlmist. Accordingly, it argued that Silkchime was estopped from adopting a contrary position.
I do not accept that the 'Westpoint Reconciliation' statement should be read in the manner suggested by Earlmist. The statement deals with a number of distinct aspects of the indebtedness of the Westpoint Group to Westpac: the receipt and application of the proceeds of sale of the Warnbro land (table 1); receipts and payments out of the Silkchime Pty Ltd Receivers and Managers account numbered 552 568 905 and receipts and payments out of the Earlmist Pty Ltd Receivers and Managers account 552 547 557 (table 2); receipts and payments in the 'set-off account', (table 3); and the dates on which the bank guarantee liabilities were discharged by set-offs from the set off account (table 4).
Considering the 'Westpoint Reconciliation' statement in the context of the other evidence to which I have referred, I am satisfied that it establishes that the bank guarantee liabilities were discharged prior to the sale of the Warnbro land and out of the funds in the set-off account. No part of the Warnbro Proceeds were used to discharge the Westpoint Constructions and Westpoint Corporation bank guarantees. The quantum of Earlmist's Contribution Claim is limited to $108,072.97.
I accept that if the contest in this case was between Earlmist and Silkchime then, because of cl 2.1.2 of the Deed of Assignment, Release and Indemnity, Silkchime may not be able to deny that the bank guarantee liabilities were paid out of the proceeds of sale of the Warnbro land but the agreement between those entities does not bind third parties such as WEC.
The interest issues
Earlmist's case on interest
In outline Earlmist's submissions were as follows:
(i) In respect of Silkchime's breach of its obligation to indemnify Earlmist for payments made by it as a surety in reduction of Silkchime's liability to St George Bank, it has an entitlement to damages for breach of contract and an entitlement to interest on those damages which ought to be calculated at commercial rates by analogy to Hungerfords v Walker.[xcvii] I did not understand Earlmist's submissions to suggest that Earlmist had a claim for damages for loss of the use of the money of the nature explained by Mason CJ and Wilson J (with whom Brennan and Deane JJ agreed) in Hungerfords v Walker, rather that the Warnbro land was land held by Earlmist for commercial purposes and thus pre-judgment interest should be assessed at commercial rates.[xcviii]
(ii)In equity, Earlmist ought to be entitled to interest at commercial rates so as to avoid inequitable or unconscionable adjustment of the rights between Earlmist as surety and Silkchime as debtor.
(iii)The applicable interest rate should be 13.75%. If necessary, Earlmist should be entitled to adduce further evidence about interest rates. Mr Carey attached to his affidavit of 21 November 2016 the Reserve Bank of Australia's indicative institutional lending rates for small businesses for the period between July 2006 to October 2016. He also attached a document entitled 'Westpoint Group - Bank Loan Summary as at November 2005 Draft'. This document set out details of the loans made to various Westpoint Group companies and the interest rate applicable to each loan.
(iv) Earlmist has a contractual right to interest under the terms of the Silkchime Mortgages assigned to it in July 2012. In oral submissions Earlmist's counsel relied heavily on the assignment by Westpac to Earlmist of the Silkchime Mortgages.
(v)It was an implied term of an agreement between Silkchime and Earlmist pursuant to which Earlmist's Indemnification claim arose that Silkchime would pay interest 'at a commercial/mercantile rate, alternatively at a 'trustee' rate, alternatively at such rate as may be determined by a court, and on a compound, alternatively simple basis'.[xcix] This implied term submission was not developed in oral or written submissions.
In outline WEC's submissions were as follows:
(i)Earlmist's subrogation rights did not entitle it to recover interest from Silkchime at the rates at which St George Bank could have charged Silkchime interest pursuant to the Silkchime Mortgages.
(ii)The appropriate rate of interest was a 'trustee' rate which, for the purposes of this case, the parties had agreed should be 6%.
(iii)Earlmist was not entitled to interest from the date the Warnbro Sale Proceeds were applied in reduction of Silkchime's indebtedness because Earlmist had not made any demand for payment and had not taken any steps to enforce its rights.
The authorities on a subrogated party's entitlement to interest
I am grateful for the considerable assistance provided by Daly AJ's extensive review of the authorities in Titles Strata Management Pty Ltd v Nirta in which her Honour dealt with the question of whether a party subrogated to a security is entitled to the benefit of a covenant to pay interest at the rate specified in the security.[c] There was no criticism by counsel of her Honour's review of the authorities or the conclusions she derived from that review.
Daly AJ noted that there was no clear guidance from the authorities as to whether a third party payer of an extinguished debt is entitled to the benefit of all of the contractual rights of the original lender. Her Honour noted the following observation in Subrogation: Law and Practice:[ci]
… the law governing interest awards in subrogation cases is inconsistent, and rests on uncertain foundations.
Her Honour noted the divergence of opinion between English and Australian courts saying:[cii]
Essentially, the courts have adopted two different approaches: the first, more common in English cases, being to award pre-judgment interest based upon the interest charged in accordance with the loan agreement giving rise to the discharged principal debt, and the second, more common in Australian cases, but also not unusual in England, where the Court has exercised its own power under the relevant legislation to award pre‑judgment interest upon the subrogated amount, sometimes at the statutory maximum, or some other rate, selected at the court's discretion, and usually by no reference to the basis upon which that award was made.
One authority which has squarely considered the point is Western Trust & Savings Ltd v Rock, where an innocent victim of a fraud found to be liable upon the principles of subrogation to pay out a lender, contended that there ought to have been no award of interest, or alternatively, simple interest only at the rate charged by the first lender, being 11.25 per cent per annum, not compound interest. The Court of Appeal disagreed, with Balcombe LJ holding that:
'The rights of the [first lender], to which the [second lender] is subrogated, included a right to interest and to compound interest at the rate to which I have mentioned.'
Gibson LJ agreed, stating:
'If the charge is preserved for the bank as if it were the equitable assignee of the charge, why should not the bank take the benefit of the rights under the charge, including the right to interest? Prima facie, the bank succeeds to the whole security, and that means the rights relating to capital and interest. Even without authority, I would have thought it obvious that the assignee would be entitled to that interest, unless of course there were special circumstances which made it inequitable for the assignee to take the same rate of interest as to that to which the original owner of the charge was entitled.'
This approach was endorsed and adopted by the Court of Appeal in Castle Phillips Finance v Piddington and Filby v Mortgage Express (No 2) Ltd.
However, the only Australian authority which I could locate which has directly considered the point is McColl's Wholesale Pty Ltd v State Bank of New South Wales and ors where Powell J stated:
'However, although by virtue of the doctrine of subrogation, a surety may become entitled to the benefit of any security given by the principal debtor, he does not, so it seems to me, necessarily obtain the benefit of all the covenants on the part of the principal creditor which may be contained in the instrument conferring the security. That this should be so is due to the fact that the ultimate purpose of subrogation is not to put the surety in the identical position in which the creditor formerly stood, but to enable the surety to enforce his right to an indemnity by resort to the securities formerly held by the creditor … If any demonstration of this be needed, it is readily provided by the fact that, although, as I have earlier recorded, the court will usually allow interest in respect of moneys paid by a surety pursuant to his guarantee, it is by no means automatic that interest will be allowed at the rate provided for in the contract between the creditor and the principal debtor.'
While Powell J was dealing with a right to subrogation claimed by a guarantor, rather than a third party payer, one would not expect a court to reach a different view based upon the capacity in which the claimant established a right to subrogation. The above passage was referred to with apparent approval by a single judge of the Supreme Court of Queensland in Re Octaviar Ltd (No 8), but in support of a different proposition.
Daly AJ noted that:[ciii]
A survey of the Australian authorities where an award has been made on the basis of the principle of subrogation reveals limited discussion of the basis upon which interest is to be awarded, and practices vary. In Commonwealth Bank of Australia v Horvath, O'Bryan J held that a plaintiff who succeeded on a claim based upon subrogation was entitled to pre‑judgment interest at the statutory penalty interest rate. In Hill v ANZ Banking Group Ltd and anor, Riley J awarded a rate of five per cent, without explaining how this rate was arrived at, and in Rogers v RESI Statewide Ltd, Von Doussa J awarded interest at the lower of the rates charged by it and the original lender.
In both McColl Wholesale Pty Ltd and AE Goodwin Ltd v AG Heating Ltd, there was some debate about whether the court ought to apply a 'commercial' rate, or a 'trustee' rate of interest to the principal debt. In Gertsch v Atsas, interest was awarded at the Supreme Court scale, while in Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd, the Court exercised its discretion not to award interest at all, on the basis that the creditor to which the claimant was subrogated charged a one‑off amount by way of interest, and there were no circumstances which otherwise warranted the award of interest. In Morgan Equipment Co v Rodgers (No 2), Giles J considered the decisions of Powell J in McColl Wholesale and AE Goodwin Ltd v AG Heating Ltd, and determined that in the circumstances of the proceeding before him, a commercial rate was more appropriate than a trustee rate. Each of these cases were heard in the Equity Division of the New South Wales Supreme Court, which apparently has an established practice of awarding interest on either a lower 'trustee' rate, or a higher 'commercial' rate.
In the light of the authorities Daly AJ concluded that there was no binding authority which required that she hold that the subrogated party should stand in the shoes of the secured creditor in every respect and that there were sound reasons of principle why that should not be so. Her Honour identified those reasons as being:[civ]
First, subrogation is an equitable remedy, not a contractual remedy. As stated by the New South Wales Court of Appeal in Registrar General v Gill:
'The equitable principles relating to subrogation aim to adjust the interests of three parties, such as a creditor, a debtor and an insurer or surety, in such a way as to avoid the unconscionable result of double recovery by the creditor or inequitable discharge of the liability of the debtor.'
It is trite law that the Court should strive to do the minimum it needs to do to achieve equity between the parties. In some cases, that may mean giving relief to the effect that a subsequent payer ought stand in the shoes of the creditor whose liability has been discharged. However, in my view, the question of whether the subsequent payer ought to be allowed interest, and if so, at what rate and on what basis, should, if possible, be determined according to the principles of equitable compensation. In Talacko v Talacko, Kyrou J stated as follows:
'The Court, in its equitable jurisdiction, has the power to award compensation for breach of fiduciary duty.
As an equitable remedy, the award of compensation is discretionary and it is subject to the usual equitable defences, such as laches or acquiescence, that the Court may consider before granting relief.
The objective of the remedy is to place the innocent party, as much as possible, in the position in which he or she would have been had there been no breach of duty. Equitable compensation is conceptually different from common law damages in that it involves restitution for the loss and damage suffered by the innocent party as a result of a breach of duty.'
Daly AJ held that as the court was exercising its equitable jurisdiction to allow the subrogated party to assume the proprietary rights of the secured holder the question of the applicable interest rate was a matter to be determined by the exercise of the court's discretion. On the facts of the case her Honour held that it would not be consistent with equitable principle to allow the subrogated party to assume the benefit of the interest rate provided for in the security, 6% per month.
The only observation that I would add to those made by Daly AJ is that the English cases do not support the existence of an inflexible rule that, in every case in which a party is subrogated to a security, the subrogated party takes the benefit of all the covenants in favour of the secured party including the interest covenant. That there is no such inflexible rule is made clear by the observations of May LJ (with whom Hooper and Kennedy LJJ agreed) in Filby v Mortgage Express (No 2) Ltd:[cv]
[62]Accordingly so far as is relevant to this appeal, the remedy of equitable subrogation is a restitutionary remedy available to reverse what would otherwise be unjust enrichment of a defendant at the expense of the claimant. The defendant is enriched if his financial position is materially improved, usually as here where the defendant is relieved of a financial burden. The enrichment will be at the expense of the claimant if in reality it was the claimant's money which effected the improvement. Subject to special defences, questions of policy or exceptional circumstances affecting the balance of justice, the enrichment will be unjust if the claimant did not get the security he bargained for when he advanced the money which in reality effected the improvement, and if the defendant's financial improvement is properly seen as a windfall. The remedy does not extend to giving the claimant more than he bargained for. The remedy is not limited to cases where either or both the claimant and defendant intended that the money advanced should be used to effect the improvement. It is sufficient that it was in fact in reality so used. The remedy is flexible and adaptable to produce a just result. Within this framework, the remedy is discretionary in the sense that at each stage it is a matter of judgment whether on the facts the necessary elements are fulfilled.
[63]The label 'subrogation' is unhelpful, as has been frequently recognised. The essence of the remedy is that the court declares the claimant to have a right having characteristics and content identical to that enjoyed, in this instance, by Midland Bank, subject to any modification (for example as to rates of interest) necessary to ensure that the claimant does not get more than he bargained for. (emphasis supplied) (citations omitted)
Conclusions on interest
In my view, Earlmist is not entitled to claim interest on the amounts claimed by it pursuant to its rights of indemnity and contribution either at 'commercial rates' or on the rates set out in the Silkchime Mortgages The reasoning that leads me to this conclusion is as follows.
First, subrogation is a flexible remedy that may be employed in a wide variety of circumstances. The English cases in which the subrogated party has been held to be entitled to interest at the rate specified in the security to which it has been subrogated share a common factual substratum. They involved situations in which money was advanced by lenders in the expectation of security being obtained and the money advanced was used to pay off earlier secured debts but the expected security was not obtained. In those circumstances it may be more readily understood why holding that the subrogated party is entitled to the benefit of the interest covenant produces a just result. The cases do not establish a rule that the subrogated party will always be entitled to the benefit of the interest covenant. As the High Court has emphasised in every case, the way the remedy is fashioned will depend on the nature of the case and the particular facts.[cvi]
Secondly, in this case Earlmist's right of indemnity is founded on the Cross Deed of Covenant. It is a contractual right. In the absence of express agreement as to interest in contractual claims, pre-judgment interest is awarded at the statutory rate provided for in s 32 of the Supreme Court Act 1935 (WA). Although Earlmist's right of contribution is founded on equitable principles, there is no reason to adopt a different approach to interest on the amount of the Contribution Claim from that adopted in respect of the Indemnity Claim.
Thirdly, as explained by Powell J in McColl's Wholesale v State Bank of New South Wales, the doctrine of subrogation provides a remedy which, relevantly, is an aid to the enforcement of existing rights of indemnity or contribution. In order to protect Earlmist's equity it is not necessary for it to acquire Westpac's right to interest under the Silkchime Mortgage. Earlmist has its own rights that exist independently of the subrogated rights. Those rights do not include a right to interest because the evidence does not support the proposition that Earlmist had bargained for interest at commercial rates.[cvii] Thus, I am not persuaded that there is a principled basis for the subrogation to be extended to entitle Earlmist to claim interest at the rate provided for in the Silkchime Mortgages. It is of some significance that Earlmist and Silkchime were part of the same corporate group. It was on that basis that they entered into the Cross Deed of Covenant. It was open to the parties to make express provision for the payment of interest on amounts paid by one party in discharge of another party's liabilities but they did not do so. I am not persuaded that a term should be implied into the Cross Deed of Covenant to the effect that any sum paid by one party on behalf of another should bear interest at 'commercial rates'. In my opinion, such a term does not satisfy the BP Refinery criteria. When regard is had to the fact that the parties to the Cross Deed of Covenant are members of the same corporate group it is difficult to conclude that the term is so obvious that 'it goes without saying'. It is not reasonable and equitable. It is not capable of clear expression other than at such a high level of generality that would create uncertainty. Finally, it is difficult to see how it is necessary for business efficacy.
Fourthly, that the Silkchime Mortgages were in fact transferred to Earlmist (with Silkchime's agreement) pursuant to the Transfer of Land Act does not constitute a basis for holding that Earlmist is entitled to interest in accordance with the covenants in the Silkchime Mortgages. The transfers were for the purposes of assisting Earlmist to exercise its rights of subrogation, that is, to aid in the enforcement of Earlmist's pre-existing rights of indemnity and contribution. The debt to Westpac to which the interest covenants applied had been discharged. Earlmist was not acquiring Westpac's cause of action based on the covenants to repay the mortgage debt and interest because that cause of action had been extinguished. In my view, the transfer of the Silkchime Mortgages did not confer any benefits on Earlmist to which it was not entitled by way of the equitable subrogation principles.
Fifthly, the evidence does not establish the factual foundation required for an award of interest at commercial rates on the basis of Hungerfords v Walker. The fact that the Warnbro land was, as Earlmist's counsel described it, 'commercial land' and that Earlmist was part of a group of companies involved in property development is not a sufficient foundation to award interest at commercial rates.
Sixthly I do not accept the submission that Earlmist is not entitled to interest because it did not make a formal demand of Silkchime. There was no obligation on Earlmist to make such a demand. It is clear from the way this application has been run that Silkchime does not dispute Earlmist's claims.
The parties agreed that if I held that Earlmist was not entitled to a commercial rate of interest then a trustee rate of 6% should be applied. I consider that is an appropriate rate.
I will hear the parties in relation to the orders that are required to give effect to these reasons and on costs.
Appendix A
WESTPOINT RECONCILIATION
Mortgagee in Possession Settlement Sale of Lots 911, 914 and 915 Warnbro Sound Avenue, Warnbro, effected on 29/09/2006.
| Received at settlement | ||
| Deposit less Agent's fee | 417,462.50 | |
| Balance of sale proceeds | 4,546.001.09 | |
| Total | 4,963,463.59 | |
| Application of Funds | ||
| Silkchime Pty Ltd | ||
| Account 551 520 803 | To payout facility and close the account | 2,117,104.18 |
| Account 551 821 649 | To payout facility and close the account | 1,384.49 |
| Account 551 821 657 | To payout facility and close the account | 2,028.46 |
| Westpoint Corporation Pty Ltd | ||
| Account 551 515 772 | To payout facility and close the account | 238,065.54 |
| Westpoint Corporation Pty Ltd | ||
| Account 551 516 142 | To payout facility and close the account | 3,242.07 |
| Account 551 862 141 | To payout facility and close the account | 190,984.28 |
| Earlmist Pty Ltd | ||
| 551 579 223 | To payout facility and close the account | 986,437.73 |
| Earlmist Pty Ltd Receivers and Managers | ||
| Account 552 547 557 | 18,821.14 | |
| Silkchime Pty Ltd Receivers and Managers | ||
| Account 552 568 905 | 1,405,395.70 | |
| Total | 4,963,463.59 |
After the above settlement, the followings were effected into the Receiver and Managers Accounts.
| Silkchime Pty Ltd Receivers and Managers | |
| Account 552 568 905 | |
| Opening Balance | -45,170.99 |
| Add Deposit of remaining settlement funds | 1,405,395.70 |
| Less Withdrawals, Interests & Fees | -3,634.46 |
| Add Interests & Fees | 227.01 |
| Balances Available after settlement | 1,356,817.26 |
| Legal Costs (Lavan Legal) | -164,999.78 |
| R&M Fees (Korda Mentha) | -182,924.22 |
| Valuation Fee (Various) | -22,312.14 |
| Add Interests & Fees | 58,773.25 |
| Less Interests & Fees | -35,053.85 |
| Balance as at 01/08/2007 | 1,010,300.52 |
| Transferred to Earlmist 552 547 557 | -1,010,300.52 |
| Balance as at 02/08/2007 | 0.00 |
| Earlmist Pty Ltd Receivers and Managers | |
| Account 552 547 557 | |
| Opening Balance | -18,659.82 |
| Add (part) settlement proceed | 18,821.14 |
| Less Interests & Fees | -163.21 |
| Balance Available after settlement | -1.89 |
| Add Interests & Fees | 584.00 |
| Less interests & Fees | -827.60 |
| Balance as at 01/08/2007 | -245.49 |
| Transferred from Silkchime 552 568 905 | 1,010,300.52 |
| Balance as at 02/08/2007 | 1,010,055.03 |
| GST Liability on MIP Sale (14/08/2007) | 455,000.00 |
| Balance as at 15/08/2007 | 555,055.03 |
In relation to the Set-Off account number 552 006 371
| Balance as at 06/10/2005 | 662,906.99 |
| Set off against Bank Guarantee claimed/presented (refer below for further details) | 508,517.77 |
| Less Legal Fees (Lavan Legal) | 7,169.69 |
| Add reimbursement of Legal Fees from Silkchime R&M | 7,169.69 |
| Less Account Fees | 220.00 |
| Add Interest accrued on account 551 859 081 | 8,242.98 |
| Add Interest accrued on 552 006 371 | 17,284.10 |
| Balance as at 31/07/2007 | 179,696.30 |
Note: On 6 October 2005, Westpoint provided additional cash security $361,212.97 to enable the Bank to issue 2 new bank guarantee [sic] to Boral Limited $25,000 and GPT RE Limited $336,212.97 (both have since claimed and/or cancelled).
Summary of Bank Guarantees claimed/presented:
| Date of set off from account 552 006 371 | Bank Guarantee Reference | Amount Claimed |
| 25/01/2006 | 552445614 | 11,290.45 |
| 14/02/2006 | 552346042 | 55,562.97 |
| 03/03/2006 | 551929529 | 44,775.12 |
| 24/04/2006 | 551929529 | 49,231.26 |
| 24/04/2006 | 552445622 | 336,212.97 |
| 24/04/2006 | 552022726 | 11,445.00 |
| Total | 508,517.77 |
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JB
ASSOCIATE TO HIS HONOUR JUSTICE TOTTLE20 APRIL 2018
[i] Earlmist relies on the equitable doctrine of subrogation, its statutory rights under s 5 of the Mercantile Law Amendment Act 1856 (Imp) and the assignment of the securities to it.
[ii] Exhibit P1, 11.
[iii] The judgment was amended on 20 August 2014 to correct an error in relation to the interest claimed.
[iv] Warwick Entertainment Centre Pty Ltd (receivers and managers appointed) atf the Warwick Entertainment Centre Unit Trust v Silkchime Pty Ltd (receivers and managers appointed)atf the Silkchime Unit Trust [No 2] [2012] WASC 275 (Warwick Entertainment Centre Pty Ltd v Silkchime Pty Ltd [No 2]).
[v] Civil Judgments Enforcement Act 2004 (WA) s 59.
[vi] Exhibit P1, 323 - 324.
[vii] Civil Judgments Enforcement Act 2004 (WA) s 85.
[viii] Exhibit P8.
[ix] Exhibit P3.
[x] Exhibit P7.
[xi] Exhibit P6.
[xii] Exhibits P4 and P5.
[xiii] Exhibits D3 and D4.
[xiv] Exhibit P1.
[xv] Warwick Entertainment Centre Pty Ltd v Silkchime Pty Ltd [No 2] [5].
[xvi] Warwick Entertainment Centre Pty Ltd v Silkchime Pty Ltd [No 2] [6].
[xvii] Exhibit D3, 5 - 6.
[xviii] Statement of facts, matters and contentions for the defendant and third party dated 26 April 2016.
[xix] Minute of proposed amended statement of facts, matters and contentions for the defendant and third party dated 2 December 2016.
[xx] Exhibit D3, 214 - 215.
[xxi] Exhibit P1, 311.
[xxii] Exhibit P1, 308.
[xxiii] Exhibit P1, 314.
[xxiv] Exhibit P4, 134 - 137.
[xxv] Exhibit P4, 138 - 139.
[xxvi] Exhibit P1, 225 - 226.
[xxvii] NW Robbie & Co Ltd v Witney Warehouse Co Ltd [1963] 1 WLR 1324, 1338 - 1339.
[xxviii] Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2015) 987 - 8.
[xxix] Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2015) 987 - 8.
[xxx] ts 1972.4.
[xxxi] Ladong Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203 [3] (McLure JA).
[xxxii] Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 [9]. Murray and Parker JJ consider three further principles relating to a stay of proceedings in the context of an appeal.
[xxxiii] Minute of proposed amended statement of facts, matters and contentions for the defendant and the third party dated 2 December 2016 par 64.5.
[xxxiv] Silkchime Pty Ltd v Warwick Entertainment Centre Pty Ltd [No 2] [2013] WASCA 224.
[xxxv] New Resource Holdings Pty Ltd v Lunt (No 3) [2008] WASC 221 [32] citing State Bank of Victoria v Parry [1989] WAR 240.
[xxxvi] Exhibit D2.
[xxxvii] The Second Silkchime Mortgage was registered on 26 October 1999.
[xxxviii] Exhibit P1, 176 - 190.
[xxxix] Plaintiff's written closing submissions pars 99 and 100 and defendant's outline of closing submissions par 2.
[xl] Boscawen v Bajwa [1996] 1 WLR 328, 335 (Millett LJ) cited with approval in Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 129 [94].
[xli] Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291 [36] (Neuberger LJ).
[xlii] See generally Bofinger v Kingsway Group Ltd [6] - [12] (Gummow, Hayne, Heydon, Kiefel and Bell JJ).
[xliii] Gedye v Matson (1858) 53 ER 655, 656 (Sir John Romilly MR).
[xliv] Transfer of Land Act 1893 (WA) s 83.
[xlv] Plaintiff's statement of facts, matters and contentions 12 February 2016 [32].
[xlvi] Plaintiff's outline of submissions 15 November 2016 [53] and [69].
[xlvii] Plaintiff's written closing submissions (incorporating submissions made orally in opening) 17 July 2017 [112] - [126].
[xlviii] McColl's Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365, 376.
[xlix] Collinge v Heywood (1839) 112 ER 1352.
[l] Limitation Act 2005 (WA) s 13.
[li] Limitation Act 2005 (WA) s 13.
[lii] Amended statement of facts, matters and contentions for the defendant and third party 2 December 2016 par 32.
[liii] Limitation Act 2005 (WA) s 27(1).
[liv] Limitation Act2005 (WA) s 18.
[lv] Mitchell C and Watterson S, Subrogation Law and Practice (2007) 7.137.
[lvi] Attorney-General of Canada v Nalleweg(1998) 165 DLR (4th) 606 (Alberta CA).
[lvii] Attorney-General of Canada v Nalleweg [21].
[lviii] Lang v Le Boursicot (1993) 5 BPR 11,782.
[lix] Mitchell C and Watterson S, Subrogation Law and Practice (2007) [7.146] - [7.153] and [7.154] and following.
[lx] Limitation Act 2005 (WA) s 20 and s 21.
[lxi] Limitation Act 2005 (WA) s 27.
[lxii] Limitation Act 2005 (WA) s 46(1)(a).
[lxiii] Limitation Act 2005 (WA) s 49.
[lxiv] Limitation Act 2005 (WA) s 50.
[lxv] Dal Pont GE, Law of Limitation (2016) 17.29.
[lxvi] The Assigned Securities included the First Silkchime Mortgage and the Second Silkchime Mortgage.
[lxvii] Warman International Ltd v Dwyer (1995) 182 CLR 544, 559; Bofinger v Kingsway Group Ltd [1].
[lxviii] ts 1752.
[lxix] Re a Debtor [1937] Ch 156.
[lxx] This was due to an exception created by s 4(1)(c) of the Law Reform Act.
[lxxi] Batard v Hawes 2 El & Bl 287, 289.
[lxxii] Re a Debtor (165).
[lxxiii] Re a Debtor (166).
[lxxiv] Anson v Anson [1953] 1 QB 636.
[lxxv] Anson v Anson (642).
[lxxvi] Brook's Wharf and Bull Wharf Ltd v Goodman Brothers [1937] 1 KB 534.
[lxxvii] Anson v Anson (643).
[lxxviii] McColl's Wholesale Pty Ltd v State Bank of New South Wales (376D).
[lxxix] Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 [67] - [71].
[lxxx] Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221.
[lxxxi] Anson v Anson (641 - 642).
[lxxxii] Israel v Foreshore Properties Pty Ltd (1980) 30 ALR 631.
[lxxxiii] Israel v Foreshore Properties Pty Ltd (636).
[lxxxiv] See generally the discussion by Finn J in Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 (194 - 195).
[lxxxv] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283.
[lxxxvi] Limitation Act 2005 (WA) s 18.
[lxxxvii] Belgravia Nominees Pty Ltd v Lowe Pty Ltd [2017] WASCA 127; (2017) 51 WAR 341 [46(e)] (Martin CJ, Murphy and Mitchell JA).
[lxxxviii] Exhibit P1, 63 (cl 13 and 14 of the First Silkchime Mortgage) and Exhibit P1, 128 - 135 (cl 18 and 19 of the Second Silkchime Mortgage).
[lxxxix] Outline of defendant's/third party's closing submissions [3].
[xc] Plaintiff's written closing submissions (incorporating submissions made orally in opening) [102].
[xci] Exhibit P15.
[xcii] Exhibit D6.
[xciii] Exhibit P16.
[xciv] Exhibit P18.
[xcv] Exhibit P1, 256.
[xcvi] ts 1912 - 1913.
[xcvii] Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125.
[xcviii] Defendant's opening submissions at par 37 and ts 1942 - 1943.
[xcix] Statement of facts, matters and contentions for the defendant and third party 2 December 2016 at par 33A
[c] Titles Strata Management Pty Ltd v Nirta [2015] VSC 187.
[ci] Titles Strata Management Pty Ltd v Nirta [111].
[cii] Titles Strata Management Pty Ltd v Nirta [112] - [116]. In all the following passages quoted from Titles Strata Management Pty Ltd v Nirta footnotes have been omitted.
[ciii] Titles Strata Management Pty Ltd v Nirta [117] - [118].
[civ] Titles Strata Management Pty Ltd v Nirta [119] - [120].
[cv] Filby v Mortgage Express (No 2) Ltd [2004] EWCA Civ 759.
[cvi] Bofinger v Kingsway Group Ltd [1].
[cvii] cf May LJ's observations in Filby v Mortgage Express (No 2) Ltd [63].
Key Legal Topics
Areas of Law
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Insolvency Law
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Civil Litigation & Procedure
Legal Concepts
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Set-Off
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Equitable Set-Off
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Subrogation
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Limitation Periods
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Enforcement Orders
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Interest
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Guarantor's Right of Indemnity
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