Wayland v Tonkin No. Scciv-01-401

[2001] SASC 96

WAYLAND v TONKIN
[2001] SASC 96

Civil
Leave to Appeal

1................ Gray J This is an application for leave to appeal from an interlocutory order of a District Court judge.  

Heading

2      In 1989 WAG No 2 Pty Ltd ("WAG") borrowed $442,500.00 from Mutual Community Friendly Society of South Australia ("MCFSSA"). Mr Wayland, Mr McCulloch and Mr Tonkin granted MCFSSA a deed of guarantee and indemnity.  In September 1991 WAG borrowed a further $600,000.00 from MCFSSA. Mr Wayland, Mr McCulloch and Mr Tonkin granted MCFSSA a further deed of guarantee and indemnity.  MCFSSA assigned its interest in the mortgages and deeds of guarantee and indemnity to National Mutual Health Insurance Pty Ltd ("National Mutual").

3      WAG defaulted.  The monies secured by the mortgages and the guarantees became due and payable.  National Mutual exercised its powers and entered into possession of the mortgaged land.

4      On 24 November 1997 a deed was entered into between National Mutual, WAG, Mr Wayland, Mr McCulloch and Mr Tonkin.  Pursuant to the deed, National Mutual covenanted and agreed, that upon receipt of $235,000.00 from Mr Tonkin it would release:

-....... WAG from its obligations under the security instruments.

-....... the guarantors from their obligations under the guarantees.

5      In consideration of the sale of the land and the payment by Mr Tonkin, National Mutual released and discharged WAG and the guarantors from all liability.

Plaintiff's Case before the District Court

6      Mr Tonkin instituted proceedings in the District Court claiming (partly by amendment) a right of contribution from Mr Wayland and Mr McCulloch as co-guarantors and co-indemnifiers in respect of the payment of $235,000.00.

7      Alternatively, Mr Tonkin claims that if the right to contribution has been extinguished by reason of the terms of the deed, Mr Wayland and Mr McCulloch are liable to him pursuant to his right of contribution as a co-surety.  They remain liable to contribute as co-indemnifiers. 

8      In the further alternative, it is said that an estoppel arises. It is claimed by reason of Mr Wayland and Mr McCulloch's conduct, Mr Tonkin was allowed to act to their benefit and to his detriment in circumstances that were unconscionable. It is alleged that Mr Wayland and Mr McCulloch will be unjustly enriched unless they are estopped from claiming that the deed barred Mr Tonkin's rights to contribution. 

9 Finally it is pleaded that the conduct of Mr Wayland and Mr McCulloch was misleading and deceptive contrary to s 56 of the Fair Trading Act 1987 (SA).

Defendant's Case before the District Court

10     Mr Wayland raised a number of defences.  These included pleas that Mr Tonkin acted in breach of fiduciary duty and was negligent.  It is said that the principal debt is unenforceable.  The defence also pleads:

"In further answer to the whole of the Statement of Claim, the first defendant says that any right of contribution which the plaintiff might otherwise have had against the first defendant was extinguished as a consequence of the terms of a certain deed of release made on 24 November 1997 between National Mutual, Wag, the plaintiff and the defendants."

11     The defence has not yet been amended to plead to the plaintiff's alternative claims.

Interlocutory Order - Application to a Master

12     Mr Wayland applied to a master of the District Court for an order dismissing the plaintiff's claim. It was submitted that the deed of release operated as a bar.  At the time of the application, the plaintiff had not pleaded the alternative causes of action.  The master dismissed the application.  He gave the following reasons:

"R25, which entitles a party to apply for summary judgment, requires the applicant to establish that the plaintiff's claim cannot succeed on any possible view of the facts or the law. The remedy is discretionary and there are wide grounds of discretion.  There are a number of factors which I can take into account in exercising this discretion.  Civil Procedure South Australia at 25.02.5 analyses some of these grounds.  It is suggested that it should not be used where there are complex questions of law and fact which cannot be readily disposed of in chambers, that it might be refused or a party was in breach of various rules about the proper procedure in the action.  It was not inappropriate for an application to be made even close to trial where it would save costs.

In the present case there have certainly been circumstances of delay in relation to the issue of the application.  Apart from the issue of a response to the notice to admit, which was to expire on 14 November 2000, the action is ready to be listed for trial and there is every prospect that it would be heard in the first half of 2001.  Notwithstanding service of the proceedings on the first defendant in March, his defence was not filed until 16 June.  The first defendant was a signatory to the Deed which was dated 24 November 1997 and it is referred to in the statement of claim and admitted in the defence.  It was discovered on 14 August 2000.

I note, however, the first defendant's explanation that he had not either received or retained a copy of the Deed and could not recall its exact terms as to rights of contribution and it was not until a copy of the Deed was provided and considered by the first defendant's legal advisers that he had an opportunity to research the point.

Be that as it may, a determination of the summary judgment at this stage is unlikely to save any or any significant costs in relation to the interlocutory processes in this action.

I also take into account that there has not been any urgency demonstrated by the first defendant and I take into account that the proceedings involve a claim with no counterclaim and that the determination of the summary judgment application in favour of the plaintiff would not have the effect of stopping this matter from proceeding to trial, as there are other grounds of defence relied on by the first defendant.  I also take into account that the plaintiff contends that in order to argue the application issues of fact might necessarily be pertinent and the high onus faced by a defendant applicant under R25.04.

In all these circumstances, notwithstanding the first defendant's contentions as set out in their submissions, I have formed the view that it is inappropriate in this instance to entertain the application."

Appeal to the District Court

13     Mr Wayland appealed to a District Court judge pursuant to the District Court Rules.  The judge dismissed the appeal.  He said:

"Quite a number of detailed legal arguments were addressed in argument before me.  None of them seemed to me to be so clear that I can say that the question to be resolved in the case at bar is beyond dispute.  I pick only one particular problem, and that is the question whether prejudice to the sued guarantor is to be presumed from the discharge of the liability of the debtor to the creditor.  It's said to be the case that flowing from that there is a discharge of the liability to the co-guarantor, the loss of the right without further inquiry is alleged to be enough.

I am not satisfied that that proposition is beyond argument.  It may well be the case that if the debtor has no means remaining to meet any claim from the co-guarantor, it cannot be said that the co-guarantor has lost something.  That is a point to be determined when it is fully argued.  It may be a point to be determined when more facts are known.

In my view this is not an appropriate case for summary judgment in favour of the applicant, and I dismiss the appeal."

14     During the District Court appeal, Mr Wayland indicated that he intended to amend his defence to plead that the action was barred by the deed of release.  The plaintiff outlined that he proposed to amend his Statement of Claim to plead alternative causes of action.  When the District Court judge made his decision neither amendment had been made.

Application for Leave to Appeal

15 Mr Wayland has sought leave to appeal against the order of the District Court judge pursuant to Section 43(2)(b) of the District Court Act 1991 (SA). It was accepted that the order dismissing the appeal was interlocutory. Rule 96A.02 of the Supreme Court Rules provides:

"(1)   Unless a Judge of the District Court has certified that the proposed appeal involves:

(a).... A point of law of difficulty or importance which justifies it being reviewed on an interlocutory appeal; or

(b)    A point of sufficient importance in the proceedings to warrant it being reviewed on an interlocutory appeal without waiting for the final judgment in the action,

any appeal against an interlocutory judgment under Section 43(2)(b)
of the Act is subject to leave being obtained from the Court."

16     Initially the application for leave proceeded ex parte.  However pursuant to Rule 96A.02(2) an order was made that notice be given to the plaintiff. Thereafter the matter proceeded inter partes. 

The Applicant's Case

17     The applicant submitted that it was settled law that the release and discharge of WAG, by National Mutual (by way of the deed) operated to discharge all rights of contribution between the guarantors.  It was said that the only exception to this was if there had been an express reservation of rights as between guarantors.  When pressed, counsel for the applicant was unable to refer to any Australian authority directly on point. He relied primarily on a Canadian decision, Griffith v Wade[1] and relevant passages in TheModern Contract of Guarantee (3rd ed).[2]

[1] (1967) 60 DLR (2d) 62

[2] J O'Donovan, J Phillips The Modern Contract of Guarantee (3rd ed) LBC 1996

18      Counsel for the respondent submitted that the issue raised by this application was not settled. He  referred to passages in Equity Doctrines & Remedies[3], the decision in Commercial Finance Company Pty Ltd v ANZ Banking Group Ltd[4] and dicta in Greenwood & Anor v Francis[5].

Conclusions

[3] M Meagher, W Gummow, J Lehane, Equity Doctrines & Remedies Butterworths 1992 (3rd ed) at Chapt 10, [1026]

[4] (1986) 128 LSJS 333

[5] [1899] 1 QB 312 at 320.

19     I am not satisfied that settled law resolves the issue of whether rights to contribution between guarantors have been discharged in the circumstances of this case.  I am also not satisfied that a clear and uncontroverted factual situation exists in which to consider the issue. 

20     The action is listed for trial in June 2001.  If the defendant's submission is upheld, and the plaintiff is successful on appeal, the trial date will be lost. I consider this to be a strong factor against granting leave. A decision in the defendant's favour would not alleviate the need to determine other outstanding issues at trial.  The plaintiffs' alternative causes of action also remain.

21     Such reasons have previously influenced courts when refusing applications for the preliminary disposal of points of law.  In CSIRO v Perry[6] Olsson J said at (12):

"It is fair to say that, in general, the Courts have been slow to make orders for the trial of preliminary issues of fact or points of law raised by the pleadings."

In Stephenson, Blake & Co v Grant, Legros & Co[7] it was said that practical experience suggests that attempts to pick out propositions of law first generally entail more expense and delay.  In Rogers v Baillieu Bullock Wilkinson Pty Ltd[8] Walters J noted the reluctance of courts to determine preliminary points whilst  disputes of fact exist.  It was said at (597):

"But, as it seems to me, an order that a point of law be set down for hearing and disposed of before trial ought only to be made where the objection in point of law raises a question which, if decided in favour of the party objecting, would dispense with any further trial of some substantial issue in the action, and, more particularly, where there is no dispute on the facts. ..."

[6] Judgment No 100 20 August 1987 SA unreported

[7] (1917) 86 LJ Ch 439

[8] (1981) 28 SASR 594

22     In Craig & Craig v Jetmaster Fireplaces Pty Ltd[9] after reviewing the authorities, von Doussa J noted that such orders tend to increase delay and expense.

[9] (1988) 142 LSJS 258

23     To decide the point raised without the question of fact first being resolved raises the possibility that the decision will be made hypothetically. The High Court in Bass v Permanent Trustee Company Ltd[10] emphasised the dangers of deciding hypothetical points. Gleeson CJ, Gaudron, McHugh, Gummow, Hayne, Callinan JJ said at [49]:

"As the answers given by the Full Court and the declaration it made were not based on facts, found or agreed, they were purely hypothetical.  At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established.  What those facts are is not stated, nor can they be identified with any precision.  They may be all or some only of the facts.  What facts are determinative of the legal issue involved in the question asked is left open.  Such a result cannot assist the efficient administration of justice.  It does not finally resolve the dispute or quell the controversy.  Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings.  Since the relevant facts are not identified and the existence of some of them is apparently in dispute, the answers given by the Full Court may be of no use at all to the parties and may even mislead them as to their rights.  Courts have traditionally declined to state - let alone answer - preliminary questions when the answers will neither determine the rights of the parties nor necessarily lead to the final determination of their rights.  The efficient administration of the business of courts is incompatible with answering hypothetical questions which frequently require considerable time and cause considerable expense to the parties, expense which may eventually be seen to be unnecessarily incurred."

[10] (1999) 73 ALJR 522 at 533

24     If this application is allowed to proceed it will tend to fragment the interlocutory processes of the trial court. It will create the spectre of multiple appeals. I consider that a point of sufficient importance in the proceedings has not been raised.  The issue does not warrant review before final judgment. The matter should proceed to trial on the date fixed.

25     Leave to appeal is refused.

1 (1967) 60 DLR (2d) 62

2J O'Donovan, J Phillips The Modern Contract of Guarantee (3rd ed) LBC 1996

3Meagher, Gummow, Lehane Equity Doctrines & Remedies Butterworths 1992 (3rd ed) at Chapt 10, [1026]

4     (1986) 128 LSJS page 333

5 [1899] 1 QB 312 at 320.

6     20 August 1987 Judgment No 100 SA unreported

7 (1917) 86 LJ Ch 439

8 (1981) 28 SASR 594

9 (1988) 142 LSJS 258

10 (1999) 73 ALJR 522 at 533