Yi v Park

[2024] NSWCA 187

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Yi v Park [2024] NSWCA 187

Hearing dates:

26 July 2024

Date of orders:

31 July 2024

Decision date:

31 July 2024

Before:

Bell CJ at [1];
Mitchelmore JA at [56];
Adamson JA at [57].

Decision:

1.        Allow the appeal.

2.        Set aside order 1 of the Court below made on 22 March 2024 and orders 2 and 3 made on 11 April 2024 and in lieu thereof, order that the plaintiff’s claim is dismissed with costs.

3.       Order the Respondent to pay the Appellant’s costs of the appeal.

Catchwords:

APPEALS – point not taken below – whether argument sought to be run on appeal was outside the pleadings and the manner in which the case was run at first instance – where evidence relied upon by the Respondent on appeal was not challenged by the Appellant at first instance given the way the case has been formulated and run

CONTRACTS – formation – consideration – forbearance to sue – whether there was a presently owing debt as at the date when the agreement was entered into – whether the primary judge made a finding that there was a presently owing debt as at the date when the agreement was entered into – where pleadings were silent as to how any indebtedness was said to have arisen – where the Respondent sought to advance a different argument on appeal that was not pleaded at first instance and did not reflect the way the trial was conducted at first instance

Legislation Cited:

Contracts Review Act 1980 (NSW)

Family Law Act 1975 (Cth) s 90C

Cases Cited:

Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33

Eastwood v Kenyon (1840) 11 Ad & E 438

Liftronic Pty Ltd v Unver [2001] HCA 24; (2001) 75 ALJR 867

SAS Realty Developments Pty Ltd v Kerr [2013] NSWCA 56

University of Wollongong v Metwally (No 2) [1985] HCA 28; (1985) 59 ALJR 481

Water Board v Moustakas (1988) 180 CLR 491; [1988] HCA 12

Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598

Category:

Principal judgment

Parties:

Chong Eun Yi as the executor of the late Young Ja Yi (Appellant)
Eun Ju Park (Respondent)

Representation:

Counsel:

A Hochroth with B Lambourne (Appellant)
L Ellison SC with A Byrne (Respondent)

Solicitors:

Uther Webster & Evans (Appellant)
Strathfield Law (Respondent)

File Number(s):

2024/146740

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Common Law

Citation:

[2024] NSWSC 294

Date of Decision:

22 March 2024

Before:

Elkaim AJ

File Number(s):

2022/130757

HEADNOTE

[This headnote is not to be read as part of the judgment]

The Respondent, Ms Eun Ju Park, and her late mother, Ms Young Ja Yi (the deceased), entered into an agreement on 13 July 2017 (the Loan Agreement). The recitals to the Loan Agreement stated that the deceased borrowed $300,000 from the Respondent in 2012 and used this sum to renovate a property at Concord West (the Property). The $300,000 was defined as “the Loan”. The operative terms of the Loan Agreement were that “Party A [the deceased] agrees to pay Party B [the Respondent] the Loan with a fixed interest of AUD $200,000 if the [Property] is sold or Party A is deceased.”

It was not contested that “around 2011 or 2012”, the Respondent and the deceased reached an agreement (the First Agreement) with the following “ingredients”:

“(1)  the plaintiff and Dominic [the Respondent’s then husband] would sell their two properties and provide the equity to the deceased;

(2)   the deceased would permit the plaintiff and Dominic to construct a second storey on the [Property] and also, separately, a ‘granny flat’;

(3)   once the second storey was completed, the plaintiff and her family would move into the extension and live there rent-free;

(4)   the plaintiff would receive any rent paid in respect of the granny flat; and

(5)   the deceased would leave the entire house to the plaintiff in her will.”

The Respondent, as plaintiff in the proceedings below, positively pleaded that the Loan Agreement was supported by valuable consideration, particularising this as an agreement that “any moneys due to the plaintiff would not be payable by the deceased until [the Property] was sold (during the lifetime of the deceased) or the deceased became deceased.”

By way of opening written submissions filed at first instance, the Respondent sought to characterise the First Agreement as involving a loan repayable on demand.

This was denied by the Appellant, Mr Chong Eun Yi, the Respondent’s brother and the deceased’s son and executor of her will. He disputed that there had been any forbearance on the part of the Respondent in relation to an accrued liability or debt as between the Respondent and the deceased which supplied good consideration for the Loan Agreement on the basis that the First Agreement did not include any loan at all.

The primary judge treated the “deferred” repayment of the loan as supplying valuable consideration for the Loan Agreement. On appeal, the Appellant challenged the primary judge’s conclusion that there was valuable consideration, essentially on the basis that there was no finding that any moneys were due to the Respondent by the deceased at the time of her entry into the Loan Agreement and that there were in fact no moneys due to her from the deceased.

The Respondent submitted that the primary judge had made an implicit finding that “the Deceased was indebted to the [Respondent] in respect of funds advanced between 2010 and 2012, and the amount was immediately repayable” and that this was a finding open to the primary judge on the basis that the evidence supported the existence of a binding agreement between the deceased and the Respondent formed in mid-2017 as to the repayment of the funds.

The Court held (Bell CJ, Mitchelmore JA and Adamson JA agreeing), allowing the appeal with costs:

1. The primary judge did not engage with the central submissions made by the Appellant on the question of forbearance and made no finding as to whether there was any presently owing debt to the Respondent as at the date the Loan Agreement was entered into. Neither of his Honour’s twin assumptions, namely that the moneys advanced in 2012 were in the form of a loan and were repayable on demand, was correct and both flew in the face of the primary judge’s unchallenged finding as to the “ingredients” of the First Agreement: [40]-[41].

2. The alternative arguments sought to be put by the Respondent on appeal by reference to evidence that was not challenged or dealt with by the primary judge were not open to be put. None of the potential alternative arguments, and different acts of forbearance, which could have been advanced on behalf of the Respondent was either pleaded or put at first instance and it was not open to the Respondent to advance them for the first time on appeal: [46]-[51].

3. It is an important principle, underscored by considerations of practical fairness and the importance of finality in litigation, that fresh arguments are generally not permitted to be advanced on appeal. It is a virtual certainty that had any of the alternative cases advanced by the Respondent on appeal been pleaded, the Respondent would have been cross-examined on portions of her affidavits upon which she was not tested and have been tested more thoroughly or with a different forensic purpose or intent which was not necessitated by the clear and narrow way in which the case was formulated at trial: [53]-[54].

Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598, applied.

University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481, Coulton v Holcombe (1986) 162 CLR 1, Liftronic Pty Ltd v Unver (2001) 75 ALJR 867, Water Board v Moustakas (1988) 180 CLR 491, referred to.

JUDGMENT

1. BELL CJ: Although many issues were litigated between the parties in the proceedings at first instance, this appeal raises a single issue, namely whether the primary judge erred in finding that an agreement entered into between the Respondent, Ms Eun Ju Park, and her late mother, Ms Young Ja Yi (the deceased), on 13 July 2017 (the Loan Agreement) was supported by valuable consideration: Park v Yi [2024] NSWSC 294 (the primary judgment or PJ) at [83].

2. The recitals to the Loan Agreement stated that the deceased borrowed $300,000 from the Respondent in 2012 and used this sum to renovate a property at Concord West (the Property) which, at the time of the Loan Agreement, was jointly owned by the deceased and her husband from whom she separated in 2015 (they were to divorce in 2018). The $300,000 referred to in the recitals was defined as “the Loan”.

3. The operative terms of the Loan Agreement were simply that “Party A [the deceased] agrees to pay Party B [the Respondent] the Loan with a fixed interest of AUD $200,000.00 if the [Property] is sold or Party A is deceased.”

4. The Respondent, as plaintiff in the proceedings below, positively pleaded that the Loan Agreement was supported by valuable consideration, particularising this plea as follows:

“The plaintiff agreed any moneys due to the plaintiff would not be payable by the deceased until the property known as 189 Queen Street Concord West (the property) was sold (during the lifetime of the deceased) or the deceased became deceased.”

5. This was denied by the Appellant, Mr Chong Eun Yi, who is the Respondent’s brother and the deceased’s son. He was sued in his capacity as executor of the deceased’s estate.

6. The primary judge characterised the particularised agreement that “any moneys due to the plaintiff would not be payable by the deceased until [the Property] was sold” or the deceased died as an act of forbearance on the part of the Respondent. The reference to “any moneys due to the plaintiff” was not a reference to any moneys advanced under the Loan Agreement but a reference to any moneys due to the plaintiff [Respondent] as a result of an earlier commercial arrangement between the Respondent and her mother, as referred to, in short form, in the recitals to the Loan Agreement.

7. In this context, the primary judge found (at PJ [20]), and it is not contested, that around 2011 or 2012, the Respondent and the deceased reached an agreement, which it is convenient to refer to as the First Agreement, which had the following “ingredients”:

“(1)  the plaintiff and Dominic [the Respondent’s then husband] would sell their two properties and provide the equity to the deceased;

(2)   the deceased would permit the plaintiff and Dominic to construct a second storey on [the Property] and also, separately, a ‘granny flat’;

(3)   once the second storey was completed, the plaintiff and her family would move into the extension and live there rent-free;

(4)   the plaintiff would receive any rent paid in respect of the granny flat; and

(5)   the deceased would leave the entire house to the plaintiff in her will.”

8. If the Loan Agreement was supported by valuable consideration, $500,000 together with interest will be required to be paid by the Appellant from the estate before any distribution of the residue under the deceased’s will. (An initial distribution has been made but $2 million remains to be distributed subject to the outcome of this appeal.)

9. At first instance, the Appellant was unsuccessful in his argument that the Loan Agreement was not supported by any valuable consideration. He had disputed that there had been any forbearance on the part of the Respondent in relation to an accrued liability or debt as between the Respondent and the deceased which supplied good consideration for the Loan Agreement. On appeal, he challenged the primary judge’s conclusion that there was valuable consideration, essentially on the basis that there was no finding that any moneys were due to the Respondent from the deceased at the time of her entry into the Loan Agreement. He also said that there were in fact no moneys due to her from the deceased.

10. The terms of the Notice of Appeal are as follows:

“1    The primary judge erred in finding that the respondent provided valuable consideration for the ‘Loan Agreement’ made on 13 July 2017, and hence erred in holding that the Loan Agreement was enforceable against the appellant, because:

(a)    the primary judge found that the respondent had given consideration in the form of forbearance as to when the respondent would seek repayment from [the deceased]: at [83];

(b)    however, the primary judge made no express finding that immediately prior to the Loan Agreement being made, there was any presently enforceable debt owing from the deceased to the respondent, and the evidence did not support any such finding;

(c)    in the absence of any finding that there was a presently enforceable debt owed by the deceased to the respondent prior to the Loan Agreement being made, the finding of forbearance was not open.”

11. The Respondent submitted that the primary judge made an implicit finding that “the Deceased was indebted to the [Respondent] in respect of funds advanced between 2010 and 2012, and the amount was immediately repayable” and that this was a finding open to the primary judge on the basis that the evidence supported the existence of a binding agreement between the deceased and the Respondent formed in mid-2017 as to the repayment of the funds.

12. In order to consider the merits of the appeal, it is first necessary to set out some further background to the matter as emerges from the primary judgment as well as some affidavit evidence not referred to by the primary judge but sought to be relied upon by the Respondent on appeal.

Factual background

13. The deceased, together with her then husband, purchased the Property in 1990. They separated in 2015 and were divorced in 2018. In 2018, the deceased’s ex-husband also executed an agreement pursuant to s 90C of the Family Law Act 1975 (Cth) by which he transferred his interest in the Property to the deceased who thereafter became its sole owner.

14. Prior to 2010, the Respondent, together with her ex-husband, Young Seek Park (Dominic), owned two properties subject to one mortgage. It was the equity from the sale of these two properties which was provided to the deceased and which permitted the construction of a second storey on the Property and also, separately, a “granny flat”. The Respondent’s evidence was that this amounted to $370,000 which was paid to the deceased in cash: PJ [21].

15. The construction of the second storey extension was completed in August 2012. Consistent with the agreement found by the primary judge as summarised at [7] above, the Respondent and her family moved into the extension to the Property and the granny flat was let. Whilst the Respondent and her family resided at the Property, they did not pay rent but occasionally provided the deceased with funds for her living expenses. The primary judge found that the Respondent did receive rent from the granny flat ($450 per week) “although this was not every week as the deceased sometimes kept money for herself”: PJ [22].

16. The Appellant moved into the granny flat with his wife and children in about 2016 or early 2017 and from that time the Respondent ceased to receive any rent from the granny flat.

17. In an affidavit dated 14 July 2023, the Respondent gave the following evidence as to the existence of any agreement for the repayment of the funds she had provided to the deceased in around 2012:

“4.    After Dominic completed the extensions and renovations and after we handed over all the proceeds of the sale of our two residential properties to my mother, I did not demand money from my mother. I was confident that my mother would leave me the house in her Will. It was on that understanding that … I did nothing to recover the money we handed my mother and the value of Dominic’s work. Were it not for her promise to leave the [the Property] to me by Will, I would have sought repayment of all monies and time investments …”

18. On 2 June 2017, the deceased executed a will which left the whole of her estate to her husband or, if he did not survive the deceased, 60% to the Appellant and 40% to the Respondent. This was obviously contrary to the fifth of the “ingredients” of the agreement which the primary judge held had been reached between the deceased and the Respondent in 2011 or 2012: see [7] above.

19. By affidavit of 7 December 2022, the Respondent deposed to the fact that in “probably around June 2017” she had the following conversation with the deceased as to the repayment of the “money and time … put into” the Property:

“Me:   ‘We need some kind of security; an assurance that we won’t lose the money and time we put into this house. There is no justice in father or Chong sharing in the increase in value in this house from the extensions and additions that Dominic and I solely paid for. Worse there would be no justice if we aren’t repaid the money we put in; let alone the time.’

Mother:   ‘Okay. I can sign a document that I owe you for the extension and additions.’

Me:   ‘I will call Mr Song at Cambridge lawyers. He did [your] work before. I will make an appointment for us to meet with him.’”

The Respondent, who was not cross-examined in relation to this conversation, said that she made an appointment with Cambridge Lawyers for early July 2017. The primary judge did not refer to this evidence.

20. On 4 July 2017, the Respondent contacted Mr Song to seek advice in relation to the funds. Mr Song sent text messages to the Respondent, which were translated from Korean, advising her that there were “3 steps available”. The Respondent and the deceased agreed to proceed with the first step proposed by Mr Song, being to “make an IOU for a loan for $300,000 …” and “$200,000 as fixed interest on which you and your mother have agreed” which would allow for the funds to be deducted “without difficulty, when the property is sold or when you succeed to the property as inheritance”.

21. The Respondent also deposed to a conversation at the solicitor’s office on about 6 July 2017 which included the following:

“Mother:  ‘I did promise Eun that if she built the upstairs extension and later the granny flat that I would leave my home to her in my Will. We have now agreed instead that I will pay her back the money she and her husband invested when I sell my house and if I pass away before that, I want to make sure that she is repaid that money with interest. I want to make a document which proves that I owe her that money. I agree with your suggestion (speaking to Song) that we should document it now as a loan. I also want to give Eun a Power of Attorney so that she can look after things if I can't anymore.’

Song:  ‘How much do you owe Eun? How much should the loan be for?’

Mother:  ‘I know that Eun and Young Seek spent at least $300,000 on the extensions and additions. That does not count Young Seek's work. She says it was $450,000 and that could be correct. I'll be happy with your suggestion (addressing Mr Song) that the document should be for a $500,000 loan; break it up as you suggest.’

Song:  ‘I'll calculate the interest and make sure it's right. Eun do you accept that solution? Do you agree to be your mother's attorney?’

Me:  ‘Of course, [whatever] is fair.’

Song:  ‘Please give me a couple of days, 3 or 4 at most, and I'll call you when it is ready. I'll do the Loan document in Korean and English so that there is no doubt what either of you is signing.’”

22. The primary judge also did not refer to this evidence.

23. A file note made by Mr Song on 11 July 2017 recorded the following conversation:

“●  They want to make a deed of loan agreement → happened in 2012 & 2013

●   Asked whether it can be ‘back-dated’ → No.”

24. Mr Song’s file note also recorded that he provided the Respondent and the deceased with an English version of the Loan Agreement and asked them to return on 13 July 2017 to obtain a Korean version.

25. In that portion of his reasons dealing with the Contracts Review Act 1980 (NSW) (Contracts Review Act) (a matter of no continuing relevance in this appeal), the primary judge referred (at PJ [93]) to what was Exhibit C at first instance, namely a letter from Cambridge Lawyers, who prepared the Loan Agreement, to Uther Webster & Evans, the Appellant’s solicitors, dated 25 January 2021. The letter noted that Cambridge Lawyers were the deceased’s “instructing solicitors back on 13 July 2017 when she entered her loan agreement with her daughter”. The primary judge indicated that he took this “as a statement that Cambridge Lawyers regarded the deceased as their client and owed their primary duties as solicitors, to the deceased.”

24. The letter, which was admitted for all purposes, bears some light on the background to the entry into the Loan Agreement and is confirmatory of the Respondent’s account. It included the following:

“We are also informed that there were some concerns from your client in relation to the Deed of Private Loan Agreement made between the late Mrs Yi and her daughter on 11 July 2017 for the amount of AUD $500,000.

However, we can assist both parties as to how the late Mrs Yi and her daughter came to agree this amount as the late Mrs Yi’s loan from her daughter back in 2012 or 2012 (sic) when the late Mrs Yi asked her daughter’s former husband to perform some works to her house at the above address.

At the time of assisting the late Mrs Yi with her informal Korean version of the deed, she indicated that the actual financial dealing occurred sometime in 2012 or 2013 with her daughter and her former husband.

On 11 July 2017, we were informed by the late Mrs Yi that her daughter and her then husband provided the construction funds for the late Mrs Yi to extend the above house and the late Mrs Yi estimated the total costs spent by them to be around $300,000 but the late Mrs Yi’s daughter disputed this amount and she viewed the total amounts would be close to $450,000.

Instead of arguing with the exact amount spent at the above house as the actual construction and extension of the house did occur back in 2012 or 2013, the late Mrs Yi was willing to consider paying her daughter the total sum of $500,000 when she is either deceased or when the house is sold in due course whichever occurs earlier.

The late Mrs Yi agreed $500,000 consisted of $300,000 as the actual amount that her daughter and her husband spent on the house with the remaining $200,000 as the fixed interest for the principal loan of $300,000 used by the late Mrs Yi’s daughter and her former husband.

Both parties were happy with the contents contained in their informal deed as we could not assist them formally as we could not back-date their deed to 2012 or 2013 and the late Mrs Yi wanted the deed prepared in Korean so that she could understand what she was signing for.

The late Mrs Yi and her daughter were happy to execute their informal deed of agreement in Korean (with the English version as a back-up) as long as they could both see and acknowledge the contributions made by the late Mrs Yi’s daughter and her husband were reflected in the deed for $500,000 as their entitlements.”

27. On 13 July 2017, the Loan Agreement was executed. It should be noted that it was styled as a Deed of Loan Agreement but it did not take effect as a Deed as it was not witnessed. Had it been executed as a Deed (as Cambridge Lawyers had advised), no question of want of valuable consideration would have arisen.

28. The deceased executed a further will on 2 June 2020, two days prior to her death. That will provided that, after payment of the estate’s liabilities, there be left:

“(1)  $300,000 to the plaintiff.

(2)   $200,000 to the defendant.

(3)   Anything remaining to be distributed in this way:

(a)   60% to the defendant.

(b)   11.76% to the deceased’s grandson, Gregory Park.

(c)   5.88% to the deceased’s granddaughter, Serena Park.

(d)   22.36% to the plaintiff.”

29. The Property was sold in December 2022 for $2.68 million. Following the sale, the mortgage over the Property was discharged and the distributions provided for by cl 2.1 of the will ($300,000 to the Respondent and $200,000 to the Appellant) were made. At the time of the trial, approximately $2 million remained in a solicitor’s trust account awaiting distribution.

The manner in which the matter was argued at first instance

30. Reference has already been made to the way in which the valuable consideration was particularised in the pleading: see [4] above.

31. In his opening written submissions filed on 5 March 2024, more than a week before the hearing, Mr Ellison SC wrote:

“5.16  There is no doubt the deceased did borrow money from her daughter for work on the Queen Street residence. At the time of Deed, by definition, the deceased did not know when she would die.

5.17   In circumstances where a loan had been made by the plaintiff to the deceased then that loan was repayable on demand. However, the agreement was the loan would not be repaid until the property was sold or the deceased had died. In other words, there was present consideration in that the plaintiff gave up her right to sue for recovery of the loan moneys knowing that she would receive them upon sale or death.”

32. In her opening written submissions, Ms Bailey, who appeared for the Appellant at first instance, contended that:

“33.   It is pleaded at ASOC [3.2] that Ms Park provided “valuable consideration” for the Deceased’s obligation to pay the Amount under the Agreement, that consideration being that the monies would not be paid until the Deceased sold the Property or died. However, the fixing of time of when monies become payable under an agreement is not consideration.

34.   It may possibly be inferred from the particulars at ASOC [3.10] that the consideration is also said to be Ms Park’s forbearance from taking steps to recover monies from the Deceased during her lifetime (it being agreed that the Property was not sold prior to the Deceased’s passing). However (and even assuming that that was a properly pleaded assertion), there is no suggestion that Ms Park ever had any intention of taking steps to recover any part of the Amount from the Deceased, either at the time of the Agreement or otherwise, or that she had any entitlement to recover any part of the Amount as at 13 July 2017, noting in particular:

34.1.   Ms Park and her family resided, rent-free, in the renovated second storey which they had allegedly contributed funds to construct, and thus obtained a benefit from any contribution they had made to those renovations;

34.2.   For an unspecified period up to 2017 and for no specified reason, the Deceased gave Ms Park $450 per week (being $23,400 per year); and

34.3.   The original alleged agreement between Ms Park and the Deceased apparently involved the Deceased leaving the Property to Ms Park in her will; not being under any obligation to repay any amounts actually advanced by Ms Park (about which there is little if any credible evidence).

35.   There was no dispute about any repayment obligation that was resolved by the Agreement such that fresh consideration could be said to arise by its terms or its execution.

36.   It follows that Ms Park will not be able to establish that she provided valuable consideration for the Deceased’s obligation under the Agreement to pay the Amount. Her claim for contractual breach therefore fails.”

33. There were no final written submissions but simply brief oral addresses. Relevantly, the following exchange occurred between the primary judge and Ms Bailey:

“BAILEY: … This case is not a case about a breach of that first agreement, that is the 2010 agreement. As I said, if there was any indebtedness, it would be under that and not the 2017 one.

Ms Park’s case that the 2017 agreement gave rise to a fresh indebtedness suffers from two main problems. The first is that there were no actual moneys provided that are capable of constituting a new indebtedness as of 2017 and the second is that there has been no consideration provided by Ms Park.

Having agreed that she never previously demanded repayment from her mother, the fact that there was a term of the loan agreement that $500,000 would be paid to her on the happening of a specific event reflects neither a forbearance, which might be constituted as fresh consideration, nor anything other than a temporal contractual term.

HIS HONOUR: Why isn’t it a forbearance? I won’t sue you, or I won’t do anything until (a) or (b). Why isn’t that a forbearance? Normally if you, just putting aside what you said about the fresh moneys and so on, just let’s say there was a payment of $300,000 as a loan, that would be repayable immediately, wouldn’t it? Or on demand.

BAILEY: It would be. On that assumption. On that assumption that fresh moneys were advanced.

HIS HONOUR: Yeah. So why isn’t saying ‘I won’t ask for it back until X or Y happens’ a forbearance?

BAILEY: Because, even on the assumption that there was fresh money paid, it was Ms Park’s evidence that she had never - for the money that was handed over - ever sought it for repayment or ever intended to sue her mother for it.

HIS HONOUR: Yes, but we’re just looking at the question of whether that cl 1 amounts to a forbearance. What I’m putting to you is that, by saying ‘I won’t go after the money until one of two events’ - isn’t that a forbearance?

BAILEY: I accept it would be a forbearance if there was a fresh advance and fresh moneys paid. But in circumstances where the money had already been paid five or six years prior and there was no evidence that Ms Park ever intended to pursue it, there’s no fresh consideration and no forbearance that was then addressed by reference to the agreement. There was no evidence of a dispute, your Honour, as sometimes there is in these cases about the deceased’s liability under the 2010 agreement and then that dispute was resolved by entry into this deed. That would be an example of fresh consideration, but that’s not the case here because there was never an agreement that that money had to be repaid.”

Primary judgment

34. In finding that the Loan Agreement was supported by valuable consideration and that the Respondent was accordingly entitled to judgment in the sum of $500,000 plus interest, the primary judge (at PJ [78]-[86]) held the following:

“[78]  The defendant conceded that ‘consideration may be given in form of forbearance from suing on an existing debt’ but went on to say that such consideration is only available where ‘the forbearance is requested by the debtor or offered by the creditor as consideration’.

[79]   In support of this argument, the defendant referred me to Kearney v Grow Choice Pty Ltd [2023] NSWCA 325, where, at [34], Basten JA stated:

‘Fifthly, the Mr Fagan’s evidence did not include any statement that he had said to Mr Kearney that Grow Choice would not take proceedings against North West until the sale of Longacres, or the water rights. In other words, not only did Mr Kearney not seek forbearance, but Mr Fagan did not offer it. While it may be possible to imply a contract of guarantee where there was no discussion of the possible consideration for such a contract, the implication is, at best, strained. The mere fact of not bringing proceedings does not relevantly constitute forbearance.’

[80]   In Player & Ors v Isenberg & Ors [2002] NSWCA 186 at [45], Beazley JA (as Her Excellency then was) said:

‘… forbearance to sue only constitutes good consideration if it comes about at the request of the other party to the contract.’

[81]   I think there is an important point of distinction between the present case and both Kearney and Player. In both of these cases, the forbearance was asserted to be implied from the circumstances of the case. In Kearney the implication was said to arise from conversations between Mr Kearney and Mr Fagan.

[82]   In this matter, to the contrary, the forbearance is specifically stated in the agreement:

‘THE PARTIES AGREE:

1. Party A agrees to pay Party B the Loan with a fixed interest of AUD $200,000.00 if the property known as XXXXX XXX, Concord West NSW 2138 is sold or Party A is deceased.’

[83]   My reading of cl 1 of the agreement is of a direct statement that Party A agrees with Party B to not seek repayment of the loan from Party B until the property is sold or the deceased dies. I think there is a forbearance both as to when repayment might be sought and as to the happening of one of only two events.

[84]   Another way of stating my view is that the forbearance to sue is actual forbearance falling within this statement by Isaacs J in Butler v Fairclough (1917) 23 CLR 78; [1917] HCA 9 at 96:

‘A promise not to sue for a limited period, definite or indefinite, is a valuable consideration where the substantive claim is one for which the other party is liable.’

[85]   As stated by Gzell J in Brehm v Wright [2007] NSWSC 1101 at [29], ‘actual forbearance’ is ‘good consideration.’

[86]   Accordingly, I reject the defendant’s argument that the plaintiff did not provide valuable consideration.”

35. Three comments may be made about these reasons.

36. First, they represent the entirety of his Honour’s reasoning in relation to the issue of consideration.

37. Second, the primary judge did not address an important and indeed central part of the argument that had been expressed both in writing and orally by the Appellant at first instance, as reproduced at [32] and [33] above. This was regrettable, and the failure to address that argument is an aspect of the appeal.

38. Third, at PJ [83], the primary judge mistakenly inverted the parties in the sense that Party A, who was the deceased, did not advance or indeed lend any moneys to Party B, the Respondent. Moneys were advanced to Party A by Party B and her husband Dominic. It was common ground that [83] contained a misdescription but nothing ultimately turns on that.

Consideration

39. The Appellant contended that the central error in the reasoning of the primary judge was that his Honour did not make any finding that any money was presently repayable by the deceased to the Respondent at the time the Loan Agreement was made. Further, it was contended that his Honour’s primary findings of fact, and the evidence, were contrary to any such finding with the consequence that the conclusion of forbearance lacked a factual basis. The Appellant also submitted that the primary judge did not find, nor did the Respondent allege, that it was a term of the First Agreement, that the deceased would “repay” the Respondent the equity provided to her. The Appellant then submitted that “[r]egrettably, and in error”, the primary judge did not engage with the submissions that had been put both in writing and orally, and that his Honour “made no finding as to whether there was any presently owing debt of the Deceased to Ms Park as at 13 July 2017.”

40. As has already been observed, the primary judge did not engage with the central submissions made by the Appellant on the question of forbearance, and made no finding as to whether there was any presently owing debt to the Respondent as at the date the Loan Agreement was entered into. The primary judge’s reasoning also did not engage in any real detail with the circumstances as at 13 July 2017, the date of execution of the Loan Agreement, and, in particular, the question of what the legal position was as between the Respondent and the deceased at that time for the purposes of assessing the question of forbearance. In this context, his Honour did not refer to any of the evidence identified at [19]-[21] above, nor make findings of fact in respect of that evidence.

41. Rather, the primary judge appears to have proceeded on the twin assumptions, no doubt influenced by the language of the recitals to the Loan Agreement and the way in which the case was put, that the moneys advanced in 2012 were in fact in the form of a loan and were repayable on demand. Neither assumption was, however, correct and both assumptions flew in the face of the primary judge’s unchallenged finding as to the “ingredients” of the First Agreement: see [7] above.

42. That agreement was not a loan which contemplated repayment at all let alone on demand. Nor, contrary to Mr Ellison’s opening written submission, did it entail a “borrowing” of moneys. It was a “loan” only in the most colloquial sense of an advance of moneys for which there was no expectation of repayment. In point of fact and critically, the essence of the First Agreement was that the moneys advanced to the deceased would be utilised to fund an extension to the Property in return for which the Respondent would receive a number of benefits, namely permission to construct a second storey on the Property and also, separately, a granny flat; the right to move into the second storey and reside there rent free; the right to rent from the granny flat and the expectation/promise that the deceased would leave the entire house to the Respondent in her will.

43. There being no loan in or around 2012 in relation to the First Agreement, there was therefore no loan which was repayable on demand as at 13 July 2017 when the Loan Agreement was entered into, and thus no act of forbearance which was capable of supplying the consideration for the Loan Agreement. It is hornbook law that past consideration is not good consideration: Eastwood v Kenyon (1840) 11 Ad & E 438; SAS Realty Developments Pty Ltd v Kerr [2013] NSWCA 56 at [69].

44. As noted at [11] above, the Respondent submitted that the primary judge made an implicit finding that “the Deceased was indebted to the [Respondent] in respect of funds advanced between 2010 and 2012, and the amount was immediately repayable”, and that this was a finding open to the primary judge on the basis that the evidence supported the existence of a binding agreement between the deceased and the Respondent formed in mid-2017 as to the repayment of the funds. On appeal, Mr Ellison (who appeared on appeal with Mr Byrne) referred in his written submissions in this Court to the primary judge’s reference to the loan at PJ [83] in inverted commas, namely “loan”, presumably in recognition of the reality that the First Agreement did not entail a loan at all.

45. The Respondent’s reference to an “implicit finding by the primary judge, by reference to the ‘loan’” entailed acceptance of two of the Appellant’s criticisms of the primary judgment, namely that there was no express finding on a critical issue, and that the First Agreement was not in fact a loan in any recognised sense of the word. For there to have been forbearance, there would have had to be an indebtedness in respect of the funds advanced in 2012, but the pleading was silent as to how any such indebtedness was said to have arisen. Mr Ellison’s opening written submissions at first instance purported to fill this gap by seeking to characterise the First Agreement as amounting to a loan “repayable on demand”: see [31] above. For the reasons already given, that conclusion was not sustainable.

46. To overcome this point, the Respondent sought to advance on appeal a very different and far more nuanced argument but, most unfortunately for the Respondent, one that was neither pleaded nor advanced at first instance. That argument was summarised in the Respondent’s written submissions in this Court as follows:

“… the evidence before the Court (which is reflected in the findings of the primary judge) established that, by June 2016, an earlier arrangement concerning the Advanced Funds had ceased to be performed; a related promise by the Deceased, to leave a property in Concord West (Concord West property) to the Respondent, had been abandoned; the Deceased accepted that she needed to repay the Advanced Funds to the Respondent; the Respondent indicated to the Deceased that she required security in respect of the funds; the Respondent approached a solicitor about ‘recoupment’ options; and the Deceased and Respondent subsequently instructed the solicitor, and executed, the 2017 Agreement.”

47. There was evidence to this effect before the Court but, contrary to this submission, it was not fully reflected in any findings by the primary judge. As already noted, for example, his Honour made no reference to the material that has been reproduced at [19] and [21] above, and his Honour’s only reference to the letter from Cambridge Lawyers, parts of which have been reproduced at [26] above, was in the context of considering an argument under the Contracts Review Act.

48. The Respondent submitted on appeal that the evidence summarised in [46] above was unchallenged. That submission was correct but, as pointed out firmly by Mr Hochroth, who appeared with Ms Lambourne for the Appellant in this Court, that lack of challenge had to be considered in light of the very and unambiguously narrow way in which the Respondent had put her case at first instance. He submitted that counsel for the Appellant at first instance was forensically entitled not to challenge this evidence, given the way the case was formulated, and it was not open to rely on this evidence to advance a different argument for the first time on appeal, given the forensic course that had been taken on the basis of the pleading and how the case had been run at first instance. As pointed out by Ms Bailey to the primary judge in the extract of the transcript set out at [33] above, “[t]his case is not a case about a breach of that first agreement”.

47. It is not difficult to conceive how a different case could have been advanced on behalf of the Respondent to the effect that, as at July 2017, the Respondent had a contractual claim against her mother who, by making her will in June 2017 leaving the Property to her husband, had manifested a clear intention no longer to be bound by the First Agreement, giving rise to a claim in damages that may have been compromised by the Respondent’s entry into the Loan Agreement.

48. It is similarly not difficult to conceive how an alternative claim for money had and received or restitution on the basis of a partial failure of consideration (to the extent that the First Agreement was not contractually enforceable) may also have been formulated as giving rise to a claim, forbearance in respect of which could also have been contended to have supplied consideration for the Loan Agreement.

49. But neither of these potential alternative arguments, and different acts of forbearance, were either pleaded or put and I accept Mr Hochroth’s argument that it was not open to the Respondent to advance them in this Court for the first time on appeal.

50. Mr Ellison also acknowledged that he did not rely on any argument that valuable consideration for the Loan Agreement was supplied by some compromise of the amount (and value of services) that may have been advanced by the Respondent and Dominic to the deceased under the First Agreement for the purposes of undertaking the additions to the Property. Various paragraphs towards the end of the letter extracted at [26] may have supplied the basis for such an argument but, again, it was neither formulated nor put this way at first instance.

51. It is an important principle, underscored by considerations of practical fairness and the importance of finality in litigation, that fresh arguments are generally not permitted to be advanced on appeal. Thus, in Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 at [51], Gleeson CJ, McHugh and Gummow JJ said, referring to University of Wollongong v Metwally (No 2) [1985] HCA 28; (1985) 59 ALJR 481 at 483; Coulton v Holcombe (1986) 162 CLR 1 at 8-9; [1986] HCA 33; Liftronic Pty Ltd v Unver [2001] HCA 24; (2001) 75 ALJR 867 at [44]; and Water Board v Moustakas (1988) 180 CLR 491 at 496-497; [1988] HCA 12, that it:

“… would be inimical to the due administration of justice if, on appeal, a party could raise a point that was not taken at the trial unless it could not possibly have been met by further evidence at the trial. Nothing is more likely to give rise to a sense of injustice in a litigant than to have a verdict taken away on a point that was not taken at the trial and could or might possibly have been met by rebutting evidence or cross-examination.”

54. In the context of that particular case, their Honours said at [53] that “it is a virtual certainty that, if such a case had been run at the trial, Whisprun would have wished to cross-examine the doctors.” In the present case, it is also “a virtual certainty” that, had any of the possible alternative cases posited above been pleaded, not only would the Respondent have been cross-examined on portions of her affidavits upon which she was not tested but she may well have been tested more thoroughly or with a different forensic purpose or intent which was not necessitated by the clear and narrow way in which the case had been formulated at trial.

Orders

55. For the above reasons, I propose the following orders:

1. Allow the appeal.

2. Set aside order 1 of the Court below made on 22 March 2024 and orders 2 and 3 made on 11 April 2024 and in lieu thereof, order that the plaintiff’s claim is dismissed with costs.

3. Order the Respondent to pay the Appellant’s costs of the appeal.

56. MITCHELMORE JA: I agree with Bell CJ.

57. ADAMSON JA: I agree with the Chief Justice.

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Decision last updated: 31 July 2024