AMP Bank Limited v Brown and Kavanagh

Supreme Court of NSW|2016-12-16|Before: Kunc J

Summary

The defendants, Mr Daniel Brown and Mr Dustin Kavanagh, guaranteed the obligations of Rethink Financial Group Pty Ltd ("Rethink") to the plaintiff, AMP Bank Limited ("AMP Bank"). There is no dispute that Messrs Brown and Kavanagh are liable to AMP Bank. Nor is there any issue that, prima facie, as between themselves, they are liable as co-guarantors to AMP Bank in equal shares. In other words, to the extent that one of them pays more than half of Rethink's debt to AMP Bank, he is entitled to contribution from the other in the amount of that excess.
The only question which the Court has been required to determine is whether, in the exercise of its equitable jurisdiction, the Court can adjust the respective liability of Messrs Brown and Kavanagh as between themselves in circumstances where there is no agreement or discernible intention that should be the case. Instead, Mr Brown has pointed to certain conduct of Mr Kavanagh and other matters which Mr Brown has submitted justify the Court in declaring that, as between themselves, Mr Kavanagh should bear a greater part of the liability to AMP Bank than Mr Brown.

The facts

With the exception of the matters set out in paragraph [14] below (which the Court will assume for the purposes of the argument, but does not need to make any positive findings about), the following facts were not in dispute.
Rethink was the corporate vehicle through which Mr Brown and Mr Kavanagh conducted a financial advisory business in the Newcastle area.
Mr Brown was a director of Rethink from 4 March 2010 to 11 March 2016.
Mr Kavanagh was a director of Rethink from 4 March 2010 and remained a director at the time of the hearing.
At all relevant times up to and including the hearing, Mr Brown held 30% of the shares in Rethink.
At all relevant times up to and including the hearing, Mr Kavanagh held 70% of the shares in Rethink.
On or about 5 March 2014, AMP Bank agreed to provide financial accommodation to Rethink under an Advisory Practice Finance Loan Agreement (the "Agreement").
Mr Brown and Mr Kavanagh undertook, as part of the Agreement, a common obligation to guarantee the performance of Rethink under the Agreement.
On 10 November 2015, Mr Brown informed Mr Kavanagh that he (Mr Brown) wished to start his own business and would be leaving Rethink.
What then happened was a matter of intense controversy between the parties. For reasons which will become apparent, it is not necessary for the Court to resolve those controversies. For the purpose of disposing of Mr Brown's case, the Court will assume in his favour that the following facts (the "Complaints") were established: 1. Notwithstanding Mr Brown's offer to stay on for six to twelve months in order to effect an orderly transition from the business, from around 20 November 2015, Mr Brown was locked out of Rethink's business at the behest of Mr Kavanagh's wife, Cassandra, who was Rethink's office manager. 2. From 20 November 2015, the services of two financial planners at Rethink were terminated. Another left by mutual agreement and a fourth alleged that his employment had been repudiated by Rethink. Another employee, who was apparently retained to replace Mr Brown, was only with Rethink from December 2015 to May 2016. Mr Brown was not consulted about any of these staff matters. 3. During 2016 many of the assets of Rethink were transferred to other entities without any consultation with or involvement of Mr Brown and not necessarily for value. 4. Since November 2015, Mr Brown has not received any income, shareholder's dividend or superannuation or other form of income from Rethink. He has not received his leave entitlements. 5. Mr Kavanagh has failed to agree to an arrangement with AMP Bank that would have seen both him and Mr Brown released from their guarantee obligations. In particular, Mr Kavanagh did not agree to an offer made on 5 July 2016 (to which Mr Brown had agreed) that required, among other things, Mr Brown to pay $780,000 and Mr Kavanagh to pay $250,000.
On 21 March 2016, AMP Bank gave Rethink a default notice under the Agreement. The matters said to constitute defaults included: 1. that Mr Brown together with others had left Rethink's business; 2. that Rethink only had two advisers left to service its customers; 3. that Mr Brown and others sought to take customers of Rethink to a different entity; 4. the value of customers who ceased to be customers of Rethink represented an approximately $633,000 decline in the value of the "secured property" (as defined under the Agreement); 5. the effect of the customers ceasing to be customers of Rethink was that the ability of Rethink to meet its obligations under the Agreement for the balance of its term was substantially lessened; and 6. the threat of litigation by one of the former employees arising out of his employment by Rethink and its alleged repudiation and termination.
On 21 March 2016, AMP Bank also gave Mr Brown and Mr Kavanagh notices under the Agreement requiring them to pay all the amounts outstanding under the Agreement within 30 days. They did not comply with those demands.
On 12 August 2016, AMP Bank made further demands on Mr Brown and Mr Kavanagh requiring payment of the amount then outstanding under the Agreement within five days. They did not comply with those further demands.
By summons filed on 22 August 2016, AMP Bank sued Mr Brown and Mr Kavanagh under the Agreement for an amount then calculated as $2,705,912.83.
On 14 October 2016, Mr Brown filed his cross-claim against Mr Kavanagh which, in broad terms, set out the Complaints and concluded: "29. As a direct consequence of the cross-defendant's actions in relation to the matters pleaded above, namely: (a) locking out the cross-claimant from the business; and/or (b) decisions of [Rethink] made without any participation, consultation or agreement by the cross-claimant after 18 November 2015; and /or (c) unreasonably withholding settlement of the cross-claimant's liability for the guarantee, "the Material Adverse Events" have arisen under the Agreement. 30. It would be unconscionable, and not just and equitable, in the circumstances that have arisen, for the cross-claimant to be required to bear an equal share of the liability for the amount outstanding under the Agreement. 31. The cross-claimant should be indemnified by the cross-defendant by a contribution to the debt, in such proportion or amount as the Court sees fit."
Mr Brown's cross-claim sought orders including: 1. A declaration as to the proportion or amount which the cross-claimant is liable to contribute to the amount outstanding pursuant to the Agreement; 2. An order for contribution by the cross-defendant to the amount outstanding pursuant to the Agreement, in such proportion or amount as to the Court seems fit.
On 22 November 2016, Mr Brown and Mr Kavanagh reached a settlement with AMP Bank. Under that settlement: 1. Mr Brown and Mr Kavanagh each signed and returned a consent judgment for the debt owed to AMP Bank. 2. AMP Bank agreed to hold the consent judgments in escrow pending determination of Mr Brown's cross-claim. 3. AMP Bank agreed not to seek to enter the consent judgments without giving each of Mr Brown and Mr Kavanagh ten business days' notice. 4. Interest on the judgment debt ceased as at the date that each of them signed and returned the consent judgment.
I heard Mr Brown's cross-claim against Mr Kavanagh on 1 and 16 December 2016.
On 9 December 2016, the receivers and managers of Rethink - who had been appointed by AMP Bank - entered into an asset sale agreement (the "ASA") to sell what were referred to as "Rethink's client service rights" to Rethink Financial Planning Newcastle Pty Ltd, a company of which Ms Kavanagh is a director. The ASA provided for a purchase price of $1,222,748, of which $733,648.80 was payable when the ASA was executed on 9 December 2016. It included provisions that if the purchaser completed all of its obligations under the ASA, including the payment of the balance of the purchase price, Mr Kavanagh would be released from his guarantee to AMP Bank.

Can equity adjust the obligations of the guarantors as between themselves?

For the reasons which follow, the Court concludes that Mr Brown's cross-claim fails as a matter of law. I should immediately record three matters about the way in which Mr Brown's case was argued.
First, Ms Tibbey accepted that, on any view, the fact that the parties' shareholding in Rethink was 30:70% was in and of itself not a sufficient basis for the Court to adjust Mr Brown's and Mr Kavanagh's obligations between themselves as co-guarantors accordingly.
Second, it was not suggested for Mr Brown that there was any express or implied agreement between him and Mr Kavanagh that their obligations as between themselves in relation to their liability as co-guarantors to AMP Bank would be anything other than equal.
Third, all of the matters relied upon in Mr Brown's case (being the Complaints and, at the heel of the hunt, the entry into the ASA) post-dated November 2016, when the dispute arose between Mr Brown and Mr Kavanagh. No reliance was placed on any conduct in relation to how Rethink was run or its obligations were met. For example, there was no evidence that the benefit or the burden of running Rethink in relation to matters such as income and expenditure or satisfaction of liabilities was undertaken or conducted in a way that reflected Mr Brown's and Mr Kavanagh's respective shareholdings in Rethink (or in any other proportion).

The law - introduction

The Court has concluded that there is no power or jurisdiction in equity to vary the right to contribution between co-sureties in the way Mr Brown submits should be done between him and Mr Kavanagh. Starting with a reference to the respective shareholdings of Mr Brown and Mr Kavanagh as being 30:70%, Ms Tibbey's ultimate submission was that the matters relied upon by Mr Brown warranted a finding that it would be inequitable and unfair for Mr Brown to bear more than 20% of the liability to AMP Bank as between himself and Mr Kavanagh.
There is no authority binding upon me as a first instance judge to the effect of the conclusion I have reached. However, general principle, persuasive authority and leading texts all support that result. I will explain it by reference to the following: general principle, the accepted exceptions, the persuasive authorities, the texts, and, finally, the cases relied upon for Mr Brown.

The law - general principle

The foundation authority is Dering v The Earl of Winchelsea (1787) 1 Cox, 318; 29 ER 1184 ("Dering's Case"). In that case, Thomas Dering was appointed a collector of customs duties. Upon accepting that appointment it was necessary for him to enter into bonds to the Crown to secure the due performance of his office. Three people (Sir Edward Dering, the Earl of Winchelsea and Sir John Rous) agreed to stand surety for Thomas Dering and each of them executed a separate bond in the sum of £4,000 to secure due performance of Thomas Dering's responsibilities. Thomas Dering fell in arrears and judgment for £3,883, 14s was obtained by the Crown against Sir Edward Dering. Sir Edward then sued the Earl of Winchelsea and Sir John Rous claiming contribution from each of them for one third of the amount Sir Edward had paid in satisfaction of his bond.
The judgment of Eyre LCB is important for two reasons.
First, it makes clear that the doctrine of contribution among sureties is not founded in contract, but in equity on the ground of equality of burden and benefit (at 1185 - 1186): "If we take a view of the cases both in law and equity, we shall find that contribution is bottomed and fixed on general principles of justice, and does not spring from contract; though contract may qualify it … and the reason given in the books is, that in equali jure the law requires equality; one shall not bear the burthen and ease of the rest, and the law is grounded in great equity. Contract is never mentioned. Now the doctrine of equality operates more effectually in this Court, than in a Court of law … Now who ought to pay this? … all are equally liable to the obligee to the extent of the penalty of the bonds when they are not all exhausted: if, as in the common case of a joint bond, no distinction is to be made, why shall not the same rule govern here? As is the case of average of cargo in Court of law, qui sentit commodum sentire debet et onus. This principle has a direct application here, for the charging one surety, discharges the other, and each therefore ought to contribute to the onus. In questions of average there is no contract or privity in ordinary cases, but it is the result of general justice from the equality of burthen and benefit: then there is no difficulty or absurdity in making a contribution take place in this case, if not founded on contract, nor any difficulty in adjusting the proportions in which they are to contribute; for the penalties will necessarily determine this."
The Court ordered each of the Earl of Winchelsea and Sir John Rous to contribute one third of the amount which had been paid by Sir Edward Dering to the Crown.
The second way in which the case is significant is because it was contended that Sir Edward Dering had engaged in conduct which meant he should not enjoy the benefit of a right of contribution. Although it was not put in these terms, the submission was identical in effect to the kind of submission made in this case, namely that by his conduct Sir Edward should bear the entirety of the burden under the guarantee without recourse to his "innocent" co-sureties. Eyre LCB dealt with the argument in this way (at 1184-1185): "The misconduct imputed to Sir Edward is, that he encouraged his brother in gaming and other irregularities; that he knew his brother had no fortune of his own, and must necessarily be making use of the public money, and that Sir Edward was privy to his brother's breaking the orders of the Lords of the Treasury, to keep the money in a particular box, and in a particular manner, &c. This may all be true, and such a representation of Sir Edward's conduct certainly places him in a bad point of view; [1] and perhaps it is not a very decorous proceeding in Sir Edward to come into this Court under these circumstances: he might possibly have involved his brother in some measure, but yet it is not made out to the satisfaction of the Court, that these facts will constitute a defence. It is argued that the author of the loss shall not have the benefit of a contribution; but no cases have been cited to this point, nor any principle which applies to this case. It is not laying down any principle to say that his ill conduct disables him from having any relief in this Court. If this can be founded on any principle, it must be, that a man must come into a Court of Equity with clean hands; but when this is said, it does not mean a general depravity; it must have an immediate and necessary relation to the equity sued for; it must be a depravity in a legal as well as in a moral sense. In a moral sense, the companion, and perhaps the conductor, of Mr. Dering, may be said to be the author of the loss, but to legal purposes, Mr. Dering himself is the author of it; and if the evil example of Sir Edward led him on, this is not what the Court can take cognizance of."
It follows that, from the very origins of the principle of equal contribution between co-sureties, the fact that one of those co-sureties (the plaintiff) has caused or increased the guaranteed debt is insufficient to deny the plaintiff a right to contribution unless it can be shown that the plaintiff does not come to equity with clean hands. It is important to note that the present case was not argued by reference to the clean hands doctrine and, on the evidence, it is difficult to see how it could have been.
Insofar as modern statements of the principle are concerned, Mr Gray squarely argued Mr Kavanagh's resistance to Mr Brown's cross-claim by reference to the dictum of Gibbs CJ in Mahoney v McManus [1994] HCA 54; (1994) 180 CLR 370 at 376 (with whom Murphy, Aickin and Wilson JJ agreed): "A surety is entitled to contribution from his co-sureties so that the common burden is borne equally and so that no surety is required, as between himself and co-sureties, to pay more than his due share. The right arises whether the sureties are bound jointly, jointly and severally, or severally, and whether by the same or different instruments, and whether or not the sureties knew of each other's existence, provided that they are liable in respect of the same debt. … The amount of contribution recoverable depends on the number of sureties who are solvent at the time when contribution is sought and on the proportion for which each is liable."
A more recent authoritative expression of the same principle can be found in the judgment of the High Court in Lavin v Toppi (2015) 254 CLR 459; [2015] HCA 4 at [32]: "The rationale of the right to contribution, both at law and in equity, was described by Kitto J in Albion Insurance Co Ltd v Government Insurance Office (NSW) [(1969) 121 CLR 342 at 349-350] "as one of natural justice" which ensures "that persons who are under co-ordinate liabilities to make good the one loss (eg sureties liable to make good a failure to pay the one debt) must share the burden pro rata" [see also HIH Claims Support Ltd v Insurance Australia Ltd (2011) 244 CLR 72 at 87 [36]]. In cases of suretyship, the concern is to ensure that the common burden of suretyship is borne equally as between co-sureties, so that the exercise by a creditor of its contractual right under its guarantee to recover the guaranteed debt in full from one of several co-sureties does not leave that surety to bear a disproportionate share of the burden of suretyship."
To summarise these statements of principle, it is important to appreciate that the equity of contribution only arises if the parties' liabilities are coordinate, meaning "of the same nature and to the same extent": Caledonian Railway Co v Colt (1860) 3 Macq 833 at 844 per Lord Chelmsford; BP Petroleum Development Ltd v Esso Petroleum Co Ltd [1987] SLT 345 at 348; Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 ("Burke") at [15] per Gaudron ACJ and Hayne J, and at [50] per McHugh J. As Dering's Case makes clear, from the outset this equity has always been identified as resting upon a fundamental, intuitive principle of natural justice, common to law and equity, that equal exposure to coordinate liabilities demands equal contribution: see also Albion Insurance Co Ltd v Government Insurance Office (NSW) [1969] HCA 55; (1969) 121 CLR 342 at 349-351 per Kitto J.
Therefore, it is of the very essence of the equity that if two co-sureties are equally liable to a creditor, then between themselves there is a right to equal contribution. In my view, as a matter of principle, the existence of any general discretion to depart from equal contribution by reference to subjective notions of culpability or liability is completely inimical and alien to the equity itself. Putting this another way, if the alleged culpability or responsibility of one co-surety for the debt to the creditor makes no difference to both co-sureties being equally liable to that creditor, then it can make no difference to the right of equal contribution between the co-sureties.

The law - the accepted exceptions

The authorities disclose four exceptions to the general principle of equality as between co-sureties (the "accepted exceptions"): 1. Contract, or something less than contract, being the manifestation of a common intention to modify or exclude rights to contribution; 2. Where one surety has obtained the whole benefit of the guarantee; 3. Where one surety is guilty of "fraud, illegality, wilful misconduct or gross negligence"; 4. Equitable defences such as clean hands.
I will consider each of these in turn.
Dering's Case itself recognised that the right of contribution between co-sureties could be modified by contract. However, courts have recognised something less than a contract as being sufficient to manifest a common intention to modify or exclude rights to contribution. In those circumstances, an equal distribution of liability would be inequitable and the Court will give effect to the parties' intention: Coulls v Bagot's Executor and Trustee Co Ltd [1967] HCA 3;(1967) 119 CLR 460 at 480 per Barwick CJ, and at 488 per Taylor and Owen JJ; Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 at 597 per Gibbs CJ, and at 617 per Deane J; Robinson v Campbell (No 2) (1992) 30 NSWLR 503 at 508.
In some cases, the intention to apportion liability has been identified according to the parties' respective shareholdings in a joint venture, rather than per capita. However, that outcome has not followed automatically from the mere fact of unequal shareholding. In Trotter v Franklin [1991] 2 NZLR 92 ("Trotter") and Leigh-Mardon Pty Ltd v Wawn (1995) 17 ACSR 741 ("Leigh-Mardon"), the parties consistently provided and distributed funds in accordance with their respective interests in the venture. In Morgan Equipment Co v Rodgers (1993) 32 NSWLR 467, the conversation and memorandum between the parties expressly contemplated the formal agreement to apportion liability by shareholding.
In addition to cases of express or implied intention, there are circumstances where one surety will be liable for the whole debt at law and in equity. In particular, a surety who obtains the whole benefit of a guarantee may be required to bear the whole burden, either by affording other co-sureties an equitable defence or by granting them a right of indemnity: see Bater v Kare [1964] SCR 206 ("Bater") at 211-12 per Cartwright J for the Court; Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 ("Citibank") at 125-127 per Bryson J; Ogilvie v Ferry (2010) NSWSC 379 at [53]-[55] per Hamilton AJ; Day v Shaw [2014] EWHC 36 (Ch) at [34]-[36].
The third clearly identified specific exception in the authorities is that a person who has been guilty of fraud, illegality, wilful misconduct or gross negligence is not entitled to contribution: Burke at [17] per Gaudron ACJ and Hayne J, and at [143] per Callinan J.
Finally, as the decision in Dering's Case demonstrates, because the doctrine of contribution is equitable, then equitable defences such as clean hands will be available.

The law - the persuasive authorities

There are no binding decisions which determine the specific issue before the Court. However, there are persuasive authorities, beginning with two decisions of this Court. Each is by a judge whose views in this area are, in my opinion, entitled to the highest respect. Each of them became the Chief Judge in Equity and then a judge of the Court of Appeal.
First, in Leigh-Mardon, Hodgson J (as his Honour then was) held (at 752): "In my view, the authorities relied on by Mr Thomson indicate that there is no general discretion to adjust contributions by reason of some perceived difference in responsibility of the debtors for the incurring of the debt: that is, there is nothing like the apportionment discretion that applies in cases of contribution between tortfeasors or in cases of contributory negligence."
Second, in Sky Channel Pty Limited v Tszyu (No 2) [2000] NSWSC 1150, Young J (as his Honour then was) was considering whether, in an appeal from the Master, further evidence should be admitted to support a possible finding that the contribution between the plaintiff and the defendant should be in an unequal amount. Young J said: "5 In New South Wales there is no statute that deals with contribution generally. There are two varieties of contribution in this State: (a) rights between tortfeasors arising out of the Law Reform (Miscellaneous Provisions) Act 1946, s 5 (the 1946 Act); and (b) rights of contribution in equity. 6 Rights of contribution in equity were thoroughly considered by the High Court in Albion Insurance Co Limited v Government Insurance Office (NSW) [1969] HCA 55; (1969) 121 CLR 342, particularly per Kitto J at 349-352. 7 Almost all the textbook writers make it clear that the basis of the principle of contribution other than that which flows out of the 1946 Act is the maxim equality is equity. As Goff and Jones, Law of Restitution, 5th edition (Sweet & Maxwell, London, 1998) says at p 397: Consequently, the equitable and not the statutory principles governing contribution claims apply if the liability of debtor is in solidus; the co-obligors, being equal jure must bear any loss equally. 8 This principle very clearly comes out in the cases where a loss has occurred to a trust where one trustee is a professional person who was left with virtual control of the trust and the other trustee is unskilled. In some cases the unskilled trustee will be entitled to an indemnity against the other but, unless the right of indemnity can be established, contribution is equal. The matter is well discussed in Scott on Trusts, 3rd edition, Para 258.1, the leading cases being Bain v Hughes (1886) 31 Ch D 390 and in this State Goodwin v Duggan (1996) 41 NSWLR 158. 9 There are, however, some situations where equal contribution will not apply, but those situations do not depend on fault. The exception is, as the Court of Appeal said in Robinson v Campbell (No 2) (1992) 30 NSWLR 503, 508, that equity will not permit people to enforce rights of contribution where it would be inequitable to do so. However, for it to be inequitable in this area of the law there must be a common intention by contract or looser arrangement to that effect. When one is considering whether there is such a common intention one bears in mind what Giles J said in Morgan Equipment Co v Rodgers (1993) 32 NSWLR 467, 477: While equal sharing should not be lightly departed from, where the rationale for equal sharing is that the parties are taken to have intended to share equally then the contrary intention must suffice to replace the general rule. 10 The thrust of the submissions of Mr Aldridge SC and Mr Morris for the appellant is that in this case the appellant is not a person who is experienced in commercial transactions; he is not fluent in English, he is a sporting man, a boxer. He is in difficulties. In these circumstances, at any trial he would be shown to be a person who is labouring under special difficulties. I do not know whether that is so, I am merely repeating the submissions. 11 The submissions then proceed that the respondent is a large and experienced corporation in commerce and that its culpability for the damages caused to the principal creditor are almost entirely in the respondent's court. Equality is equity means equality so far as people paying what is their fair share of the coordinate liability because of their respective culpability. Although this is a relatively recent concept, cases such as the last two I have cited and the decision of the Full Federal Court of Australia in Burke v LFOT Pty Limited (2000) FCA 1155 show that the law has moved away from the strictness of earlier decisions. 12 The answer is, I think, in the words of Mr Wood for the respondent in his written submissions, that the authorities are dead against the concept of apportionment sought to be propounded by the Appellant. Both authority and principle negate the Appellant's argument, and to adduce evidence on the subject would be futile."
It is to be noted that the decision of the Full Federal Court of Australia referred to by Young J in paragraph [11] of his reasons just quoted (and which upheld an order for contribution) was overturned by the High Court in Burke.
In my view those judgments of Hodgson J and Young J reflect the fundamental statements of principle in this area (see paragraphs [30] to [39] above). I therefore follow and apply those decisions and express my respectful agreement.
There are other Australian authorities to the same effect.
In Bialkower v ACOHS Pty Ltd (1998) 83 FCR 1 at 13, the Full Court of the Federal Court of Australia said the following by way of obiter dictum: "… we doubt whether the general law of contribution authorises an apportionment such as that made by the primary judge [based on relative responsibility]. Contribution is "founded on equality": Albion at 351, though it is true that "equality" in the maxim "equity is equality" is not literal equality, but proportionate equality: Re Steel [1979] Ch 218 at 225-226. Equality was the basis of the doctrine of contribution between trustees liable to make good a breach of trust: RP Meagher and WMC Gummow, Jacobs' Law of Trusts in Australia (6th ed, 1997), p 644. If one paid more than his share he could claim contribution from the others. In exceptional cases the rule of equal contribution was replaced by a right on the part of one trustee to obtain indemnity from the others. But, according to Snell, until the intervention of statute (Civil Liability (Contribution) Act 1978 (UK) ss 1(1), 6(1), 7(3), there was no intermediate position between these two extremes: Snell's Equity (29th ed, 1990), p 296. And see Jacobs, p 644. The matter was not argued before us, and since the apportionment can be supported by s 23B of the Wrongs Act, we need not decide the issue, which will be a live one in jurisdictions such as New South Wales which do not have a provision such as s 23B. The contribution order made by the primary judge, apparently under the general law of contribution, could have been made under s 23B of the Wrongs Act."
There are two further decisions which reach the same conclusion: the decision of the Full Court of the Supreme Court of South Australia in Glenmont Investments Pty Ltd v O'Loughlin (No 3) (2001) 79 SASR 288; [2001] SASC 88 at [18] - although qualified (at [17]) as being "made without the benefit of full argument on the authorities and should not be taken as intended to determine authoritatively the Court's power in this respect" - and the decision of E M Heenan J in Fico v O'Leary [2004] WASC 215 at [247].

The law - the texts

Two of the leading equity texts express the general proposition that the liability for coordinate obligations cannot be apportioned other than equally: J Heydon, M Leeming and P Turner, Meagher Gummow and Lehane's Equity Doctrines and Remedies, (5th ed, 2015, Lexis-Nexis Butterworths) at [10-090]; and P Young, C Croft and M Smith, On Equity, (2009, Lawbook Co) at [23.430].

The law - the cases relied on by Mr Brown

Finally, it is necessary for the Court to consider those authorities relied upon by Ms Tibbey for Mr Brown. By way of summary, and for reasons which I will now explain, I decline to follow those authorities. None is binding upon me and, with the utmost respect, to the extent that they suggest there is a general discretion to depart from the position of equality as between co-sureties, I do not agree that they correctly state the law in Australia.
The first case upon which Mr Brown relied was Bryson J's (as his Honour then was) decision in Citibank. Citibank had made advances to Wytoe Pty Ltd ("Wytoe"). Wytoe was the vehicle through which Ralph and Rosa Panebianco conducted their business. They were its only directors and shareholders. At the request of their son and for no benefit or consideration, Ralph Panebianco's parents gave guarantees and mortgages to Citibank to secure Wytoe's obligations to Citibank. The proceedings were a claim for contribution by Ralph and Rosa Panebianco's trustee in bankruptcy against his parents in relation to amounts paid to meet Wytoe's debt to Citibank.
The first point to note about Citibank is that Bryson J's analysis of the equitable right to contribution are obiter dicta. His Honour decided the case by reference to the judgment of Aickin J in Israel v Foreshore Properties Ltd (In liq) (1980) 54 ALJR 421. Applying that principle, his Honour said (at 119): "The principle stated by Aickin J appears to me to be a sufficient basis for the dismissal of these proceedings. … On a whole view of the parties' rights at law, consideration of an equitable remedy on the basis that all are co-sureties cannot even begin. However the plaintiff's case was presented and argued as if equity were sole source of applicable principles, and I will address this."
His Honour then considered a number of potentially applicable equitable doctrines. For present purposes, his Honour's most relevant conclusion is (at 128-129): "Plaintiff's contentions - common intention is essential to rebut contribution: The position taken by the plaintiff's counsel before me was to the effect that the prima facie right of contribution can only be rebutted if a common intention to the contrary is clearly proved by evidence of some agreement or arrangement. No doubt it is very usual that rebuttal takes that form, but in my opinion it is not necessary that there should be a common intention or a bilateral arrangement, and it is not necessary that there should be any expression of an intention or arrangement, as circumstances can occur in which an intended outcome is so clear and obvious that it must be imputed to the parties that they intended it. Quite apart from any intention held by the parties or imputed to them, circumstances can occur in which, without there being any expression of intention or actual advertence to the subject of contribution, it is clear that equity does not require that an obligation to make contribution should be imposed on a party. The court should not lose sight of the origin of the right to contribution in the equitable principle that equity is equality, or forget that facts may exist in which it is not appropriate to treat parties under a common liability as in an equal position, or in which some other equitable principle ought to be given effect. In substance the plaintiff's counsel put before me an argument which was put to Tipping J in Trotter v Franklin: see at 98. Tipping J there said: "Mr Randerson was inclined to submit initially that this prima facie rule of equal sharing between co-sureties could only be displaced by express agreement to the contrary. However I do not consider that to be the law. As the right to contribution is founded in equity the ultimate question is what is a just apportionment between the co-sureties. Ordinarily the justice of the matter will require equality of sharing. Obviously if the parties have expressly provided to the contrary then justice will require such contrary arrangement to be enforced. It seems to me however that equity may well require unequal sharing if the Court can discern by clear implication either that this is what the parties must have intended or that such unequal sharing is necessary to do justice in the particular case." This conclusion is substantially the same as my own. Tipping J did not cite authority but spoke from the standpoint of the application of principle. Further, his observations were obiter as he awarded contribution on a basis of equality."
The submissions made on behalf of Mr Brown then fastened on Bryson J's reference in the passage just quoted to the possibility that "circumstances can occur in which, without there being any expression of intention or actual advertence to the subject of contribution, it is clear that equity does not require that an obligation to make contribution should be imposed on a party". It was submitted that the Complaints and entry into the ASA were such circumstances.
However, there are at least two reasons why Bryson J's reference to "circumstances" is of no assistance to Mr Brown. First, as I have already noted, his Honour's entire treatment of the equitable aspects of the matter are obiter dicta. Second, insofar as his Honour did consider the circumstances, they were all directed to the circumstances that surrounded Ralph Panebianco's parents giving their guarantees and mortgages. Unlike the case at bar, Citibank did not require consideration of anybody's conduct long after the guarantees have been given. In expressing his conclusion, Bryson J (at 135) again emphasised that it was unnecessary to consider the position in equity to resolve the proceedings. However, if it were, his Honour went on to give a "series of reasons" why Mr Panebianco's parents did not have an obligation to make contribution. Apart from representations that were made to them at the time, Bryson J's analysis is an application of the principle that a person who derives no benefit from the transaction which he or she guarantees is not required to make contribution to a co-surety who does receive benefit. In Citibank there was no doubt that Mr Panebianco's parents received absolutely no benefit from the transaction which they had guaranteed. So understood, even if his Honour's conclusions were part of the ratio decidendi, they are an application of one of the accepted exceptions to the equitable requirement for equal contribution.
Mr Brown's next submission was that the circumstances of this case fell within the accepted exception of him not receiving the benefit of the guarantee which he had given, at least in part. In written submissions this was put as "we do not say that the cross-claimant received no benefits but that he received less benefits than the cross-defendant and that the conduct of the cross-defendant creates circumstances that make it appropriate not to require repayment in equal proportions".
It was submitted that the present case was similar to the facts considered by the Supreme Court of Canada in Bater. Bater was the only case cited by Mr Brown where the lack of benefit was not apparent from the time the relevant guarantee was given.
Bater does not assist Mr Brown. It is distinguishable on the facts. In Bater, Mr Bater and Mr Kare entered into an agreement under which they associated themselves together in a company to carry on a business. As part of their business, Mr Bater and Mr Kare guaranteed their company's obligations to its lender, the Royal Bank. Each of their guarantees was limited to $50,000 and then subsequently $80,000.
Sometime later Mr Kare withdrew from the company he had formed with Mr Bater. Money standing to Mr Kare's credit in the books of the company was transferred to Mr Bater. All of the shares in the company held by Mr Kare and his wife were transferred to Mr Bater. Mr Kare and his wife ceased to be directors of the company and Mr Bater became its sole signing officer. A letter from the firm of solicitors who acted for Mr Bater reported to him "upon completion of your settlement with Isaac Kare". Following that settlement Mr Kare had no further connection with the company but the Royal Bank retained his guarantee and Mr Kare gave no notice determining his liability under it.
After Mr Bater's death the business of the company ceased. Ultimately, Mr Bater's estate paid a sum of approximately $59,000 to the Royal Bank under Mr Bater's guarantee. Mr Bater's estate sued Mr Kare for so much of the amount which exceeded $50,000.
On this point the Supreme Court of Canada concluded (at 211): "It remains to consider the final argument of Mr Dewar that, at all events, the appellants are entitled to contribution as to the $9,034.21 paid by Bater and his estate in excess of the $50,000. In my opinion, this argument is not entitled to prevail. In this case the benefit derived from Bater and Kare continuing as sureties for the company's running account with the bank after Kare had made his settlement with Bater and withdrawn from the company was in the first instance that of the company but Bater alone was then interested in the company and alone stood to gain from its continued operations. From the date of Kare's withdrawal, as between Bater and Kare, the whole benefit resulting from the suretyship was Bater's … The rule that the one who gets the whole benefit must bear the whole burden is equally applicable in equity; indeed it has been said that the maxim qui sentit commodum sentire debet et onus is but one aspect of the comprehensive rule "equality is equity"."
In this case, there was no comparable agreement settling the relationship between Mr Brown and Mr Kavanagh. Moreover, Mr Brown continued as a 30% shareholder in Rethink. As a shareholder, with the potential for dividends and other rights, Mr Brown continued to have the benefit of an interest in Rethink, which had received financial accommodation as a result (among other things) of the provision of the guarantee. In Bater, the settlement that had been reached between Mr Bater and Mr Kare drew a complete line under Mr Kare's involvement in their company. That is not this case. The facts of this case do not bring it within the accepted exception which depends upon the co-surety not benefiting at all from the transaction or interest facilitated by the guarantee.
The next submission on behalf of Mr Brown relied on this passage from the online edition of O'Donovan's Modern Contract of Guarantee [2] (at 12.1200) (emphasis added): " '…it is not true that the prima facie rule of equal sharing of the common burden of the principal debt can only be displaced by the express agreement of the co-sureties. Unequal sharing may be ordered where the court can discern a clear implication that this is what the parties must have intended or where unequal sharing is necessary to do justice in the circumstances of the case.'"
The authority cited for the italicised proposition is Trotter. This invites consideration of that part of the judgment in Trotter referred to by Bryson J in the passage from Citibank quoted in paragraph [59] above. For convenience, that passage from Trotter (at 98) is repeated here: "Mr Randerson was inclined to submit initially that this prima facie rule of equal sharing between co-sureties could only be displaced by express agreement to the contrary. However I do not consider that to be the law. As the right to contribution is founded in equity the ultimate question is what is a just apportionment between the co-sureties. Ordinarily the justice of the matter will require equality of sharing. Obviously if the parties have expressly provided to the contrary then justice will require such contrary arrangement to be enforced. It seems to me however that equity may well require unequal sharing if the Court can discern by clear implication either that this is what the parties must have intended or that such unequal sharing is necessary to do justice in the particular case."
Tipping J in Trotter went on to say (at 98): "There is no doubt that the prima facie rule of equal sharing between co-sureties can be modified or varied by contract. It seems to me there is no reason why that contract should have to be express. It is in my judgment in accordance with the principle that if the Court can find by clear and necessary implication that some certain basis of contribution other than equality was intended or is just between the parties then such basis should be adopted. I agree with Mr Randerson's proposition that equal sharing should not be departed from lightly because in ordinary circumstances, co-sureties of the same debt without limitation can be expected to have intended to share equally and it will accordingly be just they should contribute equally. The real question in the present case is whether or not the evidence supports with sufficient clarity the proposition that the parties have implicitly agreed to vary the prima facie position or that justice demands that the prima facie position be departed from."
Tipping J then identified a number of objective, factual matters as to how the parties conducted their business which led to this conclusion (at 100): "I find it to be established by clear and necessary implication that the parties agreed to vary the prima facie rule with effect that Mr Franklin should carry 50% of the liabilities under the guarantee and the three plaintiffs should carry the other 50% between them. I also find that such conclusion accords entirely with the justice and equity of the matter when one considers all of the features of the case to which I have drawn attention."
Insofar as Tipping J relied on the objective matters which he had identified to conclude the parties had a common intention, being something less than a contract, to vary the prima facie rule for contribution, in my respectful opinion his Honour's conclusion was entirely orthodox and in accordance with the authorities to which I have referred in paragraphs [42] - [43] above. The difficulty in his Honour's approach is the further or alternative basis identified in his reasoning, being an appeal to what "is necessary to do justice in the particular case" or that "accords entirely with the justice and equity of the matter when one considers all the features of the case".
Tipping J cited no authority for the just quoted words. It is not entirely clear what his Honour meant. If he was referring compendiously or generically to a class of recognised equitable principles such as, for example, estoppel or clean hands, then I consider that his Honour's statement accords with authority. However, if by those phrases his Honour intended to erect a free-standing basis for displacing the prima facie rule of equal contribution unconnected with existing equitable principles (the "wider exception"), then I respectfully do not accept them as a correct statement of the law in Australia. They do not accord with fundamental principle (see paragraphs [30] to [39] above) and are unsupported by authority. I understood Mr Brown was inviting the Court to apply Trotter for the wider exception. For the reasons just given, I decline to apply it in that way.
There are two further answers to Mr Brown's reliance on Trotter First, I am not bound to follow it. Second, it was unnecessary for his Honour to rely on the wider exception of "justice and equity" in the circumstances of the case. His Honour primarily reached his conclusion on the basis of the objective facts and the accepted exception to the usual rule when the Court can discern an intention on the part of the parties to achieve a result different from the presumption of equality.
For completeness I note that Tipping J's expression of the wider exception was approved by the New Zealand Court of Appeal in Molloy v Dobson [2016] NZCA 25 at [78]-[79]. However, that case, like Trotter, was primarily decided on the basis of objective indications (including a deed) of the parties' common intention to displace the normal presumption of equality between co-sureties.
Trotter has been doubted in both England and Australia. In Hampton v Minns [2002] 1 WLR 1 at [66] Kevin Garnett QC (sitting as a Deputy High Court Judge) said: "66. As to the suggestion in Trotter v. Franklin that the right of contribution as between co-sureties may be modified if the justice of the case demands it, it is not clear that this represents a correct statement of English law in the absence, for example, of something in the nature of an estoppel. Even it did, however, then for the same reasons that I have concluded that the facts of the case do not point to any agreement to vary the normal 50:50 rule, I would not have held that justice made such a demand in this case."
In Australia, in Parker v Alessi [2011] NSWSC 947 at [119], Bergin CJ in Eq noted: "I'm not sure that the observations in Trotter v Franklin and/or Official Trustee in Bankruptcy v Citibank Savings Limited equate to the proposition that there is a general discretion to depart from equality of contribution."
If the law of New Zealand now permits the prima facie equality of contribution between co-sureties to be displaced by an appeal to the equity and justice of the circumstances of any particular case, then I conclude, with the utmost respect, that such a principle is not part of the common law of Australia.
Finally, I should record that Mr Brown sought to rely on Parker v Alessi as a decision which assisted his case. I do not agree. It is an orthodox example of the application of the accepted exception of discerning the parties' intention from their objective conduct. Bergin CJ in Eq concluded at [130] that: "Although the parties did not reach final agreement as to what was to happen in relation to the repayment of the overdraft if there were no profits from the Project, I am satisfied that their conduct indicates a clear intention that the burden for the repayment of the overdraft amount was never to be with the architects and was always to be the responsibility of the engineers."
The case otherwise concerned whether, and if so how, a benefit that was received by one of the co-sureties should be brought to account. That is not an issue raised by these proceedings.
For these reasons, the Court is not satisfied that any of the authorities relied on by Mr Brown support the conclusion that there is in Australia some general equitable power or jurisdiction to adjust the rights of co-sureties as between themselves on the basis of fairness or justice in the circumstances of a particular case.

No basis for an adjustment on the facts

Even if I am wrong in the view that I have expressed as to the law, Mr Brown has failed to make out a case on the facts that would provide a rational basis to depart from a position of equal liability between himself and Mr Kavanagh.
In the circumstances, it is unnecessary for the Court to resolve finally the factual issues raised by the Complaints. Without suggesting this is the only way of considering the problem, even if the Complaints are assumed in Mr Brown's favour, he has, for example, failed to demonstrate on the balance of probabilities any connection between them and Rethink's liability, or increased liability, to AMP Bank. Adopting an analogy from the common law, even if the allocation of responsibility between joint tortfeasors is to some extent impressionistic, it nevertheless must have some rational basis in proven facts.
The Court will consider each of the Complaints and the entry into the ASA separately.
The first matter relied upon was the unilateral locking of Mr Brown out of Rethink's business instead of accepting his offer to enable a smooth transition. It was submitted that the failure to allow a smooth transition had an adverse impact on the business of Rethink, potentially reducing its ability to meet its loan repayments due to AMP Bank. The difficulty for Mr Brown is the lack of any evidence, expert or otherwise, that would enable the Court to accept that proposition as anything more than speculation.
The same observation can be made in relation to Ms Tibbey's submission on this point (and staffing decisions more generally) in final address where (T127:6-10) she submitted that the Court should "draw an inference that had it not been for the precipitate nature of the terminations, by whatever name, that clients would have been serviced in a more regular fashion and, therefore, income would have continued to flow to the business and would have enabled the loan to be paid". The difficulty with that submission is the lack of primary facts from which such a sweeping inference could be drawn.
The second matter is what was referred to in Ms Tibbey's submissions as "the myriad staffing and directional decisions made by Rethink since November 2015 without consultation with Mr Brown". It was submitted that a number of staffing decisions were made without any reference to Mr Brown, causing financial planners to leave Rethink and resulting in a reduction in the ability of Rethink to service clients in a satisfactory way and therefore retain business to service the loan from AMP Bank.
Ms Tibbey pointed to the fact that from April 2014 Rethink was apparently meeting its loan repayment obligations to AMP Bank. However, the evidence showed that difficulties in repaying the loan began in April 2016.
However, the evidence does not permit any assessment as to whether the particular decisions as to staffing or anything else were rational or irrational, justified or unjustified. It was certainly not suggested that Mr Kavanagh (either by himself or through his wife) engaged in conduct that was fraudulent, illegal or negligent. Nor is there any basis for suggesting that they deliberately acted - contrary to their economic interest - to cause the business of Rethink to fail. There is also no evidence from which the Court could conclude that there would have been any different outcome if Mr Brown had stayed in the business or had been consulted about the various decisions, even setting aside for present purposes the fact that he was only a minority shareholder in Rethink.
With no disrespect to the diligent way in which Ms Tibbey put the arguments, a lack of evidence left Mr Brown's case in a position where submissions had to be put at a very high level of generality. For example, it was submitted (T130:32-35) that "the ability to meet the loan was much reduced by the departure of the planners. And the failure to organise an orderly transition had an enormous impact on the business not being able to meet its obligations, which eventually led to the receiver being called in". However, the evidence of the lay witnesses does not permit such large inferences to be drawn. Furthermore, neither the lay witnesses nor an expert had undertaken the task of actually analysing, for example, what income was in fact lost with the departure of the planners.
One example of the evidentiary difficulties will suffice. There was no dispute that a significant proportion of Rethink's income would have been constituted by ongoing commission or other "long tail" income which did not depend upon the day to day activity of the planners. There was no evidence about what happened to that income other than general statements that it diminished.
It is not at all obvious from the evidence how a bright line could be drawn from the departure of the planners to the inability of Rethink to meet its repayment obligations to AMP Bank, let alone how an adverse conclusion could be drawn against Mr Kavanagh arising from his conduct at the time that would warrant him bearing a greater share of the liability to AMP Bank as between himself and Mr Brown. When I asked Ms Tibbey "Where is the evidence that enables me to say that as soon as those planners left, suddenly income disappeared?" she fairly responded "I don't think we can put it quite as directly as that your Honour, but we can note the reduction in the ability to pay; [and] ability to meet debts as and when they fall due" (T131:1-3). The difficulty for Mr Brown's case is that the evidence does not enable the Court to be satisfied on the balance of probabilities as to what the cause or causes were for that situation coming about and, in particular, the extent to which (if at all) Mr Kavanagh was "culpable" or "responsible" for it.
Insofar as there was a Complaint about the transfer of parts of Rethink's business to other businesses connected with Mr or Mrs Kavanagh, again the evidence fell far short of enabling any adverse conclusions to be drawn against Mr Kavanagh in relation to those matters.
Mr Brown's case really amounted to no more than inviting the Court to draw an adverse inference on the basis that parts of Rethink's business were transferred to related entities for either no consideration or at written down values. Mr Brown's submission ultimately was that the items were never offered on the open market and there was no evidence of external valuation. In those circumstances, Ms Tibbey submitted that "where there's no external valuation of those items, I suggest that that is the conclusion open to the Court, that there was not a proper valuation, and therefore the Court cannot be sure that they were transferred for a reasonable value" (T133:13-16). However, Ms Tibbey properly accepted that her client bore the onus of persuading the Court that the assets had been transferred for something less than their proper value. That onus was not discharged because there was no evidence, lay or expert, that would enable the Court to have made findings as to what the true value of those assets was at the time of their transfer.
The next Complaint was that after November 2015 Mr Brown did not receive any income, shareholder's dividend or superannuation or other form of income from Rethink, nor has he received his leave entitlements. For the purposes of considering this argument the Court is prepared to assume that Mr and Mrs Kavanagh continued to receive income from the business of Rethink after November 2015. While Mr Brown may have a cause of action against Rethink in relation to those matters, I am unable to identify any logical connection between those circumstances and why Mr Kavanagh should bear a greater share of the burden of the guarantee liability to a third party - AMP Bank - than Mr Brown. One answer to this Complaint is the possibility (about which there is no evidence) that Rethink's failure to pay those amounts left it better able to make some reduction in its obligations to AMP Bank.
The submission again became one of unfairness: "just simply that there becomes a great inequity in what's received and what the liability is for, and so just the inequity of that situation, where one party does continue to receive, the other does not" (T133:34-36). While the situation may be unfair in a very general sense, there is insufficient connection between that unfairness and any alleged conduct of Mr Kavanagh.
I do not accept that the present situation bears any real resemblance to those cases referred to in paragraph [44] above where the Court has adjusted the rights as between co-guarantors because the guarantee was entered into entirely for the benefit of one party and not the other. Mr Brown clearly did receive benefits from the operation of Rethink that were made possible by the loan of which he was a co-guarantor. In relation to matters such as loss of income, he retains his rights against Rethink. His position cannot be equated with any of those in the cases, such as wives or elderly parents, who had exposed themselves to liability in circumstances where they were never going to receive any benefit.
The next Complaint was that Mr Kavanagh had failed to agree to an arrangement with AMP Bank that would have seen both him and Mr Brown released from their guarantee obligations. Attention, in particular, was drawn to the offer referred to in paragraph [14(5)] above.
Mr Brown's case in relation to the failure to settle with AMP Bank fails for at least two reasons. First, no basis in law was advanced whereby it was said that Mr Brown had an obligation to have agreed to any settlement with AMP Bank, reasonable or otherwise. Second, even if he did have some kind of obligation to agree to a reasonable settlement, the evidence does not go so far as to enable the Court to reach any conclusion as to whether the offers made by AMP Bank were "reasonable" in any relevant sense.
When I asked Ms Tibbey "How do I know, in all the circumstances, that this was a reasonable offer that should have been accepted?" (referring to the offer of 5 July 2016) she fairly replied "Well, you don't really know that, your Honour" (T134:22-25). Ms Tibbey did submit that the offer was a reasonable one because its acceptance would have resulted in Mr Brown and Mr Kavanagh being released from the guarantee. However, I do not accept that submission. It does not necessarily follow in and of itself that such an outcome, obviously desirable as it was, necessarily meant the offer was a reasonable one or one that Mr Kavanagh should have accepted. No attempt was made to explain by reference to the other terms of the offer and the surrounding facts and circumstances why the offer was a reasonable one which should have been accepted by Mr Kavanagh, even assuming that he had some obligation to do so.
Because the ASA had only been entered into shortly before the second and final day of the hearing, the Court made directions for further submissions insofar as it was suggested that the ASA was a further matter that the Court should take into account to adjust the obligations of Mr Brown and Mr Kavanagh as between themselves.
The burden of Mr Brown's complaint in relation to ASA was that while he recognised that payment of the purchase price of $1,222,748 would significantly reduce both his and Mr Kavanagh's liability to AMP Bank, the ASA gave Mr Kavanagh other advantages to which Mr Brown was not a party. One of these was that completion of the ASA would mean that Mr Kavanagh was released from his guarantee to AMP Bank.
This led to the written submission that there was "a potential for AMP Bank to seek repayment either of the whole debt or a proportion of it from Mr Brown in circumstances where he had withdrawn from Rethink at an earlier time and had no part in decisions that were critical to the amount now owed". This was said to include the fact that he "had no part in negotiating the contract for sale of business or asset sale agreement, each of which potentially affects his interests". This submission was further refined to be that "the question is whether a more transparent arrangement (for example with an independent entity or these parties and also external independent valuation) would have resulted in a higher price than that which was being paid by the purchaser". Such a higher price would have reduced Mr Brown's and Mr Kavanagh's liability to AMP Bank even more than was the result of the ASA.
The submissions put on behalf of Mr Brown in relation to the ASA do no more than invite speculation. The submissions are, again, an appeal to the general unfairness of the situation. No allegation is made that Mr Kavanagh acted in any way that equity would regard as colourable in negotiating the ASA or its terms. The Court has no evidence about the course of negotiations that led to the ASA. It cannot reach any conclusions adverse to Mr Kavanagh based solely on the fact of the ASA and its terms that would justify readjustment of the obligations between him and Mr Brown (assuming such a readjustment could be done).

Conclusion and orders

While Mr Brown's predicament is obviously most serious and unfortunate from his point of view, it is not novel. He has fallen foul of the common commercial risk that in guaranteeing the obligations of a business to a financier, liability under the guarantee can continue after the guarantor's departure from the business unless he or she is able to negotiate a different result. That did not occur in this case. In Australia there is no power or jurisdiction in equity to adjust the right to contribution between co-sureties by reference to general considerations of justice and fairness. It would have to be introduced by statute, as was done to create a right of contribution between joint tortfeasors. In any event, even if such a power or jurisdiction to adjust the rights as between Mr Brown and Mr Kavanagh existed in equity, Mr Brown has not proven sufficient facts which would provide a principled or logical basis for such an adjustment to be made in this case.
Mr Brown's cross-claim fails and will be dismissed. The Court will hear the parties as to costs and any consequential orders.

Endnotes

The entry for Sir Edward Dering in L Namier and J Brooke (eds), The History of Parliament: the House of Commons 1754-1790, (1964, Boydell and Brewer) bears out this less than flattering assessment of Sir Edward's character: http://www.historyofparliamentonline.org/volume/1754-1790/member/dering-edward-1732-98
J O'Donovan and J Phillips, Modern Contract of Guarantee - Online, (2004, Lawbook Co).

Amendments 12 April 2017 - Small typographical errors in paragraphs [49], [53], [71] and [80] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 April 2017

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