BROOKER v FRIEND & BROOKER PTY LTD & Anor

Appellant: R G Forster SC/ M S White COUNSEL: 1st Respondent: No appearance 2nd Respondent: R Newlinds SC/ B Kremer

Appellant: Jonathan D'Arcy & Co SOLICITORS: 1st Respondent: None 2nd Respondent: Bull, Son & Schmidt

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT DATE OF DECISION: 29 April 2005

LOWER COURT MEDIUM NEUTRAL CITATION: [2005] NSWSC 395

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40438/05

MASON P McCOLL JA BASTEN JA

Wednesday 7 May 2008 Frederick Clarkson BROOKER v FRIEND & BROOKER PTY LIMITED & Ors (No 2) JUDGMENT 1 MASON P: On 20 December 2006 the Court published reasons to the effect that a majority (Mason P and McColl JA) had decided to uphold the appeal (Brooker v Friend & Brooker & Anor [2006] NSWCA 385). 2 I do not intend to recount the facts or recite the details of the earlier reasons. References to paragraphs in them will appear as J1, J2 etc. 3 I concluded that the appellant (Mr Brooker) was entitled to a declaration that the second respondent (Mr Friend) is required to contribute equally to the discharge of the outstanding obligations under the SMK loan arrangements, with consequential orders for payment of the appropriate sum. McColl JA indicated (at J163) her agreement with the orders proposed by me. Basten JA proposed the dismissal of the appeal. 4 My reasons included the adoption of McColl JA's summary of the facts (J1). 5 The parties were directed to consult and to file Short Minutes of Order if they could agree. 6 Mr Brooker filed draft Orders that go well beyond the relief foreshadowed by the majority of the Court. 7 Mr Friend filed a notice of motion seeking orders that "the Court" recall the whole of my reasons for judgment and paras [152], [155], [156], [162] and [163] of the reasons for judgment of McColl JA. 8 Written submissions were exchanged and the Court reconvened to hear further argument on the motion and as to the terms of orders that would give effect to the reasons of the majority if unrecalled. 9 Despite the form of the prayer for relief in the notice of motion, each judge whose reasons are sought to be recalled is, in my view, required to address that application individually. Accordingly, what follows seeks to explain why I decline to withdraw my published reasons or to resile from the range of orders I have proposed. My reasons also seek to explain why the declaration and orders proposed by Mr Brooker go beyond the scope indicated in my earlier reasons. 10 I have approached the matter on the basis that my power at this stage of the appeal is limited, notwithstanding that final orders have not yet been pronounced, let alone entered, in the appeal. Exactly how limited was the subject of debate at the hearing on 29 November 2007. The principles are helpfully summarised by Heydon JA (with whom Barr J and Smart AJ agreed) in R v Nitin Giri (No 2) [2001] NSWCCA 234 at [17]. 11 At the end of the day, Mr Friend accepted that it was not open to this Court in effect, to entertain an appeal from its own decision. Unless it could be shown that we had misunderstood the issues in the appeal or failed to address them or had denied procedural fairness in resolving them then, as a general proposition, what has been written must stand. It would be for the High Court to determine whether the reasons of the majority embody appealable error, and whether to set aside or vary orders based upon them. 12 The qualification indicated by the words "as a general proposition" flags the possibility that, if we discerned unfairness or miscarriage, then we may have power to rectify it even at this late stage of the appeal. However, for the reasons that follow, I do not perceive any process irregularity that would engage an exceptional power to change direction at this stage of the appeal. 13 I propose to address the matters that Mr Friend pressed. His senior counsel made plain, as was his right, that he did not accept the correctness of all of the propositions stated in my earlier reasons. But equally he accepted that this matter would have to be taken up with the High Court if an appeal ensued from the final orders in the appeal. On this basis, senior counsel for Mr Brooker did not address arguments on those matters either. 14 Friend & Brooker Pty Ltd (the company) had ceased to trade by about 1990. It thereafter concerned itself exclusively in the pursuit of the bitterly contested claim for moneys owing by Eurobodalla Council. During the 1990s discussions between the two directors focussed upon the arbitration proceedings and decision-making as to the order in which company debts should be discharged (J10). 15 Over the years before and after it ceased to trade, the company borrowed from its directors and from outsiders. The directors in turn sometimes borrowed from outsiders and on-lent the money borrowed to the company: Mr Brooker's 1986 SMK borrowing was of this nature. The individual directors were also parties to transactions involving guarantees of borrowings used for company purposes. 16 Mr Friend submits that my reasons proceed from a conclusion that the two directors discharged all but one of the external debts of the company with the proceeds of the debt recovered from the Eurobodalla Shire Council. These included all debts still owing by the directors themselves in respect of their external borrowings for company purposes, except for the SMK loan involving Mr Brooker. I accept that this is a correct understanding of a key step in my reasons (see J12, 18, 45, 52). See also the facts stated by McColl JA in J152. See also the reasons of Nicholas J in Frederick Clarkson Brooker v Friend & Brooker Pty Ltd [2005] NSWSC 395 at [47]. 17 For convenience I repeat two portions of my reasons (J18, 45): 18 Between 1993 and 1998 the company disbursed effectively all of its funds. The details are set out in paras 20-24 of the judgment at first instance (see McColl JA's reasons at [63]). The disbursements were effected pursuant to instructions from the appellant and the respondent jointly. Nothing in the terms of those discussions and instructions involved the appellant relinquishing his claim, repeated from time to time, that he anticipated a final adjustment as between the two men of the burden of discharging the outstanding SMK loan. The effect of these transactions was that the company effectively exhausted its assets in discharging all external obligations and making a series of agreed payments to the two men (in equal amounts) totalling $345,000 paid to each man. … 45 The subsequent arrangement whereby it was agreed that the company would pay interest at Supreme Court rates on the directors' loan accounts was a further recognition that borrowing has a cost that is usually reflected in an obligation to pay interest. But this arrangement did not, in my view, alter or cap the underlying obligation now belatedly called upon (in the circumstances of the company's insolvency) to share in the exoneration of his "partner" as regards the one remaining external debt arising out of the venture. A fortiori, in circumstances where the arrangements entered into by the respondent in the mid 1990s helped bring about the company's repudiation of liability to pay the directors' loan accounts. 18 I would emphasise the dates, because of their relevance to what follows. I was addressing a situation that came about no earlier than 1998 and in consequence of the company having become clearly insolvent. The company had ceased to trade in the early 1990s and was deregistered in 1996. 19 The nub of Mr Friend's application for recall of my earlier reasons is that this conclusion about the unique situation of the outstanding balance of Mr Brooker's obligations under the SMK transaction was said to be both incorrect and based on a misunderstanding as to the issues fought at first instance and on appeal. The relief proposed by myself and McColl JA in the appeal was also said to lie outside the pleadings. 20 Examination of the written and oral submissions in the appeal discloses that Mr Brooker's main claim on appeal, as at first instance, was for what may be termed a general accounting as between the two men who used the company as the primary vehicle for their shared business dealings. To this end, Mr Brooker had argued that the SMK loan played a significant role, albeit that it was not the only matter that was in dispute between the parties. It was nevertheless presented as a "perfect illustration" of the basis of the wider claim for a general accounting (CA Tr 13/03/06 p2). 21 The claim for a general accounting for all direct or indirect contributions of money and time (spanning the period from 1977 onwards) was rejected by Nicholas J and also rejected unanimously in the earlier reasons of the Court (see esp per Mason P at J52, per McColl JA at J133-150, per Basten JA at J180). 22 But an alternative, narrower, claim found favour with the majority of this Court. It confined itself to the continuing burden upon Mr Brooker of the obligation with reference to the SMK loan that he had borrowed for company purposes and on-lent to the company to the extent that that loan remained outstanding. The words "to the extent that that loan remained outstanding" are important because Mr Friend's obligation to contribute that I found to exist stemmed from much more than the circumstances in which the SMK loan was first incurred. My reasons for proposing declaratory and consequential relief referable to the outstanding burden of the SMK loan focus upon matters peculiar to that loan in its creation and partial discharge as well as the circumstances surrounding the company exhausting its assets involving as they did the two men arranging matters in such a way that all other external debts were discharged. It is unnecessary to repeat those reasons and it would be inappropriate in the circumstances for me to enlarge upon them. 23 The possibility that the SMK transaction might be viewed in isolation and by way of a claim for a declaration and/or specific monetary order propounded in the alternative to the "wider claim" for a general accounting was flagged during argument on the appeal (see eg CA Tr 13/03/06 pp38, 42). Counsel addressed on the matter (see eg Mr Newlinds SC at p49). The parties took up the opportunity to file supplementary submissions on the topic and the ambit of relief based upon it. Mr Brooker's submission on relief said: 8. If it were minded to do so, the Court could fashion relief directed at compensation relating only to the circumstances of the 1986 SMK Investments loan. Allegations specific to the SMK investments were made in paragraphs 23 and 24 of the fifth amended statement of claim (Red 6). 24 During the hearing of the present motion, senior counsel for Mr Friend accepted that the matter had been ventilated during the hearing of the appeal. His point is that this Court ought not to have entertained it having regard to the pleadings and the manner in which the case had been fought below. While these points were squarely taken in the supplementary submissions filed after this Court reserved judgment, Mr Friend seeks to put the argument afresh, supplemented with additional evidence about matters that occurred before or during the trial. 25 In my opinion, a narrower claim was propounded in the alternative at first instance (and in the notice of appeal) and no unfairness to the parties flows from the matter having been addressed by this Court in the appeal.

The issues pleaded and fought 26 Mr Friend has submitted that the relief in relation to the SMK obligation that has been proposed by the majority lies outside the pleadings, the prayers for relief at first instance, and the prayers in the notice of appeal. It is contended that the only claim made at first instance was for a general accounting, ie the claim rejected by Nicholas J and by each member of the Court of Appeal. 27 Evidence led in the motion is said to show that Mr Friend and his legal advisers charted their course below on the basis of this understanding about the claim being exclusively one for a general accounting. We were referred to statements made in pre-trial directions hearings and to affidavit evidence that was filed but not read at trial. In Mr Friend's submission, this occurred in consequence of Mr Brooker's case always having been confined to a claim for a general accounting. If this was established, then Mr Friend would have demonstrated a miscarriage justifying intervention even at this late stage in the appeal. The mere fact that the issue lay masked until after delivery of the Court of Appeal's reasons on 20 December 2006 would not be fatal, assuming that bringing the matter to attention at this stage did not fly in the face of the way the appeal itself was fought in this Court. 28 It is perfectly clear that the primary thrust of Mr Brooker's claim at first instance was for a general accounting of all dealings by the two principals, direct and indirect, financial and non-financial. The trial was fought on the basis that if the case for such an accounting as between fiduciaries was made out, then the details would be addressed in the course of that accounting. Accordingly, while both men flagged the possibility that the directors' loan accounts might not tell the full story, neither party sought to prove each and every item of expenditure or work and each payment or receipt that he wished to have brought into that curial accounting. 29 But there was always an alternative claim, much narrower in scope, that isolated the SMK loan and sought relief confined to exonerating Mr Brooker of its burden so far as that loan (made by him and on-lent to the company) remained outstanding by him to his creditors. 30 I shall first trace the indications of that alternative claim in the issues pleaded and fought at first instance and in this Court. 31 The parties went to trial on 6 December 2004 on the basis of Mr Brooker's Fifth Amended Statement of Claim filed on 3 December 2004. I shall set out its relevant parts, while observing that they appear in virtually identical form in at least some of the earlier versions of that pleading. 32 The Fifth Amended Statement of Claim contains the following sections: The parties (ss1-3) The agreement and fiduciary relationship (ss4-8) The Joint Venture (ss9-12) - this pleaded compendiously various dealings from 1977 onwards Failure to Account (ss13-24) Prayers for relief (ss25-37) 33 It is necessary to set out the references to the SMK loan in the pleading. They show to my satisfaction that the SMK transaction was being singled out as an alternative free-standing claim that, if accepted, could result in relief falling short of a general accounting arising out of the entire "joint venture" or "partnership". Paras 21 and 22 relate to the claim for a general accounting, but their terms are presently relevant because of the opening words of para 23 ("In the further alternative"). 13. In November 1986 SMK Investments Pty Ltd ("SMK") offered to advance to the Joint Venture or partnership the sum of $350,000 for the purpose of funding the expenses of the Joint Venture or partnership. … 14. In November 1986 the plaintiff and defendants agreed that the Joint Venture or partnership borrow the $350,000 from SMK. … 15. The Joint Venture or partnership agreed to borrow $350,000 from SMK initially at 19.5% with a reduction to 18% for prompt payment and subsequently at an interest rate 2% above the Westpac Investment loan rate, and the loan was advanced on 8 and 23 December 1986 for the account of the plaintiff. … 17. Interest on the outstanding balance of the SMK loans and borrowing costs of maintaining the loans has been incurred by the plaintiff. … 18. The monies advanced by SMK to the Joint Venture or partnership has been expended for the benefit of the Joint Venture or partnership. … 19. The second defendant as a joint venturer with the plaintiff, or as a partner of the plaintiff in the partnership, had a duty to account to the plaintiff for the second defendant's share of the obligation of the joint venture or partnership to repay the SMK loans. … 21. Mr Friend, in breach of his fiduciary duty to the plaintiff, has failed to account to the plaintiff in relation to the Joint Venture or partnership. 22. In the alternative, the second defendant breached the Agreement by failing to account to the plaintiff, and/or contribute to the payment of the Joint Venture losses and/or debts in accordance with the Agreement, and the plaintiff has thereby suffered loss and damage. 23. In the further alternative, the plaintiff incurred liability to repay the SMK loans personally with the knowledge and consent of the defendants for the purposes of the joint venture or partnership and disbursed the loan moneys to or for the benefit of the joint venture or partnership and thereby for the benefit of the second defendant. 24. To the extent that the SMK loans were expended by the plaintiff to repay debts and pay expenses on behalf of the joint venture and partnership, the SMK loans were expended on liabilities jointly owed by the plaintiff and second defendant as joint venturers or partners, or on items from which the Joint Venture or partnership, and therefore also the second defendant, has materially benefited, and for all of which the second defendant has not recouped the plaintiff, or made contribution to or accounted to the plaintiff, for his share of the liability or benefit to the Joint Venture or partnership, as a result of which the second defendant has been unjustly enriched at the expense of the plaintiff. 34 Most of the prayers for relief were referable to the wider (ultimately unsuccessful) claim for a general accounting. However, paras 31, 32, 34 and 35 provided: 31. An order that the Second Defendant pay to the Plaintiff such amount as may be found due by the Second Defendant to the Plaintiff. 32. Damages or alternatively equitable compensation. … 34. An order that the Second Defendant pay restitution to the plaintiff. … 35. Such further and other orders and directions as may be appropriate.

35 Written submissions filed on behalf of the plaintiff at trial included claims referable to the SMK loan in isolation (Orange 74-6). 36 Nicholas J addressed and rejected a claim that focussed upon a claim for contribution referable only to the SMK loan. His Honour said (at [75]-[76]): 75. There is also no evidence that Mr Friend agreed to be jointly liable for, or to contribute to, the repayment of the SMK loan. It is difficult to accept that, if in truth he held the belief that Mr Friend was equally liable for this loan, Mr Brooker proceeded with the borrowing, and procured the securities from his wife and his mother, without first obtaining Mr Friend's acceptance of such liability. That there is no evidence that there was even discussion as to liability is remarkable having regard to the financial difficulties then facing the company, and the likelihood that it may have been unable to repay Mr Brooker the monies which he had on-lent to it. The absence of evidence as to these matters is, in my opinion, further indication that there was no agreement to the effect claimed in these proceedings. This doubt is reinforced by the delay until about October 1994 when Mr Brooker first claimed that Mr Friend was equally liable for the loan. 76. In reviewing the evidence concerning the SMK loan I have not overlooked that on 30 June 1993 Mr Friend agreed that the company should pay SMK the sum of $250,000.00 in partial repayment of Mr Brooker's borrowing. In his affidavit of 30 April 2004 (para 7) Mr Brooker says that at the meeting on that date Mr Friend altered the amount referable to the loan but said nothing about it. There is no evidence that the issue of joint liability was raised. This occasion provides no support for the existence of the agreement alleged.

37 Mr Brooker's notice of appeal also included matters referable to the SMK matter in isolation. His grounds of appeal included: 11. The trial Judge erred in paragraph [75] and following in finding that there was no evidence of any conversation between the parties in which the Respondent agreed to accept liability for the SMK loan. 12. The trial Judge should have found that the unchallenged evidence was that the Appellant had obtained the Respondent's agreement to the SMK loan, and that the Respondent's said agreement was on a the [sic] basis that he would contribute equally to any loss personally incurred by the Appellant by reason thereof. 38 I accept that these grounds focussed upon the SMK loan at its inception. An even narrower focus emerged during the hearing of the appeal and in the reasons of the majority. As indicated, it factored in additional matters touching the circumstances in which portion of that obligation came to be left unrecouped. My reasoning in the appeal proceeded on the basis that at the end of the day "the two men arranged matters in such a way that all external debts were repaid. The appellant's claim [on the narrower basis] is confined to equalising the burden of the SMK loan." (J52). 39 The prayers for relief in the notice of appeal included: 9. A declaration that the Second Defendant has breached his fiduciary or alternatively his contractual duty to the Plaintiff from in or about January 1995 (or such other date as the Court may find) in failing or refusing to account when called upon by the Plaintiff to do so. 10. An order that a receiver be appointed without security of the undertakings, assets and property of the Joint Venture or partnership including the undertakings, assets and property of the Company. 11. An order that the Second Defendant pay the Plaintiff such amount as may be found due by the Second Defendant to the Plaintiff. 12. Pursuant to Part 72, rule 2, an order that it be referred to a referee for inquiry and report the taking of the accounts the subject of the orders sought in paragraphs 28 and 28A hereof or in the alternative the assessment of damages or equitable compensation. The "hereof" in prayer 12 was a slip and should have been a reference to the latest amended statement of claim. 40 The issues in an appeal are formulated on the appellant's side by the notice of appeal and the written and oral arguments presented; and on the respondent's side by any notice of contention and the written and oral arguments presented for the respondent. 41 Issues in dispute are often refined as litigation progresses. Arguments are recast. Particular factual and legal propositions that once were in dispute become common ground. The obligation to afford procedural fairness requires the court to remain focussed upon the arguments put to it. To go beyond them will usually entail unfairness to one or both of the parties. But to refine and confine them is of the essence of an adversary system that includes an oral hearing. The proposal to restrict relief to the SMK transaction to the extent that moneys were outstanding by Mr Brooker was raised and addressed during the hearing of the appeal and in the supplementary submissions filed after judgment in the appeal was reserved. 42 Mr Friend submits that it would be unconscientious for Mr Brooker to obtain relief because some of the proceeds of the SMK loan were used by Mr Brooker for "personal purposes". In my opinion, this misstates the effect of the evidence cited by Mr Friend which reads (Blue 1/50): The remainder of the SMK loan, after repayment of the secured loans, approximately $57,000, was used in part to pay a number of small unsecured debts and in part as reimbursement for a number of expenses of the business paid by me.

In any event, this argument was addressed by me at J47 and 55. 43 Mr Friend also submits that there are outstanding issues about the present status of the SMK loan, including the appropriateness of allowing Mr Brooker to be recouped his actual interest obligations as distinct from interest at some lesser rate (Outline of Submissions of the Second Respondent, para 23(c)-(f).) These arguments were recognised by me and addressed at J53-55. I remain of the view there expressed. In any event, if my conclusions are erroneous in fact or law, they must be corrected in another place.

Other matters 44 Mr Friend had indicated his intention to claim, in a general accounting, an allowance for work allegedly done by him in the Eurobodalla claim and for payments to third parties he had allegedly made in that context. 45 He submits that forensic decisions about the reading of affidavits and tendering of evidence were made at trial on the basis of his and his lawyers' understanding that all matters of accounting would be addressed if and when a general accounting were ordered. I accept this submission, although it does not assist in the present matter if a narrower claim (not dependent on a general accounting) was propounded in the alternative by Mr Brooker at first instance. 46 It would have been unfair and a denial of procedural fairness to depart from the common understanding that the nuts and bolts of any general accounting were to be addressed if and when an accounting was ordered. But this claim failed and the one that survived was of a different nature. It proceeded on the basis that outstanding disputes about a myriad of transactions that may have occurred before the mid 1990s were irrelevant to the justice of Mr Brooker's claim for contribution with respect to the continuing burden of the unique SMK debt. 47 There was a directions hearing before the trial judge on 9 November 2004. The hearing was set to commence on 7 December 2004. Mr White, counsel for the plaintiff, objected to the late filing by the defendant of an accountant's report and additional affidavits sworn by Mr Friend on 1 and 3 December 2004. Mr White argued that this material went to the details of the accounting that the plaintiff sought to have ordered at the trial. It was argued that, since all that the plaintiff was seeking was an order that he was entitled to an account, this later material was both irrelevant and burdensome. 48 Nicholas J said that he was not going to make a ruling at that stage. Nevertheless, his Honour indicated general agreement with Mr White's submission. 49 On 11 November 2004 Mr Brooker's solicitor wrote to his counterpart stating: We are given to understand that our respective Counsel have discussed the report of Dolman Bateman and have agreed that the report would be more appropriate to any issues arising out of the taking of accounts. The taking of accounts would occur after the liability hearing. Accordingly we consider that it would be unnecessary, and premature, to consider that report in detail with a view to articulating objections to it at this juncture. 50 Later pre-trial correspondence also confirmed a common understanding that the scope of the hearing would be "limited to determining issues of liability". I do not overlook the fact that statements to this effect were usually accompanied by observations that the detailed accounting would take place, if at all, before the Master and at a later stage in the proceedings if the plaintiff established his entitlement to the general accounting he was seeking. 51 I do not see this correspondence as having foreclosed the right to press for more limited relief. Everything really turns upon the scope of the pleadings and the way the case was actually conducted at the trial when it commenced on 6 December 2004. 52 The accountant's report prepared on behalf of Mr Friend was never pressed into evidence at trial but it has been placed before us. It records that Friend & Brooker Pty Ltd was "maintained until 1994/1995 due to pending litigation proceedings". The report addressed the relationship of the two men over the whole period of their dealings in what was referred to as their joint venture. There was a passage in which the accountant explained why, in his view, Mr Brooker's assessment of the amount owing between the two men was inaccurate (see pp4, 9-13). I would, however, observe that this addressed what may be termed the claim for a full accounting of all dealings and it examined transactions spanning the period between 1984 and 31 December 1994. I view this material as relevant only to the issue on which Mr Brooker ultimately lost at first instance and in this Court. The fact that the expert accountant was addressing these matters casts no useful light on the question whether an alternative case based upon post 1994 transactions confined to the SMK loan balance was in play. 53 Before parting with the accountant's report, I observe that he records (p9) that:

We are advised that the bank and all external creditors of the company were paid or settled [by 31.12.94]. 54 Mr Friend has further submitted that this Court erred in fact when it found that the SMK loan was the only external debt of the business which remained unpaid. 55 I cannot accept this submission. Nicholas J had found (at [47]) that the SMK loan was the only external debt not repaid. This was Mr Brooker's unchallenged affidavit evidence (Blue 43). It was the very position put to Mr Brooker in cross-examination at trial (Black 50-51, 96-97). Mr Friend did not appeal against this finding of fact, nor did he dispute it in submissions. During the appeal, the fact that the SMK loan was the only external debt that remained unpaid was mentioned on several occasions without any contradiction from those representing Mr Friend. The possibility that this peculiarity might be a factor contributing to the justice of making a special order was squarely debated in this Court (see CA Tr 13/03/06 pp42, 44, 48-9). 56 The additional external obligation now said by Mr Friend to stand alongside the SMK loan has been referred to as the "Friend family loan". Evidence of Mr Brooker at trial recognised that in November 1986 relatives of Mr Friend had paid $182,754 to the ANZ Bank upon a guarantee given in relation to a loan from the Bank to the company upon which the company defaulted. Mr Brooker did not dispute this transaction, although it was his claim that the Friend family members were repaid by the company out of the proceeds of the Eurobadalla claim well before the mid 1990s (Black 12). That assertion was supported by Mr Brooker's evidence at the trial (Blue 85, 492). 57 Mr Friend led no oral evidence at the trial. The affidavits that he prepared, yet did not read at the trial, were nevertheless placed before us in the motion. 58 The Court was taken to paras 60, 66, 81, 117, 127 and 156 of an affidavit of Mr Friend sworn 3 November 2003. This material does not assist. The affidavit was not read at the trial; the material is irrelevant or at least equivocal on the issue of the uniqueness of the situation presented with reference to the unpaid balance of the SMK debt; and the proposition it is said to support is directly contrary to what was represented to this Court during the appeal in relation to the unique status of the outstanding SMK debt. The reason why the material is equivocal on the present issue is that it does not clearly state that the borrowings from the family of Mr Friend that are discussed in some of the identified paragraphs of the affidavit themselves remain unpaid. 59 Mr Friend also points to discussions between the two men and to draft accounts prepared on their behalf in which the burden of the SMK loan was sought to be brought to account along with a myriad of other claims. In my view, these matters do not assist. The time-frame of these discussions was 1995 at the latest. In other words, the discussions show Mr Brooker's undisputed entitlement to have the initial burden of the SMK loan transaction brought to account in the general accounting that the men were discussing at that time. This is really water under the bridge, an aspect of the claim for a general accounting that the Court has rejected. The rights that I have recognised relate to later dealings referable to the continuing burden of the outstanding balance of the SMK loan obligation that Mr Brooker was left holding after all other external debts were met and after the company's coffers were exhausted in the series of mutually agreed drawings that took place in the latter part of the 1990s.

Orders 60 Accordingly, the motion for recall of the Court's reasons should be dismissed with costs. 61 The appellant proposed orders, some of which ventured back into the territory of a general accounting. Others went beyond the narrow scope of the orders as to the SMK transaction that I indicated my willingness to make in the earlier reasons. 62 I propose the following orders to dispose of the appeal although, for reasons set out below, I would allow a limited further opportunity for the parties to address them:

Set aside the orders of Nicholas J made on 29 April 2005.

Declare that the second respondent is required to contribute equally to the discharge of the appellant's outstanding obligations under the borrowing of $350,000 from SMK Investments Pty Ltd made in 1986.

Order that there be a reference to an Associate Judge of the Equity Division to determined the sum due under the said declaration and in accordance with paras 53 and 54 of the reasons of Mason P delivered on 20 December 2006.

Order that the second respondent pay the sum thus determined to SMK Investments Pty Ltd within 28 days of being served with a minute of the determination of the Associate Judge.

Order that the second respondent pay the appellant's costs of the appeal and have a certificate under the Suitors' Fund Act 1951 if qualified. 63 It would appear that the parties have overlooked addressing on the question of costs referable to the hearing at first instance in the light of the relief that this Court is disposed to make. 64 According to an inquiry of the Equity Registry that I have had conducted, Nicholas J ordered that the plaintiff pay the defendant's costs of the proceedings on the usual basis, such costs not to include the defendant's costs in attending to callovers on 25 August 2003 and 2 October 2003. 65 In his proposed orders Mr Brooker seeks that Mr Friend pay all of his costs at first instance. Such an order goes well beyond the justice of the case. The claim for it may well have proceeded from Mr Brooker's ambitious claim for a general accounting (that was tentatively renewed in the hearing of the motion) and/or an accounting referable to the SMK transaction going beyond the limited basis of the orders I had foreshadowed. 66 I incline to the view that there should be no order as to the costs at first instance given (a) the rejection of the claim for a general accounting that occupied the greater part of the attention of the parties at first instance and (b) the limited success of Mr Brooker in relation to the SMK matter. 67 I propose that the parties be afforded one further opportunity, within the next 7 days, to address in writing the orders foreshadowed in these reasons. The Court will then proceed to make final orders without further consultation unless it proves necessary. 68 The formal orders that I propose are therefore:

1. Motion to recall the Court's reasons dismissed with costs.

2. Direct the parties to file submissions as to final orders within 7 days. 69 McCOLL JA: The second respondent, Nicholas Macarthur Friend, seeks an order that I recall pars [152], [155], [156], [162] and [163] of my reasons for judgment delivered on 20 December 2006: Brooker v Friend & Brooker and Anor [2006] NSWCA 385 (the "principal judgment"). He also seeks an order that Mason P recall the entirety of his reasons for judgment. As I indicated in the principal judgment (at [61]) the first respondent took no part in the trial, so that it was appropriate to refer to Mr Friend as the respondent. I shall continue that course in these reasons. 70 The impugned paragraphs state: "152 It is apparent from the facts I have recited that the relationship between the parties was an evolving one. It is reasonable to infer, as the primary judge did, that their intention in 1977 was to conduct their business purely through the company and any other corporate structure as they may be advised would facilitate immunity from personal liability from trading debts. However, once the company's financial circumstances deteriorated, they agreed to borrow from family and friends to keep the company afloat. By and large, particularly in the case of the SMK loan, those loans were treated as monies borrowed by each party and were reflected as director's loans in the company's books. There do not appear to have been any discussions about the terms of such borrowings (e.g. as to rate of interest, security etc) nevertheless by 1995 all the loans made by family or friends had been repaid with company funds by reimbursing the relevant director and crediting his loan account. Only the SMK loan remained outstanding . At the time all other debts were repaid, the company had $690,000 which was insufficient to repay the SMK loan and which the parties agreed (albeit the appellant says his agreement was under protest, subject to a final accounting) to divide equally, although it should be noted that the distribution of the $690,000 was eked out between 1995 and 1998 rather than distributed in a lump sum. The respondent says, in effect, that this is unfortunate, but it is the appellant's problem. … 155 The circumstances in which the SMK loan was undertaken exemplified the relationship. It appears to have been one of the largest personal borrowings. It was undertaken at a time when the company needed to repay external creditors to remain financially viable to pursue the litigation against Eurobodalla Council. It was the success of that litigation (to which the appellant devoted his energies for many years) which brought $2,7286,44 into the coffers and enabled the parties to repay all but the SMK loan . It is unnecessary to find that the parties personally borrowed those funds to conclude that, by virtue of their fiduciary relationship, the respondent is prima facie liable to account to the appellant in relation to the SMK loan. 156 Accordingly, subject to the Notice of Contention point, I would propose the following declaration: "That there existed between the appellant and the respondent between 1977 and 1995 a quasi-partnership which gave rise to a fiduciary relationship and an obligation to account to each other to equalise contributions and losses arising from the SMK loan" … Laches, acquiescence and delay … 162 In my view neither the passage of time nor the appellant's receipt of a distribution from the company instead of insisting on its payment to SMK prevents the Court from granting the appellant equitable relief. The respondent has been on notice of the appellant's claim since at least 1995. He could not, in my view, properly have thought that it had been abandoned. While the respondent might be said to suffer detriment to the extent that interest has accrued on the SMK loan, any such detriment can be met by formulating terms as to, for example, the interest rate and the period for which the respondent should bear liability. 163 Since preparing these reasons I have read Mason P and Basten JA's draft judgments. I agree with Mason P that the principles of contribution are an alternative route to the outcome I propose. I also agree, with respect, with his Honour's analysis of Basten JA's judgment and with the relief his Honour proposes." (emphasis added) 71 There are two bases upon which it is put that I should recall the impugned paragraphs. The first is that pars [152] and [155] proceed upon a fundamental misapprehension as to a critical fact, that the SMK loan represented the only debt unpaid by Friend Pty Ltd v Brooker (the "Company"). The respondent submits that that misapprehension tainted the declaration I proposed (par [156]) which was limited to an obligation to account arising from the SMK loan, and also my consideration (at [157] - [162]) of the defences of laches, acquiescence and delay. 72 The second basis upon which the respondent submits I should recall the impugned paragraphs of my reasons is that, having regard to the way the case was conducted, it was inappropriate to limit (at [156]) the relief proposed to the SMK loan. The respondent submits that that relief would have extended to all outstanding debts owed by the Company to each of the two directors if it had been recognised that other debts, in addition to that relating to the SMK loan, were outstanding. 73 The misapprehension as to the state of accounts is also said to have led to me wrongly dismissing the respondent's defences of laches and acquiescence for reasons with which Mason P agreed. This is because that dismissal looked to the circumstances surrounding the lapse of time in relation to the appellant's claim for contribution to repayment of the SMK loan, rather than as relating to a request for an accounting of all transactions entered into between the parties dating back to the formation of the Company in mid 1997. 74 Finally, the respondent asked that I recall par [163] of my reasons in which I agreed with Mason P that the principles of contribution were an alternative route to the outcome I proposed. 75 I have had the benefit of reading Mason P's reasons in draft. His Honour has declined to withdraw his judgment on the issue of contribution for reasons with which I agree and, accordingly I do not withdraw par [163]. 76 I would add some further observations to Mason P's analysis of the circumstances in which a Court may recall a judgment. 77 As Mason P has indicated the critical question to consider in determining whether the relevant paragraphs should be withdrawn is whether there has been a "process irregularity". 78 The circumstances that will justify recalling a court's orders must be quite exceptional: State Rail Authority of New South Wales v Codelfa Construction Pty Ltd (No 2) [1982] HCA 24; (1982) 150 CLR 29 (at 38) per Mason and Wilson JJ. However the public interest in the finality of litigation will not preclude the exceptional step of reviewing or rehearing an issue when a court has good reason to consider that, in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law. That jurisdiction is not to be exercised, inter alia, because the party seeking a rehearing has "failed to present the argument in all aspects or as well as it might have been put." An applicant for review or rehearing of an issue must demonstrate that "the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing": Autodesk Inc v Dyason (No 2) [1993] HCA 6; (1993) 176 CLR 300 (at 302-303) per Mason CJ. The High Court has unanimously endorsed the validity of Mason CJ's remarks in Autodesk notwithstanding that his Honour dissented as to the outcome of the reopening application in that case: Elliott v The Queen; Blessington v The Queen [2007] HCA 51; (2007) 82 ALJR 82 (at [32]). 79 Here one of the bases upon which the respondent asks that the impugned paragraphs be recalled is that it was inappropriate to propose that relief be limited to the SMK loan in circumstances where the appellant had run his case on the basis that if he were successful, a general accounting would be ordered. However as Mason P has demonstrated separate relief based on the SMK loan was sought in the pleadings and the prospect that the relief sought might be so confined was expressly raised in the course of the appeal. 80 Refining issues in the way the discussion proceeded during the appeal in relation to the relief is consistent with the Court's power to "give any judgment … which ought to have been given or made or which the nature of the case requires": s 75A(10), Supreme Court Act 1970. 81 The plenary power conferred by s 75A(10) is amplified by r 51.52 of the Uniform Civil Procedure Rules 2005 which permits the Court of Appeal to exercise its power under the Civil Procedure Act 2005, the Supreme Court Act and the Uniform Civil Procedure Rules notwithstanding there being no appeal from some part of the decision below (UCPR 51.52(1)(a)), that a party had not appealed (UCPR 51.52(1)(b)), that a ground for, in substance, disposing of the appeal, was not included in any notice of appeal, cross-appeal or notice of contention (UCPR 51.52(1)(c)) or that there has been no appeal from some other decision in the proceedings (UCPR 51.52(1)(d)). Further, the Court "may, on terms, make any order to ensure the determination on the merits of the real question in controversy": UCPR 51.52(3). The tenor of UCPR 51.52 is to require the Court of Appeal to focus on the real issues. 82 In considering the proper exercise of its s 75A(10) power, the fact that an appeal to the Court of Appeal involves a rehearing (s 75A(5)) must also be borne in mind. In every such appeal, "a judgment of the appellate court is required both on the facts and the law": Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 (at [29]) per Gleeson CJ, Gummow and Kirby JJ. 83 The requirements to give such judgment as the nature of the case requires and to determine the real question in controversy provide a focus for hearings before the Court of Appeal. As Mason P has pointed out (at [41]) "[i]ssues in dispute are often refined as litigation progresses", that process being "of the essence of an adversary system that includes an oral hearing". The amplitude of the Court of Appeal's powers must also be considered in the context of the requirement that the overriding purpose of, inter alia, the rules of court "is to facilitate the just, quick and cheap resolution of the real issues in the proceedings": s 56(1), Civil Procedure Act. 84 It not uncommon for "an appellate court [to] perceive a case in a way dramatically different from the case that was run at trial": Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 (at [3]). While the Court must be conscious of "the damages of reconstruction upon appeal" (Mastronardi v New South Wales [2007] NSWCA 54 (at [70]) per Basten JA (Ipp and Campbell JJA agreeing)), if a case was open on the pleadings, the evidence and the way the proceedings were conducted, it is consistent with the provisions of the Supreme Court Act and the UCPR for the Court of Appeal to dispose of it accordingly. 85 In the light of those observations I turn to the respondent's complaints about my conclusions that "[o]nly the SMK loan remained outstanding" and that it was appropriate to confine the declaration I proposed to that loan. 86 I agree with, and gratefully adopt, Mason P's analysis of the way the case was pleaded and fought. As his Honour says (at [29]) there was always an alternative claim confined to the SMK loan. Further, the proposition that relief might be confined to the SMK loan was raised in the course of the appeal hearing and expressly advanced by the appellant in supplementary submissions. 87 The proposition that SMK was the only remaining creditor was also the case for which the appellant contended at trial: Brooker v Friend & Brooker Pty Ltd [2005] NSWSC 395 (at [47]). The respondent led no evidence to contradict this assertion at trial, nor did his Counsel cross-examine the appellant to dispute this assertion. Indeed, he put to the appellant (Black 97) that: "Q. The last remaining money was received at the end of 1994 and all the other creditors, external creditors were settled shortly thereafter. The bank and all the other external creditors? A. Yes." 88 Further the appellant's assertion that SMK was the "one remaining creditor" was explored on appeal in the following exchanges on 13 March 2006: "( T 14) MASON P: Was SMK the only debt that was channelled in by a loan account? Were all the other debts directly owed by the company?

FORSTER: Some were made directly to the company, some debts, particularly from outside organisations were made directly into the company, some loans were made directly into the company, security being provided by one or other or both of the two individuals or their families.

MASON P: And there was no need for them to be accounted for if they were ultimately paid off.

FORSTER: That is so your Honour, and they were all ultimately paid off , the only one that remains unpaid off is this so called third SMK loan, the big one …

( T 42 ) McCOLL JA: Presumably Mr Newlinds also over the time in which this company conducted its business some of those loans advanced by the directors were repaid with they being the conduits to their families from the company's funds, that's also the appellant's case as I understand it.

McCOLL JA: That's why he says the SMK loan fell into that category and should be treated differently.

NEWLINDS: The reason it is treated differently is because the company ran out of money, so that's no answer to his case. I mean that's all very unfortunate if the one creditor who was left unpaid was Mr Brooker's friend, but that doesn't give Mr Brooker a cause of action, he needs to make good this overarching agreement or fiduciary relationship for which he contends.

( T 47 ) BASTEN JA: Your introductory statement was 'Mr Friend treated it differently' so now you must explain in what way he treated it differently if I'm to understand your point.

FORSTER: All of the other debts to third parties - I'll leave aside for a moment the Friend family loan, I'll come back to that - but all the other debts to third parties were paid off by these two men.

BASTEN JA: With interest? Was there a contribution to interest on all the other debts treated as part of the equal responsibility? Did Mr Brooker say that?

FORSTER: Can I take it in one stage? Whatever the claims were made by third parties, an agreement was reached, whether that included interest or not or whether there was a discount or not, all of the external or third parties were paid and fully satisfied by agreements between the appellant and the respondent.

FORSTER: And out of the company's funds. The only debt owing to a third party which did not fall into that category was the Peterson debt, the SMK debt, and that is because Mr Friend said, "I don't accept liability for the debt to the Petersons". (emphasis added ) 89 Mr Newlinds did not gainsay Mr Forster's assertion that the SMK loan was the only debt which remained outstanding. 90 As to the respondent's submission that confining relief to the SMK loan confounded the basis on which the case had been run that if the appellant was successful a general accounting would be ordered, I agree with Mason P that these propositions were squarely raised both by the Court and, ultimately, the appellant. The material the respondent now seeks to put before the Court seeks to contradict the factual propositions advanced at trial and in this Court as to the status of the SMK loan. 91 In my view the respondent's challenge to the impugned paragraphs which depend upon the status of the SMK loan is an attempt to re-agitate arguments already considered by the Court and reveal that the respondent now realises he has "failed to present the argument in all its aspects or as well as it might have been put". As I have said, the jurisdiction to review or rehear an issue is not enlivened in such circumstances: Autodesk (at 303) per Mason CJ. 92 I decline to recall the impugned paragraphs. 93 I agree with the orders Mason P proposes. 94 BASTEN JA: The application before the Court does not raise any issue with my reasons for judgment. It is not, therefore, necessary or appropriate for me to enter upon the nature of the exercise sought to be undertaken by other members of the Court. 95 Nor, given that I would dismiss the appeal with costs, need I consider the form of the orders appropriate to give effect to the opinions of the majority. **********

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