Capitalink Pty Ltd v Withnall

Ltd v AM Green Investments Pty Ltd [2012] NSWCA 225 Rialto Sports Pty Limited v Cancer Care Associates Pty Limited [2022] NSWCA 146 Robinson v Harman (1848) 1 Exch 850 Russo v Aiello (2003) 215 CLR 643; [2003] HCA 53 Shalhoub v Buchanan [2004] NSWSC 99 Sunbird Plaza Pty Limited v Maloney (1988) 166 CLR 245; [1988] HCA 11 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35 Tabcorp Holdings Limited v Bowen Investments Pty Limited (2009) 236 CLR 272; [2009] HCA 8 Way v Latilla [1937] 3 All ER 759 Texts Cited: IM Jackman, The Varieties of Restitution (2nd ed, 2017, Federation Press) JD Heydon, Cross on Evidence (13th ed, 2021, LexisNexis) RM Goode, Payment Obligations in Commercial and Financial Transactions (1st ed, 1983, Sweet & Maxwell) Category: Principal judgment Parties: Capitalink Pty Ltd (Appellant) Marc Douglas Withnall (Respondent) Representation: Counsel:

S A Lawrance SC (Appellant) P Knowles SC with M Connor (Respondent)

Centurion Lawyers (Appellant) Macpherson Kelley (Respondent) File Number(s): 2023/445571 Decision under appeal Court or tribunal: District Court of New South Wales Jurisdiction: Civil Citation: [2023] NSWDC 547 Date of Decision: 07 December 2023 Before: Abadee DCJ File Number(s): 2021/357102

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The Appellant, Capitalink Pty Ltd (Capitalink), brought a contractual claim against the Respondent, Mr Marc Withnall, pursuant to a promise by the latter to guarantee the performance by Development Delivery Construction Pty Ltd (DDC) of its contractual obligations in relation to the development of six partially completed townhouses located on land in Queensland (the Property) which was purchased by the Appellant. The guarantee was contained in a so-called Deed of Agreement (the Deed) between the Appellant and DDC to which the Respondent was also a party. It was common ground that DDC had failed to complete its obligations under that Deed. The Appellant sued the Respondent on the guarantee to recover damages in the sum of $479,935.08, plus interest and costs. This sum was comprised of past and future costs associated with the completion of the project. Although many (but not all) of the invoices issued by third party contractors in relation to past costs were addressed to the Appellant, two companies other than the Appellant, namely LBT Corp Pty Limited (LBT) and Ray White Tingalpa (Ray White), who was appointed by the Appellant as the managing agent of the Property, paid the invoices in respect of past work, including those that had been issued to the Appellant. A large number of other invoices said to relate to past costs incurred to complete DDC's obligations were addressed to First State Pty Limited (First State) but also paid by LBT. The Appellant's principal witness was Mr Andrew Kavanagh who was "one of the ultimate beneficiaries of the shares held on trust by Lisa Maree Young" in the Appellant. Ms Lisa Maree Young was the sole and beneficial shareholder of Capitalink. Mr David Kavanagh was the sole director and secretary of LBT. LBT registered a first ranking registered mortgage over the property on 30 July 2018. Ms Lorraine Young, Andrew Kavanagh's mother-in-law, was the sole director and secretary of both First State and Capitalink. None of David Kavanagh, Lisa Maree Young or Lorraine Young gave evidence in the proceedings. Mr David Whitting of Teak Projects Pty Ltd (Teak) was engaged by the Appellant and First State to manage the completion of the townhouses in mid-2019 and he prepared a report in December 2021, detailing "expenditure incurred to date by Capitalink or anticipated to be expended to enable completion of a … 6 dwelling Multi Unit Dwelling" (the Teak Report). Andrew Kavanagh gave evidence of and limited to his belief that there was an understanding between Capitalink and each of LBT and First State that LBT/First State would pay the financial obligations of Capitalink as and when required and that Capitalink would repay those monies on demand. No documents were tendered which recorded or otherwise documented this understanding such as any loan account as between the companies referred to. The primary judge held that the Respondent's guarantee pursuant to the Deed was contractually valid and binding but that the Appellant had not established a right to substantial damages on the basis that it had not proved that it was liable for the amounts that had been (past costs) or would be (future costs) paid to complete the project. His Honour awarded nominal damages in the sum of $100 and ordered that the Appellant pay the Respondent's costs of the proceedings: Capitalink Pty Ltd v Withnall (No 2) [2023] NSWDC 547. On appeal, the Appellant challenged the findings in relation to the past and future costs. The thrust of submissions made on appeal in respect of past costs was that they were incurred by LBT for the benefit of the Appellant and that, pursuant to the law of restitution and/or the doctrine of implied contract, the Appellant was legally obliged to reimburse LBT such that the Appellant had suffered loss and damage for which the Respondent was ultimately liable under the guarantee. The Respondent contended that this argument was not run at first instance and could not be raised on appeal. In the case of the costs paid by Ray White, the Appellant argued that those costs were paid from a trust account in the Appellant's name (the Ray White Trust Account) such that they were a measure of loss suffered by the Appellant. The Court held (Bell CJ, Leeming and Stern JJA agreeing) upholding grounds 2 and 7 of the appeal and entering judgment in favour of the Appellant in the sum of $133,160.51 (being $113,239.78 in relation to future costs and $19,920.73 in relation to a portion of the past costs, being payments made from the Ray White Trust Account): 1. In relation to the future costs, Mr Whitting's evidence of his understanding in respect of those costs did not supply a basis upon which the present case could be distinguished from the orthodox principle that, to establish loss and entitlement to payment under the guarantee, all that the Appellant needed to establish was that the development was still defective because DDC admitted non-performance of its obligations, and the costs claimed for remediation were necessary and reasonable: [32]. Robinson v Harman (1848) 1 Exch 850, Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, Tabcorp Holdings Limited v Bowen Investments Pty Limited (2009) 236 CLR 272, Clark v Macourt (2013) 253 CLR 1, Sunbird Plaza Pty Limited v Maloney (1988) 166 CLR 245, Bellgrove v Eldridge (1954) 90 CLR 613, Rialto Sports Pty Limited v Cancer Care Associates Pty Limited [2022] NSWCA 146, referred to. 1. The restitutionary argument underpinning the challenge to the findings in relation to past costs was sufficiently in play at first instance notwithstanding that it went beyond the pleadings. No question of prejudice arose to the Respondent in this circumstance: [49]. Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, Coulton v Holcombe (1986) 162 CLR 1, Progressive Pod Properties Pty Ltd v AM Green Investments Pty Ltd [2012] NSWCA 225, Dare v Pulham (1982) 148 CLR 658, referred to. 1. An understanding of the kind referred to by Andrew Kavanagh in his affidavit evidence is one that would be expected to be reflected in documents such as loan accounts and financial statements of each of the companies or in deductions claimed in tax returns. No such documents were in evidence nor was the mortgage tendered or any evidence led as to what it secured. The unexplained failure of David Kavanagh, Lisa Maree Young and Lorraine Young to give evidence also permitted the negative inference to be drawn that their evidence would not have assisted the Appellant's case: [66]-[70] (Bell CJ), [85] (Leeming JA). CBRE (V) Pty Ltd v City Pacific Ltd (in liq) [2022] NSWCA 54, Lumbers v W Cook Builders Pty Ltd (in liq.) (2008) 232 CLR 635, Progressive Pod Properties Pty Ltd v AM Green Investments Pty Ltd [2012] NSWCA 225, O3 Capital Pty Ltd v WY Properties Pty Ltd (2016) 49 WAR 517, Birmingham and District Land Co Ltd v London and North Western Railway Co (1886) 34 Ch D 261, Way v Latilla [1937] 3 All ER 759, Israel v Foreshore Properties Pty Ltd (in liq.) (1980) 54 ALJR 421, Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234, Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, Russo v Aiello (2003) 215 CLR 643, Blatch v Archer (1774) 1 Cowp 63, G v H (1994) 181 CLR 387, Ho v Powell (2001) 51 NSWLR 572, Cook's Construction Pty Ltd v Brown [2004] NSWCA 105, Shalhoub v Buchanan [2004] NSWSC 99; Australian Securities and Investments Commission v Rich [2009] NSWSC 1229, Jones v Dunkel (1959) 101 CLR 298, Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361, referred to. 1. The evidentiary onus which lay on the Appellant was not discharged in relation to the past costs issue and the material relied upon by the Appellant was insufficient to establish an implied promise to repay the Appellant. Such an implication is less readily drawn where the parties involved were part of a "family" group of companies: [72] (Bell CJ), [87] (Leeming JA). CBRE (V) Pty Ltd v City Pacific Ltd (in liq) [2022] NSWCA 54, referred to. 1. Ray White paid third party creditors from funds held by it in the Appellant's name in the Ray White Trust Account. These payments evidenced the fact that, to the extent of those payments, the Appellant was out of pocket in relation to payment for work the performance of which the Respondent had guaranteed and entitled to damages to the extent of those payments: [77].

JUDGMENT

1. BELL CJ: This appeal from the decision of Abadee DCJ (the primary judge) flows from a contractual claim by the Appellant, Capitalink Pty Ltd (Capitalink), against the Respondent, Mr Marc Withnall, pursuant to a promise by the latter to guarantee the performance by Development Delivery Construction Pty Ltd (DDC) of its obligations in relation to a residential development in Queensland. The guarantee was contained in a so-called Deed of Agreement (the Deed) between the Appellant and DDC to which the Respondent was also a party.
2. It was common ground that DDC had failed to complete its obligations under that Deed. In fact, DDC entered external administration on or about 9 March 2017 and was deregistered on 12 September 2020.
3. The Appellant purchased land (the Property) upon which upon which there was already a partially completed multi-unit dwelling comprising six townhouses on 30 October 2014. It became the registered proprietor of the Property on 1 July 2016.
4. The Deed, which was executed on 23 December 2015, related to the completion of the development. By cl 1 of the Deed, DDC was obliged: "… in return for the consideration payable to it under this Deed (of $229,720.000) complete all of the outstanding works required to the Townhouses in a good and workmanlike manner, pay all statutory fees and statutory/council contributions, and do all such things necessarily required such that; a) The Townhouses are fully completed … and otherwise clean and tidy and able to be rented to residential tenants; and b) DDC will obtain the signed/ approved strata subdivision linen plan from the Local Council in registrable form …"
5. Clause 2 of the Deed provided that: "Capitalink will pay to DDC a fixed sum of $229,270.000 (incl gst) as consideration under this Deed ("the Consideration"), as follows: a. $229,270.000 paid to DDC upon completion of all its obligations under this Deed. b. DDC warrants to complete the Works as quickly as possible but in any event by no later than 8 weeks from the execution of this Agreement. c. DDC shall be responsible as part of its obligations under this Deed for preparing, lodging and obtaining final signatures from the Local Council in relation to the strata subdivision linen plan for the Townhouses, along with obtaining all necessary statutory approvals in connection with the construction and separate strata titling of the completed Townhouses. DDC must provide the full building, structural and product warranties for the completed Townhouses and provide all necessary documentation in relation to such warranties to Capitalink. DDC must provide to Capitalink all certificates including ALL structural, plumbing, electrical, waterproofing, glazing, acoustics in relation to the property … … h. MW [Marc Douglas Withnall] agrees to personally guarantee to Capitalink all of the obligations of DDC under this Agreement. …"

The primary judgment

1. On 7 December 2023, the primary judge held that the Respondent's guarantee pursuant to the Deed was contractually valid and binding but that the Appellant had not established a right to substantial damages on the basis that it had not proved that it was liable for the amounts that had been (past costs) or would be (future costs) paid to complete the project. His Honour made a limited award of nominal damages in the sum of $100 and also ordered that the Appellant pay the Respondent's costs of the proceedings: Capitalink Pty Ltd v Withnall (No 2) [2023] NSWDC 547 (the primary judgment or PJ).
2. The thrust of submissions made on appeal in respect of past costs was that they had been incurred for the benefit of the Appellant by LBT and Ray White and that, pursuant to the law of restitution and/ or the doctrine of implied contract, the Appellant was legally obliged to reimburse LBT such that, pro tanto the expenditure which had been made by LBT, the Appellant had suffered loss and damage for which the Respondent was ultimately liable under the guarantee. In the case of expenditure made by Ray White, the Appellant's position was that Ray White had paid certain invoices from its trust account in the Appellant's name. This is addressed under appeal ground 7.
3. The essence of the primary judge's reasoning was as follows: "[145] It is apparent that none of the invoices Capitalink relied upon to establish its claim for past incurred losses were actually paid by Capitalink; even though many invoices were addressed to it. In numerical terms (rather than in value terms), most were paid by LBT. Some were paid by Ray White Tingalpa, the managing agent. [146] It is also apparent (Exhibit 1, being p 61 of Ex BLSI) that rent from the occupation of the properties appears to have been paid to LBT and it was from LBT's account out of which the managing agent, Ray White Tingalpa, deducted its fees; even though the managing agent identified the client as Capitalink. [147] I infer that LBT is a shorthand reference to LBT Corp Pty Ltd. Andrew Kavanagh's brother, David, is the sole director and secretary of that company. LBT has a mortgage over the Property. It may be further inferred that LBT had provided the loan finance for Capitalink to purchase the Property. [148] As to the part of its claim that concerns expenses incurred to the date of the hearing, it was LBT who paid the expenses directly, or indirectly, through the managing agent deducting from an account in LBT's name. It appears that Capitalink was, essentially a passive owner of the Property. [149] In my opinion, Capitalink's difficulty cannot be sidestepped by pointing, in vague terms (ie Andrew Kavanagh's subjective understanding) about the closeness of the connection between LBT and Capitalink. For one thing, there was an absence of admissible proof as to what those connections or arrangements actually were. There were not, for example, any ASIC searches to disclose information about membership of the companies which might, conceivably, have proven that they one of more were subsidiaries of a holding company within a corporate group. Further, given that LBT was a mortgagee, Capitalink might (barely) have adduced evidence about the existence of secured loan arrangements, but that only facilitated proof of Capitalink's obligation to make loan repayments to LBT. It did not adduce evidence of obligations with LBT viz a viza rental receipts and expenses associated with the Property itself. So Capitalink's first problem is evidentiary in nature. [150] More fundamentally, however, to assimilate LBT's position to Capitalink's position would be to deny their separate status as companies, a fundamental tenet of company law (Saloman v Saloman & Co Ltd [1897] AC 22). Counsel for Capitalink submitted that LBT was a family company that has an interest (T 136.48, 139.33) and invited the Court to infer that that Capitalink would bear liability for the expenses. Even if, for the sake of argument, LBT and Capitalink were proven to be companies within a family group of companies, Australian law, solidly entrenched since 1976, is that entities within corporate groups are separate entities, with the consequences that assets of companies within the group cannot be pooled to pay for debts incurred by each company within the group and debts incurred by each company belong to the particular company and not the group collectively. It is not enough that they are acting in a general way to benefit each other. [151] I agree with Mr Withnall's submission that it would be necessary for Capitalink to show that Capitalink is legally obliged to reimburse LBT for payments the latter entity made to the contractors and other suppliers engaged to complete the 'works' left unperformed by DDC. This it did not do, either by documents or admissible testimonial evidence. [152] Counsel for Capitalink argued that the circumstance that LBT received rent whilst paying expenses to improve the Property facilitated the Court's inference of Capitalink being ultimately liable to LBT and invited the Court to presume that it had liability to LBT. I am unable to accept that argument. It is not surprising that an arrangement would be made that LBT would receive rent as a quid pro quo for paying out expenses. As a mortgagee it had its own interest in the improvement of the condition of the Property. Capitalink also had its interest in the improvement of the Property for potential resale purposes. These circumstances are not compelling in identifying how Capitalink itself bore liabilities by reason of LBT's payments of the expenses in connection with complete of the property. There is no basis for any such presumption. [153] The same position pertains to First State Pty Ltd, the entity that had engaged (and apparently paid) Mr Whitting for Teak's services. Similarly, it was said about that this company that there is a family connection between First State's manager (Lorraine Young) and Andrew Kavanagh. [154] Further, to reason that LBT was paying expenses for the benefit of Capitalink does not advance Capitalink's position. Capitalink's Counsel disclaimed any submission that LBT (or First State) could be regarded as acting as Capitalink's agent in its dealings with the third parties for the purposes of works on this development project (T 138.40). [155] Without proof that it has suffered loss or losses, Capitalink cannot prove that any losses caused by DDC can be sheeted home to DDC and, therefore Mr Withnall."

The Notice of Appeal and challenges to factual findings

1. The Appellant raised the following grounds of appeal: "2 The learned trial judge erred in finding that the future cost remaining to complete the works ($113,239.78) was not a measure of loss suffered by the appellant. … 5 The learned trial judge should have found that the past costs of completing the works paid by LBT Corp and First State were paid by them at the request of the appellant. 6 The learned trial judge should have found that the appellant was liable to reimburse LBT Corp and First State for costs paid by them to complete the works (alternatively, for payments made by LBT Corp and First State that discharged a liability of the appellant to the payee). 7 The learned trial judge erred in finding that the past costs of completing the works paid from the rent account ($19,920.73) were not loss suffered by the appellant."
2. The following factual findings of the primary judge were also challenged and are relevant to ground 7 of the Notice of Appeal: "1. The appellant challenges the finding at J [145] that the managing agent, Ray White Tingalpa, deducted its fees from an account of LBT. 2. The appellant challenges the findings at J [148] (repeated at J [161]) that expenses paid by the managing agent, Ray White Tingalpa (a) were paid by deduction from an account in LBT's name and (b) were paid by LBT indirectly."
3. (The reference in the first challenge to PJ [145] was mistaken; the correct reference was to [146]. Nothing turned on this, as it was plain from the Appellant's written submissions that the reference should have been to PJ [146].)

Ground 2

1. Ground 2 of the appeal related to the primary judge's refusal to award damages in relation to the future costs of works required to be undertaken as at the time of the hearing in order to put the Appellant in the position it would have been in had DDC complied with its obligations under the Deed, it being contended that the primary judge erred in finding that the future costs remaining to complete the works ($113,239.78) were not a measure of loss suffered by the Appellant.
2. A preliminary matter to be noted is that his Honour did accept that the future costs, i.e. the costs required to be incurred to complete DDC's obligations under the Deed that had been guaranteed by the Respondent, amounted to $113,239.78: PJ [169]-[171]. It follows that, if his Honour erred as a matter of principle in relation to ground 2, no question of quantum or quantification arises.
3. By ground 2 of the appeal, the Appellant contends that the primary judge erred in holding that it was necessary for the Appellant to prove that it "undertook to become liable to other entities" in respect of future costs: see PJ [156]. Rather, the Appellant put that it was entitled to the damages claimed because those damages were required to put it, as nearly as possible, in the position it would have been in had DDC completed the project, citing in this regard classical statements as to the purpose of compensatory contractual damages in cases such as Robinson v Harman (1848) 1 Exch 850 at 855, Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80, 98, 117, 134, 148 and 161; [1991] HCA 54, Tabcorp Holdings Limited v Bowen Investments Pty Limited (2009) 236 CLR 272; [2009] HCA 8 (Tabcorp) at [13], Clark v Macourt (2013) 253 CLR 1; [2013] HCA 56 at [26] and Sunbird Plaza Pty Limited v Maloney (1988) 166 CLR 245 at 255; [1988] HCA 11.
4. The Appellant also referred to Bellgrove v Eldridge (1954) 90 CLR 613 at 620; [1954] HCA 36 (Bellgrove) and Rialto Sports Pty Limited v Cancer Care Associates Pty Limited [2022] NSWCA 146 at [112]-[113]. In the latter case, it had been argued that certain lot owners could not recover damages insofar as remedial works to the common property had not yet been undertaken and the lot owners could never undertake those works themselves. Gleeson JA, with whom Macfarlan JA and I agreed, rejected this argument, holding by reference to Tabcorp at [13]-[15] that the lot owners could recover the costs of rectification of incomplete or defective building work in accordance with the contract, and noting, by reference to Bellgrove, that it is not the point that the work may be never done by the owners corporation. In Bellgrove, Dixon CJ, Webb and Taylor JJ said (at 620): "It was suggested during the course of argument that if the respondent retains her present judgment and it is satisfied, she may or may not demolish the existing house and re-erect another. If she does not, it is said, she will still have a house together with the cost of erecting another one. To our mind this circumstance is quite immaterial and is but one variation of a feature which so often presents itself in the assessment of damages in cases where they must be assessed once and for all."

Grounds 5 and 6

1. Grounds 5 and 6 of the appeal were that the primary judge should have found that: 1. "the past costs of completing the works paid by LBT Corp and First State were paid by them at the request of the Appellant"; and 2. "the Appellant was liable to reimburse LBT Corp and First State for costs paid by them to complete the works (alternatively, for payments made by LBT Corp and First State that discharged a liability of the appellant to the payee)." In fact, as the Appendix to these reasons shows, while First State was invoiced for some of what were claimed as past costs, the invoices issued to it were paid by LBT. So also, First State did not itself pay any invoices issued to the Appellant.
2. In support of these grounds, Mr Lawrance raised what was essentially a restitutionary argument in support of these two grounds based upon implied requests (by the Appellant to LBT to pay third party invoices largely issued to the Appellant) and corresponding implied promises on the part of the Appellant to repay LBT.
3. On this theory, that restitutionary obligation as between the Appellant and LBT/First State, as a result of the latter companies' discharge of the former's obligation to third party contractors, would underpin the Appellant's claim of loss and corresponding right to compensation by the Respondent pursuant to the guarantee. This form of analysis was explained by Leeming JA (with whom Brereton JA and I agreed) in CBRE (V) Pty Ltd v City Pacific Ltd (in liq) [2022] NSWCA 54; (2022) 365 FLR 45 (CBRE) at [32]: "… if there is to be an implied loan, what matters is not so much an implicit request, but rather an implicit promise to repay. A moment's pause enables this to be seen. An implicit or explicit request to make a payment discharging the obligation of another may amount to a gift, or it may be a form of financial accommodation giving rise to an obligation to repay. What matters for the purpose of the legal character of the transfer of money is whether the person whose obligation has been discharged by the payment has impliedly promised to repay the payer. Obviously, much will depend on the nature of the relationship. If the parties are at arm's length then a promise to repay may be discerned more readily. On the other hand, if the parties are related, the same implied promise may not so readily be discerned."
4. Behind these observations there lies a vast body of case law, some of which was expressly relied upon by Mr Lawrance including Lumbers v W Cook Builders Pty Ltd (in liq.) (2008) 232 CLR 635; [2008] HCA 27 (Lumbers) at [89]; Progressive Pod Properties Pty Ltd v AM Green Investments Pty Ltd [2012] NSWCA 225 at [36], [47], [59]-[60] (Progressive Pod); O3 Capital Pty Ltd v WY Properties Pty Ltd (2016) 49 WAR 517; [2016] WASCA 82 at [74]-[78] (O3 Capital); CBRE at [32]-[36]; IM Jackman, The Varieties of Restitution (2nd ed, 2017, Federation Press) at 125-128.

Was the argument "in play" at first instance?

1. Mr Lawrance referred to a number of matters to suggest that the issue was "in play". What follows are the principal matters referred to and relied upon.
2. First, he submitted that it was obvious from well before the trial and the evidence filed that, notwithstanding the pleaded case, the Appellant had not itself directly paid any of the invoices which collectively comprised the "past costs". In this circumstance, Mr Lawrance submitted that the Appellant could only succeed on the question of past costs at least if there was some argument based upon an "implied loan" or implicit agreement that the Appellant would repay LBT and First State and that this must have been clear to the Respondent.
3. Second, this was made even more clear by para 12 of Andrew Kavanagh's affidavit reproduced at [16] above. Although that paragraph was objected to, it was not an objection other than as to its form, including any attempt to rely on it for hearsay purposes. It was not objected to on the basis that it was irrelevant to the case and it was admitted, albeit subject to a limitation under s 136 of the Evidence Act 1995 (NSW). While that ruling no doubt diminished the forensic and evidentiary force of para 12 of Andrew Kavanagh's affidavit, the key point emphasised by Mr Lawrance was that it showed how the Appellant was putting its case at first instance, and that this was not said to be irrelevant by the Respondent.
4. Third, that the Respondent appreciated how the Appellant was seeking to put its case (even if only in part and perhaps without the greatest clarity), was supported by reference to the Respondent's own opening oral and written submissions. Paragraphs 55-59 of the written opening referred to para 12 of Andrew Kavanagh's affidavit and stated: "Most of the invoices claimed have not been issued to Capitalink and, as such, the Court would not accept that it is liable for those invoices and has suffered any relevant loss. That is amplified by the evidence that most if not all of the invoices, if they have been paid, have not been paid by Capitalink; they have been paid by either LBT Corp Pty Ltd (LBT) or First State Pty Ltd (First). In a faint attempt to address this issue, Mr Kavanagh asserts that there is some 'understanding' between Capitalink and each of LBT and First that they will pay expenses on behalf of Capital Link. [This was the reference to [12] of Mr Kavanagh's Affidavit]. Mr Kavanagh is not a director, or otherwise an officer of Capitalink or a shareholder of Capitalink and does not state how he is aware of the purported understanding. There is no evidence of when the understanding was formed, how the understanding was formed, whether there was correspondence or conversations between the directors of the respective entities or the limits to the understanding. Lorraine Young is the director of both Capitalink and First and, without explanation from Capitalink, has not given evidence in the proceedings. Also, David Kavanagh, the director of LBT, without explanation from Capitalink has ailed to give evidence in the proceedings. That is, each of the individuals who control the entities said to be part of the understanding have not given evidence. The Court would draw an adverse inference in those circumstances. Further, Capitalink has not adduced any of the documents which would be expected to support its assertion regarding the existence of the understanding in that it has not adduced any: a) loan documents suggesting intercompany loans. b) contemporaneous correspondence between Capitalink, LBT and First requesting or agreeing to make payment. c) financial statements or other accounting records to show intercompany liabilities. d) evidence of any demands by LBT or First. e) documents showing repayments made by Capitalink to LBT or First. f) tax returns showing the accounting treatment of the payments or understanding."

Was there an implied request and an implied promise to repay?

1. This was not a case, at least on the evidence before the Court, where third party payments were made by LBT as a result of an express request or authorisation by the Appellant, although they undoubtedly did benefit the Appellant on the assumption that its creditors have not pursued the Appellant and would appear to have treated the debts as having been discharged. In the case of an express request to pay, it has been described as "trite law" that a party who acted on the request is entitled to an indemnity from the requesting party, a classic restitutionary obligation (see Israel v Foreshore Properties Pty Ltd (in liq.) (1980) 54 ALJR 421 at 423) although, as Leeming JA (with whom I agreed) observed in CBRE, that decision is "not authority for the proposition that in every case a person who makes payment without consideration at the request and for the benefit of another is entitled to an indemnity" (emphasis added): at [34]. His Honour pointed to the fact that the proposition was styled as a "'general principle', its being grounded in a concept of implied contract, and the references to equitable principles and the possibility of identifying a contrary intention" as "all tell[ing] against there being any such rule."
2. Accepting this, a request to make a payment might be implied from slight circumstances (Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 at 241) and, as Professor Goode observed many years ago now, "a deliberate officious payment of another's debt is relatively rare": RM Goode, Payment Obligations in Commercial and Financial Transactions (1st ed, 1983, Sweet & Maxwell) at 24. But everything turns on the context, circumstances of the case and the evidence adduced. The careful and qualified language of the Western Australian Court of Appeal in O3 Capital at [76] to the effect that "… in a commercial context, it might (generally speaking) readily be inferred that a party laying out money for another person would have an expectation to be repaid, and that the other person, knowing of the payment, might be inferred to have knowledge of that fact" underscores the point that ultimately one is addressing a question of fact, and that is how the primary judge correctly approached the question.
3. As has been noted, the invoices in relation to past costs which were addressed to the Appellant, their dates, the amount claimed and by whom they were paid are set out in the Appendix to these reasons. The Appendix also sets out those past costs taken from the Teak Report which were invoiced to Ray White and First State.

Ground 7

1. This ground of appeal related to $19,920.73 of expenses (involving some 17 separate payments) which were paid out by Ray White from its trust account in the name of the Appellant on account of expenses that had been identified in the Teak Report as past costs in respect of the development.
2. Ground 7 was that the primary judge "erred in finding that expenses paid by Ray White Tingalpa had been paid, indirectly by LBT as opposed to the appellant". The Appellant also raised the two factual challenges noted at [21] above relating to PJ [146] and [148]. Those paragraphs, with those parts of his Honour's reasoning under challenge underlined, were as follows: "[146] It is also apparent (Exhibit 1, being p 61 of Ex BLSI) that rent from the occupation of the properties appears to have been paid to LBT and it was from LBT's account out of which the managing agent, Ray White Tingalpa, deducted its fees; even though the managing agent identified the client as Capitalink. … [148] As to the part of its claim that concerns expenses incurred to the date of the hearing, it was LBT who paid the expenses directly, or indirectly, through the managing agent deducting from an account in LBT's name. It appears that Capitalink was, essentially a passive owner of the Property."
3. It was ultimately accepted in argument by Mr Knowles that references in these two paragraphs to "LBT's account" and "an account in LBT's name" were erroneous and that the account was the Ray White Trust Account in the Appellant's name. Once this error was acknowledged, consistent with a concession that was made at first instance, namely that "[i]n the schedule provided to Court summarising the invoices claimed by Capitalink, the only invoices which appear to have been paid by Capitalink, albeit through Ray White, total $20,627.48…". At PJ [126], the primary judge had recorded the concession in the context of summarising the Respondent's argument, namely that "a large preponderance of the invoices were not ultimately paid by Capitalink at all: an exception was an aggregated amount ($20,011.48) which was only indirectly paid by Capitalink" (emphasis added). For reasons which are not entirely clear, the sum sought on appeal in relation to the Ray White payments was $19,920.73 as opposed to $20,011.48.
4. The fact that Ray White also paid money out of the Appellant's trust account to others including LBT did not assist the Respondent on this aspect of the argument or indeed more generally. Such payments did not alter the fact that Ray White paid third party creditors from funds held by it in the Appellant's name. Subject to the argument considered in the next paragraph, such payments evidenced the fact that, to the extent of those payments, the Appellant was out of pocket in relation to payment for work the performance of which the Respondent had guaranteed.

Conclusion

1. For the above reasons, although the Appellant was unsuccessful in relation to grounds 5 and 6, the appeal should otherwise be allowed.
2. The orders of the primary judge should be set aside and, in lieu thereof, there should be judgment for Capitalink in the sum of $133,160.51, being $113,239.78 in relation to future costs and $19,920.73 in relation to the payments from the Ray White Trust Account. To the figure of $133,160.51 should be added interest.
3. My view is that costs should follow the event, both in relation to the trial and the appeal.
4. LEEMING JA: I agree with the Chief Justice that, for the reasons he gives, this appeal should be allowed on grounds 2 and 7, but dismissed on grounds 5 and 6. The Chief Justice has explained how whether Capitalink's implied obligation to repay LBT and First State was sufficient to satisfy its claim on the guarantee was both outside its pleadings but nonetheless within the scope of the arguments raised at trial so as not to entitle the respondent to prevent these grounds from being raised in this Court, and I have nothing to add. The Chief Justice has also explained why Capitalink has failed to discharge its onus. I wish to add the following reasons not because I disagree with those of the Chief Justice, but in recognition of the quality of both sides' submissions on an issue as to which my mind has wavered both during and after the hearing.
5. I fully recognise that, consistently with the authorities to which the Chief Justice referred, it is not difficult to infer an entitlement to be repaid, even when related companies discharge each other's obligations. The most important consideration which leads me to conclude that Capitalink did not discharge its onus of establishing a liability to be repaid, is that there was so much that Capitalink could have done to establish its liability to LBT and First State, without undue difficulty if there were ordinary financial statements available, and if not, by testimonial evidence. Capitalink chose to put forward a lengthy affidavit from Mr Kavanagh in support of its case, but that affidavit merely expressed the casual statement that there was an "understanding" that payments made by LBT and First State were "taken to be monies lent by LBT Corp/First State to Capitalink" which were repayable on demand. If the statement were correct, it might be expected that two loan accounts would be readily capable of being produced. Similarly, Mr Kavanagh identified the mortgage, but made no effort to identify the obligations secured by it.

APPENDIX Appendix - Capitalink Pty Ltd v Withnall (676659, pdf)

Amendments 19 July 2024 - Changed "Capital Link" to "Capitalink" in Order 2 on Coversheet. 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: 19 July 2024