Hopper v D J Sincock Pty Ltd

Court of Appeal (NSW)|2021-09-29|Before: Brereton JA, McCallum JA

Background

In early 2016, Mr Sincock announced that he wished to leave the Partnership, and sought return of his investment of $195,000, plus the amount that he claimed to have paid as tax on unpaid dividends (said to amount to a further $200,000). However, the Partnership was by then in default of its obligations to CNH Industrial Capital Australia Pty Ltd ("CNH") which, prior to 2016, provided finance for the Partnership's acquisition of floor stock, and was seeking to refinance. DLL was prepared to provide finance, but only if Mr Sincock and DJS were parties to the arrangements.
There ensued a number of conversations between Mr Sincock, Mr Hopper, and Mr Henley. First, in or around February or March 2016, all three met at Mr Henley's home in Condobolin. According to Mr Sincock, whose version was accepted by the trial judge, he said: "I want to get out of the business. It's too much stress for me and causing mental health issues." Mr Hopper said: "We're happy for you to get out." Mr Sincock said: "All I want back is the money that I put in and the tax that I paid on the dividends that I never received." Mr Hopper said: "We want that as well. Do you understand all the documents and guarantees that you've signed?" Mr Sincock said: "I want exclusions from all the documents and guarantees as well." Mr Hopper replied: "Well that will take a little bit of organising." [5]

The Bailment Agreement

In the Bailment Agreement, the "Bailee" was defined as LVM as agent for LVMH in its own capacity and as trustee for the Hopper Family Trust, DJS in its own capacity and as trustee for the Sincock Family Trust, and Dags in its own capacity and as trustee for the Henley Family Trust. The "Guarantor" was defined as including, jointly and severally, Mr Hopper, Mr Sincock, and Mr Henley. "Transaction" was defined as meaning "this agreement and each bailment".
Clause 6.2 ('Security') was as follows: "As security for payment of any money due to DLL under a Transaction, Bailee agrees to mortgage all of the freehold interests and, if allowed under the relevant lease, leasehold interests in land held by Bailee at any time during the currency of any Transaction including, without limitation, any interest of Bailee in the Properties. This clause survives the termination of, or the acceptance of repudiation of, any Transaction."
Clause 9.2 ('DLL's Right to lodge a caveat') provided: "DLL may at any time lodge a caveat to protect its interest in the real property of Bailee or Guarantor granted under clause 6.2 or clause 15.7 and Bailee and Guarantor consent to DLL lodging any such caveat."
Clause 15 ('Guarantee and Indemnity') relevantly provided: "Extent of Guarantor's obligations. 15.1 By signing this agreement, the Guarantor acknowledges that the Guarantor could become liable to pay DLL: a. under the guarantee in clauses 15.3 and 15.4; b. under the indemnity in clauses 15.5 and 15.6; c. costs and other expenses under clause 15.8; and d. interest under clause 15.9, if clause 15.9 applies, and the guarantor acknowledges that it mortgages its real property as security under clause 15.7. … Guarantee 15.3 In consideration of DLL agreeing to enter into each Transaction with the Bailee the Guarantor guarantees that Bailee will pay DLL all amounts payable under each Transaction when they are due. This guarantee continues until all these amounts have been paid in full. … Further security 15.7 As further security for payment of any money due to DLL under a Transaction, the Guarantor agrees to mortgage all of the freehold interests and, if allowed under the relevant lease, leasehold interests in land held by the Guarantor at any time during the currency of any Transaction including, without limitation, any interest of the Guarantor in the Properties. This clause survives the termination of, or the acceptance of repudiation of, any Transaction."
The Bailment Agreement was executed by DJS by its directors Mr and Mrs Sincock. The execution page included provision for execution also by LVM, LVMH, and Dags. Each of Mr Hopper, Mr Sincock, and Mr Henley also signed separate "Certificate[s] from Guarantor", in which each stated: "DLL has drawn my attention to the Guarantee and Indemnity set out in Clause 15 of the Bailment Agreement. I acknowledge the recommendation from DLL to obtain legal and financial advice before signing the document. I am satisfied that I am fully aware of the nature of the document and of the risks associated with signing it. I do not regard the obtaining of legal or financial advice as necessary and I prefer to proceed without it. I declare that I am executing the guarantee and indemnity voluntarily."
The signatures of each of Mr Hopper, Mr Sincock, and Mr Henley as guarantors and on the "Certificate[s] from Guarantor" were purportedly witnessed by one Mr Brenton Paech. However, Mr Sincock says that Mr Paech was not present when he signed the documents, and there is no evidence to the contrary.

Subsequent events

It seems that on 31 March 2016, Mr Jim Main, a solicitor acting for the Sincock interests, sent an email to Mr Damian Scroope, a solicitor acting for the Hopper interests. The contents of that email are not in evidence, but a subsequent email from Mr Main to Mr Scroope of 14 April 2016 was, relevantly, as follows: "Hello Damian, Subsequent to our email of 31 March your client Gary Hopper has contacted ours (David Sincock) to largely repudiate the proposed settlement. Given the extraordinarily limited rights our clients have under the agreement they have limited negotiating ability. I don't know to what extent your client has conveyed his position to you but my understanding is that the position is as follows: …"
The email stated that Mr Sincock's proposal in relation to an agreement for his exit from the Partnership included: "5. The clause in relation to personal guarantees should be varied so as to create a positive obligation to seek a release of our clients from any liability. Further, we request that the indemnity be extended to include your client Gary Hopper personally. We understand Case IH has already agreed to the transaction so presumably will not have a problem in releasing our client from the guarantee." and that it was understood that Mr Hopper's response to this proposal was: "Agreed that our clients [Sincocks] be released from the guarantees but (A) it would have to be actioned by them and paid for by them and (B) your client [Hopper] will not give a personal indemnity."
There followed protracted correspondence and negotiations about the terms of Mr Sincock's exit, including as to the release of personal guarantees. It is notable that nowhere in this correspondence is there to be found any assertion on behalf of Mr Sincock that a binding arrangement had already been reached.
Some days after signing the Bailment Agreement at Lake Cargelligo, Mr Sincock asked Mr Henley about "his money", to which Mr Henley replied: "We're working on it". Mr Sincock continued to raise the issue every couple of weeks, receiving substantially the same reply, until 2 June 2016, when Mr Hopper requested a meeting to "discuss your pending exit from Sincock LVM". However, no such meeting eventuated. Mr Sincock resigned as a director of LVM on 8 June 2016 and thereafter had nothing to do with the business nor any contact with either Mr Hopper or Mr Henley, but DJS remained a partner in the Partnership. [12]
On 21 September 2018, receivers and managers were appointed to LVM, and it went into voluntary liquidation on 11 December 2018. DLL demanded payment of the moneys outstanding under the Bailment Agreement, which, as at 2 April 2019, amounted to $808,874.86. Mr Hopper, without reference to Mr Sincock or Mr Henley, negotiated a settlement with DLL, and on 6 May 2019 executed an agreement by which he promised to pay DLL $200,000 in full settlement of DLL's demand. On 7 June 2019, solicitors acting for Mr Hopper sent a letter of demand to DJS and Dags, asserting that they were jointly and severally liable, and demanding payment of $200,000. [13]

The judgment below

Mr Hopper's case at trial was confined to reliance upon a contractual term, said to be implied in the Bailment Agreement, to the effect that he was entitled to be indemnified by the three companies for any amount he was required to pay DLL as a guarantor under clause 15. There was no claim for restitution nor for contribution in equity. [14] DJS denied that there was any such implied term, and alternatively relied on a defence of promissory estoppel. The primary judge held that there was no implied term, essentially because it would have been inconsistent with Mr Sincock's protestations that he would only sign the agreement if he would be paid out and able to leave the business without any ongoing liabilities. [15] Her Honour also indicated that, had it been necessary to decide it, the defence of promissory estoppel would also have been upheld. [16]
At trial, the critical issue was whether Mr Hopper's guarantee was given "at the request of" the principal debtor. Her Honour held that it was not, by reason that: 1. Mr Hopper did not say that Mr Sincock requested the guarantee. To the contrary, it was Mr Hopper and Mr Henley who approached Mr Sincock to sign the Bailment Agreement, which contained the guarantee; [17] 2. There was no evidence that Mr Sincock requested "that he provide a guarantee: rather the obverse. Mr Sincock was most reluctant to provide a guarantee and explicitly told Mr Henley that he would only provide the guarantee if he was assured that he would not be liable for the company's debts or pursuant to the guarantee"; [18] and 3. The basis upon which Mr Sincock signed the Bailment Agreement was fundamentally different from the basis upon which Mr Hopper did so: Mr Hopper wanted finance for the business to continue, while Mr Sincock wanted funds to be available for him to leave the business, and although he was still a member of the Partnership he was not working for it when the Bailment Agreement was executed. [19]
The appellant contends that (contrary to the primary judge's conclusion) there was a request made by the principal debtor - which was not DJS but the Partnership - that Mr Hopper provide the guarantee (grounds 1 and 2), and alternatively that the guarantee was given with the knowledge of the principal debtor in circumstances sufficient to give rise to an implied indemnity (ground 3). The respondent contends that the appellant ought not be permitted to propound a case based on a request by the Partnership; that in any event there was no such request; that the supposed implied term was excluded by the circumstances; and alternatively that the judgment below should be upheld on the basis of equitable estoppel. The respondent also cross-appeals from the dismissal of its claim for contribution against the other defendants, should the appeal succeed.

The guarantor's implied contractual right of indemnity

It was at first instance and remains uncontroversial that, where a guarantor gives a guarantee at the valid request of the principal debtor, there is, in the absence of an express right of indemnity, an implied contract of indemnity, or an implied term in the contract of guarantee to similar effect. [20] There is no such express or implied contract of indemnity if the guarantee is furnished without the request or knowledge of the principal debtor. [21] In Batard v Hawes, Lord Campbell CJ said: [22] "To support the action for money paid, it is necessary that there should be a request from the defendant to pay, either express or implied by law. Where one party enters into a legal liability for and at the request of another, a request to pay the money is implied by law from the fact of entering into the engagement; and, if the debt or liability is incurred entirely for a principal, the surety, being liable for him at his request, and being obliged to pay, is held at law to pay on an implied request from the principal that he will do so."
Thus, the mere fact that a guarantor gives a guarantee is not enough to establish a request. [23] However, a request may be inferred from the circumstances. [24] It suffices if the principal debtor knew that the surety intended to guarantee its debts and acquiesced in the provision of the guarantee for the benefit of the debtor; in such a case, the debtor company is taken to have requested the guarantee, and the guarantor will have an implied right of indemnity; and if the principal debtor be a company, it will be bound in that respect by the knowledge and acquiescence of the majority of its directors. [25]
The appellant's alternative contention is that knowledge (without request) suffices to create a contractual right of indemnity. In Re TVSN Ltd, Young CJ in Eq said: [26] "However, whatever the result of that exploration, whether a surety is liable under a guarantee or an indemnity, the surety is entitled to be indemnified on the same legal basis. In the context of guarantees proper, such a right will be found to exist unless the guarantee was furnished without the request or knowledge of the principal debtor. By parallel reasoning, therefore, TVSN's subsidiaries would be entitled to be indemnified by TVSN unless they provided the guarantee and indemnity to St George without TVSN's request or knowledge."
In Weatherly v Mann, a husband signed a guarantee of a proposed overdraft on his wife's account, limited so as not to exceed £2,800 and interest. The wife did not sign the document, and there was no evidence that she ever requested it or was aware of its existence. After the guarantee was called on, the husband sued the wife for "money paid by the plaintiff for the defendant at her request". Moffitt AP held that in the face of a comprehensive deed of settlement in relation to their financial arrangements, there was no room for an implied promise to arise outside its terms. [27] Hardie JA also held that the matter was dealt with under the deed of settlement. [28] However, Hutley JA said: [29] "The sheet-anchor of the husband's case was Re a Debtor [1937] 1 All ER 1, where it was decided that the right to indemnity arises immediately when the guarantee is executed. It is to be noted, however, that this guarantee was given at the request of the debtor (see p7) and this, in my opinion, is fundamental. It is true that Halsbury 3rd Ed Vol 18 s873 states: 'Although a person cannot make himself a creditor of another merely by volunteering to discharge that other person's obligation, it seems that, even where a guarantee is given without any antecedent request, the surety will be entitled to be reimbursed by the principal debtor if the surety can bring himself within the principle which enables a person, who has been compelled to make a payment for which another person is ultimately liable and of which that person obtains the benefit, to recover payment from that other person.' For the proposition Re a Debtor and Anson v Anson [1958] 1 QB 638 are relied upon. Both these cases, however are instances of guarantees which were entered into on request and are not authorities for the broad proposition stated in Halsbury. Whether or not it is true that a guarantee entered into without request can give rise to a right of indemnification, it does not follow from this proposition that a guarantee entered into without knowledge can give rise to a right of indemnification. In Rowlatt on Principal and Security 3rd Ed p185 the learned author said: 'It has at any rate never been decided in this country (ie England) that a person who guarantees the debt of another without his knowledge can recover over against him in his own name. It has, however, been held in America that such a guarantor may recover against the principal upon the same ground that a surety may recover contribution against a co-surety to whom he was unknown, the principle being an equitable one and founded upon the right of the surety to the remedies of the creditor.' In my opinion Mr Mann cannot sue to recover the moneys which he paid to satisfy the Bank under the guarantee into which he entered without establishing that the execution of this guarantee was done with the knowledge of his then wife."
While these two cases might lend some support to the proposition that knowledge, without request, could suffice, they do not do so in decisive terms. Moreover, it would be a curious result if a contractual indemnity could be implied in circumstances where the principal debtor did not in some way assent to it; consensus underpins contract. For that reason, I do not accept that mere knowledge suffices; to establish a contractual (as distinct from an equitable) basis for relief, [30] some element of concurrence is required. However, that element will readily be found where, at the time that the principal obligation is incurred, the principal obligor is aware that the guarantor has given or will give a guarantee.

Request by the principal debtor

The principle to which reference has been made directs attention to whether there was a request by the "principal debtor". The primary judge so stated the proposition. [31] Her Honour also noticed the proposition, referred to above, that if the majority of the directors of a debtor company knew that the surety intended to guarantee the company's debts and acquiesced in the provision of the guarantee, a request may be inferred. [32] However, her Honour then focussed on whether there had been a request "by Mr Sincock", although at one point this appears to have been confused with whether Mr Sincock was asked to provide a guarantee himself. [33] Mr Hopper's claim is not one to recover contribution from DJS or Mr Sincock in respect of any guarantee either might have given; but to be indemnified by the principal debtors, including DJS, which prior to the refinance must have been correspondingly indebted to the previous financier CNH.
Her Honour concluded that it was not established that any request, express or implied, was made by Mr Sincock to Mr Hopper for a guarantee. However, Mr Sincock was not the principal debtor; the principal debtor was the entity described in the bailment agreement as "Bailee", being LVM as agent for the Partnership. It is clear that LVM, or at least the majority of its directors, and at least a majority of the partners in the Partnership, knew that Mr Hopper would provide a guarantee and acquiesced in his doing so for the benefit of the company and the Partnership. Indeed, the commercial circumstances bespoke a request that he do so. The bailment agreement was one of a suite of documents which provided for the secured finance of equipment to enable the Partnership to continue its business. [34] One of the other documents in the suite of documents was a "Dealer Agreement", which included a provision as follows: "7.1 The term of this Agreement shall be for 36 months commencing on the Commencement Date. This Agreement is automatically extended for successive 12 month renewal periods, unless either party gives Notice to the other of termination at least 90 days prior to the end of the term or any extension thereof or unless termination occurs pursuant to clause 7.2, 7.3, 7.4 or 7.5."
Mr Sincock desired that the refinance proceed, so that the Partnership would be enabled to remain in business and to pay him out, allowing him to extricate himself and recoup his investment. [35] DLL would provide finance only upon personal guarantees from each of Mr Hopper, Mr Henley, and Mr Sincock. The directors of each of the three companies who executed the Bailment Agreement did so both in their capacity as directors, and separately in their personal capacity as guarantors. At the very least, each of the partners knew that each of the directors was giving a guarantee for the benefit of the Partnership business, and acquiesced in those guarantees being given. That is established by the form of the Bailment Agreement, including in particular the execution pages, from which it was manifest that Mr Hopper (as well as Mr Henley and Mr Sincock) had given, or would be giving, a guarantee. In the context that DLL was insisting on the joint and several personal guarantees of each of Mr Hopper, Mr Henley, and Mr Sincock, where refinance was essential to the survival of the business, and where it was also essential to Mr Sincock's extrication from the business, it must be inferred that the Partnership requested that each of the guarantors give their respective guarantees. Moreover, Mr Sincock expressly acknowledged in cross-examination that when he executed the bailment agreement he knew that both Mr Henley and Mr Hopper were to be guarantors as well as himself, [36] that that was "part of the deal", [37] and that the deal was critical for the survival of the Partnership's business. [38] It is clear that Mr Sincock gave his personal guarantee at the request of the Partnership; it is inconceivable that Mr Hopper did not likewise act upon the request of the Partnership. The implication arises not merely from the Partnership's need for a refinance, but from that need coupled with its intention to borrow, and the concurrence of the three partners - including DJS - in the borrowing, via the Bailment Agreement, with knowledge of the terms upon which finance would be provided, including that the guarantees were required. In those circumstances, the assent of the three companies - including DJS - to a Bailment Agreement which was conditional upon a guarantee from Mr Hopper, inescapably conveyed a request that Mr Hopper give the guarantee.
The respondent submitted that there was no evidence of any request by the Partnership, and that all the evidence pointed to the guarantees being given at the request of DLL. That submission is misconceived. The relevant request is implied, not express, and thus the absence of evidence of a request is irrelevant. Moreover, it will almost invariably be the creditor that requires a guarantee, but such a circumstance says nothing as to whether for relevant purposes it is given at the request of the principal debtor. The fact that it is the creditor who requires or insists on a guarantee does not mean that the guarantee is not, for relevant purposes, given at the request of the principal debtor.
The trial judge considered the case to be analogous to Sisic, in that while Mr Sincock knew that the DLL required guarantees from Mr Hopper, and that Mr Hopper had provided or would provide a guarantee, he signed the Bailment Agreement on the express assurance that if he did so, he would be paid out and completely free of the business and the guarantees he had given, and the mere fact that Mr Hopper entered into the guarantee was not enough to establish a request. [39] In Sisic, Ward J (as her Honour then was) declined to find an implied request, in circumstances where the relevant guarantee given by Mr Sisic to Westpac was in a separate document to which Mr Krpo was not a party. Her Honour said: [40] "The difficulty with such a proposition in this case, and the basis of the defence as pleaded, is that the Guarantee is a contract between Mr Sisic and a third party (Westpac). Hence what Mr Sisic is seeking is the implication, into a contract to which Mr Krpo is not a party, of a term imposing an obligation on Mr Krpo. Mr Sisic's claim must fail on that ground."
That distinguishes the present case, where the guarantee is contained in the same document. Otherwise, Sisic turned on whether there was an express request for Mr Sisic to enter into the guarantee, [41] a question which does not arise in the present case.
The respondent objected that it was not open to the appellant to invoke on appeal a request by the Partnership (as distinct from by DJS) as principal debtor, as no such request was pleaded, nor the subject of any evidence from Mr Hopper, nor cross-examination of Mr Sincock. It is true that the Statement of Claim did not expressly plead any such request. Nor did it plead a request by DJS or Mr Sincock, or anyone else; it merely alleged the implied term. The defence explicitly contended that no express or implied request was ever made by DJS. The plaintiff's "Schedule of Issues" embraced the defendants' formulation, identifying as issues: "5. Whether, as alleged by the second defendant, no express or implied request was ever made by it for the plaintiff to provide any guarantee of its obligations under the Bailment Agreement; 6. Whether, if no express or implied request was ever made by the second defendant for the plaintiff to provide any guarantee of its obligations under the Bailment Agreement, there was no implied term that the second defendant would indemnify the plaintiff in respect to any payment by the plaintiff as guarantor to DLL."
At first instance, the parties did not engage with the distinction between the Partnership and the second defendant DJS in this respect, in the manner in which they now do. That, it seems to me, was because at trial the focus was understandably on DJS, in circumstances where only DJS disputed liability. However, in opening submissions, reference was made to an express or implied request "by the principal debtor" - although the distinction between DJS and the principal debtor was at times elided. [42] More particularly, in closing submissions, counsel for Mr Hopper said (emphasis added): [43] "In my submission the request that is relevant in this case is the request of the principal debtor and that's the partnership. It's not the second defendant in its own capacity. Your Honour knows the partnership comprised of the three defendants. This Court, with respect, is not searching for a request from the second defendant per se. In circumstances where each of the defendants assumed joint and several liabilities to DLL, pursuant to a contract to which they were all party and where DLL insisted that a director of each of the defendant companies was required to provide a personal guarantee to guarantee the performance by the partnership as bailee of its obligations and where the guarantee covenants themselves formed part of the bailment agreement itself. Each of the relevant directors gave a personal guarantee at the time that the bailment agreement was executed. The Court can readily conclude, in my submission, from the conduct and circumstances including the relation of the parties, that there was an implied request".
This submission did not provoke any objection that it did not reflect the case pleaded and conducted. To the contrary, towards the end of his submissions, Counsel for DJS said (emphasis added): [44] "It was said by my friend that the request was made by the partnership. But that denies the fact that this was all entered into by a, on a fundamentally different basis. It's true that the agent entered into this and your Honour will, if your Honour looks at the bailment agreement which is, it's not necessary. But your Honour will see that unsurprisingly, Lachlan Valley Machinery, the two directors Mr Hopper and Mr Henley signed on behalf of it and it might have made a request on the basis of this sort of common state of mind that one sees in some of these cases that are relied on by my friend. But the second defendant, well its governing mind is Mr Sincock and Mr Sincock's state of mind was I'm signing this so I can be free of the business and as a matter of implied request, it doesn't stand up."
In my judgment, the case was not pleaded nor conducted in a manner which precludes Mr Hopper from contending, as was the fact, that the relevant principal debtor was the Partnership.

Inconsistent agreement and equitable estoppel

The respondent submitted that implication of the right of indemnity was inconsistent with and excluded by the express assurance given to Mr Sincock that he would have no further involvement "including liability on a guarantee" and would execute the bailment agreement only "if I am paid out and completely free of the business and all the guarantees", and alternatively that the doctrine of equitable estoppel precluded Mr Hopper from insisting on his legal right to recover from DJS indemnity in respect of the amount paid by him to DLL. The pleaded estoppel was as follows: "(c) in or about March 2016, at various times before the second defendant executed the Bailment Agreement, in various telephone calls between Mr Sincock and Mr Henley and at a meeting between Mr Sincock and Mr Henley at Lake Cargelligo, Mr Henley (for and on behalf of himself, the plaintiff, the first defendant and the third defendant) represented that: (i) the business of the Partnership would not survive unless the parties signed the Bailment Agreement (so as to provide equipment finance to the Partnership); and (ii) if the second defendant executed and delivered the Bailment Agreement, then it would be paid its share of the value of the Partnership business and it would have no further liability for the debts of the Partnership, (March 2016 representations); … (d) The second defendant, in reliance upon the making of the … March 2016 Representations … executed the Bailment Agreement and delivered it to Mr Henley; … (e) by relying upon the … March 2016 Representations … the second defendant acted to its detriment by executing the Bailment Agreement and thereby potentially incurring a liability to DLL or to the guarantors (including the plaintiff) with respect to the debts of the Partnership; (f) had the second defendant known that the plaintiff would seek to recover from the second defendant any amount paid by the plaintiff to DLL pursuant to the terms of the Bailment Agreement, then the second defendant would not have signed the Bailment Agreement; (g) it would be unfair or unconscionable for the plaintiff to resile from the … March 2016 Representations … and to insist that the second defendant has a liability to the plaintiff for any amount paid by the plaintiff to DLL pursuant to the terms of the Bailment Agreement; and (h) in the premises, the plaintiff is estopped from asserting that the second defendant has a liability to pay to the plaintiff the monies that are the subject of the plaintiff's claim in these proceedings."
The possibility that there might be circumstances in which a right of indemnity is excluded by express or implied agreement was adverted to by Pearson J in Anson. [45] After referring to the judgment of Simonds J in Re Salisbury-Jones, Hammond v Salisbury-Jones, which concluded relevantly: [46] "The husband made the payments, at the moment when he made them, in pursuance of a legal obligation which he was under to the mortgagee society. A demand being made, he fulfilled his obligation, and, from the moment of fulfilling his obligation, he became entitled to claim against the principal debtor for the sums which he so paid. He had all the rights at law and in equity of a surety who pays off the principal debtor's debt, and, as it appears to me, the wife, or those claiming through her, must show that in some way he released that right."
Pearson J then continued: [47] "That, prima facie, is the position here. But it is possible to conceive a case as between husband and wife in which the right of reimbursement might be excluded by express or implied agreement between the parties at the moment when the guarantee is given. Suppose a case where the wife had no substantial resources of her own, but had an account at the bank in her own name, being her own account, out of which she paid the household bills and her own personal expenses, and which was fed by her husband by regular monthly payments. Suppose that in such a case in one particular month the husband was unable to provide the money, but was able to arrange by himself giving a bank guarantee to provide an overdraft for the wife on that bank account; and suppose he said to his wife expressly or by implication: 'This new guarantee arrangement that I have made will involve your being in debt to the bank, but you need not worry about it, because this arrangement is entirely for my convenience; it will be my debt, and I will pay it and you will not be concerned in it.' If something of that sort had been said, I think it would be very arguable that, working out the position on a contractual basis, one should read into the implied contract a term excluding the right of reimbursement."
There is no doubt that Mr Sincock wanted to exit the Partnership, and to be free of all guarantees. However, he also wanted to be paid out. That outcome was not achievable without a refinance to which DJS was a party. What was discussed between Mr Henley and Mr Sincock in their telephone conversation and subsequently at Lake Cargelligo involved that, in consideration of DJS and Mr Sincock executing the Bailment Agreement, including Mr Sincock's guarantee, DJS would be "paid out and completely free of the business and all the guarantees". Such an agreement, if concluded, would have been in effect one to dissolve the Partnership (so far as it concerned DJS) and to procure the release of DJS and Mr Sincock from their associated liabilities. Another way of looking at it is that while as between the three companies, their principals, and DLL, DLL could look to any of them; as between the partners, DJS and Mr Sincock were to be exonerated. Although Mr Sincock was not sued in respect of any guarantee binding him - rather, DJS was sued as one of the principal debtors - nonetheless, if there were such an agreement, then it would be inconsistent with and exclude the implied term, and/or by operation of the doctrine of equitable estoppel it would preclude Mr Hopper from insisting on his legal right to recover from DJS indemnity in respect of the amount paid by him to DLL.
However, Mr Hopper was not present when the relevant representations were made. There was no direct evidence that he authorised Mr Henley to make them. Mr Sincock said, in cross-examination, that he had thought that Mr Hopper might have been present during the telephone conversations but could not be sure, although "Mr Henley could not do anything [without] Mr Hopper's say so". [48]
The respondent relies on the words attributed by Mr Sincock to Mr Henley ("that's exactly what we want too") as some evidence of the latter's authority to bind Mr Hopper, coupled with the absence of evidence to the contrary from Mr Hopper. However, Mr Hopper gave the following evidence, in his affidavit of 15 June 2020 (emphasis added): "I refer to paragraphs 7 - 9 of Mr Sincock's affidavit. I was not privy to or present at any of Mr Sincock's alleged discussions with Mr Henley. However, by about the time that the second defendant and Mr Sincock signed the Bailment Agreement the negotiations concerning the second defendant's departure from the Partnership were as set out in an email from Mr Main to Mr Scroope on 14 April 2016 which is annexed to my affidavit and marked 'A'."
The annexed email of 14 April 2016 has been set out above. [49] In cross-examination, Mr Hopper gave this evidence: [50] "Q. You needed Mr Sincock to sign it [the bailment agreement], didn't you? A. Yes. Q. You knew that Mr Sincock wanted to be financially separated from the business of the partnership, didn't you? A. Yes, in return for being paid. Like, there was other terms that he wanted. Q. But importantly, but he wanted to be separated from the business, didn't he? So the answer's yes? A. Yes. Q. You potentially had a problem, didn't you, because you needed him to sign the document and he wanted to be separated financially from the partnership? A. I think we all had the problem. Q. But you were one of the people that had the problem, aren't you? A. I am, yes, I had the problem. Q. Mr Sincock didn't stand to take any benefit from the bailment agreement, did he? A. Yes, he did. Q. He wanted out of the partnership, didn't he? A. He was still part of the partnership. Q. Yes, but he wanted to leave the partnership, didn't he? A. He did. … HER HONOUR: Q. As I understand your evidence, what you're saying is in order to pay him out, if that's what he wanted, you were going to have to raise the finance. Is that a-- A. I guess we had to-- Q. --fair summary of your evidence in your first affidavit? A. Yeah, we had to reach terms that were acceptable and we couldn't reach terms that were acceptable. Q. Yes, but the question I'm asking is do you say that it was the case that the partnership could not, did not have sufficient funds to pay Mr Sincock out, assuming that's what he asked for, and that it had to raise moneys in order to do that? A. No. The bailment agreement - we, we actually had machinery expiring on another floor plan through CNH Industrial Capital and we were in default on that agreement so we needed another bailment agreement to transfer those assets onto the - from I guess CNH Industrial Capital to, to DLL."
Mr Hopper's evidence that he was not present at nor privy to any of the relevant discussions was not challenged. Her Honour observed: [51] "Mr Hopper did not give evidence that the statements made by Mr Henley to Mr Hopper [sic, Mr Sincock] were made without authority. The only response he gave was that he 'was not there'."
The words "was not there" appear to be her Honour's paraphrasing of the statement in Mr Hopper's affidavit, about which he was not cross-examined. In my view, the assertion that he was "not privy to or present at" (emphasis added) goes beyond a statement that he merely "was not there".
The use by Mr Henley of the plural "we" when speaking to Mr Sincock is incapable of establishing that he had Mr Hopper's authority to make the representations attributed to him. Even if Mr Hopper had not given unchallenged evidence that he was neither privy to nor present at those conversations, there would have been no evidence of Mr Henley's authority to bind him. The implied authority of one partner to bind the others by representations made to the third parties in the ordinary course of the business of the Partnership [52] would not authorise Mr Henley to bind Mr Hopper in a negotiation with their other partner for the acquisition of his interest in the Partnership, which is neither with a third party dealing with the firm, nor in the ordinary course of the Partnership's business. Nor it is open to reason that Mr Henley was effectively "armed" by Mr Hopper to obtain Mr Sincock's signature: while the evidence does not reveal just how Mr Sincock received the Bailment Agreement for execution, it is clear that he had received it (and his wife had signed it) before he drove to Lake Cargelligo to meet Mr Henley.
Moreover, that Mr Sincock did not consider that he had reached a binding agreement with Mr Hopper is reflected in his solicitor's correspondence of and subsequent to 14 April 2016, in which no assertion was made that a binding agreement, as distinct from a "proposed settlement", had been reached. Absent a concluded agreement binding Mr Hopper, his implied contractual right of indemnity was not excluded; nor could an estoppel binding Mr Hopper arise. [53]

Conclusion on the appeal

It follows that the appeal should be allowed. The judgment in favour of the second defendant should be set aside. In lieu of the separate judgments against the first defendant and the third defendant, there should be judgment that the defendants (jointly and severally) pay the plaintiff $217,814, to take effect from 6 May 2021. The respondent should pay the appellant's costs of the appeal and of the proceedings at first instance.

The cross-appeal for contribution

By cross-appeal, the respondent sought that, should the appeal succeed, the dismissal of its cross-claim be set aside and it have judgment on its cross-claim for contribution from LVMH and Dags. Counsel for the appellant accepted that should the appeal succeed, the cross-appellant would also be entitled to succeed. As it seems to me, the partners should bear the liability inter se proportionately to their interests in the Partnership, that is to say 51% as to LVMH, 10% as to Dags, and 39% as to DJS. [54]
Judgment cannot be given for a sum of money by way of contribution, because it has not yet been paid. However, in equity, relief may be granted to one of several co-obligors against whom judgment has been entered. [55] In Wolmershausen, Wright J said that if the creditor had been a party to the proceedings, then, on the precedents of Morgan v Seymour [56] and Dering v Earl of Winchelsea, [57] the surety would have been entitled to a declaration of her right to contribution and to an order upon the solvent co-surety to pay his proportion to the principal creditor. [58] His Lordship referred to Macdonald v Whitfield, [59] in which the right to contribution of a surety who had not paid but had had judgment entered against him was recorded as "entitled and liable to equal contribution inter se".
As there will be a judgment against all the three partners jointly and severally, there is no need for an order for payment to the principal creditor. Nor can the plaintiff be prevented from enforcing his judgment against DJS alone. As Wright J said: [60] "The principal creditor not being a party, I think that I cannot order payment to him or directly prevent him from enforcing his judgment against the Plaintiff alone. Nor can I at present order the co-surety to pay his half to the Plaintiff, for the Plaintiff cannot give him a discharge as against the principal creditor, and this case is not like the case of a Plaintiff who merely claims indemnity, … But I think that I can declare the Plaintiff's right, and make a prospective order under which, whenever she has paid any sum beyond her share, she can get it back, and I therefore declare the Plaintiff's right to contribution, and direct that, upon the Plaintiff paying her own share, the Defendant Gullick is to indemnify her against further payment or liability, and is, by payment to her or to the principal creditor or otherwise, to exonerate the Plaintiff from liability beyond the extent of her own share. The Plaintiff must have liberty to apply in Chambers and generally to apply."
By analogy, the judgment should record that each judgment debtor is entitled and liable to contribution in the proportions to which I have referred, and order that upon each paying its share, the others indemnify it against any further payment or liability and, by payment to it or to the principal creditor or otherwise, exonerate it from liability beyond the extent of its own share. As in Wolmershausen (and as also in other such cases as Thomas v Nottingham Inc Football Club Ltd [61] ), liberty to apply should be reserved in case of any difficulty arising in the implementation of the orders.
Although the jurisdiction in question here is that of the District Court, such orders, though equitable in character, may be made in that Court's jurisdiction, pursuant to District Court Act 1973 (NSW) ("DCA"), s 134(1)(h), as on an "equitable claim or demand for recovery of money … whether liquidated or unliquidated … in an amount not exceeding the Court's jurisdictional limit", [62] and pursuant to DCA, s 46(1), which gives that Court "power to grant any injunction (whether interlocutory or otherwise) which the Supreme Court might have granted if the action were proceedings in the Supreme Court."
I therefore propose the following orders: 1. Allow the appeal and the cross-appeal; 2. Set aside the judgments and orders of the District Court given on 6 May 2021 and substitute: 1. judgment that the defendants (jointly and severally) pay the plaintiff $217,814, such judgment to take effect from 6 May 2021, the defendants being entitled and liable to contribution inter se in proportions 51% as to the first defendant, 39% as to the second defendant, and 10% as to the third defendant; 2. order that upon any defendant paying its share, the other defendants indemnify it against any further payment or liability under this judgment and, by payment to it or to the principal creditor or otherwise, exonerate it from liability beyond the extent of its own share; 3. reserve liberty to apply to the District Court in the event of any difficulty arising in the implementation of order (b); and 4. order that the second defendant pay the plaintiff's costs; and 1. Order that the respondent pay the appellant's costs of the appeal.
McCALLUM JA: I agree with Brereton JA.
SIMPSON AJA: I agree with Brereton JA.

Endnotes

At all material times the shares in LVMH were held as to 50% by Mr Hopper and 50% by his wife; he was a director until 20 December 2018, when he was replaced by his father.
At all material times Mr Sincock and his wife were the directors of DJS.
Mr Henley later became an employee of Mr Hopper, but was not at the relevant times.
Hopper v LVM Holdings Pty Ltd (District Court (NSW), Olsson SC DCJ, 6 May 2021, unrep) ("Primary Judgment").
Primary Judgment at [18].
Primary Judgment at [19].
Primary Judgment at [20].
Primary Judgment at [21]-[22].
Tcpt, 15 July 2020, p 45(38)-(40).
Tcpt, 15 July 2020, p 58(2)-(4).
Tcpt, 15 July 2020, p 58(10)-(16).
Primary Judgment at [27]-[28].
Primary Judgment at [33]-[37].
Primary Judgment at [44].
Primary Judgment at [54]-[55].
Primary Judgment at [56].
Primary Judgment at [49].
Primary Judgment at [49].
Primary Judgment at [49].
J O'Donovan and J Phillips, The Modern Contract of Guarantee (3rd ed, 1992, Law Book Co) at 585-586 ("O'Donovan and Phillips"); Primary Judgment at [45]. See Barber v De Prima (2018) 97 NSWLR 932 at 960 [109] (Robb J); [2018] NSWSC 601; Wollongong Coal Ltd v NRE Resources Pty Ltd (No 2) [2017] NSWSC 1552 at [49] (Stevenson J); Gujarat NRE India Pty Ltd v Wollongong Coal Ltd [2017] NSWSC 209 at [13] (Slattery J); Grego v D Club Pty Ltd [2011] WASC 55 at [19] (Corboy J) ("Grego"); Sisic v Krpo [2008] NSWSC 1086 at [42] (Ward J) ("Sisic"); McColls Wholesale Pty Ltd v State Bank of NSW [1984] 3 NSWLR 365 at 376 (Powell J); Israel v Foreshore Properties Pty Limited (in liq) (1980) 54 ALJR 421 at 424 (Aickin J; Gibbs, Steven, Murphy and Wilson JJ agreeing); 30 ALR 631; Anson v Anson [1953] 1 QB 636 at 641 (Pearson J); 1 All ER 867 ("Anson"); Re A Debtor [1937] Ch 156 at 160-161 (Slesser LJ; Romer LJ agreeing), 163-166 (Greene LJ; Romer LJ agreeing); 1 All ER 1 ("Re A Debtor").
Weatherly v Mann (Court of Appeal (NSW), Moffitt AP, Hardie and Hutley JJA, 16 August 1973, unrep) at 6 (Moffitt AP; Hardie JA agreeing), 2 (Hutley JA) ("Weatherly"); Conaghan v Cahill (1932) 26 QJP 54 at 57 (Henchman J); O'Donovan and Phillips at 586.
(1853) 2 El & Bl 287 at 296 (Lord Campbell CJ for Lord Campbell CJ, Wightman, Erle and Crompton JJ); 118 ER 775.
Sisic at [44] (Ward J).
Grego at [30] (Corboy J); Sisic at [42] (Ward J); Re TVSN Ltd [2005] NSWSC 692 at [46] (Young CJ in Eq) ("Re TVSN"); Seabird Corp Ltd v Sherlock (1990) 2 ACSR 111 at 115 (Cohen J); 8 ACLC 510; Re A Debtor at 161 (Slesser LJ; Romer LJ agreeing), 163 (Greene LJ; Romer LJ agreeing); Bank of England v Cutler [1908] 2 KB 208 at 221 (Vaughan Williams LJ), 232 (Farwell LJ), 235-236 (Kennedy LJ); Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 at 241 (Cotton LJ), 249 (Bowen LJ).
Rogers v ANZ Banking Group Ltd [1985] WAR 304 at 313 (Burt CJ).
Re TVSN at [46] (Young CJ in Eq).
Weatherly at 6 (Moffitt AP; Hardie JA agreeing).
Weatherly at 3-4 (Hardie JA).
Weatherly at 1-2 (Hutley JA).
Which does not require even knowledge, as Hutley JA proceeded to explain in Weatherly at 3.
Primary Judgment at [45].
Primary Judgment at [48].
Primary Judgment at [49].
Primary Judgment at [38].
Primary Judgment at [41].
Tcpt, 15 July 2020, p 60(47)-(49).
Tcpt, 15 July 2020, p 61(1)-(23).
Tcpt, 15 July 2020, p 61(25)-(28).
Primary Judgment at [50]-[53].
Sisic at [15] (Ward J).
Sisic at [46]-[47] (Ward J).
Tcpt, 15 July 2020, p 8(33)-(42).
Tcpt, 17 July 2020, p 79(16)-(32).
Tcpt, 17 July 2020, p 90(19)-(30).
Anson at 645-646 (Pearson J).
[1938] 3 All ER 459 at 462 (Simonds J); (1938) 82 Sol Jo 728.
Anson at 645 (Pearson J).
Tcpt, 15 July 2020, p 65(31).
At [17]-[18].
Tcpt, 15 July 2020, pp 29(32)-31(8).
Primary Judgment at [24].
Partnership Act 1892 (NSW), ss 5(1), 15.
Cf Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 584 (Kirby P), 602 (Priestley JA).
Tcpt, 29 September 2021, pp 57(43)-58(1).
Woolmington v Bronze Lamp Restaurant Pty Ltd [1984] 2 NSWLR 242 at 245 (Needham J); Wolmershausen v Gullick [1893] 2 Ch 514 at 528-529 (Wright J) ("Wolmershausen").
(1637) 1 Rep Ch 120; 21 ER 525.
(1787) 1 Cox 318; 29 ER 1184.
Wolmershausen at 528-529 (Wright J).
(1883) 8 App Cas 733, as noted in Wolmershausen at 527 (Wright J).
Wolmershausen at 529 (Wright J).
[1972] Ch 596; 1 All ER 1176.
Cf Kolavo v Pitsikas [2003] NSWCA 59 at [10]-[12], [69]-[70] (Cripps AJA; Stein JA and Santow JA agreeing).

Amendments 15 March 2022 - paragraphs [19]-[59]: corrected paragraph numbering 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: 15 March 2022

8] NSWSC 601 Batard v Hawes (1853) 2 El & Bl 287; 118 ER 775 Conaghan v Cahill (1932) 26 QJP 54 Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184 Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 Grego v D Club Pty Ltd [2011] WASC 55 Gujarat NRE India Pty Ltd v Wollongong Coal Ltd [2017] NSWSC 209 Israel v Foreshore Properties Pty Limited (in liq) (1980) 54 ALJR 421; 30 ALR 631 Kolavo v Pitsikas [2003] NSWCA 59 Macdonald v Whitfield (1883) 8 App Cas 733 McColls Wholesale Pty Ltd v State Bank of NSW [1984] 3 NSWLR 365 Morgan v Seymour (1637) 1 Rep Ch 120; 21 ER 525 Re A Debtor [1937] Ch 156; 1 All ER 1 Re Salisbury-Jones, Hammond v Salisbury-Jones [1938] 3 All ER 459; (1938) 82 Sol Jo 728 Re TVSN Ltd [2005] NSWSC 692 Rogers v ANZ Banking Group Ltd [1985] WAR 304 Seabird Corp Ltd v Sherlock (1990) 2 ACSR 111; 8 ACLC 510 Sisic v Krpo [2008] NSWSC 1086 Thomas v Nottingham Inc Football Club Ltd [1972] Ch 596; 1 All ER 1176 Weatherly v Mann (Court of Appeal (NSW), Moffitt AP, Hardie and Hutley JJA, 16 August 1973, unrep) Wollongong Coal Ltd v NRE Resources Pty Ltd (No 2) [2017] NSWSC 1552 Wolmershausen v Gullick [1893] 2 Ch 514 Woolmington v Bronze Lamp Restaurant Pty Ltd [1984] 2 NSWLR 242 Texts Cited: J O'Donovan and J Phillips, The Modern Contract of Guarantee (3rd ed, 1992, Law Book Co) Category: Principal judgment Parties: Garry Raymond Hopper (Appellant) D J Sincock Pty Ltd (Respondent/Cross-Appellant) LVM Holdings Pty Ltd (First Cross-Respondent) Dags Machinery Pty Ltd (Second Cross-Respondent) Representation: Counsel: S R Meehan (Appellant) M Einfeld QC w/ D K Smith (Respondent/Cross-Appellant)

HEADNOTE [This headnote is not to be read as part of the judgment] Lachlan Valley Machinery Pty Ltd ("LVM") was in the business of selling farming and agricultural machinery as agent for the Sincock LVM Partnership ("the Partnership"). The Partnership had three partners: the respondent/cross-appellant, D J Sincock Pty Ltd ("DJS") (as to a 39% share); the first cross-respondent, LVM Holdings Pty Ltd ("LVMH") (as to a 51% share); and the second cross-respondent, Dags Machinery Pty Ltd ("Dags") (as to a 10% share). The respective beneficial owners and directors of these corporations, and the three directors of LVM, were Mr David Sincock; the appellant, Mr Garry Hopper; and Mr Darryl Henley. By early 2016, Mr Sincock desired for his company to leave the Partnership, and he sought the return of his investment plus an amount said to have been paid as tax on unpaid dividends. However, the Partnership was by then in default of its obligations to its finance provider, and was seeking refinance from De Lage Landen Pty Ltd ("DLL"). DLL was only prepared to provide finance if Mr Sincock and DJS were parties to the arrangements. Mr Sincock initially resisted signing any documents, but was persuaded to execute a 'Bailment Agreement' proposed by DLL on the basis that, as asserted by Mr Henley, this was the only way that funds would become available to pay Mr Sincock out. In that agreement, the 'Bailee' was LVM as agent for LVMH, DJS, and Dags, and the 'Guarantor' was, jointly and severally, Mr Sincock, Mr Hopper, and Mr Henley. Mr Henley also made assurances to Mr Sincock that he would be paid out and released from any guarantee. DJS was not paid out and did not formally exit the Partnership. On 11 December 2018, LVM went into voluntary liquidation, and DLL demanded payment of the moneys outstanding under the Bailment Agreement, which by then amounted to over $800,000. Mr Hopper unilaterally negotiated a settlement with DLL, and on 6 May 2019 executed an agreement under which he promised to pay $200,000 in full satisfaction of DLL's demand. A month later, Mr Hopper's representatives sent a letter of demand to DJS and Dags asserting their joint and several liability for the $200,000. That demand went unfulfilled, and Mr Hopper commenced proceedings in the District Court. LVMH and Dags did not file defences and default judgment was given against them in favour of Mr Hopper. However, the proceedings against DJS were dismissed. DJS also filed a cross-claim seeking contribution by LVMH and Dags, which was dismissed as a consequence of DJS's success in defending the claim. Mr Hopper now appeals to this Court against DJS, while DJS cross-appeals against LVMH and Dags in the event that the appeal is successful. Held (per Brereton JA; McCallum JA and Simpson AJA agreeing), allowing the appeal and cross-appeal, setting aside the judgments and orders of the District Court, substituting judgment for the appellant in the sum of $217,814, with the respondent and cross-respondents being each liable in proportion to their share in the Partnership, and liable to indemnify each other against any further payment or liability beyond their own shares: [56] (Brereton JA), [57] (McCallum JA), [58] (Simpson AJA). As to an implied contractual right of indemnity:

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