[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, a solicitor representing one of the respondents, entered into a contractual arrangement with two brothers (one of whom later died) to purchase their sisters' share of a co-owned property. The brothers agreed that the appellant could borrow funds for the purchase and could provide a mortgage of the property as security. The brothers also agreed to provide guarantees to the lender.
The appellant made the purchase using borrowed funds secured over the property and the brothers provided the guarantees. The appellant defaulted on the loan and the lender took possession of the property. One brother incurred expenses unsuccessfully resisting the lender's claim.
The respondents (one brother and the estate of the other) subsequently filed cross-claims to have the mortgage and guarantee set aside pursuant to the Contracts Review Act 1980 (NSW) (Contracts Review Act). The appellant also filed a cross-claim seeking an indemnity from the respondents in respect of interest she had paid to the mortgagee and other expenses incurred by her. She also claimed an order for an account.
The primary Judge found that the original contractual arrangement was unjust under the Contracts Review Act and declared it void to the extent that it required the appellant's liability to be borne by the respondents. The primary Judge also made orders requiring the appellant to pay compensation to the respondents to reimburse them for discharging the mortgage and incurring various other expenses due to the appellant's default.
The appellant appealed against the decisions made by the primary Judge on the cross-claims. The principal issues on appeal are:
(1) Whether a claim for relief in relation to the original contract was pleaded or argued at trial.
(2) Whether the appellant was denied procedural fairness.
(3) Whether the primary Judge should have made certain allowances in favour of the appellant on the taking of accounts.
Held (per Sackville AJA, Beazley P and Macfarlan JA agreeing), allowing the appeal:
In relation to (1):
The primary Judge's finding that the contractual arrangement was unjust was outside the cross-claims pleaded by the respondents. No such allegation was made in terms and the cross-claims did not allege material facts that, if proved, would establish that the contractual arrangement was unjust: (at [105]). The respondents made no submissions at trial that their case was that the contractual arrangement was unjust or that the court should grant relief to avoid the unjust consequences of the original contract. Accordingly, the conditions as laid down in Dare v Pulham for the conduct of a case outside the pleadings were not satisfied: (at [110], [111])
Dare v Pulham [1982] HCA 70; 148 CLR 658; Gould v Mount Oxide Mines Ltd (In Liq) [1916] HCA 81; 22 CLR 490; Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486
In relation to (2):
The appellant was denied procedural fairness because had the respondents articulated a claim for relief in relation to the original contract, even if not pleaded, the appellant would have had the opportunity to adduce evidence and make submissions in opposition to the claim: (at [112]). She was denied that opportunity.
In relation to (3)
As against the appellant, the respondents were not entitled to claim the expenses of unsuccessfully resisting the lenders claim for possession: (at [138], [142])