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[1998] WASC 265
defendant. Application for summary judgment dismissed. Costs of the application to be costs in the cause.
No linked legislation citations have been extracted yet.
The plaintiffs asked the court to order two co-sureties to pay their shares of an unpaid bank debt directly to the bank. The Master treated that as a request for a mandatory injunction. Because there was no evidence about whether the defendants could afford to pay, the Master considered that an order would not be enforceable if they did not comply. The application was dismissed. The judgment also explains that the plaintiffs might have a contribution claim if they paid the full debt, and that the earlier declaration could help clarify that claim. The Master did not decide whether a later payment order could be made against individual defendants after an inquiry into their means.
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Rangewood Investments Pty Ltd and Richard Mell Todd applied for summary judgment against David George Hellyer and Kevin James Aitken. The five were described in the judgment as co-sureties under a guarantee and indemnity in favour of the National Australia Bank. The bank was also named as the third defendant, but the application addressed in this decision sought orders against the first and second defendants.
The underlying facility was for $70,000 and was obtained on or about 7 September 1995. The statement of claim, quoted by Master Sanderson, described the customers as Aitken as trustee for the Aitken Malmo Trust, Hellyer as trustee for the Balding Trust, and Rangewood as trustee for the Red Feathers Trust, trading as Eureka Timber Specialists. The security documents included a guarantee and indemnity signed by the plaintiffs and defendants, a debenture, and a mortgage over land. The loan financed a business venture, which the judgment says failed.
The bank issued demands for payment. The decision recites a demand dated 31 December 1996 and a later demand dated 23 June 1997. The latter recorded an amount of $67,438.99 as at that date. By the current application, the plaintiffs sought an order that each of the first and second defendants pay one quarter of $72,487.97, described as the amount owing to the bank up to 30 April 1998. The order was not framed as payment to the plaintiffs. It required payment to the bank.
This was the plaintiffs' second summary judgment application. Master Sanderson had heard the first on 4 May 1998 and delivered judgment for the plaintiffs on 11 May 1998. The current application was brought with leave granted by Master Bredmeyer on 30 June 1998. The Master said the material change since the first application was that the plaintiffs had obtained updated information from the bank about the amount outstanding and the daily interest rate.
The court focused on a key distinction in the relief sought. The plaintiffs were not asking for an ordinary judgment requiring payment of a sum to themselves. They sought an order compelling the defendants to pay the bank, which the Master characterised as a mandatory injunction. The evidence did not show that the defendants had paid, that they could afford to pay, or that the plaintiffs were ready, willing and able to discharge the bank liability. Nor was there evidence that the bank was about to enforce its mortgage. The application was dismissed. The costs of the application were ordered to be costs in the cause.
The decisive point was the combination of the form of the order and the lack of evidence about the defendants' capacity to comply. The Master observed that the plaintiffs sought an order requiring each defendant to pay the bank, although any amount then payable under the guarantee was owed to the bank rather than to the plaintiffs. In substance, the application sought a mandatory order directing the defendants to take a particular step.
The Master did not set out a general legal test for mandatory injunctions. He expressly said there was no purpose in going through the applicable principles. Instead, he resolved the application on the particular record. There was “no evidence at all” about the personal circumstances of the first and second defendants. The Master noted that they might not have the means to make the payments. If the order were granted and payment did not follow, he considered that there was no way to enforce the injunction. That was stated as a sufficient reason to dismiss the application.
Other features of the record formed part of the setting, but were not identified as independent grounds for dismissal. The bank had not yet taken steps to enforce the mortgage, although it could do so. The reason for that was not established. The plaintiffs had not provided evidence that they were able or willing to pay the liability themselves. The judgment therefore did not treat the bank's potential enforcement, by itself, as a basis for ordering the co-sureties to pay immediately.
The Master also addressed the plaintiffs' concern about the utility of their earlier declaration. He explained that if the plaintiffs paid the full liability, they would have a right to seek reimbursement from the other co-sureties. He cited Albion Insurance Co Ltd v Government Insurance Office of New South Wales for that proposition. The declaration could also have value by preventing the defendants from raising arguments about the plaintiffs' claim. This explanation answered the concern about the declaration, but did not supply a basis for granting the immediate mandatory order.
Finally, the Master considered whether a payment order might be possible after a later inquiry into a party's circumstances. He referred to Rogers v ANZ Bank, where a declaration had been made and the court's order contemplated that the company's circumstances and liability could be considered on an application for further relief. The Master suggested that, for a corporation, its books might show whether it had the means to pay. But he emphasised that there is a difference between a corporate entity and individuals, and expressly left undecided whether a similar procedure could be used for individuals.
The decision does not purport to change or comprehensively state the law governing mandatory injunctions. It expressly declines to review the general principles. Its significance is therefore case-specific: on the evidence before Master Sanderson, a mandatory order requiring payment to a creditor was not granted where there was no evidence about the defendants' ability to comply and the Master considered that non-compliance would leave the order unenforceable.
The decision does state the practical distinction between a declaration of liability and an immediate order to pay. The earlier application had resulted in judgment for the plaintiffs, and the present decision refers to a declaration. The Master considered that declaration potentially useful even though it did not compel immediate payment. If the plaintiffs later paid the full liability, their contribution claim could arise independently of the declaration; the declaration might narrow the issues the defendants could raise.
In that sense, the decision presents two different stages. Before the plaintiffs discharged the bank debt, the order they sought directed the defendants to pay the bank. The Master refused that order on the evidence. If the plaintiffs paid the full liability, the judgment recognised a possible reimbursement claim against the co-sureties, referring to Albion Insurance. The decision does not determine the amount of any such future claim or the outcome of a later proceeding.
Nor does the judgment establish that a liberty-to-apply mechanism is generally available in cases involving individual co-sureties. It discusses the possibility by reference to Rogers, but reserves the issue. The text does not provide a broader account of the law before the decision, nor does it identify any later change to the law.
The Master identified the nature of the order sought: “It is couched in terms of a mandatory injunction.” In plain English, the plaintiffs wanted the court to direct the defendants to do something, namely pay a specified share of the debt to the bank, rather than simply award the plaintiffs money.
The central passage was: “If I was to grant the orders sought and payments were not made, there is no way that the injunction could be enforced.” The Master connected this concern to the absence of evidence about the defendants' personal circumstances and their ability to make the payments. The point was not that the judgment found the defendants unable to pay. Rather, their means had not been established, and the Master considered the proposed order ineffective if they failed to comply.
On the earlier declaration, the Master said the plaintiffs would be entitled to judgment against the defendants for their shares if the plaintiffs paid the full liability. He added that this right existed independently of the declaration, citing Albion Insurance. In plain English, the declaration was not described as the source of the contribution right, but it could help define the parties' position and reduce later disputes.
On the possible later procedure, the Master referred to Rogers v ANZ Bank and said a corporation could be required to produce its books to establish whether it could pay. He then stated: “Whether or not a similar procedure can be utilised in relation to individuals, is a question which I do not presently need to decide.” This is an express reservation, not a ruling that the procedure does or does not apply to individuals.
The judgment supplied has no numbered paragraphs. The quotations and propositions above are therefore identified by their wording rather than paragraph citations.
The closest factual match is an application seeking a mandatory order that co-sureties pay a creditor directly, where the court has no evidence about the defendants' means and the order may be ineffective if they do not comply. The judgment also involved an outstanding bank debt secured by a guarantee and indemnity, a mortgage over land, and an earlier declaration in favour of the plaintiffs.
The case may be relevant where the party seeking immediate payment has not yet paid the creditor and asks the court to direct other sureties to pay their shares directly to that creditor. The distinction between payment to the creditor and reimbursement to a co-surety is central to the reasoning. The Master noted that, if the plaintiffs themselves paid the full liability, they could seek contribution from the defendants. The judgment does not decide the precise conditions for that future claim.
The absence of evidence about ability to pay is particularly important. The Master did not find that a defendant's inability to pay had been proved. Rather, there was no evidence either way about the defendants' circumstances. Nor does the decision say that evidence of means alone would necessarily make such an order appropriate. It identifies the evidentiary gap and the practical enforceability concern in this application.
The judgment also involved no evidence that the bank was about to enforce its mortgage. That circumstance was noted but not made the stated ground for dismissal. The decision should not be read from this text as establishing that imminent enforcement is always required before a court can consider relief, or that the absence of imminent enforcement always defeats an application.
The supplied judgment contains no account of later judicial treatment of Rangewood Investments Pty Ltd v Hellyer. It therefore does not establish whether later courts followed, distinguished, applied, or questioned this decision. No later authorities can be responsibly identified from the provided material.
Within this judgment, Master Sanderson cited Albion Insurance Co Ltd v Government Insurance Office of New South Wales for the proposition that the plaintiffs would have a right to reimbursement if they paid the full liability. He also referred to Rogers v ANZ Bank as an example of a declaration accompanied by liberty to apply concerning a corporation's circumstances and liability. The Master did not adopt a general rule from Rogers for individual defendants, instead leaving that question open.
The case list also names Webster v Lampard, Woolmington v Bronze Lamp Restaurant, and Esplanade Hotel Busselton Pty Ltd v Graywinter Properties Pty Ltd. The body of the decision supplied here does not discuss or rely on those authorities. Their appearance in the case information alone does not establish what propositions they support or how the Master treated them. Any assessment of subsequent treatment or the role of those authorities would require source material beyond this judgment.
Several questions are expressly or practically unresolved. First, the Master did not decide whether a liberty-to-apply procedure of the kind discussed in Rogers could be used for individuals. The judgment leaves that question open.
Second, the decision does not explain what evidence about an individual's means would be sufficient to support a mandatory payment order, or whether such evidence would overcome the enforceability concern. There was no evidence about the defendants' personal circumstances, and the Master did not consider a fuller evidentiary record.
Third, the judgment does not decide the plaintiffs' ultimate contribution claim. It says that if they paid the full liability, they would have a right to reimbursement from the co-sureties, independently of the declaration. It does not determine whether they would in fact pay, the amount recoverable from each defendant, or any issues that might arise in a later claim.
Fourth, the bank's possible enforcement of its mortgage remained uncertain. The judgment records that enforcement was open to the bank, but says the evidence did not show that the bank was about to act. The reason it had not acted was not established. The decision does not determine how imminent enforcement would affect a different application.
Finally, the judgment does not set out the general principles governing mandatory injunctions. Its conclusion rests on the evidence and proposed order in this application. Broader propositions about injunctions, summary judgment, or the circumstances in which co-sureties may be compelled to pay should not be attributed to this decision unless supported by other legal sources.
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JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
BETWEEN : RANGEWOOD INVESTMENTS PTY LTD (ACN 068 897 825)
Summary judgment - Mandatory injunction - Turns on its own facts
Esplanade Hotel Busselton Pty Ltd v Graywinter Properties Pty Ltd & Ors, unreported; SCt of WA (Master Sanderson); Library No 980032; 4 February 1998
Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598
Woolmington v Bronze Lamp Restaurant [1984] 2 NSWLR 242
This is the plaintiffs' application for summary judgment against the first and second defendants. By para 1 of their chamber summons, the plaintiffs seek the following orders:
"That each of the First and Second Defendants, as co-sureties with the Plaintiffs, pay the sum of $18,121.66 being one quarter of $72,487.97 owed to the Third Defendant up to the 30 April 1998 under the Guarantee and Indemnity."
This is the plaintiffs' second application for summary judgment. It is brought by leave granted by Master Bredmeyer on 30 June 1998. I heard the first summary judgment application on 4 May 1998 and delivered judgment in favour of the plaintiffs on 11 May 1998. At that time I summarised the fact situation in some detail. It is appropriate that I quote from the summary of facts in that earlier decision:
"There is no contest on the facts. The plaintiffs' application is supported by an affidavit of the second defendant sworn 22 January 1998. In effect, this affidavit does no more than confirm the accuracy of the substituted statement of claim. It is pleaded that the Richard Mell Todd Family Trust is the owner of certain land located at Asquith Road, Collie (the land). Using this land as security, the sum of $70,000 was borrowed from the third defendant by the first plaintiff. The way in which this transaction was undertaken is best explained by quoting paras 8, 9, 10 and 11 of the substituted statement of claim. They read as follows:
'8. On or about 7 September 1995 a loan facility in the sum of $70,000.00 was sought and obtained from the National Australia Bank (the Third Defendant) to assist with the expansion and operation of the business.
(a) "The customer" for the loan as described in the Guarantee and Indemnity was:
"Kevin James Aitken As Trustee For The Aitken Malmo Trust, David George Hellyer As Trustee For The Balding Trust, Rangewood Investments Pty Ltd As Trustee For The Red Feathers Trust Trading As Eureka Timber Specialists".
9. The loan facility obtained from the Third Defendant is evidenced by the following security documents.
(a) a Guarantee and Indemnity, the Guarantors of which were The First and Second Plaintiffs and the First and Second Defendants.
(b) a Debenture, sealed by the First Plaintiff on 7 September 1995;
(c) a mortgage, in registerable [sic] form sealed by the First Plaintiff on 7 September 1995 over the land.
10. On 7 September 1995 the mortgage was registered as registered mortgage number G14674 over the land.
11. The mortgage was a colateral [sic] security given to the Bank as an additional security if the customers did not make the payments required under the Guarantee and Indemnity.
(a) Part C of the Guarantee and Indemnity Clauses 11-12 states how the Third Defendant treats other securities;
(b) Clause 11 of the Guarantee and Indemnity states:
"11. To cover your liability under this guarantee and indemnity we can resort to any security we hold from you at any time over any of your property or assets unless the security by its express terms does not apply to this liability." '
The $70,000 which had been borrowed was used to finance a business venture. For the purposes of this application it is unnecessary for me to go into the details of this venture. It is sufficient if I say that it was a failure. This led the third defendant to make demand for repayment of the outstanding loan. The way in which this demand was made and the liability that consequently arose are set out in para 24 of the substituted statement of claim. That paragraph reads as follows:
'24. On or about the 31 day of December 1996 the National Australia Bank made a demand for payment of the amount owed.
(a) Notification was given by the National Australia Bank to all of the persons carrying on business under the business name.
(b) On 31 December 1996 the National Australia Bank issued a Notice of Demand for Payment under the Transfer of Land Act against the Plaintiff stating that under Mortgage G14674 dated 7 September 1995 encumbering the land with the debt owed by Eureka Timber Specialists plus interest at the rate of 14% per annum until the debt is discharged was comprised of the following amounts.
(c) as at 31 December 1996 the amount owed to the National Australia Bank was $75,976.90 being comprised of:
(i) Principal liability inclusive of interest, bank fees, costs, charges, expenses and taxes accrued and capitalised as at 30 November 1996 Account No 64-778-7246
(ii) Interest accrued (at the rate of 14% pa) and unpaid by the customer for the period of 1 December 1996 to 19 December 1996 Account No. 64-778-7246
(iii) Bank Fees, costs, charges expenses and taxes accrued and unpaid by the customer for the period of 1 December 1996 to 19 December 1996
Subsequent to the making of these demands, further discussions took place between the parties. Once again it is unnecessary for me, in the context of this application, to detail the machinations which took place between the parties. It is sufficient if I say that the indebtedness to the third defendant was not satisfied. This resulted in further action being taken by the third defendant. Once again, it is apposite if I quote the statement of claim. Paragraph 35 reads as follows:
'35. On 23 June 1997 the National Australia Bank issued a Notice of Demand for Payment under the Transfer of Land Act against the Plaintiff stating that under Mortgage G14674 dated 7 September 1995 encumbering the land with the debt plus interest at the rate of 13.5% per annum until the debt is discharged was comprised of the following amounts.
(a) Notification was given by the National Australia Bank to all of the persons carrying on business under the business name.
(b) As at 23 June 1997 the amount owed to the National Australia Bank was $67,438.99 being comprised of:
(i) Principal liability inclusive of interest, bank fees, costs, charges, expenses and taxes accrued and capitalised as at 30 May 1997 Account No 64-778-7246
(ii) Interest accrued (at the rate of 14% pa) and unpaid by the customer for the period of 31 May 1997 to 22 June 1997 Account No. 64-778-7246
(iii) Bank Fees, costs, charges expenses and taxes accrued and unpaid by the customer for the period of 31 May 1997 to 22 June 1997
It is apparent that there is a real prospect that the bank will take action against the land over which it has a mortgage. However, it has not yet taken any steps to enforce that mortgage. Why it has not done so does not emerge from the evidence. An attempt was made by counsel for the plaintiffs to explain the position from the Bar table. Counsel for the defendants quite rightly objected to this course of action. On the evidence as it stands, all that can be said is that it is open to the third defendant to proceed to enforce its mortgage at any time. It is common ground that the first and second defendants have not made payment to the third defendant of any amount for which they would be liable as sureties under the security documents. There is also nothing in the evidence which would suggest the plaintiffs are either willing or able to make payment of such amounts. Against that factual background, the plaintiffs claim relief in the following terms (see para 2 of the prayer for relief):
2. The Plaintiffs as Guarantors of the Guarantee and Indemnity claim against the First and Second Defendants as co-sureties of the Guarantee and Indemnity - for Contribution and Quia timet relief in equity being:
A. A Declaration that each of the First and Second Defendants, as co-sureties with the Plaintiffs in the Guarantee and Indemnity are liable to contribute a sum equal to the proportion for which they are liable under the Guarantee and Indemnity to the amount of the debt together with the interest and costs owed to the Third Defendant as may be or become due until the date of payment.
B. An order that each of the First and Second Defendants do pay forthwith to the Third Defendant such sum together with interest and costs as aforesaid and take any other steps necessary for discharge of their share of the debt arising from their position as co-sureties or co-guarantors with the Plaintiffs under the Guarantee and Indemnity.' "
Since my earlier decision there has been only one material change in the fact situation. The plaintiffs have now ascertained from the Bank what amount is outstanding and the daily rate at which interest is accruing. Neither the first or second defendant has made payment of their share of the debt under the guarantee and indemnity. There is no evidence that the plaintiffs are ready, willing and able to discharge the liability. Further, there is no evidence that the Bank is about to move to enforce their security and sell the mortgaged property. It is against that background that the plaintiffs seek judgment in the terms I have quoted above.
There is an initial difficulty with the terms of the order sought by the plaintiffs. It is couched in terms of a mandatory injunction. The plaintiffs do not seek judgment for a money sum. After all, any amount that the first and second defendants are presently liable to pay is payable to the Bank and not to the plaintiffs.
There is no purpose to be served in my going through the principles applicable to mandatory injunctions. In this case I have no evidence at all as to the personal circumstances of the first and second defendants. They may simply not have the wherewithal to make the payments the plaintiffs seek to have them make. If I was to grant the orders sought and payments were not made, there is no way that the injunction could be enforced. For this, if for no other reason, the application must be dismissed.
During the course of his submissions, counsel for the plaintiffs asked rhetorically what purpose is served by a declaration such as was made on the earlier hearing if, at a subsequent date, the defendants could not be compelled to meet their obligations as sureties. I think the answer to that is twofold. First, if the plaintiffs were to pay out the full liability they would be entitled, as of right, to judgment against the first and second defendants for their share of the liability. Of course, the plaintiffs would have this right to reimbursement independent of the declaration: see Albion Insurance Co Ltd v Government Insurance Office of New South Wales [1969] HCA 55; (1969) 121 CLR 342. However, the existence of the declaration may preclude there being any argument raised by the first and second defendants as to the plaintiffs' claim.
Secondly, it may be that in certain circumstances an order for payment will be made. In my earlier decision I quoted from the judgment of Burt CJ in Rogers v ANZ Bank [1985] WAR 304. In that case his Honour granted a declaration and concluded his judgment in the following terms:
"Should the company fail to pay the debt then its circumstances and its liability to do so can be gone into upon exercise of liberty to apply."
It is not difficult to see how this provision could operate. The corporation could be required to produce its books of account and if it was shown that the corporation had the wherewithal to make payment then an order directing that payment be made might be appropriate. There is clearly a difference between a corporate entity and individuals. Whether or not a similar procedure can be utilised in relation to individuals, is a question which I do not presently need to decide.
In my view, this application for summary judgment ought be dismissed. I would order that the costs of the application be costs in the cause.
Rangewood Investments Pty Ltd (Acn 068 897 825) & Ors
David George Hellyer & Ors [1998] WASC 265
(1993) 177 CLR 598
(1969) 121 CLR 342
Application for summary judgment dismissed. Costs of the application to be costs in the cause.