"In particular, it seems to me, on the evidence now available, a significant consideration was the position of the second plaintiff. On the evidence, she had no source of support, except the funds hoped to be obtained from the sale of the former matrimonial home".
15 One thing that is now obvious, particularly to the parties, is that there is no provision in either the Family Court settlement or the settlement of proceedings 1430 of 2002 to deal with the obvious right of a surety to recover after payment to the creditor. It would seem unlikely that any term to this effect could be implied. The only evidence to which the plaintiff points is that in the solicitor's affidavit. The omission or, perhaps more properly, the assumption made by the solicitor is equally likely to have been predicated on the fact that the matter of indemnity was not even thought of at the time. The likelihood is that the indemnity would not have been thought of because if it had the parties obviously would have addressed the matter in concluding their arrangements.
16 The submission did not deal with the nature of the waiver. Assuming it is waiver in the sense of an election, there is no evidence of a conscious election between rights and thus it is a matter of whether the conduct of the defendant and Rocco in commencing or settling the proceedings would be justifiable only if an election had been made one way or the another. There is nothing in the commencement of the proceedings which would suggest an election. Similarly, the settlement itself is not an election. The terms of the solicitor's conduct more properly should be considered under the next section.
Estoppel arising from the settlement of proceedings 1430 of 2002.
17 The plaintiff also put the same facts as the basis of Estoppel. It is clear that there is no evidence of any representations by the defendant to found some estoppel in paix. The plaintiff's submissions suggest that there is an estoppel by convention as a result of the proceedings being run and settled on the mutual assumption of fact that the defendant and Rocco Reale would not thereafter claim an indemnity.
18 The defendant's answer to this claim is that there is no evidence that the defendant and the plaintiff chose to conduct their mutual dealings on any basis different from the true facts and more importantly a mutual assumption of fact for the purposes of conventional estoppel means mutual assumption about an existing fact, not mutual assumption about a future course of action. See Con-Stan Industries of Australia Ltd v Norwich Winterhur Insurance (Aust) Ltd (1986) 160 CLR 226 The Court at 244 -- 245.
19 I should consider whether any equitable estoppel might arise.
20 The current formulation of the Australian position is said in the 4th edition of Meagher, Gummow and Lehane Equity Doctrines and Remedies to be encapsulated in the judgment of Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. At 428 he said:-
"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the (1987) 164 CLR 387 at 429 defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
21 The authors point out that the statement should be understood as holding, particularly in cases involving an assumption about a state of affairs, that reasonable notice of an intended departure from the assumption may avoid any sufficient detriment. See The Commonwealth v Verwayen (1990) 170 CLR 394 Deane J at 442.
22 In this case the statement by the solicitor in the affidavit was in these terms:-
"On settlement of the sale of the property, the second plaintiff will receive approximately $950,000 net (including after the payment to the third defendant referred to below).
After completion of her purchase of the Bondi property and after payment of her legal fees and stamp duty fees the second plaintiff will receive approximately $268,000.00. That money will be used to support herself and her 4 children. The second plaintiff has no other source of income."
23 That says nothing about the right to claim as surety but the argument would be that it was implicit in what was being said that she would have no other assets. In Foran v Wight (1989-90) 168 CLR 385 Mason CJ at 410-11, Brennan J at 435-6 and in Legione v Hateley (1983) 152 CLR 406 Mason and Deane JJ at 435-7 the High Court has stressed the need for a representation to be clear and unequivocal if it is to work an estoppel, saying that a party should not be estopped on an ambiguity.
24 Although I accept that minds may differ I would have thought that the statement was not too ambiguous and that there may be room for an argument for promissory estoppel. Detriment is obvious and reliance would be arguable.
25 In my view, there is a genuine dispute in this area.
Anschun estoppel
26 In Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, Gibbs CJ, Mason and Aickin JJ at 598 approved the following statement of principle in Henderson v Henderson (1843) 3 Hare at 115:
"The critical issue, then, is whether the case falls within the extended principle expressed by Sir James Wigram VC in Henderson v Henderson. The Vice-Chancellor expressed the principle in these terms:
'Where a given matter becomes the subject of litigation in , and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time".
27 It was submitted by the plaintiff that the claim on an indemnity pursuant to the statutory demand was intimately related to the subject matter of the earlier Supreme Court proceedings and reasonable diligence ought to have dictated that the claim be brought at that time rather than the present time. The problem with this submission is that if the defendant had tried to raise it in that matter before she made the payment she would have been met with a defence that the question was hypothetical because her right to claim on the indemnity does not arise till after payment has been made. As is plain from the proceedings, the settlement was before the completion of the sale of the property and the payment to the bank. My view is that although it is true that the circumstances in which an Anschun estoppel might apply are never closed it seems to me absolutely unlikely that any such claim could succeed in the circumstances of this case.
Was the principal debtor the plaintiff or Rocco Reale?
28 Cases such as AGC (Advances) Ltd v West (1984) 5 NSWLR 590 at 603-4 establish that one can have regard to extrinsic evidence in cases concerning guarantees, to determine who is in substance a guarantor, and who is in substance a principal debtor.
29 This is said to arise, inter alia, because of a recital in the property settlement to the following effect:
"The said former matrimonial home is encumbered by a registered first mortgage in favour of the Commonwealth bank of Australia. The mortgage is registered as dealing number 354-5788 and the security for monies borrowed by the husband for business purposes by way of a business loan with a current balance of $250,000 and overdraft with a current balance of approximately $50,000."
30 All that can be said of these words is that they are perhaps somewhat equivocal and if one looks at the documents that the parties executed there is absolutely no suggestion that the principal debtor was other than the plaintiff company. In addition the accounts of the plaintiff company did not reflect any suggestion that Rocco Reale was the principal debtor.
31 However, when one has regard to the arrangements between the brothers to the effect that Rocco Reale was to personally repay the loan and that it was for the purpose of him providing a similar level of funds to the company as had been provided by his brother, the truth and substance of the transaction would tend to suggest that the principal debtor was Rocco Reale.
32 In my view there is a genuine dispute as to who is the principal debtor.
Offsetting claim
33 There was a claim to offset a debt of $129,499 owed by the defendant and Rocco Reale to the plaintiff. However, given that the claim is by the defendant it was submitted that there can be no set off as a joint debt cannot be set off against a separate debt. See S R Derham Set Off Ch 5 note 3. The plaintiff did not press the claim, which is probably appropriate as the debt prima facie is a joint debt and cannot be claimed against one debtor alone.
Conclusion
34 In my view the plaintiff has established a genuine dispute and, accordingly, I make order 1 in the application. I will hear submissions on costs.
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