Trent v Bolton

Judgment

1. BASTEN JA: I agree with Macfarlan JA.
2. MACFARLAN JA: By summons filed on 9 March 2020 Mr Bradley Trent and Ms Eraina Trent sought leave to appeal against a decision of P Taylor SC DCJ dated 11 December 2019 ([2019] NSWDC 853). In their written submissions they confined their challenge to his Honour's decision to reduce their claim by $21,500 to account for an offsetting claim of the present respondents, Mr Kenneth Bolton and Ms Pauline Shumack.
3. The following are my reasons for joining in this Court's orders made on 20 October 2020 dismissing the application for leave to appeal and ordering the applicants to pay the respondents' disbursements incurred in the proceedings in this Court (the costs order being limited to disbursements because the respondents were self-represented, as they had been at first instance).
4. In 2001 the applicants and respondents became shareholders of a company (AJ Roberts Removals and Storage Pty Ltd) which conducted a removals and storage business. Mr Trent and Mr Bolton worked for the company and were the directors. The company was funded by finance provided to it by the National Australia Bank. Each of the applicants and respondents provided guarantees and registered mortgages over their homes to the Bank.
5. In 2009 Mr Trent ceased employment with the company, although he remained as a director and secretary. Mr Bolton and Ms Shumack thereafter managed the company's business.
6. In 2012 Mr and Mrs Trent sold their home, with the Bank accepting a deposit of $155,000 as security from them in lieu of its mortgage over their property.
7. In 2017 the company was placed in liquidation, with $104,757.09 outstanding to the Bank. The Bank deducted this amount from the applicants' deposit, with the consequence that in their District Court action the applicants sought from the respondents as co-guarantors a contribution of half that sum, namely $52,378.55. The applicants succeeded on that claim. Favourably to the respondents his Honour however off-set from that claim $21,500, being half of the sum of $43,000 that the respondents pleaded that they had as guarantors paid the Bank prior to the winding up. Their verified defence referred to this payment as an amount "paid through the company on the [applicants'] behalf, while taking low wages in order to reduce the liabilities". The respondents' cross-claim was to similar effect. Both pleadings were verified by an affidavit of Ms Shumack which stated that she believed the statements of fact in the pleadings to be true.
8. The primary judge referred to these pleadings and their verification, and continued: "[27] In her affidavit, Ms Shumack said: 'NAB loan account no 534467318 This account was the account that was the original loan to purchase the business. When the Plaintiff [Mr Trent] left the balance was $43,000. The [applicants] made no contribution. I never took any wage throughout this time. I only took some limited wages in 2017 when Ken's pension was continually delayed. There were times when Ken took very little in wages. MYOB report for 1/7/2009 to 30/06/2010 - $34,838.' [28] The financial statements of the AJ Roberts company for 2013 and 2014, by the absence of any reference to this loan, support the assertion that the loan was fully repaid by then, perhaps by 30 June 2012. [29] Ms Shumack was not cross-examined on this evidence or at all. None of these matters were disputed by Mr Trent in evidence, although the defence to cross-claim did not admit them. Mrs Trent and Mr Bolton did not give evidence. [30] By reason of all these matters, I am persuaded on the balance of probabilities that Mr Bolton and Ms Shumack repaid to NAB a loan of the AJ Roberts company. The debt of the AJ Roberts company to NAB comes within the terms of the Guarantee." (Footnotes omitted.)
9. His Honour then referred to a submission by the applicants that the respondents' claim as guarantors must fail because, if any relevant payment was made to the Bank, it was made by the company rather than the respondents. His Honour rejected the submission, stating that he found that the respondents made the payments but "even if it were uncertain which of the company, Mr Bolton and Ms Shumack paid off the loan", the respondents were entitled to the contribution they claimed.
10. The only proposed ground of appeal stated in the applicants' Draft Notice of Appeal lodged in support of their application for leave to appeal was as follows: "The primary judge erred in holding that the defendants had given evidence of the assertion that they had made loan repayments on behalf of AJ Roberts Removals and Storage Pty Ltd to National Australia Bank Limited by having verified the pleadings in which the allegation was made."
11. The first point to be made is that it is not clear that the primary judge did rely on the affidavits verifying the pleadings as evidence. Arguably at least, his Honour simply relied on the evidence he described in [27] and [28] (see [8] above).
12. Secondly, contrary to the applicants' submissions, this proposed ground of appeal did not in the circumstances of this matter raise a point of principle that required this Court's attention. Certainly, affidavits verifying pleadings are not strictly part of the evidence adduced at a hearing unless a successful application is made to use them as such. Such an application would ordinarily meet objections as to form (the affidavits only being expressed in terms of belief) and requests for attendance for cross examination.
13. Whether by reason of the manner in which the hearing in this matter was conducted it was however permissible for the primary judge to refer to those affidavits as evidentiary support for his conclusion would have needed to be determined by reference to a careful examination of the transcript of which only extracts were provided to this Court. This Court would not in any event ordinarily be prepared to grant leave to appeal to enable it to conduct such an exercise.
14. The need for an examination of the transcript was emphasised by the following observations the primary judge made at the commencement of his judgment: "[3] Ms Shumack appeared unrepresented. Although she had no legal training, she said that her husband, Mr Bolton, was unwell and sought to appear for him as well as for herself. Mr and Mrs Trent did not oppose this course and leave was granted. [4] The pleadings of Mr Bolton and Ms Shumack, and her affidavits, reflect that absence of legal training, making it difficult in many cases to ascertain precisely the nature of their claim or defence. The matter was conducted with a level of informality, where Mr and Mrs Trent did not object to much of the material relied on by Mr Bolton and Ms Shumack even though its relevance was often hard to discern. Ms Shumack was left to rely upon material which comprised pleadings, affidavits, submissions and argument, for what it was worth."
15. As his Honour indicated, the hearing was conducted with a "level of informality" and Ms Shumack (who represented herself and Mr Bolton) was "left to rely upon material" which extended beyond evidence in the strict sense and in particular included "pleadings". The well-established proposition that parties "may, by consent, choose to disregard or abandon the case as pleaded and fight their case on some other basis" (Delaney v Winn [2015] NSWCA 124 at [55]; and see Dare v Pulham (1982) 148 CLR 658 at 664; [1982] HCA 70) applies equally to parties' disregard of evidentiary rules.
16. Thirdly, any reliance by the primary judge on the affidavits verifying the respondents' pleadings was not shown to be necessarily material to the outcome. It was arguably a reasonable inference from the evidence (not including the affidavits verifying) to which his Honour referred (see Judgment [28]-[29] quoted in [8] above) that in support of their pleaded contribution claim the respondents were saying that they had provided financial support to the company and that this enabled the company to pay the relevant debt to the Bank. This was confirmed by the following interchange between his Honour and Ms Shumack that occurred in the course of the hearing: "HIS HONOUR: So what has happened it seems Ms Shumack, correct me if I'm wrong, is when you say we paid out those liabilities, you lent money to the company and the company paid the NAB so that, so that the liability to the NAB was less? DEFENDANT SHUMACK: Yes. HIS HONOUR: So you have an entitlement to be paid by the company for lending it money? DEFENDANT SHUMACK: Yes …"
17. Whilst Ms Shumack does not appear to have been in the witness box, and sworn, when this exchange occurred, it would arguably not have been unreasonable for his Honour to rely upon what Ms Shumack said in determining the respondents' claim, bearing in mind the apparent informality of the hearing and Ms Shumack's status as a self-represented person who was not legally qualified. Certainly, in this Court the applicants sought to take advantage of the exchange by describing it as a "concession".
18. Fourthly, the primary judge's alternative conclusion (see [9] above) provided an arguably correct basis for his order. The alternative conclusion was that it did not assist the applicants to demonstrate that the respondents' payments were to the company and not to the Bank (in this Court the applicants said that the respondents' "concession" referred to in [16] above established this).
19. A question of this type arose in Mahoney v McManus (1981) 180 CLR 370; [1981] HCA 54 in which a guarantor provided the principal debtor with funds to enable it to pay creditors. The High Court held that the guarantor had provided the money to the company, not as a loan out of the proceeds of which the company had paid off part of its indebtedness to the creditors, but as a payment under the guarantees, entitling the guarantor to contribution from a co-guarantor. Gibbs CJ (with whom Murphy and Aickin JJ agreed) stated (at 378): "In my opinion the proper conclusion to be drawn from all the facts is that on each occasion the appellant provided the money, not as a loan which the company might use as it liked, but to be applied in payment of the debts the subject of the guarantees. The learned trial judge was in my opinion right in saying that the interposition of the company between the appellant and the creditors was a mere matter of procedure. In so far as the moneys were used for the purpose of paying the creditors, they were in my opinion payments by the appellant under his guarantees and they should be taken into account in determining the amount of contribution payable as between the appellant and the respondent. It should be remembered that the doctrine of contribution is based on the principle of natural justice that if several persons have a common obligation they should as between themselves contribute proportionately in satisfaction of that obligation. The operation of such a principle should not be defeated by too technical an approach to the question whether a surety has paid the creditor, when he has supplied moneys to the principal debtor for the purpose of making such payment." See also Lavin v Toppi (2015) 254 CLR 459; [2015] HCA 4 at [34] and [41].
20. In Mahoney, Murphy J (at 381) expressly characterised the guarantor's conduct as use of the principal debtor "as agent or conduit for payment under the guarantee[s]".
21. In these circumstances, it is clear that both the primary judge's principal finding that the respondents made the payments to the Bank and his apparent alternative finding that, even if they were made to the company, they were effectively made for the purpose of the company, as their agent, paying the Bank were findings of fact. Such findings were capable of supporting his Honour's conclusion that the respondents were entitled to contribution from the applicants. They did not give rise to any question of principle that might warrant a grant of leave to appeal.
22. For these reasons, it was appropriate for this Court to refuse leave to appeal. The amount at issue, apart from costs, was the relatively small sum of $21,500, being only a small proportion of the sum of $100,000 which marks the point at which leave to appeal is not required (see s 101(2)(r) of the Supreme Court Act 1970 (NSW)). Further, the application did not raise any point of principle but instead concerned questions of fact appropriate for final resolution by the primary judge. Nor did the applicants demonstrate that his Honour's conclusion was obviously wrong and that an injustice to the applicants was therefore apparent.
23. SIMPSON AJA: I joined in the orders made on 20 October 2020 for the reasons expressed by Macfarlan JA.