Equity - General principles - Equitable doctrines and presumptions - Contribution - Generally - Equitable contribution - Scope of availability - Co-ordinate liability - Creditor debt owed by a company of which the appellant and respondent where both directors and both guarantors to the relevant creditor - Whether appellant was entitled to contribution from respondent.

Magistrates Court (Civil Division) Act 1992 (Tas), s28.

State of Tasmania v Boyd [2010] TASSC 13, considered.

Estoppel - Anshun estoppel - Generally - Res judicata - Creditor debt - Whether guarantee had merged into default judgment already entered against the respondent - Whether respondent was estopped from recovering equitable contribution.

Walker v Bowry [1924] HCA 28, considered.

Judgment Number: [2014] TASSC 13

TIMOTHY JAMES TUBB v CHRISTOPHER PETER REISSIG (NO 2)

1. The appellant appeals on 11 grounds against a decision of Magistrate Pearce (as he then was) of 6 March 2013 (Reissig v Tubb [2013] TASMC 25). His Honour entered judgment against the appellant (Timothy James Tubb) in the respondent's (Christopher Peter Reissig) action against him for contribution from the appellant in respect of a debt owed by a company of which the appellant and the respondent were both directors, and in respect of which they were both guarantors to the relevant creditor.
2. Ground 10 of the notice of appeal asserts that the learned magistrate erred in refusing the appellant leave to amend his defence on the fourth day of a six day trial. This ground was disposed of adversely to the appellant in Tubb v Reissig [2013] TASSC 76. These reasons deal with the remaining 10 grounds of appeal.

The background to the action before the magistrate

1. There were two actions by the respondent against the appellant which were heard together by the learned magistrate on 27 and 28 August 2012, 8 October 2012, 15 and 29 November 2012, and 19 December 2012. His Honour set out the background to those two actions at pars[3] - [12] of his reasons for decision as follows:

"3 Prior to 2006 Mr Tubb conducted business as an automotive mechanic through a company Dreem Mechanical Pty Ltd. Mr Reissig operated and still operates a building business through the company Chris Reissig Builders Pty Ltd. Mr Reissig and Mr Tubb, who had known one another for some time and become friends, commenced a business relationship. A solicitor, Melanie Kerrison of Rae and Partners, set up a unit trust called the C & T Unit Trust of which Mr Reissig and Mr Tubb were the trustees. Through the trust they engaged in the construction and sale of residential buildings. In 2006 they decided to buy a hotel together. They looked around for a suitable business and decided upon the Inveresk Tavern at 13-19 Dry Street Invermay in Tasmania. They sought advice from an accountant Mr Ronald Brown.

4 Rae and Partners acted as solicitors in the purchase. Mr Brown advised that a company should be incorporated to purchase the hotel business which consisted of a leasehold, plant and equipment and stock. Skyline Enterprises (Tas) Pty Ltd ('Skyline Enterprises') was incorporated on 9 November 2006. Mr Reissig and Mr Tubb were the directors. The shares were owned by the companies associated with each of them; in Mr Reissig's case Chris Reissig Builders Pty Ltd and in Mr Tubb's case Dreem Mechanical Pty Ltd Company bank accounts were opened.

5 The purchase price for the business was about $160,000. A deposit of $10,000 was paid from the unit trust with the respective accounts of Mr Reissig and Mr Tubb each being debited by $5,000. To fund the balance and to provide working capital Skyline Enterprises obtained a business loan of $150,000 and an overdraft facility of $100,000 from the ANZ Bank. A letter of offer dated 20 November 2006 was submitted and formed the basis of the agreement with the bank. To further secure the indebtedness to the bank Mr Reissig and Mr Tubb entered into a guarantee and indemnity both in their personal capacity and as trustee for the C & T Unit Trust. Chris Reissig Builders Pty Ltd also entered into a guarantee and indemnity agreement in respect to the liability of Skyline Enterprises.

6 On 13 November 2006 Skyline Enterprises executed an application for a credit account with Australian Liquor Marketers Pty Ltd, a liquor supplier. The application was accepted by ALM which thereafter supplied liquor to the hotel. In part, the application provided:

'The Applicant agrees that if the Applicant is a private company, the directors of the Applicant will be bound as guarantors of the Applicant and shall execute and be bound by ALM's standard Credit Trading Terms.'

The credit trading terms are attached to the application and are also dated 13 November 2006. Both the application and the terms are signed by Mr Tubb and Mr Reissig as directors of Skyline Enterprises and as guarantors. The trading terms relevantly provide for a joint and several guarantee of the liability of Skyline Enterprises to ALM in the following terms:

'30 In consideration of ALM at the request of the Guarantor entering into this Agreement with the Customer the Guarantor covenants and agrees with ALM that:

30.1 The Guarantor guarantees to ALM that he will be with the Customer jointly and severally liable for the due payment of all moneys to be paid under this agreement ...

30.4 The liability of the Guarantor under this guarantee and indemnity shall not be affected by the granting of time or any other indulgence to the Customer ...

30.9 Where there is more than one person ... which together constitute the Guarantor to this Agreement the obligations and liabilities of each and every such person ... shall be joint and several.'

7 As between Mr Reissig and Mr Tubb an agreement was reached whereby Mr Tubb would be paid $1000 per week to manage the hotel. Mr Reissig's case, although now disputed by Mr Tubb, is that Mr Reissig's wife Emma was to be paid a wage of $25 per hour to manage and prepare the books of account. Mr Reissig was to, at the same time as continuing to operate his building business, provide some limited services such as preparation of staff rosters and ordering stock, but without remuneration.

8 The hotel commenced operation at the beginning of December 2006. The hotel business did not go well. It suffered substantial losses. Over the course of the next year tension developed between Mr Reissig and Mr Tubb both on a business and personal level. At some point during 2007 Mr Tubb ceased to manage the hotel and another member of staff was appointed to be manager. Mr and Mrs Reissig assumed greater responsibility for the business. The ANZ Bank was paid its debt and re-finance was obtained from the Bank of Queensland. Notwithstanding the falling out between the two men, Mr Reissig and Mr Tubb both remained as directors.

9 There is a dispute about Mr Tubb's level of involvement with the management of the hotel and access to business and company records after 1 July 2007 and the reasons for his reduced role. I will refer to that dispute later in these reasons. Findings about the disputed facts are required to enable determination of the issues in each claim.

10 Eventually the hotel was sold by contract dated 26 May 2009 which was completed on 30 June 2009. The sale price was $250,000 plus stock of $69,039.29. The settlement statement prepared by Rae and Partners records that from the proceeds of sale moneys were paid including $104,344.20 to the Bank of Queensland and $69,039.29 (the stock payment) to ALM. The balance sale proceeds of $128,493.22 were paid into the company bank account with ANZ on 21 July 2009.

11 The sum deposited to the company bank account was used to pay creditors. The payments to creditors included payments to Chris Reissig Builders Pty Ltd and to Mr and Mrs Reissig personally.

12 After the hotel was sold Skyline Enterprises was wound up following appointment of Paul Cook as liquidator. There were insufficient funds to discharge all of the still outstanding liabilities of the company. Two such liabilities, the balance debt to ALM of $51,364.30 and a debt to the ATO of $81,994.48, form the basis of these actions."

1. This appeal concerns only the balance debt to Australian Liquor Marketers Pty Ltd ("ALM"). An appeal by the respondent against the decision of the learned magistrate concerning the Australian Taxation Office ("ATO") debt was determined adversely to the respondent in Reissig v Tubb [2013] TASSC 77.

1. The grounds of appeal, including, for context only, ground 10, are as follows:

"1 Judgment for the Claimant against the Defendant in the sum of $26,689.94 in Claim no 4484/2011

AND TO QUASH the said decision and, in substitution thereof, order the following:-

1. Judgment for the Appellant against the Claimant; and
2. Costs;
3. Such further or other orders or directions as this honourable Court deems fit.
4. Alternatively:-

(b) Set aside the Order of his Honour Magistrate Pearce made on the 6 day of March, 2013 in relation to Claim no 4484/2011;

(c) The matter be remitted to the Magistrates Court (Civil Division) differently constituted to be determined according to law;

(d) Such further or other orders or directions as this honourable Court deems fit.

1. the learned Magistrate erred in holding that the Claimant '...suffered a personal detriment by the payment...' of $26,689.94 to ALM or that '...He suffered the loss and is able to recover it...' (Reasons for Decision - Paragraph 44) by virtue of the fact that he did not make the said payment but Chris Reissig Builders Pty Ltd did (Exhibit C8) a company controlled by him, but only after he caused to be paid from Skyline Enterprises' bank account into Chris Reissig Builders Pty Ltd's bank account, from the balance Sale proceeds of the Hotel, the following amounts on the following dates:

(a) $19,750.00 on the 22 July, 2009 (see Exhibit D6 & D7);

(b) $9,000.00 on the 27th July, 2009 (see Exhibit D6 & D26);

(Reasons for Decision - Paragraphs 10, 11, 44 and 53)

1. the learned Magistrate erred in holding that the Claimant '...suffered a personal detriment by the payment...' of $26,689.94 to ALM or that '...He suffered the loss and is able to recover it...' (Reasons for Decision - Paragraph 44) by virtue of the fact that he caused to be transferred from the balance Sale proceeds of the Hotel, out of Skyline Enterprises' bank account and into a bank account held jointly by him and his wife (ie BSB: 017-042 A/C: 582746637) an amount of $5,739.50 on the 21st July, 2009 (Exhibit D6). (Reasons for Decision - Paragraph 53) (See also Ground 3 below)
2. the learned Magistrate erred in holding, in essence, that the Claimant had 'come to equity with clean hands' when in fact he had not and therefore is not entitled to recoup an equitable contribution in the amount of $26,689.94 from the Appellant towards the ALM debt, by virtue of the fact that:

(a) he took the monies from Skyline Enterprises' bank account referred to in Grounds 1 and 2 above, prior to the payment of the ALM debt;

(b) he shut out (Exhibits D8 & D15) the Appellant entirely from the management of the Hotel, prior to the accrual of the said ALM debt,

(c) he took and/or mixed Skyline Enterprises' monies with his own monies and/or Chris Reissig Builders Pty Ltd's monies, as described below, in excess of $283,000.00 (ie $186,753.55 plus $96,500.00 (Exhibits C18 & 19)) and applied it to his own use and/or to the use of Chris Reissig Builders Pty Ltd:

(i) payments made between July, 2008 and June 2009 from Skyline Enterprises' to an account held jointly with he and his wife totalling $96,500.00 (BSB: 017-042 A/C: 5827-46637) (See Exhibit D22); and

(ii) payments made between April, 2007 and December, 2008 from Skyline Enterprises' account to an account held by Chris Reissig Builders Pty Ltd totalling $186,753.55 (BSB: 127-850 A/C: 020786078) (See Exhibit D26)

(d) he took more monies out of Skyline Enterprises' bank account than he put back into Skyline Enterprises' bank account;

(e) he took $5,884.89 of Skyline Enterprises' monies, as described below, and used it to pay Chris Reissig Builders Pty Ltd's Examiner newspaper account, being for advertising costs, the majority of which costs did not relate to the Hotel's activities: -

(i**)** $3,884.89 transferred on the 12th July, 2007 (see Exhibit D10); and

(ii) $2,000.00 transferred on the 27th July, 2007 (see Exhibit D10) (Reasons for Decision - Paragraph 52)

(f) he took $4,000.00 of Skyline Enterprises' monies on the 10th March, 2009 (from the balance Sale proceeds of the Hotel) and used it to pay his own private ANZ Credit card debt (ie BSB: 017-042 A/C: 407220-9021537602) (Exhibit Dll, see also Exhibit D1 and particularly Statement no 28 at page 2);

(g) he allowed Skyline Enterprises' debts to spiral out of control, without consulting the Appellant at any stage, to the point where the company was placed into liquidation by the Deputy Commissioner of Taxation (Exhibits D2, D18, D19, D20, D21, D28, D29, D30, D31 & C23);

(h) he allowed Skyline Enterprises' to pay his wife a significant 'salary' (but into a bank account held jointly with he and his wife (ie BSB: 017042 A/C: 5827-46637) (See Exhibit D26)), unbeknownst to the Appellant, for apparently accounting services provided by her to the company, when in fact the company at the time was suffering from substantial losses (See also Ground 6 below).

(Reasons for Decision - Paragraphs 38, 45 - 53)

1. the learned Magistrate erred in holding that the Appellant had not been released from the ALM debt in toto in February, 2011 and therefore the Guarantee, by ALM agreeing to discontinue its Claim against the Appellant (Exhibit D40 & D41), the result of which is that the Claimant is not automatically entitled to recoup an equitable contribution in the amount of $26,689.94 from the Appellant towards the ALM debt (See also Ground 5(d) below).

1. the learned Magistrate erred in law in holding that the Guarantee had not merged in the Judgment of the Melbourne Magistrates Court dated 5 November, 2010 (Exhibit D17), and thus the Claimant is not estopped from recouping from the Appellant an equitable contribution in the amount of $26,689.94 towards the ALM debt, particularly given the following undisputed facts:

(a) the Claimant and the Appellant were sued together in the Melbourne Magistrates Court (Case no A12567224) (Exhibit C7);

(b) the Melbourne Magistrates Court complaint (Case no A12567224) was struck out as against the Appellant on the 1st March, 2011 (Exhibit D42);

(c) the Claimant and the Appellant were primary debtors of ALM by virtue of Clause 30.5 of the Deed of Guarantee (Exhibit C1), which set outs:

'Notwithstanding that as between the Guarantor and the Customer the Guarantor may be a surety only nevertheless as between the Guarantor and ALM the Guarantor shall be deemed to be a primary debtor and contractor jointly and severally with the Customer.' (my emphasis)

(d) ALM had released the Appellant from the debt (see Ground 4 above);

(e) the Claimant could have but by his own admission omitted to bring a Claim for contribution against the Appellant in the Melbourne Magistrates Court's proceedings;

(f) there are now 2 conflicting results in that a Claim against the Appellant was struck out in the Melbourne Magistrates Court in connection with the ALM debt, whilst there is now a Judgment against the Appellant in the Launceston Magistrates Court in connection with the same debt.

(Reasons for Decision - Paragraphs 39, 40 and 41)

1. the learned Magistrate erred in rejecting '...Mr Tubb's evidence that he knew of no such arrangement and did not agree to it...' in favour of the Claimant's wife's evidence '...that it was agreed at the start of the enterprise that Mrs Reissig would be paid at the rate of $25 per hour for her accounting and administrative work...' and whereupon she admits to having received from Skyline Enterprises something in order of Gross $80,462.50 (Net $61,324.50) between the 20th January, 2007 and 30th June, 2009 (Exhibit C16), when at the time, Skyline Enterprises was apparently suffering from substantial losses. (Reasons for Decision - Paragraph 51) (See also Ground 3(h) above)
2. the learned Magistrate erred in holding that it was a relevant consideration that the liquidator appointed to Skyline Enterprises by the Deputy Commissioner of Taxation ('the Commissioner'), did not take issue with any of the payments referred to in the abovementioned Grounds, given that the Claimant had entered into a payment plan with the Commissioner to pay PAYG tax said to be owed by Skyline Enterprises to the Commissioner and therefore the Commissioner would have had no reason to investigate any transactions, including those referred to in the abovementioned Grounds (Exhibits C20, C21 and C22).

1. the learned Magistrate erred in holding that: -

'...even if it were the case that the moneys were applied deliberately leaving debts, for example the ALM debt, guaranteed by Mr Tubb with a view to obtaining a contribution, that in my view is no grounds for refusing the claim for contribution...'

in relation to the application by the Claimant of the balance Sale proceeds of the Hotel in the amount of $128,493.22 which his Honour found were sufficient to cover the ALM debt.

1. the learned Magistrate erred in holding that: -

'...There was nothing unlawful or unfair in using that money to pay other creditors, including Mrs Reissig and Chris Reissig Builders Pty Ltd, from the balance proceeds...' (Reasons for Decision - Paragraph 54)

presumably in reference to the payments totalling $34,489.50 received by Chris Reissig Builders Pty Ltd, a company he controlled and he and his Wife, especially given his Honour's finding that: -

'...No agreement was produced evidencing an entitlement to payment...' (Reasons for Decision - Paragraphs 53).

1. the learned Magistrate erred in refusing the Appellant's Application for leave (filed with the Court on the 9th November, 2012 and determined by the Court on the 15th November 2011) to amend his Defence to incorporate the following additional allegations:

'18 In the alternative, the defendant savs that the Claimant and his Wife, Emma Maree Reissig, during the period from the 1st November. 2006 until the company went into liquidation on or about 12th August, 2010 have fraudulently misappropriated company funds and property for either their own benefit or for the benefit of entities controlled by them, to the company's detriment and therefore the Claimant is not entitled to any contribution from the Defendant towards the Judgment sum.

1. In the alternative, if the defendant signed the Deed of Guarantee referred to in paragraph 6 of the Claim, he did so pursuant to the false representation made to him by the Claimant and his Wife, Emma Maree Reissig that the document was only an Application for a line of Credit with the wholesale liquor group known as 'ALM'.
2. In the alternative, the Defendant savs that he was released from all liability under the alleged Deed of Guarantee by the wholesale liquor group known as 'ALM' on or about the 20th December, 2010.'

1. the learned Magistrate erred in refusing the Appellant the opportunity of pursuing in essence his defences of, Non est factum, and Fraud, as described in Ground 10 above (ie paragraphs 18 and 19 of the proposed Amended Defence referred to above) and thus excluding the cross-examination of the Claimant and his wife in relation to those issues.

1. The nature of an appeal such as the present, brought pursuant to the Magistrates Court (Civil Division) Act 1992, s28, was considered by Blow J (as he then was) in State of Tasmania v Boyd [2010] TASSC 13 where his Honour said at par[27]:

"For these reasons, I think s28 should be interpreted not as conferring a right of appeal in the strict sense, but as conferring a right of appeal by way of rehearing 'on the papers', whereby the judge hearing and determining the appeal may substitute his or her own findings of fact for those of the magistrate appealed from, to the extent that it is appropriate to do that without having seen and heard the witnesses. That approach is consistent with the approach that judges of this Court have taken in the past: Cook v Jennings [2007] TASSC 40; (2007) 48 MVR 185; Cuthbert v Roberts [2004] TASSC 63; (2004) 13 Tas R 83."

1. Reading his reasons in their entirety, I do not understand Evans J to have considered the position ten years earlier to have been otherwise than as stated by Blow J, notwithstanding Evans J's use of the term "appeal stricto sensu" to describe the nature of an appeal such as the present in Clark v Eadie [2000] TASSC 32 at pars[3] - [6]. And, Blow J's view in State of Tasmania v Boyd remains relevant to s28 as currently enacted. Amendments to s28 made in 2009 relate, relevantly, only to "minor civil claims" involving claims that do not exceed $5,000. This is not such a claim.

Consideration of ground 1 of the notice of appeal

1. Ground 1 of the notice of appeal asserts, in effect, that the learned magistrate erred in holding that the respondent suffered a personal loss or detriment in paying the amount due to ALM ("the ALM debt") and was thus entitled to recover half of that amount, namely $26,689.94, when it was Chris Reissig Builders Pty Ltd, a company controlled by the respondent which made the payment and which did so only after the respondent had caused to be paid into that company's account monies from the proceeds of sale of the hotel held in the account of Skyline Enterprises (Tas) Pty Ltd.
2. By his defence the appellant did not deny or refuse to admit the respondent's pleading that he had paid the ALM debt. Rather he pleaded that he was "unable to plead" to the particular paragraph.
3. Whatever flows from such a plea in view of r250 of the Supreme Court Rules 2000, the learned magistrate obviously regarded the payment of the ALM debt by the respondent as in issue on the pleadings. His Honour dealt with this in his reasons for decision at par[44] as follows:

"Mr Tubb does not admit that Mr Reissig paid the ALM debt. The evidence discloses that the payments came from the account of Chris Reissig Builders Pty Ltd. This fact does not preclude Mr Reissig from relief. I am satisfied that he suffered a personal detriment by the payment. I accept Mrs Reissig's evidence that the amount of the payment was debited against Mr Reissig's personal drawings from that company. He suffered the loss and is able to recover it." [My emphasis.]

1. That was a credit based finding by the learned magistrate that was perfectly open to his Honour, and there is nothing in my review of the evidence before him that would allow me to identify any appealable error in coming to that conclusion.
2. The gravamen of the submission on behalf of the appellant seems to be a suggested error by the learned magistrate in not finding to the contrary of that conclusion because monies paid to Chris Reissig Builders Pty Ltd and used in payment of the ALM debt were fraudulently or inequitably transferred from the proceeds of sale of the hotel into the account of Skyline Enterprises (Tas) Pty Ltd.
3. That claim was not a pleaded claim raising an issue for the consideration of the learned magistrate.
4. Whilst it was therefore unnecessary to do so, his Honour nonetheless did touch on the question of whether it was unlawful or unfair that Chris Reissig Builders Pty Ltd was paid monies owed to it before the ALM debt was paid in full. He did so in the following terms at par[54] of his reasons:

"It was also submitted that there were sufficient moneys from the balance proceeds of sale to discharge both the ALM and ATO debts in full. I accept that $128,493.22 was paid into the Skyline Enterprises bank account in July 2009 after the hotel was sold. That was enough to cover both debts. However ALM and the ATO were not the only creditors of the company. There was nothing unlawful or unfair in using that money to pay other creditors, including Mrs Reissig and Chris Reissig Builders Pty Ltd, from the balance proceeds, to the exclusion of ALM and the ATO. That is so even if those payments were so allocated leaving only debts in respect to which a contribution may be sought from Mr Tubb. In other words, even if it were the case that the moneys were applied deliberately leaving debts, for example the ALM debt, guaranteed by Mr Tubb with a view to obtaining a contribution, that in my view is no grounds for refusing the claim for contribution. Again, I would point out that the liquidator has apparently taken no issue with the propriety of any of the payments made by the company following completion of the hotel sale and the liquidation." [My emphasis.]

1. What is important to understand however, is that given that the learned magistrate had rejected the appellant's claims that the guarantee had somehow merged in the judgment obtained by ALM against the respondent and/or that the appellant had been released from the ALM debt by ALM discontinuing its claim against him after obtaining a default judgment against the respondent (views that I share, as will be seen from my reasons below relating to grounds 4 and 5 of the notice of appeal) the passage set out above did not form part of his Honour's reasoning on any issue properly before him arising from the pleadings. His Honour pointed this out quite clearly at pars[45] - [46] of his reasons for decision in the following terms:

45 In the course of the hearing Mr Tubb, through his counsel, cross examined at considerable length about issues in such a manner as to make clear that he was alleging fraudulent behaviour on the part of Mr Reissig and his wife. No such allegation was pleaded. It was put in argument that the issues were relevant because Mr Reissig relied on an equitable remedy and thus must "come to equity with clean hands". A person who has been guilty of fraud or sharp practice may be precluded from obtaining a contribution where it may be unjust or unfair to allow it; see Burke v LFOT Pty Ltd, supra, at [17] and Staples v Baker [1999] 1 Qd R 317 at 327 - 329. However allegations of fact asserting inequitable conduct, especially fraud, must be properly pleaded with adequate particulars. General allegations of fraud are not enough and fraud that is not alleged in the pleadings cannot be proved at the trial. Cross examination was permitted of the claimant's witnesses about facts relevant to this issue because, during the hearing, leave was granted on terms to the defendant to amend his defence. As the hearing progressed however the defendant did not take up the opportunity to amend afforded by the grant of leave.

46 Nevertheless I consider it appropriate to deal in a limited way with the factual assertions put by the defendant to make clear my conclusion that they are without merit." [My emphasis.]

1. Upon a review of the pleadings, the evidence and the submissions of the parties, I find no error in his Honour's observations as set out at par[14] above, and indeed I would respectfully endorse them.
2. The point remains however that in the result, those observations were quite plainly made only as a matter of courtesy to the parties, and even if there were some error in them, such an error would not represent a material and operative (and thus an appealable) error, unless of course something contained in them shone a bright light on an erroneous finding or conclusion made or reached by his Honour in his reasoning on matters that were in issue on the pleadings, and thus properly before him for adjudication. I see no such light.
3. Ground 1 fails.

Consideration of ground 2 of the notice of appeal

1. Ground 2 of the notice of appeal asserts, in effect, that the learned magistrate erred in holding that the respondent suffered a personal loss or detriment in paying the ALM debt and was thus entitled to recover half of that amount, namely $26,689.94, when he caused monies to be transferred from the balance proceeds of sale of the hotel, held in the account of Skyline Enterprises (Tas) Pty Ltd, into a bank account held jointly by him and his wife.
2. This ground fails for the same essential reasons as does ground 1.

Consideration of ground 3 of the notice of appeal

1. Ground 3 of the notice of appeal asserts that by virtue of the eight matters set out at sub-pars(a) - (h), the learned magistrate erred "in holding, in essence, that the [respondent] had 'come to equity with clean hands' when in fact he had not ...".
2. Whether the respondent had come to equity with clean hands, although the subject of much cross-examination and submission on behalf of the appellant, was not ultimately an issue open on the pleadings for the reasons explained by the learned magistrate at par[45] of his reasons and set out above at par[15] of these reasons.
3. The learned magistrate did not hold, "in essence", or otherwise, that the respondent had "come to equity with clean hands". His Honour made some legally unnecessary observations under the heading "Defences not pleaded - fraud" and to point, as the appellant seeks now to do, to arguments as to how his Honour might have been wrong in those observations does not raise a valid ground of appeal for my consideration.
4. There can be no appeal against gratuitous observations by a trial judge, which observations do not amount to findings or conclusions relevant to the disposition of the proceedings before him or her. Such observations, as I have already mentioned, might highlight a flaw in other, essential, reasoning of the trial judge. They do not in the present case.
5. Ground 3 fails.

Consideration of ground 4 of the notice of appeal

1. This ground asserts error on the part of the learned magistrate in finding that the appellant had not been released from the ALM debt with the result that the respondent had no right to contribution in respect of it.
2. The relevant facts are set out by his Honour at pars[22] - [23] of his reasons for decision as follows:

"22 On 16 September 2010 ALM commenced proceedings in the Magistrates Court of Victoria against Mr Reissig and Mr Tubb. The action claimed from them the sum of $51,364.30 and costs as guarantors of the liability of Skyline Enterprises for goods sold and delivered between December 2008 and June 2009. Mr Reissig sought advice about the proceedings. A default judgment was entered against him on 5 November 2010. He later entered into an agreement to pay the claimed sum and costs totalling $53,379.88. Mr Reissig, through an account operated by his building company, paid that amount in full by a payment of $26,689.94 made on 3 December 2010 and another payment of $26,689.94 made on 16 December 2010.

23 On 3 February 2011 Mr Tubb's solicitor signed a memorandum submitted by ALM's solicitor consenting to an order that the proceeding, so far as it concerned Mr Tubb, be discontinued. On 22 May 2011 the Victorian Magistrates' Court ordered, without the appearance of either party, that the claim against Mr Tubb be struck out."

1. This ground is misconceived.
2. The learned magistrate canvassed the law as to equitable contribution at pars[28] - [33] of his reasons for decision as follows:

28 If a guarantor who is directly liable to a creditor pays the principal debt he can claim contribution from his co-sureties because he has discharged their obligations to the creditor; Ellesmere Brewing Co v Cooper [1986] 1 QB 75 at 79, McLean v Discount & Finance Ltd [1939] HCA 38; (1939) 64 CLR 312, Albion Insurance Co Ltd v Government Insurance Office (NSW) [1969] HCA 55; (1969) 121 CLR 342. See Phillips and O'Donovan, The Modern Contract of Guarantee 2nd Ed 1992 at 526. The doctrine of equitable contribution is based on fairness and justice and arises at common law and in equity; Burke v LFOT Pty Limited [2002] HCA 17 at [15] and [38] [2002] HCA 17; (2002) 209 CLR 282.

29 The principle has been regularly applied to co-sureties; Burke (supra) at [14]. As soon as a guarantor has paid more than his fair share to discharge a co-ordinate liability he is entitled to be recompensed by those who have not in proportion to the respective liabilities; McLean v Discount & Finance Ltd ibid at 328. In Mahoney v McManus [1981] HCA 54; (1994) 180 CLR 370 Gibbs C J said, at [14]

'A surety is entitled to contribution from his co-sureties so that the common burden is borne equally and so that no surety is required, as between himself and his co-sureties, to pay more than his due share. The right arises whether the sureties are bound jointly, jointly and severally, or severally, and whether by the same or different instruments, and whether or not the sureties knew of each other's existence, provided that they are liable in respect of the same debt. The right to contribution arises when a surety has paid or provided more than his proper share of the principal debt, but it may also be enforced by a surety who has not made payment; the circumstances in which a surety who has not made payment may enforce a claim to contribution have not been precisely defined, but it appears that he may at least do so as soon as the creditor has acquired a right to immediate payment from him.'

30 Although a court may alter contribution, the starting point is that contribution should be equal. In Armstrong v Commr of Stamp Duties (1976) 69 SR (NSW) 38 Wallace P said, dealing with an equitable claim, at [43] '[T]he right and duty of contribution ... are founded on doctrines of equity and on the maxim "equality is equity".' See also Albion Insurance Co Ltd (supra) at 349 - 350 where Kitto J referred to sharing the burden 'pro-rata'.

31 It is unfair and unjust if the equality of burden is disturbed or defeated by the accident or chance that a creditor has selected or may select one or some rather than all for recovery. See Friend v Brooker (2009) 239 CLR 129, [2009] HCA 21 where at [38] the majority said that in such a circumstance:

'Were equity not to intervene, then it would remain within the power of the creditor so to act as to cause one debtor to be relieved of a responsibility shared with another'.

32 However, the right to contribution is from those who are liable in respect of the same principal debt owed by the same principal debtor. The doctrine applies to contribution between parties sharing co-ordinate liabilities or a common obligation to make good the one loss, where the liabilities were of the same nature and to the same extent; Albion Insurance Co Ltd (supra) at 350, Friend v Brooker (supra). In Burke v LFOT Pty Ltd (supra) Gaudron ACJ and Hayne J said at [14]:

'In general terms, the principle of equitable contribution requires that those who are jointly or severally liable in respect of the same loss or damage should contribute to the compensation payable in respect of that loss or damage, either equally where they are liable in the same amount or proportionately, where the amount of their liability differs. The principle has regularly been applied between co-sureties, co-insurers, partners, co-owners, where payment is made by one in discharge of a common liability, and co-trustees who are in pari delicto.

The doctrine of equitable contribution applies both at common law and in equity. It is usually expressed in terms requiring contribution between parties who share "co-ordinate liabilities" or a "common obligation" to "make good the one loss". More recently, in BP Petroleum Development Ltd v Esso Petroleum Co Ltd, the right to contribution was said to depend on whether the liability was "of the same nature and to the same extent".'

33 A statutory liability can give rise to a right of contribution at least in equity; Armstrong (supra). In Street v Retravision (NSW) Pty Ltd [1995] FCA 1197; (1995) 56 FCR 588; 135 ALR 168, Gummow J found that a liability imposed under s592 of the Corporations Law was not co-ordinate with the liability of guarantors of the corporation because there was no common interest and no common burden. However, in Hall & Ors v Poolman & Ors [2007] NSWSC 1330 Palmer J of the Supreme Court of NSW considered whether a claim for contribution could be brought against a co-director liable for insolvent trading under s588M(2) and (3) of the Corporations Act. The Court, after referring to Burke v LFOT Pty Ltd, supra and Spika Trading Pty Ltd v Harrison (1990) 19 NSWLR 211 found a right to contribution existed. At [467] - [468] his Honour said:

'As was the case under s556(1) of the Code, joint and several liability of co-directors for insolvent trading follows, as a matter of law, from the nature of the liability created by CA s588M(2) and (3): each person who was a director during the period of insolvent trading, and who cannot make out a defence, is liable to compensate for the same loss by reason of contravention of the same statutory prohibition in s588G(2). That is sufficient to attract the doctrine of equitable contribution.

I am unable to accept Mr Stoljar's next submission that Mr Martini could not be liable for contribution because he has not been sued directly by the Liquidators. Ex hypothesi, the doctrine of equitable contribution is applicable where the person from whom contribution is sought has not been sued although he or she could have been sued. The person claiming contribution must show that, had the co-obligor been sued, he or she would have been liable for the same loss, or a proportionate part of the same loss'."

1. There is, with respect, no error in that analysis.
2. His Honour dealt with the appellant's defence that he had been released from the ALM debt at pars[39] - [41] as follows:

"39 Mr Tubb relies, as a defence, on the manner in which the ALM proceedings commenced in Victoria were terminated. The evidence discloses that ALM, through its solicitors and with the consent of Mr Tubb's solicitor, agreed to discontinue its claim against him in February 2011. On 22 May 2011 the Victorian court ordered the claim be 'struck out'. However this does not constitute a defence to Mr Reissig's claim to a contribution. By then he had paid the whole ALM debt. In those circumstances it is hardly surprising that ALM did not proceed against Mr Tubb. It already had its money. The discontinuance and court order did not amount to a determination on the merits. Reference is made by the defendant to what is referred to as an Anshun estoppel, a reference to Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589. A 'cause of action estoppel' or 'res judicata' will prevent a further action or claim when the same claim has already been determined in an earlier proceeding; see Anshun, supra at 597 where Gibbs CJ, Mason and Aickin JJ observed that the 'rule as to res judicata comes into operation whenever a party attempts in a second proceeding to litigate a cause of action which has merged into judgment in a prior proceeding.' See also the judgment of Dixon J in Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 532.

40 There has been no such determination here as to give rise to an estoppel, at least one binding Mr Reissig. Were the right of contribution lost as a consequence of the facts relied on by the defendant, it would be an example of the injustice or unfairness arising from a decision by the creditor, ALM in this case, to recover against Mr Reissig and not Mr Tubb.

41 Because reliance was placed on it by the defendant, reference should be made to Walker v Bowry [1924] HCA 28; (1924) 35 CLR 48 although the facts are somewhat different. The case does not assist the defendant. Walker and Bowry jointly and severally guaranteed the debt of a company to a bank. The bank sued Mr Walker alone and obtained a judgment for £2,865. Later, after his insolvency, he paid the bank £800 and was released from the judgment. He sought a contribution from Mr Bowry. The court pointed out that the judgment did not affect his right of contribution from co-sureties; see p58. And whilst the release of Mr Walker discharged Mr Bowry from the obligation to pay the whole of the debt to the bank it did not extinguish Mr Walker's right to a contribution but limited to a portion of the amount he actually paid."

1. The learned magistrate's rejection of this defence, for the reasons his Honour gave, was plainly correct in my view.
2. By 3 February 2011, the whole of the ALM debt had been paid by the respondent. The debt was paid by him in two tranches, one on 3 December 2010 and one on 16 December 2010. By that latter date the respondent had paid more than his fair share to discharge a co-ordinate liability shared by him and the appellant. He was thereupon entitled to be recompensed by the appellant who had not paid in proportion to their respective liabilities.
3. That ALM chose to enter judgment by default against the respondent and did not actively engage in the proceedings as far as they related to the appellant, and, that after recovery of the debt in full from the respondent ALM offered to and did discontinue against the appellant, could in no conceivable way deprive the respondent of his right to equitable contribution. First, as submitted by counsel for the respondent, Mr Stanton, Walker v Bowry (above) per Isaacs ACJ at 55 - 56 and per Starke J at 58 - 59, stands for the proposition that a judgment obtained against a guarantor does not affect the right of contribution in respect of the amount actually paid by the guarantor and not released. Secondly, the discontinuance of a proceeding simply means that the action is removed from the list of cases before the court. It involves no determination of the proceeding and, absent some express or implied agreement to the contrary it is not finally determinative of the rights and liabilities of the parties; Re Twenty-First Larena Pty Ltd; Maximova v Goodwin [2010] VSC 84 at [21]. In my view the circumstances surrounding the discontinuance by ALM of its action against the appellant do not give rise to an estoppel of any kind that would bind the respondent in a way that would prevent him from asserting a right to contribution against the appellant in respect of the ALM debt.
4. Ground 4 fails.

Consideration of ground 5 of the notice of appeal

1. Ground 5 of the notice of appeal asserts that the learned magistrate erred in law in holding that the "guarantee had not merged in the judgment of the Melbourne Magistrates Court dated 5 November 2010", against the respondent in favour of ALM, with the result that the respondent is "estopped" from recovering contribution.
2. This ground of appeal is devoid of merit.
3. Counsel for the appellant put his argument before the learned magistrate in this way:

"At D41 it's a letter by my firm back to that law firm that sent the email provided signed minutes of consent orders, so in actual fact what we say there is that at law the actual claimant in the Victorian proceedings released Mr Tubb from his obligations under the guarantee.

So you've got a double whammy there, you've got a release at law that is actually effective to release him entirely, which means that no contribution can be made, the claim against him by Mr Reissig. Secondly the claim was struck out. So you've got a release and then a record that indicates that the court says that the claim was struck out against this person. So we say it's entered into the record. It is res judicata or whatever you want to call it, we say it goes to that. So we saw he ought not to be able to actually litigate this matter. It should have been stopped right from the beginning, but the other matter would have gone on as well, so really there was nothing to be lost, I suppose, by having both matters heard together, only time, I suppose, Your Honour.

So as stated earlier, we say the guarantees merged in the judgment. I think it is really well settled law that once a judgment is entered in relation to a guarantee like this the contract is at an end. I refer you, Your Honour, to Isaacs J in Walker v Bowry 1924 a High Court decision, that's in my list of authorities filed with the court.

It's almost - it's settled law that once a judgment is entered that contract is at an end, so the only, as I say, the only way that Mr Reissig could recoup any monies from Mr Tubb is through equity."

1. There was and is no substance to that submission.
2. There was no error on the part of the learned magistrate in not holding that the effect of the judgment against the respondent in favour of ALM prevented him from recovering contribution from the appellant once he had paid the judgment debt in full. The respondent's right to contribution in the circumstances of this case was not dependent upon him bringing a claim for contribution against the appellant in ALM's action. It was not unreasonable for him not to have done so. Nor can it be said, as is claimed by the appellant, that there were "2 conflicting results" as between the default judgment against the respondent and the merger of the guarantee in that judgment on the one hand, and the fact of ALM's claim against the appellant being discontinued and struck out by consent on the other. In my view no Anshun or other estoppel arose.
3. Any merger of the guarantee and the judgment against the respondent was only between the parties to the judgment, namely, ALM and the respondent. Walker v Bowry (above), discussed by the learned magistrate at par[41] of his reasons for decision which are set out at par[31] of these reasons, was of no assistance to the appellant. The judgment itself, being a default judgment, involved no determination on the merits and absent evidence of conduct of the parties capable of establishing a broader subject matter of dispute, it created an estoppel only as to the bare essence of the pleaded claim; Grimsey v Southern Regional Health Board [1997] TASSC 77 (judgment no 76/1997). In this case the default judgment could only be taken as having decided that the respondent was liable to ALM under the guarantee.
4. Ground 5 fails.

Consideration of ground 6 of the notice of appeal

1. This ground asserts that the learned magistrate erred in rejecting the appellant's evidence that he did not know of any arrangement that Mrs Reissig would be paid at the rate of $25 per hour for her accounting and administrative work.
2. The relevant passage in his Honour's reasons for decision is at par[51] as follows:

"51 The defendant also made reference to payments from the Skyline Developments account to Mrs Reissig. I am satisfied that such payments are remuneration for her accounting services and that there is nothing improper about them. I accept the evidence of Mr Brown and Mr and Mrs Reissig that it was agreed at the start of the enterprise that Mrs Reissig would be paid at the rate of $25 per hour for her accounting and administrative work. I reject Mr Tubb's evidence that he knew of no such arrangement and did not agree to it. I find it inconceivable that Mr Tubb, at least in the early days of the business, did not become aware that Mrs Reissig was being paid. It was reflected in the accounts and records of the company. It accords with common sense also that there should have been such an arrangement given the level of work involved. Mrs Reissig gave plausible and persuasive evidence that she would not have been prepared to do the work unless paid for it."

1. Once again this is not now a valid ground of appeal as at best it attacks an observation of the learned magistrate made, in the result, unnecessarily, in respect of a defence not pleaded by the appellant, and thus not ultimately in issue in the proceedings before his Honour.
2. Accordingly, ground 6 fails for the same reasons as did grounds 1, 2 and 3 of the notice of appeal.

Consideration of ground 7 of the notice of appeal

1. Ground 7 of the notice of appeal asserts that the learned magistrate erred in holding that it was a relevant consideration that the liquidator appointed for Skyline Enterprises (Tas) Pty Ltd by the Deputy Commissioner of Taxation did not take issue with payments made by the company to the respondent and his wife and to the respondent's company.
2. The relevant passages are at pars[53] and [54] of the learned magistrate's reasons for decision:

"53 Submission was also made about 3 payments respectively made on 21, 22 and 27 July 2009 from the balance proceeds of sale of the hotel in July 2009 to Chris Reissig Builders Pty Ltd totalling $34,489.50. This was put by the defendant as 'sharp practice' that disentitles Mr Reissig on equitable grounds from a contribution. Mr and Mrs Reissig both gave evidence that the payments were for services provided by Mr Reissig's company to the hotel. I have a little more hesitation about these payments. No agreement was produced evidencing an entitlement to payment. However it was not contended that Mr Reissig did not perform a substantial amount of work and time in operating and managing the hotel that he would ordinarily be remunerated for. If he had not done the work then others would have been paid to do it. When Mr Tubb did so he was paid. No issue was taken by the liquidator in respect to these or indeed any other payments made by the company. I do not regard these payments as disentitling Mr Reissig to contribution; even the facts relevant to those payments had been pleaded.

54 It was also submitted that there were sufficient moneys from the balance proceeds of sale to discharge both the ALM and ATO debts in full. I accept that $128,493.22 was paid into the Skyline Enterprises bank account in July 2009 after the hotel was sold. That was enough to cover both debts. However ALM and the ATO were not the only creditors of the company. There was nothing unlawful or unfair in using that money to pay other creditors, including Mrs Reissig and Chris Reissig Builders Pty Ltd, from the balance proceeds, to the exclusion of ALM and the ATO. That is so even if those payments were so allocated leaving only debts in respect to which a contribution may be sought from Mr Tubb. In other words, even if it were the case that the moneys were applied deliberately leaving debts, for example the ALM debt, guaranteed by Mr Tubb with a view to obtaining a contribution, that in my view is no grounds for refusing the claim for contribution. Again, I would point out that the liquidator has apparently taken no issue with the propriety of any of the payments made by the company following completion of the hotel sale and the liquidation."

1. This is yet another ground of appeal that attacks an observation of the learned magistrate made, in the result, unnecessarily in respect of a defence not pleaded by the appellant and thus not ultimately in issue in the proceedings before his Honour.
2. Ground 7 fails for the same reasons as did grounds 1, 2, 3 and 6 of the notice of appeal.

Consideration of grounds 8 and 9 of the notice of appeal

1. Grounds 8 and 9 of the notice of appeal assert that the learned magistrate erred in "holding" that even if monies were deliberately applied by the respondent leaving debts in respect of which the appellant had a co-ordinate liability, that is no ground for refusing the claim for contribution and that there was nothing unlawful or unfair in using the balance proceeds of sale of the hotel to pay other creditors.
2. Grounds 8 and 9 fail for the same reason as did grounds 1, 2, 3, 6 and 7.

Consideration of ground 11 of the notice of appeal

1. Ground 11 of the notice of appeal asserts that the learned magistrate erred in refusing the appellant the opportunity of pursuing his defences as described in par10 of the notice, that is to say, as contained in pars18 and 19 of the proposed amended defence set out in ground 10.
2. This ground does not survive the decision as to ground 10 of the notice of appeal in Tubb v Reissig [2013] TASSC 76, which determined that the learned magistrate did not err in refusing to allow the amendments sought by pars18 and 19 of the proposed amended defence.

1. All grounds of appeal having failed, the appeal is dismissed.