Wilson & Anor v Dartanyon Pty Ltd

CATCHWORDS: CONTRACTS - Agreement for sale of land and construction of house - Whether second appellant executed agreement - Whether terms of agreement and accompanying 'Annexure A' required second appellant to repay respondent 'vendor finance' loan upon sale of property - Whether first appellant executed guarantee of loan - Whether guarantee, if executed, extended to 'vendor finance' loan - Agreement unable to be produced at hearing - Findings by primary judge as to terms of agreement based primarily upon credit findings - APPEAL - Admission of further evidence - Where evidence not available at hearing - Building contract anonymously received by appellants after hearing - Whether special grounds existed to admit contract under s 75A(8) Supreme Court Act 1970 - Whether there was a real possibility that the primary judge would have reached a different decision had the building contract been admitted at hearing

Atkins v National Australia Bank (1994) 34 NSWLR 155 CASES CITED: Commonwealth Bank of Australia v Quade [1991] HCA 61; (1991) 178 CLR 134 Thomas v HP Mercantile Pty Ltd (2008) NSWCA 308

Ian Wilson PARTIES: Matthew Wilson Dartanyon Pty Ltd

COUNSEL: A: G P McNally SC R: B De Buse

SOLICITORS: A: Dignan & Hanrahan, Campbelltown R: Marsdens Law Group, Campbelltown

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40187/09

TOBIAS JA YOUNG JA REIN J

Wednesday 25 November 2009 IAN WILSON & Anor v DARTANYON PTY LIMITED Judgment 1 TOBIAS JA: In September 2004 Dartanyon Pty Limited (the respondent) was a real estate developer carrying on the business of buying allotments of land, erecting houses thereon and then selling the house and land as a package. 2 Mr Ian Wilson (the first appellant) was an employee of the respondent, whereas Matthew Wilson (the second appellant) was his son (together the appellants). 3 Negotiations took place between Mr Gregory Kellner (a director of the respondent) and the first appellant whereby the latter was to acquire the property known as Lot 2355 Sir Warwick Fairfax Drive, Harrington Park (the property). The purpose of the sale was to complete a partially constructed house on the property and, after a period of time, to sell the property with a view to making a capital gain. 4 It was common ground that in or about September 2004 the first appellant advised Mr Kellner that the purchaser of the property would be the second appellant. The principal issues at trial therefore related to identification of the terms of the agreement in relation to the sale of the property to the second appellant and, in particular, whether the first appellant had guaranteed the second appellant's obligations under that agreement. 5 The respondent's primary case was that the sum of $100,000 had been "lent" by the respondent to the second appellant as "vendor finance" for the purchase of the property, which sum was to be repaid by the second appellant on its sale. 6 Upon the property being sold in December 2006 there were insufficient funds to repay the $100,000. Consequently the respondent instituted proceedings in the District Court to recover, amongst other amounts, the sum of $100,000 from the second appellant as the principal debtor and from the first appellant as guarantor. 7 One of the issues at the hearing concerned the terms of any agreements between the respondent and the appellants. Its resolution depended in large part upon whether the primary judge accepted the evidence of Mr Kellner or that of the appellants. One of the difficulties which his Honour faced related to the fact that notwithstanding that the parties had issued notices to produce as well as subpoenas, no relevant documents were produced apart from the document known as Annexure A (which was Exhibit A in the trial) which evidenced the agreement between the parties. In particular, no building contract between the respondent and the second appellant was produced notwithstanding that the respondent had constructed the dwelling upon the property for the benefit of the second appellant. The second appellant had borrowed the sum of $565,000 from an external source to fund both the acquisition of the land and the construction of the dwelling thereon. 8 It was for the foregoing reasons that, despite the production of Annexure A, the issue of the credit of the parties, and in particular Mr Kellner and the first appellant, assumed significance. 9 The primary judge resolved the issue of credit in favour of Mr Kellner and rejected the appellants' evidence. At [16] he stated that his impression of the first appellant was that he was "devious and manipulative" and prepared to say anything if it would suit his purposes during the course of the trial. With respect to the second appellant, his Honour (at [56]) considered that he was a very unsatisfactory witness whose evidence he was not prepared to accept as either accurate or truthful. These are strong findings in respect of which no challenge is made. 10 Ultimately his Honour found (at [64]) that the "vendor finance" in the sum of $100,000 was payable by the second appellant to the respondent on the sale of the property as per their agreement, and that the second appellant's obligation to pay that sum had been guaranteed by the first appellant. 11 Accordingly, the primary judge entered judgment in favour of the respondent against the first appellant in the sum of $138,000 together with interest of $18,034.52 and judgment against the second appellant in the sum of $110,500 together with interest of $14,440.68. The appellants appeal against his Honour's orders. 12 The judgment with respect to the second appellant was asserted by the appellants to include a sum of $10,500 in respect of which no claim was pleaded but which was said by his Honour to be owing on the building contract and house purchase: see [46]. The respondent conceded in its written submissions that his Honour was in error in including that amount and that it should be deducted from any judgment to which the respondent was entitled against the second appellant. 13 The appellants asserted in their written submissions that the judgment entered by his Honour against the first appellant included not only the sum of $110,500 the subject of the judgment against the second appellant, but also a further amount of $13,500 said to be for advances by the respondent to the first appellant on account of "slab payments" which formed part of his remuneration package: see [39]. It was conceded that the sum of $9,486.32 should be set off against this amount of $13,500 and any judgment against the first appellant reduced accordingly. 14 The judgment against the first appellant also included, so the appellants contended, an amount of $34,293 which related to a claim by the respondent that it had, on behalf of the first appellant, paid $483 per week for a period of 71 weeks, being one half of the interest payable by the first appellant to the second appellant's financier. However, his Honour found (at [38]) that the respondent contributed to these payments for a period of only 66 weeks, which amounts to $31,878. For some unknown reason and notwithstanding this finding, the primary judge appears to have awarded the full $34,293. 15 Nevertheless, it was common ground that, as evidenced by Annexure A, part of the agreement between the parties was that the respondent was to pay 50% of those interest payments. Ultimately the respondent conceded, correctly in my respectful opinion, that his Honour was in error in awarding the respondent the sum of $34,293 against the first appellant and that any judgment against that appellant should be reduced accordingly.

16 As a consequence of the various concessions to which I have referred above, the only issue to be determined on the appeal is whether the primary judge was in error in awarding the respondent the sum of $100,000 being the "vendor finance" referred to in Annexure A and found by him to be owing by the second appellant and guaranteed by the first appellant.

17 Before turning to this issue, I interpose briefly to note that notwithstanding the foregoing, having regard to his Honour's reasons, it is difficult to ascertain how he arrived at the figure (before interest) of $138,000 which was awarded in favour of the respondent against the first appellant. The purported breakdown of this figure contained in the appellants' written submissions does not assist in this respect as the various amounts said to comprise this figure in fact significantly exceed $138,000.

The terms of Annexure A 18 Annexure A was on the respondent's letterhead and was dated 6 September 2004. It was in the following terms: "Attach to building agreement. Purchase of Lot 2355 Sir Warwick Fairfax Dr, Harrington Park. Contract between Dartanyon Pty Ltd and Matthew Wilson. Purchase Price of $505,000.00 Comprising of $200,000.00 GST inclusive for Land $305,000.00 GST inclusive for House Vendor finance of $100,000.00 (additional to above figures). The loan repayment amount is to be paid 50% by Dartanyon Pty Ltd and 50% by Matthew Wilson monthly or weekly. Stamp duty is not payable due to first home buyer grant. The first home buyers grant will be payable to Matthew Wilson at Settlement ($7,000). Council rates are to be split 50/50. Water rates (sewerage connection) are to be split 50/50. Water usage and Electricity is to be paid by Dartanyon Pty Ltd. The house is to go on the market at an agreed price - say $750,000.00. Any agent's commission (if payable) is to be deducted from the cost of the house. If the house is sold by the office no commission is payable. Example Approx Sale Price $750,000 Purchase Price $505,000 Vendor Finance $100,000 First Home Buyers Grant $ 7,000 Agent's Fee $ 10,000 Legals $ 1,000 Approx $127,000 divide by 2 Any expense missed in the selling of the house is to be split 50/50. Upon settlement on resale Matthew Wilson is to pay the Finance Company, Vendor Finance, Expenses and then Dartanyon Pty Ltd 50% of profit. __________________________ _____________________ Greg Kellner Date Dartanyon Pty Ltd __________________________ _____________________ Matthew Wilson Date This deed of agreement made the 9 th day of September 2004 between Dartanyon Pty Ltd of 3 Hambledon Cir, Harrington Park and Matthew Wilson of 8 The Lanes, Kirkham."

The primary judge's findings with respect to the agreement between the parties 19 At [8] his Honour set out Annexure A noting that the "building agreement" referred to therein was Exhibit B in the proceedings before him which was a blank copy of a Pro Forma Standard Housing Industry Association (HIA) building agreement. 20 The primary judge's findings can be summarised as follows:

(a) Annexure A had been annexed to a building agreement (in the form of Exhibit B) created between the respondent and the second appellant on or about 6 September 2004 and which provided for a purchase price for the package (including the land and the construction of the residence thereon) of $605,000 with the respondent providing $100,000 thereof as " vendor finance ": ([9]).

(b) Although it was not necessary to find that the second appellant signed the building agreement, nevertheless he did: ([11]). Annexure A was sufficient evidence (taken with that of the first appellant) to establish that the total contract price was $605,000 and not $505,000 as the appellants alleged.

(c) The assertion by the first appellant that the amount of $100,000 referred to in Annexure A as " vendor finance " was intended to be the profit to be earned on the resale of the property with the consequence that the true purchase price was only $505,000 should be rejected ([16]). Although Annexure A referred to a purchase price of $505,000, comprising $200,000 for the land and $305,000 for the construction of the house thereon, the " vendor finance " of $100,000 was stated to be " additional to above figures " thus constituting part of the total purchase price of the overall package.

(d) It was more likely than not that the first appellant signed the guarantee that was part of the building agreement ([17]). The guarantee provision of Exhibit B stated that the guarantor was deemed to be a principal debtor jointly and severally liable with the owner to discharge the obligations referred to in clause 1 of the building agreement which relevantly included the obligations of the second appellant the subject of Annexure A which formed part of the building agreement ([18]).

(e) In any event, Mr Kellner had given evidence that the first appellant had told him that he would guarantee the loan, which was intended to refer to the $100,000 loan from the respondent to the second appellant as the latter did not have the borrowing capacity to acquire the property on his own ([30]). Mr Kellner's evidence was that he had agreed with the first appellant that the contract would be in his son's name and that he, the first appellant, would be the guarantor and that this evidence should be accepted.

(f) It was after Mr Kellner and the first appellant had agreed on the terms of the transaction that Annexure A was typed up by the respondent's office manager, Ms Brenda Martin. According to Mr Kellner, whose evidence was accepted, Annexure A was attached to the building agreement which he had then given to the first appellant ([31]).

(g) Mr Kellner also gave evidence that the respondent used a standard building contract which was the ER Plain English Building Contract for the HIA, a copy of which was Exhibit B ([32]). [It can be noted in passing that Exhibit B was a form of contract dated November 2004. It was not suggested that the standard HIA building agreement available in September 2004 differed in any material respect from Exhibit B.]

(h) Mr Kellner's evidence, which was accepted, was that the building agreement for the property was filled out in the respondent's office and that he was present when the second appellant signed it. He stated that the cost of the construction of the house was to be $365,000 which was consistent with the contents of Exhibit H which was a tender by the respondent for the construction of the house on the property dated 28 July 2004 ([33]). On the coversheet it was stated that the clients' names were " Ian, Debbie and Matthew Wilson ". [I note that Mr Kellner's evidence (at Black 9(41-42); 40(16) and 41(28)) was that the building agreement provided for a construction cost of $365,000 notwithstanding that Annexure A referred to a construction cost of $305,000.]

(i) The first appellant had told Mr Kellner that he would guarantee the performance by his son of the agreement constituted by Annexure A as well as the building agreement particularly because the second appellant had no personal assets or significant income ([40]). 21 The case for the appellants at trial was that Mr Kellner had provided the first appellant with a building agreement (and counterpart) which included Annexure A; that he then took the documents home and discussed them with the second appellant but that they decided not to sign them as there was no certainty that the property would be sold for the $750,000 referred to in Annexure A or for an amount at least exceeding $605,000. The first appellant's evidence was that he returned the unsigned documents to Ms Martin. 22 Mr Kellner's evidence, which his Honour accepted, was that both appellants attended the respondent's office with the building agreement (and its counterpart) including Annexure A both of which they had already signed. Mr Kellner then signed the documents and, at the request of the first appellant, provided him with both copies as he wished to retain one copy and provide the other to his bank. He could not obtain finance without the bank sighting a signed building agreement. 23 The primary judge concluded as follows (at [64]): "The above evidence persuades me that on the probabilities Mr Ian Wilson guaranteed the obligations of his son, Matthew, those obligations being to repay to Dartanyon the vendor finance of $100,000. I am satisfied that Mr Kellner on behalf of Dartanyon would not have entered into the agreement to sell the property to Mr M Wilson had his father not guaranteed the transaction. After all, if the money was not paid he had no security. He had not insisted on a mortgage or taken a caveat or done anything to protect himself other than accepting the word of Mr I Wilson that he would go guarantor and noting that he had signed the guarantee. I have no hesitation in accepting Mr Kellner's evidence that he saw Mr Wilson sign a guarantee at the back of the building contract. I am satisfied that the version that has been given by Mr I Wilson cannot be accepted as either truthful or reliable. I reject it. I am satisfied, as I have stated, that the plaintiff should succeed against Mr M Wilson for the sum of $100,000 and the balance of $10,500 and that there should also be a verdict against Mr I Wilson for the same amount together with the mortgage repayments and slab advancements."

The appellants' motion to lead further evidence 24 The respondent issued a notice to produce to each of the appellants requesting, amongst other documents, the production of a copy of the building agreement for the property. No such document was produced. One could surmise that this was probably because, on the appellants' case, they had returned the building agreement unsigned to Ms Martin at the respondent's office. 25 A notice to produce was also served on behalf of the appellants upon the respondent requesting production of any document evidencing a building agreement between the parties. In response the respondent's solicitor confirmed that his client was unable to produce the relevant document and advised that the respondent understood that the document was either with the Perpetual Trustee Company or Sydney Credit Union. The respondent at that time understood those organisations to have provided the second appellant with the necessary finance to acquire the land and complete construction of the house. Subpoenas were then issued on behalf of the appellants to those organisations, but neither produced any building agreement in response. 26 As I have indicated, Mr Kellner's evidence at trial was that both the original and counterpart copies of the building agreement (signed by all parties including by the first appellant as guarantor) were taken from the office by the first appellant so that the original could be provided to the second appellant's financier thus enabling him to purchase the land and to construct the house. A loan in the sum of $565,000 was in fact obtained being $60,000 more than the $505,000 referred to in Annexure A (which comprised $200,000 for the land and $305,000 for the construction of the house). A loan in that amount would cover what Mr Kellner said was the agreed construction cost of $365,000 which had been inserted into the building agreement. 27 Mr Kellner's evidence was that he did not retain a copy of the building agreement as he expected it to be returned to him by the first appellant after a copy of it had been provided to the second appellant's financier. The respondent had a copy of Annexure A on Ms Martin's computer as she had prepared the document at Mr Kellner's request. Accordingly, the respondent was able at trial to produce an unsigned copy of that document. 28 On 14 May 2009 the appellants' solicitor, Mr Hanrahan, received through the Document Exchange in a plain white envelope without any sender details, a photocopy of a guarantee and three pages of a building agreement purporting to be between the second appellant and the respondent, placed over a page from the Sun Herald dated 10 May 2009 and then photocopied, together with a full copy of an HIA issued NSW Plain Language Building Contract for New Home Construction identifying the second appellant as the owner and the respondent as the builder. It provided for a contract price of $305,000. This document was marked Exhibit A on the motion. 29 On 18 May 2009 the first appellant's wife collected the mail from the letterbox at her home. She found a plain white envelope containing the original of the document sent to Mr Hanrahan. That document was marked Exhibit B on the motion. On page 26, clause 15 provided for the second appellant (and not the first appellant) as the guarantor. On page 7 under the heading "Special Conditions", the words "Refer to attached annexure" had been written. On page 8 Ms Martin had signed the document on behalf of the respondent as builder and Mr Kellner had witnessed her signature. The document was not signed by the appellants and did not contain the annexure referred to under the heading "Special Conditions". 30 The appellants filed a notice of motion seeking an order that Exhibit B be admitted as evidence on the appeal pursuant to s 75A(7) of the Supreme Court Act 1970. It is apparent that the purpose of the tender was to corroborate the evidence of the appellants at trial that they had not signed a building agreement but had returned it unsigned to the respondent, evidence the primary judge had rejected generally, but not entirely, on credit grounds. 31 In response to the affidavits of Mr Hanrahan and the first appellant, to which copies of Exhibits A and B were annexed and which explained the circumstances under which they came into the possession of the deponents, the respondent filed affidavits from a number of deponents including, relevantly, Mr Kellner and Ms Martin. 32 Mr Kellner deposed that he could not recall that Exhibit B had come into existence as a result of instructions he had given to Ms Martin, the respondent's office manager, and that he had forgotten about the document until he was shown Mr Hanrahan's affidavit. He further deposed that he could not recall whether he had provided Exhibit B to the first appellant. Mr Kellner then deposed that the building agreement, to which he had referred in his evidence before the primary judge, had a price of $365,000 inserted in "Schedule 1. Particulars of Contract" on page 1 of the document, that there were two originals made of that document and that each had stapled to it Annexure A. 33 Ms Martin deposed that the handwriting on Exhibit B was hers including the signature on behalf of the respondent and that the witness to her signature was Mr Kellner; that she was instructed by Mr Kellner to prepare Exhibit B on or about 6 September 2004 but that she was later instructed by him to prepare a further version of the same building agreement - inserting a contract price of $365,000 in lieu of $305,000 with appropriate alterations to the progress payments schedule on page 5 to account for the difference in the contract price; that on or about 6 September 2004 she prepared the document known as Annexure A for insertion into the building agreement and that she had stapled that annexure to the building agreement (Exhibit B) at the time of its preparation. 34 After being instructed by Mr Kellner to prepare the further copy of the building agreement with the new contract price, Ms Martin deposed that she recalled preparing two identical copies of a further building contract reflecting the change in the particulars of the agreement, which she then provided to Mr Kellner. In her oral evidence (at Tpt 55) she confirmed that she would have filled in the page headed "Special Conditions" by referring to the amount and would have stapled a copy of Annexure A to the document - as she had with Exhibit B. 35 Both Mr Kellner and Ms Martin were cross-examined but, in my view, their affidavit and oral evidence was unaffected thereby. 36 In support of the motion, the appellants submitted that:

(a) section 75A(9) of the Supreme Court Act applied to the present case as Exhibit B was evidence concerning matters occurring after the trial before the primary judge with the consequence that special grounds were not required to be established pursuant to s 75A(8);

(b) in any event, upon the authority of Commonwealth Bank of Australia v Quade [1991] HCA 61; (1991) 178 CLR 134 at 142 [7], the present was a case where it was unnecessary for the appellants to establish that it was " almost certain " or " reasonably clear " that a different result would have been produced at trial if Exhibit B had been available; and

(c) the evidence should be admitted notwithstanding that all the criteria identified by this Court in Atkins v National Australia Bank (1994) 34 NSWLR 155 at 160 had not been satisfied as Exhibit B was " incontrovertible ": Thomas v HP Mercantile Pty Ltd (2008) NSWCA 308 at [83]. 37 In my opinion the present is the case of an application to admit further evidence rather than fresh evidence. The latter relates to matters that occur after trial whereas the former relates to matters that occur before trial but which are not adduced as evidence in the trial. Section 75A(9) provides that the requirement for special grounds referred to in s 75A(8) does not apply "to evidence concerning matters occurring after the trial or hearing". Relevantly, to engage subsection (9) it is necessary to establish that the evidence relates to a matter that occurred after the trial or hearing. 38 In the present case, although it is true that Exhibit B was only discovered after the trial, it constituted evidence which related to a matter that occurred prior to trial. Accordingly, it was further evidence rather than fresh evidence in respect of which special grounds must be established before it can be admitted on appeal. 39 In Atkins the following were stated by Clarke JA (with whom Sheller and Powell JJA agreed) at 160 as being required to be established before further evidence could be admitted on appeal pursuant to s 75A(8):

(a) it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial;

(b) the evidence must be such that there must be a high degree of probability that there would be a different verdict; and

(c) the evidence must be credible. 40 Clarke JA made it clear that it was not possible to formulate a test that could be applied in every case to determine whether "special grounds" existed. 41 In the present case the first requirement was satisfied given that Exhibit B could not, in the circumstances to which I have already referred with respect to the giving of notices to produce and the issuing of subpoenas, with reasonable diligence been obtained for use in the trial before the primary judge. The real issue in the present application is whether there was a high degree of probability that there would have been a different decision had Exhibit B been tendered and admitted before his Honour. 42 As I have indicated, the appellants relied upon the following passage from the joint judgment of Mason CJ, Deane, Dawson, Toohey and Gaudron JJ in Quade at 142 [7]: "The position is, however, different in a case such as the present where the unavailability of the evidence at the trial resulted from a significant failure by the successful party to comply with an order for the discovery of relevant documents in his possession or under his control. The application to that category of case of the general rule that a new trial should only be ordered on the ground of fresh evidence if it is 'almost certain' (7) see Orr v. Holmes (1948) 76 CLR at p 640 or 'reasonably clear' (8) see Wollongong Corporation v. Cowan (1955) 93 CLR at p 444 that the opposite result would have been produced if the evidence had been available at the first trial would, particularly where the failure was deliberate or remains unexplained, serve neither the demands of justice in the individual case nor the public interest in the administration of justice generally. …" 43 It was submitted on behalf of the appellants that at the very least, the production of Exhibit B "remained unexplained" thus negativing any requirement of the appellants to establish that had Exhibit B been tendered before the primary judge it was "almost certain" or "reasonably clear" that the appellants would have succeeded before his Honour. However, the difficulty with this proposition is that there is no evidence that would indicate that there was any relevant misconduct on the part of the respondent in failing to produce Exhibit B. In its context, the reference in the above passage in Quade to the evidence remaining unexplained is to a failure to explain the unavailability of the evidence by the party who would be expected to provide that explanation in circumstances where that lack of explanation gives rise at least to some suspicion of improper conduct on that party's part. 44 In his evidence on the motion Mr Kellner deposed that at the time of the trial (which was some four years after the events in question) he had forgotten about Exhibit B and had not had reason to recall it until he saw Mr Hanrahan's affidavit. He and Ms Martin both deposed to its creation and then to its replacement by a further form of building agreement which had an increased contract price of $365,000 in lieu of the $305,000 in Exhibit B. There was no issue but that Exhibit B had never been signed by the appellants. Neither Mr Hanrahan nor Ms Martin was able to explain why Exhibit B had not been retained in the respondent's files with respect to the subject transaction. The primary judge observed at [35] that Mr Kellner had not been able to find or obtain a copy of the completed building agreement with the guarantee signed by the first appellant. But that fact does not in my view lead to the inference that there was some reason to hide Exhibit B given the evidence both at trial and on the motion that the only building agreement signed by the appellants was one which provided for a contract price of $365,000 for the construction of the house on the property. 45 In any event, in Quade their Honours (at 143 [8]) further observed: "While it is not necessary that the appellate court be persuaded in such a case that it is 'almost certain' or 'reasonably clear' that an opposite result would have been produced, the question of whether the verdict should be set aside would almost inevitably be answered in the negative if it does not appear that there is at least a real possibility that that would have been so." 46 Nor do I consider that the appellants gain any comfort from their reliance upon the passage from the judgment of Sackville AJA, with whom the Chief Justice and myself agreed, in Thomas. In my view, his Honour at [83] (upon which the appellants rely) was positing a situation where the evidence sought to be adduced on the appeal is incontrovertible in the sense that it would lead inevitably to a different result and it was for that reason that not all of the criteria identified in Atkins were required to be satisfied. It is to be noted that his Honour observed that the difficulty in the case before him was that there were grounds to doubt the reliability of the particular evidence sought to be adduced as further evidence and it was clear that it would be strenuously challenged. 47 So it is in the present case - at least to the extent that, on the basis of the evidence of Mr Kellner and Ms Martin filed on the motion, any suggestion that Exhibit B was the only building agreement prepared for the purpose of the subject transaction would be strenuously challenged. As I have observed, both deponents stated that a further building agreement was required to be prepared so as to change the contract price to $365,000. This is consistent with Mr Kellner's evidence, which his Honour accepted and to which I refer at [20(h)] above, that he was adamant that the building agreement signed by the appellants provided for a construction cost of $365,000. 48 It was thus submitted on behalf of the respondent that had Exhibit B been available for tendering at the hearing before the primary judge, exactly the same controversy as to how that document came into existence would have occurred before his Honour as occurred on the hearing of the motion before this Court. Although in one of his affidavits sworn in support of the motion, the first appellant deposed that Exhibit B was the document given to him by Mr Kellner and which he had returned unsigned to Ms Martin, it is clear that such an assertion would have been in serious dispute had Exhibit B been tendered before the primary judge. 49 In my opinion, had Exhibit B been admitted into evidence before the primary judge, there would have been a significant controversy as to its provenance and, in particular, as to whether it was the document allegedly provided by Mr Kellner to the first appellant and returned unsigned by him to Ms Martin. Furthermore, it is reasonable to infer that had Exhibit B been tendered, evidence relating to it would have been called from Mr Kellner and Ms Martin of the nature of that tendered before this Court. 50 In the foregoing circumstances in my opinion, and putting it at its lowest, it is impossible to conclude that had Exhibit B been tendered and admitted before the primary judge, there would have been a real possibility that the opposite result would have been produced to that which in fact occurred. The position is a fortiori on the Atkins test to the effect that there must be a high degree of probability that there would be a different verdict. 51 Accordingly, in my view the appellants have failed to establish special grounds within the meaning of s 75A(8) of the Supreme Court Act to justify this Court receiving the further evidence constituted by Exhibit B. For these reasons the appellants' motion to adduce Exhibit B as further evidence should be refused.

Disposition of the appeal 52 Leaving aside those grounds of appeal which the respondent has conceded, the remaining grounds of appeal originally asserted by the appellants were as follows:

(a) That the primary judge erred in finding as fact that: (i) the second appellant executed Annexure A and that he entered into a contract with the respondent in accordance with the terms therein; (ii) the first appellant executed the guarantee in the building agreement or entered into any guarantee.

(b) The primary judge erred in finding that if the first appellant executed the guarantee in the building agreement, he thereby guaranteed the second appellant's obligations under Annexure A.

(c) The primary judge failed or failed to adequately take into consideration the respondent's failure to tender a signed copy of either Annexure A or the building agreement. 53 The appellants acknowledged in their written submissions that the errors of fact alleged in Grounds (a)(i) and (ii) above depended for their success upon the admission on the appeal of Exhibit B. Without its admission, those grounds fail. 54 With respect to Ground (b) the appellants' written submissions were as follows:

(a) Upon the assumption (found as a fact by the primary judge) that the first appellant signed the Deed of Guarantee and Indemnity contained in the building agreement (Exhibit B at the trial), that guarantee only extended to the fulfilment of the second appellant's obligations under the " contract ".

(b) The " contract " was defined as meaning " the agreement between the builder and owner set out in the contract documents ".

(c) The term " contract documents " was defined as " these general conditions, any special conditions, the plans, the specifications and other documents specified in Item 14 of Schedule 1 ".

(d) The guarantee therefore did not include Annexure A. 55 The submissions referred to in subparagraph (b) and (c) above refer to the definitions contained in Exhibit B on the motion which, for present purposes, was not in evidence before the primary judge. If it had been, then it would not have assisted the first appellant as according to Ms Martin's evidence, the special conditions to the contract were those contained in Annexure A. 56 The primary judge stated (at [34]) that according to Mr Kellner's evidence, Annexure A was attached to the building agreement that was given to the first appellant whose signature to Annexure A he had witnessed. It is apparent that his Honour accepted that evidence as he expressly rejected the evidence of the appellants to the contrary (at [37]). He expressly found (at [64]) that the first appellant had signed the guarantee at the back of the building agreement. In these circumstances it was open to his Honour to find, as he implicitly did, that Annexure A formed part of the building agreement so that the first appellant's signature to the guarantee contained in it extended to the second appellant's obligations under Annexure A. 57 The primary judge further dealt with the issue of the first appellant's guarantee in the following terms (at [18]): "In my opinion, if it is established that Mr I Wilson guaranteed the obligations of Mr Matthew Wilson then annexure A to the building contract is part of that document and Mr I Wilson will be taken to have guaranteed the obligations of Mr M Wilson. For the reasons that follow, I am of the opinion that the liability of Mr I Wilson as guarantor has been established even in the absence of an executed deed of guarantee." 58 For the foregoing reasons in my opinion, based upon the factual findings of the primary judge, it was open to him to find, as he did, that the first appellant's guarantee extended to the second appellant's obligations under Annexure A. 59 Before concluding this judgment I should refer to the manner in which the respondent pleaded its case with respect to the "vendor finance" of $100,000. Paragraph 4 of its Amended Statement of Claim was in the following terms: "In or around September 2004 a contract was entered into between the [respondent] and the Second [appellant] namely that the [respondent] agreed to lend to the Second [appellant] the sum of $100,000 in consideration of the Second [appellant] repaying the said amount ('the contract'). Particulars a) It was an express term of the contract that the [respondent] lend the Second [appellant] the sum of $100,000.00 ('the loaned monies'). b) It was an express term of the contract that the Second [appellant] use the loaned monies as vendor finance associated with the purchase of a property ('the property') by the Second [appellant]. c) It was an express term of the contract that the Second [appellant] pay the loaned moneys to the [respondent] in entirety on or before the settlement associated with the sale of the property." 60 During the course of argument it was observed by the Court that his Honour's findings as to the "vendor finance" of $100,000 did not appear to be based upon the respondent's pleaded case with respect to that sum. It was suggested that this was because that there had in fact been no loan of $100,000 and, therefore, there was no loan to be repaid. 61 In my view, the answer to this suggestion is the evidence accepted by the primary judge which established that the true purchase price of the land and house package was $605,000 and not $505,000. Of that purchase price, $100,000 was to be regarded as a notional loan. 62 Although the evidence appears inconclusive, of the $565,000 borrowed by the second appellant from his financier, $505,000 was paid to the respondent being $200,000 for the land and $305,000 for the house as per Annexure A. The balance of the purchase price of $100,000 was, therefore, notionally loaned by the respondent to the second appellant and remained outstanding at the time the property was sold in December 2006. It was used to pay the extra $60,000 of the construction costs and for other financial obligations of the first appellant including his income tax liability. At least this appears to be the manner in which the case was conducted at trial. 63 In cross-examination of the first appellant the following exchanges occurred which are revealing (at Black 115, 116, 120-122): "Q. You said you conveyed an offer to your son? A. Yes. Q. Presumably it was a specific arrangement that you had in mind? A. As between myself and Matthew or between Dartanyon and Matthew? Q. Dartanyon had offered to do something. You said they had offered to sell you the land at $200,000. A. Correct. Q. To do a construction package? A. Yes. Q. And for vendor finance of $100,000? A. Yes. Q. You said you went home and talked about that to your son? A. Yes. Q. He said, if you thought it was a good idea he was prepared to do it? A. Yes." … Q. Can I just suggest to you that you were having discussions as early as July in which Mr Kellner and you were discussing a purchase of a house and land package for $605,000. A. Yes. … Q. Do you agree that Mr Kellner effectively told you that he was reducing the price of the property from $605,000 to $505,000 on the basis that it was vendor finance, and it would be repaid to Dartanyon when the property was sold? A. Yes. Q. When the property was sold you didn't repay Dartanyon $100,000 did you? A. No. Q. At no time prior to the sale of the property did you ever tell Mr Kellner, that neither you or your son proposed to pay $100,000? A. That we did not propose to pay it? Q. That you did not propose? A. No, there was not that discussion. Q. Do you agree with me that Mr Kellner had prepared that document, annexure A? A. It was - yes. Q. That document reflected the discussions you'd had with him? A. Yes. … Q. You already discussed the fact that Dartanyon was entering into the agreement on the basis that it would be paid $100,000 on sale of the property? A. That $100,000 was to come from the sale of the property, yes. Q. You'd agreed to every one of those points at that time? A. Yes. … Q. Why was $100,000 not paid to Dartanyon on the sale of the property? A. Basically because there was no true profit to pay for that amount. There was no profit of $100,000 to pay to Dartanyon." 64 The case as fought at the trial was, on the respondent's case, that the second appellant would pay $605,000 in total for the land and construction work but would only have to pay the final $100,000 at the time of sale of the property to a third party (an obligation guaranteed by the first appellant) and, on the appellants' case, that the last $100,000 was to be paid by the second appellant at the time of sale to a third party but only out of the difference (if any) between the net sale proceeds and the $605,000 (and not guaranteed by the first appellant). His Honour rejected the appellants' contention that there had been an agreement to the effect contended for and it was not submitted at the trial or before this Court that Annexure A should be construed in that manner. 65 However, the first appellant's evidence whereby he sought to transfer the liability for the $100,000 to profit on the sale rather than as vendor finance was rejected by his Honour at [16]. 66 For the foregoing reasons, and acknowledging that paragraph 4 of the Amended Statement of Claim does not truly reflect the basis upon which his Honour found the appellants liable to the respondent for the sum of $100,000, that fact does not in my view detract from the appellants' failure to establish any error on the part of the primary judge that would justify appellate intervention. 67 In my opinion the respondent is entitled to maintain his Honour's finding against each of the appellants that each was liable to the respondent for the sum of $100,000 together with interest. As his Honour calculated the interest on figures greater than $100,000, it will be necessary for that interest to be recalculated. Furthermore, I note that although at the end of his judgment the primary judge (at [66]) stood the matter over to enable the parties to agree upon interest and costs, in the orders entered on 3 April 2009 he ordered the first appellant to pay the respondent's costs on the ordinary basis to 9 October 2008 and thereafter to 3 April 2009 on an indemnity basis. I would assume from the contents of this order that there was some form of statutory or Calderbank offer. 68 However, whether the order for indemnity costs should stand, given that his Honour's orders will require variation to reduce the liability of each of the appellants to $100,000 or possibly less excluding interest, is a matter which the parties will need to address. 69 So far as the costs of the appeal are concerned, the appellants have been partially successful so that the appeal should be allowed in part. Nevertheless, the appellants have been unsuccessful on the main issue as a consequence whereof I would propose that the appellants should pay 80% of the respondent's costs of the appeal. 70 Due to the necessity for the final amount of the judgment against each appellant as well as interest thereon to be recalculated and for the issue of indemnity costs to be resolved given the variation of his Honour's orders to which I have referred, the only order I propose at this time is to direct the parties to bring in short minutes of order to reflect these reasons and to agree upon the amount of interest payable on the judgment as at 3 April 2009. The parties should also attempt to agree upon the question of indemnity costs. If they are unable to agree then they should provide short submissions on that issue within 14 days of the date of this judgment. 71 Accordingly I would propose the following:

(a) Direct the parties within 14 days to file with the Court short minutes of order to give effect to these reasons for judgment and reflecting: (i) the amount of the judgment to which the respondent is entitled against each appellant; (ii) the amount of interest payable on that judgment up to and including 3 April 2009 (being the date of the orders of Delaney DCJ); (iii) the terms, if agreement can be reached, of the orders for costs of the trial if they are to differ from those made by his Honour.

(b) In the event that the parties cannot agree on (a)(iii) above, they are directed to file submissions on the question of indemnity costs within the said period of 14 days. 72 YOUNG JA: I agree with Tobias JA. 73 REIN J: I agree with Tobias JA. **********

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