(New South Wales) Mr and Mrs P owned and controlled W Ltd. W Ltd borrowed monies from Citibank which took security for repayment in the form of a charge over the home of Mr and Mrs P and also a charge over the home of the parents of Mr P. On the face of the documents, Mr and Mrs P and the parents of Mr P were co-sureties for the debt of W Ltd. W Ltd defaulted and Mr and Mrs P were made bankrupt. Their trustee in bankruptcy sold their home and repaid the debt to Citibank. The trustee then claimed an equal contribution from Mr P’s parents on the basis that they were co-sureties with Mr and Mrs P and that the default position was that the co-sureties were equally liable to contribute to the payment of the debt.
Held: The claim by the trustee in bankruptcy was dismissed. Mr P’s parents had entered into the charge at the request of Mr and Mrs P and therefore Mr and Mrs P were liable to indemnify Mr P’s parents and, accordingly, were not entitled to claim a contribution from them. A right of contribution may not arise where two persons borrow money but that money is applied for the purposes of only one of them, or if one guarantor enjoys the whole benefit of the guarantee in another capacity to the exclusion of his co-surety.
In considering whether common intention is essential to rebut contribution, Bryson J said: ‘The position taken by the plaintiff’s counsel before me was to the effect that the prima facie right of contribution can only be rebutted if a common intention to the contrary is clearly proved by evidence of some agreement or arrangement. No doubt it is very usual that rebuttal takes that form, but in my opinion it is not necessary that there should be a common intention or a bilateral arrangement, and it is not necessary that there should be any expression of an intention or arrangement, as circumstances can occur in which an intended outcome is so clear and obvious that it must be imputed to the parties that they intended it. Quite apart from any intention held by the parties or imputed to them, circumstances can occur in which, without there being any expression of intention or actual advertence to the subject of contribution, it is clear that equity does not require that an obligation to make contribution should be imposed on a party. The court should not lose sight of the origin of the right to contribution in the equitable principle that equity is equality, or forget that facts may exist in which it is not appropriate to treat parties under a common liability as in an equal position, or in which some other equitable principle ought to be given effect.’
Judges:
Bryson J
Citations:
[1999] BPIR 754, (1995) 38 NSWLR 116
Cited by:
Cited – Day v Shaw and Another ChD 17-Jan-2014
Mr and Mrs Shaw had granted a second charge over their jointly-owned matrimonial home to secure the personal guarantee given by their daughter and by Mr Shaw in respect of a bank loan to a company (Avon). Their daughter and Mr Shaw were the . .
Lists of cited by and citing cases may be incomplete.
Commonwealth, Equity
Updated: 18 May 2022; Ref: scu.567255