Capitalink Pty Ltd v Withnall

1. [1]

   BELL CJ: This appeal from the decision of Abadee DCJ (the primary judge) flows from a contractual claim by the Appellant, Capitalink Pty Ltd (Capitalink), against the Respondent, Mr Marc Withnall, pursuant to a promise by the latter to guarantee the performance by Development Delivery Construction Pty Ltd (DDC) of its obligations in relation to a residential development in Queensland. The guarantee was contained in a so-called Deed of Agreement (the Deed) between the Appellant and DDC to which the Respondent was also a party.

2. [2]

   It was common ground that DDC had failed to complete its obligations under that Deed. In fact, DDC entered external administration on or about 9 March 2017 and was deregistered on 12 September 2020.

3. [3]

   The Appellant purchased land (the Property) upon which upon which there was already a partially completed multi-unit dwelling comprising six townhouses on 30 October 2014. It became the registered proprietor of the Property on 1 July 2016.

4. [4]

   The Deed, which was executed on 23 December 2015, related to the completion of the development. By cl 1 of the Deed, DDC was obliged:

5. [5]

   Clause 2 of the Deed provided that:

6. [6]

   In or around June 2016, tenants moved into some of the townhouses on the Property and commenced paying rent. Capitalink’s receipts from tenants (after deducting agent’s costs and miscellaneous expenses but not all costs associated with the townhouses) were between $8,000 and $10,000 per month. The Appellant appointed Ray White Tingalpa (Ray White) as the managing agent of the Property and Ray White established a trust account for those purposes in the Appellant’s name (the Ray White Trust Account).

7. [7]

   By way of a Statement of Claim filed on 16 December 2021, the Appellant sued the Respondent on the guarantee to recover damages in the sum of $479,935.08, plus interest and costs. This sum essentially was comprised of two components (past and future costs) as reflected in para 9 of the pleading:

8. [8]

   Paragraph 12 of the Statement of Claim pleaded that the Appellant was “entitled to claim as against the [Respondent] loss of bargain damages in the sum of $479,935.08, being the costs incurred and to be incurred by the [Appellant] in completing the Incomplete Works.” As volunteered by Mr Lawrance SC, who appeared for the Appellant in this Court (but not at first instance), the reference to “loss of bargain” damages was somewhat problematic but nothing ultimately turned on that.

9. [9]

   The invoices in relation to past costs which were addressed to the Appellant, their dates, the amount claimed and by whom they were paid are set out in the Appendix to these Reasons.

10. [10]

    Although many (but not all) of the invoices issued by third party contractors in relation to past costs were addressed to the Appellant, the evidence was (and the primary judge accepted) that two companies other than the Appellant, namely LBT Corp Pty Limited (LBT) and Ray White paid the invoices in respect of past costs, including those that had been issued to the Appellant. A large number of other invoices said to relate to past costs incurred to complete DDC’s obligations were addressed to First State Pty Limited (First State) but also paid by LBT. (The invoices paid by Ray White amounted to $19,920.73 and were the subject of ground 7 of the appeal, dealt with at [74]-[80] below.)

11. [11]

    Mr David Whitting of Teak Projects Pty Ltd (Teak) was engaged by the Appellant and First State to manage the completion of the townhouses in mid-2019 and he prepared a report in December 2021 detailing “expenditure incurred to date by Capitalink or anticipated to be expended to enable completion of a … 6 dwelling Multi Unit Dwelling” (the Teak Report).

12. [12]

    Apart from Mr Whitting, the Appellant’s principal witness was Mr Andrew Kavanagh. He described himself in his affidavit as “one of the ultimate beneficiaries of the shares held on trust by Lisa Maree Young in” Capitalink and as authorised by Capitalink to make his affidavit on behalf of Capitalink. An ASIC search in relation to Capitalink deposed that Ms Lisa Maree Young was the sole and beneficial shareholder of Capitalink.

13. [13]

    Andrew Kavanagh deposed to the fact that he made his affidavit from “an examination of Capitalink's records available to me, or otherwise from information within my own knowledge” and that where he deposed to matters from information and belief, he did so “after having made all relevant inquiries”.

14. [14]

    Lisa Maree Young did not give evidence, nor did Mr David Kavanagh. He was identified in Andrew Kavanagh’s affidavit, under the heading “Capitalink’s payment arrangements with family companies”, as Andrew Kavanagh’s brother and the sole director and secretary of LBT. LBT registered a first ranking registered mortgage over the Property on 30 July 2018. That mortgage was not annexed nor was any evidence led as to what it secured. A prior mortgage had been released on 1 July 2016.

15. [15]

    Andrew Kavanagh also deposed to the fact that “First State Pty Ltd ACN 155 959 569 (First State) is a company that has as its sole director and secretary my mother-in-law, Lorraine Young.” Lorraine Young was disclosed on the ASIC search as the sole director and secretary of Capitalink. She also was not called as a witness. As has already been noted, and as can be seen in the Appendix, some of the invoices in respect of work alleged to have been done to complete DDC’s obligations were addressed to First State and not to the Appellant.

16. [16]

    Andrew Kavanagh gave evidence of (and limited to) his belief that there was:

The primary judgment

1. [17]

   On 7 December 2023, the primary judge held that the Respondent’s guarantee pursuant to the Deed was contractually valid and binding but that the Appellant had not established a right to substantial damages on the basis that it had not proved that it was liable for the amounts that had been (past costs) or would be (future costs) paid to complete the project. His Honour made a limited award of nominal damages in the sum of $100 and also ordered that the Appellant pay the Respondent’s costs of the proceedings: Capitalink Pty Ltd v Withnall (No 2) [2023] NSWDC 547 (the primary judgment or PJ).

2. [18]

   The thrust of submissions made on appeal in respect of past costs was that they had been incurred for the benefit of the Appellant by LBT and Ray White and that, pursuant to the law of restitution and/ or the doctrine of implied contract, the Appellant was legally obliged to reimburse LBT such that, pro tanto the expenditure which had been made by LBT, the Appellant had suffered loss and damage for which the Respondent was ultimately liable under the guarantee. In the case of expenditure made by Ray White, the Appellant’s position was that Ray White had paid certain invoices from its trust account in the Appellant’s name. This is addressed under appeal ground 7.

3. [19]

   The essence of the primary judge’s reasoning was as follows:

The Notice of Appeal and challenges to factual findings

1. [20]

   The Appellant raised the following grounds of appeal:

2. [21]

   The following factual findings of the primary judge were also challenged and are relevant to ground 7 of the Notice of Appeal:

3. [22]

   (The reference in the first challenge to PJ [145] was mistaken; the correct reference was to [146]. Nothing turned on this, as it was plain from the Appellant’s written submissions that the reference should have been to PJ [146].)

Ground 2

1. [23]

   Ground 2 of the appeal related to the primary judge’s refusal to award damages in relation to the future costs of works required to be undertaken as at the time of the hearing in order to put the Appellant in the position it would have been in had DDC complied with its obligations under the Deed, it being contended that the primary judge erred in finding that the future costs remaining to complete the works ($113,239.78) were not a measure of loss suffered by the Appellant.

2. [24]

   A preliminary matter to be noted is that his Honour did accept that the future costs, i.e. the costs required to be incurred to complete DDC’s obligations under the Deed that had been guaranteed by the Respondent, amounted to $113,239.78: PJ [169]-[171]. It follows that, if his Honour erred as a matter of principle in relation to ground 2, no question of quantum or quantification arises.

3. [25]

   By ground 2 of the appeal, the Appellant contends that the primary judge erred in holding that it was necessary for the Appellant to prove that it “undertook to become liable to other entities” in respect of future costs: see PJ [156]. Rather, the Appellant put that it was entitled to the damages claimed because those damages were required to put it, as nearly as possible, in the position it would have been in had DDC completed the project, citing in this regard classical statements as to the purpose of compensatory contractual damages in cases such as Robinson v Harman (1848) 1 Exch 850 at 855, Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80, 98, 117, 134, 148 and 161; [1991] HCA 54, Tabcorp Holdings Limited v Bowen Investments Pty Limited (2009) 236 CLR 272; [2009] HCA 8 (Tabcorp) at [13], Clark v Macourt (2013) 253 CLR 1; [2013] HCA 56 at [26] and Sunbird Plaza Pty Limited v Maloney (1988) 166 CLR 245 at 255; [1988] HCA 11.

4. [26]

   The Appellant also referred to Bellgrove v Eldridge (1954) 90 CLR 613 at 620; [1954] HCA 36 (Bellgrove) and Rialto Sports Pty Limited v Cancer Care Associates Pty Limited [2022] NSWCA 146 at [112]-[113]. In the latter case, it had been argued that certain lot owners could not recover damages insofar as remedial works to the common property had not yet been undertaken and the lot owners could never undertake those works themselves. Gleeson JA, with whom Macfarlan JA and I agreed, rejected this argument, holding by reference to Tabcorp at [13]-[15] that the lot owners could recover the costs of rectification of incomplete or defective building work in accordance with the contract, and noting, by reference to Bellgrove, that it is not the point that the work may be never done by the owners corporation. In Bellgrove, Dixon CJ, Webb and Taylor JJ said (at 620):

5. [27]

   In his written submissions, the Respondent accepted that “the prima facie measure of damage to give effect to this principle in the context of defective or incomplete building contracts is the cost of rectifying or completing the building works to the standard as promised under the contract” and that “in many (and perhaps most) cases it will be sufficient for the plaintiff to simply prove the reasonable costs of future remediation works”. The Respondent’s key submission on this aspect of the appeal was as follows:

6. [28]

   It is not necessary to determine whether there is a qualification to orthodox principle which the Respondent otherwise accepted, namely that, to establish loss and an entitlement to payment under the guarantee, all that the Appellant needed to establish was that the development was still defective because DDC admitted non-performance of its obligations, and the costs claimed for remediation were necessary and reasonable (as to which there was no issue).

7. [29]

   It is important to attend to what the primary judge actually found with respect to future costs as well as the slender evidence in relation to future costs. Whereas, in relation to past costs, there was an issue as to who had incurred the costs and whether the Appellant could claim them under the guarantee (the principal issue that arose under grounds 5 and 6), the future costs had, by definition, not been incurred. The primary judge appeared to assume and proceeded on the basis that they would be incurred by LBT and there was no evidence that the Appellant would be or had undertaken to be liable for those future costs, even if it did not pay for them directly itself. Thus, his Honour said at PJ [156]:

8. [30]

   Contrary to the Respondent’s submission including that “[t]he primary judge can be taken to have accepted that the future costs would be paid for by a third party”, this was not “a finding … that the costs of those future works would be met by a party other than Capitalink”: cf the Respondent’s written submission set out at [27] above.

9. [31]

   Mr Knowles SC, who appeared with Mr Connor for the Respondent, sought to fasten on to the following evidence which had been given by Mr Whitting under cross examination:

10. [32]

    For a number of reasons, this evidence did not supply a basis upon which the present case could be distinguished from the line of authority reflected in the cases referred to in [25]-[26] above. Mr Whitting was not an officer of the Appellant. Secondly, the basis for Mr Whitting’s “understanding” was not established and, in any event, it was an understanding as to something that had not yet happened. Implicit in the question put to him was that no one had been engaged to do the future work. Thirdly, whatever Mr Whitting’s understanding was on the question of to whom future invoices would be issued did not necessarily bear upon whether that entity would be recompensed for undertaking works to and for the benefit of the Property of which the Appellant was the registered proprietor.

11. [33]

    For these reasons, ground 2 must succeed with the consequence that the Appellant was entitled to future costs in the sum of $113,239.78.

Grounds 5 and 6

1. [34]

   Grounds 5 and 6 of the appeal were that the primary judge should have found that:

2. [35]

   In support of these grounds, Mr Lawrance raised what was essentially a restitutionary argument in support of these two grounds based upon implied requests (by the Appellant to LBT to pay third party invoices largely issued to the Appellant) and corresponding implied promises on the part of the Appellant to repay LBT.

3. [36]

   On this theory, that restitutionary obligation as between the Appellant and LBT/First State, as a result of the latter companies’ discharge of the former’s obligation to third party contractors, would underpin the Appellant’s claim of loss and corresponding right to compensation by the Respondent pursuant to the guarantee. This form of analysis was explained by Leeming JA (with whom Brereton JA and I agreed) in CBRE (V) Pty Ltd v City Pacific Ltd (in liq) [2022] NSWCA 54; (2022) 365 FLR 45 (CBRE) at [32]:

4. [37]

   Behind these observations there lies a vast body of case law, some of which was expressly relied upon by Mr Lawrance including Lumbers v W Cook Builders Pty Ltd (in liq.) (2008) 232 CLR 635; [2008] HCA 27 (Lumbers) at [89]; Progressive Pod Properties Pty Ltd v AM Green Investments Pty Ltd [2012] NSWCA 225 at [36], [47], [59]-[60] (Progressive Pod); O3 Capital Pty Ltd v WY Properties Pty Ltd (2016) 49 WAR 517; [2016] WASCA 82 at [74]-[78] (O3 Capital); CBRE at [32]-[36]; IM Jackman, The Varieties of Restitution (2nd ed, 2017, Federation Press) at 125-128.

5. [38]

   In short, these authorities are to the effect that, although, in general, the bare fact of the conferral of some benefit upon another does not suffice to establish an obligation to repay the expenditure in providing that benefit (Lumbers at [80]), the law will imply a promise by A, who requests B to pay a third party creditor, to repay B, in the form of the old actions, an action for money paid for and at the request of a party, whether the request was made expressly, or its making was to be implied from the actions of the parties in the circumstances of the case: Lumbers at [89], citing Birmingham and District Land Co Ltd v London and North Western Railway Co (1886) 34 Ch D 261 at 274; Way v Latilla [1937] 3 All ER 759 at 765.

6. [39]

   The law will also imply an obligation to repay where a party, A, adopts a payment already made by B which discharges a third party debt of A at least in circumstances where it is understood that B did not intend to discharge A’s debt gratuitously, that is to say, without any expectation of repayment by A such that the original payment was in the nature of a gift.

7. [40]

   The primary judge considered that there was insufficient evidence of the relationship and dealings as between the Appellant, LBT and First State to satisfy him that any obligation to repay had arisen by implication from the discharge by LBT of the invoices issued to the Appellant and First State. Indeed, the evidence as to how LBT came to pay invoices addressed to both the Appellant and First State was also exiguous. His Honour was also exercised by the possibility that LBT’s payment of invoices addressed to it may also have been for its benefit (at least since it took a mortgage over the Property). Discharge of a third party’s liability that also benefits the payer may not so readily entail an expectation of repayment: Progressive Pod at [62].

8. [41]

   Mr Knowles submitted that the arguments sought to be raised by Mr Lawrance in relation to grounds 5 and 6 had been neither pleaded nor run at first instance and should not be permitted to be raised on appeal, invoking the well-known principles in Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; [1950] HCA 35 (Suttor) and Coulton v Holcombe (1986) 162 CLR 1 at 7-8; [1986] HCA 33. Reference was also made to Progressive Pod at [40] where Macfarlan JA observed that “Greens neither pleaded nor argued at first instance a restitutionary claim based upon an implied request by Progressive.” Having referred to the famous statement in Suttor at 438 that:

9. [42]

   Mr Lawrance frankly conceded that the argument he sought to advance on appeal went beyond the pleaded case (which was to the effect that the Appellant “has, at its own cost, expended the sum of $388,635.08”). In light of this concession, Mr Lawrance maintained that, although not pleaded, the type of reasoning he was seeking to deploy was sufficiently “in play” during the proceedings at first instance and that this was a case where the parties could be said to have fought the case at first instance outside of the pleadings. In Dare v Pulham (1982) 148 CLR 658 at 664; [1982] HCA 70, reference was made to “cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial”.

10. [43]

    Much of the argument on appeal related to whether the argument Mr Lawrance sought to propound on appeal was “in play” at first instance and, if it was (with the consequence that the argument was able to be made on appeal), whether the implied request/implied obligation case could be sustained on the evidence.

11. [44]

    Mr Lawrance referred to a number of matters to suggest that the issue was “in play”. What follows are the principal matters referred to and relied upon.

12. [45]

    First, he submitted that it was obvious from well before the trial and the evidence filed that, notwithstanding the pleaded case, the Appellant had not itself directly paid any of the invoices which collectively comprised the “past costs”. In this circumstance, Mr Lawrance submitted that the Appellant could only succeed on the question of past costs at least if there was some argument based upon an “implied loan” or implicit agreement that the Appellant would repay LBT and First State and that this must have been clear to the Respondent.

13. [46]

    Second, this was made even more clear by para 12 of Andrew Kavanagh’s affidavit reproduced at [16] above. Although that paragraph was objected to, it was not an objection other than as to its form, including any attempt to rely on it for hearsay purposes. It was not objected to on the basis that it was irrelevant to the case and it was admitted, albeit subject to a limitation under s 136 of the Evidence Act 1995 (NSW). While that ruling no doubt diminished the forensic and evidentiary force of para 12 of Andrew Kavanagh’s affidavit, the key point emphasised by Mr Lawrance was that it showed how the Appellant was putting its case at first instance, and that this was not said to be irrelevant by the Respondent.

14. [47]

    Third, that the Respondent appreciated how the Appellant was seeking to put its case (even if only in part and perhaps without the greatest clarity), was supported by reference to the Respondent’s own opening oral and written submissions. Paragraphs 55-59 of the written opening referred to para 12 of Andrew Kavanagh’s affidavit and stated:

15. [48]

    Perhaps most significantly, when one has regard to PJ [148]-[155] extracted at [19] above, it is tolerably clear that the case fought at first instance, or at least the argument advanced, encompassed in substance the arguments sought to be put forward on appeal by Mr Lawrance.

16. [49]

    In light of the extracts from the Respondent’s submissions at first instance and the terms of the primary judgment, it is evident that, while perhaps not presented with the same clarity of analysis and supporting reference to authority as this Court received from Mr Lawrance, the argument was sufficiently in play at first instance notwithstanding that it went beyond the pleadings. No question of prejudice to the Respondent arises in this circumstance.

17. [50]

    This was not a case, at least on the evidence before the Court, where third party payments were made by LBT as a result of an express request or authorisation by the Appellant, although they undoubtedly did benefit the Appellant on the assumption that its creditors have not pursued the Appellant and would appear to have treated the debts as having been discharged. In the case of an express request to pay, it has been described as “trite law” that a party who acted on the request is entitled to an indemnity from the requesting party, a classic restitutionary obligation (see Israel v Foreshore Properties Pty Ltd (in liq.) (1980) 54 ALJR 421 at 423) although, as Leeming JA (with whom I agreed) observed in CBRE, that decision is “not authority for the proposition that in every case a person who makes payment without consideration at the request and for the benefit of another is entitled to an indemnity” (emphasis added): at [34]. His Honour pointed to the fact that the proposition was styled as a “‘general principle’, its being grounded in a concept of implied contract, and the references to equitable principles and the possibility of identifying a contrary intention” as “all tell[ing] against there being any such rule.”

18. [51]

    Accepting this, a request to make a payment might be implied from slight circumstances (Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 at 241) and, as Professor Goode observed many years ago now, “a deliberate officious payment of another’s debt is relatively rare”: RM Goode, Payment Obligations in Commercial and Financial Transactions (1st ed, 1983, Sweet & Maxwell) at 24. But everything turns on the context, circumstances of the case and the evidence adduced. The careful and qualified language of the Western Australian Court of Appeal in O3 Capital at [76] to the effect that

19. [52]

    As has been noted, the invoices in relation to past costs which were addressed to the Appellant, their dates, the amount claimed and by whom they were paid are set out in the Appendix to these reasons. The Appendix also sets out those past costs taken from the Teak Report which were invoiced to Ray White and First State.

20. [53]

    The fact that the invoices in the Appendix addressed to the Appellant have been paid by either LBT or Ray White makes it easier to imply or infer a request made by the Appellant to the entity which paid the invoice to do so than is the case with respect to the invoices addressed to First State. How they came to be addressed and sent to First State, and the underlying contractual responsibility for undertaking the work to which they related, was not explained in the evidence.

21. [54]

    In relation to the invoices addressed to the Appellant, where the evidentiary deficit lay in the opinion of the primary judge was in the paucity of evidence available to support the existence not only of a request to pay but of a corresponding promise by the Appellant to repay LBT, which paid for the vast bulk of the past costs. (The situation in the case of payments made by Ray White is different, in short because, as explained later in these reasons, payments to third party creditors were in fact paid by Ray White from moneys held by it in the Ray White Trust Account for the Appellant’s benefit.)

22. [55]

    Mr Lawrance pointed to a body of material said to negative any donative intent by LBT and to support the drawing of an inference or implication that the Appellant agreed to repay LBT for discharging the Appellant’s obligations to third party contractors. With commendable candour, Mr Lawrence conceded that this body of material was “slender”.

23. [56]

    Before turning to consider the material relied upon by the Appellant, there are a number of well-known principles (in addition to the observations of Leeming JA in CBRE) which inform the analysis and which were referred or alluded to by Mr Knowles. In Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 (Ferrcom) at 417, Handley JA explained that:

24. [57]

    The same reasoning underpinning the observations of Handley JA in Ferrcom may be seen in Gleeson CJ’s decision in Russo v Aiello (2003) 215 CLR 643; [2003] HCA 53 at [10]:

25. [58]

    In the present case, the relevant conduct of the claimant was the arrangements, if any, between the Appellant and LBT as to reimbursement or repayment of any amounts paid by LBT to discharge obligations of the former (and First State). The only witness put forward by the Appellant on this topic was Andrew Kavanagh. Paragraph 12 of his affidavit has already been referred to at [16] above. His position and that of his relatives in relation to the Appellant, LBT and First State have also been noted at [12]-[15] above.

26. [59]

    In Blatch v Archer (1774) 1 Cowp 63 at 65, Lord Mansfield famously said that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.” That principle continues to be of great importance in the everyday work of Australian courts in the ascertainment of contentious facts and the drawing of inferences. Thus, in G v H (1994) 181 CLR 387 at 391-392; [1994] HCA 48. Brennan and McHugh JJ stated that:

27. [60]

    To similar effect, in Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168 at [14]-[15], Hodgson JA stated that:

28. [61]

    In Cook's Construction Pty Ltd v Brown [2004] NSWCA 105; (2004) 49 ACSR 62 at [42], Hodgson JA also observed that:

29. [62]

    With these principles in mind, I turn to consider the body of material relied upon by Mr Lawrance in support of the Appellant’s case based upon an implied promise to repay.

30. [63]

    First, reliance was placed upon two statements made in Andrew Kavanagh’s affidavit (paras [77] and [172]) to the effect that the Appellant “incurred” the past costs. These paragraphs were, unsurprisingly, the subject of objection and there was a debate as to the extent of the primary judge’s evidentiary ruling and, in particular, whether his Honour limited the witness’ use of the word “accrued” to the witness’ understanding. There was a degree of ambiguity upon an examination of the transcript and, while the better view is that his Honour’s ruling did so extend, even if it did not, the evidence was utterly conclusory in a case where the question of whether or not the Appellant had in truth “incurred” the costs for which it had in fact not paid was hotly in contest. No weight could sensibly or reasonably be given to it in these circumstances.

31. [64]

    Mr Lawrance next placed reliance upon para 12 of Andrew Kavanagh’s affidavit (reproduced at [16] above). That evidence was limited to evidence of Andrew Kavanagh’s understanding but that understanding was itself of an “understanding” between three companies, the Appellant, LBT and First State, none of which Andrew Kavanagh was an officer or shareholder of. It was evidence of an extremely exiguous character.

32. [65]

    Moreover, an understanding of the kind Andrew Kavanagh referred to is one that would, if it existed, be expected to be reflected in documents such as loan accounts and financial statements of each of the companies, including the Appellant. Deductions claimed in annual tax returns would also have been revealing as to how various payments had been accounted for. No such documents were annexed to his affidavit or otherwise tendered notwithstanding his statement that his evidence was in part based upon “an examination of Capitalink's records available to me”. Applying the principles derived from the cases set out at [59]-[61] above, no favourable inference can be drawn to support the Appellant.

33. [66]

    Moreover, the unexplained failure of any of David Kavanagh, Lisa Maree Young or Lorraine Young to give evidence permits the negative inference to be drawn that their evidence would not have assisted the Appellant’s case: Jones v Dunkel (1959) 101 CLR 298 at 308, 312 and 320-321; [1959] HCA 8 (Jones v Dunkel). There was no question that those witnesses were in the Appellant’s camp, given Andrew Kavanagh’s reference in his affidavit to LBT, First State and the Appellant being “family companies”. In Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63], Heydon, Crennan and Bell JJ described the rule in Jones v Dunkel as:

34. [67]

    Next, Mr Lawrance referred to the fact that LBT registered a mortgage over the Property in 2018, and that that mortgage was entered into after some of the “past costs” had been incurred and paid for by LBT and some four years after the Property had been purchased by the Appellant. As such, the mortgage did not appear to represent a refinancing at least of a secured lender as no mortgage was taken out when the property was purchased in 2014 or when the Appellant became registered proprietor of the Property in 2016. The inference which the Court was asked to draw was that the mortgage secured the repayment of moneys owed to LBT by the Appellant, including the moneys paid by LBT to third party contractors to discharge the Appellant’s liabilities.

35. [68]

    Moreover, the fact that a mortgage was given by the Appellant to LBT over the Property defeated, to some degree, the notion that payments made by LBT to discharge the Appellant’s debts to third party creditors were gratuitous and understood by the Appellant to have been made with donative intent by LBT.

36. [69]

    Allied with the reliance on the mortgage was the fact that, from at least December 2017, i.e. before the registration of the mortgage, there were regular withdrawals of the balance of funds from time to time sitting in the Ray White Trust Account with payment to LBT. The ledger entries took the form “Withdrawal by EFT to owner LBT Corp Pty Ltd”. These entries certainly supported an inference that the Appellant had directed Ray White to make payments to LBT but whether or not this was by way of a “repayment” to LBT for its discharge of third party obligations as opposed to some other form of financing or in relation to some other obligations was left as a matter of speculation. The description of LBT as “owner” was also opaque.

37. [70]

    The absence of any evidence in relation to these matters, coupled with the failure to tender the mortgage or to lead any evidence as to what it secured, works powerfully against the Appellant and the case it sought to put on appeal in relation to past costs. The authorities referred to above are clear that an inference in favour of the Appellant should not be drawn in such circumstances. The onus was the Appellant’s to discharge.

38. [71]

    Mr Lawrance also advanced an argument to the effect that, by commencing the proceedings against the Respondent, the Appellant in some way ratified its obligation to reimburse LBT for paying its third party creditors. While the bringing of the proceedings may be consistent with the existence of such an obligation, it assumes the existence of the very obligation whose existence is in question. That obligation either existed or it did not. The position may be contrasted with a case where a third party creditor sued the Appellant in relation to allegedly unpaid invoices. A plea by way of defence that the debt had been discharged by a third party would amount to a ratification of that payment by the Appellant (if not previously adopted) and confirm an obligation by it to make restitution to the party that discharged the debt.

39. [72]

    Resolution of grounds 5 and 6 of the appeal is finely balanced but I have concluded that the Respondent was correct in his submission, as was the primary judge in his reasons, that the evidentiary onus which lay on the Appellant was not discharged in relation to the past costs issue and that the material relied upon by the Appellant was insufficient to establish an implied promise to repay by the Appellant. Such an implication is far less readily drawn, as Leeming JA observed in CBRE at [32] where, as here, the parties involved were not at arm’s length. Another way of putting this is to observe that the commercial unlikelihood of one company discharging another company’s liability gratuitously is less so in a “family” group of companies, which was how the only witness authorised to speak for the Appellant, Andrew Kavanagh, described the Appellant’s relationship with First State and LBT.

40. [73]

    For these reasons, appeal grounds 5 and 6 should be rejected.

Ground 7

1. [74]

   This ground of appeal related to $19,920.73 of expenses (involving some 17 separate payments) which were paid out by Ray White from its trust account in the name of the Appellant on account of expenses that had been identified in the Teak Report as past costs in respect of the development.

2. [75]

   Ground 7 was that the primary judge “erred in finding that expenses paid by Ray White Tingalpa had been paid, indirectly by LBT as opposed to the appellant”. The Appellant also raised the two factual challenges noted at [21] above relating to PJ [146] and [148]. Those paragraphs, with those parts of his Honour’s reasoning under challenge underlined, were as follows:

3. [76]

   It was ultimately accepted in argument by Mr Knowles that references in these two paragraphs to “LBT’s account” and “an account in LBT’s name” were erroneous and that the account was the Ray White Trust Account in the Appellant’s name. Once this error was acknowledged, consistent with a concession that was made at first instance, namely that “[i]n the schedule provided to Court summarising the invoices claimed by Capitalink, the only invoices which appear to have been paid by Capitalink, albeit through Ray White, total $20,627.48…”. At PJ [126], the primary judge had recorded the concession in the context of summarising the Respondent’s argument, namely that “a large preponderance of the invoices were not ultimately paid by Capitalink at all: an exception was an aggregated amount ($20,011.48) which was only indirectly paid by Capitalink” (emphasis added). For reasons which are not entirely clear, the sum sought on appeal in relation to the Ray White payments was $19,920.73 as opposed to $20,011.48.

4. [77]

   The fact that Ray White also paid money out of the Appellant’s trust account to others including LBT did not assist the Respondent on this aspect of the argument or indeed more generally. Such payments did not alter the fact that Ray White paid third party creditors from funds held by it in the Appellant’s name. Subject to the argument considered in the next paragraph, such payments evidenced the fact that, to the extent of those payments, the Appellant was out of pocket in relation to payment for work the performance of which the Respondent had guaranteed.

5. [78]

   The only other argument advanced by Mr Knowles in this context was that his Honour had not been satisfied that all of the past costs incurred were in fact referable to DDC’s non-performance of its obligations under the Deed which the Respondent had guaranteed. It was for this reason, for example, that the primary judge had contemplated a reference out of individual items of past costs to confirm that they related to the completion of obligations which had been DDC’s under the Deed.

6. [79]

   In my opinion, given that the Teak Report was received in evidence and so categorised the expenses paid for from the Ray White Trust Account, presumably by direction of the Appellant, this final argument of the Respondent should not be accepted.

7. [80]

   Ground 7 of the appeal should succeed.

Conclusion

1. [81]

   For the above reasons, although the Appellant was unsuccessful in relation to grounds 5 and 6, the appeal should otherwise be allowed.

2. [82]

   The orders of the primary judge should be set aside and, in lieu thereof, there should be judgment for Capitalink in the sum of $133,160.51, being $113,239.78 in relation to future costs and $19,920.73 in relation to the payments from the Ray White Trust Account. To the figure of $133,160.51 should be added interest.

3. [83]

   My view is that costs should follow the event, both in relation to the trial and the appeal.

4. [84]

   LEEMING JA: I agree with the Chief Justice that, for the reasons he gives, this appeal should be allowed on grounds 2 and 7, but dismissed on grounds 5 and 6. The Chief Justice has explained how whether Capitalink’s implied obligation to repay LBT and First State was sufficient to satisfy its claim on the guarantee was both outside its pleadings but nonetheless within the scope of the arguments raised at trial so as not to entitle the respondent to prevent these grounds from being raised in this Court, and I have nothing to add. The Chief Justice has also explained why Capitalink has failed to discharge its onus. I wish to add the following reasons not because I disagree with those of the Chief Justice, but in recognition of the quality of both sides’ submissions on an issue as to which my mind has wavered both during and after the hearing.

5. [85]

   I fully recognise that, consistently with the authorities to which the Chief Justice referred, it is not difficult to infer an entitlement to be repaid, even when related companies discharge each other’s obligations. The most important consideration which leads me to conclude that Capitalink did not discharge its onus of establishing a liability to be repaid, is that there was so much that Capitalink could have done to establish its liability to LBT and First State, without undue difficulty if there were ordinary financial statements available, and if not, by testimonial evidence. Capitalink chose to put forward a lengthy affidavit from Mr Kavanagh in support of its case, but that affidavit merely expressed the casual statement that there was an “understanding” that payments made by LBT and First State were “taken to be monies lent by LBT Corp/First State to Capitalink” which were repayable on demand. If the statement were correct, it might be expected that two loan accounts would be readily capable of being produced. Similarly, Mr Kavanagh identified the mortgage, but made no effort to identify the obligations secured by it.

6. [86]

   As the Chief Justice observes, the principles stated by Hodgson JA in Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168 at [14] are apposite, notably his Honour’s observation that the court is concerned not just with the question “what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision”. That proposition is undoubted, and was endorsed by J D Heydon, Cross on Evidence (13th ed, 2021, LexisNexis) at 47 [1215] whose endorsement was itself endorsed more recently by Kiefel CJ, Gageler and Jagot JJ in the joint majority reasons in GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; 97 ALJR 857 at [58].

7. [87]

   I appreciate that it can be difficult to run a relatively small claim, especially where as here there were many issues (including whether the so-called “Deed of Agreement” was a deed, and if not, was there consideration to support the guarantee and was it varied), and the defendant took all the points available to him. But none of that absolves a plaintiff from establishing each element of its case. On balance, I am unpersuaded that Capitalink did that, for the reasons given by the Chief Justice supplemented by the above.

8. [88]

   I agree with the Chief Justice that, in light of Capitalink’s substantial albeit incomplete success, it is entitled to orders for costs (noting that grounds 1, 3 and 4 were abandoned well in advance of the hearing, no later than when the appellant’s submissions were first supplied).

9. [89]

   STERN JA: I agree with the Chief Justice and with the additional observations of Leeming JA.