Gattellaro v Westpac Banking Corporation [2004] HCA 6

HIGH COURT OF AUSTRALIA

GLEESON CJ,

McHUGH, KIRBY, HAYNE AND HEYDON JJ

YOLANDA GATTELLARO & ANOR APPELLANTS

AND

WESTPAC BANKING CORPORATION RESPONDENT

Gattellaro v Westpac Banking Corporation

[2004] HCA 6

11 February 2004

S77/2003

ORDER

Appeal dismissed.

On appeal from the Supreme Court of New South Wales

Representation:

G J McVay with D M Loewenstein for the appellants (instructed by Spencer Whitby and Co)

J C Sheahan SC with K A Rees for the respondent (instructed by Henry Davis York)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Gattellaro v Westpac Banking Corporation

Evidence – Judicial notice – Whether judicial notice can be taken that institutions such as the respondent use a standard form of guarantee.

Guarantee – Consequence of person named as co-surety not being shown to have executed guarantee.

Practice and procedure – High Court – Determination of appeal – Appellants' ground of appeal succeeds – Notice of Contention – Whether respondent should have leave to amend contentions sought in motion filed immediately before appeal hearing – Whether outstanding issues should be determined in intermediate appellate court.

Words and Phrases: "judicial notice", "common knowledge".

Contracts Review Act 1980 (NSW).

Evidence Act 1995 (NSW), s 144.

Supreme Court Rules 1970 (NSW), Pt 15 r 13(2).

GLEESON CJ, McHUGH, HAYNE AND HEYDON JJ.

Background of the appeal

1. From the late 1960s Falgat Constructions Pty Ltd ("the company") engaged in the business of acquiring, renovating and selling houses; extending and altering houses; and building houses and home units. Mr and Mrs Gattellaro were its sole directors and shareholders. The company and the Gattellaros had accounts with the Goulburn Street, Sydney branch of the Commercial Bank of Australia Ltd ("CBA"). 2. On 17 June 1977 Mr and Mrs Gattellaro executed a mortgage over their home to secure their personal indebtedness to CBA ("the 1977 mortgage"). Following a merger between CBA and Westpac Banking Corporation ("Westpac") in October 1982, a statutory novation took place substituting Westpac for CBA in its contractual relationships with the company and the Gattellaros. 3. By late 1985 officers of Westpac were becoming concerned with the incapacity of the Gattellaros to finance the interest burdens on their loans from income. 4. On 2 June 1986 the accounts of the company and the Gattellaros at the Goulburn Street branch were closed. New accounts were opened at the Westpac Plaza branch. A bill acceptance line of credit in favour of the Gattellaros was arranged. This was used to pay out the indebtedness of the company and the Gattellaros at the Goulburn Street branch. The Gattellaros entered a mortgage over their home to secure the advance of $450,000 ("the 2 June 1986 mortgage"). The 1977 mortgage was discharged. 5. On 30 May 1990 Westpac instituted proceedings under the 2 June 1986 mortgage claiming $197,378.09 and also seeking judgment for possession of the Gattellaros' home. 6. After a trial on 1-3 and 5 November 1999, Hulme J in the Supreme Court of New South Wales delivered reasons for judgment on 11 August 2000 upholding Westpac's claims and rejecting the Gattellaros' defences[1]. On 25 August 2000 he ordered the Gattellaros to pay Westpac $983,339.02 and ordered them to give up possession of their home. On 6 April 2001 the Court of Appeal dismissed an appeal by the Gattellaros[2]. 7. Among the defences advanced by the Gattellaros and rejected by the trial judge was a defence under the Contracts Review Act 1980 (NSW). That defence was that the 2 June 1986 mortgage was unjust in that it rendered the Gattellaros personally liable for the indebtedness of the company. It was contended that they had not been personally liable for that indebtedness before; that their home had not been security for that indebtedness; that no adequate explanation had been given about these changes; and that they had not understood that these changes had been effected. 8. Among the answers which Westpac gave to that defence was the contention that the company's indebtedness on the Goulburn Street branch accounts was secured by an unlimited guarantee given by Mr Gattellaro in or about November 1985; that the obligations under that guarantee were secured by the 1977 mortgage of their home; and that the 1977 mortgage made Mrs Gattellaro liable for that indebtedness also. Hence, said Westpac, the 2 June 1986 mortgage was not unjust because it did not make the Gattellaros liable for any company indebtedness they were not previously liable for, and it did not make their home security for any indebtedness for which it was not previously security. 9. A difficulty in Westpac's position was that it could not produce the unlimited guarantee of November 1985 on which its contention depended. It endeavoured to prove its existence by recourse to other materials. Those other materials included an internal Westpac memorandum of 27 November 1985 suggesting that Mr Gattellaro had given a guarantee of the company's indebtedness to the extent of $120,000 which was secured by the 1977 mortgage and that Mrs Gattellaro was also to give a guarantee that week. Other Westpac documents (a diary note of 14 February 1986 and a Westpac memorandum from the Goulburn Street branch to the regional office dated 21 February 1986) suggested that the reference to a guarantee limited to $120,000 was in error. 10. The trial judge found that at the time of the 2 June 1986 mortgage, Westpac had an unlimited guarantee from Mr Gattellaro executed in November 1985 guaranteeing the company's liability, but said that he was not persuaded that Westpac had obtained one from Mrs Gattellaro. 11. The minority judge in the Court of Appeal agreed in relation to both the Gattellaros. The majority of the Court of Appeal agreed in relation to Mr Gattellaro, and said it was not necessary to decide whether Mrs Gattellaro had given a guarantee. No attempt was made in this Court to contend that she had. 12. The Gattellaros conceded to the Court of Appeal that if there were in fact a guarantee of the company's debts unlimited as to amount, and if the obligations of the Gattellaros under that guarantee were secured on their home by the 1977 mortgage, then the 2 June 1986 mortgage was not unjust. The Court of Appeal acted on that concession, modified in light of the fact that only Mr Gattellaro had given an unlimited guarantee of the company's debts: it said that because he had given that guarantee, the 1977 mortgage made Mrs Gattellaro liable in relation to his responsibility under the guarantee and rendered their home security for the company's debts. Though the Gattellaros unsuccessfully argued to the Court of Appeal that the evidence did not support an inference that Mr Gattellaro had signed an unlimited guarantee in November 1985, they had a further argument. They apparently contended that even if Mr Gattellaro had given the unlimited guarantee it could not be operative even against him if it was in the form of a co-guarantee and if Mrs Gattellaro had not signed it. That contention would fail if there were an express clause providing that the guarantee was binding on each person who did sign it notwithstanding that some other person named as guarantor had not. The majority of the Court of Appeal found that there was an express clause of that kind, because they took judicial notice of the fact that Westpac had a standard form guarantee and that it contained an express clause of that kind. The only aspect of the Court of Appeal's reasoning which the Gattellaros challenged was the premise that Mr Gattellaro had given an unlimited guarantee in November 1985, and they challenged it, not on the ground that Mr Gattellaro had not signed it, but on the ground that the reasoning leading to the conclusion that the express clause relied on by the majority of the Court of Appeal was part of the November 1985 guarantee was erroneous. 13. The majority reasoning relevantly contained the following passage: