BROOKES v MARSHALL [1996] NSWCA 67

BROOKES v MARSHALL SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

KIRBY P, PRIESTLEY and CLARKE JJA 10 October 1995, 1 February 1996

[1996] NSWCA 67

GUARANTEE & INDEMNITY — contribution between co-sureties — application of general equitable principles — proof of diversion of assets of company — want of proof of proper regard to interests of co-sureties — held: Co-sureties released from contribution.

EQUITY — equitable principles — co-sureties — obligations inter se — application of equitable principles — onus of proof — removal of assets — failure to protect position of co-surety — held: Contribution as between co-sureties released.

GUARANTEE & INDEMNITY — contribution between co-sureties — application of general equitable principles — co-surety contributes to boat building business — provides guarantee to bank for business overdraft — subsequent sale of business and removal of asset to another company at behest of other surety — original business thereby deprived of assets to use in reduction of bank overdraft — no provision made for release of guarantee — upon appeal from the decision of the Supreme Court (McInerney J) dismissing a claim for contribution — held: (Priestley JA; Kirby P and Clarke JA concurring): (1) Co-sureties are subject to general equitable principles and may, by their conduct, be disqualified from relief as against each other. Connelly v Joosse, Supreme Court (NSW) (Needham J), unreported, 28 May 1990 approved. (2) The objective proof of the removal of the assets of the company and the failure of the other surety to establish that it had occurred in circumstances properly defensive of the position of the co-surety, sustained the decision of the primary judge. (3) Appeal dismissed.

EQUITY — equitable principles — co-sureties — contribution between — obligations to conform to general equitable principles — onus of proof — removal of assets to disadvantage of co-surety — obligation of other surety to establish that such removal, without apparent regard to the interests of the co-surety, was not such as to deprive of co-surety entitlement to contribution. — Trade, Practices Act 1974 (Cth). — Contracts Review Act 1980. — Fair Trading Act 1987.