Austin & Anor v Royal & Ors [1999] NSWCA 222

Reported Decision : 47 NSWLR 27

New South Wales Court of Appeal CITATION : Austin & Anor v Royal & Ors [1999] NSWCA 222 FILE NUMBER(S) : CA 40382/98 HEARING DATE(S) : 10 June 1999 JUDGMENT DATE : 10 June 1999

Kenneth James Austin Diane Christina Austin v PARTIES : Michael Royal Australia and New Zealand Banking Group Ltd Peter Allen Australian Padding Co Pty Ltd (In Liquidation) JUDGMENT OF : Meagher JA; Handley JA; Cole AJA

LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : Comm D 50157/95 LOWER COURT JUDICIAL OFFICER : Giles CJ Comm D

A - J Young COUNSEL : 1 and 3R - P Wood 2R - J Dowdy A - Karageorge & Co, Sydney SOLICITORS : 1 and 3R - Henry Davis York, Sydney 2R - Norton Smith & Co, Sydney 4R - Kemp Strang & Chippindall, Sydney CATCHWORDS : Guarantee and Indemnity - Effect of guarantee - Subrogation - Discussion of principles - Ongoing liability - Whether subrogation to guarantor in absence of complete payment. DECISION : Appeal dismissed with costs

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40382/98 Comm D 50157/95

MEAGHER JA HANDLEY JA COLE AJA

Thursday, 10 June 1999

Kenneth James AUSTIN & Anor v Michael ROYAL & Ors JUDGMENT 1 COLE AJA: Mr and Mrs Austin have appealed from a judgment of Giles J, Chief Judge of Commercial Division as he then was, on 14 May 1998 in which his Honour denied their claim that they were entitled to be subrogated to the extent of $364,666 to the rights of the second respondent, the ANZ Banking Group Ltd ("the bank") in consequence of their having paid the sum mentioned in partial discharge of moneys due by the third respondent, Australian Padding Company Pty Ltd (In Liquidation) (Receiver and Manager Appointed) ("APC") whose debts they had guaranteed. 2 Giles J held that clause 12 of the guarantee excluded any such right. His Honour also denied the appellants relief pursuant to the Contracts Review Act 1980. 3 His Honour held that clause 12 of the guarantee was not materially distinguishable from the clause considered by the High Court in O'Day v Commercial Bank of Australia (1933) 50 CLR 200. That authority, binding on his Honour and on this Court, resulted in any right of subrogation having been contracted away by the Austins. 4 In this appeal, the Austins seek to distinguish that authority from the clause in their guarantee although they accept that, unless distinguished, and assuming clause 12 bears the construction placed upon it by his Honour, the appeal must fail. 5 The facts are adequately set out in the judgment of Giles J at pages 1 to 10 of the judgment. In my view, the facts as found necessarily result in the appeal failing. 6 The reason for this may briefly be stated. The contention of the appellants is that clause 12 of the guarantee did not exclude the right of subrogation to the extent of the sum mentioned. They further contended that it did not exclude s.3 of the Law Reform (Miscellaneous Provisions) Act 1965 (or its statutory forebear) which provides: "3(1) A person who, being surety for the debt or duty of another, or being liable with another for a debt or duty, pays that debt, or performs that duty is entitled: