Gattellaro v Westpac Banking Corporation

[2004] HCA6

---

(Decision by: Gleeson CJ, Mchugh J, Hayne J, Heydon J)

Gattellaro
vWestpac Banking Corporation

Court:

Judges:
Gleeson CJ
Mchugh J
Hayne J
Heydon JKirby J

Subject References:
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.

Legislative References:
Contracts Review Act 1980 (NSW) - The Act
Evidence Act 1995 (NSW) - s 144
Supreme Court Rules 1970 (NSW) - Pt 15 r 13(2)

Hearing date:
Judgment date: 11 February 2004

---

Decision by:
Gleeson CJ
Mchugh J
Hayne J
Heydon J

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:

"It was submitted that the guarantee given by Mr Gattellaro might not have become operative in the absence of signature by Mrs Gattellaro as co-guarantor. However, the evidence included a guarantee given by a relative of Mr and Mrs Gattellaro in May 1986 in respect of their indebtedness, a Westpac guarantee on a printed form with a print date of 1 October 1984. Judicial notice can be taken of the fact that institutions such as Westpac used a standard form guarantee. It was submitted that this could not be found to have been Westpac's standard form guarantee, and so the form of guarantee which would have been given in November 1985, in the absence of explicit evidence from Westpac. I think that unrealistic, and conclude that the guarantee given by Mr Gattellaro in November 1985 was in the same form. It provided that the guarantee was binding on each signatory notwithstanding that one or more of the persons named as guarantor did not execute it."

The "guarantee given by a relative" which was "on a printed form with a print date of 1 October 1984" was a guarantee dated 21 May 1986 given by Mr and Mrs Falcomata to Westpac securing the indebtedness of the Gattellaros to Westpac ("the Falcomata guarantee"). Clause 20 of the Falcomata guarantee provided:

"THAT this instrument shall bind each of the signatories hereto to the extent aforesaid notwithstanding that one or more of the persons named herein as the Guarantor or the Debtor may never execute the same or that the execution of this instrument by any one or more of such persons (other than the person sought to be made liable hereunder) is or may become void or voidable."

14. The minority judge in the Court of Appeal said that the majority reasoning depended on a view taken by the majority of what was in the guarantee which they inferred Mr Gattellaro had signed. He stated:

"This view depends upon their taking judicial notice both of the fact that the Bank used a standard form of guarantee and of what was in it.

I do not think judicial notice can safely be taken of either of those matters, for three reasons: in my experience bank forms frequently change - they must, in light of constantly changing economic conditions and legislative provisions, and never ending court decisions around the world about the meaning and effect of bank forms; there are, I believe and there certainly may be, different forms of guarantee within a single bank; and, transaction by transaction, additions and/or deletions may be made to standard forms."

Judicial notice

15. While in the course of the hearing of the special leave application on 14 February 2003 counsel for Westpac did not formally concede that the reasoning advanced by the majority of the Court of Appeal on judicial notice was wrong, he did not defend it. He submitted that no judicial notice question arose and that the Court of Appeal's orders dismissing the appeal could be defended on other grounds. Westpac adopted a similar posture in its Notice of Contention filed on 17 March 2003. On 12 June 2003, in its written submissions, Westpac accepted "that the doctrine of judicial notice did not permit the majority of the Court of Appeal to find that [Westpac] in 1985 used a standard form of guarantee"[ ^[3] ].

16. In these circumstances it is not necessary to deal with the judicial notice question in detail.

17. Below, the matter was dealt with as though the common law applied. In New South Wales there would appear to be no room for the operation of the common law doctrine of judicial notice, strictly so called, since the enactment of the Evidence Act 1995 (NSW), s 144 . This section provides:

"(1) Proof is not required about knowledge that is not reasonably open to question and is:

(a)

common knowledge in the locality in which the proceeding is being held or generally, or

(b)

capable of verification by reference to a document the authority of which cannot reasonably be questioned.

(2) The judge may acquire knowledge of that kind in any way the judge thinks fit.

(3) The court (including, if there is a jury, the jury) is to take knowledge of that kind into account.

(4) The judge is to give a party such opportunity to make submissions, and to refer to relevant information, relating to the acquiring or taking into account of knowledge of that kind as is necessary to ensure that the party is not unfairly prejudiced."

18. Knowledge of the proposition that institutions such as Westpac use, or at any particular time used, a standard form guarantee is not common knowledge, either in Sydney, which is the locality in which the proceeding was held, or generally. Nor is it knowledge capable of verification by reference to a document the authority of which could not reasonably be questioned. Further, it has not been demonstrated that the majority of the Court of Appeal gave the Gattellaros an opportunity to make submissions, and to refer to relevant information, relating to the acquiring or taking into account of the knowledge in question as was necessary to ensure that they were not unfairly prejudiced. Indeed, counsel for both sides said that the judicial notice issue was raised by the Court of Appeal for the first time in its judgments. For these reasons judicial notice could not be taken in the way the majority of the Court of Appeal did.

19. However, Westpac submitted that the Court of Appeal's dismissal of the appeal could be upheld on one or other of two contentions propounded in its Amended Notice of Contention.

Inference that Mr Gattellaro's guarantee contained cl 20 of the Falcomata guarantee

20. The first of the two contentions propounded in Westpac's Amended Notice of Contention was "that there was sufficient evidence (albeit barely sufficient) to warrant a finding that, more probably than not, the guarantee executed by Mr Gattellaro would have included a term such as cls 20 of the Falcomata guarantee". A brief submission to the same effect had been put to, but not dealt with by, the Court of Appeal. In this Court, Westpac pointed to four circumstances in support of the contention.

21. First, several aspects of the Falcomata guarantee suggested it was a standard form. It had marginal notes giving instructions for execution; and in particular there were instructions relating to execution in different jurisdictions. It referred to "all moratorium legislation and regulations which may now or hereafter be in force". It contained words permitting imposition of a limit on liability which had been struck out.

22. While this reasoning certainly supports the conclusion that the Falcomata guarantee was a standard form, it does not justify the conclusion that it was the only standard form in use in May 1986, let alone November 1985. There may have been others. And even if the Falcomata guarantee was in the form of the guarantee signed by Mr Gattellaro , just as parts of the Falcomata guarantee were filled in or struck out, so cl 20 may have been struck out of the guarantee signed by Mr Gattellaro .

23. The second circumstance which Westpac relied on was that the form of the Falcomata guarantee was apt to be used for a guarantee by Mr Gattellaro of the company's debts.

24. It is true that its form was not inappropriate for that use. But it does not follow that a guarantee in that form was the only form capable of use for that purpose, or that it was in fact used for that purpose.

25. The third circumstance is that the form of the Falcomata guarantee was used in relation to a transaction to which the Falcomatas were party which was equivalent to that entered by Mr Gattellaro . Even if that is correct, it does not exclude the possibility that other forms were capable of use, particularly since Mr Gattellaro's guarantee was signed at the request of officers of the Goulburn Street branch, while the Falcomata guarantee was signed at the request of officers of the Westpac Plaza branch.

26. The fourth circumstance relied on was that the Falcomata form of guarantee was used in May 1986, only six months after Mr Gattellaro's guarantee was given in November 1985, and the marginal notes referring to 1 October 1984 indicate that the Falcomata form of guarantee was in use from that date.

27. One difficulty with that contention is that the significance of the date was unexplored. Another is that it does not point to the form of the Falcomata guarantee as being the only one in use in November 1985.

28. For these reasons it is necessary to reject the submission that an inference could be drawn that Mr Gattellaro's guarantee contained cl 20 of the Falcomata guarantee.

Issues relating to whether the giving of the guarantee by Mr Gattellaro was subject to Mrs Gattellaro executing it

29. Before this Court the Gattellaros contended in their written submissions in chief:

"[I]f it is a term of the arrangements leading to the execution of a guarantee that there will be another co-surety of the debt, then unless the intended surety who has executed the guarantee consents to the other co-surety not thereafter executing the guarantee, failure of the co-surety to execute the guarantee relieves the intended co-surety of liability under the guarantee despite his execution of it."

30. Arguments relating to this contention were both elaborated and varied in the course of the oral hearing and it will be necessary to trace the course of these arguments in some detail. It is convenient to say at once, however, that they are arguments which, in both their original and varied forms, should fail. Counsel for the Gattellaros conceded that it was for the Gattellaros to prove that Mr Gattellaro was relieved from his obligation under the guarantee. This they did not do. Even if, in the courts below, Westpac did not advance the argument that the Gattellaros bore this onus, it is not debarred from doing so in this Court.

31. In oral argument, counsel for the Gattellaros submitted that the relevant principles were conveniently recorded in Marston v Charles H Griffith & Co Pty Ltd [ ^[4] ]. In that case Powell J said:

"1. if it is a term, whether express or implied, of the arrangements pursuant to which a parol contract of guarantee is executed, that there will be another co-surety or other co-sureties, or that the principal debt, or the guarantee, will be secured in an identified way, then, unless the intended surety who has executed the guarantee consents to the other co-surety or co-sureties not thereafter executing the guarantee ... or to the contemplated security not being provided ... then the intended surety never becomes liable under the guarantee despite his execution of it - the failure of the other co-surety or co-sureties to execute the guarantee, or the failure to provide the intended security, thus affords the intending surety who executed the guarantee a defence at law to an action on the guarantee;

2. if a parol contract of guarantee which is executed by an intending surety is drawn in a form showing another or others as intended joint and several sureties, it will be presumed, in the absence of acceptable evidence to the contrary, that the execution of that other, or those others, was a condition precedent to the surety who signed the guarantee becoming liable under it, and his, or their, failure to execute the guarantee will afford to the intending surety who executed the guarantee a defence at law to an action on the guarantee;

..." (footnotes omitted)

32. It thus appeared to be a contention of the Gattellaros that if it was a term of Mr Gattellaro 's guarantee that Mrs Gattellaro was to be a co-surety, since Westpac had not established that she had become a co-surety, Mr Gattellaro was relieved of liability under the November 1985 guarantee ("the Marston contention").

33. At all events, Westpac appeared to understand the Gattellaros' position in this way, because after the Gattellaros had served their written submissions in chief, Westpac formulated a second ground on which it sought to uphold the order of the Court of Appeal dismissing the Gattellaros' appeal to that Court. The second ground was put thus in par 4 of the Amended Notice of Contention:

"[T]he decision below should be affirmed on the ground that the [Gattellaros] did not plead or prove that the guarantee given by [Mr Gattellaro ] was subject to [Mrs Gattellaro ] also giving such a guarantee, or that [Mr Gattellaro ] had such a belief, induced by the form of the guarantee, and did not plead or prove that [Mrs Gattellaro ] did not give such a guarantee."

The Gattellaros opposed Westpac's application for leave to amend its Notice of Contention to rely on this ground. The written submissions of Westpac in support of the second ground were to the effect that the Marston contention had not been pleaded, and that the conduct of both parties at the trial suggested that the Marston contention had not been advanced by the Gattellaros.

34. The written submissions of the Gattellaros in reply took the stance that it was not open to Westpac to raise any issue adverse to them about whether it was a term of the arrangements pursuant to which Mr Gattellaro entered the November 1985 guarantee that Mrs Gattellaro should become a co-surety. It was said not to be open to Westpac to do this because of the principles relating to the raising of issues in an appeal which had not been raised at the trial.

35. From the Gattellaros' point of view, the difficulty in that stance is that their success on the judicial notice point did not affect the concurrent findings of the trial judge and the Court of Appeal that Mr Gattellaro gave the guarantee of November 1985 in an unlimited amount. The effect of that guarantee was to make Mr Gattellaro liable for all the company's debts to Westpac, and hence also to make Mrs Gattellaro liable for them, and to make their home security for the company's debts by reason of the 1977 mortgage. That meant that the attack on the 2 June 1986 mortgage would fail since it did not worsen the Gattellaros' position.

36. Perhaps because of a perception of that difficulty, in oral argument the Gattellaros appeared to adopt a slightly different posture. They submitted that until notice was given in Westpac's written submissions of what became par 4 of the Amended Notice of Contention, the joint position of the parties was that "if one joint guarantor signed a guarantee form which was expressed to be with others and unless that guarantor who signed the guarantee form agreed, he was not bound if the others did not sign." The Gattellaros conceded that as "a matter of law" they bore the onus on the Marston contention; but said that it was not open to Westpac to rely on that legal rule in this Court in view of Westpac's failure to rely on it below[ ^[5] ].

37. The Gattellaros thus seemed to contend that they could rely on the propositions of law inherent in the Marston contention favourable to them (the validity of which, according to them, was common ground at all stages until the oral argument in this Court), but that Westpac could not rely on one of the propositions of law associated with the Marston contention favourable to it, namely that the surety seeking to escape liability bore the onus of proving the facts which had to be established if the Marston contention were to be made good.

38. It is far from clear whether the Marston contention was raised before the trial judge. There are strong indications that it was not.

39. Since the Gattellaros bore the onus of proving that the 2 June 1986 mortgage was unjust, they bore the onus of nullifying the November 1985 guarantee signed by Mr Gattellaro . Their counsel conceded this to be so as a matter of law, as has been noted. That meant that it was for them to prove that there was a clause in that guarantee, or in the arrangements leading to its execution, that Mrs Gattellaro was to be a co-surety.

40. The structure of the pleadings was that Westpac relied on the 2 June 1986 mortgage in its Statement of Claim. The Further Amended Cross Claim filed by the Gattellaros pleaded that the 2 June 1986 mortgage was unjust because, for the first time, it caused them to guarantee the company's debts, and secured them over the Gattellaros' home. Par 5 alleged:

"By the said mortgage of 2 June 1986 [Westpac] obtained a mortgage over land owned by the [Gattellaros] which had the effect of securing amounts which had previously been advanced to [the company] and which were previously unsecured and which became the debts of the [Gattellaros] after 2 June 1986."

41. In its Amended Defence to Further Amended Cross Claim, par 10, Westpac responded as follows:

"In further answer to the allegation made in the Claim to the effect that prior to 2 June 1986 the monies advanced by the Bank to [the company] had been unsecured, the Bank:

(a)

denies the allegation;

(b)

says that by mortgage dated 17 June 1977 and registered number Q283741 ('the 1977 Mortgage') the cross-claimants mortgaged the [Gattellaros' home] to the Bank (by its predecessor [the CBA]) to secure, among other things, all monies that the cross-claimants, or either of them, had then guaranteed to the Bank (or its predecessor) or thereafter guarantee to the Bank (or its predecessor).

Particulars

Paragraphs 2 and 27 of the 1977 Mortgage

(c)

says that by a Guarantee made in or about November 1985 the first cross-claimant guaranteed to the Bank payment of all monies owing to the Bank by [the company].

Particulars

The Bank is not able to produce a copy of the Guarantee. Its existence is to be inferred from the entries made in the Bank's diary notes of 27 November 1985 and 21 February 1986 (2) and from item 22 in the defendants' List of Documents dated 7 March 1991 in these proceedings."

By par 10 Westpac was contending that since Mr Gattellaro was liable for the company's debts under the November 1985 guarantee, that Mrs Gattellaro was also liable for them under the 1977 mortgage, and that the Gattellaros' home was security for those debts under the 1977 mortgage.

42. Part 15 r 13(2) of the Supreme Court Rules 1970 (NSW) provides:

"In a defence or subsequent pleading the party pleading shall plead specifically any matter ...

(a)

which he alleges makes any claim, defence or other case of the opposite party not maintainable;

(b)

which, if not pleaded specifically, may take the opposite party by surprise; or

(c)

which raises matters of fact not arising out of the preceding pleading."

43. The Marston contention was one which, if sound, would have made par 10 of Westpac's Amended Defence to Further Amended Cross Claim not maintainable, because it would have nullified the November 1985 guarantee. It was also a contention which, if not pleaded specifically, might have taken Westpac by surprise. And the Marston contention would have raised matters of fact not arising out of the preceding pleading. If the Gattellaros wished to rely on the Marston contention, on which they bore the burden of proof, Pt 15 r 13(2) obliged them to file a reply to Westpac's Amended Defence to Further Amended Cross Claim. This they did not do.

44. Counsel for the Gattellaros complained about the alleged failure of Westpac to make it clear at the trial that it saw the Gattellaros as bearing the onus of proof in relation to the Marston contention, and said that his clients were prejudiced because the passage of nearly four years from the trial caused him not to be able to remember the details of what had happened at the trial and what informal accommodations he may have come to with his opponent during the trial. This complaint, however, cannot affect the question of what ought to have been pleaded. The Amended Defence to Further Amended Cross Claim was served before the trial.

45. The failure of the Gattellaros to plead the facts necessary to make good the Marston contention was not necessarily fatal to any intention they had of relying on it. It was open to the parties by their conduct of the trial to consent to a widening or narrowing of the issues defined by the pleadings. Demonstration to an appellate court of how a trial was conducted depends on proof by affidavit, or on an admission, or on clear evidence in the transcript or in some other part of the record of the proceedings, or on an inference from the record. Here there was no affidavit. There was no admission: neither of the counsel for Westpac who appeared before this Court had appeared at the trial, and though leading counsel for the Gattellaros had, he could not recall what had happened more than three and a half years earlier. There is no clear evidence in the transcript. It may be possible to draw inferences from passages in the reasons for judgment of the trial judge and of the majority of the Court of Appeal, and in various written submissions, that the Marston contention had been in issue. Even if it was in issue, it was not dealt with by either the trial judge or the Court of Appeal. There is no utility in this Court remitting the matter to one of the courts below for the Marston contention to be decided, since if it has to be decided, this Court is in as good a position as they were. It is not necessary to reach a conclusion on whether the Marston contention was in issue, since even if it was, the Gattellaros must fail.

46. If the crucial question were whether, assuming that the Gattellaros bore an onus of making good the Marston contention in the different forms in which they described it, they satisfied it - and the parties wavered on whether that was the question - the answer would be that they did not. The onus on the Gattellaros would have been to prove:

(a)

that there was a term, express or implied, of the arrangements pursuant to which the November 1985 guarantee was executed, that Mrs Gattellaro was to be a co-surety; or

(b)

that the November 1985 guarantee was drawn in a form showing Mrs Gattellaro as an intended joint and several surety.

47. The Gattellaros did not prove proposition (b). That is because Westpac lost its copy of the guarantee, and because although the Gattellaros may have given discovery of the guarantee (which their solicitor denied was in signed form), they too lost their copy. Since the form of the guarantee is not in evidence, no inference can be drawn from it.

48. Further, the Gattellaros did not prove proposition (a). The internal Westpac documents reveal that Westpac expected Mrs Gattellaro to sign a guarantee; but they do not prove any relevant term of the arrangements.

49. But at the end of the day the parties appeared to be inviting this Court to decide a different question - not whether the Gattellaros satisfied an onus borne by them of making good the Marston contention, but whether Westpac bore the onus of disproving the Marston contention, and whether Westpac was disentitled from taking the point in this Court that the onus lay on the Gattellaros. The Gattellaros argued that even if, as a matter of law, they would otherwise have borne the onus of establishing the matters of fact necessary to make good the Marston contention, Westpac had not taken that point below, concentrating instead on the issue, not raised by the pleadings but introduced by the parties during the trial, of whether Mrs Gattellaro had signed the guarantee. Hence, they argued, Westpac could not rely on any contention now that the Gattellaros bore the onus. In effect the Gattellaros argued that while there was a gap in proof in relation to the Marston contention, and while cases containing gaps in proof ought to be decided by recourse to the onus of proof, since Westpac took no point at the trial that the onus of proof lay on the Gattellaros, it was debarred from relying on that location of the onus in this Court, and hence had to fail.

50. One difficulty in this argument is that just as it is difficult to conclude that the Marston contention was advanced at trial because of the absence of any relevant affidavit, admission, express indication in the record or inference from the record, for the same reasons it is difficult to conclude that the validity of the Marston contention was common ground, or to conclude that the question of the burden of proof in relation to the Marston contention was not argued at trial or was assumed by Westpac.

51. If in truth Westpac did not take the onus of proof point below, that points to the conclusion that the Marston contention was not put below by the Gattellaros and hence cannot be relied on now. In any event, the question of where the onus of proof on the Marston contention lies (as distinct from the question whether it was satisfied) is an issue of pure law. If the Gattellaros wished to rely on the Marston contention at any stage, it was in their interests to ensure that evidence was called to support it, wherever the onus lay. Either the Marston contention was advanced at trial or it was not. If it was, the Gattellaros had an opportunity to call evidence about it, but failed to do so to a degree sufficient to permit them to discharge their onus of proof. If the Gattellaros did not advance the Marston contention at trial, but wished to do so for the first time in the Court of Appeal or this Court, it was for them to make it good on the existing evidentiary material: any deficiency in the evidentiary material flows from their failure to call more evidence about it at trial. The Gattellaros did not call one item of evidence which it was within their power to call, namely evidence from Mr Gattellaro , including evidence as to his state of mind, as to any relevant term in the arrangements. And the Gattellaros did not cross-examine a relevant witness called by Westpac in that regard.

52. The Gattellaros' contention that Westpac cannot now rely on the rule of law which places the onus of establishing the facts relevant to the Marston contention on the surety must be rejected. If the Marston contention was never raised below and is not raised now by the Gattellaros, then the location of the onus is immaterial: par 10 of the Amended Defence to Further Amended Cross Claim will have been made out. If the Marston contention was raised at trial or is now raised, then the onus lay or now lies on the Gattellaros, unless Westpac assumed the onus. Since counsel for the Gattellaros lacked any recollection about the specific conduct of the trial, there were only two circumstances to which the Gattellaros pointed as a sign that Westpac assumed, or had abandoned any point about, the onus. The first circumstance was that Westpac made several attempts to procure an admission from Mrs Gattellaro in cross-examination that she had signed the guarantee even though Westpac had not alleged in its Amended Defence to the Further Amended Cross Claim that she had. These attempts wholly failed, but Westpac's conduct in trying to elicit this admission does not point to any assumption of an onus or abandonment of any point about onus on its part. Westpac's conduct is readily explicable in other ways: had Westpac established that Mrs Gattellaro had signed the guarantee, it would have made Westpac's overall task easier, and it would have tended to weaken various allegations in the Further Amended Cross Claim that she was unaware that the 2 June 1986 mortgage worsened her position. The other circumstance to which the Gattellaros pointed was that counsel for Westpac on the special leave application said that it was common ground that the general principle was that in the absence of contrary language, "if a guarantee is drawn up for two guarantors, and one only signs, then [that] one is not bound, because the only promise he made was to join with the other to guarantee, and if the other does not join, then he is not bound". But counsel for Westpac made no concession about the onus of proof or about how the trial had been conducted in that regard. Hence there is nothing to suggest that Westpac did assume the onus. Even if Westpac remained silent about the onus, there was no reason why the Gattellaros should have assumed that the onus lay anywhere but where the law placed it, namely, on them. Accordingly, Westpac is not debarred from relying on the fact that the onus of pleading and proof rests on the Gattellaros and from pointing out that the evidence called at trial does not satisfy the onus of proof.

53. Leave to amend the Notice of Contention to include ground 4 should be granted, and the ground should be upheld.

Conclusion

54. It follows that Mr Gattellaro's contention that he is not bound by the November 1985 guarantee fails. Since it obliged him to pay to Westpac the debts owed by the company, the 1977 mortgage applied. The 1977 mortgage made Mrs Gattellaro liable for, and secured against the Gattellaros' home, all monies for which Mr Gattellaro might be liable to Westpac. In consequence the 2 June 1986 mortgage did not increase the Gattellaros' liability, and the appeal to this Court must be dismissed.

55. What should be done about costs? Special leave to appeal was granted to determine an important point concerning judicial notice. The Court of Appeal of New South Wales had rejected the appellants' appeal because it held that courts could take judicial notice that banks such as Westpac used a standard form of guarantee and that it could be inferred that the appellants had signed Westpac's standard form. That was a far-reaching proposition of great practical importance in the conduct of commercial litigation. Special leave was granted to test the correctness of that ruling.

56. In Westpac's written submissions, however, it conceded "that the doctrine of judicial notice did not permit the majority of the Court of Appeal to find that [Westpac] in 1985 used a standard form of guarantee." It had made no such concession on the special leave hearing. After conceding that the Court of Appeal had erred in relying on the doctrine of judicial notice, Westpac sought to uphold the Court of Appeal's decision on certain factual grounds.

57. Thus, by reason of Westpac's concession concerning judicial notice, the Court of Appeal's decision could not stand unless Westpac made good one or both of the two grounds in its Notice of Contention. From this Court's point of view, the better course would have been to allow the appeal and remit the Notice of Contention to the Court of Appeal. That course would, however, have put the parties to further expense and delay. In the circumstances, the interests of justice have been best served by this Court determining the factual and procedural questions, questions of a kind with which ordinarily it should have no concern. For the reasons given above, the second of the grounds relied on by Westpac must succeed and the appeal must be dismissed.

58. But in our opinion, Westpac should not have the costs of the appeal in this Court. Its dilatoriness in conceding that the Court of Appeal had erred caused the appellants to incur the expense of filing a notice of appeal, preparing appeal books, briefing counsel and preparing written submissions. This expense could have been avoided if Westpac had conceded at the special leave application that the Court of Appeal had erred. If it had, this Court could have allowed the appeal instanter and remitted the matter to the Court of Appeal to determine at least the first ground in the Notice of Contention which had been raised in the Court of Appeal but not decided. Whether on a remitter Westpac could have raised the second ground of the Notice of Contention - the ground on which it succeeds in this Court - may be debatable. In this Court, it was entitled to support the decision in its favour on that ground, even if the point was being raised for the first time, because it involved a question of law that could not be affected by further evidence[ ^[6] ]. If the matter had been remitted to the Court of Appeal, however, the public interest in the finality of litigation might have induced that Court in its discretion to refuse to allow the second ground to be argued, if it had not been raised on the first hearing of the appeal. Thus, Westpac may have gained a considerable advantage in not making its concession earlier than it did.

59. In these circumstances, Westpac should not have its costs. Indeed, there is much to be said for ordering Westpac to pay the costs of the appeal even though it succeeds in having the appeal dismissed. However, on balance, the justice of the case is served by not making a costs order in favour of either side.