HIS HONOUR: By Statement of Claim filed on 23 January 2014, the plaintiff Commonwealth Bank of Australia trading as Bankwest sues the first defendant Warren George Harrison and the second defendant Marcus Lindsey Langman on guarantees given by each of them respectively of the indebtedness of a number of companies in a group of companies which operated pharmacies in various parts of Australia. The claim against the first defendant is for a sum of $22 million approximately, whereas that against the second defendant is for $3,843,377 dollars, it being upon guarantees allegedly given by him of two facilities called respectively the Langman Indooroopilly facility and the Langman Townsville facility.
The Statement of Claim, while pleading the guarantees allegedly given by Mr Langman and the terms of those guarantees and demands said to have been made pursuant to them, nowhere alleges that there are "amounts payable by the debtor under the guaranteed agreement" as referred to in paragraph 16 of the statement of claim, nor that there are "amounts payable by Langman North under the Langman Indooroopilly facility agreement" or under the Langman Townsville facility agreement as referred to in paragraphs 17 and 18 of the statement of claim, let alone the amounts so payable. Those are fundamental and essential material facts in the cause of action asserted by the plaintiff against the second defendant, but are not alleged. In that respect, it seems to me that the statement of claim is, in a formal sense, fundamentally defective. That said, the recipient of the statement of claim would not have been under much doubt as to what was alleged in that respect, because the pleading of the notices of acceleration in paragraph 22, though not pleading the relevant indebtedness, at least contains a clear if indirect reference to it - relevantly, for present purposes, in particular in paragraph 22(e).
Commonwealth Bank of Australia t/as Bankwest v Warren George Harrison [2014] NSWSC 1436 | Case summary | Zoe
That said, the fundamental deficiency in the statement of claim means that it should be amended to plead the relevant material facts. However, the pleading defects to which I have referred were not in any real sense the subject matter of the present application brought by Notice of Motion filed by the second defendant on 10 September 2014 and seeking an order pursuant to (NSW) Uniform Civil Procedure Rules 2005, r 13.4, that the proceedings be dismissed; alternatively pursuant to r 14.28 that the Statement of Claim be struck out as against the second defendant; and, alternatively, the provision of further and better particulars of the statement of claim as against the second defendant. The application was brought on the basis that the proceedings were vexatious, or that the Statement of Claim had a tendency to cause prejudice or that further particulars were necessary for the proper conduct of the proceedings.
It is necessary to refer to a little of the procedural history. The Statement of Claim as against the second defendant concluded paragraph 30 with the allegation that as at 17 January 2014, the plaintiff claims against the second defendant pursuant to the Langman Indooroopilly guarantees (Marcus) $3,534,109, and pursuant to the Langman Townsville guarantee (Marcus) $309,267, a total of $3,843,377. The statement of claim contains no further elaboration of those amounts and, as I have said, contains no allegation let alone particularisation of the amounts owed by the "borrower", as the principal debtor is called in the pleading.
By letter dated 18 February 2014, the second defendant's solicitor sought particulars of the statement of claim, including relevantly precisely how the amounts claimed were calculated. That was, as the plaintiff's counsel conceded, an entirely reasonable and proper request. If further authority be needed for it, the obligation of a party claiming a lump sum to provide particulars of the amount claimed, showing what sums have been paid or were payable to other persons or companies or on behalf of the defendant, and how the amount claimed is made up is illustrated by George Patterson Pty Limited v James Wallace Pty Limited [1964-5] NSWR 1299; Kemp v Goldberg (1887) 36 Ch D 505, and Godden v Corsten (1879) 5 CPD 17. It is entirely regrettable that the response to that request by the plaintiff's solicitors on 20 February 2014 was to the effect that the matter of calculations of the amounts claimed "will be addressed in evidence".
Given that response, the second defendant's solicitors, however, did not further pursue the request for particulars until the plaintiff's evidence was served.
The second defendant appears to complain that it has been provided with documents in respect of loans and guarantees relevant to the claim identifying 30 entities as purportedly providing guarantees in respect of the borrower. As it seems to me, it may well be - if there are 29 other guarantors - that the second defendant may have cross-claims for contribution against those other guarantors, but the fact that there are other guarantees for the debt guaranteed by the second defendant does mean that the existence of those other guarantees are a material fact in the plaintiff's cause of action against the second defendant.
When the plaintiff on 15 August 2014 served its evidence in chief in the proceedings, the only evidence relevant to the calculation of the amounts comprised two documents in the form of certificates by an officer of the plaintiff which purported to certify the amount due and payable. That too was unfortunate, because it in no way provided particulars of precisely how the amounts claimed were calculated. Even if the plaintiff is entitled to rely on such certificates to prove its claim, that does not relieve it of the obligation to provide proper particulars as, indeed, it had said on 20 February 2014 it would.
However, in response to a further request from the second defendant's solicitor, the plaintiff then provided the bank statements of each of the accounts of the principal debtor for which it was alleged that the second defendant was liable. Those bank statements appear to have covered the life of the guarantee, and show each transaction on the account during that relevant period. Each of them concluded with an account closing entity which reduced the balance to zero. It was not then explained (as it has now been in evidence served only two days ago) that this was the result of a procedure within the bank to close accounts that were in default; but it would not require a highly intelligent reader of those statements together with the interest summaries that accompany them to realise that the amount on which interest was calculated was the same amount as the debit balance in the account immediately prior to the closing entry, and thus to understand how the amount claimed to be owing by the principal debtor and to be recoverable from the second defendant as guarantor was calculated. Thus, although belatedly, when that material was provided on 26 August 2014 to the second defendant's solicitor the plaintiff had at last provided the particulars - which it ought to have provided much earlier - of the amounts claimed against the second defendant.
However, the plaintiff had appointed receivers pursuant to various of the securities held by it for the indebtedness of the pharmacy group. Those receivers had realised many assets and, so it would now seem, received approximately $19.9 million, of which it seems that about $10.9 million has been paid to the plaintiff and applied in reduction of the liabilities of certain entities within the Harrison group, though not of the entity whose liabilities are guaranteed by the second defendant.
In an affidavit sworn on 14 October 2014, an officer of the plaintiff deposes to the amount received and to how it has been applied, specifying and providing bank statements evidencing the accounts to which the receipts have been applied and deposing that none have been applied to the amounts outstanding under the facilities in respect of which the claim is made against the second defendant. Apparently the receivers have incurred costs and expenses of $9.9 million which, at first sight, seems extraordinary; but that is not a matter which forms a material fact in the plaintiff's claim against the second defendant.
The second defendant's submission that the proceedings are an abuse of process or vexatious or have a tendency to cause prejudice, depended essentially on the proposition that there were facts relevant to the plaintiff's claim that were deliberately omitted from the pleading; in particular, the appointment of receivers, the sale of security properties, the incurring of receivers fees and expenses and the application of receipts from the sales to various of the accounts of the group.
It is no part of the plaintiff's cause of action that any of the receipts were applied to accounts for which the second defendant is said to be liable. In those circumstances, it eludes me how it can be said that those matters are material facts in the plaintiff's cause of action that the plaintiff was bound to plead. Accordingly, it similarly eludes me how it can be said that they were deliberately omitted when, if pleaded, they would have been irrelevant.
This can be illustrated by the circumstance that, given what is now known, if the defendant's submission be correct, the plaintiff ought to have pleaded that none of the amounts received from the realisation of securities were applied to the accounts for which the second defendant is responsible. But to plead that would have been mere surplusage. It constitutes no part of the cause of action. That is not to say that the second defendant might not be entitled to raise by way of defence or cross-claim an allegation that the plaintiff has or ought to have received from the securities more than it has, and that it ought to be required to bring them to account in reduction of its liability of the second defendant, or that it ought to have applied the moneys that it did receive from the realisation of the securities in some manner different to that which it has, more to the benefit of the second defendant. I do not say that such a defence or cross-claim would necessarily be available to the second defendant, but it is possible. I certainly do not exclude them. But they are matters to be raised by the second defendant by way of defence or cross-claim. They are not part of the plaintiff's case and the plaintiff is not bound to plead them.
It did for some time exercise my mind that it would be reasonable to require the plaintiff to provide at least some account of what amounts it had received from the realisation of the securities and to what accounts those receipts have been applied. But Mr Dellit's affidavit 14 October 2014, in paragraphs 28 through to 35 and the exhibits referred to therein, essentially does that. In doing so, it goes beyond the requirement for proper particularisation of the statement of claim and while it may well be that when it comes to disclosure the second defendant might, depending on the state of the pleadings and evidence, be entitled to further documents, it is not entitled to them by way of particulars of the statement of claim.
Reference was also made to a deed of cross collateralisation of 7 October 2010 not referred to in the statement of claim. It was not referred to in the statement of claim no doubt because it is not relevant in the pleading sense to the cause of action brought against the second defendant. If the second defendant wishes to allege that, inter alia, because the first defendant is not a party to that deed but proceeds of realisation appear to have been applied to accounts in his name, there has been some misapplication of the proceeds, then the second defendant can do that by defence or cross-claim. But the omission of reference to such material from the statement of claim does not indicate any deliberate concealment or vexation in the conduct of the proceedings.
Complaint was also made that despite the certificates given by the bank officer of indebtedness in the bank's evidence-in-chief, the bank account statements showed a nil balance. As I have said, I do not think it required much intelligence to work out from the accompanying documents exactly how the claim was formulated but in any event, the 14 October affidavit now explains the bank's version as to why a nil balance appears.
While the failure of the bank to provide the particulars of the amount claimed promptly when first requested to do so, and then when it served its evidence, is regrettable, there is nothing to support the view that these proceedings were commenced and conducted vexatiously or as an abuse of process. Nor do I think there is anything to support the view that the statement of claim has a tendency to cause prejudice in the relevant sense, save for the defect that I have already identified but which was not the subject of complaint by the second defendant.
As to particulars, the second defendant now, if belatedly, has the requisite particulars of the allegations against it. It is not entitled, at least at this stage of the proceedings, to a complete account of how the securities were realised and their proceeds applied, although, as I have said, when the time comes for disclosure, it may well be entitled to more than has so far been provided.
The Court orders that;
1. The Statement of Claim be struck out with leave to replead within 7 days.
2. The notice of motion be otherwise dismissed.
On the question of costs, although I have, as indicated, struck out the statement of claim with leave to replead, that is a matter which was not raised in the written submissions and did not significantly contribute to the argument or the costs incurred. I do regard the plaintiff as having some responsibility for the motion, in particular, through what approaches unnecessary recalcitrance in the provision of particulars when they ought to have been provided. On the other hand, the allegations raised by the second defendant were, in my view, baseless.
My mind has wavered as to whether there should be no costs of the motion, or whether the second defendant should pay the plaintiff's costs of the motion. I am clearly of the view that the second defendant is not entitled to costs. On balance, I think there should be some recognition of the recalcitrance to which I have referred. The Court further orders that:
1. There be no order as to the costs of the motion to the intent that each party bear its own costs.
The Court further directs that:
1. The plaintiff file and served its amended statement of claim by 24 October 2014.
2. The defendant file and serve its defence to the amended statement of claim by 7 November 2014.
3. The second defendant to serve its affidavit evidence in respect of the claim and cross-claim by 21 November 2014.
4. The proceedings be adjourned to 28 November 2014 at 9.30 before me for directions.
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Decision last updated: 27 February 2015