Commonwealth Bank of Australia v Ekes

The Motions 1In these proceedings the Plaintiff sues the Defendants under two guarantees given on 9 September 2010 for an amount in excess of $28 million. The present judgment concerns three motions: first, a Notice of Motion filed 24 October 2012 by the First Defendant to file a cross-claim out of time; secondly, a Notice of Motion filed 9 April 2013 by the Plaintiff to dismiss, alternatively, strike out the First Defendant's Further Amended Defence; thirdly, a Notice of Motion by the Plaintiff filed 11 April 2013 seeking orders under s 68 Civil Procedure Act 2005 requiring the First Defendant to attend for examination and to produce certain documents. 2The hearing of the First Defendant's Notice of Motion has taken place over an extended period including a number of hearing days. This was largely, but not solely, because objection was taken by the Plaintiff to the form of pleading in the cross-claim. That has resulted in amended forms of the proposed Cross-Claim being put forward on a number of separate occasions. 3The objections to leave being granted to the First Defendant to file the Cross-Claim were only partly based on pleading issues. Certain substantive matters were put forward to suggest that leave should be refused. 4It also became apparent during the argument dealing with the substantive matters that those matters were relevant not only to the proposed Cross-Claim but also to the Further Amended Defence and to a proposed Second Further Amended Defence resulting in the filing by the Plaintiff of its first motion on 9 April 2013. That in turn led to the First Defendant seeking and obtaining leave to file on 13 May 2013 an Amended Notice of Motion asking leave to file the proposed Second Further Amended Defence. 5Associated with the argument concerning delay by the First Defendant in moving to file the proposed Cross-Claim was the alleged failure by the First Defendant to produce certain documents, the subject of two Notices to Produce. That resulted in the Plaintiff filing its second Motion of 11 April 2013. 6The objections taken on a substantive basis were the sorts of matters that might have been appropriate for dealing with as separate questions. However, the substantive matters were argued on a summary dismissal and summary judgment basis. The constraints referred to in General Steel Industries (Inc) v Commissioner for Railways (NSW) (1964) 112 CLR 125 govern the determination of the motions.

The proceedings 7The proceedings themselves have had an extended history up to the hearing of the present Notices of Motion. They commenced on 14 September 2010 by the filing of a Statement of Claim. The Plaintiff was Bank of Western Australia Limited. The Statement of Claim pleaded the following matters: (1)On or about 5 June 2007, Bankwest agreed to provide to 888 Projects (the Company) a commercial advance facility with a credit limit of $19,640,000, for the purpose of assisting with the acquisition and construction of apartments at the property known as 4-6 Walton Crescent, Abbotsford. (2)The Facility Agreement was varied by a loan variation agreement dated 13 November 2007 which increased the credit limit to $24,284,000. (3)The Facility Agreement was again varied by way of loan variation agreement dated 16 January 2009 which increased the credit limit to $24,900,000. (4)The relevant terms of the facility were these: (a)The loan must be repaid on the repayment date being 30 June 2009; (b)It would be a default if there was a failure to repay the loan on that date or to pay any other money under the facility; (c)There would be an event of default if an order for the winding up of 888 Projects was made; (5)The Company defaulted by failing to repay the loan by 30 June 2009; (6)The Company defaulted by virtue of an order being made for its winding up on 16 April 2010; (7)Each of the First and Second Defendants entered into a written guarantee and indemnity with Bankwest guaranteeing the payment of amounts due by the Company to a limit of $24,900,000 plus interest, fees, costs and other expenses. The guarantee by the First Defendant was given on 5 June 2007 and by the Second Defendant on 16 January 2009; (8)On 27 July 2010 demand was made on each of the Defendants under their guarantees claiming (then) the sum of $27,313,589.17; (9)As of 9 September 2010 the amount owing by each of the Defendants under their guarantees was $28,344,516.45. 8888 Projects was a company with two shareholders being the First Defendant and Christian Bechara (or Becerra) until 2007. They and the Second Defendant were or had been the directors. From August 2007, after Mr Bechara died, the First Defendant controlled the Company himself. 9At some date after the proceedings commenced the present Plaintiff (the Commonwealth Bank of Australia) took over Bankwest. No distinction was made in pleadings between Bankwest and the CBA. 10On 16 July 2009 the Second Defendant entered into a Part X arrangement under the Bankruptcy Act 1966. Apart from swearing an affidavit in 2011 the Second defendant took no part in the proceedings. 11On 19 May 2011 the First Defendant filed a Defence which apart from admissions, non-admissions and denials raised only two defences of substance. The first was that it was said that the Plaintiff had extended the repayment date under the facility agreements to 31 March 2010. The second was that the Plaintiff had participated in the Part X arrangement made by the Second Defendant which apparently (it was not clear from the pleading) meant that the Plaintiff could not claim against the First Defendant. There was, in addition, a denial that money was due and payable to the Plaintiff "due to its deceptive and misleading conduct". No material facts were pleaded nor were any particulars provided concerning this allegation. 12On 17 June 2011 the matter came before the Registrar who granted leave to the First Defendant to file and serve an amended defence and any cross-claim on or before 24 June 2011. The orders were made by consent. No amended defence or cross-claim was filed. 13The matter came before the Registrar again on 1 July 2011. The Registrar extended the time for the First Defendant to file and serve an amended defence and cross-claim to 8 July 2011. He also directed that should the First Defendant not comply with that order then he was to apply to the Court for leave to amend the defence and file a cross-claim. These orders were said by the First Defendant's solicitor to be by consent. 14On 8 July 2011 an Amended Defence was filed but no cross-claim was filed. The Amended Defence pleaded in some detail matters concerned with the allegation that the Plaintiff agreed to extend the repayment date. By reason of that it was alleged that the Plaintiff elected not to treat the loan as repayable at the earlier time, that the Plaintiff was estopped from asserting it was repayable at the earlier time, that it breached s 52 Trade Practices Act 1974 (Cth) by reasons of what it represented and engaged in unconscionable conduct contrary to the ASIC Act 2001 (Cth) by reasons of its actions. 15On 12 August 2011 the Plaintiff filed a Notice of Motion to strike out the Amended Defence. After negotiations and correspondence orders were made by consent on 5 December 2011 that the Amended Defence be struck out, that any proposed further amended defence and any cross-claim be provided to the Plaintiff by 13 December 2011 and that the Plaintiff notify the First Defendant by 20 December 2011 whether it consented to the filing of the proposed pleadings. 16On 23 December 2011 the Defendant served its proposed Further Amended Defence. There was then correspondence regarding particulars of that proposed defence, and directions were made by the Registrar by consent on 7 February 2012 to that end. Included in those directions was a direction that the First Defendant was to provide the Plaintiff with his draft proposed cross-claim by 15 February 2012. No such draft cross-claim was provided. 17On 22 February 2012 the Registrar made orders by consent including an order that the First Defendant was to provide the Plaintiff with his draft proposed cross-claim by no later than 5pm on 29 February 2012. 18On 12 March 2012 the First Defendant filed his Further Amended Defence. This Defence in substance pleaded the following: (1) On or about 2 April 2009 the Plaintiff and the Company agreed to vary the facility further by extending the repayment date "to at least 31 (sic) November 2009" and by permitting the Company to make further drawings under the facility to meet expenses of the project the subject of the facility; (2) Pursuant to that agreement on or about 9 July 2009 the Plaintiff permitted a further draw down of $427,152 under the facility; (3) On or about 10 August 2009 the Plaintiff and the Company agreed to vary the facility further by extending the repayment date to 31 March 2010 and permitting the Company to make further drawings under the facility for the purpose of meeting expenses of the project subject of the facility; (4) Pursuant to that further variation on or about 12 August 2009 the Plaintiff permitted a further draw down of $453,549 under the facility for the purpose of meeting expenses of the project the subject of the facility; (5) Similarly, pursuant to the further variation of the facility on 10 August 2009 the Plaintiff permitted the following further draw downs: (a) 24 August 2009: $259,841 (b) 10 September 2009: $426,343 (c) 12 October 2009: $800,000 (d) 9 November 2009: $770,000 (6) On 30 July 2009, 18 September 2009, 23 October 2009 and 17 November 2009 the Company paid $60,000 interest to the Plaintiff. (7) On about 11 February 2010 the Plaintiff wrongfully purported to appoint receivers and managers to the Company with the result that the Company could not complete the project and pay its creditors. That led to the winding up of the Company on 16 April 2010. (8) In the circumstances the Plaintiff waived any alleged default or elected to affirm the facility so as to preclude reliance on any alleged default after 30 June 2009. (9) As a result of these matters the First Defendant had no liability under the guarantee. 19The nub of the defence is to be found in paragraph 40 in answer to the allegation that the amount due from the company is owed by the First Defendant: In further answer to paragraph 18 of the claim, the first defendant says: (a) the first defendant has no liability under the first guarantee as alleged in circumstances where: i. there has been no default by 888 Projects as alleged upon which the plaintiff is entitled to rely upon; and ii there are no amounts owing by 888 Projects as alleged under the Facility; and (b) the plaintiff has suffered no loss because of 888 Projects' alleged insolvency and any loss suffered by the plaintiff is loss that arises as the result of its own conduct in breach of the Facility. 20It is to be noted that paragraph 2(b) of this Further Amended Defence said that the First Defendant: repeats and relies on the matters raised by him in this Defence and in the cross-claim filed by the First Defendant as cross-claimant in these proceedings. (emphasis added) Further, paragraph 44 said this: In further and alternate (sic) answer to the whole of the claim, the First Defendant repeats and relies on the matters raised in the cross-claim filed by the First Defendant as cross-claimant in these proceedings. (emphasis added) 21No cross-claim was ever filed and it is only by the present Motion that the First Defendant sought leave to file a cross-claim. 22Thereafter, there were disputes concerning discovery which culminated in consent orders being made by Schmidt J as Duty Judge on 28 June 2012. 23On 30 July 2012 the matter came before the Registrar who made orders by consent. The first of those orders was that the First Defendant was to provide his draft proposed cross-claim to the Plaintiff by no later than 4pm on 3 August 2012. Orders were then made for mediation including staying the orders for discovery until the mediation was completed. The orders further provided that where the matter was not resolved at mediation the Plaintiff was to indicate whether or not it consented to the filing of the draft cross-claim by 5 October 2012. If the Plaintiff did not consent the First Defendant was to file and serve a Motion in relation to the proposed cross-claim by 12 October 2012. 24It was not until 13 September 2012 that the First Defendant provided its draft cross-claim to the Plaintiff. On 5 October 2012 the Plaintiff's solicitors wrote objecting to the form of the proposed cross-claim. No Motion was filed by the First Defendant for leave to file the cross-claim. 25The matter came before the Registrar on 16 October 2012. The Registrar ordered that the Defendant was to file and serve a Notice of Motion and affidavit material in support seeking leave to file any cross-claim and in relation to alleged insufficiency of discovery by 24 October 2012. 26On 24 October 2012 the First Defendant filed two Motions. One sought orders that there be judgment for the First Defendant, alternatively that the proceedings against the First Defendant be dismissed, struck out or stayed by reason of the failure by the Plaintiff to comply with orders made by the Court on 28 June. Those orders dealt with discovery. 27The other Motion sought leave for the First Defendant to file a cross-claim within 28 days after compliance by the Plaintiff with the orders made on 28 June 2012. No affidavit was filed in support of the Motion for leave to file a cross-claim. Nor was any draft cross-claim provided to the Plaintiff or to the Court.

The hearing of the Motions 28The Motions came before me on 31 October 2012. I made an order that the orders made by Schmidt J be complied with by 14 November 2012. I also ordered that any affidavit and draft cross-claim in support of the Motion for leave to file a cross-claim be served by 28 November 2012. The Motions were fixed for hearing before me on 5 December 2012. 29When the Motions came before me on 5 December 2012 the parties agreed that only the Motion for leave to file a cross-claim should be dealt with. They were prepared to continue to endeavour to resolve the discovery dispute which had led to the Motion by the First Defendant for judgment in his favour. 30No affidavit or draft cross-claim was served by the First Defendant by 28 November as I had ordered. That was not done until 5pm on 4 December 2012, the day before the hearing of the Motion. 31The proposed Cross-Claim sought relief under the Contracts Review Act in respect of the Guarantee as well as the Loan Facility Agreement and each of the two variations relied upon by the Plaintiff. It sought declarations and damages by reason of alleged misleading or deceptive conduct and unconscionable conduct contrary to the provisions of the ASIC Act 2001 (Cth) and the Competition and Consumer Act 2010 (Cth). 32The proposed Cross-Claim set out the pleading of the matters in the Further Amended Defence which appear at [18] above as to matters in sub-paragraphs (1), (2), (3) & (4). It then pleaded the further drawdowns referred to in subparagraph (5)(a) & (b). Somewhat inconsistently it pleaded a further drawdown of $770,000 on 12 October 2009 and asserted that on 9 November 2009 the Plaintiff paid $770,000 to SMS Constructions on the instructions of the Company. It is not clear if that was the same $770,000 referred to as the drawdown on 12 October 2009 or an additional one. Also, the proposed Cross-Claim made no mention of a drawdown of $800,000 on 12 October 2009 or any other date. For present purposes, these inconsistencies do not matter. 33The proposed Cross-Claim asserted that in reliance on the representations concerning the extended repayment date the First Defendant made various payments "on his own behalf and for the benefit of" the Company including interest payments due by the Company to the Plaintiff. 34The proposed Cross-Claim then pleaded that the appointment of the receivers was wrongful by reason of the Plaintiff's extension of the repayment date and the other representations the Plaintiff had made. The representations were said to be misleading and deceptive, and the First Defendant pleaded that he had suffered loss and damage in reliance on those representations. 35The proposed Cross-Claim also asserted that in appointing the Receivers in the manner set out the Plaintiff engaged in unconscionable conduct in contravention of the ASIC Act and the CC Act. As a result the First Defendant pleaded that he suffered loss and damage. The particulars of loss and damage in respect of both claims in paragraph 72 of the proposed Cross-Claim are as follows: (a) any liability (which is denied) to the Bank under the guarantee the subject of these proceedings; (b) loss of $832,600 (being the total of payouts referred to at paragraphs 28, 30-31, 36, 39-45, 47-49 and 51)[those payments referred to in paragraph [33] above]; and (c) consequential liability pursuant to the Murray Mortgage: $2,700,000. 36The Murray Mortgage was a liability incurred by the First Defendant when he bought out Mr Bechara's interest in the Company in August 2007. He alleges that he did this because the Plaintiff said it would not continue to fund the development unless he did so. Since this occurred almost 2 years before the Plaintiff's representations complained of it is not easy to see how it is a loss arising from those representations. 37The main evidence in support of the First Defendant's defence to the Plaintiff's claim and his proposed Cross-Claim is contained in an affidavit of the Second Defendant Hector Ekes sworn 21 December 2011 and an affidavit of the First Defendant sworn the same date. 38The affidavit in support of the Motion to file the Cross-Claim was an affidavit from the First Defendant's solicitor. This affidavit was entirely unsatisfactory for a number of reasons. First, it wrongly asserted that the Defence filed on 19 May 2011 articulated many of the claims now included in the proposed Cross-Claim. As I have noted in para [10] above that Defence only raised two defences of substance. The relevant one for the purposes of the proposed Cross-Claim was the defence that asserted that the Plaintiff had extended the repayment date under the facility agreements to 31 March 2010. 39Nothing was said in that Defence about the Contracts Review Act nor unconscionable conduct which appear in the proposed Cross-Claim. As I noted earlier although misleading and deceptive conduct was pleaded in the first Defence no facts or particulars were included. There was simply a bare assertion, unconnected to the reference to misleading and deceptive conduct, of an agreement to extend the repayment date. The first defence which included matters relevant to the proposed Cross-Claim was the Further Amended Defence filed in March 2012. 40Secondly, one general theme running through the affidavit was that the Cross-Claim had not been filed because the First Defendant and his solicitor were investigating what was referred to as the HBOS claim. That claim was not explained in the affidavit. Rather, the First Defendant's Senior Counsel explained it to me during the first day of hearing of the Motion on 5 December. In short, the claim was that the CBA purchased Bankwest from the Halifax Bank of Scotland (HBOS) which owned Bankwest. Part of the arrangement was that the greater the value of Bankwest's bad debts the lower the purchase price was that the Plaintiff had to pay. The assertion was that receivers and managers were appointed in a way that would bring about default by the Company and the ultimate benefit to the CBA would be a reduced purchase price for the shares in Bankwest from HBOS. 41The HBOS claim, although apparently included in the draft cross-claim provided to the Plaintiff on 14 September 2012, was abandoned by the time a further form of the proposed Cross-Claim was served on the Plaintiff annexed to the solicitor's affidavit on 4 December 2012. 42Thirdly, and associated with the second matter, was the worst aspect of the solicitor's affidavit. The affidavit recited various dates when orders were made, largely by consent, for the filing and serving of a cross-claim. After each such occasion was mentioned the affidavit then referred either to the First Defendant's financial embarrassment or to his limited financial resources that did not enable him to comply with the orders agreed to by him and made by the Court. No details were given of the limited financial resources or the financial embarrassment. 43That evidence suffered from two vices. The first was it was hearsay. The second was it was entirely conclusionary without any facts being provided. Although on an interlocutory application hearsay evidence can be received, where the evidence was crucial evidence that went to an explanation for repeated failures to comply with Court orders it was entirely unsatisfactory that hearsay evidence should be given. Further, nothing explained or justified the form of the conclusionary evidence. 44I raised the unsatisfactory state of this evidence with Mr Pritchard SC who appeared for the First Defendant. Mr Pritchard offered to let the First Defendant go into the witness box to say why he did not have the funds on the days concerned. It was apparent, however, that proper evidence would not be able to be given - merely general recollections that the First Defendant would have about his financial position. It was clear that the First Defendant's evidence in that regard would have to be postponed. 45Mr Pritchard SC then sought to read two affidavits, one from each of the Defendants, that had been sworn 12 months earlier for a different purpose. These were substantial affidavits. No notice had been given to the Plaintiff of an intention to rely on those affidavits for the purposes of the Motion. 46To avoid losing the day, Mr McInerney SC for the Plaintiff said that he was in a position to address arguments to the form of the pleading of the Cross-Claim. Senior Counsel for both parties then addressed me on those matters. At the conclusion of the day Mr Pritchard accepted that further amendments needed to be made to the proposed Cross-Claim. Accordingly, I adjourned the hearing of the Motion to 6 February 2013 and asked Mr Pritchard to provide a further draft to the Plaintiff by an early date in January to enable the Plaintiff to give appropriate instructions about it. 47A further form of the cross-claim was forwarded in due time for consideration by the Plaintiff. However, the First Defendant finally swore an affidavit only on 5 February 2013 concerning his financial position throughout the period he had failed to file a cross-claim. 48The late service of this affidavit created further problems. There was a limited number of contemporaneous financial documents annexed to the affidavit to support what was said by the First Defendant in the body of the affidavit. Mr McInerney said that if the affidavit had been served in due time he would have required a number of primary documents to be produced so that the matter could be properly examined and, if necessary, the First Defendant cross-examined on his affidavit. That meant, once again, that the matter could not be concluded on 6 February 2013. To avoid losing that day argument was addressed to a number of issues concerning the pleading. Both sides also addressed the substantive issue of whether all appropriate parties had been joined to the proceedings. 49Mr McInerney indicated that he wished to argue the substantive matter concerning issue estoppel, Anshun estoppel and abuse of process arising out of Federal Court proceedings involving the Company that had been dismissed. That issue had not been notified to the First Defendant and his lawyers had not had an opportunity to consider the Federal Court documents that formed the basis of the argument. 50Mr Pritchard agreed, after further argument on the form of the pleading, to have a further form of the cross-claim served dealing with the matters that had been raised in argument. 51When the matter came back before me for Directions on 27 February 2013 Mr McInerney said he wished to file a Notice of Motion to strike out the Further Amended Defence on the same basis as he was resisting the filing of the Cross-Claim, that is, as a result of the Federal Court proceedings and their conclusion. At the same time Mr Pritchard said that he wished to file a second Further Amended Defence. It was accepted that any argument directed to striking out the Further Amended Defence would also apply to the as yet unfiled second Further Amended Defence. 52In those circumstances the further hearing of the First Defendant's Motion to file a cross-claim was stood over to 9 May 2013 and leave was given to both parties to file further Notices of Motion dealing with the relief that they indicated they wished to seek. The Plaintiff filed a Notice of Motion on 9 April 2013 seeking orders that the Further Amended Defence including the proposed second Further Amended Defence be dismissed and that the Cross-Claim (which had not yet been filed) should also be dismissed. 53The Plaintiff also served two Notices to Produce dated 13 February 2013 and 4 March 2013 which sought various documents including those evidencing payments pleaded in the proposed Cross-Claim as well as documents relevant to the First Defendant's financial position during 2011 and 2012 relevant to his failure to file the Cross-Claim. 54At the commencement of the resumed hearing on 9 May 2013 counsel for the First Defendant provided a form of amended Notice of Motion which it sought leave to file. The Amended Notice of Motion was filed 13 May 2013 but was considered during the course of argument on 9 and 10 May 2013. The Amended Notice of Motion sought leave for the First Defendant to file a second Further Amended Defence in the form contained behind Tab 3 of the court book and a first Cross-Claim in the form contained behind Tab 4 of the court book. 55The proposed Second Further Amended Defence simply added claims based on what were said to be estoppels in relation to April 2009, June 2009 and August 2009 (the dates when the extended repayment dates were allegedly represented). As with the Further Amended Defence the whole defence to the claim was said to arise from the actions and representations of the Plaintiff concerning when the repayment date was. 56The parties also made clear at the outset of the resumed hearing that matters involving the form of the pleadings had been resolved and that what was left for argument were only the matters of substance being (1) the matters of issue estoppel, Anshun estoppel and abuse of process, (2) the appropriate parties to the proceedings, and (3) the lateness of the application to file the Cross-Claim. 57The First Defendant (once again on the evening before the hearing was due to resume on 9 May 2013) served fresh material. On this occasion it consisted of two affidavits of the First Defendant's solicitor Osman Khanji sworn 8 May 2013 and two affidavits of the First Defendant sworn 8 May 2013. In addition, on the morning of the resumed hearing a third affidavit of Mr Khanji was sworn and served. 58The three matters of substance to be determined were these: (1) The effect of the dismissal of the Federal court proceedings; (2) The proper parties to the proceedings; (3) Discretionary considerations concerning the lateness of the application for leave to file a cross-claim. 59On the afternoon of 9 May Mr Pritchard agreed that he would seek to join to the proceedings the Company and the representative of Mr Bechara's estate arising from the First Defendant's reliance on the Contracts Review Act. He appeared to accept, in doing so, that if the contractual arrangements between the Company and the Plaintiff were sought to be varied on the one hand, and if the First Defendant's liability under the guarantee was sought to be reduced or eliminated on the other hand, then both the Company and Mr Bechara's estate were necessary parties. 60I raised at the outset on 5 December 2012 the issue whether the Company needed to be joined to the proceedings. Submissions were made by both parties with Senior Counsel for the First Defendant saying that he would give the matter further consideration before the matter resumed in February. When the matter resumed in February there was extensive argument about the proper parties to the litigation with the First Defendant strongly resisting the notion that any other party needed to be joined. It is, therefore, unfortunate that the concession made on 9 May was not made much earlier. I consider, however, that the concession was properly made: John Alexander's Clubs Pty Ltd v White City Tennis Club Limited [2010] HCA 19; (2010) 241 CLR 1 at [130] - [132]. 61That was not the only aspect to (2) above. The other aspect concerned who the appropriate party was to be making the claims in the proposed Cross-Claim. That, in turn, related to the Federal Court proceedings. I shall ,therefore, deal with (1) and (2) together.

(1) & (2) Federal Court proceedings and parties 62So that the arguments in relation to these proceedings can be fully understood it will be necessary to set out in some detail documents filed in the Federal Court. 63The originating process was filed on 25 February 2010. The Company was the plaintiff. The present Plaintiff was the first defendant. The two receivers were the second and third defendants. 64In the section of the originating process headed "A. Details of Application" it was said that the application was made under s 410A Corporations Act 2001 (Cth), s 52 Trade Practices Act 1974 (Cth), s12DA ASIC Act and under the general law. It further said: This is a complaint about the appointment of the receivers. 65The originating process then sought this relief: 1. A declaration pursuant to s.418A(2)(a) of the Corporations Act that the purported appointment of the second and third defendants as receivers of the plaintiff by deed dated 11 February 2010 was invalid. 2. Alternatively, a declaration pursuant to s.418A(2)(b) of the Corporations Act that the second and third defendants invalidly entered into possession or assumed control of the plaintiffs property pursuant to a mortgage registered number AD185608 dated 5 June 2007 and a charge registered No. 1463139 dated 5 June 2007. 3. A declaration that, the first defendant is not entitled to rely on a purported notice of default to the plaintiff dated 27 October 2009. 4. A declaration that in or about June 2009, the first defendant agreed in writing to vary the loan facility agreement between the plaintiff and the first defendant dated 5 June 2007 by extending the term thereof to 31 March 2010 or until completion of the Building Works as defined therein in consideration of the plaintiff making additional monthly interest payments from 1 July 2009. 5. Alternatively, a declaration that the first defendant is estopped from denying that the loan facility agreement between the plaintiff and the first defendant dated 5 June 2007 expires on 31 March 2010 or upon completion of the Building Works as defined therein. 6. A declaration that the plaintiff has breached the loan facility agreement between the plaintiff and the first defendant dated 5 June 2007 as varied, the mortgage registered number AD185608 dated 5 June 2007 and the charge registered No. 1463139 dated 5 June 2007. 7. A declaration that the first defendant in trade or commerce has engaged in conduct that is misleading and deceptive or likely to mislead or deceive in contravention of s.52 of the Trade Practices Act, 1974 (Cth). 8. Alternatively, a declaration that the first defendant in trade or commerce has engaged in conduct in relation to financial services that is misleading and deceptive or likely to mislead or deceive in contravention of s. 12DA of the ASIC Act, 2001 (Cth). 9. A declaration that the second and third defendants are jointly and severally liable as trespassers to pay to the plaintiff the value of the property of the plaintiff in their possession. 10. An order that the requirements of s.429 of the Corporations Act be dispensed with.

Against the First Defendant: 11. Damages for breach of contract and/or pursuant to s.82 of the Trade Practices Act, and/or S.12GF of the ASIC Act. 12. Alternatively, compensation or other orders pursuant to s.87 of the Trade Practices Act and/or S.12GM of the ASIC Act. 13. Equitable compensation. 14. An order that the first defendant indemnify the plaintiff for: (a) any liability it may have to the second and third defendants resulting from their appointment by the first defendant as receivers of the plaintiffs property; and (b) the second and third defendants' costs of these proceedings. 15. Costs. 16. Further or other orders.

Against the second and third defendants: 17. An order that the second and third defendants forthwith deliver up to the plaintiff: (a) the plaintiffs property known as and situated at 4-6 Walton Crescent, Abbotsford, New South Wales, contained in folio identifiers 1/499738 and 1/179874; and (b) all of the plaintiffs rights property and undertaking of whatever kind and wherever situated and whether past present or future. 18. An order that an inquiry be held into the manner in which the second and third defendants have dealt with the property of the plaintiff referred to in paragraph 17 above. 19. An order that the second and third defendants account to the plaintiff for the property of the plaintiff referred to in paragraph 17 above.

Interlocutory relief 20. Until the final hearing of these proceedings, an order that the second and third defendants be restrained from taking any further steps as receivers of the plaintiffs assets and undertaking pursuant to the deed of appointment dated 11 February 2010.

Grounds of the Application pursuant to S.418A of the Corporations Act, 2001 (Cth) A. The plaintiff was not and is not in default of the mortgage and the charge. B. The first defendant is not entitled to rely upon a purported notice of default dated 27 October 2009. C. The first defendant is in breach the loan agreement, the charge and the mortgage. D. Alternatively, the first defendant is estopped from denying that the plaintiff was not on 11 February 2010 and is not in default of the mortgage and the charge. E. The first defendant has failed to demand repayment of the sum secured by the mortgage and the charge and/or has failed to allow the plaintiff a reasonable time to remedy the alleged default. F. The first defendant has contravened s.52 of the Trade Practices Act. G. Alternatively, the first defendant has contravened s. 12DA of the ASIC Act. H. Other grounds. 66The Statement of Claim filed 2 March 2010 pleaded the loan facility agreement dated 5 June 2007 as well as the two Deeds of Variation dated 13 November 2007 and 16 January 2009. 67Paragraph 13 pleaded: 13. On 2 April 2009, in writing, the plaintiff and Bankwest further agreed to vary the Loan Agreement ('the Third Variation') by: (a) extending the repayment date to 10 April 2010 or alternatively to the date of completion of the Development, (b) requiring the plaintiff to make specified monthly interest payments to Bankwest from May to October 2009; and (c) obtaining variations of the dates by which plaintiffs contracts of sale to purchasers of units in the Development would become unconditional to 10 April 2010. Particulars (i) Email dated 2 April 2009 from Mario Caliete, Bankwest Business Director, Property Finance, NSW. (ii) Email dated 2 April 2009 from Hector Ekes on behalf of the plaintiff to Mario Caliete. 68The Company then pleaded that by letters of 4 August and 27 October 2009 the Bank asserted an event of default by reason of the failure by the Company to repay the loan in full on 30 June 2009 as well as two other events of default being an application to wind up the Company filed in this Court and the Part X arrangement entered into by Hector Ekes, the Second Defendant in these present proceedings. 69Under a heading in the Statement of Claim which said "BANKWEST IS NOT ENTITLED TO RELY ON THE ALLEGED DEFAULTS" the following was pleaded: Election 20. Further and in the alternative: (a) on 30 June 2009, Bankwest was entitled at its option pursuant to clause 10(l)(b) of the Loan Agreement to treat the Loan as immediately due and payable; (b) Bankwest did not exercise that option on 30 June 2009; (c) on and after 28 July 2009, Bankwest elected to exercise its option and decided not to treat the loan as immediately due and payable and instead affirmed the Loan Agreement by: (i) accepting an interest payment of $60,000 on 28 July 2009 from the plaintiff as required by Bankwest in the emails referred to in paragraph 13(c) above; and (ii) thereafter granting the plaintiff further accommodation under the Loan Agreement and permitting it to make further drawings of principal; and (iii) requiring and accepting regular interest payments from the plaintiff. (d) In the premises, Bankwest is estopped on and after 28 July 2009 from asserting that failure by the plaintiff to repay the Loan by 30 June 2009 constituted an event of default pursuant to the Loan Agreement, the Charge and the Mortgage. Promissory Estoppel 21. Further and in the alternative: (a) From about 2 April 2009, Bankwest represented to the plaintiff ('the Representations') that: (i) Bankwest would extend the term of the Loan Agreement to 10 April 2010 or until completion of the Development, whichever was the later date, and (ii) would permit the plaintiff to make further drawings of principal, on the condition that the plaintiff made specified interest payments to Bankwest. PARTICULARS (1) Email dated 2 April 2009 from Mario Caliete. (2) Conversation between Hector Ekes and Mario Caleite on 2 April 2009 (refer to paragraph 16 of the affidavit of Hector Ekes sworn on 25 February 2009.) (3) Email dated 1 June 2009 from Ingrid Lipovz. (4) Meeting in early June 2009 attended by Mario Caliete, Cran Mullin (Bankwest's State Manager, Property Finance), Ingrid Lipovz, David Muray (Plaintiffs project Manager) and Hector Ekes (refer to paragraph 47 of the affidavit of Hector Ekes sworn on 25 February 2009.) (5) Email dated 15 June 2009 from Mario Caliete. (6) Email dated 18 June 2009 from Mario Caliete. (7) Email dated 7 July 2009 from Ingrid Lipovz. (8) Conversation between Hector Ekes and Mario Caliete on 5 August 2009 (refer to paragraph 70 of the affidavit of Hector Ekes sworn on 25 February 2009). (9) Conversation between Hector Ekes and Ingrid Lipovz on about 5 August 2009 (refer to paragraph 70 of the affidavit of Hector Ekes sworn on 25 February 2009). (10) Email dated 10 August 2009 from Ingrid Lipovz. (11) Conversation between Hector Ekes and Mario Caliete on 5 August 2009 (refer to paragraph 72 of the affidavit of Hector Ekes sworn on 25 February 2009). (12) Email dated 19 August 2009 from Ingrid Lipovz. (13) Email dated 8 September 2009 from Ingrid Lipovz. (14) Email dated 8 October 2009 from Ingrid Lipovz. (15) Email dated 5 November 2009 from Ingrid Lipovz. (16) Email dated 9 November 2009 from Ingrid Lipovz. (17) Telephone conversation between Hector Ekes and Mario Caliete on 2 December 2009 (refer to paragraph 115 of the affidavit of Hector Ekes sworn on 25 February 2009). (18) Conversations between Elise Cockerell and Hector Ekes on 2 December 2009. (b) In reliance upon the Representations: (i) the plaintiff assumed that the Loan Agreement would be extended in accordance with the Representations; and (ii) acted to its detriment PARTICULARS OF RELIANCE The plaintiff: (1) made all interest payments required by Bankwest after 30 June 2009; (2) incurred liabilities to its building contractors working on the development (3) made further drawings of principal under the Loan Agreement; (4) used those drawings of principal to pay its building contractors; and (5) varied the dates by which plaintiff's contracts of sale to purchasers of units in the Development would become unconditional to 10 April 2010. (6) Further particulars will be supplied after discovery has taken place. (c) Bankwest intended the plaintiff to act in that manner. (d) The plaintiff will suffer severe detriment if its assumption that the repayment date of the Loan was not extended to 10 April 2009 or until completion of the Development, whichever is the later. PARTICULARS OF DETRIMENT (1) Lost profit from the development when completed. (2) Interest paid after May 2009. (3) Principal drawn down after 20 June 2009. (4) Further particulars will be supplied after discovery has taken place. (e) By appointing the Receivers, the plaintiff has failed to act to avoid that detriment. 22. In the premises, Bankwest is estopped from: (a) relying upon the Events of Default referred to in the Notices of Default; and (b) denying that the repayment date of the loan is 10 April 2010 or the date of Completion of the Development whichever is the later. Estoppel by Convention 23. Further and in the alternative, from 30 June 2009 the plaintiff and Bankwest agreed to conduct their business relationship upon the basis that: (a) the term of the Loan Agreement was extended to 10 April 2010 or until completion of the Development, whichever was the later date, (b) Bankwest would permit the plaintiff to make further drawings of principal to enable the Development to be completed, and (c) the plaintiff would make monthly interest payments to Bankwest, PARTICULARS Refer to paragraph 13 above. 24. Alternatively, the plaintiff and Bankwest assumed that their business relationship would be conducted upon that basis, and that assumption was adopted by both of them. PARTICULARS Refer to the particulars given in paragraph 21(a) above. 25. In the premises, Bankwest is estopped from: (a) relying upon the Events of Default referred to in the Notices of Default; and (b) denying that the repayment date of the loan is 10 April 2010 or the date of Completion of the Development whichever is the later. THE APPOINTMENT OF THE RECEIVERS IS NOT VALID 26. By reason of the matters alleged in paragraphs 18 - 25 above, the plaintiff is not in breach of the Loan Agreement, the Charge or the Mortgage, 27. Alternatively, by reason of the matters alleged in paragraphs 20 - 25 above Bankwest is estopped from denying that the plaintiff is not in breach of the Loan Agreement, the Charge or the Mortgage, 28. In the premises: (a) the Notices of Default are of no effect and Bankwest is not entitled to rely upon them; and (b) Bankwest was not entitled to enforce the Charge and the Mortgage 29. Further and in the alternative: (a) Clause 10(1) of the Loan Agreement prevails over the default provisions of the Charge and the Mortgage referred to in paragraphs 9 and 10 above; and (b) upon the true construction of clause 10(1), Bankwest must demand repayment of the loan before enforcing the Charge and the Mortgage if it elects not to treat the Loan as immediately due and payable. (c) By reason of the matters set out in paragraph 20 and by the Second Notice of Default, Bankwest has elected not to treat the Loan as immediately due and payable and has reserved to itself the right to make a future demand for payment 30. Further and in the alternative, by reason of the matters set out in paragraph 20 - 25 and by the Second Notice of Default, Bankwest has waived its right to enforce the Charge and Mortgage without demanding that the plaintiff repay the Loan and granting to the plaintiff a reasonable time to make repayment 31. The plaintiff seeks orders and declarations pursuant to S.418A of the Corporations Act. CONTRAVENTION OF S.52 OF THE TRADE PRACTICES ACT AND THE ASIC ACT 32. Bankwest is a corporation within the meaning of the Trade Practices Act, 1914 (Cth) and the ASIC Act, 2001 (Cth). 33. Bankwest made the Representations in trade or commerce and in relation to the provision of financial services. 34. The Representations are misleading or deceptive or likely to mislead or deceive because Bankwest asserts that the plaintiff is in default of the Loan Agreement as asserted in the Notices of Default. 35. Bankwest has thereby contravened s.52 of the Trade Practices Act, 1974 (Cth) and s.12DA of the ASIC Act, 2001 (Cth). 36. To the extent that the Representations were as to future matters, the plaintiff relies on s.51A of the Trade Practices Act and/or S.12BB of the ASIC Act. 37. The plaintiff relied upon the Representations and has suffered and will continue to suffer loss and damage. PARTICULARS (1) Loss of profits caused by the delay in completing the Development (2) Penalty interest paid but not payable under the Loan Agreement. (3) Penalty interest accrued but not paid. (4) Further particulars will be provided in due course. 38. The plaintiff is entitled to recover damages from Bankwest pursuant to s.82 of the Trade Practices Act and/or s. 12GF of the ASIC Act. BREACH OF CONTRACT 39. In breach of the Loan Agreement as varied, Bankwest has asserted that the Charge and the Mortgage are immediately enforceable the appointed the Receivers. 40. The plaintiff has thereby suffered damage, and seeks damages in contract. PARTICULARS Refer to paragraph 37 UNCONSCIENTIOUS CONDUCT 41. If Bankwest was legally entitled to enforce the Charge and the Mortgage, which the plaintiff denies, then the appointment of the receivers was an unconscientious use of that power in the light of the conduct of Bankwest set out in paragraphs ### (sic) above. PARTICULARS OF UNCONSCIENTIOUS CONDUCT (1) From May 2009, by the Representations and its conduct in accepting interest payments and permitting the plaintiff to make further drawings of principal, Bankwest induced the plaintiff to assume that if it paid interest as required from time to time, Bankwest would support the Development until completion, and thereby lulled the Plaintiff into a false sense of security. (2) On 4 August 2009, Ingrid Lipovz told the (sic) Hector Ekes that the plaintiff should disregard a notice of default. (3) On 8 February 2010, Elise Cockerell said Hector West (sic) that no receivers had been appointed to the plaintiff thereby inducing the plaintiff to assume that Bankwest had no intention of appointing receivers. 42. The plaintiff is entitled to equitable compensation. PARTICULARS Refer to paragraph 37 UNCONSCIONABLE CONDUCT 43. Further and in the alternative, Bankwest has in trade or commerce in connection with the supply of services and financial services has engaged in conduct that is, in all the circumstances, unconscionable. PARTICULARS Refer to paragraphs 20 and 21above 44. Bankwest has thereby contravened s.51A Trade Practices Act, 1974 (Cth) and S.12CB of the ASIC Act, 2001 (Cth). 45. The plaintiff is entitled to recover damages from Bankwest pursuant to s.82 of the Trade Practices Act and/or s 12GF of the ASIC Act. 70On 26 February 2010 the receivers gave undertakings to the Federal Court not to carry out any work on the property at 4-6 Walton Crescent, Abbotsford and not to sell the property on condition that security for costs in the sum of $20,000 was provided. 71On 8 March 2010 an application was made by the defendants in the Federal Court proceedings for the Company to provide further security for costs as well as security for the Plaintiff's undertaking as to damages which had been given for interlocutory relief that had been sought. 72An amended originating process and an Amended Statement of Claim were filed on 9 March 2010. The only significant alterations made to the Statement of Claim for present purposes were changes to paragraphs 18, 21(a)(i), 21(d), 22, 23(a) and 25(b) which substituted for the words "10 April 2010 or until completion of the Development, whichever is the later" the words "the date of completion of the Development or a date to be agreed by the parties". 73In a judgment of 16 March 2010 Jacobson J ordered security as set out in that judgment: 888 Projects Pty Ltd (Receivers and Managers Appointed) (ACN 121 369 793) v Bank of Western Australia Ltd (ACN 050 494 454) [2010] FCA 296. The security was to be provided within seven days. It was not so provided. 74On 13 April 2010 consent orders were made by Jacobson J as follows: 1. The proceedings be dismissed. 2. The plaintiff pay the first, second and third defendants' costs of the proceedings, as agreed or assessed. There was a subsidiary order for the payment out of $20,000 paid into Court by way of security for costs. 75Order 35 r 10A of the Federal Court Rules in force at the relevant time provided in sub-r (1) that a judge might make an order in accordance with the terms of a written consent of the parties to a proceeding and that the order must state that it is made by consent. Sub-rule (3) provided: The order is of the same force and validity as if it had been made after a hearing by the Judge. 76In that regard Order 35 r 6 was relevant because it provided: (1) Where the Court makes an order for the dismissal of proceedings or for the dismissal of proceedings so far as concerns any cause of action where the whole or any part of any claim for relief, the Court may order that such dismissal should be without prejudice to any right of the applicant or claimant to bring fresh proceedings or to claim the same relief in fresh proceedings. 77The present Plaintiff submitted that it was open to the parties in the proceedings before Jacobson J to include in the Consent Order a further order that the dismissal effected by the Consent Order was without prejudice to the right of the Company to bring fresh proceedings or to make a claim for the same relief in fresh proceedings. In the absence of having done so, the Plaintiff submitted, r 10A had effect with the result that there is a res judicata or an issue estoppel. 78The First Defendant submitted that no issue estoppel arises by reason of the dismissal of the Federal Court proceedings. This is because, it was submitted, the dismissal was only an interlocutory order as was held in Bank of Western Australia Ltd v Tannous (No. 4) [2013] NSWSC 182 at [44] and the cases discussed therein. The First Defendant pointed further to the fact that all that had occurred was that an order for security for costs had been made and the security was not provided leading to a consent dismissal. 79That submission of the First Defendant does not appear to me to take account of the terms of the Federal Court Rules coupled with the fact that an order was not made at the time which would have permitted the Company to make the same claim in subsequent proceedings. 80In Bailey v Marinoff; (1971) 125 CLR 529 the Court of Appeal had made this order on 10 February 1970: It is ordered that the Appellant file and serve the appeal books herein on or before the 31st day of March 1970 and it is further ordered that if the Appellant does not file and serve the appeal books herein on or before the 31st day of March 1970 the appeal is to stand dismissed for want of prosecution and it is further ordered that the costs of this motion be costs in the appeal of the Respondent. 81Although the appeal books were filed on 31 March they were not served until 6 April. The result was that the appeal stood dismissed. 82Notwithstanding the dismissal the Court of Appeal on 28 September 1970 on the application of the Respondent ordered that the filing and service of the appeal books that had been effected should be deemed to be a sufficient compliance with the order of 10 February 1970. The Respondent in the Court of Appeal appealed to the High Court on the basis that the Court of Appeal had no power to make that order because the appeal had been earlier concluded. 83Menzies J said (at 531): However wide the inherent jurisdiction of a court may be to vary orders which have been made, it cannot, in my opinion, extend the making of orders in litigation that has been brought regularly to an end. 84Barwick CJ said (at 538): Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance, in my opinion, beyond recall by that court. It would, in my opinion, not promote the due administration of the law or the promotion of justice for a court to have a power to reinstate a proceeding of which it has finally disposed. 85It is significant that the order which resulted in the dismissal of the proceedings in Bailey was not an order made as a result of the hearing of the appeal but from a procedural order. The same position obtains in the present case. It cannot be said, therefore, that the principle derived from Bailey is one dependent upon there having been a final hearing on the merits. That position is, in any event, reinforced by what appears in O 35 r 10A FCR. 86In SCF Finance Co Ltd v Masri (No 3) [1987] 1 QB 1028 it was held that an order of the Court dismissing proceedings gave rise to an issue estoppel even though the Court had not heard argument or evidence on the merits. The judgment of the Court was given by Ralph Gibson LJ who said (at 1047 - 1049): The decision in Khan v Golechhi International Limited [1980] 1 WLR 1482 makes it clear that an order dismissing proceedings is capable of giving rise to issue estoppel even though the court making such order has not heard argument or evidence directed to the merits. ... If a party puts forward a positive case, as the basis of asking the court to make the order which that party seeks, and then at trial declines to proceed it accepts that the claim must be dismissed, then that party must, in our view, save in exceptional circumstances, lose the right to raise again that case against the other party to those proceedings.... The principle of the decision of this court in Khan ... is, in our judgment, applicable to this case: a litigant who has had an opportunity of proving the fact in support of his claim or defence and has chosen not to rely on it is not permitted afterwards to put it before another tribunal. In this case the second defendant had her opportunity to establish the case upon which her application was based; and she chose not to establish her alleged ownership of the dollar account. Her counsel on her instructions acknowledged that her application must be dismissed. (emphasis added) 87The highlighted words in the passage above must be doubted as representing the law in Australia: Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 (per Brennan J at 504-5 and Dawson J at 512) and Brennan J in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 at 614 with the result that there is no exception to the rule based on the existence of exceptional circumstances. 88In Chamberlain the Deputy Commissioner commenced proceedings against a taxpayer and claimed $25,557.92 "being a debt due to the Crown from the Defendant" although the amounts particularised totalled $255,579.20. The defendant entered an appearance. Thereafter Terms of Settlement were agreed as follows: By Consent and without admission of liability:- 1. Judgment for the Plaintiff in the sum of $25,557.92 together with costs to be assessed and agreed at $115.00.... Judgment was entered in these terms: Terms of Settlement having been filed herein IT IS THIS DAY ADJUDGED that the Plaintiff recover against the Defendants the sum of $25,557.92 for debt and $115.00 for costs. 89Four days later (presumably when the error was realised) the Deputy Commissioner commenced proceedings to recover the balance as "being a debt due to the Crown from the Defendant. The High Court held that the principle of res judicata operated with the result that the second claim must be dismissed. Significantly, for the present case, Deane, Toohey & Gaudron JJ said (at 508); The fact that a judgment is entered by consent may on occasion make it hard to say what was necessarily decided by the judgment.... But the principle of res judicata holds good in such a case. 90The First Defendant cannot gain any comfort from the decision in Tannous (No. 4). That case involved the striking out of a cross-claim because it disclosed no cause of action. The principle from Re Luck [2003] HCA 70; (2003) 203 ALR 1 was relevant as demonstrating that the order was interlocutory. In any event s 91 Civil Procedure Act was relevant as identifying the effect of what was done. In addition there was no equivalent to O 35 rules 6 and 10A in the Civil Procedure Act or the Uniform Civil Procedure Rules. 91The order made by Jacobsen J was not interlocutory. Notwithstanding that it was made by consent it was a final judgment disposing of the whole proceedings. Even without O 35 R 10A there would be an issue estoppel with respect to the causes of action pleaded in those proceedings: Bailey; Chamberlain; SCF Finance. 92Mr McInerney read an affidavit of his instructing solicitor, Jennifer Alfred, who made a comparison and analysis of material contained in the affidavit of Hector Ekes sworn 25 February 2010 and filed in the Federal Court proceedings and the affidavit of Hector Ekes sworn 21 December 2011 and filed in the current Supreme Court proceedings. The purpose of this comparison was to show the similarity between the facts and evidence relied upon by 888 Projects in the Federal Court on the one hand and the facts and evidence relied upon in support of the Defence and proposed Cross-Claim in the present proceedings. The comparison shows that a large number of the paragraphs in the Federal Court affidavit were identical with those in the affidavit filed in the present proceedings. In a large number of other cases paragraphs were very similar as between the two affidavits. This identity and similarity accounted for the vast majority of the material in the affidavits. 93The defence sought to be raised by both the Further Amended Defence, the proposed Second Further Amended Defence and the proposed Cross-Claim is dependent upon a finding that the Facility Agreement was varied again in April 2009 and in the months following to postpone the repayment date. In that way, the appointment of the receivers was said to be wrongful. Two significant emails of 2 April 2009 and 10 August 2009 are relied upon these pleadings as they were in the Federal Court proceedings. Similar estoppels and statutory breaches are alleged in these pleadings to those alleged in the Federal Court proceedings. 94By reason of the judgment in the Federal Court dismissing the Company's proceedings that defence and claim is no longer available to the Company. The issue is, therefore, whether the First Defendant can raise this issue both to defend the claim brought and to bring any cross-claim against the Plaintiff. 95The Plaintiff submitted that the First Defendant could have made the present claim in the Federal Court proceedings. 96The First Defendant submitted that it was not unreasonable for him not to have joined in the Federal Court proceedings principally because of the urgency with which those proceedings were commenced. The receivers were appointed on 11 February 2010 and the Federal Court proceedings were commenced on 25 February 2010. On 3 March 2010 the defendants in those proceedings gave undertakings in lieu of an interlocutory injunction in relation to the property and works at 4-6 Walton Crescent, Abbotsford. Thereafter application was made by them for security for costs culminating in the judgment and orders of Jacobson J on 16 March 2010. 97Whilst it may be accepted that there was some urgency to commence the proceedings because of the appointment of the receivers the Statement of Claim, nevertheless, pleaded the full panoply of complaints and claims against the Bank including estoppel and contraventions of the Trade Practices Act and the ASIC Act. Further, the affidavit of Hector Ekes in those Federal Court proceedings was sworn as early as 25 February 2010 and ran to 207 paragraphs. 98In all those circumstances the notion of any urgency which did not enable the First Defendant to be a party to those proceedings is rejected. In any event, even if no Anshun estoppel arises against the First Defendant by reason of his failure to join in the Federal Court proceedings the further point is that the company brought the Federal Court proceedings claiming the same relief arising out of the same issues and facts as are raised in the present proceedings and that those Federal Court proceedings were dismissed. Had the First Defendant been a party to those proceedings his position here would have been largely unarguable. There would be a clear res judicata or issue estoppel. The Plaintiff's point is, however, that because the Company took the proceedings, it being the appropriate party to do so, the First Defendant is disentitled from doing so here. 99It is necessary, therefore, to examine the issues of parties given that the First Defendant and proposed cross-claimant is not the Company but the First Defendant. 100In the first place it may be accepted that the doctrine of privity of contract means that a stranger cannot sue on the contract. Notwithstanding the particular result in Trident General Insurance Co. Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 the doctrine of privity of contract was reaffirmed by all of the judges (Mason CJ and Wilson J at 115, Brennan J at 127, Deane J at 141, Dawson J at 155, Toohey J at 165 and Gaudron J at 172). 101Accordingly, it is not open to the First Defendant to assert that the contract between the Plaintiff and the Company has been varied. Nor can he bring a claim for damages suffered by the Company. In Prudential Assurance Co Ltd v Newman Industries Ltd [No 2] [1982] 1 Ch 204 the English Court of Appeal said (at 210): A derivative action is an exception to the elementary principle that A cannot, as a general rule, bring an action against B to recover damages or secure other relief on behalf of C for an injury done by B to C. C is proper plaintiff because C is the party injured, and, therefore, the person in whom the cause of action is vested. This is sometimes referred to as the rule in Foss v Harbottle (1843) 2 Hare 461 when applied to corporations, but it has a wider scope and is fundamental to any rational system of jurisprudence. ... The classic definition of the rule in Foss v Harbottle is stated in the judgment of Jenkins LJ in Edwards v Halliwell [1950] 2 All ER 1064 as follows: 1. The proper plaintiff in an action in respect of a wrong alleged to be done to a corporation is, prima facie, the corporation. 102The statements in Prudential Assurance were followed by the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1 at 35 and by the NSW Court of Appeal in Chen v Karandonis [2002] NSWCA 412. 103The facts in Gore Wood are well summarised by Beazley JA in Chen as follows: [36] ... The appellant's company, W Ltd, had sued the respondents, a firm of solicitors, in negligence arising out of their conduct in acting for the company in respect of the exercise of an option to purchase land. Prior to the hearing of the claim, the appellant gave notice that he had a personal claim against the solicitors, arising out of the same matters, which he intended to pursue at a later stage. The company's action was settled. During the course of the settlement discussions, the settlement of the appellant's claim was also discussed, but it did not settle. The appellant subsequently commenced proceedings against the respondents. [37] The respondents applied to strike out the appellant's claim on the basis that the claim was an abuse of process and also sought the determination as a preliminary issue of the questions whether they owed the appellant a duty of care and whether the damages he claimed were irrecoverable as a matter of law for the pleaded breach of duty. [38] An order was made that there be a determination of the preliminary issues. 104Lord Bingham said (at 32); Two subsidiary arguments were advanced by Mr. ter Haar in the courts below and rejected by each. The first was that the rule in Henderson v. Henderson did not apply to Mr. Johnson since he had not been the plaintiff in the first action against GW. In my judgment this argument was rightly rejected. A formulaic approach to application of the rule would be mistaken. WWH was the corporate embodiment of Mr. Johnson. He made decisions and gave instructions on its behalf. If he had wished to include his personal claim in the company's action, or to issue proceedings in tandem with those of the company, he had power to do so. The correct approach is that formulated by Sir Robert Megarry V-C. in Gleeson v. J. Wippell & Co. Ltd. [1977] 1 W.L.R. 510 at 515 where he said: Second, it seems to me that the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public. But I cannot see that this provides any basis for a successful defendant to say that the successful defence is a bar to the plaintiff suing some third party, or for that third party to say that the successful defence prevents the plaintiff from suing him, unless there is a sufficient degree of identity between the successful defendant and the third party. I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in that sense that I would regard the phrase 'privity of interest ... . On the present facts that test was clearly satisfied. The second subsidiary argument was that the rule in Henderson v. Henderson did not apply to Mr. Johnson since the first action against GW had culminated in a compromise and not a judgment. This argument also was rightly rejected. An important purpose of the rule is to protect a defendant against the harassment necessarily involved in repeated actions concerning the same subject matter. A second action is not the less harassing because the defendant has been driven or thought it prudent to settle the first; often, indeed, that outcome would make a second action the more harassing. 105The Plaintiff submits that, because the First Defendant is the privy of the Company, he cannot now rely on any defence or claim that is posited upon the further variation of April 2009 because of the issue estoppel arising from the dismissal of the Federal Court proceedings. The First Defendant denies that he is a privy of the Company and says that the dismissal of the Federal Court proceedings, if it gives rise to res judicata or an issue estoppel as far as the Company is concerned, does not prevent the First Defendant relying on the Further Amended Defence nor the proposed cross-claim. 106In Ramsay v Pigram (1968) 118 CLR 271 Barwick CJ said (at 279): The basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy. 107In Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245 it was held that the test for privity in an Anshun case is not the same as the test where a cause of action or issue estoppel is raised (Allsop P at [5], Handley AJA at [104]). Handley AJA went on to say: [131] I see no reason in principle why an issue estoppel binding on a company should not bind its controlling shareholder/director and vice versa where, as will generally be the case, the shareholder has a real financial "interest" in proceedings brought by the company. Nor do I see any reason why the converse should not also apply, although ordinarily a company will have no equivalent interest in proceedings by or against its controlling shareholder/director. [132] An alternative ground for reaching that result may be the principle that identity of parties is a matter of substance, not form. In Carl Zeiss (above) at 911 Lord Reid said: There does, however, seem to me to be a possible extension of the doctrine of privity as commonly understood. A party against whom a previous decision was pronounced may employ a servant or engage a third party to do something which infringes the right established in the earlier litigation and so raise the whole matter again in his interest. Then if the other party to the earlier litigation brings an action against a servant or agent, the real defendant could be said to be the employer, who alone has the real interest, and it might well be thought unjust if he could vex his opponent by relitigating the original question by means of the device of putting forward his servant. 108Giles JA said at [64]: That Mr Lawrence was sole director and shareholder of Champerslife did not give rise to privity of interest in the sense considered in Ramsay v Pigram. Regrettably, the submissions on behalf of Messrs Manojlovski and Grech did not initially draw attention to Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd. 109He went on to refer to the decision in Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (Receivers and Managers appointed - in liq) (1993) 43 FCR 510 and, in particular, to the acceptance by Birchett J (at 542) of the position that a director and shareholder of a company is not, as such, its privy in reliance on Clegg v Abel (1898) 14 WN (NSW) 131. Giles JA thought that Clegg v Abel may not provide strong authority for that point because the basis for its decision could be identified as otherwise. 110However, Giles JA placed some reliance upon what was said in Belton v Carlow County Council [1997] 1 IR 172 at 181 that just because the third parties were owners of all the shares in a company and were the only directors did not mean that privity of interest existed between them and the company (see Champerslife at [68]). He allowed, nevertheless, for the position that an Anshun estoppel may arise where a person controls a company and can cause it to act in a particular way: Champerslife at [69]. 111On the other hand, Handley AJA said (at [137]) that he was not persuaded that the decision in Belton was the last word on this topic partly at least because a res judicata estoppel might bind one way (e.g. a tenant bound by an estoppel on the landlord) but not the converse (the landlord not bound by an estoppel on the tenant). 112The First Defendant submitted that he was not a privy of the Company for any purpose. Nor was he the controlling mind of the Company. The submission was based on the ASIC search of the Company as at 14 November 2011. That search showed that the First Defendant was appointed a Director of the Company of 26 September 2006 and ceased to be a director on 15 March 2010. It showed that Hector Ekes was appointed a Director on 18 August 2007 and remained in that position. The search showed that only two shares were issued. One Class A share was held by the First Defendant although it was said not to have been held beneficially. The other share was held by Mr Bechara and was held beneficially. 113However, what was asserted in the present case in the proposed Cross-Claim is relevantly this: 1. At all material times: a. 888 Projects Pty Limited (ACN 121 369 793) C'888 Projects") was: i. a company duly incorporated and able to sue and be sued in its corporate name and style; ii. a sole purpose vehicle originally incorporated with a 50% shareholding by the cross claimant ("Mr Ekes") and a 50% shareholding by Mr Christian Beccara ("Mr Beccara"), to carry on the business of a development at the property contained within folio identifiers 1/499738 and 1/179874 also known as 4-6 Walton Crescent, Abbotsford ("the Property"); b. 888 Projects was a customer of the cross defendant ("the Bank"); and c. over the period 26 September 2006 to 15 March 2010, Mr Ekes was a director and secretary of 888 Projects. ... 3. Prior to October 2006, Mr Ekes, through 888 Projects, proposed to purchase, maintain and refurbish an existing building on the Property and construct 8 new villa style homes and 5 terrace style homes ("the Development"). 4. Around October 2006, Mr Ekes, through 888 Projects, commenced seeking finance to assist with funding the purchase of the Property and undertaking the Development. ... 7. Mr Ekes, through 888 Projects, commenced negotiations with the Director with respect to the possibility of the Bank providing funding to 888 Projects to undertake the Development. ... 14. On 5 August 2007, Mr Beccara died. ... 17. In or about late August 2007, Mr Ekes purchased the shares of 888 Projects from Mr Beccara's estate ("the Estate Purchase") for the sum of $1,400,000. 114Since I am considering an application for leave to file the cross-claim it is necessary to accept the allegations in the cross-claim at their highest to determine if the causes of action pleaded therein should be allowed to go forward. 115Whilst on the face of the search the First Defendant does not appear to have been the controlling mind of the Company, in that there was another equal shareholder and another director at the time the Federal Court proceedings commenced, the proposed Cross-Claim and what it pleads cannot be ignored. What was sought to be put forward by the First Defendant in the Cross-Claim shows that he was the controlling mind of the Company and was acting through the Company in the project (paragraphs, 1, 3, 4, 7, 15 and 17 tend to show that). His oral evidence was that he controlled the company from the time he purchased Mr Bechara's share. 116The First Defendant relied on what Conti J said in Australian Associated Motor Insurers Limited v NRMA Insurance Limited [2002] FCA 1061; (2002) 124 FCR 518 at [74]: Barwick CJ observed in Ramsay at 279 that "[t]he basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy", being a requirement found not to have been satisfied in Ramsay. An insurer and the entity insured per se is on the other hand perhaps the most common example of a privy, and may be further contrasted with the principle that a surety is not a privy of either the principal creditor or the principal debtor (Lloyds Bank Plc v Independent Insurance Co Ltd [1999] 2 WLR 986), where the respective interests involved do not sufficiently coincide. 117The assertion that Lloyd's Bank Plc v Independent Insurance Co Ltd [1999] 2 WLR 986 is authority for the proposition that a surety is not the privy of the principal debtor appears also in an article by Stewart Maiden, Recent steps in the evolution of res judicata, cause of action estoppel and the Anshun doctrine in Australia (2004) 25 Australian Bar Review 130 at 148. I have carefully read that case and with all due respect to both Conti J and Mr Maiden I can see nothing in the case which justifies the conclusion that each has reached. 118In the present case, however, the claims (except the claim relating to the Murray mortgage) which the First Defendant seeks to bring and upon which he seeks to defend the Bank's claim are matters which pertain to the Company. He is, in effect, seeking that defences and cross-claims available to the Company should be available to him to defend the Bank's claim and to bring the cross-claim he seeks to bring. 119As a guarantor he is, generally speaking, entitled to defend the claim in reliance on any defence and claims available to the principal debtor, the Company. In that way, the First Defendant is claiming through the Company and the Company is the person of whom he is said to be the privy. Indeed, the First Defendant asserted in his written submissions that he is entitled to rely on any defence which would establish that the amounts demanded under the guarantee were not properly owing by the Company. 120As far as his defence is concerned, any defence based on a further variation of the agreement is a defence only available to the First Defendant if it is a defence available to the Company. By reason of the Federal Court judgment that defence is no longer available to the company. The First Defendant's liability for the claim must be determined without regard to that defence. 121To the extent that the First Defendant is entitled to bring any claims against the Plaintiff, he cannot, nevertheless claim what is called reflective loss. This was explained in Chen at [34] to [47] relying in particular on Prudential and Johnson v Gore Wood & Co. It is the loss that is "merely a reflection of the loss suffered by the company": Prudential at 223. 122The First Defendant submitted that the loss he claims cannot be regarded as reflective loss. He submitted that the loss identified in paragraph 72(a) of the proposed Cross-Claim [any liability to the Bank under the guarantee the subject of these proceedings] is claimed because it is a necessary element of the s 52 claim. However, to the extent that damages are claimed equivalent to the amount of any liability the First Defendant has as guarantor that claim falls to be considered with regard to the matter of issue estoppel. 123The result is, therefore, that this claim is not available to the First Defendant. The matter has been determined by the judgment in the Federal Court proceedings. 124The second head of damage in paragraph (b) [loss of $832,600 (being the total of payouts referred to at paragraphs 28, 30-31, 36, 39-45, 47-49 and 51) [those payments referred to in paragraph [33] above] is submitted by the Plaintiff to be reflective loss relying on Chen at [48] and [52]. 125The First Defendant pointed to what was said by McDougall J in David Ballard v Multiplex Limited [2008] NSWSC 1019. In that case the first particular of loss and damage by the Plaintiff in relation to losses sustained by his Company Stoneglow Pty Ltd was this: (i) Stoneglow was deprived of funds, and so was unable to make payments that the plaintiff had guaranteed and/or for which he was liable as a director of Stoneglow, with the result that the plaintiff became liable to, and did, make those payments, and lost the use of the money that he thereby paid. Particulars The plaintiff made payments to the Westpac Banking Corporation and the Australian Taxation Office that in total amounted to about $115,000. 126In relation to those payments McDougall J said: [42] I do not think that the Prudential principle, as explained in the cases to which I have referred, would deny recovery of the payments in question. From the particulars to the particulars, it would appear that Mr Ballard claims to have paid amounts owed by Stoneglow to its bank or to the Australian Taxation Office. Stoneglow did not suffer any loss by not making those payments. Presumably, it was legally obliged to pay them, and would have paid them but for its lack of funds. Mr Ballard paid them, pursuant to legal obligations which for present purposes must be assumed to have bound him, because Stoneglow, being incapable of paying them, did not. If Mr Ballard recovers judgment for the payments, there will be no question of the defendants' being exposed to double liability. Nor will there be any question of Stoneglow's assets being depleted by Mr Ballard's recovery. (In each case, I leave aside the not insignificant practical consideration that Stoneglow has been wound up and dissolved.) [43] This head of claim seems to me to fall within the exception recognised by Lord Millett in Johnson at 67, and recognised - at least as a possibility - by McPherson JA in Thomas (see, respectively, at [35] and [40] above). [44] I conclude that this aspect of Mr Ballard's claim for damages is not barred by what I have called the Prudential principle. 127In Chen Beazley JA said: [48] His Honour identified the losses suffered by Karandonis as being: (i) the loss of salary in China; (ii) the loss of salary as managing director in Australia; (iii) the loss of the benefit of a promised 20% interest in Total Win, who had a 60% interest in SKS; and (iv) the loss of his 20% interest in KSA and the $73,500 lent to KSA to fund the acquisition of the Karandonis Shoes business. His Honour also observed that "by reason of the [appellants'] actions [Karandonis] has [lost] the right to trademark his goods under his own name", although, correctly, he does not appear to have included that matter in the catalogue of claimed losses. (emphasis added) 128Her Honour then dealt with category (iv) as follows: [52] That leaves the third and fourth claims. His Honour found that Karandonis was led by the appellants to believe that as part of his package in the Chinese joint venture he would hold a 20% interest in Total Win. The effect of his Honour's finding was that there was an agreement to this effect with the appellants. This is not challenged on appeal. Sometime after 9 January 1996, a decision was made not to allocate any such interest to Karandonis. This loss, therefore, falls into the same category as the loss of the salary whilst in China and is recoverable from the appellants. [53] The loss of the 20% interest in KSA, however, is not. It was a loss of Karandonis' investment in the company. The loss was caused by the depletion of the assets of that company due to the appellants' breach of their fiduciary duty to the company. The recovery of such a loss is directly denied by the principles stated in Prudential Assurance v Newman. The loan of $73,500, being the second amount referred to in (iv), is also not recoverable. They were monies lent to KSA and are only recoverable from it. On the principles in Prudential Assurance v Newman it is irrelevant that KSA's inability to repay was caused by the appellants' conduct. Accordingly, the principles in Gould v Vaggelas, to the extent they might otherwise have applied, are of no assistance: see Actionable Misrepresentation, Bower, Turner and Handley at para 223. 129It is difficult to see how the payments made by the First Defendant can be distinguished from loans to the Company which were held in Chen at [53] not to be recoverable. At the time the payments were made the guarantee that the First Defendant had given to the Plaintiff had not been called upon. The First Defendant was under no obligation to make the payments and it is difficult to see how they can be characterised otherwise than as loans to enable the Company to pay various debts. 130Further, in the particulars of loss in the Federal Court Statement of Claim (paragraph 21(d) - see paragraph [65] above) a claim is made in respect of the payments of interest after May 2009 which were alleged to have been paid by the Company. In his Further Amended Defence the First Defendant alleges the Company made the interest payments for July 2009 (paragraph 11), for September (paragraph 17), for October (paragraph 19) and November (paragraph 21). 131This allegation of payment by the Company is generally supported by the First Defendant's affidavit of 21 December 2011 in these present proceedings, although his use of "we" in relation to the payments in a number of places suggests an identification of himself with the Company. However, in the proposed Cross-Claim the First Defendant said that he paid the interest payments for July (paragraph 30), August (paragraph 31), September (paragraph 40), October (paragraph 47) and November (paragraph 51). 132Those contrasting or inconsistent allegations suggest strongly, and I infer, that the interest payments were loaned by the First Defendant to the Company. At the time they were paid the First Defendant was under no obligation to pay them because no demand had been made under the Guarantee. The position is indistinguishable from the position in Chen. 133The third head of damage in paragraph (c) [consequential liability pursuant to the Murray Mortgage: $2,700,000] is, as I have said, difficult to understand. The purchase of Mr Bechara's share and the Murray mortgage took place almost two years prior to the representations which are alleged to have caused this loss. Even if liabilities under that mortgage extended beyond the date the representations were allegedly made by the Plaintiff the First Defendant's liability under that mortgage was incurred before those representations. This matter was not ventilated in any detail at the hearing of the Motions and I cannot reach a view about this causation issue at this time. However, the loss, if established, could not be a reflective loss. 134For the reasons I have given, the losses claimed in paragraph 72 (a) and (b), are reflective losses only with the result that the First Defendant cannot be given leave to bring them. The claim based on the Murray mortgage does not involve reflective loss. It was not a claim the company could have brought. 135All of the defences pleaded arise from the allegation that the Plaintiff extended the repayment date, which means the Further Amended Defence should be struck out and leave should not be given to file the Second Further Amended Defence. As far as the proposed Cross-Claim is concerned, apart from the claim based on the Murray mortgage the only other claim is for relief under the Contracts Review Act. Reliance on the CRA amounts to a defence or partial defence to the claim even if framed as a cross-claim for relief under that Act. If leave is given for the filing of the proposed Cross-Claim it would be inappropriate to order summary judgment for the Plaintiff although no other defence is shown. 136The First Defendant submitted that, as it is agreed (subject to discretionary matters involving delay) that the First Defendant is entitled to make his own CRA claim in respect of the guarantee, the matter will have to go to trial. It was submitted that that was a discretionary consideration against the grant of a summary disposal in relation to the other claims and defences raised. 137Where claims or defences are discrete there can be no basis for allowing untenable claims or defences going to trial simply because others are arguable. Summary judgment can be obtained for part of a claim: Costain Australia Limited v State Superannuation Board (Supreme Court of NSW - Brownie J, 22 February 1991, unreported). Those claims and defences which I have determined should not go to trial do not depend on a resolution of any factual issue which the arguable claims could supplement, (cf Wickstead v Browne (1992) 30 NSWLR 1) or, indeed on any factual issue at all.

Delay 138The Plaintiff submitted that the delays on the First Defendant's part are such that, as a matter of discretion, leave should not be given to file the proposed Cross-Claim. 139The First Defendant accepted that there has been considerable delay in the matter by him. Nevertheless, he submitted that delay should not disentitle him from being able to defend the case and make the claims he now seeks to bring in the Cross-Claim. He submitted that there can be no real prejudice to the Plaintiff in that the claim is one for a monetary sum only and the amount is so large that the Plaintiff will only recover a very small amount if anything from him if successful in any event. 140Secondly, the First Defendant submitted that, in substance, the matters sought to be raised in the Cross-Claim were in issue between the parties by virtue of the earlier defence that had been filed by the First Defendant. In that sense it was submitted that there is no forensic disadvantage in the way that there might be if the issues were raised for the first time. Coupled with that it is submitted that because the principal issues appear in the Defence the First Defendant ought to be able to go to trial by making whatever claims he is able to make arising out of the same issues. 141The difficulty with that submission is that I have held, as a matter of law, that the claims in the Cross-Claim which appeared in earlier forms of the Defence (matters arising out of the alleged extension of the repayment date) cannot now be litigated because of the estoppel that arises from the Federal Court proceedings and the doctrine of reflective loss. All that is left are two claims which appeared for the first time in the proposed Cross-Claim. 142He further submitted that there was no evidence that the First Defendant had deliberately delayed nor that his desire to satisfy himself about the HBOS claim and run that issue was not a genuine one even though it was ultimately abandoned. 143The explanation for the delay in putting forward the proposed Cross-Claim was principally an assertion that the First Defendant was investigating the HBOS claim and that he could not afford to pay his lawyers to prepare and file the Cross-Claim. The evidence about his ability to pay his lawyers for preparing documents including the proposed Cross-Claim was left in a most unsatisfactory state. 144In his affidavit sworn 5 February 2013 the First Defendant said that the preparation of the proposed Cross-Claim had been delayed due to his financial embarrassment largely due to his limited income and his actual income being less than his expected income. 145The First Defendant went on to say that the HBOS claim was part of his case theory advanced to explain why the receivers and managers were appointed to the Company when it was not in default. He said he made enquiries and did research for the HBOS claim with his solicitor assisting him from time to time when he had funds and when the First Defendant needed his solicitor's help. That involved the solicitor issuing subpoenas to various banks and assisting him to answer a motion from the Plaintiff to set aside the subpoenas. All of this involved him paying fees to the solicitors. 146The First Defendant had been served with a Notice to Produce. Category three of the Notice to Produce required the production of all receipts for payment issued by Avondale Lawyers recording amounts paid by the First Defendant on account of legal costs and barrister's fees concerning the proceedings. The First Defendant annexed to his affidavit sworn 5 February 2013 what he said was a copy of all of the trust receipts he had received from Avondale Lawyers to that date. There were five such receipts expressed to be for monies received from the First Defendant between 21 November and 2 December 2011 totalling $13,500. Each of them was said to be "on account of barrister's fees". 147Osman Khanji, an employed solicitor at Avondale Lawyers, in his third affidavit of 9 May 2013, annexed a copy of the trust ledger in respect of the First Defendant. That ledger showed, in addition to the five amounts totalling $13,500 already referred to that payments were made by the First Defendant as follows: 25 June 2012: $8000 for disbursements and barrister's fees 25 February 2013: $5000 on account of fees and disbursements 27 February 2013: $5000 on account of fees and disbursements 5 April 2013: $3,500 on account of barrister's fees 148The evidence was otherwise most unsatisfactory. Evidence of payments made and income received by the First Defendant in his affidavit of 5 February 2013 was not supported by his bank statements that were exhibited to his affidavit of 8 May 2013. 149However, the significant evidence that emerged during his cross-examination was that his brother, the Second Defendant, paid Avondale Lawyers in respect of some of their fees and disbursements, that his brother was a solicitor, albeit apparently suspended because he was in a Part X arrangement, and that both his brother and junior counsel Mark Auld were available to assist him in relation to the cross-claim. The following evidence was given: Q. And Mark Auld, who's the junior barrister in this case? A. Yes. Q. And did Mr Auld use to work for your brother Hector? A. Yes, that's correct. Q. Since the commencement of these proceedings in September 2010 you've been able to look to your brother for his experience and specialised knowledge as a solicitor in assisting you in the defence of these proceedings, correct? A. Yes. Q. And you've been able to look to your brother to provide you with assistance with respect to drafting of documents in the proceedings, correct? A. Yeah, at times, yeah. Yes. Q. And your brother has assisted you with respect to the preparation of various forms of defence which have been put on in this case, correct? A. Yes. Q. And your brother assisted you with preparation of various forms of cross-claim which have been put forward on your behalf in these proceedings; is that correct? A. Yes. Q. And Mr Auld, the junior barrister, he has provided assistance to you since the commencement of these proceedings; is that right? A. Yes, I think, I believe so, yes. Q. And he's done so because of a previous personal relationship with your brother Hector; is that correct? OBJECTION. SPECULATION. Q. Has he done so because of a personal relationship with you? A. You mean Mark? Or do you mean-- Q. I withdraw the question. Has Mr Auld provided assistance to you throughout these proceedings because of the previous personal relationship? You were known to him? A. Yes, yeah. I know Mark. Q. And he has provided his time and services to you because of that relationship; is that correct? A. That's correct, yeah. Q. You understand that in your affidavit of 5 February 2013 you seek to explain the delay for complying with orders of the Court with respect to preparation of the cross-claim; do you understand that? A. Yes. Q. And is it fair to say that the explanation you put forward is that you had insufficient funds from time to time to pay for a solicitor or a barrister to provide you with services, correct? A. That's correct. Q. And is it fair to say, however, that throughout the entirety of the time that orders of the Court were put in place requiring you to put forward a cross-claim that you had access to your brother for his assistance with respect to the preparation of a cross-claim, correct? A. Yes. Q. And throughout the entirety of the time that you were required to put forward a cross-claim, in compliance with the Court's orders, you had access to call on the services of Mr Auld to provide you with assistance in respect to the preparation of a cross-claim; do you agree? A. Yes. 150What is clear is that the Cross-Claim could have been filed and served at a very much earlier time than filing of the present Motion. The First Defendant chose to pursue the HBOS matter and chose to spend the money that he had available to pay the solicitors to do that. He did that despite there being orders from the Court over an extended period requiring him to file any cross-claim that he wished to bring. 151It is also clear that if money was the problem his brother could assist and had done so. Moreover, the First Defendant had available to him not only his brother's legal knowledge and experience but also that of Mr Auld to prepare any cross-claim that he wished to bring. 152The First Defendant's Senior Counsel acknowledged that the unfortunate history in the case was largely the First Defendant's fault and described the delay that has occurred as "incredible" (T83). 153There is in fact no satisfactory explanation provided for the failure to file a Cross-Claim at a very much earlier time. Contrary to the explanation put forward by the First Defendant that he was short of money, the evidence discloses that he had legal advice and assistance available to him and, if it became necessary, funds available from his brother. 154Any Cross-Claim ought to have been filed when the first Defence was filed on 19 May 2011. The First Defendant was then given the opportunity on 17 June 2011, 1 July 2011, 5 December 2011, 7 February 2012, 22 February 2012 and 30 July 2012. The first time a draft cross-claim was provided was 13 September 2012 but that draft was abandoned. The present proposed Cross-Claim was first served on the evening before the day the hearing of these Motions commenced on 5 December 2012. 155That approach to the conduct of litigation is entirely inconsistent with what is required under ss 56-58 Civil Procedure Act. What I am dealing with on the First Defendant's Motion is making an order of a procedural nature (s 58(1)(a)(iii)). In doing so I must seek to act in accordance with the dictates of justice. Sub-s (2) sets out what must be considered and what may be considered in determining the dictates of justice in a particular case. Sections 56 and 57 must be regarded. 156In relation to matters that may be regarded matters in sub-s (2)(b)(ii), (iii) and (iv) appear to me to be relevant to the detriment of the First Defendant's application. Not only was there the inordinate delay in serving the proposed Cross-Claim, there are the other matters mentioned in [30], [38] - [48], [50], [57] and [59] - [60] above, all of which demonstrate what might be charitably described as a casual approach to the conduct of litigation and obedience to court orders and what others might describe as contemptuous. Despite that, the First Defendant now seeks an indulgence from the Court. 157Sub-paragraph (vi) which is concerned with the degree of injustice that would be suffered by the parties in consequence of an order that I make is also relevant. 158I consider that the dictates of justice require in this case that the order sought by the First Defendant for leave to file a cross-claim should be refused. My principal reason for doing so is the extreme delay involved in putting the proposed cross-claim forward coupled with the failure to obey many directions of the Court most or all of which were consented to at the time they were made by the First Defendant, and the lack of any adequate explanation for the failures. 159I also bear in mind that the only matters for which the cross-claim may now be brought are claims which appeared for the first time in the proposed Cross-Claim - the loss said to flow from the entry into the Murray mortgage by the First Defendant and a CRA claim. I have expressed some doubt earlier in this judgment about issues of causation relating to that claim. The claim itself does not, for those reasons, appear to be a strong one. It is significant that no relief under the CRA appeared in any of the three defences filed. 160For those reasons, the degree of injustice that will be suffered by the First Defendant by the refusal of leave to file a cross-claim will be small. 161On the other hand there will be considerable prejudice to the Plaintiff. These proceedings commenced on 14 September 2010. It was necessary to obtain an order for substituted service on the First Defendant with the result that the first Defence was not filed until 9 May 2011. I have detailed the procedural history thereafter. Almost all of the subsequent delays have been occasioned by the First Defendant as his Counsel acknowledged. 162In the ordinary course these proceedings would be likely to have been heard by now if the First Defendant had acted with due expedition both in completing his pleadings and in the way he approached the hearing of his motion for leave to file the Cross-Claim. Adjournments of that hearing were necessary (as described earlier) either by the acknowledged unsatisfactory pleading or by reason of late service of documents on the Plaintiff's lawyers. 163If the First Defendant is now permitted to file his Cross-Claim there will be further delays, well into 2014, before this matter will be finalised. The debt claimed is huge - more than $28 million when the proceedings commenced. The prejudice to the Plaintiff of further delay is plain. It outweighs the prejudice to the First Defendant in all of the circumstances detailed.

Conclusion 164It becomes unnecessary to make any orders in relation to the Plaintiff's Notice of Motion requiring production of documents. In any event, the matters concerning the production of documents were aired during the cross-examination of the First Defendant. The filing of the Motion was justified. It was not until the First Defendant's affidavit of 8 May 2013 was served that there was any serious attempt to comply with the Notices to Produce served by the Plaintiff dated 13 February 2103 and 4 March 2013. 165The effect of this judgment is that the Further Amended Defence will be dismissed and the First Defendant will not be permitted to file and serve the proposed Cross-Claim. Since no other defence to the claim is offered the Plaintiff must be entitled to judgment. The parties will need to bring in Short Minutes of Order disposing of the three Notices of Motion and identifying the amount for which judgment is to be given. The Short Minutes should provide that the First Defendant is to pay the costs of the proceedings including the costs of the three Motions.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 November 2013