Ekes v Commonwealth Bank of Australia - [2014] NSWCA 336 - NSWCA 2014 case summary — Zoe

NSWNSWCA

Ekes v Commonwealth Bank of Australia

[2014] NSWCA 336

Court of Appeal (NSW)|2014-06-02|Before: Bathurst CJ, Beazley P, Emmett JA

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Source facts

Court

Court of Appeal (NSW)

Decision date

2014-06-02

Before

Bathurst CJ, Beazley P, Emmett JA

Source

Original judgment source is linked above.

Judgment (28 paragraphs)

[1]

Ballard v Multiplex Ltd [2008] NSWSC 1019; (2008) 68 ACSR 208 Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 Cannon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759 Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853 Cellulose Products Pty Ltd v Truda (1970) 92 WN (NSW) 561 Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245 Chen v Karandonis [2002] NSWCA 412 Commonwealth Bank of Australia v Ekes [2013] NSWSC 1264 Covino v Bandag Manufacturing Pty Ltd [1983] 1 NSWLR 237 Effem Foods Pty Limited v Trawl Industries of Australia Pty Limited (Receivers and Managers Appointed -In Liquidation) [1993] FCA 342; (1993) 43 FCR 510 Ex parte Young; In re Kitchin (1881) 17 Ch D 668 GE Capital Australia v Davis [2002] NSWSC 1146; (2002) 180 FLR 250 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 Gerard Cassegrain & Co Pty Ltd (ACN 000 342 174) v Cassegrain [2013] NSWCA 453; (2013) 305 ALR 612 Gibbs v Kinna [1998] VSCA 52; [1999] 2 VR 19 Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 Gould v Vaggelas [1984] HCA 68; (1984) 157 CLR 215 Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 Henderson v Henderson (1843) 67 ER 313 Hyundai Shipbuilding & Heavy Industries Co v Pournaras [1978] 2 Lloyd's Rep 502 In re South American and Mexican Company; Ex parte Bank of England [1895] 1 Ch 37 Isaacs v The Ocean Accident and Guarantee Corporation Ltd and Winslett (1958) SR (NSW) 69 John Alexander's Clubs Pty Limited v White City Tennis Club Limited [2010] HCA 19; (2010) 241 CLR 1 Johnson v Gore Wood & Co [2002] 2 AC 1 Khan v Golechha International Ltd [1980] 1 WLR 1482 Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363 Langford Concrete Pty Ltd v Finlay [1978] 1 NSWLR 14 Makhoul v Barnes (1995) 60 FCR 572 Minero Pty Ltd v Redero Pty Ltd (Unreported, Supreme Court of New South Wales, 29 July 1998) Mondel v Steel (1841) 151 ER 1288 National Westminster Bank Plc v Skelton [1993] 1 WLR 72 Port of Melbourne Authority v Anshun Proprietary Limited [1981] HCA 45; (1981) 147 CLR 589 Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57 Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] 1 Ch 204 Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271 Redowood Pty Limited v Link Market Services Pty Limited (Formerly Known As ASX Perpetual Registrars Limited) [2007] NSWCA 286 Robert Louden Begley v The Attorney General of New South Wales [1910] HCA 69; (1910) 11 CLR 432 Sandtara Pty Ltd v Abigroup Ltd [1997] NSWSC 294; (1997) 42 NSWLR 5 SCF Finance Co Ltd v Masri (No 3) [1987] 1 QB 1028 Solak v Registrar of Titles [2011] VSCA 279; (2011) 33 VR 40 Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 State of New South Wales v Williams [2014] NSWCA 177 Thomas v Balanced Securities Ltd [2011] QCA 258; [2012] 2 Qd R 482 Trawl Industries of Australia Pty Limited (In liquidation) v Effem Foods Pty Limited [1992] FCA 272; (1992) 36 FCR 406 Texts Cited: Andrews and Millet, Law of Guarantees, (4th ed 2005, Sweet & Maxwell) Marks and Moss, Rowlett on Principal and Surety, (6th ed 2011, Sweet & Maxwell) O'Donovan and Phillips, The Modern Contract of Guarantee (4th ed 2004, Thomson Lawbook Co) Handley, Spencer Bower and Handley Res Judicata (4th ed 2009, LexisNexis) Category: Principal judgment Parties: Paul Ekes (Appellant) Commonwealth Bank of Australia (Respondent) Representation: Counsel: D R Pritchard SC / A Macauley (Appellant) A J McInerney SC / L T Livingston (Respondent) Solicitors: File Number(s): 2013/344471 Decision under appeal Citation: [2013] NSWSC 1264 Date of Decision: 2013-11-01 00:00:00 Before: Davies J File Number(s): 2010/306145

[3]

Background 3The background giving rise to the orders made by the primary judge is, to say the least, tortuous. In the interests of economy I have attached to my judgment as a Schedule an Agreed Chronology which contains a detailed summary of the background. As a consequence, it will only be necessary to refer to the principal events giving rise to the appeal. 4The respondent is the successor to all the rights and liabilities of the former Bank of Western Australia Limited (Bankwest) including any rights Bankwest had against the appellant and any liabilities owed by Bankwest to him. 5In June 2007 Bankwest agreed to lend 888 Projects Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (the company) $19,640,000.00 to develop a site at 4-6 Walton Crescent, Abbotsford (the property). The facility was secured by a mortgage over the property and a charge over the assets and undertaking of the company (the charge). The appellant guaranteed payment of the facility. 6There were two agreed variations to the facility agreement. On 13 November 2007 the amount advanced under the facility was increased to $24,284,000.00, whilst on 16 January 2009 the repayment date was extended to 30 June 2009. 7The appellant and a Mr Christian Becerra were the original guarantors of the company's obligations under the facility agreement. The variation of 16 January 2009 substituted Mr Hector Ekes and 888 Projects (Marinas) Pty Ltd as guarantors in place of Mr Becerra. The appellant remained a guarantor of the loan. 8On 27 October 2009 the respondent issued a notice of default to the company. The notice of default alleged three events of default. First, the facility had expired and not been repaid. Second, an application to wind-up the company had been made and, third, the appellant's co-guarantor, Mr Hector Ekes, had entered into a personal insolvency arrangement under Pt X of the Bankruptcy Act 1966 (Cth). 9The notice stated that as a consequence the facility was immediately due and payable and the security was immediately enforceable. The notice stated that Bankwest reserved its rights to make demand for the full debt and to enforce its security. 10On 11 February 2010 Bankwest issued a further notice to the company referring to the earlier notice of default under the facility and stating as a result the charge had become enforceable. On the same day Bankwest appointed receivers and managers to the company. 11On 25 February 2010 the company commenced proceedings in the Federal Court of Australia against Bankwest and the receivers and managers by way of originating process (the Federal Court proceedings). The originating process sought declarations that the appointment of the receivers and managers was invalid and that Bankwest was not entitled to rely on the notice of default of 27 October 2009. 12Relevantly for the present proceedings the company also sought a declaration that Bankwest had agreed to vary the loan facility of 5 June 2007 by extending the term to 31 March 2010 or until completion of building works referred to in the facility agreement in consideration of the company making further interest payments. Alternatively it was claimed that Bankwest was estopped from denying the variation occurred. 13The originating process mistakenly sought a declaration that the plaintiff had breached the facility agreement. It is plain that the reference should have been to Bankwest. It also sought a declaration that Bankwest had engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth). The originating process sought damages against Bankwest for breach of contract or under s 82 of the Trade Practices Act or s 12GF of the ASIC Act. 14Various other forms of relief including interlocutory relief were sought against Bankwest and the receivers and managers in the originating process. The interlocutory relief sought to restrain the receivers and managers from dealing with the assets of the company and to restrain Bankwest from exercising its powers under the mortgage and charge. 15On 26 February 2010 Jacobson J set down an interlocutory hearing of the Federal Court proceedings on 4 March 2010 and ordered the company to pay $20,000.00 as security for costs, without prejudice to the defendants' rights to seek further security. On that day the receivers and managers gave certain undertakings not to carry out construction work or sell the property. 16On 2 March 2010 the company filed a Statement of Claim in the Federal Court proceedings. The Statement of Claim was amended on 9 March. The following paragraphs of the Statement of Claim are relevant for the purpose of these proceedings: "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 or on a date to be agreed by the parties; (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 plaintiff's contracts of sale to purchasers of units in the Development would become unconditional to 10 April 2010. [Particulars omitted] ... 18. Pursuant to the Third Variation to the Loan Agreement, the plaintiff was not required to repay the Loan on 30 June 2009 but on either the date of completion of the Development 10 April 2010 or on a later date to be agreed by the parties. ... Election 20. Further and in the alternative: (a) on 30 June 2009, Bankwest was entitled at its option pursuant to clause 10(1)(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 the date of completion of the Development or a date to be agreed by the parties 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: (iii) the plaintiff made specified interest payments to Bankwest; and (iv) the plaintiff obtain variations of the dates by which plaintiff's contracts of sale to purchasers of units in the Development would become unconditional to 10 April 2010. [Particulars omitted] (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 obtained variations of 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 in accordance with the Representations 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 the date of completion of the Development or a date to be agreed by the parties 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 the date of completion of the Development or a date to be agreed by the parties 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, and (d) the plaintiff would obtain variations of the dates by which plaintiff's contracts of sale to purchasers of units in the Development would become unconditional to 10 April 2010. [Particulars omitted] 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 omitted] 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 the date of completion of the Development or a date to be agreed by the parties 10 April 2010 or the date of Completion of the Development whichever is the later. ... 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, 1974 (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 and has the appointed the Receivers. 40. The plaintiff has thereby suffered damage, and seeks damages in contract. [Particulars omitted] 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 20 and 21 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 Hector Ekes that the plaintiff should disregard a notice of default (3) On 8 February 2010, Elise Cockerell said to Hector West 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 omitted] 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 omitted] 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. The applicant claims the relief specified in the application." 17On 3 March 2010 the undertaking by the receivers and managers was extended to 14 April. 18On 8 March 2010 Bankwest and the receivers and managers of the company filed an application for security for costs in the Federal Court proceedings and for an undertaking as to damages. On that day the proceedings were set down for a final hearing on 13-14 April. 19On 15 March 2010 the application for security was heard by Jacobson J who reserved judgment. On the same day the appellant resigned as a director of the company. On 16 March Jacobson J ordered the company provide a further $50,000.00 as security for costs and a further amount of $250,000.00 as security for the undertaking for damages proffered in respect of the undertakings given by the receivers and managers. The security was payable within seven days. The company failed to pay the security and the proceedings were stayed in accordance with the orders of Jacobson J. 20His Honour's judgment made it clear that the company's claim for relief was based on the proposition that the loan repayment date had been extended. It should be noted that the company during the hearing proffered $50,000.00 as security for the undertaking, which was rejected as inadequate. 21On 24 March 2010 the solicitors for Bankwest indicated to the company's solicitor that they proposed to seek orders releasing it and the receivers and managers from the undertakings which they had given to the Court, that the company pay the defendants' costs of the proceedings and that the security of $20,000.00 paid into Court by the company be released on account of such costs. 22On 31 March 2010 Bankwest and the receivers and managers filed a notice of motion seeking orders dismissing the proceedings, releasing them from their undertakings and authorising payment to them of the $20,000.00 security. 23On 12 April 2010 the company's solicitor indicated his client's consent to the orders sought with the exception of the order for payment out of the $20,000 security. By email of 13 April the company consented to the motion. 24On 13 April 2010 consent orders were made dismissing the Federal Court proceedings (the Dismissal). 25On 16 April 2010 the company was placed into liquidation. 26On 22 July 2010 Bankwest demanded repayment of its facility from the company. 27On 26 July 2010 Bankwest (who for convenience I will now refer to as the respondent) made demand under the guarantee and on 14 September commenced proceedings in the Common Law Division of this Court seeking judgment in an amount of $28,344,516.45 as money due under the guarantee. 28The procedural history of the proceedings is set out in the Agreed Chronology and I shall not repeat it. However, on 12 March 2012 the appellant filed a pleading entitled "Further Amended Defence" (the filed defence). That defence relevantly provided as follows (omitting underlining): "8. In further answer to paragraph 5 of the claim, on or about 2 April 2009, the plaintiff and 888 Projects agreed to further vary the Facility by: a) the plaintiff extending the repayment date to at least 31 November 2009; b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff. [Particulars omitted] ... 10. After 2 April 2009, to the knowledge of the plaintiff, 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility. 11. On or about 30 July 2009, 888 Projects paid $60,000.00 interest to the Plaintiff. 12. On or about 10 August 2009, the plaintiff and 888 Projects agreed to further vary the Facility by: a) the plaintiff further extending the repayment date to 31 March 2010 ('the Final Repayment Date'); b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff. [Particulars omitted] 13. After 10 August 2009, to the knowledge of the plaintiff, 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility. 14. On or about 12 August 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $453,549.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility. After 2 April 2009, to the knowledge of the plaintiff, 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility. 15. On or about 24 August 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $259,841.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility. 16. On or about 10 September 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $426,343.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility. 17. On 18 September 2009, 888 Projects paid $60,000.00 interest to the plaintiff. 18. On or about 12 October 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $800,000.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility. 19. On 23 October 2009, 888 Projects paid $60,000.00 interest to the plaintiff. 20. On or about 9 November 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $770,000.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility. 21. On 17 November 2009, 888 Projects paid $60,000.00 interest to the plaintiff. 22. In answer to paragraph 6(a) of the claim, the first defendant says: a) the Final Repayment Date was 31 March 2010 and not 30 June 2009; ... 23. In answer to paragraph 6(b) of the claim, the first defendant says: a) the Final Repayment Date was 31 March 2010; and ... 24. In answer to paragraph 6(c) of the claim, the first defendant says: a) no event of default would arise if an order for winding up of 888 Projects was caused by an act or omission of the plaintiff of the Facility; and ... 25. In answer to paragraph 6(d) of the claim, the first defendant says: a) that the loan together with all interest accrued and all other amounts payable under the Facility would not become immediately due and payable without the necessity for notice or demand in the event of an event of default occurring which event of default was caused by an act or omission of the plaintiff in breach of the Facility; and ... 27. The first defendant denies paragraph 7 of the claim. 28. In further to answer paragraph 7 of the claim: a) on or about 11 February 2010, the plaintiff purported to appoint Messrs N G Singleton and S J Parberry as a receivers and managers to 888 Projects; b) the plaintiff purported to appoint the receivers and managers consequent upon an alleged default by 888 Projects under the Facility by failing to repay in full the Facility by the alleged repayment date of 30 June 2009; c) the purported appointment of the receivers and managers was wrongful and in breach of the Facility as the Final Repayment Date had not occurred and, alternatively, the plaintiff had waived any alleged default and, alternatively, elected to affirm the Facility as to preclude reliance on any alleged default by its conduct after 30 June 2009; d) the purported appointment of the receivers and managers had the effect that 888 Projects could not progress and complete the project the subject of the Facility and pay its creditors; e) the Office of State Revenue was a creditor of 888 Projects which could not be and, further and alternatively, was not paid by reason of the wrongful appointment of the receivers and managers by the plaintiff; f) the liability for land tax the subject of the winding up Order of 888 Projects became due and payable during the period of appointment of the receiver and managers, which the receiver and managers paid late and after the due date, being a date after the winding up of 888 Projects; and g) by reason of the failure of 888 Projects and more importantly the receivers and managers to pay the Office of State Revenue, within the demand period, the Office of State Revenue sought and obtained an order winding up 888 Projects on 16 April 2010 by order of the Supreme Court of New South Wales in proceedings No. 3703 of 2009. 29. In answer to paragraph 8 of the claim, the first defendant says: a) that the Final Repayment Date under the Facility was 31 March 2010 and not 30 June 2009; b) alternatively, the plaintiff had waived any alleged default, or alternatively, elected to affirm the Facility as to preclude reliance on any alleged default by its conduct after 30 June 2009; and c) otherwise denies paragraph 8 of the claim. 30. In answer to paragraph 9 of the claim, the first defendant says: a) the wrongful appointment of the receivers and managers by the plaintiff together with the failure by the receivers and managers to pay the outstanding Land Tax within the prescribed period to the OSR, was an act or omission of the plaintiff or its agents and/or receivers and managers which caused the winding up order to be made; b) in the premises, the plaintiff is precluded from relying on the winding up order as a default by 888 Projects; and c) otherwise denies paragraph 9 of the claim. ... 40. 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 result of its own conduct in breach of the Facility." In these circumstances liability was denied. 29The filed defence abandoned defences, including those based on promissory estoppel, estoppel by convention, contravention of the Trade Practices Act and unconscionable conduct, which had been made in previous versions of the defence. However, those claims were sought to be reintroduced by the proposed further defence which was considered by the primary judge (the proposed defence). They were pleaded as follows (omitting the Particulars to some paragraphs and underlining): "Estoppels in relation to 2 April 2009 46. Alternatively to paragraph 8 above, on or about 2 April 2009, the plaintiff represented to 888 Projects and the first defendant that the plaintiff had varied the Facility by: a) the plaintiff extending the repayment date to at least 31 November 2009; b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff. 47. After 2 April 2009, 888 Projects and the first defendant assumed that the Facility had been varied by: a) the plaintiff extending the repayment date to at least 31 November 2009; b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff. 48. After 2 April 2009, the plaintiff induced 888 Projects and the first defendant to adopt that assumption. Particulars The plaintiff did not resile from the representations, permitted 888 Projects to make further drawings under the Facility, accepted interest payments from the plaintiff and did not act on any alleged event of default by 888 Projects. 49. 888 Projects and the first defendant acted in reliance on the assumption. Particulars 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance. 50. The plaintiff knew or intended 888 Projects and the first defendant to act in reliance on the assumption. 51. If the Facility was not further varied as alleged in paragraph 8 above, 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings and the plaintiff will have failed to act to avoid the detriment by fulfilling the assumption. 52. In the premises, the plaintiff is estopped from denying that on or about 2 April 2009, the Facility was varied by: a) the plaintiff extending the repayment date to at least 31 November 2009; b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff. 53. Further and in the alternative, the first defendant repeats paragraph 46 above. 54. After 2 April 2009, the plaintiff, 888 Projects and the first defendant proceeded on the basis of the underlying assumption that the Facility had been varied. 55. After 2 April 2009, each of the plaintiff and 888 Projects and the first defendant has, to the knowledge of the other, accepted the assumption as being true for the purposes of the Facility and such acceptance was intended to affect their legal relations. 56. 888 Projects and the first defendant were entitled to act and have, as the plaintiff knew or intended, acted in reliance upon the assumption being regarded as true and binding. Particulars 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance. 57. If the Facility was not further varied as alleged in paragraph 8 above, 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings, if the plaintiff is allowed to resile or depart from the assumption. 58. In the premises, it would be unconscionable for the plaintiff to resile or depart from the assumption and the plaintiff is estopped from denying that, on or about 2 April 2009, the Facility was varied by: a) the plaintiff extending the repayment date to at least 31 November 2009; b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff. Estoppels in relation to June 2009 59. Alternatively to paragraph 10A above, on or about 19 June 2009, the plaintiff represented to 888 Projects and the first defendant that the plaintiff had further varied the Facility by 888 Projects making and the plaintiff accepting monthly instalments of $60,000.000 under the Facility. 60. After 19 June 2009, 888 Projects and the first defendant assumed that the Facility had been varied by 888 Projects making and the plaintiff accepting monthly instalments of $60,000.00 under the Facility. 61. After 19 June 2009, the plaintiff induced 888 Projects and the first defendant to adopt that assumption. 62. 888 Projects and the first defendant acted in reliance on the assumption. Particulars 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance. 63. The plaintiff knew or intended 888 Projects and the first defendant to act in reliance on the assumption. 64. If the Facility was not further varied as alleged in paragraph 10A above, 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings and the plaintiff will have failed to act to avoid the detriment by fulfilling the assumption. 65. In the premises, the plaintiff is estopped from denying that on or about 19 June 2009, the Facility was varied by 888 Projects making and the plaintiff accepting monthly instalments of $60,000.00 under the Facility. 66. Further and in the alternative, the first defendant repeats paragraph 59 above. 67. After 19 June 2009, the plaintiff, 888 Projects and the first defendant proceeded on the basis of the underlying assumption that the Facility had been varied. 68. After 19 June 2009, each of the plaintiff and 888 Projects and the first defendant has, to the knowledge of the other, accepted the assumption as being true for the purposes of the Facility and such acceptance was intended to affect their legal relations. 69. 888 Projects and the first defendant were entitled to act and have, as the plaintiff knew or intended, acted in reliance upon the assumption being regarded as true and binding. 70. 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings, if the plaintiff is allowed to resile or depart from the assumption. 71. In the premises, it would be unconscionable for the plaintiff to resile or depart from the assumption and the plaintiff is estopped from denying that on or about 19 June 2009, the Facility was varied by 888 Projects making and the plaintiff accepting monthly instalments of $60,000.000 under the Facility. Estoppels in relation to August 2009 72. Alternatively to paragraph 12 above, on or about 10 August 2009, the plaintiff represented to 888 Projects and the first defendant that the plaintiff had further varied the Facility by: a) the plaintiff extending the repayment date to at least 31 March 2010; b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff. 73. After 10 August 2009, 888 Projects and the first defendant assumed that the Facility had been varied by a) the plaintiff extending the repayment date to at least 31 March 2010; b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff. 74. After 10 August 2009, the plaintiff induced 888 Projects and the first defendant to adopt that assumption. 75. 888 Projects and the first defendant acted in reliance on the assumption. Particulars 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance. 76. The plaintiff knew or intended 888 Projects and the first defendant to act in reliance on the assumption. 77. If the Facility was not further varied as alleged in paragraph 12 above, 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings and the plaintiff will have failed to act to avoid the detriment by fulfilling the assumption. 78. In the premises, the plaintiff is estopped from denying that on or about 10 August 2009, the Facility was varied by: a) the plaintiff extending the repayment date to at least 31 March 2010; b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff. 79. Further and in the alternative, the first defendant repeats paragraph 72 above. 80. After 10 August 2009, the plaintiff, 888 Projects and the first defendant proceeded on the basis of the underlying assumption that the Facility had been varied. 81. After 10 August 2009, each of the plaintiff and 888 Projects and the first defendant has, to the knowledge of the other, accepted the assumption as being true for the purposes of the Facility and such acceptance was intended to affect their legal relations. 82. 888 Projects and the first defendant were entitled to act and have, as the plaintiff knew or intended, acted in reliance upon the assumption being regarded as true and binding. Particulars 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance. 83. 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings, if the plaintiff is allowed to resile or depart from the assumption. 84. In the premises, it would be unconscionable for the plaintiff to resile or depart from the assumption and the plaintiff is estopped from denying that on or about 10 August 2009, the Facility was varied by: a) the plaintiff extending the repayment date to at least 31 March 2010; b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and c) 888 Projects making interest payments to the plaintiff." 30The appellant also sought to rely on a draft cross-claim (the cross-claim). It introduced claims under the Contracts Review Act 1980 (NSW) (the Contracts Review Act claim). It also sought declarations that the plaintiff engaged in misleading and deceptive conduct and unconscionable conduct and claimed damages for such conduct. 31It is unnecessary to set out any part of the pleading which relates to the Contracts Review Act claim. However, the pleading of misleading conduct and unconscionable conduct reiterated the claim that the facility agreement was varied on 2 April 2009, 19 June and 10 August or, alternatively, that the bank represented that to be the case. The cross-claim asserted that in reliance on those representations the appellant permitted draw downs on the facility, made interest payments to the respondent and made certain other payments on behalf of the company. 32The cross-claim pleaded that following the builder, who was retained to develop the property, abandoning the site (cross-claim at [52]) the respondent represented it would not allege a breach of the facility or require interest payments until a replacement builder was approved. It pleaded that in reliance on that representation neither the company nor the appellant took steps to further progress the project pending approval of a replacement builder or seek to refinance the facility. 33The cross-claim then pleaded a further representation in February 2010. This portion of the pleading was in the following terms: "58 In or about early February 2010, to the knowledge of the Bank, 888 Projects had received an offer of finance from Investec, of $26,500,000 the purpose of which was to refinance the Facility and fund the remaining development of the Property. 59. On or about 8 February 2010, the Bank represented to 888 Projects that: a. that the Credit Department of the Bank would likely approve the Proposed December 2009 Variation and continue to fund the Development though to completion and sale; and b. that there was no need for 888 Projects to refinance the Facility, (the 'February 2010 Representation'). The February 2010 Representation was partly a future representation (para (a) above) and partly a present representation (para (b) above). 60. In reliance on the February 2010 Representation, 888 Projects and Mr Ekes did not take steps to further progress the project pending approval of a replacement builder or seek to refinance the Facility." 34The cross-claim then pleaded that the appointment of the receivers and managers to the company was wrongful. The pleading was as follows: "Appointment of the Receivers 61 On 11 February 2010, the Bank purposed to appoint Messrs N G Singleton and S J Parbury as receivers and managers to 888 Projects ('the Receivers'). 62. The purported appointment by the Bank of the Receivers to 888 Projects was: a. wrongful in circumstances where the repayment date of the Facility was extended to 31 March 2010; b. without prior notice to 888 Projects or Mr Ekes as guarantor; c. without any or any proper regard to the prior dealings between the Bank and 888 Projects and Mr Ekes including: i. The Estate Advice and Mr Ekes' purchase of the shares of 888 Projects including entry into the Murray Mortgage; and ii the making by the Bank and the reliance by 888 Projects and Mr Ekes on the April 2009 Representation, the June 2009 Representation, the August 2009 Representation, the December 2009 Representation and the February 2010 Representation; d. without any or any proper regard to the state of the Development; e. without any or any proper regard to the ability of 888 Projects to complete the Development; f. without any or any proper regard to the ability of 888 Projects to refinance the Facility; and g. without any or any proper regard to the effect the appointment of receivers and managers to 888 Projects would have on 888 Projects, the completion of the project the subject of the Facility and on Mr Ekes as guarantor. 63 Upon the appointment of the Receivers, 888 Projects was excluded from the site. 64 As a result of the appointment of the Receivers, 888 Projects could not, and would not have been able to, refinance the Facility and complete the Development. 65 The Bank knew, or ought to have known, that with the appointment of the Receivers 888 Projects would not have been able to refinance the Facility and complete the Development. 66 On or about late 2010, the site was sold as an uncompleted project by the Receivers. 67 On or about 2 August 2012, Ms Murray served a demand for payment pursuant to the guarantee of the second mortgage on Mr Ekes. 68 As a result of the appointment of the Receivers, Mr Ekes has suffered loss and damage as follows: a. any liability (which is denied) to the Bank under the guarantee 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; and c. consequential liability pursuant to the Murray Mortgage: $2,700.00. Misleading or Deceptive Conduct 69 The Bank has denied the fact and terms of the variations alleged on or about 28 April 2009 (para 22 above), 19 June 2009 (para 25 above) and 10 August 2009 (para 32 above). 70 In the event that the alleged agreements are not enforceable, each of the April 2009 Representation, the June 2009 Representation and the August 2009 Representation were untrue. 71 The December 2009 Representation and the February 2010 Representation were untrue. 72 Mr Ekes has suffered loss or damage in reliance on each of the April 2009 Representation, the June 2009 Representation, the August 2009 Representation, December 2009 Representation and the February 2010 Representation. Particulars (a)any liability (which is denied) to the Bank under the guarantee subject of these proceedings; (b)loss of $832,600.00 (being the total of payouts referred to at paragraphs 28, 30-31, 36, 39-45, 47-49 and 51); and (c)consequential liability pursuant to the Murray Mortgage: $2,700,000." 35In the alternative, the cross-claim alleged that if the variation agreements were not enforceable, the respondent engaged in unconscionable conduct and the appellant suffered the same loss as that claimed in paragraphs [68] and [72] of the cross-claim, which I have set out above.

[4]

The primary judgment 36Relevantly, the primary judge dealt with three matters in Commonwealth Bank of Australia v Ekes [2013] NSWSC 1264 (the primary judgment). First, a motion brought by the respondent seeking to strike out the filed defence, second, a motion by the appellant to file a further defence (being the proposed defence) and, third, a motion by the appellant to file the cross-claim. 37The primary judge accepted that as the matters were argued on the basis that the filed defence should be summarily dismissed, what he described as the constraints in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 (General Steel), governed its determination. The same principles would apply to the proposed defence and to the cross-claim as it was argued leave should not be granted to file them on the basis they disclosed no arguable cause of action. In relation to the cross-claim it was argued in addition that leave should not be granted as a matter of discretion. 38The primary judge summarised the history of the proceedings between the filing of the filed defence and the date of the hearing of the motions. He stated (primary judgment at [58]) that there were three matters of substance to be determined; the effect of the Dismissal, the proper parties to the proceedings before him and discretionary considerations concerning the lateness of the application for leave to file a cross-claim. He said that the first issue involved matters of issue estoppel, Anshun estoppel and abuse of process (primary judgment at [56]). He noted that it was contended that the company should have been joined in the proceedings (primary judgment at [60]). 39The primary judge summarised the pleadings in the Federal Court proceedings. He noted that the Federal Court Rules (Cth) (now repealed) provided that the orders of the Dismissal had the same force and validity as if they had been made by the judge (Federal Court Rules Order 35 r 10A(3)). He also noted that no application had been made under Order 35 r 6 of the Federal Court Rules that the Dismissal be "without prejudice to any right of the applicant or claimant... to claim the same relief in fresh proceedings" (primary judgment at [76]-[77]). 40The primary judge concluded that the contention that the Dismissal did not give rise to an issue estoppel did not take account of these rules. He stated that even without these rules there would be "an issue estoppel with respect to the causes of action pleaded in those proceedings" (primary judgment at [91]). His Honour concluded (at [93]) that the filed defence and the proposed defence depended on a finding that the facility agreement was varied in April 2009 and in the following months to postpone the repayment date. He concluded that in those circumstances the question was whether the appellant could raise that issue to defeat the respondent's claim and bring a cross-claim. 41In dealing with the plaintiff's submission that the first defendant could have made the present claim in the Federal Court proceedings, his Honour made the following remarks: "[98] In 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." 42His Honour then noted that the appellant, not being a party to the contract, could not assert it was varied. The consequence in his opinion was that it was not open to the appellant to assert that the agreement was varied or make a claim for damages for loss suffered by the company. 43In dealing with the question of whether the appellant was a privy of the company, so as to be precluded from relying on any defence or claim arising out of the alleged variation of the loan facility agreed to in April 2009, his Honour referred to Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245. His Honour stated that the test for privity for an Anshun estoppel was not the same as when a cause of action or issue estoppel is raised. His Honour considered whether an Anshun estoppel would bar the appellant from defending the proceedings as a result of his failure to join in the Federal Court proceedings. This was by reason of the fact that the appellant was the controlling mind of the company. It is not entirely clear whether his Honour decided the case on that basis. 44The primary judge expressed the view (primary judgment at [118]) that the appellant was seeking to avail himself of defences and cross-claims available to the company to defeat the respondent's claim. He said (at [119]) that as a guarantor, the appellant would generally be entitled to rely on such claims and defences. His Honour said that in that way the appellant was making such claims through the company. 45The primary judge concluded that the appellant could only avail himself of such claims if they were available to the company. He said they were not available because of the conclusion of the Federal Court proceedings. He also concluded the appellant could not claim reflective loss, namely, loss which is merely a reflection of loss suffered by the company. 46The primary judge concluded that the appellant was precluded from claiming the losses referred to in paragraph 72 of the cross-claim and the equivalent paragraphs by reason of the issue estoppel which had arisen (primary judgment at [122]-[123]). He also concluded that the appellant could not claim this amount because it fell within the category of reflective loss. 47The primary judge also concluded that the loss in paragraph 72 of the cross-claim and the equivalent claim in other paragraphs could not be the subject of the cross-claim. He concluded the payments in question were made by way of loans by the appellant to the company. He stated the payments were made when there was no obligation to do so. He said in these circumstances they could not be recovered relying on what was said by Beazley JA (as her Honour then was) in Chen v Karandonis [2002] NSWCA 412 (Chen). 48His Honour accepted that the claim for consequential loss under the Murray mortgage (the Murray mortgage claim) could not be regarded as reflective loss. 49In the result the primary judge concluded that all defences and those parts of the cross-claim arising from allegations of an extension of the repayment date were unarguable. This only left the Contracts Review Act claim and the Murray mortgage claim in the cross-claim (primary judgment at [135]). 50The primary judge however concluded that the appellant should not be permitted to bring those claims. He concluded that the cross-claim could have been filed and served much earlier (primary judgment at [150]). He effectively rejected the proposition that the delay was caused by the plaintiff's impecuniosity (primary judgment at [151]). He referred to the description of the delay by senior counsel for the appellant as largely the appellant's fault and incredible. He said there was no satisfactory explanation for failing to file the cross-claim earlier pointing out that the appellant had many opportunities to do so (primary judgment at [153]-[154]). 51The primary judge described the appellant's approach to litigation as entirely inconsistent with what is required under ss 56-58 of the Civil Procedure Act 2005 (NSW). He said there was not only inordinate delay but a casual approach to court orders which might be described as contemptuous. 52In these circumstances he concluded that the dictates of justice required that leave to file the cross-claim should be refused. In doing so he considered the case sought to be raised under the Contracts Review Act and the Murray mortgage claims were not strong (primary judgment at [159]) and there would be considerable prejudice to the respondent (primary judgment at [161]). 53In these circumstances the primary judge made the orders the subject of the appeal.

[6]

(1) The estoppel/abuse of process issue 55The grounds of appeal relating to this issue were as follows: "1 His Honour erred in holding that the dismissal of the Company's proceedings in the Federal Court created an issue estoppel that prevented the Company from raising the defence and claim that it had raised in those proceedings in any subsequent proceedings: [91] and [94]. 1A If, as contended by the respondent and denied by the appellant, his Honour held that the appellant was Anshun estopped by reason of his 'failure to join in the Federal court proceedings'(at [98]), his Honour erred in so finding in circumstances where: the appellant was not a party, or a necessary party, to the Federal Court proceedings; the Federal Court proceedings were dismissed prior to any hearing on the merits, or before any defence had been filed; and it was not unreasonable in the circumstances for the appellant not to have joined the proceedings. 2 His Honour erred in holding at [101] that it was not open 'to the First Defendant to assert that the contract between the Plaintiff and the Company had been varied'. 3 His Honour erred at [117] in departing from Australian Associated Motor Insurers Limited v NRMA Insurance Limited (2002) 124 FCR 518 at [74] by refusing to hold that a surety is not the privy of the principal debtor for the purposes of issue estoppel. 4 His Honour erred in holding at [119] that because the First Defendant, as guarantor, was invoking defences available to the principal debtor (the Company) against the Plaintiff, the First Defendant was 'claiming through the Company' and was, therefore, the privy of the Company, notwithstanding that the First Defendant was not a director of the Company at the time; a. the Federal Court proceedings were dismissed by reason of the Company failing to provide security in support of an undertaking as to damages; or b. when Company could have sought an order pursuant to Order 35 rule 6(1) of the Federal Court Rules (as they then were). 5 His Honour, therefore, erred in concluding at [120] that because the First Defendant was the privy of the Company, the First Defendant was prevented from asserting in his Defence any defence raised by the Company in the earlier Federal Court proceedings by reason of issue estoppel (specifically, any defence premised upon the allegation that the Plaintiff had extended the repayment date). 6 Accordingly, his Honour erred in the exercise of his discretion in striking out the First Defendant's Further Amended Defence and refusing the First Defendant leave to file a Second Further Amended Defence: [135]. 8 His Honour erred: a. at [123] in holding that the 'claim [arising under paragraph 72(a) of the proposed cross claim] is not available to the First Defendant' because '[t]he matter has been determined by judgment in the Federal Court proceedings' by reason of those matters raised in appeal grounds one and three to five above. 10 His Honour erred at [141] in holding that "the claims in the Cross-Claim which appeared in the earlier form 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" because of his Honour's erroneous findings canvassed in appeal grounds one and three to five above." 56As I indicated, the notice of contention also related to these issues. The matters raised in the notice of contention were as follows: "1 If, and to the extent, the primary judge did not do so at [92]-[98], his Honour ought to have held that the appellant was precluded from prosecuting the Further Amended Defence filed on 12 March 2012, the proposed Second Further Amended Defence and the claims made in the proposed First Cross-Claim (other than the claim under the Contracts Review Act 1980 (NSW) pleaded in [10]-[13] and the claim relating to the Murray mortgage pleaded in [18], [67], 68, [72] particular (c) and [75] particular (c)), by reason of an Anshun estoppel arising from the final determination of Federal Court of Australia proceedings NSD 182 of 2010. 2 The primary judge ought to have held that the appellant was precluded from prosecuting the Further Amended Defence filed on 12 March 2012, the proposed Second Further Amended Defence and the claims made in the proposed First Cross-Claim (other than the claim under the Contracts Review Act 1980 (NSW) pleaded in [10]-[13] and the claim relating to the Murray mortgage pleaded in [18], [67], 68, [72] particular (c) and [75] particular (c)), by reason that it was an abuse of process to do so, having regard to the final determination of Federal Court of Australia proceedings NSD 182 of 2010. 3 The primary judge ought to have held that the appellant was precluded from prosecuting those parts of his pleading (namely paragraphs 8, 12, 28(c) and 40(a) of the Further Amended Defence filed on 12 March 2012, paragraphs 8, 10A, 12, 28(c) and 40(a) of the proposed Second Further Amended Defence and paragraphs 22, 25, 32 and 62(a) of the proposed First Cross-Claim) which were founded upon any alleged agreement between 888 Projects Pty Ltd and the respondent to vary the terms of the contractual arrangement between them."

[7]

The appellant's submissions 57The appellant pointed out that for an issue estoppel to arise in subsequent proceedings three elements must exist: first, the same question has been decided in the earlier proceedings; second, the judicial decision said to create the estoppel was final; and, third that the parties to the proceedings were the same or their privies. He emphasised that the estoppel only covered those matters necessarily established as the legal foundation for the conclusion reached. 58The appellant accepted that an issue estoppel could arise from a consent judgment but emphasised it was necessary to ascertain whether any and what adjudication of matters in dispute was expressly or necessarily involved in the actual decision said to give rise to the estoppel. The appellant, however, accepted that the Dismissal effected an estoppel per rem judicatum, preventing the company from bringing the causes of action pleaded by it in the Federal Court proceedings in subsequent proceedings. However, he submitted that that did not lead to the conclusion that the judgment necessarily resulted in an issue estoppel precluding the appellant (assuming he was a privy of the company) from raising the issues in the company's pleading. 59The appellant submitted that the consent judgment was premised on the company's failure to pay the security ordered by Jacobson J. He submitted that in these circumstances the judgment did not involve a determination that the loan repayment date had not been extended as that finding was not legally indispensable to the final judgment. He submitted that the case was distinguishable from SCF Finance Co Ltd v Masri (No 3) [1987] 1 QB 1028 as there was no abandonment of the claims at the time they were ready for hearing. He pointed out that the Federal Court was not asked to make any judgment or determine the issues and could not have done so as no defence had been filed. 60The appellant submitted that in those circumstances the only estoppel that arose from the consent judgment was the actual order itself. He conceded no order under Order 35 r 6 of the Federal Court Rules was sought, a factor on which the primary judge placed some reliance (primary judgment at [76]). 61The appellant submitted that even if an issue estoppel was capable of arising he was not a privy of the company so as to be bound by any such estoppel. 62The appellant submitted that it was irrelevant for the purpose of privity of interest that the appellant had acted through the company to undertake the development of the property. He in effect, submitted that in resisting the claim under the guarantee he was not claiming through or under the company as his cause of action was entirely distinct from the company's. He submitted that it was well established that a guarantor was entitled to defend a claim on a guarantee by invoking defences available to the principal debtor and that did not constitute a guarantor being a privy of the principal debtor. 63The appellant also submitted that the fact that he was the legal owner of 100% of the shares in the company and was a director until 15 March 2010 did not make him a privy of the company. He submitted that the dictum of Handley AJA to the contrary in Champerslife at [131] should be treated with caution. He submitted, however, that if the dictum was to be adopted the appellant could not be bound because he was not a director at the time of the Dismissal. He also referred to the fact that he did not beneficially own all the shares in the company. It also should be noted that nor was he the sole director of the company. 64The appellant submitted that the conclusion reached by the primary judge was not based on Anshun estoppel (as per the case of Port of Melbourne Authority v Anshun Proprietary Limited [1981] HCA 45; (1981) 147 CLR 589 (Anshun)). He submitted that an Anshun estoppel could not arise as there had been no adjudication of the prior proceedings. 65The appellant also submitted that the primary judge was incorrect in concluding that it was unreasonable for him not to have joined in the Federal Court proceedings. He pointed out they lasted only six weeks and that at no time during their currency had any claim been made on the guarantee. He also pointed to the fact that the respondent failed to point to any case where an Anshun estoppel had been successfully raised against a defendant when he failed to join earlier proceedings as a plaintiff. 66The appellant also emphasised (referring to what was said by Hodgson JA in Redowood Pty Limited v Link Market Services Pty Limited (Formerly Known As ASX Perpetual Registrars Limited) [2007] NSWCA 286 (Redowood) at [45]) that careful scrutiny had to be employed in deciding what was unreasonable. Further, that in a case of different parties, the unreasonableness must be of such a nature that the latter proceedings are an abuse of process. 67The appellant also submitted that an important matter in determining whether an Anshun estoppel arose is whether the proceedings in question are in effect a collateral attack on the earlier judgment or give rise to the possibility of conflicting verdicts. He submitted that these possibilities did not arise in the present case. 68The appellant accepted that what was reasonable was a value judgment to be made with reference to the proper conduct of modern litigation. However, in that context he pointed out that the Federal Court proceedings were dismissed prior to the close of pleadings and that the shortness and urgency of the proceedings countered the respondent's suggestion that the appellant had ample opportunity to join in those proceedings. Further he noted that no demand had been made on the guarantee. He referred in that context to Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57 in which Garde J declined to follow part of the reasoning of the primary judge in the present case. 69The appellant also emphasised that the mere fact that he could have joined in the Federal Court proceedings was not sufficient to establish an Anshun estoppel; rather it was necessary to show that it was unreasonable for him not to do so. 70To the extent that privity is relevant to the question of whether a party is estopped from bringing proceedings by the application of Anshun estoppel, the appellant submitted that the principles governing the question of privity of interest were the same as those which arise in the case of a res judicata or issue estoppel. He submitted that this was consistent with the view of at least the majority in Champerslife. 71The appellant also submitted that the filed defence and proposed defence did not amount to an abuse of process. He submitted an abuse of process will only arise where the bringing of the proceedings would be manifestly unfair to the other party or bring the administration of justice into disrepute. He emphasised the power to stay proceedings as an abuse of process was exceptional and should only be exercised in extreme circumstances. 72The appellant pointed to the fact that any re-litigation was minor having regard to the stage the Federal Court proceedings had reached prior to the Dismissal. He submitted that the litigation did not constitute successive actions amounting to unjust harassment, noting that the matters complained of were raised as a defence in circumstances where the guarantor had not previously been sued.

[8]

The respondent's submissions 73The submissions of the respondent relied primarily on Anshun estoppel and abuse of process. It submitted that the appellant was incorrect in its conclusion that the trial judge founded his judgment on the basis that the appellant was prohibited by the doctrine of issue estoppel from bringing the claims raised in the defence and cross-claim. It should be noted that the respondent did not contend that the appellant was estopped from bringing the Contracts Review Act claim or that the bringing of that claim amounted to an abuse of process. 74The respondent submitted that each of the claims brought by the company in the Federal Court proceedings were premised on an assertion that the repayment date under the facility agreement had been varied. It submitted that the appellant's claim was based on the same allegation. It's submission that an Anshun estoppel arose in those circumstances was essentially based on the following propositions. 75First, Anshun estoppel was founded on the policy that disputes between parties should be resolved by a single action rather than several successive proceedings. Second, such an estoppel may arise where an omission to plead a claim will give rise to conflicting judgments. Third, the doctrine was concerned with substance not form, the respondent in its submission describing it as a value judgment; the doctrine being designed to promote the efficiency and finality of litigation. 76The respondent submitted the appellant would not have suffered any disadvantage by pleading his claims in the Federal Court proceedings. It submitted "the advantages of convenience, importance, economy of time and expense" favoured the inclusion of all claims. 77The respondent submitted that the fact that the Federal Court proceedings were dismissed without a hearing on the merits did not prevent an Anshun estoppel from arising. It submitted that an important purpose of the doctrine was to protect a defendant from harassment involved in repeated actions. 78The respondent submitted that the requisite degree of privity required to preclude a person not a party to the original proceedings from bringing proceedings by virtue of an Anshun estoppel was encapsulated by Megarry VC in Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510. In that case his Lordship said at 515 "that 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". 79The respondent submitted that the pleading of the cross-claim showed that the appellant was the controlling mind of the company. It described the company as the corporate embodiment of the appellant submitting that the appellant made decisions and gave instructions on behalf of the company and had a real financial interest in the outcome of the Federal Court proceedings. In these circumstances it submitted an Anshun estoppel applied to preclude the appellant raising the defences relied upon and bringing the cross-claim. 80The respondent submitted in the alternative that the bringing of the defence and cross-claim amounted to an abuse of process. It submitted in that context the guiding considerations are whether the proceedings are oppressive and unfair to the other party and a concern for the integrity of the system of administration of justice. It submitted relevant considerations included the importance of the issue to the earlier determination, the opportunity to fully litigate the issue, the finality of the finding and the extent of the unfairness if the issue was re-litigated. The respondent submitted it was not necessary that the parties be privies for an abuse of process to arise. 81The respondent submitted that if the Federal Court proceedings had been brought to trial they would have involved the same issues and evidence as the present proceedings. It repeated the submission that the claim that the repayment of the loan facility had been varied was a claim only available to the company and thus it was necessary for the company to be joined. It submitted that once joined the company would be estopped from contending there was a variation. This, it submitted, demonstrated that the bringing of the defence and cross-claim would be an abuse of process. 82At the hearing senior counsel for the respondent submitted that the need to join the company also demonstrated that what was involved was a collateral attack on an earlier judgment. He also submitted that the broad proposition that a guarantor could rely on any defence available to the company was incorrect. He submitted, referring to Covino v Bandag Manufacturing Pty Ltd [1983] 1 NSWLR 237 (Covino) and Cellulose Products Pty Ltd v Truda (1970) 92 WN (NSW) 561 (Cellulose), that in certain cases such a defence could not be relied upon unless the principal debtor was joined. He submitted that one such case was where the relief was directed to the underlying contractual arrangements between the creditor and the principal debtor. He submitted subsequently that the principle may be limited to circumstances where what is relied upon is an equitable set-off available to the principal debtor. 83The respondent also contended that an issue estoppel arising under the Federal Court proceedings precluded the appellant from bringing the present proceedings. It emphasised that no application was made under Order 35 r 6 of the Federal Court Rules. 84The respondent submitted that there was no legal or practical requirement for the company to consent to the Dismissal. Importantly it emphasised the company had sought urgent interlocutory relief and determined not to proceed with it. It submitted that the effect of the consent judgment was to effectively concede the issues the subject of the proceedings. 85The respondent submitted that the proposition that the only estoppel that arose from a consent judgment was the order itself was confined to certain circumstances. Namely, where there was no material available to ascertain the matters in dispute or which the parties recognised were the subject of litigation and fundamental to the judgment. The respondent submitted that was not the present case. 86The respondent also submitted that the appellant and the company were privies. It submitted that in Champerslife, Allsop P and Handley AJA left open the question whether a shareholder who claimed through or under the company or had a material interest with it could be a privy. It submitted the fact that the appellant was a privy to the company could be demonstrated in three ways. 87First, the company was the corporate embodiment of the appellant. Second, the appellant was claiming through the company in the sense that as guarantor he is generally entitled to defend the claim in reliance on defences and claims available to the company. Third, it submitted, that a guarantor may be bound by an issue estoppel where he or she is so closely associated with the subject matter of the proceedings, has taken no steps to defend or advance his or her own interest when he or she is in a position to do so and the determination of an identical issue affects him or her. It submitted the appellant had shared legal interests with the company so that these three propositions did not impermissibly extend the doctrine.

[9]

(a) General matters and failure to join the company 88Although the detailed submissions and argument might suggest to the contrary, this was a case, which the primary judge correctly observed, depended on the respondent satisfying the court that the filed defence, the proposed defence and the cross-claim, insofar as they raised similar issues, were so obviously untenable that they could not possibly succeed: General Steel at 128-130 and Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 at [24]. Although the principles are well known it is useful in the particular circumstances of the present case to refer to a summary of them by Emmett JA in State of New South Wales v Williams [2014] NSWCA 177 at [71], Macfarlan JA and Simpson J agreeing: "[71] The requirement for establishing that there is no triable issue is a demanding one and the power to strike out a pleading on the basis that it discloses no reasonable defence, or is an abuse of process, should be exercised only in plain and obvious cases. The power should not be exercised in cases of doubt or difficulty or where the pleading raises a debatable question of law. Once it appears that there is a real issue, whether of fact or law, and that the rights of the parties depend upon it, a court should not dismiss a defence raising such an issue, either on the basis that no reasonable defence is disclosed or as an abuse of process (see Dey v Victorian Railways Commissioners [1949] HCA 1; 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 129-130; Commonwealth v Griffiths [2007] NSWCA 370; 70 NSWLR 268 at [11]-[12] and Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 at 139-140)." 89For the reasons given below in my opinion the arguments of the respondent in the present case fell well short of meeting the required threshold. 90The filed defence, the proposed defence and the cross-claim are all somewhat complex documents and it is important in considering the issues raised to have regard to precisely what is alleged. 91The filed defence denies liability on the basis that there had been no default under the loan agreement by the principal debtor. This was based first, on the allegation that the loan repayment date had been extended to 31 March 2010. It was then alleged that the appointment of receivers and managers on 11 February was invalid. It pleaded that as a result the company could not complete the project and pay its creditors. It pleaded that as a consequence a debt due to the Office of State Revenue was not paid and the company was wound-up. 92The pleading asserts that as a result the respondent was precluded from relying on the winding-up order as a default by the company. It then asserts at [40] that there was no default by the company and no amount owing under the facility. It also alleges that any loss suffered by the respondent was loss that arose as a result of its conduct. 93The pleading is obscure. However, it seems to contend that as the loan repayment date was extended the subsequent conduct of the respondent was wrongful and caused the company loss. The loss is asserted in the pleading to exceed or be at least equal to the amount advanced to the company by the respondent and could be set-off against that amount. 94It was not in contest, either in this Court or in the Court below, that subject to the effect of the Federal Court proceedings, the pleading disclosed a cause of action that would be available to the company. 95The filed defence also pleads as an alternative to an agreement to extend the repayment date that the respondent had waived any default under the facility agreement. 96The proposed defence sought to achieve the same result by relying in addition on various estoppels. Once again it was not contended that subject to the Dismissal, such claims would not be available to the company. 97The cross-claim makes similar allegations together with the additional allegations, which I have referred to in par [30] above. It pleads that the appellant suffered loss and damage, the loss and damage being the nature of that pleaded at paragraphs [68] and [72] of the cross-claim (see par [34] above). 98Subject to any question of estoppel or abuse of process, the respondent did not contend that these claims could not be raised by the appellant but rather submitted they could not be raised without the company being joined. The respondent relied on cases which held that a guarantor could not rely on an equitable set-off available to the principal debtor or only could do so if the principal debtor was joined to the proceedings. No particular attention was paid to the question of whether the claims were in the nature of set-off or in truth cross-claims which may not be available to the guarantor: see in particular in relation to the claim at s 52 of the Trade Practices Act, O'Donovan and Phillips, The Modern Contract of Guarantee (4th ed 2004, Thomson Lawbook Co) (The Modern Contract of Guarantee) at 11-670. 99In Cellulose, Isaacs J held that a surety cannot defend an action on a guarantee by claiming, by way of set-off or cross-claim, whether at common law or in equity, unliquidated damages resulting from a breach of contract between the principal debtor and the creditor. His Honour extensively reviewed the case law in both this country and the United Kingdom and came to the following conclusion at 588: "This review of the cases lends no support to the submission that a surety when sued is entitled to set up in equity or at law as an equitable plea any cross action for unliquidated damages which the debtor may have against the creditor in respect of the transaction, the performance of which the guarantor had entered upon his guarantee; that is, in the absence of the debtor being before the court in the proceeding so as to be bound by verdict and judgments. This of course does not mean that the guarantor is without remedy; when he is sued he has a right immediately to join the debtor as a third party and claim complete indemnity from him. The debtor has then a right to join the plaintiff as a fourth party, claiming damages for breach of warranty and so obtain indemnity either in whole or in part. All the actions would be heard together, the rights of all persons determined and appropriate set-off's made after verdict, and if there be any surplus of damages over and above that which is required to meet the guarantee, the debtor will have recovered from the creditor who, in the result, will get no more than that to which he would be justly entitled." 100Covino was a case where the respondent had obtained a judgment against the principal debtor. The primary judge refused leave for the guarantor to raise a cross-claim said to be available to the company. An appeal by the guarantor was dismissed. Hutley JA decided the case on the basis that there was no equitable claim which impeached the title of the respondent. Glass JA followed Cellulose, whilst Mahoney JA considered that the primary judge was entitled as a matter of discretion to refuse leave to file the cross-claim having regard to the delay in it being made. 101In an earlier decision, Langford Concrete Pty Ltd v Finlay [1978] 1 NSWLR 14, the guarantor of a debt of a company in liquidation sought to set up a claim of the debtor for defective work going to diminution of the contract price. It was accepted that the debtor could have set up the claim in diminution of the price: Mondel v Steel (1841) 151 ER 1288. The court (Hope, Hutley and Samuels JJA) held that if all procedural difficulties could be overcome the guarantor could take advantage of the proposed set-off. Their Honours made the following remarks at 18: "No cross-claim or set-off can directly reduce the debt concerned and, if this principle were rigidly adhered to, it would mean that, in no case, could a guarantor take advantage of a set-off or cross-claim, except where the debtor is before the court. This is not consistent with authority: see Murphy v. Glass a decision of the Privy Council on appeal from the Supreme Court of Victoria. It does, therefore, appear that the rigidity of principle has been adjusted on certain occasions to permit the litigation of these issues without the presence of all parties concerned. Wilson v. Mitchell is not directly in point and, if it were, is not binding on this Court. The dictum in that case which would support the respondent's argument does not deal with the special case of an insolvent co-surety. One exception which has been suggested is where the debtor is insolvent or, as here, is a company in liquidation: Cellulose Products Pty Ltd v. Truda. Where the company is in liquidation its creditors' rights are those of proof and, except with the permission of the Supreme Court, it cannot be sued. It is impossible to imagine a liquidator electing to accept the creditor's claim in full, and then independently invoking the right of cross-action. Even in the classic days of equity the joinder of an insolvent could be dispensed with. Though ordinarily all parties to joint bonds had to be parties to a suit: Story's Equity Pleadings, 6th ed., p.192, par.169 says: "There are, however, exceptions to the general rule standing upon peculiar grounds. Thus, if, in the case of a joint and several bond, one of the obligors (either a principal, or a surety), is insolvent, he need not be made a party.", citing Cockburn v. Thompson. In this present case, the insolvent company and the appellant are both principal debtors; qua the respondent they are jointly liable." (References omitted). 102In the present case, not only is the debtor in liquidation but the creditors' rights against it have merged with the judgment. There can be no benefit to the creditor in having the company joined. 103In GE Capital Australia v Davis [2002] NSWSC 1146; (2002) 180 FLR 250, 276 Bryson J (as his Honour then was) extensively reviewed the authorities on this issue. After pointing to the fact that a somewhat different view to that expressed by Isaacs J in Cellulose had been taken by the English Court of Appeal in National Westminster Bank Plc v Skelton [1993] 1 WLR 72 and Hyundai Shipbuilding & Heavy Industries Co v Pournaras [1978] 2 Lloyd's Rep 502 his Honour reached the following conclusion at [84]: "In proceedings to establish the amount due and the availability of any equitable set-off it is desirable that all persons interested including the debtor should be parties to the proceedings and bound by the results. If guarantors took the initiative and brought proceedings in which they claimed orders establishing the amount of their indebtedness the court should not permit them to do so without joining the debtors as parties to taking the mortgage accounts. Yet for Mahiya and Chircan, which passed into creditor's voluntary liquidation the day before the sale, there seems to be little or nothing to be achieved by joining them as parties. Even under the old strict practice considered by Isaacs J in Cellulose, and even in relation to a common law claim for damages for breach of a contract in right of the debtor there may be exceptions to procedural strictness. In National Westminster Bank Plc v Skelton Slade LJ said at WLR 79; All ER 251: "First, Isaacs J himself expressly recognises, at 585, that exceptions to his general rule might arise in cases such as the present where a debtor is insolvent so that, instead of having a full right of exoneration by the principal debtor, the surety can only prove in the liquidation of the principal debtor for a dividend". In Langford Concrete Pty Ltd v Finlay [1978] 1 NSWLR 14 at 18-19 the Court of Appeal approved the absence of a debtor which was in liquidation from proceedings in which the guarantor sought to raise as a cross-claim a contractual claim to which the debtor was entitled. As Mahiya and Chircan are insolvent and in liquidation their absence from the litigation and their not being bound by the decision do not seem to have any practical importance." 104In an application of this nature, it is not necessary to examine in detail the English authorities or the extent they exhibit a different approach to the cases summarised above. The position with respect is well summarised in Andrews and Millet, Law of Guarantees, (4th ed 2005, Sweet & Maxwell) at 11-006 and in Marks and Moss, Rowlett on Principal and Surety, (6th ed 2011, Sweet & Maxwell) at 4-104. 105The uncertainty of authority on this issue has led the authors of The Modern Contract of Guarantee to conclude that, although generally a guarantor cannot plead an equitable set-off available to the debtor without joining the debtor, a guarantor should be allowed to resist a summary judgment application without joining the debtor. This is provided the debtor is subsequently joined so as to be bound by any final order. The authors recognise an exception may arise when the debtor is in liquidation. 106In light of these authorities, the appellant's case is not unarguable, notwithstanding the non-joinder of the company. The company is in liquidation and the respondent's rights against it have merged in the judgment: Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 (Blair) at 532. Not only is there no benefit to the respondent in joining the debtor but any judgment against it has no effect on the rights of the respondent and the company vis-a-vis each other. 107As the company's rights are not affected by any judgment the principle in John Alexander's Clubs Pty Limited v White City Tennis Club Limited [2010] HCA 19; (2010) 241 CLR 1 at [131]-[132] does not require the joinder of the company. 108I emphasise that I have reached this conclusion on the assumption that leaving aside the question of issue estoppel, Anshun estoppel, abuse of process and the question of joinder, it was arguably open to the appellant to rely on the filed defence, the proposed defence and cross-claim. That was the basis upon which the proceedings were conducted both before the primary judge and in this Court. In these circumstances the filed defence should not have been struck out and leave to file the proposed defence and cross-claim should not have been refused on the basis that the company was not joined.

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(b) Issue Estoppel 109It is convenient to next turn to the question of whether an issue estoppel precludes the appellant from relying on the defences and cross-claim. 110The principles which determine whether an issue estoppel arises are well established although their application can cause difficulty. For an issue estoppel to arise it is necessary that it be established that the same question arises, that the judicial decision said to create the estoppel was final and that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies: Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853 at 935 and Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363 at [21]. 111It was accepted correctly by the parties that a consent judgment could give rise to an issue estoppel: Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 (Chamberlain) (although that was a case of res judicata or cause of action estoppel), Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 (Habib) at [186] and Makhoul v Barnes (1995) 60 FCR 572 at 582. 112An issue estoppel will only arise in respect of those matters which a primary decree, order or judgment necessarily established as the legal foundation for the decision and nothing but that which is legally indispensable to the conclusion is thus finally closed or precluded: Blair at 531-532. In the case of a judgment by consent this may be productive of some difficulty: Chamberlain at 508 and Isaacs v The Ocean Accident and Guarantee Corporation Ltd and Winslett (1958) SR (NSW) 69 (Isaacs) at 75. As was pointed out in the latter case, a court will examine all evidence that is available and admissible and with the aid of such material ascertain any and what adjudication of matters in dispute was expressly or necessarily involved in the actual decision assented to. 113In the present proceedings the appellant contended that this was a case where the only estoppel which arose from the consent judgment was the actual order itself, relying on what was said by Santow J in Minero Pty Ltd v Redero Pty Ltd (Unreported, Supreme Court of New South Wales, 29 July 1998). 114In Handley, Spencer Bower and Handley Res Judicata (4th ed 2009, LexisNexis) (Spencer Bower and Handley Res Judicata), the learned author points out at 2.16 that the extent to which a consent judgment gives rise to an issue estoppel has not been finally decided. However, it seems clear that in determining that issue the court can consider the objective background leading to the judgment to determine what was decided: Isaacs and In re South American and Mexican Company; Ex parte Bank of England [1895] 1 Ch 37 at 50. 115The appellant submitted that the reason for the Dismissal was the inability of the company to meet an order for security of costs or the security for the undertakings given by the respondent and the receivers and managers. To the extent this submission suggests that regard should be had to the subjective motivation of those controlling the company in consenting to the judgment, it is incorrect. The test, in my opinion, is objective: Spencer Bower and Handley Res Judicata at 2.17. However, regard can be had to the background leading up to the order. 116In the present case the company had sought interlocutory relief restraining the receivers and managers appointed by the respondent from performing their function. Undertakings were given conditional upon compliance with any order for security. The company was unable or unwilling to comply with the conditions or to provide additional security for costs. In those circumstances, it agreed to the release of the undertakings and the Dismissal. 117In that context as Brightman LJ put it in Khan v Golechha International Ltd [1980] 1 WLR 1482 the issue raised in the proceedings was put to rest. A final hearing had been set down for 13 and 14 April 2010. The company, by declining to provide the security and consenting to the Dismissal, effectively abandoned any claims based on the extension of the loan repayment date. In the circumstances, the company would be estopped from raising against the respondent any claim based on an extension of that date. 118However, for the estoppel to bind the appellant it must be shown that he was a privy of the company. In the present case, for the respondent to succeed it was necessary for it to establish unarguably that the appellant was a privy in interest to the company. It seems to me that there are formidable difficulties in reaching that conclusion. 119The 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": Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271 at 279 per Barwick CJ and Trawl Industries of Australia Pty Limited (In liquidation) v Effem Foods Pty Limited [1992] FCA 272; (1992) 36 FCR 406 (Trawl Industries) at 413 per Gummow J. 120The respondent submitted that in raising defences available to the company the appellant is claiming through or under the company. However, there is a consistent body of authority to the effect that a guarantor is not a privy of the principal debtor. That principle was stated succinctly by Parke B in Bain, Public Officer v Cooper (1841) 151 ER 1243 in the following terms at 1244: "But that is not so in the present case, where the parties are only in the relation of principal and surety, and there is no privity of interest between them, since the surety contracts with the creditor: they are not one person in law, and are not jointly liable to the plaintiff." 121In Robert Louden Begley v The Attorney General of New South Wales [1910] HCA 69; (1910) 11 CLR 432, an action was brought against a surety to an administration bond based on a decision in the Equity Court that the administrator had not properly administered the estate. It was held a surety was not a privy of the administrator. Griffiths CJ stated the principal in the following terms, citing Ex parte Young; In re Kitchin (1881) 17 Ch D 668, at 440: "In the absence of special agreement a judgment or an award against a principal debtor is not binding on the surety, and is not evidence against him in an action against him by the creditor, but the surety is entitled to have the liability proved as against him in the same way as against the principal debtor." Isaacs J, after considering the position in the United States, came to a similar view. He stated at 459-460: "Mr Knox called in aid of the argument several American cases relating to administration bonds, in which the surety was held bound by a judgment against the administrator. The weight of opinion in America, as I read the decisions, must, I think, be conceded to be in favour of his view, including the great authority of the Supreme Court of the United States. Stovall v. Banks decided that whatever concludes the principal concludes the surety. The judgment appears to be founded on principles which, if accurate, apply to every case of principal and surety. And that appears to be the settled view of the United States Supreme Court. In Drummond v. Prestman, an ordinary case of guarantee, the chain of reasoning is that the liability of the guarantor is dependent on that of the principal, and as the principal's liability might be proved by his confession, much more may it be proved by a judgment. The Court there dissented from the English case of Evans v. Beattie. But though Drummond v. Prestman and Stovall v. Banks have been quoted with approval and in conjunction as late as 1887 in Washington Ice Co v. Webster , they are directly opposed to the reasoning and decisions of English cases such as King v. Norman; Parker v. Lewis; and Ex parte Young; In re Kitchin; and cannot be taken as representing English law." (References omitted). 122More recent authority in this Court is consistent with that view: Sandtara Pty Ltd v Abigroup Ltd [1997] NSWSC 294; (1997) 42 NSWLR 5 at 8, Gerard Cassegrain & Co Pty Ltd (ACN 000 342 174) v Cassegrain [2013] NSWCA 453; (2013) 305 ALR 612 at [109] per Beazley P, see also Cannon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759 (Cannon) at [68] per Campbell JA, Harrison J agreeing and Thomas v Balanced Securities Ltd [2011] QCA 258; [2012] 2 Qd R 482 at [40] per White JA, Wilson AJA and Martin JA agreeing. In the latter case White JA acknowledged that there was a body of authority to the effect that where a person such as a guarantor is closely associated with the subject matter of the proceedings and takes no steps to defend his or her interests, he or she will become bound as a matter of issue estoppel. 123In light of these authorities it could not be said that the relationship of principal debtor and guarantor was unarguably one of privity of interest. 124The respondent as an alternative adopted what I have described as the acknowledgement of White JA in par [ REF _Ref396468791 \r \h * MERGEFORMAT 122] above. It should be noted that White JA did not decide whether what was stated in those authorities was correct. The respondent itself acknowledged that her Honour's comments could be founded on an abuse of process. Campbell JA in Cannon at [68] doubted the correctness of the proposition (Harrison J agreeing). 125I would accept that there may be circumstances where a person, who is not strictly a privy in interest, may be precluded from bringing proceedings by not taking steps to protect his or her interest in earlier proceedings. However, this would seem to me to be as a result of the species of estoppel known as Anshun estoppel or an abuse of process. It does not seem to me that inaction by the suggested privy could have the effect of extending the concept of privy of interest where it did not otherwise exist. It is not necessary to reach a final conclusion. For present purposes, the contrary proposition is clearly arguable. 126The third basis, on which it was contended that the appellant and the company were privies, was that the company was the corporate embodiment of the appellant. This submission derives some support from the statement of Handley AJA in Champerslife to the following effect at [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." A number of matters should be noted. First, Handley AJA expressly left the question open at [126]. Second, Giles JA did not agree with his Honour at [68]-[69]. Third, the proposition is at least arguably contrary to the principle affirmed in Effem Foods Pty Limited v Trawl Industries of Australia Pty Limited (Receivers and Managers Appointed -In Liquidation) [1993] FCA 342; (1993) 43 FCR 510 at 528, where the relationship between a company and its controlling shareholder did not give rise to a privity of interest: see also Gummow J at first instance, Trawl Industries at 416-417. Finally, the conclusion that such privity arises does not seem to me to take sufficient account of the different interests of the company and its shareholders, even a controlling shareholder: see Champerslife at [68]. 127However, as was the case in Champerslife it is not necessary to reach a final conclusion on the issue. Suffice to say the contrary proposition is arguable. 128It follows that it was arguable that any issue estoppel arising from the orders made in the Federal Court proceedings did not preclude the appellant from relying on the filed defence or bringing the proposed defence and cross-claim.

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(c) Anshun estoppel 129The species of estoppel known as Anshun estoppel derives from the dictum of Wigram VC in Henderson v Henderson (1843) 67 ER 313 at 319 approved in Anshun at 598. The principle was in the following terms: "...where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but with was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time." 130In Anshun, Gibbs CJ, Mason and Aickin JJ expressed the operation of the principle as follows at 602: "In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings, e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few." 131Their Honours also stated in Anshun at 603 that a factor of importance to take into account was that the prosecution of the second action may give rise to conflicting judgments. This has been emphasised in many of the subsequent cases, particularly in cases where estoppel is sought to be raised against the person not a party to the earlier proceedings: Habib at [83], Redowood at [48]-[49], Solak v Registrar of Titles [2011] VSCA 279; (2011) 33 VR 40 (Solak) at [70] and Gibbs v Kinna [1998] VSCA 52; [1999] 2 VR 19 at [25]. 132As the appellant submitted, in Redowood Hodgson JA suggested at [45] (Mason P and Bryson AJA agreeing) that in a case where an Anshun estoppel is sought to be raised against a third party, unreasonableness is either not conclusive or of such a nature that the latter proceedings are an abuse of process: see also Solak at [67]-[71]. It was not suggested in the present case that what his Honour said was incorrect, something which would be quite inappropriate to decide on a summary application. 133Further, it is important to bear in mind that the fact that the appellant could have joined as plaintiff in the company's proceedings is not sufficient to give rise to an Anshun estoppel. The question is whether in not having done so it was unreasonable to bring the second set of proceedings: Anshun at 602 and Johnson v Gore Wood & Co [2002] 2 AC 1 (Johnson) at 31 per Lord Bingham and 59 per Lord Millett. 134It does not seem to me unarguable that it was not unreasonable for the appellant to refrain from joining in the proceedings brought by the company. First, no demand had been made on the guarantee. In circumstances where no demand had been made, it does not seem to me to be unreasonable not to join in the proceedings which may turn out to be hypothetical so far as he was concerned. Just as the respondent was entitled to enforce its rights against its security without suing the guarantor, so, in my opinion, the appellant was entitled to wait until demand was made upon him to determine whether and in what manner he would seek to defend the claim. Once again, the position is at least arguable. 135Further, I do not consider the fact that the litigation might result in a judgment inconsistent with the consent judgment affects the position. The consent judgment has resulted from an agreement between the parties, not an adjudication of the court. In these circumstances, it does not seem to me that a different result brings the administration of justice into disrepute. 136I should add that I do not believe that the lack of adjudication, of itself, prevents an Anshun estoppel from arising: Johnson at 32-33 and 59. 137It follows that it was at least arguable that the appellant was not precluded by an Anshun estoppel from bringing the claim in the filed defence, proposed defence and cross-claim. 138It is not required in those circumstances to deal with the question of whether it is necessary for the parties to be privy for an Anshun estoppel to arise and, if so, whether there is a different test for privity of interest than in the case of issue estoppel.

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(b) Paragraph 72(b) 157The respondent asserts that this head of damage is irrecoverable relying on the decision of this Court in Chen. 158The facts in Chen where complex but may be summarised for present purposes as follows. The respondent owned a business known as Karandonis Shoes. It was sold to a joint venture vehicle (KSA) in which the respondent took a 20% interest. Part of the purchase monies were financed by a loan from the respondent to KSA. 159The respondent alleged that as a result of a subsequent conspiracy, in which the appellants were involved, he was deprived of the value of his shareholding in KSA and of his ability to recover the loan previously made to that company. 160The court held that the respondent was not entitled to claim these amounts. Beazley JA (as her Honour then was) with whom Heydon JA (as his Honour then was) and Hodgson JA agreed, held that the losses were reflective of losses suffered by KSA and could only be recovered by that company. Her Honour expressed her conclusions in the following terms: "[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." 161That with respect was an orthodox application of the principles stated in Prudential. However, the facts in the present case are different. The loan in the present case was pleaded as having been made in reliance on what was said to be the misleading and deceptive conduct of the respondent. The appellant's claim is that he would not have made the loan advances to the company had the conduct not occurred and is unable to recover those advances due to the insolvency of the company. This is not a claim for damages suffered by the company. The position is analogous to that of the appellants in Gould in respect of which Wilson J made the following comments at 245: "The facts of Prudential Assurance do not present any analogy with the present case. The Goulds do not sue as shareholders of Gould Holdings. They sue in their personal capacity as individuals who were induced by Mr Vaggelas' fraudulent misrepresentations to part with their own property. They have suffered personal loss by making their own property available to enable Gould Holdings to complete the purchase unless it be that the value of that advance to the company was offset by the value of the debt owed to them by the company. They also suffered personal loss if it be held that the fraudulent misrepresentations induced them to give the personal guarantees and securities which have deprived them of their property." See also Gibbs CJ at 223, Brennan J at 253. 162It follows that the claim in paragraph 72(b) and the equivalent paragraphs do not constitute reflective loss of the company.

[21]

(3) The cross-claim issue 164This issue was the subject of Grounds 7 and 11-14 of the amended notice of appeal. The grounds were as follows: "7 Whilst his Honour correctly recognised at [114] that in considering the application for leave to file the proposed cross-claim it was 'necessary to accept allegations in the cross-claim at their highest', his Honour erred in failing to apply that principle by holding that the claim itself did not 'appear to be a strong one' (at [159]). ... 11 His Honour erred in refusing (at [165]) to allow the First Defendant to file a cross-claim raising a claim under the Contracts Review Act 1980 (NSW) by failing to: a. have regard to the concession by the Plaintiff that the First Defendant was allowed to run such a claim (Transcript, 9 May 2013, p 5.20-5.25); b. inform the First Defendant that his Honour was considering departing from that concession; and c. have regard to the fact that the claim had been fully articulated, and effectively pleaded, in the affidavit of Paul Ekes sworn 21 December 2011. 12 His Honour erred in finding at [153] that '[c]ontrary 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', as: a. the legal assistance provided by Mr Auld of counsel, and by Avondale Lawyers, was not free of charge; and b. the First Defendant was of limited financial resources, which was noted by his Honour in the course of oral submissions (Transcript, 10 May 2013, p 92.3). 13 In finding (at [158]) that there had been 'extreme delay' by the First Defendant in putting forward the proposed cross-claim, his Honour failed, in making that assessment, to have regard to: a. the delay by the Plaintiff in not commencing proceedings until 10 September 2010 and not serving the Statement of Claim on the First Defendant until 24 March 2011; b. the length of time needed by the court to hear and determine the First Defendant's motion of 24 October 2012 to file the proposed cross-claim, including the effect of the late filing, on 9 April 2013, of the Plaintiff's motion to strike-out/dismiss the First Defendant's defence and cross-claim; c. the interlocutory conduct of the proceedings associated with a series of orders and disputes in relation to categories of documents for discovery and orders for, and the conduct of, a court ordered mediation; d. the fact that the claim of the First Defendant based upon the Contracts Review Act 1980 had already been fully articulated, and effectively pleaded, in the affidavit of Paul Ekes sworn 21 December 2011, and therefore, contrary to his Honour's reasons at [159], weight could not be given to the fact that such a claim had not appeared in any of the three prior defences filed; and e. the fact that the other claims in the proposed cross-claim had been pleaded in the First Defendant's Amended Defence filed 8 July 2011. 14 His Honour, therefore, erred in concluding that: a. the degree of injustice that the First Defendant would suffer if leave were to be refused to file the proposed cross-claim (and the First Defendant would thereby suffer judgment for a sum exceeding $22m) would be small: [160]; b. the Plaintiff would suffer 'considerable prejudice' if leave were to be granted to the First Defendant to file the proposed cross-claim: [161]; c. and, therefore, in exercising his discretion to refuse leave to the First Defendant to file the proposed cross-claim as it would occasion prejudice to the Plaintiff outweighing any prejudice the First Defendant ([163]) and be contrary to the dictates of justice (at [158]), and this error was particularly so in light of the fact that the extensions in time for the First Defendant in which to file a cross-claim were by consent, and that the matter had otherwise been progressing."

[25]

Conclusion 173In the result the appellant should be allowed to file the proposed defence and the cross-claim and the orders made by Davies J entering judgment in favour of the plaintiff should be set aside. 174As to costs, the appellant should have his costs of the appeal. I am inclined to the view that the costs of the motions at first instance should be costs in the cause. Whilst the appellant was successful on his motion he was relying on an indulgence of the Court. The respondent was unsuccessful in its motion to strike out the filed defence. 175In the circumstances, I would make the following orders: (1)Leave to appeal granted. (2)Appeal allowed. (3)Set aside orders 1-9 of the orders made by the primary judge on 8 March 2013. (4)Grant the appellant leave to file an amended defence in the form of the draft defence contained at pp 65-81 of the Red Book filed in the proceedings and a cross-claim filed in the form of the draft cross-claim contained at pp 84-107 of the Red Book filed in the proceedings. (5)Remit the matter to the Common Law Division for hearing. (6)Order the respondent pay the appellant's costs of the appeal. (7)Costs of the motion at first instance, the subject of the appeal, otherwise be costs in the cause. 176BEAZLEY P: I have had the advantage of reading in draft the reasons of Bathurst CJ. I agree with his Honour's reasons and proposed orders. 177EMMETT JA: The question in this appeal is whether, as a consequence of orders made by consent in the Federal Court of Australia in proceedings NSD 182/2010 (the Federal Court Proceedings), the appellant, Mr Paul Ekes, is precluded from raising certain defences in proceedings 2010/306145 (the Supreme Court Proceedings) brought against him by the respondent, Commonwealth Bank of Australia (CBA). The Federal Court Proceedings were brought by 888 Projects Pty Ltd (888 Projects), as plaintiff, against Bank of Western Australia Ltd (BankWest) and Messrs Stephen Parbery and Neil Singleton (the Receivers), as defendants. 178CBA is the universal successor of BankWest. In the Supreme Court Proceedings, CBA sued Mr Ekes under a guarantee given by him to BankWest in respect of the obligations of 888 Projects. On 8 November 2013, for reasons published on 1 November 2013, a judge of the Common Law Division made various orders, including directing the entry of judgment in favour of CBA against Mr Ekes in the sum of $26,021,231.98. Mr Ekes has appealed from the orders made on 8 November 2013.

[26]

Factual Background 179In November 2006, 888 Projects entered into a contract for the purchase of a property in Abbotsford, New South Wales (the Property). On 5 June 2007, BankWest provided a commercial advance facility to 888 Projects (the Facility). The Facility was secured by, inter alia, a first registered mortgage over the Property (the Mortgage), a charge over the assets and undertakings of 888 Projects (the Charge) and a guarantee by Mr Ekes (the June Guarantee), also entered into on 5 June 2007. 180Under the Facility, 888 Projects was obliged to repay and finally discharge the amount drawn down under the Facility by 18 months from the initial drawdown. On 16 January 2009, BankWest and 888 Projects entered into a variation agreement, which extended the repayment date under the Facility to 30 June 2009. 181On 27 October 2009, BankWest gave to 888 Projects notice of default under the Facility (the Default Notice). The events of default relied on in the Default Notice were as follows:

The Facility had expired;
An application to wind up 888 Projects had been filed in the Supreme Court by the Chief Commissioner of State Revenue; and
Mr Hector Ekes, another guarantor of the obligations of 888 Projects and the brother of Mr Paul Ekes, had entered into an arrangement under Pt X of the Bankruptcy Act 1966 (Cth). On 11 February 2010, BankWest appointed the Receivers as the receivers and managers of 888 Projects. 182On 25 February 2010, 888 Projects commenced the Federal Court Proceedings. By its originating process, 888 Projects claimed declarations as follows:
The purported appointment of the Receivers was invalid;
BankWest was not entitled to rely on the Default Notice;
In or about June 2009, BankWest agreed to vary the Facility by extending the term to 31 March 2010 or until completion of building works on the Property;
BankWest had breached the Facility;
BankWest engaged in conduct that was misleading or deceptive, in contravention of s 52 of the Trade Practices Act 1974 (Cth) (the Trade Practices Act). 183The declaration that the appointment of the Receivers was invalid was sought under s 418A(2)(a) of the Corporations Act 2001 (Cth) (the Corporations Act). Under s 418A(1), where there is a doubt, on a specific ground, about whether the purported appointment of a person as receiver of property of a corporation is valid, the corporation may apply to the Federal Court (as well as other courts) for an order under s 418A(2) declaring whether or not the purported appointment was valid. 184In its originating process, 888 Projects claimed damages for breach of contract or pursuant to s 82 of the Trade Practices Act, compensation under s 87 of the Trade Practices Act, and equitable compensation. 888 Projects also claimed an order that BankWest indemnify it for any liability it may have to the Receivers resulting from their appointment. 185The originating process stated that the grounds of the application pursuant to s 418A of the Corporations Act were as follows:
888 Projects was not and is not in default under the Mortgage or the Charge;
BankWest is not entitled to rely upon the Notice of Default;
BankWest is in breach of the Facility, the Charge and the Mortgage;
BankWest is estopped from denying that 888 Projects was not, on 11 February 2010, and is not in default under the Mortgage and the Charge;
BankWest has failed to demand repayment of the sum secured by the Mortgage and the Charge or has failed to allow 888 Projects a reasonable time to remedy the alleged default;
BankWest has contravened s 52 of the Trade Practices Act; and
alternatively, BankWest has contravened s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). 186The originating process also claimed interlocutory relief by way of an order that the Receivers be restrained from taking any further steps as receivers of the assets and undertaking of 888 Projects. 187On 26 February 2010, the interlocutory application came before Jacobson J in the Federal Court. His Honour directed 888 Projects to file a statement of claim and any further evidence on which it intended to rely in support of the interlocutory relief, and listed the application for interlocutory relief for hearing on 4 March 2010. His Honour also noted that the Receivers undertook to 888 Projects that up to 5pm on 4 March 2010, they would not carry out any construction works at the Property and would not market for sale, sell or transfer or assign the legal interest in the Property. That undertaking by the Receivers was given on condition that 888 Projects provided security for the costs of BankWest and the Receivers in respect of the interlocutory application in the sum of $20,000 and upon 888 Projects' giving the usual undertaking as to damages to the Court. 188On 2 March 2010, 888 Projects filed a statement of claim and the matter came before Jacobson J on 3 March 2010. By leave granted by his Honour on that day, 888 Projects filed an amended originating process, varying the interlocutory relief claimed to include an order restraining BankWest from exercising the powers conferred by the Mortgage and the Charge. On the same day, Jacobson J also granted leave for 888 Projects to file an amended statement of claim. The interlocutory application by 888 Projects was fixed for hearing on 13 and 14 April 2010. 189On 8 March 2010, BankWest and the Receivers filed a notice of motion seeking further security for costs and security for 888 Projects' undertaking as to damages. The notice of motion was returnable on 15 March 2010. 190On 9 March 2010, 888 Projects filed an amended statement of claim pursuant to the leave granted on 3 March 2010. The amended statement of claim made allegations about the following matters:
The Facility and the security for the Facility;
Variation of the Facility;
The Default Notice;
Election, promissory estoppel and estoppel by convention to the effect that BankWest was not entitled to rely on alleged events of default;
Invalidity of the appointment of the Receivers;
Contravention of s 52 of the Trade Practices Act and of s 12DA of the ASIC Act;
Breach of the Facility, by asserting that the Charge and Mortgage were enforceable and by appointing the Receivers;
Unconscientious conduct, by reason of BankWest's accepting interest payments and permitting further drawdowns after alleged default under the Facility;
Unconscionable conduct, by reason of alleged election and promissory estoppel. 191On 16 March 2010, after a hearing on 15 March 2010, Jacobson J ordered that 888 Projects provide further security for the costs of BankWest and the Receivers, in the sum of $50,000, and security for 888 Projects' undertaking as to damages, in the sum of $250,000. His Honour ordered that the security be provided within seven days and that the Federal Court Proceedings be stayed if the security not be given in accordance with those orders. 192888 Projects failed to provide security in accordance with the orders made by Jacobson J. Accordingly, the stay directed by his Honour became effective on 23 March 2010. The solicitors for BankWest then arranged for the proceedings to be listed before Jacobson J on 31 March 2010, for the purpose of vacating the hearing of the interlocutory application by 888 Projects that had been fixed for 13 and 14 April 2010, and seeking other orders. 193On 31 March 2010, BankWest and the Receivers filed a notice of motion seeking orders that 888 Projects pay their costs of the proceedings, that the sum of $20,000 paid into court as security for costs be released to BankWest and that the proceedings be dismissed. On that day, Jacobson J made orders that BankWest and the Receivers be released from their undertakings, that the hearing fixed for 13 and 14 April 2010 be vacated, and that the notice of motion of 31 March 2010 be listed for hearing on 13 April 2010. 194On 13 April 2010, Jacobson J made orders, by consent, that the Federal Court Proceedings be dismissed and that 888 Projects pay BankWest's and the Receivers' costs, as agreed or as assessed. His Honour made an order that the sum of $20,000 paid into court by 888 Projects as security for costs be released on 20 April 2010 to BankWest and the Receivers. The solicitor for 888 Projects signed short minutes of order in almost identical terms. It is unclear why the order as to payment out was not expressed to be by consent. However, nothing appears to turn on that distinction. 195On 16 April 2010, in proceedings commenced by the Chief Commissioner of State Revenue, the Supreme Court made an order that 888 Projects be wound up in insolvency. The Court appointed Mr David Mansfield as liquidator of 888 Projects. 196On 26 July 2010, BankWest gave written notice of demand to Mr Ekes and to Mr Hector Ekes (the Notice of Demand). The Notice of Demand asserted that 888 Projects had failed to comply with a demand under the Facility dated 22 July 2010 for payment of the sum of $27,313,589.17. The Notice of Demand also asserted that, pursuant to a guarantee and indemnity dated 16 January 2009, Mr Paul Ekes had guaranteed that BankWest would be paid "all the guaranteed money". However, the only guarantee and indemnity given by Mr Paul Ekes that was in evidence before the primary judge was the June Guarantee, which was entered into on 5 June 2007. In the course of the hearing of the appeal, senior counsel for CBA tendered a copy of another guarantee said to have been signed by Mr Ekes. No explanation was proffered for the failure to tender such a guarantee before the primary judge and the tender was rejected. 197On 14 September 2010, BankWest commenced the Supreme Court Proceedings against Paul Ekes and Hector Ekes. In its statement of claim, BankWest claimed judgment, relevantly, against Paul Ekes in the sum of $28,344,516.45, being the amount owing under the June Guarantee. BankWest also claimed interest and costs. The allegations made by BankWest against Paul Ekes in the statement of claim may be summarised as follows:
On 5 June 2007, BankWest agreed to provide to 888 Projects a commercial advance facility with a credit limit of $19,640,000 for the purpose of assisting with the acquisition and construction of apartments on the Property;
The Facility was varied on 16 January 2009 to extend the credit limit to $24,900,000;
The Facility provided expressly that 888 Projects must repay and finally discharge the loan by 30 June 2009;
888 Projects has defaulted under the Facility by failing to pay the loan on 30 June 2009;
888 Projects has also defaulted under the Facility by virtue of an order for winding up being made against it;
BankWest had demanded from 888 Projects payment of the sum of $27,313,589.17 on 22 July 2010, and 888 Projects failed to comply with that demand;
Paul Ekes entered into the June Guarantee, whereby he guaranteed amounts payable by 888 Projects under the Facility to a limit of $24,900,000 plus interest, fees, costs and other expenses;
It was a term of the June Guarantee that Paul Ekes would guarantee payment by 888 Projects to BankWest of all amounts payable under the Facility, would pay all amounts owing on demand to a limit of $24,900,000, and would indemnify BankWest for loss suffered by reason of the insolvency of 888 Projects;
On 27 July 2010, BankWest demanded from Paul Ekes the sum of $27,313,589.17 and Paul Ekes has failed to comply with that demand. 198The statement of claim was served on Paul Ekes on 24 March 2011. No explanation was given for the delay between the time of commencing the proceedings and the service of the statement of claim. Paul Ekes filed a defence to the statement of claim on 19 May 2011. At a directions hearing on 17 June 2011, he was directed to file and serve any amended defence and any cross-claim no later than 24 June 2011. No amended defence or cross-claim was filed by that date. 199The Supreme Court Proceedings were on the subject of case management hearings between 1 July 2011 and 9 February 2013. During that time, amended defences were filed and drafts of a proposed cross-claim were provided. 200On 26 February 2013, Paul Ekes provided a draft second further amended defence and a further draft of the proposed cross-claim. On 27 February 2013, the hearing of the motion for leave to file a cross-claim continued. On that day, CBA foreshadowed a notice of motion to strike out the second further amended defence. On 9 April 2013, CBA filed a notice of motion seeking orders that the further amended defence be dismissed or struck out and that the cross-claim be dismissed or struck out. 201On 9 May and 10 May 2013, the hearing of the motions continued before the primary judge. On 13 May 2013, Mr Ekes filed an amended notice of motion in which he sought leave to file and serve a second further amended defence and a cross-claim. On 1 November 2013, the primary judge published his reasons for the conclusions that he had reached in relation to the various motions. On 8 November 2013, his Honour made orders to the following effect: (1)The further amended defence of 12 March 2012 be struck out; (2)Leave to file any cross-claim and further amended defence be refused; (3)Judgment in favour of CBA as against Paul Ekes in the sum of $26,021,231.98; (4)The notices of motion filed by Paul Ekes be dismissed; and (5)Paul Ekes pay CBA's costs of his notices of motion and CBA's costs of the Supreme Court Proceedings.

Ekes v Commonwealth Bank of Australia

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Judgment (28 paragraphs)

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Legislation Cited (8)

Cases Cited (49)

Cited By (42)