Foyster v ANZ Banking Group [1999] NSWSC 300 | Case summary

1 By the statement of claim in these proceedings the plaintiff, Lloyd Foyster sues the defendant, ANZ Banking Group Ltd for financial loss said to have resulted from a foreign currency loan. Before me are motions by each of the parties. The defendant seeks an order that the proceedings be summarily dismissed or permanently stayed. The plaintiff seeks leave to file an amended statement of claim, adding another party as plaintiff and claiming further relief. To understand the issues which I must decide it is necessary to examine the protracted history of this litigation. 2 In 1985 the plaintiff was the major shareholder in a company known as Country Properties Pty Ltd, and was its managing director. For the purpose of a large development project, the company obtained a substantial loan from the defendant in Swiss francs. It is the plaintiff's case that the manager of the defendant with whom he was dealing advised him to take the advance in that currency. The plaintiff also provided a personal guarantee in respect of the loan. Subsequently, as a result of variation in exchange rates, the company's indebtedness to the defendant in Australian dollars increased markedly, so that its viability was threatened. 3 In 1990 the company commenced proceedings against the defendant in the Commercial Division of this Court, seeking damages for what was said to be negligent advice by the defendant about the loan. Those proceedings were transferred to the Common Law Division (11620/91), but on 14 April 1993 they were dismissed pursuant to Pt 24 r9 of the Supreme Court Rules because of the company's failure to provide a verified statement in answer to interrogatories. 4 On 6 May 1991 the defendant had a receiver and manager appointed to the company, and on 17 June 1991 the plaintiff resigned as a director. On the following day he commenced proceedings himself against the defendant (13286/91). In that statement of claim he alleged that his financial interest was co-extensive with that of the company, and he sought damages for negligence and a declaration that his personal guarantee was void and should be set aside. The statement of claim was filed on the day before the limitation period expired and was served two years later, on the last day permitted by the Rules. 5 I should record that in 1991 the plaintiff also issued a statement of claim in the District Court against the defendant and the manger to whom I have referred. In September 1997 those proceedings were dismissed pursuant to Pt 11A, r3(1) of the District Court Rules, and nothing more need be said about them. 6 On 19 December 1991 the plaintiff entered into a deed of assignment under Pt X of the Bankruptcy Act 1966. On 26 October 1992 the trustee issued a certificate, pursuant to s232 of the Act, that the plaintiff's divisible property had been realised and a final dividend had been paid to creditors. The effect of that deed and that certificate upon the various causes of action which the plaintiff might have against the defendant is a matter to which I shall turn in due course. 7 Section 60(2) of the Bankruptcy Act provides that any action commenced by a person who later becomes bankrupt is stayed until the trustee elects to prosecute or discontinue the action. By s231(2) that provision also applies to a person who has executed a deed of assignment under Pt X. Section 60(3) enables the defendant to such an action to serve a "notice of the action" upon the trustee and, unless the trustee makes an election under subs(2) within 28 days thereafter, he or she is deemed to have abandoned the action. On 2 July 1993 the present defendant served such a notice upon the trustee in respect of the outstanding proceedings in this Court. There was correspondence between the trustee and the defendant's solicitors, but it is sufficient to say that no election was made within the prescribed period. 8 In the meantime, on 6 July 1993 the plaintiff offered to purchase from the trustee certain proprietary interests, including the action which he had commenced in this Court. On the same day or the following day, that offer was accepted. It was within the trustee's power to do so by virtue of s219 of the Act, and it is clear that there was an effective assignment of the action back to the plaintiff. 9 In August 1993 the defendant filed a motion seeking that that action be summarily dismissed or permanently stayed. In the following month the plaintiff filed a motion seeking leave to file an amended statement of claim. The amendments included the assertion of a further cause of action based on fraud. 10 These motions were heard by Master Malpass, who gave judgment on 26 April 1994. The Master dismissed the plaintiff's motion and struck out the statement of claim. He dealt with a number of matters which had been argued but, for present purposes, it is sufficient to say that he held that the effect of s60(3) of the Bankruptcy Act was that the action was deemed to have been abandoned, and that abandonment was unaffected by the assignment of the action to the plaintiff. An appeal against that decision was dismissed by Simpson J in a judgment of 14 May 1997. 11 In October 1995, after the appeal had been argued but before Simpson J had delivered her judgment, the plaintiff filed the statement of claim in the proceedings with which I am dealing (21004/95). It also sought damages for negligence and, in addition, alleged fraud in terms similar to the cause of action which the plaintiff had sought to incorporate by amendment into the 1991 proceedings. However, that statement of claim was not served until October 1997, after Simpson J had dismissed the appeal. It also was served on the last day permitted by the Rules. The plaintiff did not appeal against Simpson J's decision, and in evidence before me he said that, if judgment had then been given allowing the appeal, he would have pursued the 1991 proceedings and would not have served the 1995 statement of claim. 12 The story does not end there. On 1 November 1996 the plaintiff filed yet another statement of claim (21219/96). At that time, of course, Simpson J had not delivered her judgment and the 1995 statement of claim had not been served. This document was drawn by the plaintiff himself, without legal assistance. It covered the same territory as the previous statements of claim but also made some further related allegations, which are not presently material. In evidence before me, the plaintiff said that he was seeking to protect himself by this document, as he "had a gut feeling that all these things should have been under the one heading, under the one banner, heard at the one time…" 13 Yet again, the defendant sought to have this statement of claim summarily dismissed or permanently stayed. It was dismissed by Master Harrison in a judgment of 8 December 1997. The Master arrived at her decision after an examination of each of the claims in the document. For present purposes, all that need be said is that she determined that the claim in negligence should be struck out as an abuse of process as it was identical to the claim in the 1995 proceedings: see Maple v David Syme & Co (1974) 1 NSWLR 290. The plaintiff did not appeal against Master Harrison's decision. It was while that judgment was reserved that he served the 1995 statement of claim, with which I am dealing. The present motions 14 The claim for negligence in the 1995 statement of claim is identical to, or to the same effect as, those to be found in the statements of claim issued by the plaintiff in 1991 and 1996, as well as in the proceedings commenced by the company in 1990. The claim for fraud is very serious. The allegation is that the defendant, through its manager, induced the plaintiff and the company to enter into the loan transaction by false representations, made deliberately or recklessly, and by failing to provide relevant information within its knowledge. It is asserted that the manager was having an affair with the plaintiff's former wife and had resolved to cause him financial harm. 15 The proposed amended statement of claim adds the company as a second plaintiff, the plaintiff having been re-appointed as a director in September 1993. The various claims are expressed to accommodate that fact but, allowing for differences in draftsmanship, the claim for negligence is maintained. So is the claim in fraud, although all that is alleged is the reckless making of false representations. 16 What is significant is the addition of a number of further claims. As to the loan transaction, reliance is also placed, in the alternative, on s52 (and s51A) of the Trade Practices Act 1974 (Cth) and s42 of the Fair Trading Act 1987 (NSW). In addition, there are claims in negligence and in fraud arising from what is said to be the defendant's inflated valuation of a property owned by the company, upon the basis of which a further loan was made in early October 1989 for the purpose of the development. From those funds, it is said, the debt arising from the foreign currency loan was discharged. Allied to this is an allegation that members of the plaintiff's family, relying upon the valuation, offered to purchase shares in the company but that offer was unreasonably refused by the defendant. That refusal is said to amount to unconscionable conduct within the meaning of s51AA of the Trade Practices Act. 17 Finally, there is a claim arising from the sale in 1994 by the defendant, as mortgagee, of a property of the company at what is said to have been an undervalue. This claim stands apart from the others because, as will be seen, it is unaffected by the principal arguments with which I must deal. I shall return to it in due course. 18 The primary submission of counsel for the defendant was that all the other claims by the plaintiff personally were assigned to the trustee when he entered into the deed of assignment under Pt X of the Bankruptcy Act in December 1991, and it is this which determines their fate. (It is not clear when the conduct said to have been unconscionable within the meaning of s51AA of the Trade Practices Act occurred, but I proceed upon the assumption that it was before the assignment. The contrary was not suggested in argument.) The various causes of action, arising before December 1991, were part of the plaintiff's "divisible property", within the meaning of s187(1) of the Bankruptcy Act, and they were vested in the trustee upon execution of the assignment. I do not understand counsel for the plaintiff to have submitted to the contrary. It is at the next stage of the defendant's argument that the parties are at odds. 19 Counsel for the defendant submitted that, subject to the reassignment to him in July 1993 of the 1991 action, none of these causes of action has since revested in the plaintiff. It was argued that the certificate of "release" under s232 of the Act, issued in October 1992, did not have that effect. Reliance was placed upon the decision of Needham J in Pegler v Dale (1975) 1 NSWLR 265 and of the Court of Appeal in Daemar v Industrial Commission of New South Wales [No 2] (1990) 22 NSWLR 178. 20 In Pegler Needham J held that s153(1) of the Act, which relieves a bankrupt from debts provable in the bankruptcy upon his or her discharge, does not have the effect of revesting in the bankrupt property which was vested in the trustee by the sequestration order. In arriving at that conclusion, his Honour had regard to the duty of a discharged bankrupt, pursuant to s152, to "give such assistance as the trustee reasonably requires in the realisation and distribution of such of his or her property as is vested in the trustee". 21 In Daemar the Court of Appeal adopted the view of Needham J. Kirby P, with whom Clarke and Meagher JJA agreed, referred to his Honour's analysis of the effect of the discharge of a bankrupt in the light of s152, which assumes that property vested in the trustee by the sequestration order remains so vested even after discharge. However, it seems that the President's view was not wholly dependant upon s152. After noting that the property which remains vested in the trustee upon discharge includes choses in action, his Honour continued (at 185): Not only is Needham J's construction attentive of the language of s152. It is appropriate to the scheme of the Bankruptcy Act. Under that Act, it is the function of the trustee to gather for the benefit of the creditors the property of the bankrupt at the time of the sequestration. Save for the exceptions provided by the Act, such property is to be then available for distribution to the creditors. The property includes choses in action. It thus includes the "actions" which a bankrupt may have commenced at the time of the sequestration order. 22 In Daemar the question was whether a discharged bankrupt was entitled to pursue proceedings which had been the subject of a deemed abandonment by the trustee, pursuant to s60(3) of the Act, during his bankruptcy. Kirby P referred to some judicial pronouncements to the effect that an action which is stayed or abandoned during bankruptcy may be able to be prosecuted by the bankrupt upon his or her discharge: see the judgment of Rogerson J in Re Kwok; Ex parte Rummel (1981) 61 FLR 336 at 341-3, and the cases there referred to. However, the President preferred the reasoning of Needham J in Pegler to the observations of Rogerson J in Re Kwok. The matter was determined not by the effect of s60, but by the fact that property does not revest in a bankrupt upon his or her discharge. Speaking of the proceedings which Mr Daemar wished to prosecute, his Honour said (also at 185), "In short, it is not the claimant's action to pursue." 23 Counsel for the plaintiff submitted that Daemar could be distinguished because it was concerned with the effect of a sequestration order, rather than a deed of assignment under Pt X of the Act. She argued that Pt X sets up its own regime, and shares the incidents of bankruptcy only in so far as other provisions of the Act are incorporated by s231. Section 152 is not one of those provisions and it applies only to a discharged bankrupt: Official Receiver v Todd (1986) 14 FCR 177, per Lockhart J at 185. That being so, it was said, the present case is governed by the reasoning of Rogerson J in Re Kwok. 24 This submission is inconsistent with a concession made on behalf of the plaintiff (when he was differently represented) in the proceedings before Master Malpass. At pp3-4 of his judgment, the Master recorded that it was "common ground" that the Pt X deed assigned to the trustee all causes of action which the plaintiff had against the defendant, and that the certificate under s232 "did not disturb the trustee's title to the choses in action vested in him." 25 In any event, I do not consider that the reasoning of Kirby P in Daemar is inapplicable to Pt X arrangements. As I have said, the passage from his Honour's judgment quoted above demonstrates that s152 was relevant to his conclusion, but not determinative of it. The policy considerations arising from the scheme of the Act, referred to by his Honour, apply with equal force to a deed of assignment which, by s178(1), is defined as "a deed by which a debtor assigns all his divisible property for the benefit of his creditors." Accordingly, I am satisfied that a certificate under s232 does not have the effect of revesting in the debtor his or her property, including choses in action. 26 What, then, is the effect of the assignment back to the plaintiff in July 1993 of various interests in property, including the "action filed in the Supreme Court of NSW Sydney Registry Common Law Division No 13286 of 1991…"? Counsel for the defendant submitted that the assignment was of that action only, and it had been given its quietus by the decisions of Master Malpass and Simpson J. However, the plaintiff relied upon what was described as a deed of confirmation made between him and the trustee in November 1993. The effect of that deed is an assertion that the assignment of July 1993 was always intended to embrace any cause of action arising from the plaintiff's dealings with the defendant from 1995 to the date of the certificate of release, 26 October 1992. 27 The plaintiff sought to rely upon this deed before Master Malpass, although not until after the hearing had concluded. The Master refused an application to re-open for that purpose, as he considered that the deed was not admissible for the purpose of construction of the agreement of July 1993. The effect of that agreement, the Master found, was "an assignment of the subject matter of the proceedings that were then on foot", not "an assignment of all the causes of action whatsoever that the plaintiff might have against the defendant" (p12 of the judgment). I agree. 28 However, in a sense, the matter may be academic. In written submissions furnished after the hearing before me, counsel for the plaintiff foreshadowed an application for leave to call evidence from the trustee that he would be prepared to revest in the plaintiff the rights of action which he now wishes to pursue: cf Daemar at 182. Subject to hearing counsel for the defendant, I would be minded to grant that leave if I were unpersuaded by the defendant's other arguments in the matter generally. To those I now turn. 29 Counsel for the defendant advanced a number of other reasons why the existing statement of claim should be dismissed and the amendments disallowed. He referred to the sorry history of the litigation, which over the years has maintained little more than a bare existence and on several occasions was resuscitated only minutes before its terminal gasp. He submitted that the existing statement of claim is an abuse of process as it reproduces claims which had previously been struck out or dismissed, or had been the subject of a previous unsuccessful application to amend. The same argument is available in relation to the proposed amended statement of claim in so far as it maintains the causes of action in the existing statement of claim. Further, counsel argued that the pursuit of the existing statement of claim is merely an attempt to avoid the consequences of the decisions of Master Malpass and Simpson J, and the appropriate course would have been to appeal from Simpson J's decision. 30 Counsel for the defendant also submitted that a number of the claims, both existing and proposed, are statute barred. The claim in negligence arising from the foreign currency loan is well outside the six year period prescribed by s14(1)(b) of the Limitation Act 1969. Similarly, the alternative claims under s52 of the Trade Practices Act and the Fair Trading Act are outside the three year period set by s82(2) of the Trade Practices Act and s68(2) of the Fair Trading Act, even if they relate back to the date of filing of the existing statement of claim. It is true, as counsel for the plaintiff pointed out, that a limitation period is a defence which should be pleaded and would normally be a matter to be determined at the trial. Nevertheless, it is clear that the defendant would rely on the limitation periods here and counsel for the plaintiff did not suggest any basis upon which they might be resisted. 31 In Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, the High Court cautioned against deciding limitation questions of the kind which it was considering at an interlocutory stage "except in the clearest of cases": see the joint judgment at 533. In that case the question whether a limitation period applied turned on when, as a matter of law, the cause of action accrued. In the present case, the applicability of the limitation periods relied upon does not appear to depend upon the resolution of any disputed question of fact or law. This is a clear case. 32 Accordingly, the existing claim for negligence should be struck out. The proposed amended claim in negligence arising from the foreign loan transaction and the proposed claims under s52 of the Trade Practices Act and Fair Trading Act should not be allowed, as it would be futile to do so. 33 As I have said, the proposed amended statement of claim includes claims for negligence and fraud connected with the further loan of October 1989 (see para 16 above). If the claim in negligence were related back to the date of filing of the existing statement of claim, it would be within time, albeit by a hair's breadth. It was clearly out of time when the plaintiff's motion for leave to amend was filed. The time limitation on the claim in fraud cannot be determined, as it would depend on the findings of fact necessitated by s55 of the Limitation Act and there is no evidence before me about that matter. 34 Amendment after the expiry of a limitation period is dealt with by Pt 20 r4. Sub-rule (5) envisages that the plaintiff might have leave to add that claim in negligence if I were satisfied that it arises out of "the same or substantially the same facts" as those giving rise to the existing statement of claim. Clearly, it does not. 35 The existing claims relate entirely to the foreign loan transaction negotiated in 1985 (see paras 11 and 14 above). It may well be that the 1989 loan was made in the course of a continuing relationship between the parties, was for the purpose of the same development, and provided funds with which the foreign currency loan was discharged. There the connection would appear to end. To no extent could any claim arising from the 1989 loan be said to arise from the facts of the transaction four years earlier: cf McGee v Yeomans [1977] 1 NSWLR 273, especially per Mahoney JA at 284-5 and the cases there referred to. 36 I am mindful of the fact that, in the light of Pt20 r4(7), I retain a discretion to allow the amendment even though the requirements of sub-rule(5) have not been met: McGee v Yeomans, per Glass JA at 279-80. However, I do not consider it appropriate to do so. No explanation for the delay in bringing proceedings arising from the 1989 loan was proffered, and no adequate reason for depriving the defendant of the protection of the statutory bar was advanced. Accordingly, that amendment also should not be allowed. 37 The same must be said of the allied claim under s51AA of the Trade Practices Act. It is unclear from the amended statement of claim when that cause of action is said to have accrued, but earlier in these reasons (para 18) I expressed the assumption that the alleged unconscionable conduct occurred before the plaintiff entered into the deed of assignment under Pt X of the Bankruptcy Act in December 1991. If that be so, that claim was statute barred at the time of the plaintiff's motion to amend and, indeed, when the existing statement of claim was filed. I would be minded to disallow the amendment but, given the High Court's admonition in Wardley (para 31 above), counsel should have the opportunity to be heard further on this aspect. 38 The claims in fraud, both existing and proposed, cannot be disposed of in this way. The existing claim for fraud arising from the foreign loan transaction is maintained in the proposed amended statement of claim, although somewhat differently expressed. In addition, there is the proposed claim in fraud arising from the 1989 loan. The question whether any of those claims is statute barred turns, as I have said, upon the findings required by s55 of the Limitation Act. The material which I have does not enable me to decide that matter, even if it were desirable that I should do so. 39 As I have recounted, the claim for fraud arising from the foreign loan transaction was first raised when it was sought to be incorporated by amendment into the 1991 statement of claim (paras 9 and 10 supra). It seems that Master Malpass would not have allowed the amendment in any event: see p17ff of his judgment of 26 April 1994. However, the Master did not have to determine the matter in the light of his decision that the action was deemed to have been abandoned by virtue of s60(3) of the Bankruptcy Act. For the same reason, Simpson J did not consider the amendment in her judgment on the appeal from the Master. 40 As already observed (para 29 above), counsel for the defendant submitted that there were a number of reasons why I should exercise my discretion to strike out the existing claim for fraud and to disallow the proposed amendment. Those arguments have considerable force, but they do not persuade me that the plaintiff should be prevented from pursuing that claim if he is in a position to do so. The allegations are very grave and, apart from the disadvantage inevitably suffered by delay, counsel for the defendant did not suggest that his client would not now be able to gather evidence in answer to the claim. I would be minded to allow the amendment to that claim, relating back to the date of filing of the existing statement of claim. 41 Similarly, I consider that the plaintiff should be permitted to pursue the proposed claim for fraud arising from the 1989 loan transaction, if he is in a position to do so. I would be minded to allow that amendment also. However, as there may be a question whether that claim is affected by a time limitation, I think that it would be unfair to allow that claim to relate back to the date of filing of the existing statement of claim. On the other hand, there has been delay since the notice of motion for leave to amend was filed, in the listing of the matter for hearing and in my delivery of these reasons, for which the plaintiff should not be held responsible. In my view, justice would be done if that claim were deemed to have been brought on the day on which the motion to amend was filed, 13 February 1998. I see no reason why this could not be imposed as a term upon which the amendment is allowed. However, as the matter was not raised in argument, I invite counsel's submissions upon it. 42 I have said that the plaintiff should be able to pursue both claims of fraud if he is in a position to do so. Of course, he is not in that position unless the trustee revests in him those rights of action. As observed (para 28 above), counsel for the plaintiff foreshadowed that she would seek leave to call evidence from the trustee about that matter. I shall hear submissions from counsel upon that aspect also. 43 The last amendment to be dealt with is the proposed addition of the company as a second plaintiff. As counsel for the defendant correctly pointed out, this is not a matter to be dealt with by amendment under Pt 20 of the Rules. In truth, it is an application for the addition of a party under Pt 8 r8. Sub-rule (2) of that rule requires evidence that the company consents to being added as a plaintiff. That said, there is every reason to join the company as a party in accordance with sub-rule 8(1) and, given the plaintiff's controlling interest in it, I have no doubt that the company would consent to that course. I would allow the plaintiff to amend his notice of motion accordingly, and to produce evidence of the company's consent. 44 Having determined that the plaintiff and the company should be allowed to pursue the claims in fraud arising from the transactions in 1985 and 1989, I am conscious of the seriousness of the allegations giving rise to both those claims. I trust that careful consideration will be given to the evidence in support of them before they are pressed. 45 Finally, I should return to the claim arising from the defendant's sale of mortgaged property in 1994 (para 17 above). On the face of it, there is nothing to prevent the plaintiff and the company pursuing that claim at this time, and I see no reason why that should not be done by amendment of the existing statement of claim. Nor does it appear that any terms should be imposed upon that amendment but, if either party wish to be heard upon that matter, counsel should have that opportunity. 46 It will be necessary to re-list the matter for argument upon the outstanding issues to which I have referred. Appropriate orders can then be formulated and, if necessary, I shall hear argument upon costs.

Foyster v ANZ Banking Group

At a glance

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Before

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Judgment (7 paragraphs)

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Legislation Cited (2)

Cases Cited (6)

Cited By (4)