Pioneer Park Pty Limited (in liquidation) v Australia and New Zealand Banking Group Limited; Clifford John Carpenter v Australia and New Zealand Banking Group Limited - [2005] NSWSC 498 - NSWSC 2005 case summary — Zoe

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Pioneer Park Pty Limited (in liquidation) v Australia and New Zealand Banking Group Limited; Clifford John Carpenter v Australia and New Zealand Banking Group Limited

[2005] NSWSC 498

Supreme Court of NSW|2005-05-27|Before: Einstein J, Giles J, Yeldham J

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Source facts

Court

Supreme Court of NSW

Decision date

2005-05-27

Before

Einstein J, Giles J, Yeldham J

Source

Original judgment source is linked above.

Judgment (60 paragraphs)

[1]

CITATION : Pioneer Park Pty Limited (in liquidation) v Australia and New Zealand Banking Group Limited; Clifford John Carpenter v Australia and New Zealand Banking Group Limited [2005] NSWSC 498

[2]

Equity Division JURISDICTION : Commercial List

[3]

CATCHWORDS : Practice and procedure - Costs - Security for costs - General principles - Impecunious plaintiff - Bodies corporate - Requirement that appropriate financial disclosure be made concerning position of those likely to benefit in the circumstances that proceedings are successful - Purpose of a security for costs order is a protective jurisdiction to ensure that the primary purposes for having costs orders themselves can be achieved - A defendant is protected against the risk that a cost order obtained at the end of the proceedings may turn out to be of no value by reason of the impecuniosity of the plaintiff - Jurisdiction assists both the compensation purpose as well as the public interest objective - Plaintiff Company in liquidation - Defendant Bank - Claim by Company that Bank wrongfully terminated certain finance facilities and without justification proceeded to call up indebtedness, to appoint administrators and to sell property under power of sale under mortgage - Complex of litigation between Bank, Company and Mr Carpenter, former chief executive officer and director of Company, in several jurisdictions - Leave granted to Mr Carpenter to bring proceedings on behalf of Company - Leave conditional on Mr Carpenter paying, bearing and indemnifying Company against all costs charges and expenses of and incidental to the bringing and continuation of the proceedings brought by him on behalf of the Company - Proceedings commenced in the name of Company against Bank - Bank seeks security for costs - Overriding Purpose Rule - Proper approach to multiplicity of litigation raising same issues

[11]

ANZ's alleged wrongful termination of finance facilities 2 The genesis of the litigation in so far as the interests of Pioneer are concerned involves a claim that ANZ wrongfully terminated certain finance facilities extended to the Company and, without justification, proceeded to call up indebtedness, to appoint administrators under Part 5.3A of the Corporations Act and to sell property in purported exercise of a power of sale under a mortgage. Pioneer subsequently passed into the form of creditors voluntary winding up that follows on from Part 5.3A. The guarantee 3 Mr Carpenter was a guarantor of indebtedness of Pioneer to ANZ. The litigious war 4 From this general background a number of suits were commenced. Essential detail is provided in terms of the whole gamut of litigation in the affidavit of Mr Beaton made on 27 January 2005 (at [10-35]) which in general terms in the wider sense may be summarised as follows: · April 2001, Mr Thomas - then liquidator of Pioneer obtained an order from the Supreme Court to conduct examinations, relating to the affairs of Pioneer, pursuant to sections 596A and 596B of the Corporations Act 2001 (Cth) (Act). The examinations were commenced on 5 July 2001. The persons examined were Mr Carpenter and Ms Julie Stewart, the financial controller of Pioneer; · Mr Carpenter filed an interlocutory process seeking orders that Mr Thomas be replaced as liquidator of Pioneer by Mr Christopher Palmer and that Mr Palmer be given power to appoint himself as the voluntary administrator of Pioneer pursuant to section 436B(2) of the Act. Mr Carpenter's application was heard by the Honourable Justice Austin in June 2003. The application was dismissed. · District Court Proceedings No. 1842 of 2003 against Mr Carpenter and Domino Hire Pty Limited; · District Court Proceedings No. 1843 of 2003 against Mr Carpenter and Merlo Wholesale Pty Limited; · District Court Proceedings No. 858 of 2003 against Mr Carpenter and Retreat Pty Limited; · February 2004 - Mr Carpenter was authorised by the Australian Securities & Investments Commission (ASIC) to be an eligible applicant under section 9 of the Act for the purpose of carrying out examinations relating to the 'examinable affairs' of Pioneer; · April 2004, on the application of Mr Carpenter, this Court issued examination summonses and orders for production on the persons named in ASIC's authority, namely, current and former employees and officers of the Bank, including Mr John McFarlane, the Chief Executive Officer of the Bank, and Mr Charles Goode, the Chairman of the Bank. The examination summonses and the orders for production were issued in the Examination Proceedings; · 15 April 2004 - 6 of the 7 persons named in ASIC's authority ["the Applicants"] filed an interlocutory process seeking, among other things, the discharge of the examination summonses or the vacation of the examination dates; · 22 April 2004 - the Applicants and the Bank commenced the Federal Court Proceedings for judicial review of the decision by ASIC to authorise Mr Carpenter to bring the examinations as an 'eligible applicant'. The Federal Court Proceedings were heard by the Honourable Justice Hely on 28 June 2004. His Honour delivered judgment on 5 July 2004 and dismissed the application; · the seventh examinee, Mr Geoffrey Neilson, consented to his examination. However, it was opposed by the Bank. The Bank's application to adjourn Mr Neilson's examination was heard by the Honourable Justice White on 25 and 26 May 2004. On 26 May 2004 his Honour delivered an ex tempore judgment dismissing the Bank's application. The material litigation of particular present relevance 5 I now turn to an encapsulated summary of the litigation required to be understood for present purposes. The District Court Proceedings 6 The first suit of relevance for present purposes was District Court Proceedings number 1486 of 2000 ["the District Court Proceedings"] brought by ANZ against Mr Carpenter by way of proceedings on the above-described guarantee. The first Commercial List proceedings 7 The second suit of relevance comprises proceedings 50156/2004 before the Supreme Court Commercial List ["the first Commercial List proceedings"] brought by Pioneer Park (in liquidation) against ANZ by Summons filed on 12 November 2004. The section 237 proceedings 8 The antecedent to commencement of the first Commercial List proceedings was an application by Mr Carpenter by application filed on 22 September 2004 in the Equity Division Corporations List for leave under section 237 of the Corporations Act to bring those proceedings on behalf of Pioneer ["the Leave proceedings"]. The application was successful: see the judgment of Barrett J sub nom Carpenter v Pioneer Park Pty Ltd [2004] NSWSC 1007. 9 On 17 November 2004, the Bank filed an application for leave to appeal against the decisions of the Honourable Justice Barrett:

[17]

The contentions advanced on behalf of the putative plaintiff in the draft summons are detailed but may be summarised. It is contended that ANZ offered to make finance facilities available to the Company in 1996 and represented the facilities as having a five year term, that the Company accepted the offer in reliance on the representations and provided security to ANZ over its assets, as well as a guarantee and security of Mr Carpenter and his wife, that it was a term of the agreement that the facilities would be available for five years and that ANZ would act in good faith in exercising its powers, do all things reasonably necessary to enable performance of the agreement and not frustrate or prevent performance by the Company or the guarantors, that there were several subsequent variations of the agreement which imported the same terms as the five year duration and performance, that in 1998 ANZ unilaterally required the Company and certain other companies associated with Mr Carpenter to refinance their facilities with another bank or financier failing which ANZ would terminate the facilities, that ANZ later terminated the facilities and in doing so was in breach of contract, that ANZ was not entitled to call up all indebtedness or to appoint administrators or exercise a power of sale (as it subsequently did) and that ANZ committed breaches of contract and made statements that were misleading or deceptive whereby the Company suffered loss and damage." 13 Notwithstanding the differences between that description and the now updated content of the amended summons [filed on 3 December 2004] in the first Commercial List proceedings, the above description seems to me to be adequate for a general understanding of the type of issues sought to be litigated. It is unnecessary in this judgment to repeat the record in the first Commercial List proceedings [this judgment being grounded upon the litigation of the issues now described in the amended summons]. The second Commercial List proceedings 14 On 29 November 2004 Mr Carpenter commenced proceedings 50163 of 2004 against ANZ in the Commercial List ["the second Commercial List proceedings]. Those proceedings appear to seek a determination of the alleged legal rights of Pioneer in much the same terms as the first Commercial List proceedings. The Notices of Motion 15 The notice of motion filed by ANZ in the first Commercial List proceedings on 17 December 2004 is presently pursued only insofar as it seeks orders pursuant to Part 53 rule 2 of the Supreme Court Rules and section 1335 (1) of the Corporations Act that the plaintiff furnish security for the costs of the defendant of and incidental to the proceedings and staying the proceedings until such security is furnished. The balance of the motion stands adjourned. Paragraph 3 of the motion is rendered otiose in light of the Court of Appeal's dismissal of the application for leave to appeal from Barrett J's decision. 16 The notice of motion filed by Mr Carpenter on 6 May 2000 in the first Commercial List proceedings seeks an order for the transfer of the District Court Proceedings to this Court. 17 The notice of motion filed by ANZ on 14 March 2005 in the second Commercial List proceedings is presently pursued only insofar as it seeks orders staying those proceedings pending determination of the first Commercial List proceedings 18 The notices of motion have been heard together. The security for costs motion 19 This motion in the events which happened has been the fulcrum motion litigated. A very large volume of evidence has been mobilised on both sides of the Bar table. The principles 20 The principles which inform the proper exercise of the Court's discretion in relation to applications for security for costs were very extensively dealt with in Idoport Pty Ltd v National Australia Bank Limited [2001] NSWSC 744 (at [44] et seq). I approach these proceedings upon the basis that those are the principles which require to be applied. Unusual parameters of this litigation 21 Although not novel it is quite plain that both ANZ and Mr Carpenter, effectively regarding himself as a holder of the alleged rights of Pioneer, have seen fit to engage in nothing short of a litigious war. As Barrett J observed in the judgment already referred to, it was said from the Bar table that Mr Carpenter had spent approximately $1 million in pursuing the claims he considered Pioneer to have against ANZ (at [40]). In the affidavit of Mr Fordyce solicitor for Pioneer made on the 26 April 2005 on the hearing of the motions before me, evidence is given that as a result of the above described litigation and the various investigations and examinations and interlocutory applications related thereto the costs expended to date or in the order of $1.3 million [130]. 22 There is however no evidence about the source of those funds. On 3 May 2005 the defendant's solicitors wrote to Mr Carpenter's solicitors and asked that the source of the funds be identified [affidavit of James Charles Beaton sworn 6 May 2005, Annexure 'A')]. Despite that written request, no evidence about this has been led by the plaintiff. 23 The assertions from the Bar table (unsupported by the evidence) have been contradictory: · at one point, Mr Garnsey put to the Court (Transcript, page 80, lines 14 - 19):

[20]

His Honour: "But we don't have an offer to pay anything in security terms." Mr Garnsey: "Your Honour, the reason being is that whatever he's got left, and I'll take your Honour to that, is needed to satisfy Justice Barrett's order. That's the way I'm putting the case. He can't reasonably be expected to make an offer." (Transcript of 6 May 2005, page 93, lines 28 -35) 27 I accept that each of the following submissions put to the Court by ANZ is a direct reflection of the evidence and/or of the appropriate inferences to be drawn from the evidence: · on the current evidence, the indemnity required of Mr Carpenter by Barrett J, to support Mr Carpenter's section 237 leave, has no value; · Mr Carpenter deposes to ownership of life policies in accordance with Annexure D to his affidavit dated 5 May 2005, having a total surrender value net of $365,999 as at 30 June 2004. However, he does not proffer to transfer them or charge them in any manner permissible under section 200 or section 201 of the Life Insurance Act 1995 so that they might become available to meet any adverse costs order against Pioneer Park; · the life policies are not otherwise available to meet any adverse costs order against Pioneer Park because of the provisions of sections 204 - 206 of the Life Insurance Act 1995 and section 116(2)(d) of the Bankruptcy Act. Under: · "section 204(1) of the Life Insurance Act, Mr Carpenter's rights and interests under the policies "are not liable to be applied or made available by any judgment, order or process of a court in discharge of a debt owed by the person"; and · "section 116(2)(d) of the Bankruptcy Act, policies of life insurance or endowment assurance in respect of the life of the bankrupt or the spouse of the bankrupt, and the proceeds of any such policies received on or after the date of the bankruptcy, are excluded from being "property divisible amongst the creditors of the bankrupt". · the value of the life policies must be disregarded both in considering whether an order for security for costs should be made, and for the purpose of quantifying the amount of security for costs which should be lodged. If and when Mr Carpenter indicates that he wishes to use the life policies towards satisfying any security for costs order, the question of how that might be done and the security value to be attributed, can be considered further at that stage under Pt 53 r.3 [It may be appropriate for such matters to be remitted to the Registrar]; · Mr Carpenter has not provided any evidence (sworn or otherwise) of his liabilities. Carpenter Group Structure 28 The following chart was provided to the Court as prepared by Mr Carpenter's accountancy in order to described the Carpenter Group Structure:

[21]

29 I now turn to summarise the material facts by reference to the chart and the evidence and the submissions in relation to both. 30 As well be seen Pioneer Park Pty Ltd is a wholly owned subsidiary of Retreat Pty Ltd ["Retreat"]. 31 Retreat also owns other companies. It owns Merlo Australia, which in turn owns Merlo Wholesale. It also owns Domino Parts & Service Pty Ltd and Domino Mining Equipment Pty Ltd (this company, however, being a mere shelf company). For convenience, I shall refer to the group of companies owned by Retreat as the Retreat Group. Ownership and Control of Retreat 32 As Pioneer Park is a wholly owned subsidiary of Retreat, it is appropriate to examine who owns and controls Retreat in order to understand who owns and controls Pioneer Park. 33 Mr Carpenter is not a shareholder in Retreat, but does have effective control over its operations. The only shareholders of Retreat are Mr Carpenter's ex-wife and his four daughters. Each daughter holds ten (10) redeemable preference shares. The ex-wife holds 120 redeemable preference shares and ten (10) ordinary shares. The Articles of Association of Retreat state that the redeemable preference shares held by the ex-wife and daughters entitle them to voting rights in respect of company meetings. Mr Carpenter had given evidence that the shares held by his ex wife in Retreat were the subject of a recent family law settlement which he entered into with his ex-wife. His evidence [affidavit 5 May 2005 (at 19)] is that his ex wife has signed transfers in blank for those shares which have been delivered to him but that he has not yet decided who will be the transferees. He adds "I can confirm that I will not be that transferee". I return to the matter below where there is an advance in terms of a now proposed undertaking to be given to the Court. Financial Situation of the Retreat Group 34 The evidence before the Court regarding the financial situation of the Retreat Group, Mr Carpenter and its shareholders is sparse. Prior to Liquidation 35 Prior to the placement of Pioneer Part into liquidation in June 1999, the material in evidence discloses that it was far from being in a comfortable financial situation. The records in evidence are lacking in much detail and the most recent records, prior to the placement into liquidation, are the summaries as at 30 June 1997 and 30 June 1998. 36 Most of the figures which follow are based on an ANZ Diary Note dated 20 November 1998. 37 In regard to the Retreat Group, the ANZ Diary Note shows that it was in a negative net asset position at 30 June 1997 and 30 June 1998. The amount of the deficit was $237,000 and $350,000 in the respective years. Total assets at the end of these years were $12,268,000 and $8,303,000 respectively. 38 In respect of the individual companies within the group, no information is available regarding Domino Parts & Services Pty Ltd. 39 In regard to Merlo Australia and Merlo Wholesale, the net asset position was $380,000 and $390,000 for the years ended 30 June 1997 and 30 June 1998 respectively. Total assets at the end of these years were $829,000 and $1,163,000 respectively. 40 It is not explicit on the ANZ Diary Note what the asset position of Pioneer Park was in relation to the years ended 30 June 1997 and 30 June 1998. What is shown is that for the year ended 30 June 1998, profits (before interest expense) were not sufficient to cover the interest payable on its loans. It can be inferred that Pioneer Park must have been in a parlous state when I consider that the net assets of the Retreat Group was in the red whilst Merlo Australia and Merlo Wholesale (being companies in the Retreat Group) were in the black. Current Financial Status 41 The most recent Presentation of Accounts and Statement by Liquidator shows that Pioneer Park has assets of $14.20 with proof of debts claimed of $1,106,835.31. Clearly it would be unable to pay any costs order made against it. 42 Parlous little information has been provided regarding the financial position of those standing behind Pioneer Park. The written submissions of Pioneer of 6 May 2005 had initially read:

[22]

"Those standing to benefit from the litigation, its creditors and contributories do not have any assets: they did not commence, and are not funding the proceedings." 43 During address Mr Garnsey sought to amend the submission by inserting the word "sufficient" before the word "assets" [transcript 90.50]. However it is quite plain to me that Pioneer Park has eschewed the obligation to disclose the financial position of this those standing behind Pioneer Park for whose benefit the first Commercial Proceedings are brought. 44 No information has been provided regarding the current financial position of Mr Carpenter's ex-wife or his daughters. As already indicated Mr Carpenter himself discloses that he has only life policies, an interest in a superannuation fund and publicly listed shares to the value of about $14,000. It has not been made clear what Mr Carpenter's relationship is to two companies, Wishaway Pty Ltd and Primville Pty Ltd. Each are trustees for the Derriwong Investment Trust and the Carpenter Family Trust respectively. 45 The Carpenter Family Trust has assets of $386,913 and liabilities of $384,781 for the year ended 30 June 2004. It should be noted that the accompanying notes to these summary figures have not been provided. This is of concern as both the assets and liabilities of the trust are loans to, and from, related parties. No details are provided regarding the true terms of these loan arrangements. 46 The Derriwong Investment Trust's only asset is a set of shares in Domino Hire Pty Ltd. No information has been provided regarding the value of these shares. It liabilities include a loan from the Carpenter Family Trust. It is not clear whether it has any other liabilities. 47 As at 30 June 2004, Merlo Australia had assets of $117,912 and liabilities of $579,103. It should be noted that these amounts have been taken from a balance sheet provided to the Court by Mr Carpenter and that accompanying notes to the balance sheet have not been provided. I only raise this as there appears to be an asset of $100,000 being 'Shares in Related Companies at Cost' (the concern being that this may not reflect market value/issues regarding the liquidity of this asset) and there is a liability of $577,216 being 'Loans from Related Companies' (the concern being that no details regarding the terms of this loan are disclosed). It does not appear that this balance sheet consolidates information for Merlo Wholesale. 48 In the result I accept as of substance the submission by ANZ in the following terms:

[25]

This factor is related to the next, namely: 5. Whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security: see Memetu v Lissenden (1983) 8 ACLR 364; Sent v Jet Corporation (1984) 2 FCR 201; Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 2 FCR 1; Hession v Century 21 South Pacific Ltd (1992) 28 NSWLR 120 at 123; Bryan E. Fencott at 513; Yandil Holdings at 545. The combined effect of these two principles was summarised by Meagher JA in Hession at 123 as follows: '...a company in liquidation against whom an order for security for costs is sought cannot successfully resist such an order merely by proving that it cannot fund the litigation from its own resources if an order for security is made; it must prove that it cannot do so even if it relies on the other resources available to it (the company's shareholders or creditors) ...Finally, whilst it is both true and important that poverty must be no bar to litigation, what that means is that the courts must be astute to see that no person pursuing a claim which is not frivolous is precluded from doing so by the erection of obstacles which poverty is unable to surmount; it does not mean that proof of insolvency automatically confers an immunity from statutory provisions which deal with insolvent plaintiffs .' 6. An issue related to the last guideline is whether persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking : see Cameron's Unit Services Pty Ltd v Kevin R Whelpton and Associates (Aust) Pty Ltd (1986) 13 FCR 46 at 53; Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304; Clyde Industries Ltd v Ryad Engineering Pty Ltd (1993) 11 ACLC 325. " [Per Beazley J in KP Cable Investments Pty Limited v Meltglow Pty Limited (1995) 56 FCR 189] [emphasis added] 52 In Idoport [supra] the following was said at [50]-[59]:

[32]

In considering an application under s1335, the Court is required to form an opinion about what the financial position of the plaintiff will be at the time of judgment and immediately after. An important consideration will be the financial position of the plaintiff at the time of the application, however this is not the sole consideration. Other factors may include the outcome of the trial, the costs associated with the trial and the success or otherwise of its business and investments in the meantime. When the Court is required to make a judgment involving the anticipation of future events, it must consider the degree of probability that a particular event might occur: Beach Petroleum NL & Anor v Johnson & Ors; Jingellic Minerals NL & Anor v King & Ors (1992) 10 ACLC 525 at 526-527. With specific regard to security for costs against corporations, the Court in Pearson v Naydler recognised that the basic notion of security for costs empowers the Court to order the plaintiff to do something that it will likely find difficult to do, ie. to provide security for the costs which ex hypothesi it is likely to be unable to pay. Despite this, the Court noted that this discretionary power should not be used as an instrument of oppression "by shutting out a small company from making a genuine claim against a large company" (see also Equity Access Limited v Westpac Banking Corporation (1989) 11 ATPR 40-972 at 50,635). The Court must thereby strike a balance between this consideration and the notion that: "…the court must not show such a reluctance to order security for costs that this becomes a weapon whereby the impecunious company can use its inability to pay costs as a means of putting unfair pressure on a more prosperous company. Litigation in which the defendant will be seriously out-of-pocket even if the action fails is not to be encouraged. While I accept that there is no burden of proof one way or the other, I think that the court ought not to be unduly reluctant to exercise its power to order security for costs in cases that fall squarely within the section." Pearson v Naydler at 906-907. " Applying these principles to the present circumstances 53 These principles are directly relevant to the instant application for security for costs. It is quite clear that the failure of Mr Carpenter/Pioneer to prove that they cannot fund the litigation even if relying on other resources available to either or both of them or which may be so available, is a matter of the highest moment where the principled exercise of the discretion to grant or withhold an order for security for costs is under consideration. As ANZ has contended:

[38]

(a) as to the ordinary shares which are registered in the name of his ex-wife and in respect of which he holds a signed transfer in blank, he will, if the Plaintiff is unsuccessful in these proceedings and a costs order is made against it, upon completion of the trial on all issues and upon the expiration of any right of appeal, complete the transfer to himself and procure the registration of the shares in his name and he will not otherwise transfer the shares before that time; (b) if the Plaintiff is unsuccessful in this litigation upon completion of the trial on all issues and upon the expiration of any right of appeal, the plaintiff will redeem all of the redeemable preferable shares not then redeemed; and (c) at any earlier time he will only transfer the ordinary shares to himself and/ or redeem the redeemable preference shares." 57 It does not seem to me that such an undertaking satisfies the requirements described in the above authorities that appropriate financial disclosure be made concerning the position of those likely to benefit in the circumstances that the proceedings are successful. To make Mr Carpenter the owner of the ordinary shares in Retreat does not assist or improve the position of Retreat and does not improve the liquidator's prospects of obtaining financial satisfaction from Mr Carpenter under his indemnity to meet any adverse costs order in the proceedings. An assurance that a person or entity without assets such as Mr Carpenter will take the shares in the event that the proceedings fail is simply insufficient in terms of the making of the appropriate disclosure. 58 The above analysis has been posited upon the proposition that it is appropriate to infer that an order for security will stultify the proceedings or that security for costs cannot be found. It important to note that Mr Carpenter does not depose to these matters in his evidence. The real gravamen of the submissions of Mr Garnsey QC appearing for Pioneer is that because Mr Carpenter is subjected to the Indemnity Orders of Barrett J, this Court should accept that the whole of any assets available to Mr Carpenter will be needed to honour that indemnity. The submission however completely fails to address the need for proper security for costs orders to be made when appropriate, to prevent those who will benefit from success in the proceedings from being able: · to litigate and expose a defendant to the risk of irrecoverable costs; · to so litigate whilst themselves shielded, by reason of the interposition of the impecunious plaintiff, from the burden of an adverse order for costs. Relevance of the litigious war 59 It is difficult to perceive what if any relevance the above-described litigious war has in terms of the motion for security for costs presently before the Court. Mr Garnsey did emphasise the matter on a number of occasions through his submissions. The submission is that "[t]he Bank is an advocate of groundhog day" [transcript 59. 21]. According to the Oxford English Dictionary:

[48]

In my opinion, where a liquidator has obtained advice that serious claims should be pursued and that they have reasonable prospects of success (as in the present case) then a court is entitled to have some regard to that opinion upon an application for security for costs, if the object of the liquidator in bringing the action is to provide funds to pay creditors. Cf John Arnold's Surf Shop Pty Ltd (in liq) v Heller Factors Pty Ltd (1979) 4 ACLR 26 at 30; ACLC 32,094 at 32,098; Spiel v Commodity Brokers Australia Pty Ltd (in liq) (1983) 8 ACLR 410 at 416 (Full Court SA); and GAI Holdings (No 3) Pty Ltd v GAI Holdings (No 4) Pty Ltd (1986) 4 ACLC 90 at 93. 65 There is nothing in the submissions of Pioneer entitled "Submissions in rejoinder" dated 27 May 2005 which displaces the principled exercise of the Court's discretion being for the reasons already given, to require security for costs to be paid in the sum of $600,000. Decision 66 In the result I am entirely satisfied that on a principled approach to the exercise of the Court's discretion ANZ is entitled to an order for security for costs. Treating with the second Commercial List proceedings and the application to move the District Court proceedings into this Court 67 It is now necessary to briefly examine the consent orders and the agreement made between the parties to the District Court Proceedings. The terms of the consent orders were that subject to paragraph 2 of the agreement noted, the District Court Proceedings be stayed until further order. The proceedings were ordered to be placed in the Not Ready List to be reviewed in 18 months. 68 The agreement noted was in the following terms: 1 The parties to these proceedings agree that any determination of [the first Commercial List proceedings] will be binding on them and determinative of any equivalent issues or matters arising in these proceedings (whether or not pleaded in these proceedings) as though the parties to these proceedings were both parties to [the first Commercial List proceedings]. 2 Either party is and remains entitled to seek to have these proceedings transferred to the Supreme Court of New South Wales" [Exhibit JCB 5 Tab 4] 69 In the face of this agreement Mr Carpenter commenced the second Commercial List proceedings. Those proceedings raise issues most of which mirror Pioneer's claims in the first Commercial List proceedings, although they do extend to a few areas outside of those issues. 70 Mr Garnsey sought to explain that there had not been any cross-claim pleaded in the District Court Proceedings and that Mr Carpenter should be regarded as effectively having commenced the second Commercial List proceedings as proceedings intended, as a matter of substance, to stand in the place of a cross-claim which he would have been entitled, but for the above described agreement, to plead and pursue in the District Court. However it seems that Mr Carpenter sees it as appropriate to seek to litigate all of the matters in the second Commercial List proceedings which are pleaded in the summons in those proceedings. 71 The untidiness which obtains following these steps is obvious to say the least. For one thing there seems to me to be an issue which has arisen as to precisely what, properly construed, the agreement reached between ANZ and Mr Carpenter in terms of note 2, provides. One possibility is that the parties to the District Court Proceedings should be taken to have intended that in the event that ANZ succeeds in the first Commercial List proceedings, it becomes entitled to judgment in the District Court Proceedings. There may be other possibilities in terms of the proper construction of the agreement. It is certainly arguable that notwithstanding that Mr Carpenter is not personally a party to the first Commercial List proceedings, he was content by the agreement to bind himself to the result in the first Commercial List proceedings [which could however be the subject of an application for transfer to the Supreme Court]. It is arguable that even if such a transfer were successful the proper approach of the Supreme Court might be to then stay the proceedings pending the determination of the first Commercial List proceedings leaving it open to the parties in the future to litigate the proper construction of the above described agreement and to do so only after the determination of the first Commercial List proceedings. 72 My own view is that whether or not the District Court Proceedings should be transferred to the Supreme Court, the only basis upon which such a transfer should be ordered is dependent upon a contingency:

[50]

(ii) further agree to a regime whereunder the pleadings of the proceedings so transferred are efficiently interwoven into the template of the first Commercial List proceedings-as by cross-claims and the joinder of Mr Carpenter into the altered template of the proceedings]; and (iii) further agree to the second Commercial List proceedings being likewise heard at the same time as the first Commercial List proceedings by a mode similar to that suggested in (ii). 73 I do not propose to further deal with the motion pursued by Mr Carpenter nor with the motion for a stay of the second Commercial List proceedings until the parties have had an opportunity to consider what I have said and arguably to endeavour to reach some form of agreement in relation to the matter. I should have thought that the first Commercial List proceedings will be expensive enough for both parties to closely examine the regrettable circumstance that in the absence of some sensible consensus qua the fate of the earlier agreement, the parties may face the spectre following the determination of those proceedings, of yet other proceedings but between Mr Carpenter and ANZ raising in the main the very same issues. 74 It is appropriate to add that in the absence of agreement between the parties, the heavy hand of the Court will have to be applied in order to follow the dictates of the Overriding Purpose Rule and the dictate of section 63 of the Supreme Court Act 1970. The first Commercial List proceedings cannot go forward to hearing 'alone and palely loitering' as a fully fledged suit whilst: · the second Commercial List proceedings remain in the List in the present circumstance in which in the main identical issues to those raised in the first Commercial List proceedings are suggested as appropriate to be litigated in both sets of proceedings; · the parties remain locked in dispute as to the proper construction of the above-described agreement reached in the District Court. 75 There may be other ways of dealing with the present unseemly state of affairs [cf transcript at 85.44 - 54] and these will be investigated with the parties at the Bar table following their having had an opportunity to read these reasons. Disparate matters remaining 76 It is appropriate to note that by consent the words "and of the agreement between the defendant and of the Guarantee and Indemnity agreement as varied from time to time" appearing at the end of paragraph 7 of the claims to relief made in the Amended Summons in the first Commercial List proceedings are struck out [transcript 87.53-88.6]. Quantum of security 77 It is next necessary to deal with the quantum of security for costs in relation to the first Commercial List proceedings. 78 ANZ seeks $1,037.280, the break-up of which is set out in annexure "B" to the affidavit of Mr Beaton of 27 January 2005. The detail is put in the following terms: "41. I estimate that the Bank's costs and disbursements of conducting its defence in these proceedings will be approximately $1,037,280 on a party and party basis. Annexed to this affidavit and marked 'B' is a schedule setting out a breakdown of the estimated fees and disbursements (Schedule). 42. In reaching that estimate in the Schedule I have had regard to the following matters:

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(11) Roger Marcolin - Any evidence from Mr Marcolin will relate to his role as the responsible Regional Credit Executive in 1998 and the decisions he made regarding the management of Pioneer's account at that time. (111)Ara Bastajian - Any evidence from Mr Bastajian will relate to the period in which he was responsible for Pioneer's account as the 'relieving' manager for Mr Neilson. (1V) Frank Inverso - Any evidence from Mr Inverso will relate to his conclusions in September 1998, as Manager Credit Risk Review, about the financial performance of Pioneer and the conduct of its accounts. (V) Rick Harvey - Any evidence from Mr Harvey will relate to the period for which he was responsible for Pioneer's account as a manager in the Bank's High Risk area. (V1) Ray Brennan - Any evidence from Mr Brennan will relate to his role as the Chief Manager of the Bank's High Risk area and the decision to transfer Pioneer's account from the High Risk area to Group Credit Management. (V11)Greg Pidcock - Any evidence from Mr Pidcock will relate to his role and decisions as the relevant Regional Credit Executive when Pioneer's account was in the Bank's High Risk area. (V111)Brian Soper - Any evidence from Mr Soper will relate to the transfer of Pioneer's file to Group Credit Management, the conduct of the annual review, the issue of demands and the appointment of the voluntary administrators. (1X)Theresa Casanova - Any evidence from Ms Casanova will relate to her role as the assistant manager to Mr Soper from approximately November 1998 to April 1999 and the conduct of the annual review. (X) Peter Wilson - Any evidence from Mr Wilson will focus on his opinion, as Acting State Manager, of Pioneer's account in or about December 1998. (X1) Nici Agsten - Any evidence by Ms Agsten will relate to her involvement with Pioneer's account from December 1998 to approximately June 1999 as the Bank's in-house corporate counsel. (X11)Greg Hall - Mr Hall was the investigating accountant appointed by the Bank on 24 May 1999. Mr Hall then became the voluntary administrator and liquidator of Pioneer. Any evidence by Mr Hall will concern the financial position of Pioneer. (iii) given the number of witnesses and the issues, the case will require at least 15 days (three weeks) of hearing time; and (iv) the seriousness of the allegations by the plaintiff (for example, bad faith and the potential quantum of the claim) will mean that the defendant will retain senior and junior counsel to advocate its case. Based on Mr Carpenter's conduct of the examinations, the associated proceedings and his application for leave, I expect that the plaintiff will also retain senior and junior counsel;

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(i) the Bank's file, which comprises approximately 20 arch-lever folders of relevant, irrelevant and privileged material; (ii) the Bank's policy manuals, which comprise approximately 10 arch-lever folders of documentation; and (iii) Pioneer's complete books and records so far as they relate to its dealings with the Bank, its financial position in 1997, 1998 and 1999 and certain transactions with related entities. The extent of documentation this may involve is presently unknown. I propose to utilise the skills of Minter Ellison's project services group to manage the documentation in the case. This involves the documentation being scanned and then indexed as part of an on-line database. Although there is some set-up cost involved, it is a cost saving measure in the long run because discovery can be prepared electronically and counsel and witnesses provided with electronic databases of documents - saving on multiple photocopying. (c) the defendant's anticipated costs on a party and party basis. Minter Ellison charges fees to the defendant on an hourly basis, at rates based on the experience of the lawyers involved. I have not used those 'solicitor and client' rates for the purpose of this calculation. Instead, I have had regard to the rates which I believe would be allowed on an assessment of the defendant's costs on a party and party basis. On 24 January 2005 I had a telephone conversation with Ms Deborah Vine-Hall, a senior and experienced cost consultant with the firm DSA Legal Cost Consultants. I informed Ms Vine-Hall about the nature of this proceeding and asked her to indicate what she thought would be the maximum hourly rates the defendant would likely recover on a party and party assessment of its costs. Ms Vine-Hall informed me and I verily believe that the defendant is unlikely to recover its costs of the proceeding at more than the following hourly rates: (i) Partner: $400 per hour (ii) Lawyer (Four years post-admission): $310 per hour (iii) Junior lawyer (One - two years post admission): $240 per hour I have assumed counsel's fees to be as follows: