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[2006] VSC 217
Supreme Court of Victoria
2006-05-12
DODDS-STREETON J
Original judgment source is linked above.
1 There are two related summonses by each party before the court. By summons dated 5 April 2006 the plaintiff, St George Bank seeks final judgment against the defendants, Mr Boman Irani, the first defendant and six corporate defendants namely Shalridge Pty Ltd, Thirteenth Corporation Pty Ltd, Combult Pty Ltd, Iross Pty Ltd, Apardana Pty Ltd and Boman Irani Pty Ltd.
2 The application is supported by the affidavit of Alan Bateson sworn 4 May 2006. By a summons dated 28 April 2006 the defendant said that the proceeding be forever stayed or stayed until further order and that the statement of claim be struck out. The defendants' application is supported by the affidavit of Boman Irani sworn 4 May 2006. The affidavit of Charles Leonidas sworn 4 May 2006 exhibiting a proposed amended defence and counterclaim and the affidavit of Charles Leonidas sworn 8 May 2006 exhibiting two affidavits of Mr Patrick Halinan sworn in a previous proceeding which I shall call the TranTeret proceeding.
3 At the outset of the hearing the defendants called on a notice to produce for three categories of document, two of which evidenced how the plaintiff's money claim of $2,877,466.99 in this proceeding was calculated and the third category being documents relating to interest, costs expenses including legal costs and expenses.
4 The plaintiff objected to the notice to produce on the basis that it operated as a subpoena, was fishing and designed to compel discovery. Mr Garrett, senior counsel for the plaintiff nevertheless informed the court that there were no documents as conventionally defined in the first two categories as the calculation process was wholly computerised although there were documents in the third category he said, most had already been discovered in Proceeding 6093 of 2003.
5 As on some outcomes of the two present applications it would be unnecessary to determine the objections to the notice to produce. With the concurrence of counsel that matter was stood over.
6 The defendants also sought leave to rely on an amended defence which added some matters to the defence dated 21 March 2006 and also added a counterclaim. In the context of a summary judgment application, I consider it appropriate that argument proceeded on the basis of the defendants' proposed amended pleading.
7 I should observe that on 8 May 2006, I became aware that further material was received from the plaintiff by my associate late on 7 May which was followed by an objection to its receipt by the defendants on 8 May. I did not read or consider that further material.
8 The basis for the summary judgment application is somewhat unusual. Although the plaintiff contends that some of the allegations in the defence and the entire counterclaim are legally untenable, unintelligible or both, such as to justify strike out, the principal attack on the defence and counterclaim is based on res judicata and its extended principles. The plaintiff contends that even those defences which are otherwise arguable are subject to one or more of issue estoppel, cause of action estoppel or Anshun estoppel.
9 Mr Garrett, senior counsel for the plaintiff submitted that many of the defences had already been determined against the defendants in an earlier proceeding or were substantially very similar to such questions despite minor extensions, variations or reformulations.
10 Another significant defence relating to a $525,000 EPA payment had been raised but unequivocally abandoned in the earlier proceeding. Mr Garrett acknowledged that some issues such as the counterclaim issues were new but contended that they nevertheless were precluded both because they were legally untenable and because on any view, it was unreasonable not to have raised or brought them forward in the original proceeding.
11 In that context Mr Garrett argued that irrespective of the lack of clarity and precision characterising the boundaries between the different species of res judicata the broader test of Anshun at least was satisfied in relation to all of the defendant's allegations. He further argued that not only was there no arguable defence but there was no other good reason for a trial.
12 Although the defendant sought a trial and discovery in order to assess the calculation of the plaintiff's money claim as stated in the bank's certificate the plaintiff contended that the certificate was to be conclusive in the absence of manifest error. The defendant did not, Mr Garrett says, assert manifest error and had already had discovery in the earlier proceeding, effect therefore should be given to the party's bargain in relation to the conclusive status of the certificate.
13 Mr Nash, senior counsel for the defendants, acknowledged that on many points the plaintiff had issued estoppels against the defendants. The defendant's answer to that lay in the fact that an appeal was currently pending on those questions and in that context Mr Nash relied upon the observations of Justice Finn in Lidden v Composite Buyers Ltd that concurrent proceedings should not be brought in the same court between the same parties. Mr Garrett, however, pointed out that Lidden v Composite Buyers Ltd dealt with two original proceedings. It did not apply he said to a case such as this where there was an appeal pending.
14 More fundamentally Mr Nash pointed out that the plaintiff itself had not pleaded the money claim sought in this proceeding in the early proceeding and but for the defendant's undertaking not to raise Anshun in relation to the money claim the plaintiff bank itself would be met with a like estoppel. In such circumstances the defendant should be permitted to raise defences unimpeded by wider Anshun principles of res judicata as they were directed at the evil of abuse of process which would not arise.
15 Mr Nash also disputed the plaintiff's contentions that aspects of the defendant's pleadings were in any event untenable. He pointed out that summary judgment should be cautiously approached and argued that a stay of this proceeding was appropriate where many of the defences not upheld in the first proceeding were subject to appeal and depending on the outcome of the appeal may be valid.
16 The issues involved in the stay application were inherently linked to the summary judgment application.
17 Essentially Mr Nash submitted that summary judgment would be premature and it would also be wasteful as costs would be saved if this proceeding were stayed pending the outcome of the appeal.
18 Rule 22.02(1) of the Supreme Court Rules relevantly provides that the plaintiff may at any time apply to the court for judgment against the defendant on the ground that the defendant has no defence to the whole or part of a claim or no defence except as to the amount. The court may dismiss the application or give such judgment for the plaintiff against the defendant on the claim or part of the claim unless the defendant satisfies the court that in respect of that claim or part a question ought to be tried or that there ought to be some other reason for a trial of that claim or part.
19 By Rule 22.01 where on an application for judgment on a claim for a debt the amount of the debt is not established to the satisfaction of the court and where if the amount were established the court would give judgment for the claim the court may make a declaration as to liability for the debt and order its amount to be ascertained in such manner as the court directs.
20 The applicable principles to summary judgment were uncontroversial. In the context of the summary judgment procedure once the plaintiff has established a good cause of action the defendant bears the burden of establishing that there is a question or issue of fact law or both which ought to be tried or that there is some other reason why there ought to be a trial. The power is a drastic one in its effect and it is therefore recognised that it should be exercised only where it is clear that there is no real question to be tried.
21 As stated in Australia Can Co v Levin the question is whether after the matter has been explained there remains real uncertainty without full argument or further investigation of the facts whether the plaintiff is entitled to judgment. The outcome should not depend on counsel's level of detail or ingenuity or on the variable perspicacity of an individual judge.
22 If a difficult or substantial question of law is involved which cannot be determined without full argument or there are factual disputes summary judgement is likely to be inappropriate.
23 The procedure is properly confined to cases where there is plainly no defence, although the courts should not confuse a mere smokescreen of confusion and complexity with an arguable defence. Given the issues estoppel, cause of action estoppel, and Anshun estoppel are central to the determination of the summary judgment application, it is necessary to consider briefly the relevant principles and the character and finding of the first proceeding together with the pleadings in the present proceeding.
24 Central to the plaintiff's present application, where the scope and nature of res judicata, comprising as Justice Handley writing extra judicially in "A Closer Look at Henderson v Henderson" noted:
"The defences of merger in judgment, cause of action estoppel, and issue estoppel, and the extended doctrine where, although the defences are not strictly available, further proceedings will undermine the finality of an earlier judgment, and thus constitute an abuse of process". In that article, Justice Handley analysed those questions, he criticised certain articulations and extensions of the abuse of process extended doctrine as unjustified and unnecessary, because they were predicated on an unduly narrow apprehension of the valid scope of the existing defences."
25 Justice Handley referred in the article to the famous statement of Vice Chancellor Wigram in Henderson v Henderson itself, that, and I quote, "Given that it becomes a subject of litigation, the court requires the parties to that litigation to bring forward their whole case and will not accept under special circumstances, permit the parties to open the same subject matter of litigation in respect of a matter which might have been brought forward as part of the subject matter in context, but which was not brought. The plea of res judicata applies, expect in special cases, 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".
26 Justice Handley recognised that the decision in Henderson was based on cause of action estoppels, despite subsequent judicial misinterpretation. A cause of action estoppel prevents parties from re-litigating the cause of action, it not only vows re-litigation of issues that were litigated, but issues that were not litigated. "The (indistinct) principle was", he said, "Extended to issue estoppels, which prevent an issue litigated for one cause of action being re-litigated for another, and unless displaced by the exception, it bars evidence and arguments, whether they were raised in the earlier proceedings or not".
27 In Zapodemic v Alex Constructions Pty Ltd, His Honour Justice Handley reiterated that Henderson v Henderson, which forms the basis of Anshun estoppel, makes clear that res judicata estoppels are not limited to the issues actually litigated in the earlier proceedings. He then held that in circumstances where a builder had abandoned a claim in a previous proceeding, although not making an unequivocal election to do so, the wider Anshun estoppel would apply, and in the particular case also, a cause of action estoppel, as the same evidence would be led to prove the case in both actions, and the one factual matrix had generated the controversy.
28 The substance of the controversy therefore embraced both claims, in terms of Trawl Industries of Australia v Effem Foods Pty Ltd, there was a very substantial overlap between the relevant claims. Justice Handley considered that the question posed by Henderson v Henderson was the characterisation of the subject matter of the two sets of litigation (indistinct). If the claim in one properly belonged to the subject matter of the earlier one, the latter would be barred either by a res judicata or Anshun estoppel.
29 In Gibbs v Kinner, Justice Kenny recognised that the precise ambit of the extended principle of res judicata was not entirely clear, but the majority in Anshun itself had recognised that the basic question was whether it was unreasonable not to raise the cause of action in the earlier litigation.
30 There were two basic minimum factors which could make it unreasonable not to have raised the cause of action in the earlier proceeding, according to Justice Kenny. First, the question, "Could the cause of action have been raised in the previous proceeding, and secondly, would the same or substantially the same facts arise for consideration in the second proceeding as in the first". Nevertheless, she considered that unreasonableness would depend almost entirely on particular circumstances. Her Honour noted that the possibility of conflict would ordinarily make it unreasonable to raise the question in the second proceeding but the converse did not necessarily apply.
31 The lack of potential for conflict does not necessarily mean that it was not unreasonable to refrain from raising the issue in the first proceeding. As Justice Kenny stated:
"In cases where there was no risk of inconsistent judgments, all reasonable facts would have to be considered, including the character of the previous proceeding, the scope of the pleadings, the length and complexity of any trial, any real or reasonably perceived difficulties of raising the claim in the earlier proceeding and any other explanation for the failure to make the claim earlier".
32 In King v Lintrose, Justice Callaway also recognised that it might be difficult to discern whether the estoppel was Anshun or cause of action estoppel but that it was enough that they could be dealt with under the wider question whether it was not unreasonable not to have raised the issue or claim.
33 The defendants in the present proceeding were together with one Dr Kamani, the wife of Mr Irani, the plaintiffs in the earlier Proceeding No. 6093. In that proceeding the plaintiffs who were all pursuant to a deed of guarantee and indemnity dated 16 June 2000 guarantors of the obligations of Pinnacle Pty Ltd to the St George Bank in that case the defendant and the plaintiff in this proceeding under four separate facilities including most significantly for present purposes a fully drawn advance facility for $1.88m established on 21 November 2001.
34 Pinnacle itself had mortgaged certain quarry land at Buller to the bank. Pinnacle and the corporate guarantors were companies associated with Mr Irani or Dr Kamani. One of the guarantors, Dr Kamani had given mortgages over her land situated at Kew and over shares. Unlike the other guarantors her liability was limited to the value of her mortgaged land and shares.
35 As appears from the judgment of Justice Byrne, delivered on 27 August 2004 the FDA facility was required in order to fund certain developments on the Buller quarry land to be carried out pursuant to a contact between Pinnacle and Soiltech. Soiltech was a company associated with one Mr Halinan. Pinnacle also entered into various other agreements with other companies associated with Mr Halinan.
36 In September 2001 it entered into an agreement with TranTeret Pty Ltd, a company in Mr Halinan's group pursuant to which TranTeret received an option to acquire 25 per cent of Pinnacle for $2m. It was a condition of the FDA facility that Pinnacle would provide the bank with a further bank guarantee which was given by Westpac on behalf of TranTeret for $2m. Pinnacle itself did not negotiate with the FDA facility with the bank. Rather, Soiltech through its solicitors negotiated with the bank officers. The bank was represented by its solicitors, Herbert Geer & Rundle in the transaction.
37 Justice Byrne, in his judgment stated that Dr Irani and Dr Kamani at trial had told him that on the evening of 22 November 2001 they were handed the bank's letter of offer of 21 November for the FDA facility by their solicitor, Mr Richard Florey of Rogers & Gaylard who took them through the letter and explained it. It was then executed in acceptance of the offer by them and by the various Irani corporate entities whose execution was required.
38 The bank required a bank guarantee in which it was named as favouree as additional security pursuant to the letter of offer and with the assistance of TranTeret, the Westpac Bank guarantee was obtained and provided as that additional security.
39 In 2002 Pinnacle defaulted. In September 2002 a demand were served on Pinnacle and was not satisfied. In October 2002 the bank served demands on Mr Irani and Dr Kamani under their guarantees which were not complied with. In November 2002 the bank advised TranTeret that it intended to call on the Westpac guarantee to pay out the FDA facility when it expired on or about 21 November 2001. But on 18 November 2002 TranTeret issued Proceeding No. 8189 of 2000 and the bank gave an undertaking not to do so pending determination of the proceeding or further order.
40 On 12 November 2002 an administrator was appointed to Pinnacle. On 26 November 2002 the bank appointed receivers and managers over Pinnacle's assets. On 23 May 2003 the bank as mortgagee in possession entered a contract of sale whereby the Buller land was sold to High Quality Quarries, the company associated with Mr Halinan for $6.5m.
41 Under a special condition of the contract of sale the bank had the option either to return the Westpac guarantee to TranTeret or to allow the proceeds of a call on the Westpac Bank guarantee to be used as part payment of the balance of purchase price of the land on settlement.
42 The guarantors commenced the first proceeding against the bank on 3 June 2003. The bank had a counterclaim which I will refer to subsequently. The guarantors had a number of complaints. The proceeding was initially heard by Justice Byrne. At the outset it became apparent that the bank contended that it had sold both the land and Westpac Bank guarantee for $6.5m but the guarantors had apprehended that the bank guarantee had been disposed of for no consideration.
43 Time was necessary to address that issue and in order to salvage the trial date, Justice Byrne dealt with certain identified preliminary issues only reserving other questions to a later trial which was heard by Justice Whelan. Justice Byrne noted that there were amendments of pleadings including post-trial amendments proposed and post-trial submissions and that the pleadings were very confusing.
44 In Paragraph 29 of his judgment he identified the issues which he would decide. I shall not read Paragraph 29 of his judgment. His Honour found that under the terms of the FDA on a proper construction, the bank was not limited to realising the Westpac Bank guarantee security by calling on it. The bank was entitled to sell the Westpac guarantee and no breach of contract by the bank was established on that basis.
45 He also found that on a proper construction, the terms of the FDA facility did not preclude application of the proceeds of the contract of sale to the discharge of the FDA facility rather than other liabilities of Pinnacle.
46 The standard terms of the various Pinnacle facilities provided that the proceeds of any security could be applied to discharge any liability of Pinnacle.
47 He further found that contrary to the guarantors' assertions, upon the execution of the FDA facility the other facilities and the securities were not varied or waived so as to incorporate a defined repayment term that the securities only secured Pinnacle's indebtedness other than under the FDA facility.
48 The consequence of that finding was that the bank had not lost the right to recover the FDA amount from the proceeds of the other securities and was not limited to calling on the Westpac Bank guarantee for that purpose.
49 His Honour found that the alleged repayment term that the Westpac Bank guarantee was the only way in which the bank was to be repaid the FDA debt did not become a term of the facility. Justice Byrne further considered the question whether there was a common mistaken belief that the bank would call on the Westpac Bank guarantee for $2m within 12 months from signing the FDA facility and that it was to be applied solely to clear the FDA facility provided to Pinnacle.
50 He observed that if there were such a common belief it did not carry with it a belief that the security might not be called on in the event of default or that it might not be sold. Further, he stated that in evidence it appeared that the letter of offer of 21 November was fully explained to Mr Irani and Dr Kamani by their solicitor before it was accepted. His Honour expressly rejected the guarantors' argument based on mistake. He also rejected the guarantors' argument on estoppel based on an alleged representation constructed from the alleged repayment term.
51 Justice Byrne concluded that it was self-evident that the bank recovered some value from the Westpac Bank guarantee but he did not attempt to value it, recognising that it could be worth very much less than its face value due to the encumbering claim of TranTeret he stood the valuation over for the next trial.
52 Although I shall not refer to the plaintiffs' statements of claims in the earlier proceeding I will briefly consider the amended counterclaim of the bank in that proceeding dated 4 August 2004.
53 In that counterclaim the bank allege that Pinnacle was indebted and liable to it under the banking facilities and that a demand had been served and was not satisfied. Further that the bank had served an notice of demand on the sureties which had not been satisfied. It further alleged that the guarantors as sureties were liable to the bank for Pinnacle's liabilities and indebtedness.
54 The relief actually sought however was limited to declarations that relevantly the guarantors were liable to the bank for the indebtedness and liability, as defined that is Pinnacle's indebtedness and liability, and it also sought declarations that the bank was entitled to the benefit of the share mortgage and securities and possession of the land at Marshall Street, Kew.
55 Justice Whelan heard the second trial. He heard it over an apparently protracted period from 20 to 21, 26 to 28 April 2005, 25 and 21 May 2005, 1 June 2005, 26 July 2005, 12 August 2005, and 2 September 2005. He delivered judgment on 13 October 2005.
56 His Honour identified the issue for his decision as including whether the bank breached its duty as mortgagee in selling the Buller land because its real sale price was 4.5 million and less than the land's real value, whether the bank had failed to negotiate with a potential purchaser, whether it had relied on non current and erroneous valuations, and whether it released the Westpac bank guarantee as a term of the sale. He also determined whether the bank breached its duty as mortgagee because inter alia the agents in possession incurred certain liabilities to the EPA and whether costs, charges and expenses had been improperly incurred and charged to Pinnacle.
57 His Honour relevantly to this proceeding concluded at Paragraph 187 that the matter of the $525,000 payment to the EPA had been unequivocally abandoned by the plaintiff guarantors and that he had no doubt that counsel for the bank had conducted the case in the belief that that matter was not in issue. His Honour also found that the land and the Westpac Bank guarantee were realised in one lot at Paragraph 190.
58 The Westpac Bank guarantee was not he said sold as such but realised and it achieved a significantly higher price for the mortgage land although he could not assign any particular value to the Westpac Bank guarantee given the TranTeret proceeding and he made that observation at Paragraph 216. Justice Whelan ordered that there be judgment for the bank on the plaintiff guarantor's claim. He declared that the bank as plaintiff by counterclaim was entitled to enforce and exercise its rights as mortgage of the Kew land and the share mortgage and to recover possession of the Kew land but he did not make orders in relation to any money claim by the bank.
59 Following Justice Whelan's judgment on 13 October 2005 the bank sought orders reflecting the relief claimed in the counterclaim but also sought an order for judgment for a money sum and an order for indemnity costs. In a judgment dated 26 October 2005 Justice Whelan accepted that it would not be fair to grant the relief in relation to the money sum and it would not be fair to permit the bank to reopen its case at that point.
60 The bank sought to rely on a certificate under the standard terms of the facility as to the amount.
61 Justice Whelan noted that there were various terms relating to the certificate's conclusiveness in different facilities and that the bank had never claimed to recover a money sum on the debt from the guarantors. He considered that there were uncertainties raised by the evidence so that if the bank were to be permitted to prove the quantum of debt at that stage it would be unsatisfactory.
62 As there was a possibility of the bank being met with an Anshun argument if it subsequently attempted to prove the quantum of the debt Justice Whelan had accepted an undertaking from the guarantors that should a subsequent proceeding be brought for a monetary sum due to the guarantees or under the guarantees the guarantors would not raise any Anshun estoppel or related point as a defence to such action. Justice Whelan also noted that after the realisation of the securities it may never be necessary for the bank to seek judgment for a debt.
63 In relation to St George Bank's claim for the indemnity costs of the guarantor's proceeding again Justice Whelan did not think it appropriate to make an order for indemnity costs at that stage because the provisions allowing for the indemnity of legal costs were not as clear as some and the guarantors had not been clearly alerted to the claim and the position of Dr Kamani complicated the matter.
64 His Honour therefore made a costs order on the ordinary basis indicating that if Abigroup v Sandtara were correct the St George Bank could still pursue contractual recovery of legal costs of the proceeding at an indemnity level under the guarantee.
65 Due to the nature of the argument in relation to the applications it is necessary to consider the pleadings in the present proceeding in some detail but I will observe that I am about half way through the judgment.
66 By written statement of claim dated 18 January 2006 the plaintiff pleads by Paragraph 3 that on and after 15June 2000 at the request of the defendant guarantors the plaintiff provided the specified financial facilities to Pinnacle including most significantly for present purposes the November 2001 fully drawn advance.
67 Collectively these are defined as the finance facilities. The defendants admit that allegation.
68 By Paragraph 4 it is pleaded that the terms of the finance facilities included an obligation by Pinnacle to pay the bank on demand all costs and expenses incurred by the plaintiff on a full indemnity basis in respect of a number of specifically enumerated matters. The defendants admit that the finance facilities contained terms to the effect alleged.
69 By Paragraph 5 the plaintiff pleads that by a deed of guarantee and indemnity dated 16 June 2000 the defendants irrevocably guaranteed the due payment and performance of the financial facilities by Pinnacle to the plaintiff and indemnified the plaintiff in respect of Pinnacle's non payment and non performance of the financial facilities. The defendants admit the terms of the deed of guarantee and indemnity are as set out.
70 By Paragraph 6 the plaintiffs plead that there were terms of the deed of guarantee including that each of the defendants unconditionally and irrevocably guaranteed payment of the guaranteed moneys to the bank not paid by the borrower on a due date on demand, indemnified the plaintiff bank against all losses, et cetera, incurred because Pinnacle failed to pay when payable or because the plaintiff exercised powers or rights of recovery and that any demand to the defendants could be signed on behalf of the plaintiff by its solicitors.
71 And importantly by Paragraph 6E that, "Except in the case of manifest error a written statement, certificate or determination of the plaintiffs setting out the amount of money owing or any determination of an amount to be paid under the deed of guarantee and indemnity shall be conclusive evidence of the amount owing or the determination and will be binding upon the guarantor".
72 The defendant admits all the alleged terms save for 6B, that is that they do not admit that the guaranteed money included the amount of the FDA agreement. Further they admit the guarantee subject to its production.
73 MrNash, senior counsel for the defendant, stated that the guarantee was admitted subject to an original guarantee signed by the parties. Mr Bateson in his affidavit tendered as Exhibit 81 a copy of the guarantee on which the plaintiff relies. I note further that in the Proceeding 6093 of 2003 the defendants themselves pleased the deed of guarantee and indemnity dated 16 June 2000.
74 By Paragraph 7 the plaintiff pleads that as a consequence of Pinnacle's default under the terms of the financial facilities on 18 September 2002 the plaintiffs demanded that Pinnacle pay the amount outstanding under the financial facilities. By Paragraph 8 it is pleaded that on 8 October 2002 Pinnacle not having paid the plaintiff served demands on the defendants under the guarantee and indemnity.
75 By Paragraph 9 it is pleaded that the defendants did not pay the guaranteed money or any part thereof and the service of the demands and the non payment are admitted.
76 By Paragraph 10 the plaintiff pleads that it suffered loss and damage under four specified heads being:
(i) the amount presently owing to the plaintiff by Pinnacle under the financial facilities,
(ii) expenses including recovery of the guaranteed money,
(iii) legal costs on a full indemnity basis pursuant to the provisions of the guarantee, and
(iv) interest pursuant to the financial facilities. It further pleads that a certificate as to the foregoing amount, costs and expenses, pursuant to the guarantee an indemnity will be provided.
77 The plaintiff claims judgment for the amount of the guaranteed money, alternatively damages and interest and costs, the defendants deny the allegation of loss and damage. By particulars of loss and damage dated 24 February 2006, the plaintiff attributed amounts to the categories in Paragraph 10. Those particulars are now superseded by the certificate pursuant to the deed of guarantee and indemnity on account of pinnacle, dated 16June2000, which is Exhibit AB12, to the affidavit of Mr Bateson, AB12, to the affidavit of Mr Bateson.
78 The certificate of Mr Bateson, the chief manager of the plaintiff's loan management unit, states that he is the manager in charge of Pinnacle's account, and is authorised to provide the certificate under Clause 9.2 of the guarantee and indemnity. By Paragraph 2, the certificate states that the amount owing to St George Bank by Pinnacle, including interest, cost, and expenses, and after receipt of proceeds of sale of the Buller land for $6.2m, less adjustments, and the proceeds of sale under the share mortgage of Boman Irani, that is Dr Kamani, of $1,565,036.02 is $2,877,466.94. By Paragraph 2 it is stated that the current interest payable to the St George Bank under the finance facilities is ten per cent per annum, which is $788.35 a day.
79 The plaintiff bank relies on the affidavit of Alan Bateson, Mr Bateson deposes that the indebtedness and liability of Pinnacle to the bank under the various specified financial facilities and mortgagors were established, and there had been breaches that demand was made on Pinnacle on 18 September 2002 and on the guarantor's sureties, that is on 8 October 2002, as verified by certificate under the guarantee indemnity, and that no part has been paid. The proceeds of Pinnacle's land list, costs of receivership, valuation, sale cost levies, licence fees due to the EPA, have been applied to reduce Pinnacle's indebtedness and liability.
80 Mr Bates deposes or submits that in the original guarantor's proceeding, which was heard in two stages by Justice Byrne and Justice Whelan successfully, the execution of the guarantee and the indemnity and its enforceability were not challenged, "The guarantors", he said, "Did not dispute that Pinnacle had incurred the indebtedness and liability to the bank, and the service of the demands and the non payment were not disputed". Mr Garrett submitted that all of the elements of the plaintiff's claim were admitted or proved by Mr Bates. Further, the bank argued that all the substantive defences now relied on by the defendants have been determined in the earlier proceeding against the defendants, or should have been raised in that proceeding, and the defendants therefore are estopped from raising them now.
81 By a defence dated 21 March 2006, the defendants admit the financial facilities and certain of the terms alleged. By Paragraph 4A(A), they say, however, that as far as the fully drawn advance under the 21 November 2001 facility was concerned, there was a requirement that this was to be satisfied by the plaintiff calling on the Westpac Bank guarantee and not otherwise, or (b), alternatively that the plaintiff would only be entitled to claim repayment of any part of the fully drawn advance under the defendant's guarantee, to the extent to which it could not be satisfied by the plaintiff's call on the Westpac Bank guarantee.
82 The plaintiff contended that Paragraph 4A raised construction issues in relation to the FDA facility. By Paragraph 5, the defendants admit the alleged terms of the guarantee and the indemnity, but say that under the terms of the November FDA agreement, any money payable to the plaintiff under it had to be satisfied by the plaintiff calling on the Westpac Bank guarantee, and by (c), is not covered by the deed of guarantee, or only to the extent that it could not be satisfied by the Westpac Bank guarantee. The plaintiff contended that these allegations were just reiterations of the construction question and raised no new independent point.
83 By Paragraph 5D, the defendants plead that the plaintiff breached the terms of the November fully drawn advance agreement by not calling on the Westpac Bank guarantee, but rather releasing the bank guarantee for no consideration or nominal consideration, the plaintiff contended that this was a reiteration of the construction question, although it raised the issue of no consideration or nominal consideration. By Paragraph 6, the defendants admit some of the alleged terms of the guarantee, but do not admit that the guaranteed moneys included the amount of the November fully drawn advance agreement.
84 By 6C, alternatively they deny that the guaranteed moneys included the November fully drawn advance account, save to the extent to which it could not be satisfied by the plaintiff calling on the Westpac Bank Guarantee. By Paragraph 7, the defendants admit that the plaintiff demanded an amount stated to be outstanding from Pinnacle to the plaintiff on 18 September 2002.
85 By Paragraph 7B they say that the demand was defective in that it erroneously included the amount of $1.88m payable under the November fully drawn advance agreement, which was in fact to be met by the plaintiff, calling on the Westpac Bank guarantee as the primary security. By Paragraph 8 the defendants admit that on 8 October 2005, the plaintiff's solicitors served a demand under the guarantee upon the defendants, but say that the demands were defective because the amount under the FDA agreement was erroneously included, by Paragraph 9A, admit the defendants have not paid the amount claimed in the demands, and the defendants further deny that the plaintiff suffered loss and damage.
86 In Paragraph 11, it is pleaded that the plaintiff's action in releasing the bank guarantee for nominal or no consideration, without calling on it, constituted a breach of the November FDA agreement, and in Paragraph 12 it is alleged that insofar as the guarantees given by the defendants covered the FDA agreement, the plaintiff's act in breaching the agreement released the defendants from any obligation, except to the extent to which the plaintiff's claim under the FDA agreement exceeded the value of the guarantee, or alternative release the defendants entirely.
87 Paragraphs 13 to 18 concern the EPA payment of $525,000. The defendants allege that the plaintiffs, on 19 February 2003, the plaintiff appointed receivers and managers who entered the property, or possession of the land at Buller, under the Pinnacle mortgage as agents for the mortgagee, and it is alleged that the plaintiff agreed to make a payment of $525,000 to the EPA in respect of Pyramid's debts to it, before the appointment of the receivers, it is alleged that that payment was not a payment the plaintiff was legally obliged to make, and that the plaintiff acted unreasonably and improvidently, reducing the proceeds of the land by the making of the payment, and that that payment is not an expense guaranteed under the guarantee, which is subject to an implied term that the plaintiff would not incur expenses irresponsibly or negligently or improvidently.
88 In relation to the defendant's allegations on the EPA payment, MrGarrett pointed out that Justice Whelan had concluded that this claim had been unequivocally abandoned. The defendants on 4 May 2006, gave notice of intention to seek leave to amend the existing defence by adding Paragraph 6A through to 6F, 6A through to 6F, and a counterclaim. Paragraph 6A pleads that at the time of the November FDA facility being executed, the parties had a common intention that it was for a 12 month period only, to expire on 22 November 2002, when the Westpac Bank guarantee would be called on to clear it, and that the plaintiff so advised the defendants and that it had agreed with TranTeret Pty Ltd to that effect.
89 Alternatively, by Paragraph 6B, it is pleaded that it was the intention of the defendants that the FDA would be for 12 months only, of 12 months turn, after which it would be cleared, which intention was known to the bank. By Paragraph 6D, "Alternatively, it is pleaded that the FDA facility was affected by common mistake or unilateral mistake, and that the guarantors are entitled to rectification, which, if granted, would mean that the defendants would not be indebted to the plaintiff or the $2.877m or any other sum".
90 Alternatively, by Paragraph 6F, the defendants allege by reason of the common intention or unilateral intention, that the claim for the amount is unconscionable, and the plaintiff should be estopped from claiming $2m, alternatively $1.88m, and that the plaintiff's bank's claim should be reduced accordingly. The counterclaim pleads that on 22 November 2001, the plaintiff represented to TranTeret that Pinnacle was not in default under its facilities, and would hold the Westpac Bank guarantee on behalf of TranTeret as security, that the representations were false, and that Pyramid was in default, and the bank did not hold or intend to hold the Westpac Bank guarantee as security for
91 TranTeret, but rather intended to use it to clear the full debt at the end of 12 months.
92 It is alleged that the representations were misleading and deceptive. Further, that on 4 November 2002, the bank advised TranTeret that it intended to call on the Westpac guarantee to pay out the November FDA facility. On 18 November 2002, TranTeret issued a proceeding to prevent the bank from making that demand, and the bank gave undertakings to TranTeret not to call on the Westpac Bank guarantee to pay out the FDA facility, and did not do so.
93 By Paragraph 32, it is pleaded that but for the representations to TranTeret, TranTeret would not have provided the Westpac Bank guarantee, the plaintiff would not have advanced the FDA amount to Pinnacle, and the amount guaranteed by the defendants would have been reduced by 2,000,000, alternatively 1.88 million. By Paragraph 33, it is pleaded that alternatively in the absence of misrepresentation to TranTeret, the bank would have realised the Westpac Bank guarantee in November 2002, and reduced the indebtedness under the guarantee. By Paragraph 34 it is pleaded that in the premises, the defendant guarantors have suffered loss and damage by reason of the failure to clear the November FDA facility on 18 November 2002.
94 By an affidavit sworn on 4 May 2006, Mr Boman Irani denies that the defendants are indebted to the plaintiff of the sum alleged. He deposes that the indebtedness arises from a fully drawn advance, and that prior to entering into that transaction, he received advice from the bank that the FDA facility would be repaid from the proceeds of a call on the Westpac Bank guarantee pledge by TranTeret, he refers to the FDA facility itself into a facsimile from the bank dated 22 November 2001, confirming that TranTeret was aware of the 12 month term of the facility.
95 Dr Irani, or MrIrani, asserts that there was a common intention to clear the facility by calling on the Westpac Bank guarantee, evidenced by exhibited letters, including a letter of the bank to TranTeret dated 4 November 2002. He deposes that the defendants always intended and believed that at the end of the 12 months, the bank would call on the Westpac Bank guarantee and fully pay out the FDA facility. Had this occurred, Pinnacle's debt balance would have been cancelled out by its credit balance. Further, on 22 November 2002, the bank wrote to TranTeret, including false representations that Pinnacle was not in default under the financial facilities, although it was, and that it would hold the bank guarantee on behalf of TranTeret as security, which was untrue as it intended to apply the proceeds to the FDA facility.
96 Mr Garrett made a number of criticisms of the pleading, which I will now consider in detail. He argued that the very claim based on Paragraph 4A of the amended defence had been determined by Justice Byrne on any view of res judicata, the defendants were not entitled now to raise it. Although the construction raised in Paragraph4A(B) was not previously run, he said it was manifestly part of the same subject matter, being the construction of the FDA. In any event, it was unreasonable not to have raised it in the early proceeding. As to the release of the Westpac Bank guarantee, the subject of Paragraph 5B, Justice Byrne had determined that the bank could sell or otherwise deal with it, and it was not confined to calling on the Westpac Bank guarantee. Further, Mr Garrett said that both Justice Byrne and Justice Whelan had dealt with the issue of no or nominal consideration for the bank guarantee referred to in Paragraph 5D, it was, in any event, simply a follow through of the construction issue and was not a new issue between the parties.
97 Mr Garrett has intended that the allegations in Paragraph 6 were just different ways of putting the same construction issue. I agree with his submissions in relation to the above allegations in the defence. Mr Garrett further argued that the new Paragraph 6A, the 6F introduced allegations of common or unilateral mistake, based on common intention that the FDA facility would expire on 22 November 2002, and that the Westpac Bank guarantee would be called on to clear it or on the defendants' intention as to that same matter known to the bank.
98 This led to a claim of rectification to provide a term to that effect or a plea that the bank was estopped from claiming the $2.87m or $2m or other sum from the defendant guarantors based on unconscionability.
99 Mr Garrett submitted that the claim for rectification was untenable. It did not identify any agreement which was inaccurately expressed in the document to be rectified. Even if relying on unilateral mistake it was still he said necessary to identify a text which constituted the alleged real agreement. The claims were thus inherently flawed because there was also no direct dealing between the bank and the guarantors. No detrimental reliance was pleaded.
100 Mr Nash conceded that the claims would more properly be framed as misleading or deceptive conduct. I think that was a concession anyway. A virtual concession. Further, Mr Garrett argued that it was clear that common and unilateral mistake pleas of rectification and estoppel were like the construction issues, just different ways of intercepting the obligations which would otherwise apply under the terms of the facility.
101 They all clearly belong to the subject matter dealt with exhaustively by Justice Byrne. Further, success for the defendants on those pleas would lead to inconsistent findings with those of Justice Byrne. The pleas were also inconsistent with the evidence advanced on the defendants' behalf at trial before Justice Byrne and His Honour's finding that the Iranis had been taken through the letter of offer by their solicitor. Such matters were confirmed by Mr Halinan's affidavit sworn in the TranTeret proceeding now exhibited to the second affidavit of Mr Leonidas.
102 Mr Garrett submitted that even if on a proper analysis the claim did not properly belong to the subject matter dealt with by Justice Byrne, it was utterly unreasonable not to have run them in the earlier proceeding. I am persuaded that that contention is correct.
103 As to the allegation in Paragraphs 13 to 19 of the defence in relation to the payment of $525,000 to the EPA, Justice Whelan had found that the guarantors' claim in relation to that payment was unequivocally abandoned and no explanation had been advanced for that abandonment.
104 Mr Garrett said that those allegations in relation to the EPA payment were a paradigm example of the claim which ought reasonably to have been brought in the earlier claim and the guarantors' own conduct indicated that. I agree with that submission.
105 Mr Garrett also submitted that much of Mr Boman Irani's affidavit was inadmissible because it was vague, assertive or conclusory in relation to assertions such as, "I received advice from the plaintiff" in Paragraph 4 and that "The intention of the plaintiff and the defendants were the same as evidenced in a certain affidavit".
106 While Mr Nash contended on the basis of a letter, Exhibit B1.2 referring to a conversation between Mr Phillips of the bank and Dr Irani's solicitor, Mr Florey that there was evidence of advice to Dr Irani to the bank I nevertheless accept the force of Mr Garrett's objections.
107 Mr Garrett acknowledged that the counterclaim raised new issues. But he said that the counterclaim was legally untenable and furthermore subject to cause of action and Anshun estoppel. The allegations were that the bank had made false representations to TranTeret on which TranTeret relied in providing the guarantee and that a year later TranTeret prevented the bank from consummating the alleged misrepresentation by paying out the FDA amount.
108 Mr Garrett said that first this misrepresentation pleas was untenable and hopeless because it was misrepresentation to a third party who was not related to or in privity with the defendants. One needed the right, as well as a remedy and the pleaded deception of a stranger did not give rise to such a right.
109 In relation to the argument that the defendants could not rely on representation made to a third party Mr Nash relied upon the Trade Practices Act authorities on manufacturers whose goods were misrepresented to third parties as establishing that third parties could recover damages. He relied in particular on ANZ Bank v Canned Foods where accountants may have been guilty of misleading conduct towards a bank which appointed a receiver. In that case Justice Buchanan contemplated that a third party might have a cause of action against a party who had been responsible for the misleading and deceptive conduct.
110 Mr Nash also relied in relation to the misleading and deceptive conduct issue on the affidavit of Patrick Callinan sworn 18 November 2002 in the TranTeret proceeding where he deposed that he had received a letter from the bank confirming that Pinnacle's facilities were not currently in default and the FDA was to Pinnacle. He deposed that he had subsequently learned that Pinnacle was in default and that the funds were to be used for other purposes to the bank's knowledge.
111 Mr Garrett argued and I accept that even if in some cases misleading a stranger could cause loss it was nevertheless necessary to provide sufficient particularity and it would be necessary to show the elements such as causation and loss. Those matters were not satisfied in the defendant's present pleading. The wrong to the stranger did not relate to the loss being claimed.
112 The counterclaim pleads the representation to a third party that the bank would hold the Westpac Bank as security on behalf of TranTeret which is said to be a misrepresentation because contrary to its intention, representation or obligation alleged elsewhere to apply it to discharge the FDA facility and which if false was nevertheless intercepted by TranTeret's legal action.
113 The defendants are alleged to have suffered loss because but for the representations to TranTeret, TranTeret would not have given the Westpac Bank guarantee and the bank would not have advanced the $2m to Pinnacle so that the guaranteed amount would have been reduced. Quite apart from the fact that this (indistinct) for the company with which the defendants were associated it is not clear to me how the guarantors have in any event suffered loss if the Westpac Bank guarantee was applied to discharge the total indebtedness of Pinnacle for which they were liable as guarantors.
114 The pleading in its present form appears untenable because at the very least it is confusing. Moreover I am satisfied that it was unreasonable not to raise those issues if at all in the earlier proceeding. Mr Nash conceded that there were issue estoppels against the defendants and he did not challenge the submission that if and to the extent to which any defence or the counterclaim was new it was unreasonable not to raise it in the previous proceeding.
115 The two trials in the previous proceeding appear to have committed exhaustive consideration of the circumstances relevant to the liability of the present defendants pursuant to the guarantee indemnity and the factors or circumstances which could be said to vitiate such liability. The proceeding was protracted with two trials over extended periods. In each trial the pleadings were frequently and extensively amended and other amendments were proposed or abandoned or not permitted.
116 I consider that all the allegations now raised in the defence in counterclaim properly belong to the earlier proceeding. They appear to arise from the same factual matrix. There is a great overlap of facts and evidence. Whatever be the proper demarcations between the different species of res judicata and its extended reach the determination of the present application does not depend on any precise discrimination.
117 I am satisfied that in all the circumstances including the character of the previous proceedings, the scope of the pleadings, the length and complexity of the two trials, the apparent absence of any impediment to raising those claims therein, and the absence of any reasonable explanation for the failure to do so the defendants are estopped from raising and relying on the allegations, non admissions and denials in the proposed amended defence in counterclaim.
118 Mr Nash, however, principally contended - he acknowledged that there were many issue estoppels and his principal argument was that it was the bank which had failed to put the litigation to rest.
119 And as it is litigating for a second time, equity requires equal or even handed treatment. This, however, is on the basis of the guarantor's undertaking not to rely on Anshun against the bank which was the assumption underpinning Justice Wheelan's refusal to allow the bank to raise the money claimed in the earlier proceeding.
120 The guarantors now seek to say in effect that their non-reliance on Anshun against the bank's money claim pursuant to their undertaking entails the concomitant equitable prohibition on the bank relying on Anshun against the guarantors in such a new proceeding. I am not persuaded that that is so.
121 The bank did not give a corresponding undertaking which would permit the defendants to re-run their substantive claims, variants of the same, or claims so related thereto that it would have been unreasonable not to run them, if at all, in either of the two trials in the earlier proceeding. Clearly Justice Wheelan's decision did not depend on such an assumption. The application of res judicata to the defendants in the present proceeding, while they remain subject to their undertaking, does not, in my view, result in the unequal treatment of parties who are in an equal position and it does not offend the fundamental precepts of equity.
122 While I found Mr Garrett's particular objections to specific pleadings persuasive, it is unnecessary to rely on them as in my opinion the defendants are estopped from relying on the allegations and matters enumerated above, by reason of issue estoppel, course of action estoppel or Anshun estoppel. I consider that the plaintiff is entitled to summary judgment against the guarantors on liability for the categories or classes of money claims set out in Paragraph 10 of the statement of claim.
123 Nevertheless, as the terms of Rule 22 itself acknowledge, there may be some other reason for a trial and that category has been held to apply in situations, where as Justice McGarry stated in Miles v Bull, "Most all of the relevant facts are under the control of the plaintiff and the defendant would have to seek to elicit by discovery the interrogatories and cross-examination those who will aid her".
124 The guarantors contend that this is such a case where as stated in Miles v Bull, there are circumstances that ought to be investigated and the plaintiff ought to be put to strict proof of claim and exposed to full investigation at trial. In relation to the quantum only, I am persuaded that the defendants should have the opportunity to test its calculation.
125 The defendants submit that they have had no discovery in this proceeding and although there was discovery in the previous proceeding, this has not been brought up to date. They are thus not in a position to ascertain whether or not there is error in the amount shown in the bank certificate. Mr Garrett contended that the certificate was conclusive to the bargain between the parties and observed that the defendants did not point to any error. He relied in this context on Dobbs v. NAB. Dobbs' case however did not concern, as here, a clause which provided that, "Except in the case of manifest error" a statement of an amount in a certificate would be conclusive. There was no reference to an exception for manifest error in the clause in that case. Other than for the reference to Dobbs v NAB there were no submissions in relation to the meaning of the reference to "Except in the case of manifest error". I am, in any event, of the view that it would be inappropriate to order summary judgment as to quantum in circumstances where the defendants, who are guarantors, have had not had access or updated access to all relevant documents which would enable them independently to assess whether or not there was manifest error in relation to the calculation of the amount stated in the certificate.
126 The defendants therefore in my opinion should not be subject to summary judgment on the issue of quantum and I shall order that the proceeding be referred to Justice Wheelan for directions on the ascertainment of quantum. The defendants' stay application appears predicated on the assumption either that the plaintiff's application for summary judgment would not be determined or that it would be unsuccessful whereas I have made a somewhat different determination that the plaintiff should have summary judgment on liability as to the categories of the amounts claimed but not on quantum. I do not consider that the trial on quantum should be stayed. It will be discrete and of relatively narrow compass. Until any appeal is decided adversely to it, the plaintiff's entitled, absent special circumstances, to proceed on the basis of the judgments it has obtained and in particular to have a determination of quantum on its money claim.
127 The defendants' stay application should therefore in my opinion be dismissed.
St George Bank Limited
Irani [2006] VSC 217