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 Those particulars are now superseded by the certificate pursuant to the deed of guarantee and indemnity on account of pinnacle, dated 16June2000, which is Exhibit AB12, to the affidavit of Mr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.