Plaintiff v Defendants

Plaintiff v Defendants - [2008] VSC 162 - VSC 2008 case summary — Zoe

[197]

76 As stated, counsel for the defendants did not cross-examine as to the powers of attorney being current when the certificates were signed and as duly authorising the certificates. The position taken by the defendants' counsel was that the plaintiff had simply failed to lead any evidence to establish that the powers subsisted and authorised the certificates. In my view, however, this overlooked the presumption that the relevant powers of attorney were current at the relevant time and duly authorised the certificates[7]. In McLean Bros & Rigg Ltd v Grice[8], the High Court considered whether proof of the passing of an extraordinary resolution for voluntary winding up of a company was prima facie evidence that a quorum, if required, was present at the meeting. In answering that question in the affirmative, Griffith CJ quoted[9] with approval a passage from Knox County v Ninth National Bank[10] which stated that "where an act is done which can be done legally only after the performance of some prior act, proof of the later act carries with it a presumption of the due performance of the prior act." The Chief Justice also referred to a passage from Bank of United States v Dandridge[11] which stated that "Persons acting publicly as officers of the corporation are to be presumed rightfully in office; acts done by the corporation, which presuppose the existence of other acts to make them legally operative, are presumptive proofs of the latter ... If officers of the corporation openly exercise a power which presupposes a delegated authority for that purpose, and other corporate acts show that the corporation must have contemplated the legal existence of such authority, the acts of such officers will be deemed rightful, and the delegated authority will be presumed." Although these observations were made in circumstances different from those in the present case, the relevant principle is the same. In the present case, there being no indication that the powers of attorney are (or were at the relevant time) not current and subsisting, or in any way did not authorise the certificates, there was a presumption of regularity as to those matters. The defendants did not displace that presumption. They neither challenged those matters in the pleadings nor in the cross-examination of relevant witnesses. It follows that I do not accept the defendants' submission that the plaintiff has failed to establish that the powers of attorney under which the certificates were given were current and duly authorised the certificates.

[222]

92 The starting point in considering the submission is the term "Guaranteed Money" which is defined, relevantly, as "all amounts which at any time, for any reason or circumstance in connection with any agreement, transaction, engagement, document, instrument (whether negotiable or not), event, act, omission, matter or thing whatsoever, are payable ... by the Debtor to the Security Trustee or a Financier" (emphasis added). This is a very broad definition. As to when money is "payable", cl 23 of the Facility Agreement relevantly provides that "a certificate signed by a Financier or its solicitors about a matter or about a sum payable to the Financier in connection with a Transaction Document is prima facie evidence of the amount or any other matter stated in it" (emphasis added). The HSBC certificate given under this clause refers to the relevant clauses of the agreement, the event of default, and the fact that HSBC and Rabo, by Notice of Demand served on Bustan International, declared that the Secured Moneys under the agreement were immediately due and payable. Further, the certificate stated that "The Secured Moneys under the Facility Agreement owed to HSBC by International on 31 May 2006 is $3,020,494.59". The Rabo certificate uses the same language and is to like effect. Similarly, cl 18.1 of the guarantees refers to the giving of a certificate about a "sum payable to the Security Trustee in connection with this guarantee" and the certificates given under that clause state the amount of the "sum payable" to the plaintiff pursuant to the guarantee. The bank's certificates are, to use the language of cl 23, "about a sum payable to the Financer in connection with a Transaction Document", and the plaintiff's certificates are, to use the language of cl 18.1, about a "sum payable to the Security Trustee in connection with this guarantee". In substance, the certificates claim that certain amounts are payable by Bustan International to the banks and the plaintiff. In my view, the amounts stated to be "payable" in the certificates are plainly covered by the definition of "Guaranteed Money" referred to above.

[223]

93 The defendants' submission, which I reject, amounts to saying that because the certificates are only "prima facie" or "sufficient" evidence of the sums stated, the sums stated in the certificates are not "payable" until a court determines that they are payable, and hence the term "Guaranteed Money" does not include the "sums payable" referred to in the certificates. In my view, the term "Guaranteed Money" cannot be read in such a narrow way. To do so would be to read into the broad definition of "Guaranteed Money" a qualification to the effect that money is only taken to be "payable" for the purposes of the guarantee if a Court has conclusively determined the matter. If this interpretation was correct, the indemnity in cl 4.1 would have no effect in a case where a court decided that moneys were not payable. That is to say, in the very case that moneys were not recoverable, the indemnity clause would be ineffective because it would, on the defendants' submission, only operate in respect of money "payable". Conversely, in a case where a court determined that moneys were "payable" (or recoverable), the indemnity clause would be effective, but otiose given that the plaintiff would be able to recover under the guarantee. The result is counter-intuitive and could not have been intended by the parties to the guarantee, not least the plaintiff which intended that the indemnity clause would allow recovery of losses caused to it because of and in circumstances where guaranteed moneys were, for whatever reason, held not to be recoverable. The defendants' interpretation of the indemnity clause undermines the fundamental purpose of the contract. It renders the certificates ineffective and, in so deferring the question of whether money is "Guaranteed Money" to a court's determination, has the effect of providing for an indemnity where none is required, and denying an indemnity in cases where the plaintiff cannot recover under the guarantee. In my view, the parties could not have intended such a result.

[226]

95 Notwithstanding the fact that the issues raised by the "knowledge or notice of fraud" case occupied much of the time spent at trial, and that counsel for the plaintiff stated in his closing submission that "the most substantial issue in the case is whether the banks named in the proceeding knew or had notice that some of those foreign currency transactions were being made by employees and senior management of Bustan International in fraud of the company", it is unnecessary to deal with the para 20A case for several reasons. First, my conclusion as to the effect of the clauses in the guarantees means that the defendants simply cannot avail themselves of the para 20A case. Even if they could make good that case, it would not affect my conclusion that the plaintiff must succeed on the certificates. Secondly, I agree with the plaintiff's counsel's submission that if the defendants wished to raise the matters in para 20A, the appropriate way of doing so was by joining Bustan International, who in turn would be expected to have joined the banks, so that all relevant and proper parties were before the Court and thus bound by any judgment[26]. For reasons as to which I cannot and do not speculate, that was not done in the present case. As a consequence, any consideration of the para 20A case would effectively involve making findings and reaching conclusions as to the banks' and Bustan International's liability to each other, but in circumstances where the very parties concerned were not before the Court. Thirdly, I note that Bustan International has commenced a proceeding alleging negligence and breach of other duties against its auditors[27]. While it may be expected that there will be some overlap between the documents tendered in the present case and those that might be tendered in the case against the auditors, the issues raised in that case are quite different from the matters raised in the para 20A case. In effect, the para 20A case is irrelevant to both proceedings. Even if the para 20A matters did have some relevance to the proceeding against the auditors, it would be inappropriate to use the present case as a vehicle for giving what would effectively be an advisory opinion. Fourthly, as counsel for the plaintiff was at pains to emphasise, the para 20A case raised serious allegations against the banks and their officers. To succeed, the defendants' case required findings that the banks knew (or at least were on notice) that Bustan International employees were using the Facility Agreement to engage in speculative foreign currency trading, against the policy of and in fraud of the company. Without expressing any view as to whether the evidence would warrant the making of such findings against the banks and their officers, I consider that it would be inappropriate to make findings of such a nature in circumstances where the findings cannot in any way affect my conclusion that the plaintiff must succeed.

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