S & V Nominees Pty Ltd (in liquidation) v Rabobank Australia Limited

VIRGINIA PACKING SHED PTY LTD (IN LIQUIDATION) ACN 062 072 557

AND: RABOBANK AUSTRALIA LIMITED (FORMERLY KNOWN AS PRIMARY INDUSTRY BANK OF AUSTRALIA LIMITED) ACN 001 621 129

JULIE ANN MEEKING IN HER CAPACITY AS THE EXECUTRIX OF NEVILLE JAMES OBST, DECEASED

JUDGE: BESANKO J DATE: 6 SEPTEMBER 2011 PLACE: ADELAIDE

REASONS FOR JUDGMENT 1 This proceeding concerns the sale of horticultural land at Virginia in the State of South Australia ('the land'). The plaintiffs purchased the land in 1997 and, in the years that followed, improved the land by establishing on the land a market gardening operation. In January 2001 the defendant lent the plaintiffs the sum of $2,800,000 and took security over the land and a fixed and floating charge over the assets of each of the plaintiffs. 2 In June 2001 the plaintiffs were in default of their loan obligations to the defendant. The defendant took action to realise its security over the land. The plaintiffs claim that as a result of its actions the defendant owed them certain duties. For reasons which will become clear, it is not necessary for me to set out the details of those alleged duties. Various breaches of duty are alleged but again it is not necessary for me to set out the details. The principal allegation made by the plaintiffs is that the defendant did not take all reasonable care to find a buyer for the land for a market value of $4,120,000 or the best price reasonably obtainable of $4,120,000. 3 On 5 July 2011 the plaintiffs filed and served a Further Amended Statement of Claim. That document contained the following pleas concerning the alleged failure by the defendant to comply with various sections in Chapter 5 Part 5.2 of the Corporations Act 2001 (Cth) ('Corporations Act'). The relevant pleas are as follows: 12. As a consequence of the matters pleaded above the Defendant: … 12.3 was under a statutory obligation under sections 427(1B), 427(2), 427(4) and 432 of the Act to lodge with ASIC: (a) Notification of Appointment; (b) Controller's Accounts; and (c) Notification of Cessation of Control (if/when applicable). 22. The Defendant did not in 2003, and did not until 19 February 2010, file with ASIC any notification, report or other information as Controller or as chargee under charges 786526 and 786527 nor disclose the information required by the Act nor disclose a complete or fair account of its actions and dealings as Controller to the Plaintiffs despite (inter alia): 22.1 demand having been made by the liquidators of the Plaintiffs and their staff to the Defendant's then solicitor Mr Obst in telephone conversations and meetings in and about 2003; 22.2 letters from the Plaintiffs and their solicitors Thomson Playford Cutlers between May 2009 and September 2009; 22.3 admission by the Defendant through its solicitors Finlaysons (by letter dated 24 September 2009) that it was a Controller but had not lodged Controller reports; and 22.4 request and demand from the Liquidators to the Defendant in July 2005. 22A. The Plaintiffs and Liquidators have incurred substantial costs in investigation, in seeking the issue of an examination summons, in meeting the costs of the Defendant's (or Mr Davis') application to set aside the examination summons, in conducting investigations and examination and in generally eliciting from the Defendant: 22A.1 compliance by the Defendant with its obligations under the Act as pleaded above; and/or 22A.2 part or all of the information and particulars disclosed in this amended pleading; and/or 22A.3 confirmation that the Defendant has not retained in a manner that is available a complete set of such records, files and materials that are in the normal course of business retained to properly explain its actions and transactions in connection with the matters pleaded herein, despite its obligation to do so for six years pursuant to (inter alia) section 286 of the Act and/or for seven years as a matter of usual banking and business practice; and/or 22A.4 disclosure of the information pleaded herein in a timely manner. 23. As a result of the foregoing the Defendant: 23.1 has been and was until 19 February 2010 in breach of the Controller notification and reporting obligations set out in sections 427(1B), 427(2), 427(4) (if applicable) and 432 of the Act. … 23.3B This pleading comprises within the meaning of section 423(1)(b) of the Corporations Act 2001 a complaint to the Court about an act or omission of a controller of property of a corporation in connection with performing or exercising any of the controllers (namely the Defendant's) functions and powers in that: (a) the Defendant failed to comply with section 420A of the Corporations Act 2001 in the manner particularised herein; (b) the Defendant failed to comply with sections 427(1B), 427(2), 427(4) (if applicable) and 432 of the Act in the matter particularised herein. 26. As a consequence of the foregoing the Plaintiffs have suffered loss or damage as follows: … 26.4 additional time and cost of liquidators' staff and external costs including legal costs of and associated with investigations made necessary by the Defendant's breaches of the Act and conduct pleaded herein in an amount to be particularised prior to trial and without limiting the foregoing; (a) the actual legal, accounting and other costs suffered by the Liquidators in seeking declarations against the Defendant sufficient for the Liquidators to discharge their statutory duty pursuant to section 533 of the Act to make proper reports of contravention of the Act by the Defendant to the proper Authority namely the Australian Securities and Investments Commission in connection with the matters pleaded herein; (b) in the part alternative to the above such further or other remuneration costs and expenses as may have been or may hereafter be considered reasonably necessary by the Liquidators of the Plaintiffs to discharge their duties to properly investigate and examine the matters pleaded herein; and (c) in the part alternative to the above the actual costs to the Liquidators of the Plaintiffs together with the actual legal costs and out of pocket disbursements for valuers and the like in now seeking to establish the satisfaction of this Honourable Court what the market value of the Land was as at 29 October 2003. … AND the Plaintiffs claim: … 5 Declarations that: (a) the Defendant has breached sections 427(1B), 427(2), 427(4) (if applicable) and 432 of the Act; and … 6. The actual costs incurred by the Plaintiffs including but not limited to Liquidators fees and disbursements, actual legal costs and actual costs in connection with the investigation and advancement of the case at bar including the summons for examination and expert witness costs for such amount they may total to the date of judgment. 4 The plaintiffs seek leave to file and serve a Second Further Amended Statement of Claim which deletes paragraphs 22A and 26 and the relief claimed in paragraph 6. The defendant does not oppose the removal of those paragraphs but contends that what remains is a claim by the plaintiffs for a declaration that the defendant has breached subsections 427(1B), 427(2) and 427(4) and s 432 of the Corporations Act. The defendant contends that such a claim is in the circumstances untenable. The argument before me proceeded on the basis that leave to amend should not be granted if what remains is an untenable claim and it seems to me appropriate to proceed in that way. It seemed to be common ground between the parties that the defendant did not lodge notices or accounts prior to the date this proceeding was commenced. However, it has since done so. The defendant's contention is that the plaintiffs have no real interest in seeking a declaration and that there would be no practical purpose in making a declaration. 5 The jurisdiction of this Court to make a declaration is contained in s 21 of the Federal Court of Australia Act 1976 (Cth). The section states that the fact that it is the only order sought is not a ground of objection. A number of matters previously considered relevant to the Court's jurisdiction to make a declaration may in fact be relevant to the exercise of the discretion to make or not make a declaration (J N Taylor Holdings Ltd v Bond (1993) 59 SASR 432 ('J N Taylor Holdings Ltd v Bond') at 436-437 per King CJ (with whom Perry J agreed)). If that is the correct approach then that would be a further reason why a Court would be slow to strike out a claim for a declaration at an interlocutory stage. Nevertheless, in some cases a circumstance is 'so contra-indicative to the exercise of the discretion in favour of the grant of declaratory relief that the existence of [that] circumstance would lead almost inevitably to the exercise of the discretion against the making of the declaration' (J N Taylor Holdings Ltd v Bond at 436 per King CJ). 6 The fact that there would be no practical purpose in making the declaration and that a plaintiff has no real interest in having the question determined are reasons for refusing declaratory relief (Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448 per Lord Dunedin; Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437 per Gibbs J (as his Honour then was); Woolf, Sir Harry and Zamir I, The Declaratory Judgment (3rd ed, Sweet and Maxwell, 2002) para 4.092). If these facts are clearly shown at an interlocutory stage then an order striking out the claim may be made. 7 In this case, the plaintiffs have no real interest in having the question determined. As I have said, there is no dispute that the notices and accounts had not been lodged at the time the proceeding was commenced but that those documents have since been filed. Presumably, the Australian Securities and Investments Commission are aware of the defendant's default and yet it has not sought to intervene in this case or brought its own proceeding. The plaintiffs are not adversely affected if they are not able to pursue their claim for a declaration. They are still able to adduce evidence of the defendant's failure to lodge notices and accounts in so far as it is relevant to its major claim. The plaintiffs contend that it is relevant because it is evidence of how the defendant viewed its position and therefore its obligation with respect to the property. 8 For these reasons I will not grant leave to the plaintiffs to file a statement of claim which includes the claim for a declaration of contraventions of the sections of the Corporations Act identified in these reasons. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.