Seachange Management Pty Ltd v Bank of WA Ltd (Civil Claims) [2010] VCAT 1904

1. On the undertaking by Bankwest through its counsel that it will issue and serve proceedings for possession in the Banking and Finance Division of the Commercial List in the County Court within 14 days of the making of this Order;
2. On the undertaking by Seachange through its director that until the hearing and determination of the County Court proceeding for possession to be taken by Bankwest that until the hearing and determination of the County Court Proceeding or until further order it will:
   1. pay interest and fees to the respondent or the rates specified in the respondent's letter of offer dated 13 October 2008 executed by the applicant on 15 October 2008;
   2. or, if the respondent so requests, pay interest or the rate published for 30 November 2009 for six months BBSY plus 175 basis points plus a line fee of 50 basis points plus a roll-over fee of $125.00;
3. On the undertaking by Bankwest through its counsel that for so long as Seachange honours its undertaking set out in the previous paragraph, it will permit Seachange to remain in possession of the property known as the Ocean Grove Hotel;
4. This proceeding is struck out.

Mr G De Simone, a director of Seachange Management Pty Ltd

1. In April 2006 the Bank of Western Australia Limited (Bankwest) agreed to provide a loan facility to Seachange Management Pty Ltd (Seachange). By the agreement, Bankwest was to provide a $3M interest only loan, secured by a first mortgage over a property owned by Seachange, and known as the Ocean Grove Hotel. By the original terms of the advance, the loan facility was to expire three months after the first draw down. The funds were drawn down on 1 May 2006. Between April 2006 and October 2008 there were ten variations to the original loan facility. The last of those variations, dated 13 October 2008 extended the expiry date of the facility to 31 March 2009.
2. On 26 March 2009 Seachange asked Bankwest for a minimum three month extension of the facility in order to refinance. On 6 May 2009 Bankwest, without formally extending the facility said it would forbear from enforcing the facility if refinancing occurred by 12 June and payout occurred by 30 June. Seachange was unable to refinance in that time. On 26 June 2009 the parties met, and were unable to reach agreement about a further extension of the facility. Bankwest advised the applicant that it would treat the facility as expired from 30 June, and that the default interest rate would be applied to the outstanding principal from 30 June 2009. It served formal notice on Seachange to that effect. Thereafter, Bankwest began to charge interest at the penalty rate against the amount advanced.
3. On 15 July 2009 Seachange lodged a claim with the Tribunal invoking its jurisdiction under the Fair Trading Act 1999. It alleged that Bankwest had promised it would not cancel the facility precipitously, and would give adequate notice to allow sufficient time to transfer the facility to another lender. It alleged that consistently with that, in May 2009, Bankwest had demanded it be paid interest in advance, to cover the period to August 2009. Finally, it complained it had been charged penalty interest of $ 9,500 for the period commencing 1 July 2009. It claimed that Bankwest had contravened the Fair Trading Act, and had engaged in misleading and deceptive, and unconscionable conduct. It sought damages, a variation of the contract and an urgent injunction to restrain Bankwest from treating the facility as expired or charging penalty interest.
4. On 10 November 2009 Senior Member Vassie granted an interim injunction restraining the respondent from exercising any right or power that it might have in the event of a default by the applicant in the performance of its obligations under the facility until determination of the proceeding.
5. Seachange was ordered to file its points of claim within 3 weeks of the grant of the injunction. It did not comply with that order. It was not until it was faced with an application under s 78 of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act)to strike out the claim for failure to comply with the order that, on 19 January 2010, it filed its points of claim.
6. The points of claim extended the claims made and relief sought well beyond the matters included in the original application. Seachange alleged bad faith, deceit, breaches of the Banking Code of Practice, breaches of confidentiality and privacy, improper interference in other litigation in which Seachange was involved in order to advance Bankwest's interests in respect of this loan facility, and failure to comply with lawful requests or directions. The allegations went well beyond the initial complaint concerning the promise not to cancel the facility without allowing sufficient time for Seachange to refinance. It claimed significant consequential loss, both direct and indirect, loss of profits, and damage to business reputation. Seachange also sought orders compelling Bankwest to continue the $3M loan facility, and to provide a further loan facility, or to permit the original loan facility to continue until Seachange could refinance on reasonable terms. It sought damages, including punitive damages in respect of these additional breaches alleged, as well as interest and costs.
7. The original orders had required the respondents to file points of defence within 3 weeks of receipt of the points of claim. They did not do so. Instead 6 weeks after receipt of the points of claim they applied pursuant to s 77 of the VCAT Act for the applicant's claim to be struck out and heard by a more appropriate forum, and for a discharge of the injunction. Section 77 provides:

(1) At any time, the Tribunal may make an order striking out all, or any part, of a proceeding (other than a proceeding for review of a decision) if it considers that the subject-matter of the proceeding would be more appropriately dealt with by a tribunal (other than the Tribunal), a court or any other person or body.

(2) The Tribunal's power to make an order under subsection (1) is exercisable only by a judicial member.

(3) If the Tribunal makes an order under subsection (1), it may refer the matter to the relevant tribunal, court, person or body if it considers it appropriate to do so.

(4) An order under subsection (1) may be made on the application of a party or on the Tribunal's own initiative.

1. Before that application came on for hearing, they filed two further applications, by which they sought a strikeout of the claim pursuant to s 75 of the VCAT Act, on the basis it was frivolous vexatious misconceived or lacking in substance, and a variation of the injunction granted by Senior Member Vassie on 10 November 2009. The s 75 application was abandoned before hearing.
2. Bankwest wants to issue proceeding seeking an order for possession of the property. Senior Member Vassie's order prevents it from doing so until Seachange's claim before the tribunal is discharged. It submits that its claim for an order for possession should be heard at the same time and in the same forum as Seachange's claims. It further submits a court is the more appropriate forum for determining both its claim for an order for possession and Seachange's claims, as now formulated.
3. Parts of Bankwest's outline of submissions, and some of the oral arguments put by Mr Nichol on behalf of Bankwest were directed to what was said to be the inappropriateness of an injunction which prevented Bankwest from seeking to enforce its rights under the loan facility agreement. I accept Seachange's submission that if Bankwest was of the view the injunction was inappropriate, the proper course was to appeal the orders of Senior Member Vassie. It did not do so. It cannot in my view, argue on this application the injunction should never have been granted. To do so is to subvert the proper processes available for challenging the correctness of a decision of the tribunal. I do not consider I should take into account any arguments directed to challenging the correctness of Senior Member Vassie's decision.
4. Mr De Simone, the sole director of Seachange represented it on the application. He submitted Bankwest's application for a strike out under s 77 was futile. He submitted no purpose would be served by striking the VCAT proceeding out and permitting Bankwest to issue in a court, as it was precluded from issuing a writ for possession by Senior Member Vassie's orders. Whilst it is inappropriate on this application to revisit the appropriateness of making the orders Senior Member Vassie did at the time he made them, there is always power to discharge or vary an order if circumstances change. The existence of Senior Member Vassie's order is no bar to consideration of the s 77 application or to an application to discharge or vary the injunction if Seachange's claim is struck out under s77.
5. If I find that Bankwest should no longer be enjoined from seeking an order for possession at the same time as Seachange's claims are being litigated, that both claims should be heard together, and that a court is a more appropriate forum , then s 77 gives me the power to strike out Seachange's claim, and either to refer the matter to a court, or to make the strike out order conditional upon Bankwest issuing proceedings in a court. In such a case, a discharge or variation of the injunction would be an ancillary order necessary to give efficacy to those orders. A discharge or variation in those circumstances would not be an improper revisiting of the correctness of the original decision. Rather it would be an exercise of the power conferred on the tribunal by s 130 to make an order or decision subject to any conditions or orders I think fit, including any condition or order necessary or desirable to give effect to an order or other decision. By like reasoning, if I find that Seachange should be able to prosecute its claim before the tribunal, but that it is no longer fair or appropriate for Bankwest to have to await the determination of these proceedings before seeking an order for possession in a court, then again, I would have the power to discharge or vary the injunction to permit both actions to proceed at the same time.
6. Bankwest's application, therefore, is that all matters in dispute between the parties, including its claim for an order for possession, should be litigated at the same time, and in a court. It submits that it should no longer be restrained from seeking an order for possession, but that the application should be heard and determined at the same time. It submits a court is the more appropriate forum, and that pursuant to s 77 Seachange's claim before the tribunal should be struck out, and the matter referred to a court.
7. The respondent says the claims, as now formulated by Seachange, are broader ranging, and more complex, and seek relief well beyond that identified at the time the injunction was sought and granted. It submits that it should be able to prosecute an application for possession of the Ocean Grove Hotel, the property over which there exists a first mortgage to secure the loan facility at the same time as Seachange's reformulated claim is prosecuted. Mr Nichol who appeared on behalf of Bankwest submitted that it is appropriate that its claim for possession be heard at the same time as the claims articulated by the applicant in its points of claim, as the application for the order for possession, like all the matters raised in the points of claim relate to the disputed rights of the parties pursuant to or consequential on the original loan facility.
8. The respondent initially submitted it wished to take proceedings seeking possession in the Supreme Court and that it was the more appropriate forum to hear the whole claim. In the course of argument, Mr Nichol indicated that if this proceeding were stayed, Bankwest would undertake to issue proceedings in the Banking and Finance Division of the Commercial List of the County Court seeking possession. Bankwest's final position therefore was that the Banking and Finance Division of the Commercial List of the County Court was the more appropriate forum to determine the whole claim, having regard to its processes and the likely timeframe for hearing and determination of such cases in that Division.
9. There were a number of reasons he submitted why the subject matter of the proceeding would be more appropriately dealt with by the court, and this proceeding struck out. The principal reasons relied on were these:

(1) It is uncertain whether VCAT can make an order for possession.

(2) The same issues arise for determination in respect of the applicant's claims under the Fair Trading Act, and the respondent's claim for possession. The same witnesses would be required and the evidence would be the same in both cases. It is undesirable to have two hearings with the same witnesses dealing with the same issues. That creates an unnecessary duplication of evidence and a risk of different findings of fact being made in the different forums.

(3) The issues are complex and involve a large amount of money. The monetary claim is no longer confined to the $9,500 excess interest originally identified by the applicant. The claim, as now formulated involves the $3M mortgage, and claims for loss, interest, and damages including punitive damages. It submits the complexity of the issues and the large amount of money involved in the claim are better suited to determination by a judge than by VCAT, and to the processes of the courts. In particular, he relied on the capacity of Courts to define and control issues by the use of pleadings, the intensive, individualised case management available in the Banking and Finance Division of the Commercial List of the County Court, and to the short time frames between issue and hearing and determination in the specialised lists of the County Court.

(4) The hearing of the applicant's claim is likely to be a lengthy one, and to put a strain on VCAT's resources.

(5) Although the proceeding has been before VCAT for over a year, there would be no real delay if all matters were litigated in a court. Although twelve months has elapsed since proceedings were first issued the only substantive step had been the filing of points of claim by the applicant.

(6) As the substantive proceeding before VCAT has not gone beyond the filing of points of claim there is no significant increase in costs likely to be caused to the parties.

1. Seachange opposed the application to strike out the proceeding. Mr De Simone submitted:

(1) Seachange should not be denied the right to litigate in the forum of its choice.

(2) VCAT has jurisdiction under the Fair Trading Act to hear and determine the whole of Seachange's claim.

(3) It is not clear that VCAT does not have the jurisdiction to make an order for possession. Seachange should not be denied the opportunity to litigate in the forum of its choice because the question of whether VCAT has jurisdiction is unresolved. The preferable course is to refer to the Supreme Court under s 96 of the VCAT Act the question whether VCAT has jurisdiction to make an order for possession.

(4) The value of the claim and complexity of issues are no bar to VCAT hearing and determining the matter.

(5) The respondent has sat on its rights. If it considered a court was the more appropriate forum, it should have applied to strike this proceeding out before the injunction application was heard and determined last October. If it considered it was disadvantaged by not being able to seek a writ for possession until the VCAT proceeding was determined, the appropriate course was to appeal the decision, not to wait for many months and then bring a strike out application.

(6) If Seachange's application was struck out, and Bankwest issued in the Supreme or County Courts Seachange would suffer a costs prejudice. There would be duplicated costs occasioned by recommencing proceedings, as well as the additional costs associated with litigating in a Court. It would also be prejudiced if unsuccessful in a Court, and the costs following the event rule were applied, instead of the presumption in favour of each party bearing its own costs before VCAT

(7) Seachange would suffer damage to its commercial interests if Bankwest were permitted to seek an order for possession. The global financial crisis had changed the relationship between banks and small business, and it would now be impossible for Seachange to obtain alternative finance without clear credit reference, that is if possession proceedings were on foot.

(8) Seachange could suffer further detriment if Bankwest could seek an order for possession at the same time as Seachange's Fair Trading Act 1999 claims were litigated. If Seachange was unsuccessful in its VCAT proceedings, and Bankwest could not issue proceedings for possession until the VCAT proceedings were heard and determined, Seachange would have the benefit of an extra period of grace to attempt to refinance before the possession proceedings were heard and determined. If on the other hand Seachange's claim and Bankwest's were heard and determined at the same time, it would lose that advantage.

1. It is in my view desirable that there be one piece of litigation, not two. Although Seachange's claims as now articulated cover a broad range of complaints, they all arise out of the original relationship between Bankwest and Seachange in respect of the loan facility. So does Bankwest's claim for possession. I accept Bankwest's submission that the same evidence, oral and documentary, would be relied on in each proceeding. The same witnesses would be required in each proceeding and the same credit issues would arise in each proceeding. It would add considerably to cost if two proceedings arising out of the same circumstances were permitted to run at the same time. I am satisfied it is desirable in those circumstances that duplication of effort, and that the risk of inconsistent findings on the same evidence in different proceedings be avoided if possible.
2. At the time the matter was before Senior Member Vassie, the claim appeared relatively simple, and was limited in scope and value. The timetable set by him contemplated a speedy resolution of the matter. I accept Mr Nichol's submission that it was not until Seachange filed its points of claim that the expanded nature of the claim, the complexity of the factual and legal issues, the broad ranging relief sought by Seachange and the likelihood the proceedings would be protracted became apparent. I accept it was this that led Bankwest to consider whether a court would be the more appropriate forum for Seachange's claim, and whether Bankwest should be entitled to seek possession, and to have all matters dealt with in the same proceeding.
3. There are strong arguments in favour of Seachange's claim and Bankwest's being heard in the same proceedings, in the same forum. Although Seachange's claims, as now outlined in the points of claim go well beyond a dispute about whether Bankwest is entitled to treat the loan facility as expired, it is clear that all the issues to be ventilated in the possession claim also arise in Seachange's claims. The witnesses required to give evidence in the possession claim would all be required to give evidence in Seachange's claim. The matters raised as substantive issues in Seachange's expanded claim were acknowledged by Mr De Simone to be relevant either to substantive issues, or would seek to be relied on by him as relevant to the credit of Bankwest's witnesses in the possession claim. In those circumstances there would be substantial duplication if the claims were prosecuted separately, in different proceedings. That leads to substantial duplication of cost, time and effort, and a risk of different findings on the same materials between different decision makers.
4. There are also strong arguments in favour of Bankwest being able to seek an order for possession. A party should not lightly be shut out from seeking relief to which it claims it is entitled. The effect of Senior Member Vassie's order was to prevent Bankwest taking action which would pre-empt the hearing and determination of Seachange's claim for relief, and have the potential to deny Seachange the spoils of victory. If both proceeding are heard together, then the harm sought to be avoided by those orders will still be avoided. Mr Nichol, on behalf of Bankwest has undertaken that, if the strikeout application is successful, and Bankwest is permitted to issue in the County Court, that it would permit Seachange to remain in possession of the property until the claims of Bankwest and Seachange are resolved or determined by the court. The combination of referring the matter to the County Court so all claims between the parties can be heard and determined at the same time, and Bankwest's undertaking to permit Seachange to remain in possession until the matters are resolved or determined ensures Seachange will not be deprived of the fruits of any findings or orders in its favour.
5. I was troubled by some of the submissions made by Mr De Simone in respect of the commercial disadvantage Seachange would suffer if Bankwest were permitted to pursue its claim for possession at the same time as Seachange's claims were pursued by it, or if Bankwest were not forced to wait to seek possession until Seachange's claim was heard and determined. At times he seemed to suggest that the Tribunal should assist, or at least not stand in the way of Seachange's attempts to gain a commercial advantage by litigating its claim before and cross claims by Bankwest were issued, in order to buy time until the economic climate changed and he was able to refinance on more favourable terms. I do not consider the potential commercial advantage to Seachange if Bankwest could not issue for possession until the VCAT proceeding were heard and determined should have any bearing on my decision. Nor do I consider the potential harm to Seachange's capacity to refinance if Bankwest issues proceedings for possession should have any bearing on my decision.
6. There are strong arguments in favour of permitting Seachange, who initiated the proceedings, to litigate in the forum of its choice. I accept Mr De Simone's submission a party should not be lightly prevented from doing so. I also accept his submissions in respect of the clear costs benefits to Seachange in proceeding before VCAT, and the cost detriment in the event this proceeding is struck out and the matter proceeds in the County Court. I accept a party in Seachange's position should not be lightly denied that benefit. I also accept that financial detriment can, to a significant extent, be compensated for by an appropriate order for costs.
7. I do not consider the complexity of the claim or the amount of it make the County Court the more appropriate forum because Parliament has evidenced a clear intention that VCAT be given jurisdiction to hear and determine claims of this nature, complexity and amount. There is no basis for contending that VCAT is any more or less able to grapple with such claims as are made by Seachange than the County or Supreme Courts.
8. Nor do I consider the strain that a long and complex case, as Seachange's expanded claim makes it likely to be, on VCAT's resources should influence a decision about which is the more appropriate forum. If strain is placed on the resources of a Court or Tribunal by the listing of cases it has jurisdiction to hear, that may be a matter which bears on a litigant's choice of forum. It may provide a basis for submissions to the executive arm of government for allocation of further resources to the tribunal. But it should not in my view bear on the Tribunal's consideration of more appropriate forum. Delay in hearing and determining cases due to a strain on its resources is not a proper basis for a Court or Tribunal to decline to hear and determine a matter.
9. In Linton v Commonwealth Bank of Australia[1] Judge Bowman VP considered the question of whether VCAT had jurisdiction to hear and determine an application for possession. He concluded it was not certain VCAT had the power to make an enforceable order for possession. When faced with a choice between litigating in the County Court where it was certain there was power to make, and enforce an order for possession, and litigating in VCAT where it was not certain, His Honour held that VCAT was not the appropriate forum. That decision has been followed in a succession of cases since then.
10. Whilst there is uncertainty about the jurisdiction to make an order for possession, and greater uncertainty about the enforceability of such an order, it is clearly the right decision. It is however, in my view most unsatisfactory that since 2004 the decision about the appropriate forum where a party subject to a Fair Trading Act claim who wishes to cross claim for possession continues to be determined by uncertainty about whether VCAT has jurisdiction to order, or enforce an order for possession. It is understandable that lenders seeking an order for possession would prefer to litigate in a court where there was no uncertainty about the jurisdiction to make and enforce such an order. A lender in Bankwest's position can not and should not be compelled to take proceedings in VCAT in the hope they will obtain and hold on appeal a determination VCAT does have jurisdiction. To do so would subject the parties to unjustifiable cost, and delay and uncertainty.
11. Mr De Simone submitted I should refer the question of whether the Tribunal had jurisdiction to make and enforce an order for possession as a question of law to the Supreme Court for decision under s 96 of the VCAT Act. Mr Nichol opposed that course. In my view, it is not feasible to do so in these circumstances, because it would cause further, and likely considerable delay before the substantive issues between the parties could be litigated and finalised. In any event, the President has not consented to the referral, as is required by s 96.
12. I also agree with Bankwest's submissions that the case, as now formulated by Mr De Simone in his points of claim is one well suited to the individualised, intensive case management processes of the Banking and Finance Division of the Commercial List in the County Court. This is a case where strict control over the pre trial processes is needed to ensure time limits are adhered to, unnecessary and expensive pre trial processes are not embarked on, and the case is confined to the matters really in issue between the parties, and appropriate dispute resolution mechanisms are available and integrated into the court processes. A specialist list is in my view more likely to succeed in those aims than the processes which work well for high volume and less voluminous cases. In addition, having regard to the average time between issue and hearing, and between hearing and decision in cases in that division, there is a high prospect of all matters in issue between the parties being heard and determined expeditiously. It was after making inquiries about the likely time frame for a matter such as this coming on for hearing that Bankwest amended its application to nominate the County Court as the more appropriate forum.
13. The matter has proceeded slowly to date. Some of that was due to efforts to resolve the matter before Seachange's application for an interim injunction was heard. Both parties bear some responsibility for the slow progress between the time the injunction was granted, and the time Bankwest issued its s 77 application.. Although lengthy affidavits and supporting materials have been filed by both parties, the substantive matter has not progressed beyond the filing of Seachange's points of claim. If I were to strike out this claim, although there would be a costs prejudice, the duplication of effort, and wasted costs occasioned by recommencing in the County Court is not considerable.
14. In considering the detriment to Seachange, it must also be borne in mind that it has continued to enjoy occupation of the land, and the benefit of the loan facility to date, and could continue to do so until the determination of the proceedings in the County Court. The injunction was conditional on Seachange making payments of interest and fees in accordance with the most recent variation or extension of the loan facility. Seachange undertook to pay interest and fees to Bankwest until the hearing and determination of the proceeding or until further order at the rates specified in Bankwest's letter of offer of 13 October 2008, and executed by it on 15 October 2008, or, if the respondent so requested, at a different, defined rate. It has made all payments in accordance with its undertaking. Mr De Simone indicated he considered it was in Seachange's interests to do so. Mr Nichol indicated that if it was released from the order restraining it from taking proceedings for possession, provided Seachange continued to make the payments of interest and fees in accordance with its undertaking, Bankwest would permit Seachange to remain in possession until the determination of the County court proceeding or further order. On the undertakings provided or offered by it in this proceeding and those offered by Bankwest it can continue to do so until the matter is resolved or determined provided the fees and interest payments are made when due.
15. For these reasons, I consider that the County Court, more specifically the Banking and Finance Division of the Commercial List is the more appropriate forum for hearing and determining the two linked claims, Bankwest's for possession, and Seachange's for relief under the Fair Trading Act.

[1] [2004] VCAT 870