The Bell Group Ltd (In Liq) & Ors v Westpac Banking Corporation & Ors [2001] WASC 315

The Bell Group Ltd (In Liq) & Ors v Westpac Banking Corporation & Ors [2001] WASC 315 - WASC 2001 case summary — Zoe

[240]

81 In deciding whether to allow an amendment the judicial officer must decide whether there is a reasonably arguable cause of action. In this respect the task is very similar to that which the courts adopt in deciding whether to dismiss an action or claim summarily or to strike out a pleading or claim. The dicta of Barwick CJ in General Steel Industries Industries Inc v Commissioner for Railways (New South Wales) [1964] HCA 69; (1964) 112 CLR 125 has long been the benchmark that the courts use. The jurisdiction summarily to terminate an action (or to deny the right to bring a claim at all) is to be sparingly employed and is not to be used except in a clear case where the court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. The authorities uniformly adhere to the view that a plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind it brings, unless the lack of a cause of action is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them (the pleadings) to stand would involve useless expense". At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or "so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; "so to speak apparent at a glance". As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court. But although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. As Dixon J put it in Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91:

[302]

"In causing BGF:

(a) to enter into the instruments ... and in procuring, together with TBGL, the other companies in the Bell Group to enter into the respective instruments

.............

in the circumstances and, in the case of subparagraph (c)(i) below, with the actual knowledge, and otherwise with the actual or attributed knowledge pleaded in paragraph 38, [the directors], as directors of BGF,

(c) in breach of the duty [to act in the interests of the company as a whole], failed to act bona fide in the best interests of BGF as a whole, including all of its creditors, in that:

(i) none of [the directors] then held a genuine belief that all of the instruments ..., were in the best interests of BGF as a whole, including all its creditors in that:

(A) they knew, as was the fact, that those instruments prejudiced BGF's creditors, other than the Banks, as pleaded ..., or

(B) the matters in subparagraph (A) above are repeated and [the directors] also knew, as was the fact, that by those instruments the creditors of BGF, other than the Banks, obtained no prospect, alternatively no probable prospect of benefit but had cast upon them the probable prospect of loss, as pleaded ..., or were recklessly indifferent as to whether that was so, as pleaded ..., and/or

(ii) with respect to sub-paragraph (a), they thereby caused BGF, together with TBGL, to implement, alternatively, with respect to sub-paragraph (b), they thereby caused BGF to participate in, a scheme constituted by the transactions effected by the instruments ..., whereby BGF's assets and the means of realising those assets were made available exclusively to the Banks for repayment of the debts owed by BGF and BG(UK) to the Banks, and further when there was no prospect, alternatively no probable prospect of benefit for, but the probable prospect of loss to, BGF's other creditors, to the prejudice of BGF's other creditors, ... whereby the instruments were not within the interests of BGF as a whole, including all its creditors; and/or

(iii) the instruments entered into by BGF rendered it liable for, and exposed BGF's assets to being applied in satisfaction of, the debts of an insolvent company, namely BG(UK) and by virtue of all the instruments ..., the means of realising BGF's assets were made available exclusively to the Banks for repayment of the debts owed by BGF and BG(UK) to the Banks, and BGF's entry into and procuration of such instruments with such effect was not reasonably incidental to, or within the scope of carrying on, the business of BGF and, hence, exceeded the proper interests of BGF; and

(d) in breach of the duty [to exercise powers properly], failed to exercise their powers properly, in that:

(i) they exercised their powers in a way which was not reasonably incidental to and within the scope of carrying on, BGF's business, for the reason pleaded in sub-paragraph (c)(iii) above; and/or

(ii) with respect to subparagraph (a), they thereby caused BGF, together with TBGL, to implement, alternatively, with respect to sub-paragraph (b), they thereby caused BGF to participate in, a scheme constituted by the transactions effected by the instruments ..., whereby BGF's assets and the means of realising those assets were made available exclusively to the Banks for repayment of the debts owed by BGF and BG(UK) to the Banks, and further when there was no prospect, alternatively no probable prospect of benefit for, but the probable prospect of loss to, BGF's other creditors, to the prejudice of BGF's other creditors, .... whereby the instruments were not within the interests of BGF as a whole, including all its creditors."

[540]

"I accept that whether the proposed use of a discovered document is for the purposes of the action in which it has been discovered is not to be determined by concentrating on the causes of action so far pleaded or the parties to that action as constituted at the time when discovery was given. Nevertheless, the authorities to which I have been referred make it clear that the proposed use must bear a reasonable relation to the prosecution of the case sought to be made or the mounting of a defence to that case. So it is that the use of a discovered document to frame a case of fraud in addition to one of breach of contract is permissible if the fraud is said to have infected the same transaction even if additional parties are alleged to have been implicated or the allegations of fraud are sought to be raised by way of cross-claim. Allstate v ANZ Banking Group Ltd (supra) I regard as a case of this kind.

However, I do not consider a claim in defamation to have the requisite relationship with a claim for damages in the form of financial loss occasioned by breach of contract or contravention of the Trade Practices Act by misrepresentations which are alleged to have induced an applicant to enter into a contract. The damages sought to be recovered in an action for defamation are for injury to reputation. Moreover, such an action involves questions of the nature and extent of publication and a defence to it may raise issues such as qualified privilege and malice which are quite extraneous to matters in controversy between parties to a contract. The attack which the applicant seeks to make against the MDU by pleading a cause of action in defamation could succeed or fail quite without reference to the resolution of other existing issues between the parties. I therefore regard it as entirely collateral to the attack which the applicant seeks to mount through the remaining parts of his proposed further amended statement of claim. Accordingly, leave is required before the applicant can make use of the document to frame allegations of defamation ... whether in the existing proceedings before this Court or by way of a separate action."

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Judgment (666 paragraphs)

The Bell Group Ltd (In Liq) & Ors v Westpac Banking Corporation & Ors [2001] WASC 315 (19 December 2001)

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Legislation Cited (3)

Cases Cited (76)