789Ten Pty Limited v Westpac Banking Corporation Limited

[2005] NSWSC 1161

CITATION:	789Ten Pty Limited & Anor v Westpac Banking Corporation Limited & Anor [2005] NSWSC 1161
HEARING DATE(S):	10/11/05
JUDGMENT DATE :	10 November 2005
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Hearing dates vacated. Stay order to be automatically discharged on last day of March 2006 unless extended by High Court of Australia.

CATCHWORDS:	Application to vacate hearing dates
PARTIES:	789Ten Pty Limited (Plaintiff and Third Cross Defendant) Interco Management Pty Limited (Second Plaintiff and Fifth Cross Defendant) Westpac Banking Corporation Limited (First Defendant and First Cross Claimant) Colin Alexander (Second Defendant and First Cross Defendant) Kevin Carter (Second Cross Defendant) Jennifer Carter Real Estate Pty Limited (Fourth Cross Defendant)
FILE NUMBER(S):	SC 50167/03
COUNSEL:	Mr B Rayment QC, Ms E Raper (Plaintiff) Mr R Forster SC, Mr P Dowdy (First Defendant)
SOLICITORS:	Laurence & Laurence (Plaintiff) Henry Davis York (First Defendant)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Thursday 10 November 2005 ex tempore
Revised 15 November 2005

50167/03 789Ten Pty Limited v Westpac Banking Corporation Limited

JUDGMENT

The motion

1 There is before the court a notice of motion pursuant to which Westpac Banking Corporation seeks vacation of the hearing date presently fixed for 30 January 2006 for a four week period and for ancillary orders, including costs orders.

The proceedings

2 The nature of the proceedings is for present purposes adequately set out in the written submissions of the bank which also serve to identify the principal issues:

1. In these proceedings, the plaintiff makes a claim on the Bank in an amount of approximately $10 million, plus interest thereon. The plaintiff claims that the Bank has breached its mandate by permitting the withdrawal from the plaintiff’s account with the Bank of amounts in the aggregate of approximately $12 million on the authority of Mr. Alexander, one of its directors, in circumstances where the plaintiff’s authority to the Bank provided that withdrawals in amounts in excess of $5,000.00 were to be signed by two directors. At the relevant times, the only directors were Mr. Alexander and Mr. Carter.

2. The plaintiff claims that over a period of some 3 years, that is to say between November, 1998 and November, 2001, amounts totalling approximately $12 million were withdrawn from the plaintiff’s account with the Bank, purportedly for investment purposes, on the authorization of Mr. Alexander in some 75 separate transactions. The plaintiff concedes that approximately $2 million was recovered, but claims that the balance, namely $10 million or thereabouts, was lost, and it is in respect of that loss that the plaintiff sues the Bank.

3. If entitled to interest, the plaintiff’s claim is now well over $10 million.

4. It is the plaintiff’s case that Mr. Carter knew nothing about these transactions at any time during the said 3 year period over which they were entered into, and that Mr. Alexander acted without the plaintiff’s authority.

5. On the plaintiff’s own case, some 16 months passed between the time that Mr. Carter learnt of these transactions (said to be June 2001) and the time when they first informed the Bank and asserted a claim against it. In the interim, without the Bank’s knowledge, Mr. Alexander and Mr. Carter:

a) caused the plaintiff (then called Interco Australia, now 789 Ten) to cease trading and diverted the whole of its business to a new company, the fifth cross-defendant, which is now called Interco, thereby rendering the plaintiff bereft of all assets;

b) the new company (i.e. the fifth cross-defendant) is owned as to 50% by Jennifer Carter Real Estate Pty Limited (a company associated with Mr. Carter) and as to 50% by CMA Constructions Pty Limited (which company is owned by Mr & Mrs. Alexander and is the trustee of the “Alexander Settlement”, a trust of which Mr. Alexander and members of his family are the beneficiaries);

c) Mr. Alexander subsequently transferred his shares in the plaintiff to Jennifer Carter Real Estate Pty Limited for nominal consideration;

d) Mr. Alexander and Mr. Carter entered into an agreement for the division of the proceeds of any settlement with, or judgment against, the Bank in these proceedings; and

e) Interco still functions with Mr. Alexander and members of his family taking an active role in its operations.

6. The principal issues in the proceedings are the following:

a) the capacity in which Mr. Alexander entered into the said 75 transactions;

b) the extent of Mr. Alexander’s authority to act on behalf of the plaintiff in relation to the said transactions;

c) the extent of Mr. Carter’s knowledge of the said transactions;

d) whether the conduct of Mr. Alexander and Mr. Carter during the said 16 month period, or thereafter, constituted an election, waiver or ratification of Mr. Alexander’s activities in relation to the said transactions, whether they ground an estoppel against the plaintiff and whether the said conduct constituted a conspiracy between the plaintiff, Mr. Alexander and Mr. Carter to defraud the Bank by effectively placing Mr. Alexander’s assets beyond the reach of the Bank should the Bank seek indemnity from him (as it has in fact done in these proceedings ) with respect to any judgment that may be entered against it in favour of the plaintiff; and

e) the actual loss (if any) suffered by the plaintiff in relation to each of the 75 transactions, and in particular:

(i) the precise nature and details of each of those transactions;
(ii) the circumstances in which, and the persons with whom, each of the said transactions were entered into;
(iii) the losses said to have been suffered in relation to each of the said transactions and how those losses are calculated;
(iv) the steps taken by the plaintiff, Mr. Alexander or Mr. Carter to recover the moneys invested in each such transaction;
(v) the expenses incurred in relation to attempts at such recovery; and
(vi) what has become of the proceeds of any recovery.

The course of the proceedings

3 Both sets of parties have read detailed affidavits seeking to outline the history of the proceedings from their commencement in 2003. It is unnecessary to repeat the record. The already voluminous file bespeaks the many interlocutory motions and disputes which have erupted, as well as the early joint efforts concerned with informal discovery procedures and attempts to trace moneys which may still apparently be traceable.

4 The proceedings had been fixed to commence on 1 November 2005 but on 7 July 2005 the list judge vacated that hearing date and fixed the commencement of the proceedings for four weeks to commence on 30 January 2006, apparently particularly taking into account an accommodation concerning the position of the then leading counsel for the defendant parties.

The discovery position

5 The evidence before the court has included detailed evidence of a long history of dispute concerning many issues, particularly involving discovery issues. In the past few weeks the court has on a few occasions endeavoured to work through with the parties, the particular problems of which the defendant has complained, in an attempt to ascertain, with specificity, the substance of the defendant's claim to being irreparably prejudiced if the hearing dates be retained. It is a proper summary of the evidence before the court to regard the failures by the plaintiff to properly comply with discovery directions as having been endemic, notwithstanding the recent steps taken by the plaintiff in that regard.

6 It is inappropriate presently to work through each of the complaints of the defendant, but it is appropriate to note that the events of the last few weeks are deposed to in the most recent affidavit of Mr Harris, made on 10 November 2005 where he treats with the precise updating of events since his earlier affidavit of 28 October, and deals with the precise events concerning meetings between the parties [as to alleged defective discovery on the part of the plaintiff], responses by the plaintiff, his contention that there remains a significant amount of discovery to be provided, and his detailed evidence with respect to a number of particular documents said not to have been discovered.

7 He gives evidence that in view of the further discovery given since 12 August 2005 and of the discovery which he contends is still to be provided by the plaintiff and related parties, it will be necessary for the bank in proper preparation of its defence and its cross-claim for the trial, to issue a number of subpoenas to various third party persons and companies.

8 He expresses his opinion that as a result of the delay in the plaintiff's and its related parties providing discovery and serving proper verified lists of documents, he retains the firm opinion that even if all other parties' discovery documents have been discovered and are now available to the bank, based on his experience as a litigation lawyer and on his knowledge of the matter, it will still take a significant amount of time to review and organise the documents for the purposes of preparation for trial and to undertake the necessary forensic investigations, including the issue and enforcement of subpoenas to third parties and likely, he deposes, to require the issue and enforcement of further subpoenas based on information contained in the documents produced by third parties.

9 He refers to his opinion as to the difficulty which is often encountered in procuring timely production of documents from third parties on subpoena over the court vacation period and it being unlikely that the work and forensic investigations could be carried out in sufficient time to enable the bank and its solicitors and counsel to properly prepare for a trial commencing, he says, either on 30 January 2006 or on 6 March 2006. He deposes that the ability to meet those trial dates is further reduced by the refusal to provide further discovery and the consequential need to proceed with an application by motion for orders for the giving of discovery.

10 Mr Harris has also treated with the serving by the bank on 4 November 2005 of a draft list of interrogatories for answer by the plaintiff, Mr Carter, and Mr Alexander. His evidence is that he considers the answers to those interrogatories are necessary to enable the bank to identify the ultimate purpose to which each of the payments were put; to verify the extent of the recoveries listed in the plaintiff's amended summons; to ascertain whether the plaintiff profited from any of the payments; and to ascertain the ultimate cause of loss sustain by the investments that were made with the payments.

The principled exercise of the discretion

11 I have given anxious consideration to the principled exercise of the court's discretion where the hearing date, having previously been fixed and then having had to be refixed, the court finds itself again in a position where as it seems to me, it is absolutely clear that the defendant could not be pressed to litigate on the dates originally fixed. The real question which has troubled me concerns whether or not the hearing dates should be refixed to commence on 20 March or, alternatively, to commence later in the year.

12 I take into account the fact that it is no longer necessary for the defendant to litigate the claim which it has, to be entitled to administer the interrogatories which have been served, it being the case that leading counsel for the plaintiff has conceded that the interrogatories are a forensic device which in the parameters of this case, the defendant should be entitled to deploy.

13 Mr Forster, leading counsel for the defendant, has urged upon the court the realisation that at the end of the day there are simply so many loose ends facing the defendant that it would be unfair to commit the defendant to even a hearing to commence, say, on 20 March. He has posited the likely need for a further application for discovery, the need for many subpoenas to be issued to outside parties [in the light of what he has submitted is the very slender material filed by the plaintiff in terms of their affidavits in-chief]. He has also posited a particular anxiety, lest the plaintiff under the guise of putting material evidence on by reply, be seen in due course to in truth, be providing material in fact being material in-chief only masquerading as a reply.

14 I have come to the view that the principled exercise of the court's discretion, particularly bearing in mind the type of issues which are to be litigated here, make it too dangerous to fix the proceedings for the week commencing 20 March in the circumstances.

15 The proceedings are fixed for hearing to commence on 26 June 2006 for a period of an estimate of four weeks.

Costs

16 In terms of the costs of the application for the vacated hearing, I have already said that I am satisfied that there are grave concerns with respect to the conduct of the plaintiff parties. However, it has to be accepted that the plaintiff has put forward its own detailed evidence seeking to sustain the contention that it acted reasonably in difficult circumstances and that the position is explicable only by reference to the detail.

17 In my view in those circumstances, the convenient course is to reserve costs of and occasioned in relation to the vacated hearing dates to be dealt with by the trial judge on the occasion when the hearing has in fact been completed and costs of all outstanding interlocutory matters can be dealt with on a fully informed basis.

18 Whilst I have come close to simply ordering that the plaintiff pay the defendant's costs of the motion and the costs of the vacated hearing, it does seem to me that there is sufficient in the affidavit evidence, particularly of earlier discovery and informal discovery, to warrant a far closer examination of the precise detail in order for a proper determination as to the proper exercise of the discretion to order costs to take place. It is not beyond the pale that a judicial officer, on a fully informed basis, may reach an entirely different point of view with respect to the principled exercise of the court's discretion as to costs.

Decision

19 For those reasons the existing hearing dates are vacated. The hearing is fixed to commence for four weeks on 26 June 2006.

The current stay order

20 It remains only to indicate that as the transcript will record an accommodation has been reached between the parties both in relation to the question of the interrogatories being administered and in relation to the approach to be taken by the parties to the application by the defendant to the High Court of Australia for special leave. That leave relates to the decision of Justice Bergin, the Court of Appeal having dismissed the application for leave to appeal from Justice Bergin's decision.

21 The current environment with respect to dates removes much of the pressure, I imagine, concerning the application to the High Court but it does seem to me that the parties should reach a sensible accommodation in the short minutes of order. That accommodation, it seems to me, should provide, unless the parties can otherwise agree, that the stay order will continue up until the last day of March 2006, on which date, unless the stay has by then been extended by the High Court of Australia, the stay will automatically fall away permitting the Court of Appeal decision to be given effect.

I certify that paragraphs 1 - 21
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 10 November 2005 and
revised 15 November 2005

___________________
Susan Piggott
Associate

15 November 2005