Alistair McDougall Nominees Pty Ltd as trustee for the McDougall Holdings Trust v Rural Bank (A Division of Bendigo and Adelaide Bank Limited (ACN 068 049 178)

Case •

[2021] WASC 348

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   ALISTAIR MCDOUGALL NOMINEES PTY LTD AS TRUSTEE FOR THE MCDOUGALL HOLDINGS TRUST -v- RURAL BANK (A DIVISION OF BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178) [2021] WASC 348

CORAM:   REGISTRAR GRIFFIN

HEARD:   21 SEPTEMBER 2021

DELIVERED          :   12 OCTOBER 2021

PUBLISHED           :   12 OCTOBER 2021

FILE NO/S:   CIV 1357 of 2018

BETWEEN:   ALISTAIR MCDOUGALL NOMINEES PTY LTD AS TRUSTEE FOR THE MCDOUGALL HOLDINGS TRUST

Plaintiff

AND

RURAL BANK (A DIVISION OF BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178)

Defendant

AND

RURAL BANK (A DIVISION OF BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178)

First Plaintiff by Counterclaim

AND

ALISTAIR MCDOUGALL NOMINEES PTY LTD as trustee for MCDOUGALL HOLDINGS TRUST AND AS TRUSTEE FOR ALISTAIR MCDOUGALL FAMILY TRUST

First Defendant by Counterclaim

BROOK VIEW PTY LTD

Second Defendant by Counterclaim

ALISTAIR MCDOUGALL

Third Defendant by Counterclaim

JUDITH MARGARET MCDOUGALL

Fourth Defendant by Counterclaim


Catchwords:

Practice and procedure - Discovery - Application for further and better discovery - Whether documents sought to be discovered are discoverable - Whether documents relate to matters in question - Principles to be applied

Practice and procedure - Contract - Construction of the contract - Principles to be applied

Legislation:

Competition and Consumer Act 2010 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Application dismissed
Plaintiff to pay defendant's costs of the application, to be taxed if not agreed

Category:    B

Representation:

Original Action

Counsel:

Plaintiff : P Brunner
Defendant : E L Blewett

Solicitors:

Plaintiff : Bailiwick Legal
Defendant : Corrs Chambers Westgarth

Counterclaim

Counsel:

First Plaintiff by Counterclaim : E L Blewett
First Defendant by Counterclaim : P Brunner
Second Defendant by Counterclaim : P Brunner
Third Defendant by Counterclaim : P Brunner
Fourth Defendant by Counterclaim : No appearance

Solicitors:

First Plaintiff by Counterclaim : Corrs Chambers Westgarth
First Defendant by Counterclaim : Bailiwick Legal
Second Defendant by Counterclaim : Bailiwick Legal
Third Defendant by Counterclaim : Bailiwick Legal
Fourth Defendant by Counterclaim : Not applicable

Case(s) referred to in decision(s):


Nil

REGISTRAR GRIFFIN:

  1. This is the plaintiff's application for further and better discovery from the defendant, made by letter dated 30 April 2021.

  2. The plaintiff sought orders that the defendant provide further and better discovery of 12 categories of documents.  The categories sought are annexed to these reasons.  During argument these documents were described as 'internal documents' of the defendant and it is appropriate to use that description in these reasons.

  3. The application was not pressed insofar as it related to other borrowers.[1]  (Categories 10a and 11a).

    [1] Minute of Proposed Orders for Particular Discovery filed on 30 April 2021.

  4. These proceedings relate to a number of loan facilities extended to the plaintiff by the defendant.  They were called either 'Term Facility Agreements'[2] or 'Trading Limit Facility Agreements'.[3] There were 11 agreements in all (Agreements). 

    [2] Writ of summons indorsed with statement of claim filed on 28 February 2018 [4]; [10]; [16]; [22]; [28] ('Statement of claim').

    [3] Ibid [34]; [40]; [46]; [52]; [58]; [64].

  5. Save for minor matters, the defendant admits the existence and terms of the Agreements, noting disagreement as to the construction of the terms.

  6. The Agreements provided for payment of interest by the plaintiff to the defendant.

  7. Essentially the same dispute arises with respect to each Agreement.  It is that the defendant breached the Agreements by charging interest without deducting the agreed margin from the applicable rate.[4]

    [4] Defendant's outline of submissions filed on 13 September 2021 [16(a)] ('Defendant's submissions').

  8. The parties are in dispute as to the proper construction of the Agreements.

  9. The defendant is said to have been unjustly enriched by the overpayment of interest by the plaintiff, alternatively to have engaged in misleading and deceptive conduct.  That misleading and deceptive conduct is said to be constituted by the express terms of each of the Agreements and to arise solely from the terms of the Agreements. 

  10. The plaintiff seeks damages by way of restitution for the amount of overcharged interest by way of the defendant’s unjust enrichment, alternatively damages pursuant to s 82 and s 87 and sch 2 s 236 and s 237 of the Competition and Consumer Act2010 (Cth).

The Construction Argument

  1. It is not necessary to examine each Agreement in detail as the construction argument is essentially the same for each one.  I will use the September 2009 Term Facility Agreement (2009 TFA) as an example.

  2. Paragraph 5 of the statement of claim pleads:

    Under the 2009 Term Facility Agreement a term loan facility was provided, the material terms of which were that:

    5.1the RBL bank account number would be 090151150;

    5.2RBL would provide AMN with finance in the amount of $3,070,000;

    5.3the term of the loan was the last day of the 60th month after the month in which the advance under the facility was made, or such later date approved by RBL;

    5.4during its term, AMN would be required to make monthly interest only repayments calculated at the interest rate equivalent to RBL's standard variable rate from time to time minus a margin of 3.65% per annum, which, as at the date of RBL's letter of offer, meant that a total interest rate of 4.85% per annum was payable being the seasonal account secured variable rate of 8.50% per annum less 3.65% per annum;

    5.5interest was to be charged to AMN's bank account in that amount in arrears on the last day of each month;

    5.6the accrued interest amount would be debited to AMN's bank account on the first day of the month following.[5]

    (My emphasis)

    [5] Statement of claim [5].

  3. The defence with respect to the 2009 TFA is at paragraph 5(b) of the defence:

    As to paragraph 5 of the statement of claim, Rural Bank:

    (a)admits sub-paragraphs 5.1, 5.2, 5.3, 5.5 and 5.6; and

    (b)denies each and every allegation in paragraph 5.4, and says that:

    (i)on the proper construction of the 2009 Term Facility Agreement, McDougall Nominees was required to make monthly interest payments calculated at the interest rate equivalent to Rural Bank’s standard variable rate from time to time minus a margin of 3.65%;

    (ii)on 17 September 2009, when the 2009 Term Facility Agreement was entered into, Rural Bank's standard variable rate was 12.15% and, hence, at that time, the interest rate applicable to the 2009 Term Facility Agreement was 8.50%, being 12.15% minus 3.65%;[6]

    (My emphasis)

    [6] Defence and counterclaim filed on 21 May 2018 [5(b)(i)] - [5(b)(ii)].

Submissions

  1. At hearing, plaintiff's counsel relied upon written submissions filed on 11 August 2021 and made brief oral submissions.  The plaintiff filed an affidavit of Alistair McDougall sworn 30 April 2021 (McDougall Affidavit) in support of the application.

  2. The defendant's submissions were filed on 13 September 2021, and defendant's counsel similarly made brief oral submissions and relied upon written submissions.   The defendant did not adduce any evidence on this application.

  3. The plaintiff's submissions did not cross-reference the categories of documents sought in the application to the broader categories of documents mentioned in the written submissions.  Discovery was sought with respect to 12 categories of documents, and written submissions addressed seven.  I have undertaken this cross-referencing exercise as best I can.

  4. It was accepted by both counsel that the touchstone for the discovery obligation is relevance, and that is determined by reference to matters which are in issue on the pleadings.  The plaintiff submitted that the obligation is wider than 'relevance' and encompasses all that is embraced within the word 'relate'.[7]

    [7] Plaintiff's outline of submissions filed on 11 August 2021 [6] ('Plaintiff's submissions').

  5. I accept the plaintiff's contention that a document is discoverable if it relates to any matter in question, meaning 'if it is reasonable to suppose that the documents contain information which may either directly or indirectly enable the party seeking discovery to either advance their case or damage their adversary's case (which includes documents which may fairly lead to a train of enquiry which may have either of these two consequences)'.[8]

    [8] Ibid [7].

  6. The real bone of contention here is whether the documents the plaintiff is seeking, being, in the main, internal documents generated by the defendant prior to the Agreements being entered into, could be said to 'relate' to the matters in issue.  The defendant says that the only matter in issue, on the pleadings, is construction of the Agreements, that is, a matter of contractual construction and that relevance is determined by what is admissible when a court is construing a contract.

  7. The defendant points to accepted principles of contractual construction:

    (a)the rights and liabilities of parties under a contract are determined objectively, by reference to its text, purpose and context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract);

    (b)the task requires a consideration of the language used by the parties in the contract, the circumstances of the contract and the commercial purpose or objects to be secured by the contact;

    (c)the terms of the contract are to be construed objectively, by determining what a reasonable businessperson in the position of the parties would have understood the terms to mean;

    (d)the contract must be construed to produce a result which makes commercial sense and is commercial; and

    (e)every word of the contract should be given meaning, or work to do: the words cannot be ignored.[9]

    [9] Defendant's submissions [17].

  8. It was submitted that the internal documents of the defendant were evidence of the defendant's subjective intention and, therefore, not admissible with respect to the contractual construction question which must be resolved objectively.[10]

    [10] Ibid [19].

  9. The defendant admits the existence of the Agreements.  The defendant admits the margin to be deducted from the standard variable rate.

  10. Bearing the above in mind, I will review the Application with respect to each category of document sought.

Review of Application by category

Applications for finance (Category 1)

  1. Mr McDougall recalls an officer of the defendant filling out forms when he attended at the defendant's Narrogin office.[11]  The defendant does not deny that such documents exist and has discovered three of them.  The plaintiff says there must be more.

    [11] McDougall Affidavit [12].

  2. Discovery by the defendant of three applications is an admission by the plaintiff that those three applications, at least, are relevant.  The affidavit is conclusive as to its contents.[12]

    [12] Defendant's submissions [10].

  3. I have some difficulty with finding that these documents are relevant. The plaintiff does not assert that the defendant engaged in improper lending practices.  Neither party says that the Agreement does not say what the parties intended it to say.

  4. I do not consider that applications for finance are relevant.

Internal communication (Categories 2, 3, 4 and 5)

  1. These are said to be related, in the sense that they would assist the Court to understand the factual matrix of the claim, by identifying:

    (a)the basis upon which the defendant assessed the application;

    (b)whether the application was to be approved;

    (c)the 'interest rate' the defendant was considering to apply to the relevant facility (refer page 80 of the Affidavit);

    (d)the 'margin' that was to be deducted from the 'interest rate' (refer paragraphs 5.4, 11.4, 17.4, 23.4, 29.4, 35.4.1, 41.4.1, 47.4.1, 53.4.1, 59.4.1 and 65.4.1 of the Statement of Claim); and

    (e)the basis for the defendant's decision as to the applicable 'rate' and 'margin' (considering the claims of unjust enrichment and misleading and deceptive conduct raised in the Statement of Claim).[13]

    [13] Plaintiff's submissions [18].

  2. Once again, I have difficulty understanding the relevance of this category of documents.  If the case against the defendant was that it made some error in assessing the plaintiff's income, or that it did not follow its own processes in entering into the Agreements and that this caused loss, I would accept that the documents were relevant.  The defendant's internal deliberations as to the interest rate and margin to be applied to the Agreements are not relevant when the plaintiff does not contest the interest rates and margin the bank used, but instead contests how they were used in calculating interest due under the Agreements.  The plaintiff does not say 'they told me the margin would be 3.65% and in the end it was 3.68%' or 'they told me they would calculate the margin by reference to a particular factor or calculation and it is clear by the margin used that they did not'.  He claims neither of these things. 

Authorisation of the facilities (Category 6)

  1. The facilities were authorised.  This is admitted.  There is no contest upon this.  Discovery of documents regarding this does not advance any line of enquiry.

Correspondence relating to instructions (Category 7)

  1. The plaintiff submitted that no documents have been provided which relate to any instructions given by the defendant, either internally, or to any third party (including any law firm) for the preparation of:

    (a)valuations;

    (b)letters of offer;

    (c)loan documents;

    (d)mortgage documents; and

    (e)default notices.[14]

    [14] Plaintiff's submissions [21].

  2. The defendant's counsel pointed out that some of the documents sought in this category are on their face subject to legal professional privilege.  Once again, there is no contest between the parties as to any of these matters.

  3. There is no claim with respect to valuation.

  4. These documents are not relevant, related, or such as to lead to a fruitful train of enquiry.  In fact, in my view, ordering discovery of these documents would cause delay and additional cost contrary to the principles of positive case flow management enshrined in O 1 r 4A and r 4B of the Rules of the Supreme Court 1971 (WA) (RSC).  I acknowledge the plaintiff's submission that the defendant did not adduce any evidence on this point, and that the defendant's counsel stated that the defendant did not oppose the application on the basis of oppression, undue difficulty or cost.

Reports emails re ICAS etc (Categories 8 and 9)

  1. These documents are said to be discoverable because the defendant has not disclosed any documents pertaining to the internal process that it undertook to obtain information relevant to the plaintiff, yet the defendant now says that the plaintiff breached the Deed of Forbearance by not providing such document.[15]  This contest might arise in the circumstances disclosed in the Affidavit, but does not arise on the pleadings.

    [15] McDougall Affidavit [28] - [32].

  2. There is no plea that the defendant did not obtain or properly consider information relevant to the plaintiff.  This would be relevant if the plaintiff was saying (in a pleading) to the defendant 'I didn't give you X document because you never asked me for it' and the defendant contended otherwise.  That is not the case here.

Identification of interest rate (Category 10)

  1. Annexure AM13 to the McDougall Affidavit was said to be informative in that it shows the defendant operated and applied, to different borrowers, a matrix of interest rates and margins, and that the defendant had not provided any information as to how it structured and set the interest rate and margins for any particular borrower (no longer pressed), nor for the plaintiff.[16]

    [16] Ibid [37] - [40].

  2. Once again, these documents are not relevant to the issues in dispute.  The plaintiff does not say that the interest rates are the wrong rates, or that there has been some error in the defendant's internal processes.  The dispute is as to how the accepted rates operate in practice.

  3. Mr McDougall says that in early 2017, for a period of approximately two months, interest was applied to the facilities consistent with the plaintiff's claim in this action.[17]  It is submitted that the defendant has not denied the application of the interest rate for these two months; does not appear to have made any subsequent 'adjustment' for any alleged 'underpayment' of interest;  provides no explanation of these circumstances and  provides no disclosure relevant to these circumstances.[18]

    [17] Ibid [34] - [35].

    [18] Plaintiff's submissions [27].

  4. The Agreements the subject of these proceedings are from 2009 to 2015.  The defendant's practices two years after the last Agreement in issue are not relevant.  There is no pleaded claim with respect to the defendant's actions in 2017.  The defendant has not been required to address this claim, and nothing can be inferred from it not denying it.  These documents are not relevant to the pleaded case.

Establishment of interest rates and margins and availability to borrower (Category 10)

  1. The plaintiff submits that the interaction of interest rates and the margin is at the core of the contracts and this action and that 'Emails, reports, notes, memorandum, or any other documents prepared and disseminated within [the defendant] relating to how staff are to identify which interest rate and or margin applies to the plaintiff and or Brook View Pty Ltd' is therefore discoverable.[19]  (My emphasis)

    [19] Ibid [29].

  2. The parties agree upon the percentages to be allocated to the seasonal variable rate, the marginal rate and the seasonal account basic secured rate.

  3. Documents regarding the process by which the defendant's staff identified rates of interest offered to the plaintiff cannot reasonably lead to a line of enquiry with respect to the correct construction of the Agreements.

Publicly available documents (Category 12)

  1. No written or oral submissions were advanced by the plaintiff in support of this category of documents.  The defendant's counsel submitted that the defendant had already provided discovery of such documents, further, that if the documents were publicly available, then it was open to the plaintiff to obtain them in any event.

Redactions (did not form part of Application)

  1. The plaintiff's written submissions referred to documents provided in redacted form by the defendant and asserted that 'the defendant is not able to redact portions of a document to delete that which it may consider ‘irrelevant'.[20]

    [20] Ibid [30] - [31].

  2. This did not form part of the Application and was not pressed in oral argument.  The defendant's counsel did not respond to this submission.

  3. I make no finding as to this, other than to observe that O 26 r 1B RSC expressly allows for redaction.

Disposition

  1. It follows that the plaintiff's application is dismissed, with orders that the plaintiff pay the defendant's costs to be taxed if not agreed.

ANNEXURE A

SCHEDULE

  1. Applications for finance, whether created by the plaintiff, Alistair McDougall and or Judith Margaret McDougall, Brook View Pty Ltd or Rural Bank.

  2. Emails, reports, notes, memorandum or any other document prepared and disseminated within Rural Bank relating to the Term and Trading facilities.

  3. Emails, reports, notes, memorandum or any other document relating to the assessment of risk in providing the Term and Trading facilities.

  4. Emails, reports, notes, memorandum or any other document prepared and disseminated within Rural Bank relating to the interest rate and or margin to be applied to the Term and Trading facilities.

  1. Emails, reports, notes, memorandum or any other document prepared by, sent to and or from:

    (a)    Troy Drayton;

    (b)    Glen Leeson;

    (c)    Brian Paton;

    (d)    David Watson;

    (e)    Peter Cook; and

    (f)    Shane Sander,

    relating to the plaintiff, Alistair McDougall and or Judith Margaret McDougall, Brook View Pty Ltd, and or the Term and Trading facilities.

  2. Documents authorizing the Term and Trading facilities and or the extension of those facilities.

  3. All correspondence dealing with instructions for the preparation of:

    (a)    valuations;

    (b)    letters of offer;

    (c)    loan documents;

    (d)    mortgage documents;

    (e)    budgets and or forecasts;

    (f)letters to the plaintiff and or Alistair McDougall and or Judith Margaret McDougall and or Brook View Pty Ltd;

    (g)    default notices,

    including whether such instructions were provided internally within Rural Bank and or to any third party.

  4. Reports and other records obtained by Rural Bank from any third party, including but not limited to:

    (a)    Integrated Client Account Statements;
    (b)    cash flow analysis reports;
    (c)    budgets and cash flow projections.

  5. Emails, reports, notes, memorandum or any other document between Rural Bank and any third party, relating to the plaintiff’s (and or Brook View Pty Ltd's):

    (a)    Integrated Client Account Statements;
    (b)    cash flow analysis reports;
    (c)    budgets and cash flow projections.

  6. Emails, reports, notes, memorandum or any other document prepared and disseminated within Rural Bank relating to how staff are to identify which interest rate and or margin applies to:

    (a)    any borrower;
    (b)    the plaintiff and or Brook View Pty Ltd.

  7. Documents relating to the establishment of interest rates and or margins offered by Rural Bank:

    (a)    to borrowers;
    (b)    to borrowers operating farm businesses;
    (c)    to the plaintiff and or Brook View Pty Ltd.

  8. Documents, publicly available, relating to:

    (a)    the establishment of interest rates;
    (b)    the interest rates;
    (c)    the establishment of margins;
    (d)    the margins,
    (e)    offered by Rural Bank:
    (f)    to borrowers;
    (g)    to borrowers operating farm businesses;
    (h)    to the plaintiff and or Brook View Pty Ltd.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

AW

Associate

12 OCTOBER 2021


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