Anderson v Regal Investments Pty Ltd
[2000] WASC 258
•27 OCTOBER 2000
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: ANDERSON & ORS -v- REGAL INVESTMENTS PTY LTD & ORS [2000] WASC 258
CORAM: MASTER BREDMEYER
HEARD: 16 OCTOBER 2000
DELIVERED : 27 OCTOBER 2000
FILE NO/S: CIV 2443 of 1999
BETWEEN: WARREN PERRY ANDERSON
First Plaintiff
CHERYL ANNE ANDERSON
Second PlaintiffMADELIENNE NITA ANDERSON
Third PlaintiffCATHERINE LOUISE ANDERSON
Fourth PlaintiffDANIEL JAMES ANDERSON
Fifth PlaintiffSHAUNA ELIZABETH ANDERSON
Sixth PlaintiffAND
REGAL INVESTMENTS PTY LTD (ACN 009 137 651)
First DefendantOWSTON NOMINEES NO 2 PTY LTD (ACN 001 769 099)
Second DefendantUMBERTO BRUNO GIANOTTI
Third DefendantPETER ROLFE SWAIN
Fourth Defendant(BY ORIGINAL ACTION)
REGAL INVESTMENTS PTY LTD (ACN 009 137 651)
PlaintiffAND
WARREN PERRY ANDERSON
First DefendantCHERYL ANNE ANDERSON
Second Defendant(BY COUNTERCLAIM)
Catchwords:
Pleading - Application to strike out - Standing to sue - Rolled up pleas
Legislation:
Trade Practices Act, s 51AA, s 80 and s 87
Result:
Application allowed in part
Representation:
Original Action
Counsel:
First Plaintiff : Mr R J Ellicott QC & Mr M R Speakman
Second Plaintiff : Mr R J Ellicott QC & Mr M R Speakman
Third Plaintiff : Mr R J Ellicott QC & Mr M R Speakman
Fourth Plaintiff : Mr R J Ellicott QC & Mr M R Speakman
Fifth Plaintiff : Mr R J Ellicott QC & Mr M R Speakman
Sixth Plaintiff : Mr R J Ellicott QC & Mr M R Speakman
First Defendant : Mr J Gilmour QC & Mr G R Donaldson
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : No appearance
Solicitors:
First Plaintiff : Williams & Hughes
Second Plaintiff : Williams & Hughes
Third Plaintiff : Williams & Hughes
Fourth Plaintiff : Williams & Hughes
Fifth Plaintiff : Williams & Hughes
Sixth Plaintiff : Williams & Hughes
First Defendant : Tottle Christensen
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : No appearance
Counterclaim
Counsel:
Plaintiff: Mr J Gilmour QC & Mr G R Donaldson
First Defendant : Mr R J Ellicott QC & Mr M R Speakman
Second Defendant : Mr R J Ellicott QC & Mr M R Speakman
Solicitors:
Plaintiff: Tottle Christensen
First Defendant : Williams & Hughes
Second Defendant : Williams & Hughes
Case(s) referred to in judgment(s):
Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40
Hayam v Citibank NA (1987) AC 730
Lidden v Composite Buyers Ltd (1996) 67 FCR 560
Pritchard v Race Cage Pty Ltd (1997) ATPR 41‑554
Ramage v Waclaw (1988) 12 NSWLR 84
The Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Case(s) also cited:
Antonovic v Volker (1986) 7 NSWLR 151
Bakewell v Deputy Federal Commissioner of Taxation (SA) (1937) 58 CLR 743
Blomley v Ryan (1956) 99 CLR 362
Caratti v Deputy Commissioner of Taxation (1993) 27 ATR 448
Commissioner of Stamp Duties (NSW) v Permanent Trustee Co of NSW Ltd (1933) 49 CLR 293
Commonwealth v Verwayen (1990) 170 CLR 394
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Equiticorp Finance Ltd (In Liq) v Bank of New Zealand (1993) 32 NSWLR 50
Fancourt v Mercantile Credits Limited (1983) 154 CLR 87
Gartside v Inland Revenue Commissioners [1968] AC 533
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Harry v Kreutziger (1978) 95 DLR (3d) 231
Ideas Plus Investments Ltd v National Australia Bank Ltd [1999] WASC 200
In the Marriage of Story (1977) 31 FCR 34
International Leasing Corp (Vic) Ltd v Aitken [1967] 2 NSWR 427
Louth v Diprose (1992) 175 CLR 621
Mack v Commissioner of Stamp Duties (NSW) (1920) 28 CLR 373
Magnacrete Ltd v Douglas-Hill [1988] 48 SASR 565
McHenry v Lewis [1882] 22 Ch D 397
Media Arts Group Pty Ltd v Channel 31 Community Educational Television Ltd [2000] WASC 68
Morkim Pty Ltd v Sinclair [1999] WASC 190
Morlea Professional Services Pty Ltd v Richmond Walter Pty Ltd (In Liq) (2000) 34 ACSR 371
National Westminister Bank plc v Morgan [1985] AC 686
Nichols v Jessup [1986] 1 NZLR 226
Parker-Tweedale v Dunbar plc [1990] 2 All ER 577
Permanent Trustees Australia Ltd v Perpetual Trustees Co Ltd (1995) 13 ACLC 66
Planet Securities Unit Trust v Dalrymple [1999] QSC 204
R & I Bank of Western Australia v Anchorage Investments Pty Ltd (1992) 10 WAR 59
Re Atkinson [1971] VR 612
Re Dawson (Dec) (1996) 2 NSWR 211
Re Rule Settlement [1915] VLR 670
Re Taylors Fashions [1982] 1 QB 151
Stern v McArthur (1988) 165 CLR 489
Thompson v Palmer (1933) 49 CLR 537
Universe Tankships Inc of Monrovia v International Transport Workers' Federation [1983] 1 AC 366
Webster v Lampard (1993) 177 CLR 598
Westpac Banking Corporation v Cockerill (1998) 152 ALR 267
Young v Murphy [1996] 1 VLR 279
MASTER BREDMEYER: This is an application by the first defendant to strike out parts of the plaintiffs' statement of claim of 22 December 1999. At the same time the plaintiffs would like to amend the pleading in terms of a minute of proposed amended statement of claim of October 2000 ("the minute"). I will consider the application in relation to the minute.
The first plaintiff is Mr Warren Anderson. The second plaintiff is his wife, Mrs Cheryl Anderson. The third, fourth, fifth and sixth plaintiffs are the children of Mr and Mrs Anderson. The first defendant, Regal Investments Pty Ltd ("Regal"), is a company controlled by Mr William Wyllie. The second defendant, Owston Nominees Pty Ltd, should more properly be called Owston Nominees No 2 Pty Ltd, and I will make that amendment in the heading. This company which I will refer to as "Owston" is the trustee of the Warren Anderson Trust and Mr and Mrs Anderson and their four children are the beneficiaries of that trust. The third defendant, Mr Gianotti, is a director of Owston. The fourth defendant, Mr Swain, was the secretary of Owston. No orders are sought against the third and fourth defendants and they have not appeared in this action. They are joined because they signed one of the documents which I now mention.
The pleading concerns three crucial documents, all dated 23 December 1993. The first is a Loan Agreement between Owston and Regal whereby Owston borrowed $19.3 million from Regal. The terms of this loan included a $3.5 million establishment fee to Regal to come out of the $19.3 million loan. They also included a high interest rate of 5.8 per cent above the published National Australia Bank rate, reducible to 2.8 per cent if the interest was paid on time. They also included a provision for interest on interest. The second document is a Deed of Guarantee signed by Mr and Mrs Anderson guaranteeing to Regal the obligations of Owston. The third document is a Deed of Covenant signed by all the plaintiffs, being the beneficiaries of the Warren Anderson Trust. Under this document the beneficiaries represented and warranted that the trustee had power to enter into the Loan Agreement and the other agreements, that the trustee had the right to be fully indemnified out of the trust fund in respect of obligations incurred by it under the Loan Agreement etc and that Regal's rights under the Loan Agreement and other documents ranked in priority to the interests of the beneficiaries of the trust.
The plaintiffs seek in the minute to set aside the Loan Agreement, the Regal Guarantee and the Deed of Covenant under the equitable grounds of unconscionable conduct and/or economic duress. They also seek to set aside or vary the same documents for unconscionable conduct under s 51AA and s 80(2) and s 87 of the Trade Practices Act.
Regal's first challenge to the pleading in the minute concerns the standing of the plaintiffs to sue Regal. I will consider this objection first in relation to the equitable claims and later in relation to the statutory claims. I note at the outset that Owston, the borrower of the $19.3 million from Regal, is not a plaintiff in this action but it is joined as the second defendant. It is not seeking to set aside the Loan Agreement in this action. Regal concedes that Mr and Mrs Anderson, as guarantors, can sue to set aside the guarantee and also the Loan Agreement. The Loan Agreement is between Regal and Owston and the Guarantee is between Regal and Mr and Mrs Anderson. Regal is the common link. Regal says that the plaintiffs, as beneficiaries of the trust, have no standing to apply to set aside the Loan Agreement. Only the trustee can do that. Clearly, the beneficiaries of the trust are not parties to the Loan Agreement. A beneficiary can only sue in his own name instead of the trust in exceptional circumstances, eg where the trustee refuses to sue: see Ramage v Waclaw (1988) 12 NSWLR 84; Hayam v Citibank NA (1987) AC 730 and Lidden v Composite Buyers Ltd (1996) 67 FCR 560. These beneficiaries do no come within any of those exceptions to the primary rule that only the trustee can sue to protect the trust. The trustee in this case is not unwilling to sue. On the contrary, he has sued Regal on the same grounds of unconscionable conduct and economic duress in order to set aside the Loan Agreement in another action CIV 2444 of 1999. I do not consider that the plaintiffs, as beneficiaries of the trust, have an arguable case of standing to sue Regal to set aside the Loan Agreement.
As stated, Mr and Mrs Anderson have standing to set aside the Deed of Guarantee which they signed, but I do not consider that the other plaintiffs have any arguable standing to set aside that guarantee. They are not parties to it.
The plaintiffs, as beneficiaries of the Warren Anderson Trust, have standing to set aside the Deed of Covenant which was entered in between them and Owston and Regal and Mr Gianotti and Mr Swain.
I consider now the plaintiffs' standing to seek relief on the Trade Practices Act claims. Clearly, Mr and Mrs Anderson have standing, as with the equitable claims, under s 87 to set aside the Loan Agreement and the Guarantee. I consider that the children, the third to sixth plaintiffs, arguably have standing to apply to set aside or vary the Loan Agreement under s 87 because, in the terms of s 87(1), they are "likely to suffer loss or damage" by reason of the contravening conduct in that the assets of the trust will be reduced. I know that the beneficiaries are beneficiaries of a discretionary trust and thus do not have any enforceable right to a distribution but I consider it arguable that they fall within the words of a "person ... likely to suffer loss or damage" as a result of the contravening conduct. I was cited one case against this point, but I do not consider it particularly relevant: Pritchard v Race Cage Pty Ltd (1997) ATPR 41‑554. The first defendant says it is an abuse of process to permit the Anderson children to attempt to set aside or vary the Loan Agreement under s 87 when similar relief is also sought by Owston in CIV 2444 of 1999. I think that correct. It is an unnecessary duplication of Owston's claim in the other action. Let their trustee, Owston, run this claim. I understand the plaintiffs propose that the two actions be heard together.
Have the third to sixth plaintiffs got standing to sue for an injunction under s 80 of the Trade Practices Act restraining Regal from enforcing the Loan Agreement, the Regal Guarantee and the Deed of Covenant? I do not think it arguable that they have standing under s 80 to set aside the Loan Agreement or the Deed of Guarantee. They are not parties to these agreements. I consider they do have standing under s 80 to get an injunction in relation to the Deed of Covenant to which they are parties. The first and second plaintiffs also, as beneficiaries of the trust, have the same right.
Have the third to sixth plaintiffs got standing under s 87 of the Trade Practices Act to set aside or vary the Loan Agreement, the Guarantee or the Deed of Covenant? I think they have standing to apply to set aside or vary the Loan Agreement, because under s 87 they are likely to suffer loss or damage if the Loan Agreement is enforced. But I consider it an abuse of process to allow them to apply in this case. Let the trustee Owston apply. It has an action on foot for that purpose and it is planned for the two actions to be heard together. I consider the third to sixth plaintiffs have no standing to apply under s 87 to set aside or vary the Guarantee. They are not parties to it and will not suffer loss if it is enforced. Indeed, they will benefit if it is enforced. The trust fund will have more money in it. I consider the third to sixth plaintiffs, and the first and second plaintiffs, who are also beneficiaries of the trust, have standing to apply under s 87 to set aside or vary the Deed of Covenant.
The plea of unconscionable conduct and economic duress is found in par 17 and par 18 of the minute. All three documents - the Loan Agreement, the Deed of Guarantee and the Deed of Covenant - are sought to be set aside as unconscionable or signed as a result of economic duress. All the plaintiffs apply to set aside all three agreements. This pleading is said to be bad because the two causes of action are not pleaded separately. In par 17(a) to (n) 14 facts are pleaded which together, in some combination or another, make up the two causes of action. It is said that the two causes are mutually exclusive and hence it is not possible to rely on all facts for each cause. A good account of unconscionable conduct is found in the judgment of Mason J in The Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461 ‑ 462:
"Historically, courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, e.g., a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.
There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest.
It does almost without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct. As Fullagar J said in Blomley v Ryan (1956) 99 CLR 362 at p 405:
'The circumstances adversely affecting a party, which may adduce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis‑à‑vis the other.' "
A good summary of economic duress is found in the judgment of McHugh JA in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 45:
"The rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised upon one party by another party when the law regards that pressure as illegitimate: Universie Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384 per Lord Diplock. As his Lordship pointed out, the consequence is that the 'consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind' (at 384). In the same case Lord Scarman declared (at 400) that the authorities show that there are two elements in the realm of duress: (a) pressure amounting to compulsion of the will of the victim and (b) the illegitimacy of the pressure exerted. 'There must be pressure', said Lord Scarman 'the practical effect of which is compulsion or the absence of choice'. "
It is a shorthand kind of plea. The pleas of unconscionable conduct and economic duress could have been pleaded separately. This would produce two causes of action. Then they could be pleaded separately in the case of the guarantors and of the beneficiaries, giving a total of four causes of action. Then the pleas could be further subdivided into the three documents challenged giving a total of 12 causes of action. I cannot see the point of that. I consider the plea in its present form is not embarrassing. I think the 14 facts pleaded acquaint the first defendant reasonably clearly with the case it has to meet. It admits in its defence three of those 14 facts. In relation to four other facts, the plea is "[Owston] does not know and does not admit". A positive defence is pleaded in relation to two other pleas, viz that Mrs Cheryl Anderson and Ms Madelienne Anderson, the directors of Owston who signed the Loan Agreement, had no sufficient commercial experience to protect the beneficiaries and did not fully understand the effect and commercial implications of the Loan Agreement. The defence is that all the negotiations for the loan were conducted by Mr Anderson and Mr Gianotti, the former directors, who acted as agents for the two ladies.
In further support of my view that this plea is not embarrassing, I note that there is some overlap between unconscionable conduct and economic duress. They are not mutually exclusive: see the quotation above from Mason J in Amadio. Moreover, the three documents were signed at the same time and, in broad terms, involved the same parties and the same arguments. I consider that this form of plea will not cause a lengthening of the trial.
The application will be allowed in part. The prayers for relief need to be modified to give effect to my views on standing.
In each case the prayers for equitable compensation, an account and restitution can stand. I did not hear argument on them. They may not be relevant. They may have been thrown in for good measure. They do no harm. The defendants are not required to plead to them.
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