Australia and New Zealand Banking Group Limited v James (No 2)

[2019] NSWSC 59

Supreme Court

New South Wales

Medium Neutral Citation:

Australia and New Zealand Banking Group Limited v James (No 2) [2019] NSWSC 59

Hearing dates:

7 February 2019

Decision date:

12 February 2019

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

The amended notice of motion filed on 25 October 2018 dismissed with costs

Catchwords:

CIVIL PROCEDURE – Discovery – Subpoenas – whether documents necessary for the resolution of the real issues in dispute

Legislation Cited:

Practice Note SC Eq 11

Category:

Procedural and other rulings

Parties:

Australia and New Zealand Banking Group Limited (ABN 11 005 357 522) (Plaintiff | Respondent)
David Anthony James (Defendant | Applicant)

Representation:

Counsel:

 

R Foreman with K Boyd (Plaintiff | Respondent)
J Baird (Defendant | Applicant)

 

Solicitors:

  Allens Linklaters (Plaintiff | Respondent)
Allsop Glover Lawyers (Defendant | Applicant)

File Number(s):

2013/306563

Publication restriction:

None

Judgment

Introduction

1. By an amended notice of motion filed on 25 October 2018, the plaintiff, David Anthony James (Mr James), seeks discovery from the defendant, Australian and New Zealand Banking Group Limited (ANZ), and leave to issue subpoenas to PricewaterhouseCoopers (PwC) and Crowe Howarth. The motion also seeks leave to issue a third subpoena to Mr George Mawad and Mr Joe Younan. However, an order in those terms was not pressed at the hearing of the motion.

Background

2. The dispute between Mr James and ANZ has a long and complicated history, most of which is not relevant to the current application.

3. It is sufficient for present purposes to observe that ANZ had advanced substantial sums of money to a number of companies controlled by Mr James, including TLT Nominees Pty Ltd (In Liquidation) (Receivers and Managers Appointed) (TLT) and Newcastle Liquor Wholesalers Pty Ltd (In Liquidation) (Receivers and Managers Appointed) (NLW). Those companies together carried on a substantial business of producing and selling wine.

4. On 19 August 2013, ANZ appointed Mr Hall and Mr Merryweather of PwC as receivers of the companies to which it had lent money. Their appointment followed an investigation carried out by PwC into the financial position of the companies. The companies were placed into liquidation at about the same time.

5. On 11 October 2013, ANZ commenced these proceedings against Mr James seeking to recover the sum of $14,133,818.66 together with interest under four guarantees Mr James had given in respect of loans that had been provided by ANZ to the companies controlled by Mr James.

6. On 23 April 2014, ANZ filed a notice of motion for summary judgment against Mr James and, on 16 May 2014, judgment was entered against him by consent for the sum of $13,928,818.66.

7. By a notice of motion filed on 19 September 2017, Mr James made an application to set aside the consent judgment on the ground that he had been induced to consent to it by ANZ’s misrepresentation by silence. That motion has been listed for hearing on 17 and 18 April 2019. The current application is made in support of that motion.

Consideration

8. There is a question whether it is appropriate for the Court to order discovery in relation to the issues raised by a notice of motion or whether it would have been more appropriate for Mr James to serve a notice to produce. There is also a question whether Practice Note SC Eq 11 – Disclosure in the Equity Division is applicable to the production of documents said to be relevant to the determination of issues raised by a notice of motion. However, no points were taken concerning these matters. ANZ was content to proceed on the basis that the course taken by Mr James was appropriate and both parties were content to proceed on the basis that the application should be determined in accordance with the principles set out in Practice Note SC Eq 11. In particular, both parties accepted that the critical question before the Court was whether disclosure of the documents sought (either by discovery or subpoena) was “necessary for the resolution of the real issues in dispute in the proceedings” (to quote from para 5 of the Practice Note). In the present context, the issues in dispute are the issues relevant to the question whether the consent judgment should be set aside. Critical to that question is whether ANZ was guilty of misrepresentation by silence.

9. Other questions may arise on the application to set aside the consent judgment. One question is whether Mr James has an arguable defence to ANZ’s claim under the guarantees. Some of the submissions made by Mr James tended to confuse the issues relevant to the question whether the judgment should be set aside with the issues that Mr James seeks to raise in defence of ANZ’s claim if that application is successful. To some extent that confusion can be explained by an overlap between the two sets of issues. However, as finally put, Mr James’s submissions rightly conceded, at least in the context of this case, that the outcome of the motion turned on whether the documents sought were necessary for the resolution of the question whether ANZ was guilty of misrepresentation by silence.

10. On 23 November 2018, Rein J ordered that Mr James give particulars of his claim that he was induced to consent to the judgment against him by ANZ’s misrepresentations. Mr James gave those particulars in a detailed document served under cover of a letter dated 6 December 2018 from his solicitors, Allsop Glover, to Allens, the solicitors for ANZ.

11. As particularised, Mr James’s case in relation to misrepresentation can be summarised as follows:

1. As at 16 May 2014 (the time of the consent judgment), ANZ had served three affidavits in support of its claim;

2. None of those affidavits made any reference to the realisations or recoveries made by the receivers including the property and assets of TLT and NLW;

3. As at 16 May 2014, ANZ knew that total sales to that date of TLT and NWL wine stock from their warehouses at Homebush Bay and Maryville were $1,444,908 and that the likely future realisation of the property and assets of TLT and NLW, when added to the realisations to that date, would be insufficient to pay ANZ’s debt in full;

4. ANZ did not take any steps to inform Mr James of those matters;

5. Mr James was entitled to be informed of those matters;

6. Mr James therefore assumed by the silence of ANZ that there had been no realisations or recoveries by ANZ or by the receivers on its behalf which would materially affect the amount for which ANZ was seeking to obtain judgment against him;

7. But for that misleading conduct, Mr James would not have consented to the consent judgment.

12. The documents sought by Mr James by way of discovery or subpoena essentially fall into two categories. The first is documents disclosing information ANZ had during the period 1 April 2013 to 16 May 2014 in relation to the assets of TLT and NLW and the realisation and likely realisation of those assets during that period. The second is documents disclosing the actual assets owned by those companies at about 19 August 2013.

13. During the course of argument, Mr Baird, who appeared for Mr James, conceded that documents falling into the second category were really relevant to Mr James’s defence to the substantive claim, which is that the receivers sold the assets of the two companies at an undervalue and took possession of assets to which they were not entitled, with the result that Mr James did not have other assets available to him to discharge his debts under the guarantees.

14. It is conceivable in some circumstances that the Court may order disclosure of documents relevant to the question whether one party or another has an arguable case. However, in the present context, Mr James has filed extensive evidence going to the question whether he has an arguable defence to ANZ’s claim; and, as I have said, it was not submitted that any of the documents sought on discovery were necessary for that purpose.

15. On the other hand, Mr Baird maintained that the documents falling within the second category were relevant to the issues to be determined on the substantive motion. In his submission, it was necessary for Mr James to investigate precisely what ANZ knew about the value of the assets of TLT and NLW at the time of the consent judgment. That information was relevant to what ANZ failed to disclose and was information that was solely within ANZ’s knowledge. It went to the heart of Mr James’s application to set aside the consent judgment.

16. I do not accept that submission. The difficulty with it is that ANZ does not dispute that at the time it obtained the consent judgment the receivers and it were aware that total sales to that date of wine stock held by TLT and NLW at their warehouses at Homebush Bay and Maryville were approximately $1,500,000 and that there was likely to be a significant shortfall following the realisation of any other assets held by those companies. Mr Merryweather gives affidavit evidence to that effect. ANZ resists the substantive motion not on the basis of what it believed or did not believe at the time of the consent judgment, but on various bases unconnected with its beliefs, including that it was under no duty to disclose to Mr James what it believed to be the correct position and that Mr James was on notice that it was likely that there would be a significant shortfall, so he could not have relied on any misrepresentation by ANZ. The documents sought by Mr James are not relevant, let alone necessary, to a resolution of those issues.

17. Mr Baird submitted that Mr James was still entitled to investigate ANZ’s knowledge in detail, and that that could only be done through the documents it sought. However, that is not the correct test. The question is whether it is necessary for Mr James to have access to the documents in order fairly to advance his case. I cannot see that it is in circumstances where relevantly the case he seeks to advance – that ANZ knew or believed at the time of the consent judgment that there would be a significant shortfall in the recoveries made by the receivers – is one that is conceded by ANZ.

18. It follows that the amended notice of motion filed on 25 October 2018 must be dismissed with costs.

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Decision last updated: 12 February 2019