Bendigo and Adelaide Bank Ltd v Lonergan
[2018] VSC 357
•3 July 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2017 00119
| BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178) | Plaintiff |
| v | |
| DAVID KENNETH LONERGAN | Defendant |
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JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 June 2018 |
DATE OF JUDGMENT: | 3 July 2018 |
CASE MAY BE CITED AS: | Bendigo and Adelaide Bank Ltd v Lonergan |
MEDIUM NEUTRAL CITATION: | [2018] VSC 357 |
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PRACTICE AND PROCEDURE – Deeds and other instruments – Enforcement of deed of settlement – whether summary procedure appropriate – Barratt v Rees [2014] VSCA 327 – Roberts v Gippsland Agricultural & Earthmoving Contracting Co Pty Ltd [1956] VLR 555 – Seachange Management Pty Ltd v Pital Business Pty Ltd (2009) 23 VR 396.
COURTS AND JUDICIAL SYSTEM – Consequences of being a group member – Clarke (as Trustee of the Clarke Family Trust) v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516 – Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214 – Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592; [2017] VSCA 51 – Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D.C. Gration | K & L Gates |
| For the Defendant | Mr P. Horobin | Cordato Partners Sydney via FCG Legal Pty Ltd |
HIS HONOUR:
Introduction
This is a claim by Bendigo and Adelaide Bank Limited (ACN 068 049 178) (“the Plaintiff”) against David Kenneth Lonergan (“the Defendant”) for principal and interest under two separate loans by ABL Nominees Pty Ltd (ACN 106 756 521) (“ABL Nominees”) whereby the Defendant was provided with funds to fund his investment in the Great Southern Plantations 2007 Project (“2007 Plantations MIS”) and in the Great Southern 2008 High Value Timber Project (“2008 HVT MIS”).
By loan deed dated 1 July 2007 (“the First Loan Deed”),[1] ABL Nominees agreed to loan the Defendant the sum of $76,000 to fund his investment in the 2007 Plantations MIS.
[1]Exhibit SFS-8 to the Affidavit of Stephen Flamer-Smith (4 June 2018).
There were terms of the First Loan Deed that:[2]
(a) ABL Nominees would lend the sum of $76,000 to the Defendant;
(b)the Defendant would make 107 monthly principal and interest repayments of $1,132.68 each commencing on 31 July 2007, followed by one final principal and interest repayment of $1,132.41 on 30 June 2016;
(c)the Defendant would pay interest on the Moneys Payable (as defined in the First Loan Deed) that was/were due and payable, but unpaid, at the rate of 14.5% per annum, calculated daily and charged monthly; and
(d)the Defendant would pay all costs and expenses incurred in relation to enforcement of the First Loan Deed on a full indemnity basis.
[2]Writ and Statement of Claim (17 January 2017), [3](a)–(d).
The Plaintiff claims,[3] but the Defendant does not admit on the basis of lack of knowledge of the matters,[4] that on or about 1 July 2007, ABL Nominees advanced the sum of $76,000 to the Defendant (“the First Loan”).
[3]Writ and Statement of Claim (17 January 2017), [4].
[4]Defence (8 May 2018), [4].
The Plaintiff claims that on or about 30 September 2008, the terms of the First Loan Deed were varied as follows:[5]
(a)the term of the loan was extended by 15 months from nine years to ten years and nine months; and
(b)with effect from 30 September 2008, the Defendant was required to make 12 monthly interest only repayments of $671.04 each, followed by 96 monthly principal and interest repayments of $1,118.89 each from 31 August 2017, followed by one final principal and interest repayment of $229.96 on 30 September 2017.
The Plaintiff claims that, with effect from 30 September 2012, the First Loan was capitalised, which had the effect of increasing the term of the First Loan by a further three months.[6]
[5]Writ and Statement of Claim (17 January 2017), [5]; the Defendant admits only that he sought the variation: Defence (8 May 2018), [5].
[6]Writ and Statement of Claim (17 January 2017), [6]; the Defendant admits only that this was the term of the variation he sought: Defence (8 May 2018), [6].
The Plaintiff claims, but the Defendant does not admit on the basis of lack of knowledge of the matters,[7] that after entering into the First Loan Deed, the rights under the First Loan Deed (as varied and capitalised) were assigned as follows:[8]
(a)with effect from 5 July 2007, ABL Nominees in its capacity as Trustee of the Lighthouse Trust No 12 assigned all of its rights under the [First Loan Deed] (as varied and capitalised) to Adelaide Bank Limited (ACN 061 461 550) (“ABL”); and
(b)with effect from 1 December 2008, ABL transferred all of its rights under the [the First Loan Deed] (as varied and capitalised) to the plaintiff.
[7]Defence (8 May 2018), [7].
[8]Writ and Statement of Claim (17 January 2017), [7].
By a loan deed dated 9 April 2009 (“the Second Loan Deed”),[9] ABL Nominees agreed to loan the Defendant Funds (as defined in the Second Loan Deed) to fund his investment in the 2008 HVT MIS.
[9]Exhibit SFS-37 to the Affidavit of Stephen Flamer-Smith (4 June 2018).
The Plaintiff claims, but the defendant does not admit,[10] that there were terms of the Second Loan Deed that:[11]
(a) ABL Nominees would lend the sum of $25,125 to the Defendant;
(b)the Defendant would make 36 monthly interest only repayments of $251.25 each commencing on 31 July 2008, followed by 84 monthly principal and interest repayments of $43.52 each commencing on 31 July 2011;
(c)the Defendant would pay interest on the Moneys Payable (as defined in the Second Loan Deed) that was/were due and payable, but unpaid, at the rate of 15% per annum, calculated daily and charged monthly; and
(d)the Defendant would pay all costs and expenses incurred in relation to enforcement of the Second Loan Deed on a full indemnity basis.
[10]The Defendant does not admit this claim of the Plaintiff, “in so far as the Plaintiff alleges that advance was made on or about 1 July 2008”: Defence (8 May 2018), [10].
[11]Writ and Statement of Claim (17 January 2017), [10](a)–(d).
The Plaintiff claims,[12] but the Defendant does not admit on the basis of lack of knowledge of an advance having been made as alleged,[13] that on or about 1 July 2008, ABL Nominees advanced the sum of $25,125 to the Defendant (“the Second Loan”).
[12]Writ and Statement of Claim (17 January 2017), [11].
[13]Defence (8 May 2018), [11].
With effect from 30 September 2012, the Second Loan was capitalised, which had the effect of increasing the term of the Second Loan by three months.[14] The Defendant does admit that he sought an extension for repayments of the “alleged loan” as pleaded by the Plaintiff.[15]
[14]Writ and Statement of Claim (17 January 2017), [12].
[15]Defence (8 May 2018), [12].
The Plaintiff claims, but the Defendant does not admit on the basis of lack of knowledge of any assignments as alleged,[16] that after entering into the Second Loan Deed, the rights under the Second Loan Deed (as capitalised) were assigned as follows:[17]
(a)with effect from 30 June 2008, ABL Nominees in its capacity as Trustee of the Lighthouse Trust No 11 assigned all of its rights under the Second Loan Deed (as capitalised) to ABL; and
(b)with effect from 1 December 2008, ABL transferred all of its rights under the Second Loan Deed (as capitalised) to the Plaintiff.
[16]Defence (8 May 2018), [13].
[17]Writ and Statement of Claim (17 January 2017), [13](a)–(b).
The Plaintiff claims, in respect of the First Loan, that in breach of the First Loan Deed (as varied and capitalised), the Defendant has failed to make monthly payments required under the Loan (as varied and capitalised).[18] In particulars it is alleged that the Defendant made repayments in accordance with the First Loan Deed (as varied and capitalised) between 31 July 2007 and 30 April 2013 (inclusive), but that after 30 April 2013, the Defendant made only one further payment on 31 July 2013.[19]
[18]Writ and Statement of Claim (17 January 2017), [8].
[19]Writ and Statement of Claim (17 January 2017), [8](i)–(ii).
The Plaintiff claims, in respect of the Second Loan, that in breach of the Second Loan Deed (as capitalised), the Defendant has failed to make monthly payments required under the Loan (as capitalised).[20] In particulars it is alleged that the Defendant made repayments in accordance with the Second Loan Deed (as capitalised) between 31 July 2008 and 28 February 2013 (inclusive), but that after 28 February 2013, the Defendant made sporadic repayments, the last of which was received on 30 September 2014.[21]
[20]Writ and Statement of Claim (17 January 2017), [14].
[21]Writ and Statement of Claim (17 January 2017), [14](i)–(ii).
Nature of Plaintiff’s application for judgment
The Plaintiff seeks to pursue its application for judgment as an application to give effect to terms of settlement of the kind discussed by the Court of Appeal in Barratt v Rees (“Barratt”).[22] The nature of an application of this kind was discussed by the Court of Appeal in Barratt and the authorities reviewed.[23] As the Court of Appeal observed,[24] the summary procedure to enforce terms of settlement was described in detail by Smith J in Roberts v Gippsland Agricultural & Earthmoving Contracting Co Pty Ltd (“Roberts”).[25] The Court of Appeal also made reference to the statement by Smith J in Roberts, concluding his Honour’s review of what he had identified as “certain rather vaguely defined rules of practice”:[26]
In deciding whether justice can be done under the summary procedure the Court, of course, needs to consider a variety of matters involving questions of degree. These, I think, must include the extent to which extraneous matters are involved, how substantial are the questions to be determined, to what extent questions of credibility are likely to arise, and whether pleadings and discovery may be desirable.
[22][2014] VSCA 327.
[23]Barratt v Rees [2014] VSCA 327, [10]–[18].
[24]Barratt v Rees [2014] VSCA 327, [12].
[25][1956] VLR 555; with reference also to O’Brien v O’Brien & Nicholls Pty Ltd [2001] VSC 411, [25].
[26]Roberts v Gippsland Agricultural & Earthmoving Contracting Co Pty Ltd [1956] VLR 555 at 564; referred to by the Court of Appeal in Barratt v Rees [2014] VSCA 327, [13].
The Court of Appeal in Barratt also observed that the authorities were considered by Maxwell P and Nettle JA in Seachange Management Pty Ltd v Pital Business Pty Ltd, where their Honours said:[27]
In summary, therefore, the net effect of the authorities to this point seems to be that, although the power summarily to enforce a compromise is discretionary and is wider now than once was the case, it is not to be invoked unless the court is ‘clearly satisfied that justice can be done’; and whether justice can be done is a question of degree. Consistently with the equitable origins of the power, one must weigh among other competing considerations the extent to which enforcement would involve extraneous matters, how substantial the questions to be determined as a precursor to enforcement may be, and procedural considerations like the desirability of pleadings and discovery and substantial cross-examination.
[27]Seachange Management Pty Ltd v Pital Business Pty Ltd (2009) 23 VR 396 at 408, [40]; referred to by the Court of Appeal in Barratt v Rees [2014] VSCA 327, [14].
It is important to stress that an application of the kind discussed in Barratt is not an application for summary judgment, whether under Part 4.4 of the Civil Procedure Act 2010 or under the summary judgment provisions of the Supreme Court (General Civil Procedure) Rules 2015.
In the present circumstances, I am of the opinion that the discretion of the Court should be exercised in favour of proceeding summarily to enforce the settlement approved in the Great Southern Group Proceedings.[28] The Defendant is a group member with respect to the 2007 Plantations Group Proceeding and also with respect to the 2007/2008 HVT Group Proceeding, and therefore bound by the Deed of Settlement of these group proceedings.[29] For the reasons which follow, the defences available to him are severely constrained. Consequently, extraneous matters are not involved, the questions to be determined are not substantial or of a nature which would lead to questions of credibility being raised and where justice and procedural fairness between the parties would only be served by trial of all issues on pleadings and with discovery.
[28]Being the proceedings of which settlement was approved in Clarke (as Trustee of the Clarke Family Trust v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516.
[29]Exhibit SFS-64 to the Affidavit of Stephen Flamer-Smith (4 June 2018) (“the Deed of Settlement”).
It follows, for these reasons, that the evidence relied upon by the parties in these proceedings is constrained. The Plaintiff relies on the affidavits of Stephen Flamer-Smith affirmed on 4 and 19 June 2018, and the Defendant relies upon an affidavit sworn on 7 June 2018.
Background
As indicated previously, the Plaintiff seeks to recover the loans, together with interest and costs, which loans were made to the Defendant to fund his investment in the 2007 Plantations MIS and the 2008 HVT MIS. The 2007 Plantations MIS was the subject of the Group proceeding in Samantha Murray v Great Southern Managers Australia Limited & Ors S CI 2011 04476 (“the 2007 Plantations Group Proceeding”). The 2008 HVT MIS was the subject of the group proceeding in Samantha Murray and Mohetishwar Prasad v Great Southern Managers Australia Limited & Ors S CI 2011 04071 (“the 2007/2008 HVT Group Proceeding”). The Defendant did not opt out of either of these Group proceedings.
2007 Plantations Group Proceeding
“Group Members” were relevantly defined in paragraph 2 of the Second Further Amended Statement of Claim in the 2007 Plantations Group Proceeding to be persons who:[30]
(a)at any time between 1 April 2007 and 31 March 2008 inclusive acquired and/or held an interest as a member of the 2007 Plantations Scheme;
(b)entered into a land and management agreement with Great Southern Managers Australia Limited (“GSMAL”) for woodlots in the 2007 Plantations Scheme; and
(c)entered into a loan with ABL Nominees Pty Ltd to fund payment of the application fees in respect of the 2007 Plantation Scheme.
[30]Exhibit SFS-58 to the Affidavit of Stephen Flamer-Smith (4 June 2018), [2](a)–(c).
The Defendant became a member of the 2007 Plantations MIS in June 2007.[31] The Defendant apparently entered into a land and management agreement dated 30 June 2007 with GSMAL[32] and entered into a loan with ABL Nominees to fund payment of his application fees.[33] In any event, the Defendant does not dispute that he was a Group Member in the 2007 Plantations Group Proceeding.[34]
[31]Affidavit of Stephen Flamer-Smith (4 June 2018), [8]–[11].
[32]Affidavit of Stephen Flamer-Smith (4 June 2018), [9]; cf Defendant’s Outline of Submissions (14 June 2018), [16], [17] where this position is disputed; but having regard to the matters relied upon by Mr Flamer-Smith in his affidavit of 4 June 2018 and in the context of other evidence before the Court, this evidence should be accepted.
[33]Affidavit of Stephen Flamer-Smith (4 June 2018), [14], [15].
[34]Defence (8 May 2018), [17].
2007/2008 HVT Group Proceeding
“Group Members” were relevantly defined in paragraph 2 of the Further Amended Statement of Claim in the 2007/2008 HVT Group Proceeding to be persons who:[35]
(a)at any time between 1 July 2007 and 30 June 2008 inclusive acquired and/or held an interest as a member of the 2008 HVT Scheme;
(b)entered into a lease and management agreement with Great Southern Managers Australia Limited (“GSMAL”) for woodlots in the 2008 HVT Scheme; and
(c)entered into a loan [agreement] with ABL Nominees to fund payment of the application fees in respect of the 2008 HVT Scheme.
[35]Plaintiff’s Outline of Submissions (18 June 2018), [16](a)–(b); referring to Exhibit SFS-59 to the Affidavit of Affidavit of Stephen Flamer-Smith (4 June 2018), [2](a)–(c).
The Defendant became a member of the 2008 HVT MIS by 30 June 2008.[36] The Defendant apparently entered into a land and management agreement with GSMAL.[37] The Defendant entered into a loan with ABL Nominees to fund payment of his application fees.[38]
[36]Affidavit of Stephen Flamer-Smith (4 June 2018), [31]–[43].
[37]Affidavit of Stephen Flamer-Smith (4 June 2018), [32]; cf Defendant’s Outline of Submissions (14 June 2018), [19], [20] where its veracity is disputed; but having regard to the matters relied upon by Mr Flamer-Smith in his affidavit of 4 June 2018 and in the context of other evidence before the Court, this evidence should be accepted.
[38]Affidavit of Stephen Flamer-Smith (4 June 2018), [44]–[46].
The Defendant does not admit that he was a Group Member in the 2007/2008 HVT Group Proceeding because he says his investment was made after 30 June 2008 and that he therefore did not have an interest in the scheme at the relevant date.[39] “Interest in a managed investment scheme” is defined in s 9 of the Corporations Act 2001 (Cth) to mean “a right to the benefit produced by the scheme (whether the right is actual, prospective or contingent and whether it is enforceable or not).”
[39]Defence (8 May 2018), [17].
The members of the 2008 HVT MIS are described in the constitution of the scheme as “Growers”.[40] “Grower” is defined in clause 1.1 of the constitution to mean “a person who has entered into a Land and Management Agreement… in respect of whom the Application Moneys have been fully paid”. Clause 6.5 of the constitution requires the Responsible Entity to execute the Land and Management Agreement by 30 June in the year the application was received.[41] Mr Flamer-Smith’s evidence is that the business records of Great Southern show that the Defendant’s Land and Management Agreement was dated 30 June 2008.[42] Further, Mr Flamer-Smith’s evidence is that the funds loaned to the Defendant were advanced to GSMAL, which was the responsible entity of the 2008 HVT MIS, on 30 June 2008.[43] Once received, the funds were required to be held in trust by GSMAL in accordance with s 722 of the Corporations Act. Although the Defendant does dispute the veracity of this evidence,[44] I am of the opinion that having regard to the matters relied upon by Mr Flamer-Smith and in the context of the other evidence before the Court, this evidence should be accepted. Moreover, on this basis any issues in relation to whether the Defendant may have had a presently “vested” or a future “right to the benefit produced by the scheme”[45] does not arise.
[40]Exhibit SFS-31 to the Affidavit of Stephen Flamer-Smith (4 June 2018), cl 1.1.
[41]Exhibit SFS-31 to the Affidavit of Stephen Flamer-Smith (4 June 2018), cl 6.5(a)(1).
[42]Affidavit of Stephen Flamer-Smith (4 June 2018), [43].
[43]Affidavit of Stephen Flamer-Smith (4 June 2018), [48]–[55]; Supplementary Affidavit of Stephen Flamer-Smith (19 June 2018), [5]–[7]; Plaintiff’s Outline of Submissions (18 June 2018), [24].
[44]Defendant’s Outline of Submissions (14 June 2018), [13]–[22].
[45]Transcript (21 June 2018), 46–48, 49, 50.
It follows, in my view, that in circumstances where the Defendant applied for membership of the 2008 HVT MIS on 6 June 2008, a land and management agreement had been entered into on 30 June 2008 and GSMAL—which was the responsible entity—was holding the Defendant’s application moneys on trust on 30 June 2008, the Defendant held by that date, 30 June 2008, an interest in the 2008 HVT MIS for the purposes of the Corporations Act and, importantly in the present context, for the purposes of group membership. Consequently, I find that the Defendant was, with respect to the 2007/2008 HVT Group Proceeding, a Group Member.
Consequences of being a Group Member
For the reasons which follow, the consequence of the Defendant being a Group Member with respect to both the 2007 Plantations Group Proceeding and the 2007/2008 HVT Group Proceeding is that he is bound by the terms of the Deed of Settlement[46] of the group proceedings and, particularly, the acknowledgment that his Loan Deeds are valid and binding (cl 4.1.4) and the release of any Claims (as defined in the Deed of Settlement) that he might otherwise have against the Plaintiff in this proceeding (cll 4.1.10 and 4.1.12).
[46]The Deed of Settlement was approved by the Court under s 33V of the Supreme Court Act 1986 in Clarke (as Trustee of the Clarke Family Trust) v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516.
In light of the importance of the provisions of the Deed of Settlement, it is helpful to set out the following provisions of cl 4:
4.SETTLEMENT OF CLAIMS INVOLVING BEN PARTIES AND JAVELIN
4.1On and from the Approval Date, all Claims against the BEN Parties and Javelin and any of their respective Related Bodies Corporate, Related Entities or Related Persons will be settled as follows.
4.1.1The BEN Parties agree to waive Interest Relating to Overdue Amounts accrued and unpaid as at the Approval Date, in respect of the Loan Deeds of:
4.1.1.1the Lead Plaintiffs;
4.1.1.2Group Members; and
4.1.1.3M+K Counterclaim Claimants,
insofar as those loans are between those persons and the BEN Parties.
4.1.2The BEN Parties agree not to commence or continue debt recovery proceedings against M+K Clients until at least 30 days after the Approval Date.
4.1.3Javelin will agree to vary the terms of the Loan Deeds of the Lead Plaintiffs and Group Members whose Loan Deeds were assigned to Javelin (collectively, Javelin Borrowers) in accordance with clause 5, whether or not a Javelin Borrower has ceased making repayments.
4.1.4The Lead Plaintiffs for and on behalf of themselves and all Group Members acknowledge and admit the validity and enforceability of the Lead Plaintiffs’ Loan Deeds and the Group Members’ Loan Deeds.
4.1.5The M+K Counterclaim Claimants acknowledge and admit the validity and enforceability of their Loan Deeds.
4.1.6Each of the Lead Plaintiffs acknowledges and admits their liability to the BEN Parties to pay the Loan Balance under their Loan Deed.
4.1.7Subject to the operation of clauses 5.1 to 5.19, Raymond Drummond acknowledges and admits his liability to Javelin to pay the Money Payable under his Loan Deed.
4.1.8Each of the M+K Counterclaim Claimants acknowledges and admits their liability to the BEN Parties to pay the Loan Balance under their Loan Deed.
4.1.9Each of the plaintiffs by counterclaim to the Uplifted Proceedings acknowledges and admits their liability to the BEN Parties to pay the Loan Balance under their Loan Deed.
4.1.10The Lead Plaintiffs for and on behalf of themselves and on behalf of all Group Members release the BEN Parties and their Related Entities and Javelin and its Related Entities from all Claims.
4.1.11The M+K Counterclaim Claimants release the BEN Parties and their Related Entities from all Claims.
4.1.12Each of the Lead Plaintiffs for and on behalf of themselves and on behalf of all Group Members and each of the M+K Counterclaim Claimants agree that they will not bring or pursue, or procure that a third party bring or pursue, a Claim against the BEN Parties or their Related Entities and Javelin and its Related Entities.
4.1.13Each of the BEN Parties and their Related Entities and Javelin and its Related Entities may plead this Deed as a bar or defence to any claim or action (including a claim for costs) brought by any of the Lead Plaintiffs, the Group Members or the M+K Counterclaim Claimants relating to a Claim.
…
…
Critical to these provisions of cl 4 are the definitions of “Claim”, “Loan Agreements” and “Loan Deeds” which appear in the definitions and interpretation provisions of cl 1.1, as follows:[47]
[47]Deed of Settlement, cl 1.1.
…
“Claim” means any claim, demand, action, suit or proceeding for damages, debt, restitution, equitable compensation, account, injunctive relief, specific performance, declaratory relief or any other remedy, whether by original claim, cross-claim, claim for contribution or otherwise whether presently known or unknown and whether arising at common law, in equity, under statute or otherwise and whether involving a third party or party to this Agreement and all liabilities, losses, damages, costs (including legal costs on a full indemnity basis), interest, fees, and penalties of whatever description (whether actual, contingent or prospective) arising out of, or in connection with the contents of or the facts giving rise to, the PDSs, the Loan Agreements and or the allegations made in or the facts giving rise to each of the Proceedings.
…
“Loan Agreements” means the loan agreements under which monies were advanced to Scheme Members to finance their interest in managed investment schemes of which GSMAL, and (in the case of the Great Southern 2008 Future Forestry Investment Scheme) GSMAL and Rural Funds Management Limited (formerly Great Southern Funds Management Limited), is or was the responsible entity.
…
“Loan Deeds” means the Loan Agreements the subject of the Group Proceedings and the M+K Counterclaim Proceedings entered into between:
a)the Lead Plaintiffs, Group Members or M+K Counterclaim Claimants and GSF, which were subsequently assigned by GSF to one or more of the BEN Parties or Javelin; or
b)the Lead Plaintiffs, Group Members or M+K Counterclaim Claimants and ABL Nominees Pty Ltd, which were subsequently assigned by ABL Nominees to one or more of the BEN Parties.
…
Clause 1.1 of the Deed of Settlement also defines the “Approval Date”, which is the date upon which the Court approved the settlement of the Great Southern Group Proceedings, which approval was granted on 11 December 2014.[48]
[48]Clarke (as Trustee of the Clarke Family Trust) v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516.
The effect of the Deed of Settlement on group members in the Great Southern Group Proceedings has now been considered on two occasions by the Court of Appeal. The first occasion was in Byrne v Javelin Asset Management Pty Ltd (“Byrne”),[49] and the second in Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (“Pekell”).[50] At the outset it is important to emphasise that the Great Southern Group Proceedings did not proceed to judgment. Rather, these group proceedings were concluded by the settlement now embodied in the Deed of Settlement which was, as indicated previously, approved by the Court under s 33V of the Supreme Court Act 1986. This is in contrast to the position with respect to the Timbercorp Managed Investment Schemes litigation, which proceeded to judgment in Woodcroft-Brown v Timbercorp Securities Ltd.[51] The criticality of this difference is that the group members in the Timbercorp proceedings, which went to judgment, are only bound to the extent of the common issues in the group proceedings, whereas, as is made clear by the Court of Appeal in Byrne and Pekell, the group members in the Great Southern Group Proceedings are bound by the provisions of the Deed of Settlement, properly construed; and whether or not the operation of that Deed extends to settle issues and claims beyond what would otherwise be within the ambit of the common issues in those group proceedings is a question of construction.
[49][2016] VSCA 214.
[50](2017) 118 ACSR 592.
[51](2011) 253 FLR 240; and on appeal to the Court of Appeal in Woodcroft-Brown v Timbercorp Securities Ltd (in liquidation) (2013) 96 ACSR 307 and, in turn, to the High Court in Timbercorp Finance Pty Ltd (in liquidation) v Collins (2016) 259 CLR 212.
The proceedings which culminated in the decision on appeal in Byrne concerned the position of Javelin borrowers, whose position is additionally addressed in the provisions of cl 5 of the Deed of Settlement; provisions which deal with variations to the terms of the Javelin borrowers’ loans.[52] Critically, for present purposes, the Court of Appeal found that the effect of the provisions of the Deed of Settlement was to render it unnecessary for Javelin, in seeking to enforce the loans, to establish that advances had been made to the applicant borrower having regard to the ambit of its provisions. This finding was not, however, based upon or limited with respect to the provisions of cl 5 of the Deed of Settlement which apply particularly to Javelin. Thus, in approaching the construction of the terms of the Deed of Settlement generally, the Court of Appeal observed, with respect to the respondent Javelin’s claim:[53]
28The respondent contended that the judge had no choice but to order judgment in its favour. The respondent had sued on the deed of settlement, not the underlying loan agreements. It was a premise of the deed of settlement that there was an enforceable loan agreement under which loan moneys had been advanced. The provisions of the deed of settlement confirmed the position. In particular, the admission in cl 4.1.4 as to the ‘validity and enforceability’ of the loan deeds constituted an admission that loans had been made and that the respondent had standing to sue for recovery of the amounts owing under them.
The Court of Appeal thereby emphasised the foundation or the underlying premise of the Deed of Settlement, namely, that the admission in cl 4.1.4 as to the “validity and enforceability” of the Loan Deeds was to be taken as an admission that the loans had been made and that the respondent, in that case Javelin, had standing to sue for recovery of the amounts owing under them. In my view, it is clear that the same reasoning is applicable with respect to the BEN Parties, which includes the Plaintiff in these proceedings.[54]
[52]See Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214, [11], [12].
[53]See Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214, [28].
[54]The BEN Parties are described in the Deed of Settlement as Bendigo and Adelaide Bank Limited and the other companies listed in Schedule 2 to that Deed. The Plaintiff in these proceedings is one of the companies listed in that Schedule.
The position adopted by the Court of Appeal in this respect is important more broadly, but also, particularly, having regard to the opening words or chapeau of cl 4.1 of the Deed of Settlement. This is because, on a literal reading of the chapeau out of the context of both cl 4 and the Deed of Settlement as a whole, it might be said that all cl 4.1 does is to resolve claims against the BEN Parties, Javelin and other entities—that is, defensive claims, rather than claims by the BEN Parties, Javelin and other entities. That would, in my view, be a strained and inappropriate construction of these provisions, which are contained in a commercial document, a document which, as the Court of Appeal indicates, is to be construed according to ordinary principles of construction. It follows that the provisions of cl 4.1 are general and unconstrained in that they apply to all claims by and claims against the BEN Parties and Javelin and other entities. This position is also, in my view, supported by the very broad and all-embracing definition of “Claim” in the Deed of Settlement in which there is no basis in the language employed to limit its operation to claims by or against any party. Moreover, for these reasons, any suggestion that it is of significance that the provisions of cl 4.1.4 are not couched in the language of a covenant by the Lead Plaintiffs or Group Members with respect to their obligations under the Loan Deeds must be rejected. Also, for the same reasons, nothing flows in this respect from the utilisation of somewhat different language in other parts of cl 4 of the Deed of Settlement; cll 4.1.2, 4.1.3, 4.1.6, 4.1.8 or 4.1.10, for example. Consequently, as the Court of Appeal has found, cl 4.1.4 is to be taken as a general admission with respect to the validity and enforceability of the Loan Deeds and that an entity such as the Plaintiff in the present proceedings has standing to sue for recovery of the amounts owing under them.
The Court of Appeal in Byrne also considered the nature of the binding force of the Deed of Settlement and its operation beyond the common issues in the Group Proceeding. Thus, the Court of Appeal said:[55]
[55]Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214, [31], [32], [35], [37].
31The applicant’s submission that cl 5.18.2 should not be construed in accordance with the ordinary principles applicable to commercial contracts and should be construed beneficially in his favour cannot be sustained. The deed of settlement was executed by a large number of parties in order to resolve litigation on a substantial scale involving the investment of very large sums of money in a series of managed investment schemes. If anything relevantly turns on the designation ‘commercial’, it is plain that, at least in so far as the actual parties who executed the deed are concerned, that designation is apt. Even accepting for present purposes that the binding force of the deed, in so far as group members other than the executing parties are concerned, flows from statute rather than from the deed itself, it cannot be the case that the deed merits a different description or, more fundamentally, that it attracts a different interpretation, in its application to those group members. If that were so, then provisions of the deed of settlement could conceivably bear different meanings in their application to plaintiffs on the one hand and group members on the other. That would be a very surprising consequence. There is a single deed of settlement, binding on a large range of persons, and it must be construed by reference to ordinary principles of construction of written instruments.
32The fact that the deed emerged from proceedings in which certain matters were, and others were not, in issue, does not dictate any special approach to its construction. That is a commonplace occurrence when litigation is settled. As the respondent submitted, it would be wrong to approach the deed on the basis that it is to be assumed that it goes no further than to resolve issues that were previously in dispute in the group proceedings. Instead, the scope of the proceedings might be relevant in the construction of aspects of the deed, as part of the context in which it was executed. The circumstance that, as the applicant submitted, the existence of the loans in question was not litigated in the group proceedings is therefore a matter to be taken into consideration in applying ordinary principles of construction of contracts.
…
35Other provisions of the deed of settlement make it clear that the ordinary meaning of ‘the amount owing’ is its intended meaning. …
…
37In light of these considerations, the fact that the group proceedings did not present for determination the question whether loans had in fact been advanced to group members is of little assistance in construing the deed of settlement. Given that the premise of the relevant provisions is that loans had been advanced, it is apparent that the parties resolved the proceedings on terms which travelled beyond the issues formally in issue in the litigation.
For present purposes, the critical issue in Pekell was the contention by the respondent to the Bank’s claim that the Deed of Settlement “was only effective to resolve the common issues which comprised the foundation, and the ambit, of the Group Proceedings”.[56] The appeal in Pekell was from the judgment of Randall AsJ on an application to set aside a statutory demand.[57] The respondent in those proceedings submitted that the statutory demand should be set aside because it was vitiated by defects and because there was a genuine dispute about the existence of the debt and an offsetting claim for misrepresentation. On appeal, the applicant Bank submitted that the effect of the Deed of Settlement and, particularly, cll 4.1.4, 4.1.10 and 4.1.13 precluded the respondent from raising defences or offsetting claims in respect of the loans.[58]
[56]Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592 at 598 [19].
[57]Pekell Delaire Holdings Pty Ltd v Bendigo and Adelaide Bank Limited [2016] VSC 570.
[58]See Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592 at 597 [17], 598 [21].
The respondent in Pekell sought to apply the reasoning of the High Court in Timbercorp, particularly the following explanation by French CJ, Kiefel, Keane and Nettle JJ:[59]
[59]Timbercorp Finance Pty Ltd (in liquidation) v Collins (2016) 259 CLR 212 at 235–6 [52]–[53] as set out in the judgment of the Court of Appeal in Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592 at 600 [28], with a further reference by the Court of Appeal to Timbercorp Finance Pty Ltd (in liquidation) v Collins (2016) 259 CLR 212 at 254 [141]–[142] (Gordon J).
52Part 4A creates its own kind of statutory estoppel. Section 33ZB requires that a judgment in a group proceeding identify the group members affected by it and, subject to a provision not presently relevant, provides that that judgment ‘binds all persons who are such group members at the time the judgment is given’. In order to understand that to which the group members are bound, it is necessary to read s 33ZB in the context of Pt 4A as a whole and ss 33C(1) and 33H in particular. By that process it will be seen that group members are bound by the determination of the claims giving rise to the common questions.
53The provisions of Pt 4A therefore confirm that a plaintiff in group proceedings represents group members only with respect to the claim the subject of that proceeding, but not with respect to their individual claims. The lead plaintiff is not a privy in interest with respect to the respondents’ claims. This is so regardless of whether they should have been raised in the group proceeding. That leaves for consideration the question whether the respondents themselves are estopped from raising them in these proceedings.
Thus, as the Court of Appeal observed in Pekell:[60]
29As elaborated further below, the respondent seeks to apply the above reasoning to the present case, permitting it to raise defences which were not the subject of the group proceedings. It argues that the plaintiffs could not settle the proceedings so as to bind group members in respect of the claims underlying such defences.
The Court of Appeal then considered the issue in Byrne, which was whether Javelin could take the benefit of the Deed of Settlement in respect of claims raised in a group proceeding to which it was not a party.[61] The Court of Appeal also said, in the context of considering the particular issues in Pekell, that:[62]
Byrne also established that it was permissible for a deed of settlement to go beyond the matters in issue in the group proceedings and that such a deed ought not to be construed on the assumption that it did not do so.
[60]Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592 at 600 [29].
[61]Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592 at 601–2 [31]–[34].
[62]Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592 at 603 [36]; referring to Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214, [32], [37].
Critical for present purposes was the argument in Pekell that the orders made on 11 December 2014 approving the Deed of Settlement were in excess of jurisdiction. As to this, the Court of Appeal said:[63]
[63]Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592 at 607–9 [55]–[59].
55Secondly, and in any event, the argument that the orders of 11 December 2014 were made in excess of jurisdiction is without substance. It is true, as the respondent submitted, that in Timbercorp the plurality said:
The provisions of Pt 4A … confirm that a plaintiff in group proceedings represents group members only with respect to the claim the subject of that proceeding, but not with respect to their individual claims. The lead plaintiff is not a privy in interest with respect to the respondents’ claims.[64]
56However, it does not follow from those propositions that a plaintiff in a group proceeding cannot settle that proceeding in a manner that affects the individual claims of group members. Part 4A protects the interests of group members by requiring that they be given notice of an application to approve a settlement.[65] Apart from the requirement in s 33V that any settlement of a group proceeding requires the Court’s approval, s 33KA enables a group member to apply to the Court at any time before or after judgment for an order that the person ceases to be a group member (including on the basis that it is just and expedient to make such an order). Doubtless the fact that a proposed settlement will affect the individual claims of such members will provoke anxious consideration, as it did in the present case, by the judge asked to approve the settlement.[66] But nothing in pt 4A circumscribes the power of the Court to approve such a settlement. The respondent was not able to point to any provision having that effect. Its arguments proceeded on the erroneous assumption that the observations of the High Court in Timbercorp, a case in which the group proceeding went to judgment, apply with equal force to group proceedings which are settled.[67]
57It would be highly surprising if pt 4A precluded parties to a group proceeding from resolving the common claims between them on terms which also bring finality to other issues outstanding between those parties or, in the case of a plaintiff, the group members that plaintiff represents. Full releases of all outstanding claims, whether at issue in the relevant proceedings or not, are not uncommon.[68] The respondent’s submission, if correct, would impose a remarkable constraint on those negotiating settlements of group proceedings.
58The respondent submitted that s 33ZF of the Supreme Court Act 1986, which empowers the Court to make any order it thinks ‘appropriate or necessary to ensure that justice is done in the proceeding’, is to be confined by its reference to justice being done ‘in the proceeding’. However, that argument advances no further than repeating the assertion that the proceeding could not be settled so as to bind group members except in respect of the common claims. For the reasons given, there is no basis for that assertion. Instead, as explained in Byrne,[69] s 33ZF enables a Court approving a proposed settlement of a group proceeding to make orders binding a plaintiff, group members and other parties to the settlement or authorising a plaintiff to enter into and give effect to the settlement on behalf of group members. Such an order supplies the privity which, as the High Court observed in Timbercorp, is otherwise absent in respect of the individual claims of group members. This then enables the group proceeding to be settled on whatever terms the parties have agreed and the Court has approved. Because the privity which is absent in respect of a judgment is able to be provided by virtue of the Court’s orders when approving a settlement, Timbercorp and Byrne are addressed to different situations. The respondent’s submission that the decisions are inconsistent must therefore be rejected.
59For each of the above reasons, the deed of settlement applies in accordance with its terms. To the extent it applies to the respondent, the deed is effective to preclude it from advancing the disputes and claims upon which it relies. The first two proposed grounds of appeal should be upheld.
[64](2016) 339 ALR 11 at 23 [53] (French CJ, Kiefel, Keane, and Nettle JJ).
[65]Supreme Court Act 1986 s 33X(4). The Court may dispense with such notice if satisfied that it is just to do so.
[66]Clarke v GSF [2014] VSC 516, [87]–[132] (Croft J).
[67]Nor did anything in this Court’s reasons in Timbercorp indicate that a group proceeding could not be settled on terms extending beyond the common issues. The Court disagreed with the reasons of Croft J in the course of approving the present settlement only ‘to the extent’ that those reasons suggested that failure to opt out of a group proceeding under pt 4A necessarily gave rise to an estoppel: [2016] VSCA 128 [186]–[187] (Warren CJ, Santamaria and McLeish JJA). On one reading of the relevant passage, the judge did not decide the point on that basis in any event: see Clarke v GSF [2014] VSC 516, [132].
[68]The same observation was made by Gordon J, in the course of approving a proposed settlement of a group proceeding, in Harrison v Sandhurst Trustees Ltd [2011] FCA 541 [26], which was cited with approval by Croft J in his reasons for making the 11 December 2014 orders: Clarke v GSF [2014] VSC 516 [101]. See also Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214, [59] (Hansen, Ferguson and McLeish JJA).
[69]See [32] above.
The Deed of Settlement has also been considered at District Court level in other jurisdictions and found to be enforceable in accordance with its terms and to preclude defences and claims being brought by Group Members.[70]
[70]See Bendigo and Adelaide Bank Limited v Zipevski [2018] NSWDC 54; Bendigo and Adelaide Bank Limited v Gaedtke [2017] QDC 202; ABL Custodian Services Pty Ltd v Kunz [2016] SADC 145.
For these reasons, the Defendant, as a Group Member in both of the 2007 Plantations Group Proceeding and the 2007/2008 HVT Group Proceeding, is bound by the provisions of the Deed of Settlement. It follows that he is not now able to dispute or deny the validity or enforceability of the Loan Deeds by the Plaintiff.
Advance and outstanding indebtedness
The definition of “Loan Agreements” has been set out previously and is of particular relevance in the present circumstances. It will be recalled that the definition is of “the loan agreements under which monies were advanced to Scheme Members to finance their interest in managed investment schemes of which GSMAL… is or was the responsible entity” [Plaintiff’s emphasis].[71] For the preceding reasons, consistently with Byrne and Pekell, it follows that the Defendant, as a Group Member in both the 2007 Plantations Group Proceeding and the 2007/2008 HVT Group Proceeding, is bound by the provisions of the Deed of Settlement and cannot contest the making of the advances to him.[72] In any event, the evidence of Mr Flamer-Smith is that the advances were made to the Defendant[73] and as to outstanding indebtedness.[74] Although the Defendant does dispute the veracity of this evidence,[75] I am of the opinion that having regard to the matters relied upon by Mr Flamer-Smith and in the context of the other evidence before the Court, this evidence should be accepted.
[71]Deed of Settlement, cl 1.1; Plaintiff’s Outline of Submissions (18 June 2018), [29].
[72]Plaintiff’s Outline of Submissions (18 June 2018), [30].
[73]Affidavit of Stephen Flamer-Smith (4 June 2018), [16]–[26], [48]–[60].
[74]Affidavit of Stephen Flamer-Smith (4 June 2018), [83]–[88].
[75]Defendant’s Outline of Submissions (14 June 2018), [13], [14], [18].
Assignment
Again, the provisions of the Deed of Settlement are relevant, in this instance, the definition of “Loan Deeds”. Under this definition, the term “Loan Deeds” means, relevantly, “the Loan Agreements the subject of the Group Proceedings… entered into between… Group Members and ABL Nominees Pty Ltd, which were subsequently assigned by ABL Nominees to one or more of the BEN Parties …” [Plaintiff’s emphasis].[76] Again, for the preceding reasons and consistently with Byrne and Pekell, the Defendant as a Group Member in the 2007 Plantations Group Proceeding and in the 2007/2008 HVT Group Proceeding cannot contest the assignment of his loans. In any event, the evidence of Mr Flamer-Smith provides details of the assignment and transfer of the loans.[77] Although the Defendant does dispute the veracity of this evidence,[78] I am of the opinion that having regard to the matters relied upon by Mr Flamer-Smith and in the context of the other evidence before the Court, this evidence should be accepted.
[76]Deed of Settlement, cl 1.1; Plaintiff’s Outline of Submissions (18 June 2018), [32].
[77]Affidavit of Stephen Flamer-Smith (4 June 2018), [27]–[29], [61]–[64].
[78]Defendant’s Outline of Submissions (14 June 2018), [12].
Finally, it is not clear what point the Defendant seeks to make in relation to its submissions with respect to the timing of advances, the date of entry into land and management agreements and in relation to the question whether or not the Second Loan provided for a future advance.[79] In any event, cl 2.10 of the Loan Sale and Servicing Deed[80] provides for the assignment of future loan rights in addition to those rights existing at the relevant “Cut-Off Date”.
[79]See, particularly, Defendant’s Outline of Submissions (14 June 2018), [15]–[22].
[80]Exhibit SFS-12 to the Affidavit of Stephen Flamer-Smith (4 June 2018).
Conclusion
For the preceding reasons, orders will be made in favour of the Plaintiff that:
(1)the Defendant pay the Plaintiff the amount of $131,794.65 and any further interest that should accrue after 21 June 2018; and
(2)the Defendant pay the Plaintiff’s costs on an indemnity basis pursuant to cl 7.1(c) of the Defendant’s Loan Deeds.
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