Bride v Australian Bank Ltd - [2000] WASC 116

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION: BRIDE & ANOR -v- AUSTRALIAN BANK LTD & ORS [2000] WASC 116

CORAM: PARKER J

HEARD: 9-30 NOVEMBER 1999 & 1-20 DECEMBER 1999

DELIVERED : 12 MAY 2000

FILE NO/S: CIV 1570 of 1989

BETWEEN: EDWARD JAMES BRIDE
WENDY MARGARET BRIDE as Trustees of the Pinwernying Family Trust
Plaintiffs
AND
AUSTRALIAN BANK LTD
First Defendant
SOUTHERN ROLLED OATS PTY LTD
SOUTHERN FOODS (1986) PTY LTD
Second Defendants
MILNE FEEDS PTY LTD
Third Defendant

FILE NO/S :CIV 1804 of 1989

BETWEEN :EDWARD JAMES BRIDE
WENDY MARGARET BRIDE as Trustees of the Pinwernying Family Trust
Plaintiffs
AND
PEAT MARWICK MITCHELL
Defendant

Catchwords:

Right of action - Plaintiffs suing as trustees - Whether loss alleged incurred as trustees or as partners - No new principles

Mortgage - Whether valid appointment of receivers and managers - Duties of receivers and managers to mortgagor - Whether duties breached

Mortgage - Receivers and managers - Purported entry into possession of secured land a trespass if not validly appointed

Securities - Bill of sale over business and assets - Whether valid appointment of receivers and managers - Duties of receivers and managers to manage business and re sale - Whether duties breached

Legislation:

Nil

Result:

In CIV 1570 of 1089
         Claims against First and Second Defendants dismissed.
         Claims against Third Defendant Stood Over.
In CIV 1804 of 1989
         Defendants to pay the Plaintiffs damages for trespass in the sum of $500.

Representation:

CIV 1570 of 1989

Counsel:

Plaintiffs:     In person
First Defendant             :     Mr C J Pullin QC & Ms C H Thompson
Second Defendants       :     No appearance
Third Defendant           :     No appearance

Solicitors:

Plaintiffs:     In person
First Defendant             :     Freehill Hollingdale & Page
Second Defendants       :     No appearance
Third Defendant           :     No appearance

CIV 1804 of 1989

Counsel:

Plaintiffs: In person
Defendant: Mr C J Pullin QC & Ms C H Thompson

Solicitors:

Plaintiffs: In person
Defendant: Freehill Hollingdale & Page

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

Ashmore v British Coal Corporation [1990] 2 Ch B 338
Australian Bank Ltd v Stokes & Anor, unreported; SCt of NSW, No 11079 of 1985
Barns v Queensland National Bank Limited (1906) 3 CLR 925
Bride & Anor v Hammond Fitzgerald & King, unreported; FCt SCt of WA; Library No 960160; 26 March 1996
Bride & Anor v KMG Hungerfords, unreported; FCt SCt of WA; Library No 940353, 14 July 1994
Bride & Anor v Stewart [1999] WASCA 116
Bride & Bride v Hammond Fitzgerald & King, unreported; SCt of WA (Scott J); Library No 930303; 6 May 1993
Bride & Bride v KMG Hungerfords (1991) 109 FLR 256
Bride v Australian Bank Ltd and Stewart, unreported; Fed C of A (Beaumont, Burchett and Lee JJ); 5 December 1988
Bride v Australian Bank Ltd and Stewart, unreported; Fed C of A (French J), 26 July 1988
Bride v KMG Hungerfords, unreported; FCt SCt of WA; Library No 940353; 14 July 1994
Bride v Peat Marwick Mitchell [1989] WAR 383
Bunbury Foods Pty Ltd v National Bank of Australasia Limited (1983-1984) 153 CLR 491
Commercial and General Acceptance Ltd v Nixon & Anor (1981) 152 CLR 491
Cuckmore Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949
Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234
Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295
Expo International Pty Ltd v Chant [1979] 2 NSWLR 820
Forsyth v Blundell (1973) 129 CLR 477
Grant v Dawkins [1973] 3 All ER 897
Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404
Hunter v Chief Constable of the West Midlands Police [1982] AC 529
J Leavey & Co Ltd v George H Hirst & Co Ltd [1943] 2 All ER 58
Jeogla v ANZ [1999] NSWSC 563
Luby v Newcastle-Under-Lyme Corp [1965] 1 QB 21
Medforth v Blake and Ors [1999] 3 All ER 97 (CA)
Minogue v Human Rights and Equal Opportunity Commission (1999) 166 ALR 129
Morgan v Banning (1999) 20 WAR 474
Mosman Park Town Council v Walker (1991) 73 LGRA 30
Orr v Holmes (1948) 76 CLR 632
Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676
Re B Johnson & Co (Builders) Ltd [1955] Ch 634
Re Morton, Ex parte Mitchell Products Pty Ltd; Morton and Ors v Vouris and Ors (1996) 21 ACSR 497
Reichel v Magrath (1889) 14 App Cas 665
Smith v Linskills [1996] 1 WLR 763
Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410
State Bank of Victoria v Parry and Ors (1989) 7 ACLC 226
Stergian v Citibank Savings Ltd (1998) 148 FLR 244
Walton v Gardiner (1992-1993) 177 CLR 378
Waltons Stores (Interstate) Ltd v Maher (1987-1988) 164 CLR 387
Wardley v State of Western Australia (1992) 175 CLR 514
Wentworth v Rogers (No 5) 6 NSWLR 534
Westpac Banking Corporation Ltd v Kingsland and Ors [1991] 26 NSWLR 700

Case(s) also cited:

Bahr v Nicolay (1987) 164 CLR 604
Cachia v Hanes (1991) 179 CLR 403
Clements v Ellis (1931) 51 CLR 217
Commissioner Corporate Affairs v Harvey (1980) VR 669
Farrar v Farrars Ltd (1888) 14 Ch D 395
Gibbs v Messer [1891] AC 248
Jared v Clements (1903) 1 Ch 428
Jenkins v Jones (1866) LR 2 Eq 323
Kendall v Melsom (1998) 193 CLR 46
Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265
McCallum v McCallum (1901) 1 Ch 143
McIlkenny (1991) 93 Cr App Rep 287
Robertson v Noms (1858-9) Gifforas Reports 421
Rondel v Worsley [1969] 1 AC 191

PARKER J:

Introduction

The plaintiffs in this case, Edward James Bride ("Mr Bride") and Wendy Margaret Bride ("Mrs Bride") are husband and wife. Together they established a family trust on 6 May 1977 which is the Pinwernying Family Trust (the "Trust"). It is solely in their capacities as trustees of the Trust that Mr and Mrs Bride bring these two actions which were heard together.
The first defendant in CIV 1570 of 1989, the Australian Bank Ltd (the "Bank") provided finance to Mr and Mrs Bride between 1982 and 1984. At the commencement of that period it was newly established as a banking institution and, subsequent to the material events, it seem to have been acquired by other banking interests and has ceased to conduct business. The second defendant Southern Rolled Oats Pty Ltd became the purchaser in 1985 of land and a business which is at the centre of these actions. Peat Marwick Mitchell is an accounting firm and is sued in CIV 1804 of 1989 in respect of the conduct of two of its partners, acting in that capacity, as receivers and managers in 1984-1985 pursuant to securities held by the Bank. The other second defendant Southern Foods (1986) Pty Ltd appears to have been wrongly joined but its affairs had some connection with Southern Rolled Oats Pty Ltd. The third defendant in CIV 1570 of 1989, by force of pre-trial order, was excused from participation in this trial on the basis that the findings of fact made in this trial should be binding as between it and the plaintiffs, so far as they are relevant to the case raised against it, which is to be further heard and determined at some later time. No one of the second and third defendants in CIV 1570 of 1989 participated in the trial.
From the inception of these actions Mr and Mrs Bride have not been represented. Mr Bride has conducted the case for the plaintiffs. In many respects their lack of skilled representation appears to have had a significant bearing on the way in which their case has been pleaded, prepared and conducted. I have sought to bear this in mind throughout and to make due allowance for this as far as might properly be done. While Mr Bride gave evidence, Mrs Bride was not called.
The cases have been very much delayed in coming to trial. In part this has been due to procedural and pleading problems largely caused by the lack of representation of Mr and Mrs Bride, their involvement in much other litigation and for a time their lack of funds to pursue these actions.

The Claims

The material events occurred in the early 1980's. Mr and Mrs Bride allege that as trustees of the Trust they then owned and operated a business in Katanning. The business comprised two principal components; an oatmilling division and a stockfeed manufacturing division. In addition to this business and the land on which it was conducted Mr and Mrs Bride also owned, in differing capacities, a winery, an orchard, a vineyard, 104 acres of vacant land, and their home, all located in or around Katanning. In the earlier years with which this case is concerned they also still owned a property in the town from which they had conducted a bakery business until 1979.
The statements of claim refer to the term the "business" and define it as "the business of oatmillers and stockfeed manufacturers under the business name of Oatmilling of Katanning". In these reasons I will refer to the "business" as encompassing both the oatmilling and the stockfeed components.
The claims are for damages and other relief in respect of events which befell the business and the land, especially in 1984 and their subsequent sale pursuant to securities held by the Bank. It is Mr and Mrs Bride's case that it was in their capacities as trustees of the Trust that they owned and conducted the business and owned some of the land and suffered the loss and damage alleged. The defendants deny this, asserting the business was owned and conducted by Mr and Mrs Bride in partnership, not as trustees of the Trust and that material parcels of the land were owned in partnership not as trustees of the Trust. Mr and Mrs Bride have not sued as partners. As partners they have no standing in these proceedings. In earlier proceedings, in their capacities as partners, Mr and Mrs Bride did seek unsuccessfully to recover damages and secure other relief against the Bank and Peat Marwick Mitchell for what were in substance the same causes of action; see Bride v Peat Marwick Mitchell [1989] WAR 383 and Bride v Australian Bank Ltd and Stewart, unreported; Fed C of A (French J), 26 July 1988, and on appeal Bride v Australian Bank Ltd and Stewart, unreported; Fed C of A (Beaumont, Burchett and Lee JJ); 5 December 1988 who upheld the decision of French J. A primary reason for the failure of these actions is that in 1984, shortly after the main events which are central to these actions, Mr and Mrs Bride were declared bankrupt on their own petition. The bankruptcy was conducted on the basis that the business was conducted by Mr and Mrs Bride in partnership, not as trustees of the Trust. In fact the Trust was identified as a creditor of the partnership. Whether or not that was correct in fact, any right of action Mr and Mrs Bride might have had as partners in respect of the business had vested in their trustee in bankruptcy pursuant to the Bankruptcy Act 1966 (Cth). By virtue of s116(2)(a) of the Bankruptcy Act, however, a right of action which a bankrupt may have as trustee for another does not vest in the trustee in bankruptcy. Hence, it is only in their capacities as trustees of the Trust that Mr and Mrs Bride now pursue these claims.
It will be apparent from this that if the business was not owned and conducted by them in their capacities as trustees of the Trust, as Mr and Mrs Bride now allege, their claims in these actions in respect of the loss of the business must fail. That would also be the position in respect of any of the land not owned in their capacities as trustees of the Trust, although some of the land was owned as trustees. The present actions were commenced in 1989 after Mr and Mrs Bride as partners had failed in the earlier proceedings I have mentioned.
A number of the pleaded allegations in the statements of claim expressly were not pursued at the hearing by Mr and Mrs Bride. I will not deal with those allegations in these reasons.
Mr and Mrs Bride, in which capacity is in dispute, first approached the Bank in late 1981 to borrow some $1.8m to finance the business. The Bank agreed to provide $1.7m early in 1982. The Bank took securities which, by August 1984, included two real estate mortgages over several parcels of land and two Bills of Sale by way of Security whereby, in essence, the goodwill and other assets of the business were charged in favour of the Bank. The extent of the Bank's lending had increased progressively so much so that by August 1984 with interest and charges it had come to exceed $3.5m. On 9 August 1984, the Bank acted to appoint two partners of Peat Marwick Mitchell as receivers and managers pursuant to a number of the securities. On 22 August 1984 the Bank appointed the two partners as receivers and managers pursuant to the two real estate mortgages. Later the business and a number of the mortgaged parcels of land were sold and the proceeds used in part satisfaction of the Bank's lending.
Mr and Mrs Bride allege that the Bank's appointment of receivers and managers was invalid, that by virtue of representations they allege were made by one of the Bank's officers the Bank should be estopped from denying that the Bank had agreed to continue to finance the business, and that the land and the business were sold at prices substantially below market value and in breach of duties owed them by the Bank and the receivers and managers.
It is also claimed that the receivers and managers failed properly to conduct the business during the receivership, in breach of duties owed them by the Bank and the receivers and managers, and also that before the receivers and managers were appointed the Bank improperly caused the business to be conducted inefficiently. There are also claims in trespass. While this summary of the claims is inexact and incomplete it is sufficient to indicate the general nature of the principal claims.
There is a substantial overlap of the allegations pleaded against the Bank and against Peat Marwick Mitchell in respect of the receivers and managers. I note that no issue is raised by any party as to the action being maintained against Peat Marwick Mitchell in respect of the conduct by partners while acting as receivers and managers.
By reason of these matters, in both actions, the claim is that as trustees of the Trust Mr and Mrs Bride have been wrongly deprived of the land and the business, and have suffered loss and damage. The loss and damage is particularised as being the value of the land and the business, and the loss of profit and capital gain from the land and the business from the date of the purported appointment of the receivers and managers and the taking of possession of the land and the business in August 1984 to the present time.

The Land

Relevant to the action are several parcels of land in and around Katanning. The descriptions of some of these have varied over the last 20 years but they can be described as :-
•The "Oatmill land": the land now being portion of Kojonup Location 255 and being lot 30 on Diagram 62969, and being the whole of the land in Certificate of Title Volume 1322 Folio 460, but at the time of the securities being portion of Kojonup Location 255 and being Lot 2 the subject of diagram 11099 the whole of the land in Certificate of Title Volume 1322 Folio 460. By agreement in writing this was purchased by Mr and Mrs Bride in their capacities as trustees of the Trust in 1978 from a Mr and Mrs Nesci. However, Mr and Mrs Bride became the registered proprietors as joint tenants It was one of the parcels of land secured by Mortgage C337514 dated 26 March 1982 granted by Mr and Mrs Bride to the Bank. It was on this land that the oatmill division of the business was conducted.
•The "Stockfeed land": the land being portion of Kojonup Location 337 and being Lot 8 on Plan 14220 and being the whole of the land formerly in Certificate of Title Volume 1654 Folio 429 , which Mr and Mrs Bride purchased under contract of sale from Mr and Mrs James in 1982. There is dispute as to the capacity in which this land was purchased by Mr and Mrs Bride, but it was registered in their names in 1983. This property was the subject of Mortgage C646218 dated 27 June 1983 granted by Mr and Mrs Bride in favour of the Bank. It was on this land that the principal activities of the stockfeed division of the business came to be established.
•The "Winery land": the land being portion of Kojonup 255 and being Lot 1 on Diagram 9860, being the whole of the land in Certificate of Title 1322 Folio 461. It was purchased pursuant to an agreement in writing by Mr and Mrs Bride in their capacities as trustees of the Trust from Mr and Mrs Nesci in 1978 but the transfer was simply to Mr and Mrs Bride. This land adjoins the Oatmill land. At all material times it was used essentially for the purposes of a winery. This land was one of the parcels secured by Mortgage C337514 to the Bank.
•The "Vineyard land": comprising Pinwernying Lots 21, 22, 23, 37, 54 & 55 and Pinwernying Lot 20 and being the whole of the land in Certificate of Title Volume 538 Folio 6A, which was purchased from Mr and Mrs Nesci by Mr and Mrs Bride in their capacities as trustees of the Trust pursuant to the same written agreement. Mr and Mrs Bride, as joint tenants, became the registered proprietors on 20 July 1978. This land was one of the parcels secured by Mortgage C337514 to the Bank.
•The "House land": being a portion of each of Katanning Agricultural Area Lots 51 and 70 and being Lot 3 on Diagram 41856, and being the whole of the land comprised in Certificate of Title Volume 529 Folio 74A, which was at all material times registered in the name of Mr Bride. This was and is still the residence of Mr and Mrs Bride. No claim is raised in these actions in respect of this land. This land was one of the parcels secured by Mortgage C337514 to the Bank.
•The "104 acres": comprising portion of Katanning Agricultural Area Lot 70 and being the whole of the land in Certificate of Title Volume 1333 Folio 281. At all material times Mrs Bride was the registered proprietor. It was used for agricultural purposes. No claim is made in relation to this land. This land was one of the parcels secured by Mortgage C337514 to the Bank.
•There was also the "Bakery land" which I will not describe in detail as it was sold before August 1984, although it does appear in earlier securities.

Facts

It was the case of Mr and Mrs Bride and I accept from the evidence that, whether Mr and Mrs Bride conducted the business in partnership or as trustees of the Trust, generally Mr Bride had the active conduct of the business and his words and actions were also on behalf of Mrs Bride and are binding on her in the relevant capacity. These reasons proceed on that basis.
As I have indicated, the principal and crucial issue in this case is whether it was as trustees of the Trust or in partnership that Mr and Mrs Bride owned and conducted the business. In order to understand the context in which that issue arises it is necessary to provide an outline of facts covering the years from when the business commenced under Mr and Mrs Bride to when it was sold under receivership. It is also convenient to cover briefly other relevant events.
From around 1961 Mr Bride and his parents had owned and operated a bakery in partnership in Katanning. From the time of his marriage in 1968, Mr Bride with Mrs Bride in partnership became the proprietors and continued the bakery. They sold the bakery in 1979. During this time they established professional relationships with Mr R L Duncan, of the Katanning branch of the accountants Birds Chartered Accountants, as their accountant and with Mr J Fitzgerald, of the then Katanning and Perth solicitors Hammond Fitzgerald & King, as their legal adviser. These professional relationships extended through until 1984 and Mr Duncan and Mr Fitzgerald dealt with all aspects of the affairs of Mr and Mrs Bride including the Trust.
When the bakery business was sold in early 1979 Mr and Mrs Bride looked for another enterprise. On 4 May 1979, in their capacities as trustees of the Trust, they purchased the business and plant of the Oatmilling Co of Katanning Pty Ltd, which was that of oatmillers. They did not purchase the land on which the mill was then constructed and from which the oatmilling venture was conducted. In association with the oatmill there was also a small plant which manufactured stockfeed suitable for pigs and poultry. A purchase price of $92,000 was paid which comprised goodwill of $100, plant valued at $35,000, stock-in-trade valued at $45,000, and fixed improvements valued at $11,900.

The plant purchased included an old oatmill which dated from about 1928 and which the evidence indicates was only in fair condition in 1979. It had not been well maintained. While more modern oatmills were superior, being much refined and more efficient, with appropriate repair, modification and skilled operation it was capable of producing a good product. The terms of the contract of purchase provided for Mr and Mrs Bride to dismantle and remove the oatmill and the other plant from the vendor's land. This they did over several months following the purchase. Mr A Norrish had been the manager for the Oatmilling Co of Katanning Pty Ltd. Mr Bride held him in very high regard. Mr Bride referred to him as his "mentor". Mr and Mrs Bride employed Mr Norrish. Under Mr Norrish's supervision the oatmill and other plant, including four steel silos which were about 60 feet high and 30 feet in diameter and the small stockfeed plant, were relocated to the Oatmill land. In the course of this the oatmill, in particular, was considerably modified and its productive capacity was increased. Other aspects of the plant and the layout of the plant were also considerably modified. Mr Bride had no training or experience of oatmilling or stockfeed production and he relied on Mr Norrish, in particular, in all of this work and in the redesign of the plant and layout. New pieces of plant were incorporated to replace plant thought unsuitable or to add new features. It is fair to say that a different oatmill emerged, although it incorporated much of the basic features and parts of the mill that had been purchased.
Obviously, during the process of removal of the plant from the site of the former owners and the process of construction on the Oatmill site, there was no production from the oatmill or the small stockfeed plant. The process of removal and construction took more than six months. The evidence suggests that production by Mr and Mrs Bride from the reconstructed oatmill commenced on the Oatmill land in May 1980.
Until 1982 Mr and Mrs Bride conducted all relevant banking with the Rural and Industries Bank at Katanning (the "R&I Bank). It seems that then, as was the case until 1984, there was little or no attempt to differentiate for banking purposes between the various capacities and activities of Mr and Mrs Bride. Apart from some limited use of accounts with the Bank from late 1982 onward which were in the name of two companies, the usual practice was for one operating account to be used for most purposes. Despite a suggestion to the contrary in Mr Bride's evidence, I am satisfied the main operating account used by Mr and Mrs Bride with the R&I Bank was conducted in the names of E J & W M Bride or Mr and Mrs E J Bride. This was so from the days of the bakery until at least January 1981. A statement for July 1979, ie after the oatmilling venture of the Oatmilling Co of Katanning Pty Ltd had been purchased, shows that to have been the case at that time and it was in January 1981 that the Katanning manager of the R&I Bank first proposed an account name of E J & W M Bride as trustees of the Trust. That was proposed because of the terms of a government guaranteed loan of $200,000 which had been secured. As will appear later under the influence of a Mr Moran this had been sought by Mr and Mrs Bride in their capacities as trustees of the Trust and the government correspondence and approval was in those terms. The Manager of the R&I Bank at Katanning took steps to ensure the account used for the lending was in the name of the party the government had agreed to guarantee. It is to be noted, however, that a Bill of Sale by way of security granted by Mr and Mrs Bride on 5 May 1981 over the goodwill plant stock etc of the business in favour of the R&I Bank to further secure this $200,000 loan was entered into by "Edward James Bride Master Baker and Wendy Margaret Bride Married Woman … carrying on or about to carry on in partnership at Katanning the business of Oat Millers and Stock Feed Producers (hereinafter called "the said business" or sometimes "the partnership") under the style or firm name of "Oatmilling of Katanning".
While the evidence does not enable a date to be identified, at some time after 8 April 1992, when the $200,000 and the other borrowings of Mr and Mrs Bride from the R&I Bank were repaid by virtue of moneys then advanced by the Bank, the main operating account of Mr and Mrs Bride at the R&I Bank at Katanning appears to have reverted to its former style of E J & W M Bride. That was the position in June 1993.
In the year after the oatmilling venture of the Oatmilling Co of Katanning Pty Ltd had been acquired, Mr and Mrs Bride obtained from the R&I Bank an advance of $480,000 to help finance the business. This advance was "contemporaneous with" and secured by a Bill of Sale dated 25 March 1980 over the goodwill, plant, stock etc of the business, and granted in favour of the R&I Bank by "Edward James Bride and Wendy Margaret Bride of 'Pinwernying' Katanning … carrying on business at Great Southern Highway, Katanning [the Oatmill land] … as Oat Millers under the style or name of E J & W M Bride". At the same time, further securities by way of mortgages were also entered into between Mr and Mrs Bride, either alone or together, and the R&I Bank in respect of the 104 acres, the Oatmill land, the House land and the Vineyard land. On 5 May 1980, however, the R&I Bank, no doubt having realised that the Oatmill land and the Winery land was owned by Mr and Mrs Bride in their capacities as trustees of the Trust, although not so registered, by further agreement with the R&I Bank Mr and Mrs Bride acknowledged they had mortgaged those two parcels of land in their trustee capacity.
On 10 April 1981 a new business name was registered by Mr and Mrs Bride. This was done on their behalf by their solicitor Mr Fitzgerald. The evidence discloses that the process of registration had been commenced in 1980 but had been complicated by and delayed because of similarity with the trading or registered name of the Oatmilling Co of Katanning Pty Ltd. Mr Fitzgerald dealt with these difficulties and eventually secured the registration. At least from the time of registration until August 1984 Mr and Mrs Bride used the name Oatmilling of Katanning in connection with the business.
It was the evidence of Mr Bride that even from the time the oatmilling venture of the Oatmilling Co of Katanning Pty Ltd was acquired he was aware he would need to inject large amounts of capital in order to achieve a satisfactory volume and quality of production both from the oatmill and the stockfeed plant. He and his wife had, it appears, quite an amount of capital from the sale in early 1979 of the very successful bakery which they had conducted in partnership, although the full proceeds of this sale were not available immediately. The evidence does not disclose, however, the extent of this capital. It was the evidence of Mr Bride, however, that following the sale he and his wife looked about for a new opportunity of investment and this led them to the oatmilling venture. The Oatmilling land had been acquired earlier.
The borrowings of $480,000 in 1980 and the further $200,000 in early 1981 did not prove sufficient, however, for the plans and ambitions for the business which were gradually developed by Mr and Mrs Bride. The R&I Bank was approached again in 1981 for further funding but it was not prepared to lend moneys to the extent which Mr Bride then sought. Instead, it suggested he should realise some of the assets held by himself and his wife. This was not in accordance with Mr Bride's plans and ambitions. He sought finance from other lenders. For this purpose he had a financial consultant, a Mr Hordern, assist by preparing a brief to be presented to lending institutions. While the evidence contains only a later revision of this brief it appears that it stated that Mr E J Bride and his family had "purchased as partners" the former oatmilling venture and relocated the oatmilling and other plant. This brief was supported by accounts prepared by Mr Duncan to which I will return later in these reasons.
It appears that Mr Bride was then seeking a total funding of some $1.8 million to pay out the R&I Bank, complete the then planned expansion of the oatmill and the stockfeed mill, and to allow a sum to cover operations until sufficient sales revenue was generated. Mr Bride approached the Bank on this basis and with the brief.
Mr Bride principally dealt with Mr J M Freemantle who was then the State Manager. In March 1982 the Bank agreed to provide finance for the business, including the discharge of all existing borrowing from the R&I Bank, to a limit of $1.7 million.
The Banks' written advice that a loan was approved was dated 5 March 1982. It advised the Bank was prepared to advance $1.7m by way of cash advance on current account. Surprisingly, the letter was addressed to Mr E J Bride, Oat Milling Co of Katanning Pty Ltd. This may be explained by the way in which the brief described the acquisition from that company. Further, and no doubt because of the Bank's misunderstanding about that, it proposed by way of securities not only mortgages over Bride properties including the Oatmill land, but also a mortgage debenture over the assets and undertakings of the "company" and personal guarantees of the "directors". Insurance cover on Mr Bride's life to the extent of $1.7 million and assigned to the Bank was also required. It is clear the Bank was confused at the time of the letter and it then understood that the Oat Milling Co of Katanning Pty Ltd itself had been acquired rather then merely the goodwill, plant and stock in trade.
Later that month, however, the Bank's solicitors prepared real estate mortgages to secure the Oatmill land, the Vineyard land, the House land, the Bakery and the 104 acres and also a Guarantee and Indemnity. These were executed as Deeds on 26 March 1982. The recital of the Guarantee and Indemnity included the following:
"In consideration of banking accommodation…to Edward James Bride and Wendy Margaret Bride…as Trustees of the Pinwernying Trust… (hereinafter 'the Customer')."
The instrument provided, inter alia, for joint and several guarantees by each of Mr and Mrs Bride in respect of any sums which the "Customer" might become liable to pay to the Bank on any account whatever. Later in these reasons I will consider the effect of the definition of "Customer" in this document.
Mr and Mrs Bride, however, rely on this Guarantee and Indemnity as compelling evidence that the borrowing from the Bank was by them in their capacities as trustees of the Trust and, in turn, to establish that it was the Trust which conducted the business. Further, they point to the absence from evidence of any written application by them to the Bank in respect of the loan of $1.7m. It is the evidence of Mr Bride that there was a written application, with supporting documents. The Bank has discovered some documents which Mr Bride now believes to have been parts of, or among those which supported, the application. There has not been discovered, however, a cover sheet of the application. It is Mr Bride's present belief that this would have identified Mr and Mrs Bride in their capacities as trustees of the Trust to be the borrower. From the Bank's evidence it does not now have any such cover sheet. Since these events the Bank was itself acquired in 1987 by the Bank of New Zealand and it has ceased to conduct business. I accept this has had some adverse effect on the order and completeness of the Bank's records. It also appears from the discovery that those documents which Mr Bride now believes were part of or supporting the original application have not been filed or kept as one document.
I am invited by Mr and Mrs Bride to infer that the failure to produce the cover sheet is due to deliberate dishonesty because of what they submit would be the embarrassment to the Bank's case of the identity of the borrower which it would reveal. I have weighed this issue with considerable care, having regard to the circumstances revealed by the evidence and the manner in which the evidence relating to it was given by Mr Bride and for the Bank. In the end, whilst I am persuaded that it is more probable than not that there was a cover sheet to a written application, I am not persuaded to infer that the failure to discover the cover sheet was deliberate. Mr and Mrs Bride also place some reliance in this respect on the fact that the Bank required them to produce the Trust Deed and to make a statutory declaration that they were the trustees of the Trust before 26 March 1982 as indicating that the Bank knew it was dealing with them in their capacities as trustees of the Trust. But as Mr and Mrs Bride in those capacities were granting a mortgage to the Bank over land they owned in those capacities this alone would full explain the need for the Bank to sight the Trust Deed and obtain the statutory declaration. The facets of the case which are relevant to this are quite extensive and are, to quite a degree, intertwined with the facts relevant to the primary question whether Mr and Mrs Bride in partnership, or as trustees of the Trust, owned and conducted the business. I will not, therefore, set all of them out at this point.
Anticipating some of the matters, however:-
•I accept the evidence of Mr Bride that from the outset of the business and indeed until 1989 it was his understanding and belief that the business was owned and conducted by himself and his wife in partnership. This being so, it is not satisfactorily explained by his or any evidence why he and his wife would seek to borrow money from the Bank for the purposes of the business in their capacities as trustees of the Trust.
•It was my clear impression from the overall effect of the evidence of Mr Bride and the manner in which he dealt with this aspect of his evidence that it was his present belief that the application must have been in the name of Mr and Mrs Bride in their capacities as trustees of the Trust rather than it being his actual recollection that this was so. For reasons developed later in this decision that belief, in my finding, has developed albeit unconsciously since 1989 and has no doubt, been fostered by Mr Bride's suspicion at the Bank's failure to discover the cover sheet. While I accept the honesty of Mr Bride's belief I am not persuaded of its reliability.
•I accept from the evidence of Mr Bride and his witnesses, including Mr Duncan, and for the Bank that the accounts of the business and of the other affairs of Mr and Mrs Bride, prepared by Mr Duncan the Bride's accountant, were provided to the Bank in support of the application. I further accept that all accounts prepared by Mr Duncan in respect of the business were prepared in conformity with Mr Duncan's understanding that the business was owned and conducted by Mr and Mrs Bride in partnership, not in their capacities as trustees for the Trust the accounts of which were separately maintained by Mr Duncan. These accounts of the business were prepared on the basis that the plant and stock of the business were owned by the partnership which bore the cost of its functions and received the revenue from sales. On the other hand the accounts of the Trust showed the Oatmill land and its fixed improvements to be owned by the Trust. There was provision in both accounts recording the receipt by the Trust and payment by the partnership of rental. This was in respect of the use of the Oatmill land and its fixed improvements by the partnership. The accounts submitted to the Bank by Mr and Mrs Bride in support of the application were in this form, in my finding, and would have been in marked contradiction to an application on behalf of the Trust.
•I also find from the evidence that Mr and Mrs Bride were well aware of Mr Duncan's understanding and of the basis on which he prepared the accounts of the business and of the other affairs of Mr and Mrs Bride including the Trust.
•In further contemporary confirmation of Mr Bride's then understanding and belief I find that from 1980 he dealt with and borrowed from the R&I Bank on the basis that he and his wife in partnership owned and conducted the business. As trustees of the Trust, however, they offered securities over real estate in support of borrowings by the partnership. I have already indicated how and why their operating account came to be styled differently in 1981.
•I accept from the evidence that by the time of the application to the Bank, Mr Moran, who had been retained by Mr Bride to secure government funding and assistance for the business, had formed the opinion, largely because the Trust had purchased the former oatmilling venture of the Oat Milling Co of Katanning Pty Ltd and owned the land to which the mill was moved, that the Trust owned the business and that Mr Duncan's accounts were erroneous for this reason. Mr Moran had by then, and later, on more than one occasion put his opinion to Mr Bride as well as to Mr Duncan and Mr Fitzgerald the Bride's solicitor. I find that no steps were taken by Mr Bride or by Mr Duncan or Mr Fitzgerald as a consequence, however, either then or at any later time, to have the accounts changed or in any way to give effect to Mr Moran's opinion.
•I also find on the evidence that it was the opinion of both Mr Duncan and Mr Fitzgerald and the intention at the time of Mr and Mrs Bride that the Trust was established in 1977 to hold property as a protection against death duties and as a means of distributing income to the children of Mr and Mrs Bride. It was not then intended, nor in the opinion of Mr Duncan and Mr Fitzgerald was it suitable as an unincorporated entity, to conduct a significant commercial enterprise such as the business, and that from 1977 their opinions were known to Mr Bride who relied on them in such matters.
•I also accept that Mr and Mrs Bride had lodged income tax returns for themselves and for the Trust by the time of the application to the Bank, which, to Mr and Mrs Bride's knowledge, had been prepared by Mr Duncan on the same basis as the accounts mentioned above, ie that the business was owned and conducted by Mr and Mrs Bride in partnership, not in their capacities as trustees of the Trust. I note that this practice remained unchanged at least until 8 August 1984 and that, in addition, as trustees of the Trust, Mr and Mrs Bride were parties over that period to distributions of income from the Trust to their children that were calculated and made in light of the performance of the Trust as revealed by the accounts prepared by Mr Duncan.
I also have weighed with care other aspects of the evidence which tend to the opposite view, including several applications and associated correspondence prepared for Mr Bride by Mr Moran, some of which were signed by Mr Bride, which sought governmental assistance for the business inter alia in the name of the Trust. These were prepared in this way by Mr Moran because of the opinion identified earlier which he had formed.
There are other relevant matters to which I will return later when dealing with the ownership of the business, but it is necessary at this point to consider, in particular, the Guarantee and Indemnity executed by Mr and Mrs Bride on 26 March 1982. While it is well capable of supporting the view that the application to the Bank for finance must have been by Mr and Mrs Bride in their capacities as trustees of the Trust, the matters just identified, in particular, in my view suggest it would have been highly unlikely that the application would have been made in their capacities as trustees of the Trust, especially because their then belief as to the ownership of the business was to the contrary. Clearly, Mr Bride spoke to Mr Freemantle or some other officer following receipt of the letter of 5 March 1982 and clarified that the Oatmilling Co of Katanning Pty Ltd had no role in the business. I also accept from the evidence that the Bank did not have an established and efficient system in respect of loans and securities in place at the time. The Bank was newly established and new staff were finding their way. This application was somewhat unusual for the Bank at the time because of its size and nature, and from a security viewpoint because of the complicated and obscure internal arrangements of what was at times referred to as the Bride Group, ie the variety of property holdings, commercial enterprises and private activities of Mr and Mrs Bride and the Trust. These internal arrangements were and are made the more difficult to understand because Mr Bride commonly disregarded or neglected to observe the distinctions, especially in correspondence, and because of the use of only one banking account for most operating purposes. While there is no entirely satisfactory explanation for the recital in the Guarantee and Indemnity, I am persuaded it is more probably than not that when the issue of securities were considered by the Bank's securities staff, and instructions were given to the Bank's solicitors by a member of the Bank's staff, a degree of confusion remained and the proprietorship of the Oatmill land on which the mill was constructed was regarded as determinative of the appropriate parties to provide the guarantees which earlier and mistakenly it had been contemplated would be provided by the directors of the Oatmilling Co of Katanning Pty Ltd. One effect of this is that questions arise, which are considered later, as to the effectiveness of the Guarantee and Indemnity as no moneys were in fact advanced to "the Customer" identified in it. As will appear, the answer to this may lie in the definition in the document of "the Customer".

I also note that, with inconsistency to either alternative argued by the parties, the account opened by the Bank for the purposes of the loan was in the name of Mr E J Bride. It remained so until January 1984 when it was changed to E J and W M Bride. This may have been a product of inexactitude by the bank at that time, arising because it was Mr Bride, without Mrs Bride, who dealt in Perth with Mr Freemantle. That was the impression I was given by the evidence of Mr Freemantle.
Of course the quality of the evidence as to this and other matters in dispute has been adversely affected by the delay of Mr and Mrs Bride in instituting these actions and even more so in the long delay in bringing them to trial.
While these, and the other matters to be mentioned later, provide cause for much hesitancy and anxiety, I am, in the end, unable to find that the application to the Bank for finance was by Mr and Mrs Bride in their capacities as trustees of the Trust. I am left with the conclusion that it is more probable than not that the application would have been made consistently with Mr Bride's understanding at the time that the business for which the loan was required was owned and conducted by his wife and himself in partnership, ie by E J and W M Bride. Consistently with that, and with his ordinary approach to these matters, in my finding Mr Bride supported the application by the partnership to Mr Freemantle by offering as security properties owned by either his wife or himself, or by both of them, and whether as partners or trustees, and he presented their total asset worth as including the value of everything owned by them in any capacity. In my finding the moneys then and thereafter advanced by the Bank were advanced to the partnership of Mr and Mrs Bride.
As the Bank had no branch at Katanning, Mr and Mrs Bride were to continue to use the R&I Bank at Katanning for day to day operating purposes, money being advanced to the R&I Bank by the Bank as required. The Bank advanced moneys in this way commencing 2 April 1982, which were recorded against the account of the Bank in the name of Mr Bride, and the limit of $1.7m was reached by October 1982.
It is also the effect of the evidence of Mr Freemantle and of Mr Bride, in my finding, that once it was made clear to Mr Freemantle that there was no incorporated entity which would be conducting the business, ie after the Bank's letter of 5 March 1982, he took the view that this was unsatisfactory both from the Bank's view point and that of Mr and Mrs Bride. This accorded with the opinions of Mr Duncan and Mr Fitzgerald. It also suited Mr Moran as it was his experience that he had difficulty in his approaches for governmental assistance for the business because it was not incorporated. Mr Freemantle proposed that two companies be formed, one to own and conduct the oatmilling division of the business, and to become the borrower for that purpose, and the other the stockfeed division. Mr Bride accepted the desirability of this, no doubt encouraged by his advisers, but prevailed on Mr Freemantle and secured his agreement to the delay of the transfer of assets to the two companies, to save incurring duty on the transfers at that time as finances were then tight and the planned development of the business still had far to go before full production and income could be achieved. The issue became one of some controversy. I will record my finding that no such division and transfer of the assets and liabilities of the business to the companies ever occurred. Had this occurred when Mr Freemantle first proposed it many of the issues which have been pursued in this litigation would have been avoided. What did occur, however, is that two companies were formed by Mr and Mrs Bride so as to be ready to implement Mr Freemantle's proposal. They were Bride Foods Pty Ltd and Swan Stock Foods Pty Ltd. The former was intended for the oatmilling division of the business, and the latter for the stock feed division. The latter was incorporated on 12 August 1982. There is some uncertainty on the evidence whether the former was incorporated at the same time or earlier in March 1982. Mr Duncan was the initial Secretary and Mr and Mrs Bride the Directors of both companies. In further preparation for the implementation of Mr Freemantle's proposal, later in 1982 Mr and Mrs Bride applied for and the Bank opened accounts in the names of each of the companies, funds being transferred to these accounts as required from the established borrowing of Mr and Mrs Bride. The Bank also took securities over the assets of both companies on 21 December 1982, and the two companies also joined in a Guarantee and Indemnity which is undated but which was stamped on 30 December 1982 and which I infer was also executed on 21 December 1982. This essentially repeats the terms set out earlier of the Guarantee and Indemnity of Mr and Mrs Bride dated 26 March 1982.
Somewhat typically Mr Bride seems to have used the account with the Bank of Bride Foods Pty Ltd for some ordinary trading activities of the business late in 1982. The evidence of the extent of this, however, is not complete. Nor is it clear what use was made of the Swan Stock Foods Pty Ltd account, if any. Two items of plant may have been acquired by Swan Stock Foods Pty Ltd in 1983 but nevertheless, and despite some limited activity as indicated, it is essentially the case that until July 1983 the two companies and their accounts were substantially inactive.
Late in 1982 the Bank allowed the limit of $1.7m on the borrowing of Mr and Mrs Bride to be exceeded. It was capitalizing interest payments. The borrowing level was noted as $1.8m when, in January 1983, a further "temporary increase in cash advance" was sought of $0.5m. This was approved in February 1983.
At an early stage of the business Mr Bride had become conscious that a by‑product of the oatmill, namely oat husks, were difficult to sell and presented a significant storage problem for the business. He became interested in the idea of utilizing these oat husks to develop an entirely new product being pelletized sheep food. He saw the live sheep trade from the ports of Albany and Fremantle to the middle-east as offering good market potential. There were existing products available for this market from other stockfeed producers but he considered he could develop a product which was more attractive for aspects of the market and at the same time use the oat husks from the oatmilling operation.
In 1981 and 1982 he explored this possibility and became impressed with a process that had been developed principally in Europe for the continuous alkali treatment of straw products for ruminant stock which could be suited to his idea. A well reputed supplier in Victoria marketed in Australia an American plant known as the Jaybee Strawpak System and enquiries by Mr Bride and detailed information he obtained from the supplier convinced him that he should take the very significant step of dramatically changing and developing the stockfeed division of the business by developing a pelletized sheep food using the Jaybee Strawpak System.
I record at this point that Mr Bride took appropriate advice in formulating this plan and in determining the nature of the appropriate plant and product and he secured the interest of at least one substantial purchaser of the product, a company sufficiently described as SIBA which was engaged in the live sheep trade to the Middle East. As events turned out, however, there was an unforeseen but significant problem with the plant which was largely responsible for the very grave problems later experienced with production levels. As Mr Bride realised, there was only one such plant operating in Australia when he committed himself to this course. It had just commenced production in Victoria. It was therefore a plant almost unknown in Australia and quite untested in Western Australian conditions. It was hardly a manufacturing technique demonstrated to be suitable for use in Australia. The effect of the evidence is that the technique and the plant proved unsuitable for the drier raw materials typically available in Western Australia so that the production capacity of the plant was greatly diminished. To cure this effectively, substantial and expensive modification of the plant was necessary to introduce in particular steam into the pelletizing process and consequentially to provide a greater drying capacity for the formed pellets. This became a major source of the production and financial problems which followed for Mr and Mrs Bride. More of that later in these reasons.
With this in mind at some time during 1982 Mr Bride located and agreed to purchase another block of land in Katanning, but removed from the Oatmill land, which he regarded as suitable for the location of the pelletized sheep food plant. This was the Stockfeed land. It became his plan to locate all stockfeed production on this site. The evidence is incomplete and unsatisfactory as to this acquisition. Mr Bride says this is because his records were taken by the receivers and managers and have not been returned and cannot now be located. Be that as it may, there is no written record or other evidence apart from a brief assertion by Mr Bride that he agreed to purchase the Stockfeed land, he says as early as April or May 1982, on what terms and with what funds is not established. It was not until March 1983, however, that the transfer to Mr and Mrs Bride was signed by the vendors. After further delay the transfer was registered on 31 October 1983. At the same time mortgage no C646218 was also registered. This had been granted by Mr and Mrs Bride in favour of the Bank on 27 June 1983. It secured the Stockfeed land. Neither the transfer nor the mortgage identified Mr and Mrs Bride as acting in their capacities as trustees of the Trust, but it is Mr Bride's evidence that this was the case and that the missing documents would have shown this to be so. Mr Bride also relied on the assertion that the Stockfeed land was acquired with Trust money. This, however, seemed to be linked to his evidence that it was the Trust that had borrowed from the Bank, part of the borrowings being used for the purchase of the Stockfeed land. As it is my finding that the borrowing was by the partnership rather than the Trust this contention has lost its force; indeed it tells against Mr Bride's contention. It is also the case that at the time, in the accounts, Mr Duncan treated the purchase of the Stockfeed land as an acquisition by the partnership, not of Mr and Mrs Bride as trustees of the Trust, and that remained the case until August 1984. I am satisfied that at the time Mr and Mrs Bride were aware of this and there is no evidence that this was ever queried by them. As will appear, when a brief was revised in mid 1984 by Mr Hordern for Mr Bride for the purpose of seeking fresh finance, it treated the Stockfeed land as an asset of the partnership, whereas the Oatmill land was treated as an asset of Mr and Mrs Bride as trustees of the Trust. This was also the basis on which the Stockfeed land was dealt with in the bankruptcy of Mr and Mrs Bride. Given Mr Bride's understanding of the role originally intended for the Trust it might have been expected that the acquisition of the Stockfeed land would have been for the Trust. As will appear, however, Mr Duncan had proposed in February 1983 that the Stockfeed land not be acquired by the Trust. He had in mind a movement toward establishing the two divisions of the business in the two companies as had been planned. Although this did not happen, that proposal suggests that there was fresh thinking about the use of the Trust at least by the time of the execution of the transfer of the Stockfeed land in March 1983. Having regard to these various matters I am not persuaded on the evidence that the Stockfeed land was purchased by Mr and Mrs Bride in their capacities as trustees of the Trust. In my finding the registered title and the accounts prepared by Mr Duncan reflected the true position.
During 1982 and into 1983 Mr Bride's vision of and plans for the business, especially the stockfeed division, continued to develop and expand. With the Bank's knowledge and approval, at the beginning of 1983 he had purchased a large secondhand storage shed from urea works in Albany along with weighbridges and conveying and other machinery. This had to be disassembled, transported and reassembled at Katanning at what proved to be a cost of $400,000. A new production plant for muesli was also proposed in association with the oatmill. The oatmill, however, was not consistently achieving forecast production or profitability levels.
By February 1983 a number of features of the business and the lack of adequate progress in completing the production plants and in achieving forecast production and profitability were of growing concern to the Bank. In particular the level of borrowing had grown significantly and there was no obvious sign of that growth being arrested or of the business trading so as to enable the level of borrowing to be reduced. It was trading at a loss even without provision for the payment of bank interest, which was still being capitalized, or repayment of capital.
One particular area of concern was the competency and efficiency of Mr Bride's management of the business. He had little in the way of skilled administrative support involved in the day to day running of the business which meant that much administration and production supervision fell to him. He was solely responsible for sales, a task which was demanding and which at times required visits to clients and potential clients a number of which were interstate. He also carried the main burden of the design, development and oversight of works for both the new plant, and the modification and enlargement of existing plant, with associated buildings etc. The description "one man band" could be applied. Increasingly Mr Bride was forced to apply himself for very long hours and found himself unable to devote the time and effort that was really needed to all aspects of the business. These pressures must also be understood against the background that Mr Bride had been a primary producer and a baker, but had no formal training or practical experience in conducting a significant commercial undertaking, nor in running a milling business, nor in marketing of this nature. He recognised he was overstretched and sought from time to time, especially in 1983, to find and appoint what he regarded as suitable assistance, but without success. I accept that there were also times when he proposed to the Bank that he should appoint to or seek assistance in a particular role only to be discouraged by the Bank, either or both because of the effect on budget performance or because the Bank's priorities as to the areas of management which most needed additional assistance differed from Mr Bride's.
Considerations such as these led, in February 1983, to the Bank proposing and Mr Bride agreeing to a review of the structure and performance of the business. A firm of Chartered Accountants, Hungerford Hancock and Offner - later KMG Hungerfords - ("Hungerfords") was retained for this task. The Bank had previously used the firm for work of this nature. Much of the investigation was undertaken by a Chartered Accountant Mr Stewart under the direction of a partner. A report was prepared and delivered to the Bank in April 1983. In light of the evidence before me there are some curious aspects of the work of Mr Stewart and the report which eventuated. I will not deal with these in detail. Mr and Mrs Bride, in their capacities as trustees of the Trust, much later unsuccessfully brought proceedings against both Mr Stewart and Hungerfords in respect of these and other matters. The action against Mr Stewart was in this Court being CIV 2041 of 1990. Mr Stewart obtained an order for summary judgment which was upheld on appeal; see Bride & Anor v Stewart [1999] WASCA 116. There were also proceedings against Hungerfords in this Court and the claim was dismissed after trial. The appeal from Murray J's decision was dismissed on 14 July 1994 following a five day hearing; see Bride v KMG Hungerfords, unreported; FCt SCt of WA; Library No 940353; 14 July 1994. So it is that in the present action against the Bank, having failed in respect of the April 1983 report against its actual author, Mr Stewart, and the firm retained to provide it, Hungerfords, Mr and Mrs Bride now seek to place some reliance on this episode against the present defendants. Other considerations aside, a problem with this is that it is sought to rely on this episode in factual support of the pleaded claims arising from subsequent events in 1984 on the apparent basis that Stewart and Hungerfords were acting in some way as agent of the Bank or in conspiracy with the Bank or some of its officers. The evidence reveals, in my finding, that the firm was retained and reported as independent consultants. Nothing in the nature of an agency is established. There is no direct evidence of a conspiracy; the essence of the case of Mr and Mrs Bride is that the nature of the contents of the report are so wrong and perverse that a plan to deliberately harm the Brides is the obvious inference, and by virtue of the Bank's role in introducing Hungerfords and Mr Stewart and a review of those who stood to benefit and of their subsequent conduct, there is enough to identify the Bank through its officers as parties to this conspiratorial plan. For reasons discussed in more detail shortly, it is my finding that there is no evidence to support a finding that there was any such form of conspiracy concerning the report or its consequences.
Against that background I will mention briefly some aspects of what occurred. For a reason which is not directly revealed by the evidence, for the purposes of the report Mr Stewart had the Perth office of Birds Chartered Accountants prepare a set of accounts to reflect the position on the basis that the business was divided and transferred to the two companies Bride Foods Pty Ltd and Swan Stock Foods Pty Ltd. The absence of any evidence from Mr Stewart or any other source as to the reason for this leaves an element of uncertainty as to why this was done. At the same time, however, the Katanning office of Birds Chartered Accountants continued with their ordinary accounts in respect of the business and the other affairs of Mr and Mrs Bride on the basis that the business was owned by Mr and Mrs Bride in partnership and this continued until the receivers and managers were appointed in August 1984. The contention for Mr and Mrs Bride is that the accounts prepared in Perth for the April 1983 report of Hungerfords were deliberately misleading, so as in part to create an entirely false understanding of the ownership of the business in the companies to the detriment of the interests of the Trust and later the unsecured creditors of the business. It is also contended this was done in part at least to cover a deficiency, which it is said was then perceived by the Bank in the Guarantees and Indemnities held by the Bank by way of security, ie those dated 26 March 1982 and 22 December 1982, as these extended to the two companies and the Trust it is contended, but not to the partnership. Further, it is the case for Mr and Mrs Bride that the April 1983 report falsely presented the condition and prospects of the business as well as it's ownership as part of a plan of Mr Stewart, with or without officers of the Bank, and others eventually to wrench control of the business from Mr and Mrs Bride, either for Mr Stewart or other interests with which he or officers of the Bank were connected or might introduce, to the loss of the Trust and unsecured creditors of the business.
Mr Bride also contends that the objective he alleges of creating a false understanding of the ownership of the business was also in preparation for what occurred after the Bank appointed receivers and managers in August 1984 when he contends the Bank and the receivers and managers maintained the business was owned by the two companies so that the books and assets of the business were not available to the trustee in bankruptcy of Mr and Mrs Bride's affairs.

As has been indicated, the reasons for the preparation of the accounts reflecting ownership of the business by the two companies is not directly explained by evidence. Mr Stewart and Hungerfords are not parties. It seems Mr Stewart returned to Scotland many years ago. As the ordinary accounts were also continued it is difficult to accept, however, that these accounts prepared for Mr Stewart in Perth were intended to mislead interested parties then, or for the future, as they all had access to the ordinary accounts. This observation is reinforced by the complete absence of any transfers of the business to the two companies. Perhaps even more tellingly, the contents of the report itself do not provide an adequate foundation for the contention of Mr Bride that it sought to present an entirely false understanding of the ownership of the business. Mr Bride in particular points to a diagram in the report which indicates ownership of the Oatmilling division to be in Bride Foods Pty Ltd and of the Stockfeed division to be in Swan Stock Foods Pty Ltd, and the contents of the report which in part seek to analyse asset structure and the trading performance of the different elements of the business from 1 June 1982 as thought ownership was in the two companies.
The report, though, is addressed to:
E J & W M Bride trading as Oatmilling of Katanning
E J & W M Bride as trustees of the Trust
Bride Foods Pty Ltd
Swan Stock Foods Pty Ltd.
The first addressee virtually denies the contention which Mr and Mrs Bride now seek to advance. The introduction describes the report as "our assessment of the 'Group' as planned and visualized by Mr Bride". It was Mr Bride's plan, and the Bank's, that the business should come to be owned and conducted by the two companies. The report describes the "corporate and family structure" as totally confusing, which could well be seen to be fair comment. It then states that the Trust owns the land and buildings of the commercial interests, and the partnership, trading as Oatmilling of Katanning owns the plant machinery and trading operations. There had not, at that time, been a finalisation of the purchase of the Stockfeed land from the previous owners. Apart from that question, which is dealt with elsewhere, this was an accurate summary of the position. It is contrary to the contended intention of a false portrayal of the business as being owned by the two companies.
The report goes on to state that it is proposed in the future to transfer all operations and assets with respect to human consumption products, ie oatmill and muesli, to Bride Foods Pty Ltd and animal feed products to Swan Stock Foods Pty Ltd. The report then continues "For the purposes of this report it has been assumed the above rationalization will be undertaken". In my finding this is the explanation of the accounts prepared in Perth and the diagram which so concerns Mr Bride. They reflect the position on the assumption that Mr Bride's planned rationalization was undertaken. Given the long-standing intention of the Bank and Mr Bride that the business be transferred to the two companies, which had been formed for this purpose, and the view expressed by Mr Stewart for Hungerfords in the report that the best course for the Bank in April 1983 would be to appoint a receiver with a view to the sale of the business, or part of it, as going concerns, the probability arises that the accounts prepared in Perth were to allow an appreciation of the value and viability of the two intended trading entities, ie the Oatmill and the Stockfeed divisions, if the intended restructure was implemented. That restructure would be likely to be seen as desirable or necessary if the sale of the business was to be attempted. In the absence of more adequate evidence this, or any, explanation has an element of conjecture about it, but in my view an explanation of this nature is the most probable given what is before me.
In further contradiction of the contention that the report was intended to mislead as to the ownership of the business in April 1983, the report includes a copy of proposals which Mr Duncan put to Mr and Mr Bride by letter on 25 February 1983, which proposals are supported by the report. Mr Duncan proposed the transfer of the Oatmill land to Bride Foods Pty Ltd, acquisition of the Stockfeed land by Swan Stock Foods Pty Ltd, and transfer by sale of the plant to the two companies. This would leave the Trust owning the Vineyard land, the partnership functioning as farmers and vignerons, and the two companies milling.
There are passages in the report, however, which are quite confusing. These include statements that the oatmilling and muesli operations were transferred into Bride Foods Pty Ltd from 1 July 1982 and the land, buildings, plant and machinery of the stockfeed plant are now recorded in Swan Stock Foods Pty Ltd. Read as statements purporting to reveal the true position, which is how Mr Bride reads them, these are quite wrong. Their content and context though, viewed in light of the other references in the report to which I have referred, suggest that the author may have intended these to explain how the assumption which I pointed out earlier was implemented, especially in respect of the accounts. If this was the intention it was not well expressed and these passages, if read in isolation, could well have misled. Despite these, and some other confusing or mistaken statements, if the report is read as a whole, it would not leave the reader with a false understanding of the ownership of the business although a reader might well be confused by some statements and therefore in need of some clarification. It is not, in my finding, the intended effect of the report that a reader would gain a false understanding of the ownership of the business.
Otherwise, in very brief summary, the report saw the business, or the Bride "Group", in its current structure as not viable, the margins being insufficient to justify borrowings, and the cost of the borrowings resulting in loss making situations. It noted that while the oatmill production had increased from 49776 tonnes in 1979 to 445,397 tonnes in 1982, losses were still being incurred because of weaknesses in management and production techniques. It proposed the installation of new hulling machines to eliminate a production bottleneck. The report described the decisions to diversify into muesli and animal feed as fundamentally wrong. As well as a lack of management expertise and specific product knowledge it noted that Mr Bride was overstretched and it analysed the consolidated trading to forecast a trading loss to 31 January 1984 of $587,478. The report also pointed out that even on Mr Bride's budget, which omitted provision for interest and capital repayment, if interest charges alone were included the prospect was at best to breakeven.
The report was concerned that the nearly completed muesli plant had a budgeted profit margin of only 2per cent, the pig and poultry production had a budgeted profit margin of only 11per cent and the sheep pellet production was planned for a product formula that was untested at both laboratory and market.
The report proposed the appointment of receivers with a view to sale of the business, or part of it as going concerns, or the securing of an equity partner. Failing such action it proposed a number of measures to reduce borrowings and cashflow and increase the oatmill productivity, including selling private assets of Mr and Mrs Bride and selling the muesli plant.
I will not at this stage attempt any full assessment of the evidence, such as it is, as to the viability and prospects of the business in the first half of 1983. Mr Bride's evidence and Mr Stewart's report may be seen to be poles apart in this regard. With the benefit of the knowledge we now have of what followed, Mr Stewart's views in the report cannot be lightly or entirely disregarded. Nevertheless, on the basis of the limited evidence before me, some of his observations and conclusions are difficult to justify and in some respects his report appears to be in error. The evidence is quite inadequate to allow any findings as to how or why this should have occurred.
Quite lacking in the evidence, in my view of it, however, is any adequate foundation on which a finding would be justified that the report prepared by Mr Stewart was deliberately false or misleading as to the ownership, viability, prospects and management of the business or that Mr Stewart was acting in some combination or conspiracy with the Bank or its officers or others to produce a false or misleading report. In my finding, in respect of the April 1983 report Mr Stewart acted as an employee of his accounting firm, which was retained to prepare an independent report and did so, and, whether or not Mr Stewart may have been in error in some matters, it has not been established that he acted pursuant to any improper association with the Bank or any of its officers to report in a false or misleading way.
In reaching that and subsequent findings I should note that I have inter alia had regard to matters put in cross-examination by Mr Bride with a view to establishing that Mr Stewart had been involved in the preparation of an unjustifiably adverse report in respect of another customer of the Bank, questioning which led nowhere in the end; and to cross-examination and submissions by Mr Bride in an unsuccessful attempt to make good the proposition that peculiarities in the approach of the Bank to loans of this nature led to, or were directed to, the Bank assuming an unusually direct involvement in the affairs of customers and to do so to the detriment of customers and their businesses (a matter of greater relevance to later issues in these reasons), and to the circumstance that the April 1983 report was produced in a cover which identified Mr Stewart as the author, and later a similar cover which identified the report to be that of his firm, a circumstance to which Mr Bride attached much significance but to which it has not been shown that any significance can or should be attached.
With respect to the suggestion that deficiencies were then perceived in the Bank's securities, even were that the case, it is not apparent why the Bank would not have simply acted to secure further securities to overcome any perceived deficiency. The borrowing was consistently proving inadequate requiring additional lending. Further securities could have been required on any such occasion, as indeed they were shortly afterwards in 1983 and again in 1984 and, consistently with the relationship between Mr and Mrs Bride and the Bank at that time, Mr and Mrs Bride would have provided any appropriate securities that were required.
Given Mr Stewart's recommendation that a receiver be appointed and the adverse tenor of his appreciation of the business, its prospects and its management, not surprisingly the Bank gave it serious consideration. Mr Bride, however, was provided with a copy and with his legal and financial advisers in June 1983 there was a meeting with Bank officers, which Mr Stewart attended, to assess the position. Mr Bride and his advisers were given full opportunity, and did with some success seek, to counter much of the report by presenting detailed factual and financial information which contradicted it in many respects and offered a much brighter prospect. In so far as the report presented what Mr Bride perceived to a false picture of the ownership and structure of the business and the other Bride affairs there can be no doubt that he corrected that. In my finding he did so by confirming to the Bank the position as he then believed it to be ie that it was the partnership, not the Trust that owned and conducted the business. I also accept that this view was then held and supported by both Mr Duncan and Mr Fitzgerald who were at the meeting.
In the outcome the Bank did not act on the report. The evidence of the officers of the Bank persuades me that while they were deeply concerned about a number of matters and felt that a number of changes were necessary, they held the view, contrary to that of Mr Stewart, that if the business continued and could be got to the stage of generating a positive cash flow it might well trade out of its predicament and if not, the prospects of a return to the Bank of it's lending on sale would be far better if the business continued and generated a positive cash flow. I am satisfied and find that the Bank then and thereafter saw the appointment of a receiver as an action of last resort and in mid 1983 it did not consider that course to be justified. These events also provide, in my view, some confirmation that there was no collusion or conspiracy between Mr Stewart and the Bank or its officers as to the content of the report.
One particular decision of the Bank at this time, however, was that they were not prepared to provide further funding for the purpose of completing the stockfeed mill intended for the production of sheep pellets. Construction of this had commenced on the stockfeed land.
This decision of the Bank had a number of advantages, including the reduction of the rate of expenditure (both capital outlays and wages, etc) and therefore a reduction in the rate at which the amount borrowed and the rate at which interest was accruing were growing, it reduced the demands on Mr Bride's time and the number of matters calling for his attention, and it allowed concentration of Mr Bride's time and energy on securing full and efficient production from the oatmill and the muesli plant at the earliest time and on the marketing of that production. There was reason at that time to regard the oatmilling division, especially with the associated muesli plant, as offering the quickest prospect of a reliable positive cashflow.
At the same time it had disadvantages, particularly in the eyes of Mr Bride. While the planned construction and the start up of production of the new stockfeed plant would take some months and would require the expenditure of more than a further one quarter of a million dollars, Mr Bride anticipated that the eventual sales of this stockfeed production would offer a far better level of return and profitability than the oatmill division. Mr Bride's expectations or hopes in this regard were greater than proved possible, but then, as now, it was his view that the best prospect for the business to achieve profitability and to successfully trade out of its financial problems was for the stockfeed mill to be completed and got into full production at the earliest opportunity.
Mr and Mrs Bride regard the decision of the Bank in June 1983 not to provide further funds for work on the construction of the Stockfeed mill as a serious mistake which cost the business, ie in their contention the Trust, eventually the unsecured creditors, and the Bank dearly. In my view, however, the Bank had reason in the circumstances not to be prepared at that time to advance in excess of a further one quarter of a million dollars to enable the completion of the Stockfeed mill, when the business had not then demonstrated that it would meet its existing financial obligations to the bank, and had a long and growing record of unprofitable trading and a failure to meet production and financial targets.
Given these circumstances, it has not been shown that the decision of the bank was not a genuine and reasonable decision in the commercial circumstances as they were understood by the Bank. The Bank had taken reasonable steps to assess the situation and the prospects of the business before reaching this decision. That is my view, also, with respect to other decisions of the Bank at this time.
Of course it was open to Mr and Mrs Bride to refinance their borrowing with another lending institution if they were unable to accept that work should not continue on the construction of the Stockfeed mill. The evidence does not suggest they made any attempt to do so.
The Bank sought from Mr Bride by letter dated 15 June 1983 estimates of the economic viability of each sector of his enterprise. Mr Bride's letter of reply dated 24 June 1983 stated:
"It has long been our intention to separately evaluate each section of our operation such that each can be independently analysed as an entity within itself … now that we are at the final stages of construction and poised ready to go into full production capacity we are finally in a position to rationalise the viability of each section based upon known capital cost and product capacities.
We have always envisaged the need for each section to be separately funded, operated and managed. At an appropriate time the two major sections of the operations (stock food and human food) will be transferred to corporate vehicles. As you know we already have available separate companies."
This letter and other documents which were enclosed with it were adduced in evidence. Part of the enclosure was a schedule prepared by the Bank that was headed
"E J & W M Bride
'The Pinwernying Trust'
Oatmilling of Katanning".
While Mr Bride sought to view this heading as revealing that it was the Trust which conducted the business of Oatmilling of Katanning and also that the Bank knew this, the heading is equally capable of distinguishing the Trust from the business of Oatmilling of Katanning. It is to be noted that the letter of 24 June 1983 makes it clear that there had not been transfer of the two divisions of the business, oatmilling and stockfeed, to the two companies which were, however, already "available" for that purpose. It seems to have been these letters, with or without the April 1983 report prepared by Mr Stewart, which prompted the Bank to seek confirmation of the ownership of the oatmill and stockfeed plants and of the structure of the various activities of the Bride family. At Mr Bride's request Mr Fitzgerald provided this information. By letter dated 4 August 1983 he advised inter alia:
"… the ownership of the plant and equipment in question will remain with the partnership comprised of E J & W M Bride."
At about this time the Bank also required that a system of monthly meetings of Bank officers with Mr Bride and his primary advisers, Mr Fitzgerald, Mr Duncan and Mr Moran be established with a view to a close monitoring of production performance, works progress, costs, sales etc and to establish and ensure achievement of budgets, production and sales targets, etc.
The Bank also proposed and secured Mr Bride's concurrence to the appointment in July 1983 of Hungerfords to provide additional part-time financial monitoring in relation to the business. This is clear from a letter from Hungerfords to the Bank dated 8 July 1983. This work was undertaken under the direction of a partner Mr De Crespigny, but for the most part the work was performed by Mr Stewart who also attended the monthly meetings. The way in which this work was performed by Mr Stewart was the subject of much friction between him and Mr Bride at the time. Together with reports of Mr Stewart made to the Bank from July 1983, this has been the subject of much evidence. There is no doubt Mr Bride resented controls and decisions of Mr Stewart with respect to the nature and timing of expenditure and other matters and disagreed with his views. Without detailing these issues and the evidence it is enough that I record that I am unable to accept that it reveals that Mr Stewart in this period from July 1983 until June 1984 was acting in some conspiracy or collusion with the Bank of the nature previously identified to harm the business or with a view to wrenching control of the business for the Bank or others. I note that in this time Mr Stewart made some limited use of the company cheque accounts mainly for the purchase of raw materials. This may have been undertaken with a view to providing some hedge against creditors of the business who were becoming a significant problem as payment of their accounts had constantly to be deferred because of cash flow problems. These comments should not be understood as revealing that I find no fault with Mr Stewart's conduct between July 1983 and June 1984. While the only evidence before me is all from the viewpoint of Mr Bride and those associated with him, and the circumstances might prove to have a different dimension if evidence from another viewpoint were available, what I have heard indicates some aspects of Mr Stewart's conduct to be strange indeed and not readily explicable. What is critical, however, is that his conduct has not been shown to be conduct of the Bank or for which it is responsible.

The efforts of the receivers and managers, with the support and assistance of the Bank, to achieve a satisfactory sale have not been shown by the evidence to be wanting in good faith, or indeed due care, in any respect. The price achieved tends to confirm, in my finding, the unrealistic nature of the belief of Mr Bride as to the potential and value of the business and land at the time, which was asserted in the statement of claim against the bank to be $3.0m and against Peat Marwick Mitchell to be $4.0m, although evidence to support even higher figures was offered. Disappointing as the result was for all parties, bitterly so for Mr and Mrs Bride, the result speaks for itself. The market place showed, in my view, the appreciation of the commercial world of the capacity of the business to carry the level of borrowing that had been reached and also some of the difficulty of attempting to make theoretical valuations of land and a business of this specialised nature, especially when located in a regional centre.
In all the Bank recovered some $1.745m of the more than $3.5m which it had advanced, although it has not yet acted to realise on the home of Mr and Mrs Bride, which might return even today less than $300,000, and which Mr and Mrs Bride continue to occupy. The Bank has born the deficiency. Obviously, there was no surplus for the unsecured creditors in the bankruptcy of Mr and Mrs Bride, or for the Trust as Mr and Mrs Bride would now contend.
That does not conclude the issues concerning the sale however. As I understand the case of Mr and Mrs Bride, somewhat inconsistently they complained that the receivers had failed to use real estate agents and that they paid commission to real estate agents on the actual sale. In fact they did retain and make appropriate use of a firm of real estate agents. With respect to the commission paid, the contention seems to be that Southern Foods Pty Ltd had earlier responded to the advertising campaign and had been provided with full information. Because of that it is contended there was really nothing for real estate agents to do so that there was no justification for commission to be paid. Although Southern Foods Pty Ltd, or a director of it, had been provided with full information at the time of the first advertising campaign it had not made an offer. The real estate agents were used to follow up later. As a consequence, and only after much negotiation and after securing part finance for the purchaser from the Bank, eventually they were able to secure the offer which was accepted. These complaints of Mr and Mrs Bride have not been made out.
The sale to Southern Foods Pty Ltd is also attacked at a deeper and more serious level. This company, or one or more of its directors in particular a Mr Rowland, is contended to be the or a beneficiary of the alleged plan or strategy by which it is contended the business was let run down and eventually disposed of by the receivers and the Bank at well below its true market value. The evidence, however, indicates that Southern Foods Pty Ltd (and those behind it) had some initial interest in the stockfeed pellet plant itself because of a substantial pigfarming enterprise which it, or associated interests, operated north of Perth. The interest was to secure a reliable source of a large volume of suitable pellet feed for the pigfarm at a more attractive cost than was otherwise available. This interest faded initially, but was revived by follow up approaches by the real estate agent and in the end, with the real estate agent, it had been possible to put together a package which the company considered manageable which involved a level and type of finance from the Bank which was acceptable to the Bank. A good deal of negotiation, especially by the real estate agent, had been necessary to achieve the end result. It was the company's particular interest as a consumer of stockfeed which made the business attractive to Southern Foods Pty Ltd, not the value of the business as a commercial producer of oat products, muesli and stockfeed. There is no reason from the evidence of these matters, or of the company's later dealings, to do other than to accept the general tenor and effect of this evidence. This negatives the deeper and more serious interpretation which Mr Bride in his evidence and submissions would seek to have me infer.
The fact that the Bank provided finance to the purchaser for the sale of the business was in fact a means of securing the sale and enabling a return better than would otherwise have been achieved from the disposal of the business or its assets. Mr and Mrs Bride also see bad faith in this. The manner in which the finance was provided, a subsidiary of the Bank subscribing for redeemable preference shares in a company related to Southern Foods Pty Ltd but the subscription amount in fact, by direction, being paid to Southern Foods Pty Ltd to enable it to complete the purchase of the business, with repayment being effected later by redemption of the shares, was not perhaps a usual means of enabling finance, but the evidence discloses commercial and revenue reasons for this course to be followed by Southern Foods Pty Ltd and the evidence does not support findings to the contrary or of malafides for which Mr and Mrs Bride contend.
I also note that insofar as the cause or causes of action in respect of these matters are properly founded in equity and not in negligence and the common law, the only relief claimed in these respects in each action is damages. The power to award damages in the equitable jurisdiction remains, at the least, doubted; see the discussion of Goff J in Grant v Dawkins [1973] 3 All ER 897.
In summary, it has not been shown that in the conduct of the receivership including their role in negotiating the sale of the land and business, the receivers and managers acted other than in good faith. That is also the position with respect to the Bank including its direct role in the sale of the land. Should it be relevant, it is also my finding that, in these matters, it has not been shown that there was any lack of due or reasonable care, either by the receivers and managers or the Bank.

Purchasers of Land and Business - Second and Third Defendants CIV 1570 of 1989

The second defendants are sued as purchasers of the land and business, from the Bank and the receivers and managers respectively, in 1985. The second named second defendant is not shown to have been a purchaser. It appears to have been formed after the purchase.
The third defendant is sued as the purchaser of the land and part of the business from the second defendant in November 1988.
It is the pleaded case of Mr and Mrs Bride that each purchase was on notice, in the case of the second defendants of the defective appointment of the receivers and managers, and of the Bank's lack of "valid authority to sell "either the land or the business, and in the case of the third defendants of the consequential defective title of the second defendants.
The relief claimed in the statement of claim was for the transfer to Mr and Mrs Bride of the land sold in 1985 and delivery up of all chattels and assets of the business.
For the reasons already given, I am not persuaded that either the Bank or the receivers and managers lacked power to sell the land and the business respectively or that in any other way a defective title to the land or the business passed to the second defendants. Nothing is shown to identify any defect in the title to land or other property of the business which the second defendants passed to the third defendants.
For this reason, alone, no case for relief against either of the second defendants has been made out by Mr and Mrs Bride.
Apart from the above finding, no order is appropriate with respect to the case against the third defendant, because of the procedural order noted earlier in these reasons.

Abuse of Process

Although it is not the subject of a formal motion or application, nor is it pleaded in defence against the claims, the defendants further submit the claims are an abuse of process insofar as Mr and Mrs Bride have sought to establish that the business was owned and operated by Mr and Mrs Bride as trustees of the Trust and not in their capacity as partners.
The court has inherent power to prevent a misuse of its procedure which would bring the administration of justice into disrepute among right thinking people; see the decision of the Full Court in Mosman Park Town Council v Walker (1991) 73 LGRA 30 which applied Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at 536. It has been held to be an abuse of process to mount a collateral attack upon a final decision against the plaintiff of a court of competent jurisdiction in previous proceedings in which the plaintiff had a full opportunity of contesting the decision in the court by which it was made; Hunter v Chief Constable of West Midlands Police at 541. This may be so even if the parties opposed to the plaintiff in the two proceedings are different; Reichel v Magrath (1889) 14 App Cas 665 at 668, Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 at 410. As was said by Mason CJ, Deane and Dawson JJ in Walton v Gardiner (1992-1993) 177 CLR 378 at 392-393:
"The inherent jurisdiction of a superior court to stay its proceedings on grounds of abuse of process extends to all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice and unfairness … Yet again, proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings."
The right of litigants to have their claims litigated is subject to estoppel by res judicata or issue estoppel and to the claim not being frivolous, vexatious or an abuse of process; Ashmore v British Coal Corporation [1990] 2 Ch B 338 at 348. It is not necessary that there be an ulterior purpose. The basis of the rule is the undesirable effect of relitigating an issue; Smith v Linskills [1996] 1 WLR 763.
In Bride & Bride v KMG Hungerfords (1991) 109 FLR 256 and on appeal in Bride & Anor v KMG Hungerfords, unreported; FCt SCt of WA; Library No 940353, 14 July 1994 and in Bride & Bride v Hammond Fitzgerald & King, unreported; SCt of WA (Scott J); Library No 930303; 6 May 1993 and on appeal in Bride & Anor v Hammond Fitzgerald & King, unreported; FCt SCt of WA; Library No 960160; 26 March 1996 Mr and Mrs Bride in their capacities as trustees of the Trust sought to recover damages and other relief for the loss of the land and business in issue in this case. Central to their claims in both cases was the claim that the business was owned and conducted by them in their capacities as trustees of the Trust and not in their capacities as partners. In both cases they had full opportunity to present their case, and they fully availed themselves of those opportunities. The evidence led before Murray J in the KMG Hungerfords trial and before Scott J in the Hammond Fitzgerald & King trial was substantially and in its essentials the evidence led before me on this issue. I note that Mr and Mrs Bride did not call Mr Duncan before Murray J, although he was then available to be called, but his omission was rectified before Scott J. In both cases their Honours were persuaded, contrary to the case for Mr and Mrs Bride, that the business was owned and conducted by them in partnership, and not in their capacities as trustees of the Trust.
Their attempt in this litigation to recover for the loss of the business in their capacities as trustees of the Trust constitutes, in my view, an abuse of process because it is a collateral attack on the previous decisions of Murray and Scott JJ, and also an attempt to relitigate an issue which has been twice previously determined. The continued relitigation of this issue would bring the administration of justice into disrepute among right thinking people.
Mr and Mrs Bride contended to the contrary on the basis that in this case they had material fresh evidence in the sense considered in Orr v Holmes (1948) 76 CLR 632. They pointed to the evidence as to the appointment of the receivers and managers pursuant to the real estate mortgages on 22 August 1984, rather than 9 August 1984, which was first available to them, only after much difficulty, late in 1994 and well after the two earlier decisions to which I refer. I accept this evidence was fresh in the relevant sense, but it had no relevance to the issue whether the business was owned and conducted by them as partners or in their capacities as trustees of the Trust. It as relevant to other issues in the case.
Had the question of abuse of process with respect to the issue of the ownership and conduct of the business been raised in an appropriate manner at an earlier point in these proceedings, in my view it would have been appropriate to prevent the further relitigation of that issue, though not of the whole of the actions because, as has been indicated in these reasons, there were claims which did not depend on that issue. The defendants did not take that course, however, and the issue has been fully heard once again on its merits. In the circumstances I have though it better to give my own reasons and finding.

Loss and Damage

Even though I am not persuaded that Mr and Mrs Bride have made out their case with respect to the loss by seizure and sale of the business and land it is appropriate, should it prove relevant on appeal, that I record briefly the views I have reached on the question of the loss and damage which Mr and Mrs Bride claim to have suffered in this respect.
There is quite a deal of evidence relevant to these matters although it is often tenuously based and inconsistent or contradictory. Mr Bride had particularised his claim extensively. He did so by schedules to the substituted statement of claim
With respect to the business, the values of the land and buildings and the plant and machinery claimed as at August 1984 is:-
Oatmill: Land and Buildings           $   464,900 Plant $   166,830
Stockfeed Mill: Land and Buildings $   870,300 Plant $   491,000
Totals:Land and Buildings           $1,335,200 Plant $   657,830
Total for land and buildings and plant of business         $1,993,030
With respect to the other land and buildings owned in their capacities as trustees of the Trust the values claimed by Mr and Mrs Bride are:
Winery land and buildings            $     39,000
Vineyard land and buildings          $   116,000
Total$   155,000
In the schedules particulars as to the loss of profit from the business in each year are given from 1984 to 1955. While the particulars are for the estimated profit of a full year's trading in 1984 it will be appreciated that Mr and Mrs Bride had the benefit of the trading performance of the business until 9 August 1984 so that any loss demonstrated in that year would need to be calculated accordingly for a part year. The usefulness of the claim for the 1984 year, however, is that it enables some comparison to be attempted between the basis on which Mr and Mrs Bride have calculated their claim for lost profit and the actual performance of the business at the time the business was lost to them in August 1984. Claims for lost profits are also particularised for each year between 1984 and 1985. The claim increases each year and it is submitted has continued to so since 1995. A factored increase of 10per cent each year has been applied to some items but it seems that regard has also been had to actual movements in sale price of some commodities and for some other items. Significantly, the annual figures suggest a rise in production in some years from one mill or another. As will appear shortly that seems to assume some modification of plant to achieve increased production.
Of course it would be usual in a claim such as this to have regard in formulating the claim to the actual demonstrated performance of the business. No doubt for reasons that have been apparent earlier in this decision, Mr and Mrs Bride have not followed this approach. Instead they have calculated or estimated what they claim would have been the production and sales levels and the costs of the business to achieve these levels have also been estimated. It is necessary, therefore, to give some attention to the schedules.
In these respects the claim can be summarised as follows:-
OATMILL1984           1995
Gross Profit  $   464,920   $1,752,540
Less Fixed and Variable Expenses          180,500      488,171
Estimated Profit  $   284,420   $1,264,369
SHEEP AND CATTLE PELLET MILL
Gross Profit  $1,405,000    $4,008,829
Less Fixed and Variable Expenses     453,450 1,293,746
Estimated Profit  $   951,550   $2,715,083
PIG AND POULTRY FOOD MILL
Gross Profit  $   479,510   $1,368,098
Less Fixed and Variable Expenses      83,650      238,863
Estimated Profit  $   395,860   $1,129,435
TOTAL ESTIMATED PROFIT
Oatmill$   284,420   $1,264,369
Sheep and Cattle Pellet Mill     951,550 1,293,746
Pig and Poultry Food Mill     395,860 1,129,435
Estimated Profit  $1,631,830    $3,687,550
The evidence does not, in my finding, support the estimations made in the claim in respect of the profitability of the business.

Oatmill

With respect to the Oatmill, the claim for 1984 is based on a yield of 2330 tonnes per annum of saleable oat product with 1,553 tonnes of oat husks as a by-product. These are estimated to be produced from an input of 3,883.3 tonnes of raw oats. The evidence as to the actual production of the oatmill varied from the evidence of a Mr Liwszyc who operated the plant after it was sold to Southern Foods Pty Ltd in 1985 who said that the production of oat product achieved in 1986 was only 500 tonnes, to that of a staff member of Mr Bride, a Mr Schiano, who spoke of a production rate of 1.5 tonnes per hour for a typical 12 hour working day, 6 days per week. Such a production would equal 5,616 tonnes per annum. There was also a record of actual production in 1982 which showed a total of only 691.2 tonnes for the year. The evidence of Mr Bride supported the claim. Mr Benschop reported at the beginning of August 1984, however, that the actual production was at the rate of 6 or 7 tonnes per 8 hour day for 6 days per week. This would indicate an annual production over 48 weeks of between 1,728 and 2,016 tonnes. For reasons previously given I was impressed with the impartiality and knowledge of Mr Benschop and I prefer his evidence over that of any other in this matter. I accept from this an annual production rate in the order of 1,875 tonnes rather than the claimed 2,330 tonnes, with a corresponding reduction in the raw oats required and the by‑product of oat husks. I observe that continuous production for longer than normal hours was not practical because the age of the mill required highly skilled operation and the business had only one such miller.
The claimed gross return from the sale of oat product was based on a selling price of $420 per tonne. I am satisfied that such a figure was achievable by the business at that time in the market, indeed even higher figures were achieved on occasions. What evidence there is on the subject leaves me with the understanding that $420 and higher was achievable for only the finest quality product and only in favourable market circumstances. The evidence relied on by Mr Bride to support an average of $420 spanned all the years from 1980. Even in that evidence it is clear there were many sales at much lower figures, as low as $335 and others at $355, $360, $385 and $395. An average price of about $395 would be more realistic in my finding.

A gross sales return from oat husks of $47,000 is also claimed for 1984. This represents some $30 per tonne. Such a price could be and had been achieved on occasions but the evidence also satisfies me that the demand was limited and that more often $5 per tonne would be more realistic and that a typical experience in the industry was that there were times when they had to be given away or burned as no profit could be made from sale. I note that the need to store oat husks that had not been disposed of was mentioned in the evidence and that one of the reasons for entering into the sheep pellet plant was as a means of disposing of some of the oat husks. While the evidence is sparse I would consider an estimated average annual sale price exceeding $10 per tonne to be clearly excessive.
The claim places the purchase price of raw oats at $100 per tonne. The evidence suggests the price of raw oats to be both seasonal and variable according to production, demand and quality. While $100 per tonne was achievable for suitable quality oats at times, at other times the price may well have been $120 per tonne and between $105 and $120 was often experienced. Much may depend on the planning of purchases and the ability to purchase well ahead of requirements if a suitable product is available at a good price, but this requires capital and efficient planning. I would think an average of $110 per tonne to be more realistic.
If adjustments are made to the claim in respect of these items alone, the estimated profit for the year for the oatmill is reduced from $284,420 to $46,575. The claim only allows $82,600 for wages of the operating staff. Mr Benschop's view was that a provision of some $175,000 was appropriate. Even if only two additional operating staff were necessary the oatmill would not have been returning a profit. And the provision for interest is inadequate as together with the interest provision for the other mills the interest provision is calculated on a total borrowing of $3m whereas by August 1984 the amount owing had exceeded $3.5m.
I am not able to find therefore that the oatmill has been shown to have been profitable in 1984. The claims in respect of subsequent years seem to be built on the same enhanced expectations. There is little or no specific evidence about any of these and I am not persuaded that it would be any more realistic to expect a profit in any subsequent year than in 1984.

Sheep and Cattle Pellet Plant

It was Mr Bride's evidence that the claim in this respect was based on a production rate of only 50per cent of the plant's capacity. Even so the claim estimates a production in 1984 of 40,000 tonnes per annum which on the evidence is based on a daily production of 160 tonnes. The cost of the raw materials was put at $115 per tonne with a product sale price of $160 per tonne. A gross profit of $1,405,000 was estimated and after allowing for expenses, including wages of $205,000, the net profit claimed was $951,550.
This production rate of 40,000 tonnes per annum (at half plant capacity) appears on the evidence to be grossly excessive. That production rate equates to some 160 tonnes per day. This plant was working 24 hours per day for 5 days per week. The reasons for the 24 hour a day production is that the plant was not achieving the forecast production rates and could not satisfy the demand for product that existed at the time from the client SIBA. Again, I accept the evidence of Mr Benschop as the most reliable in this regard. It was his evidence that the production rate actually being achieved was closer to four tonnes per hour, which with 24 hour a day operation equates to 96 tonnes per day at 100per cent operating capacity, which is a far cry from the claimed 160 tonnes at a claimed 50per cent operating capacity.
It was Mr Benschop's evidence, which I accept, that whereas the plant could be modified to improve production on an interim basis at a cost of some $64,000, for the plant to achieve a production rate of 160 tonnes per 24 hour day it would be necessary to extensively modify the plant at a minimum cost of $288,000 which would be largely spent on the provision of a new boiler and the provision of steam to the production process. This was necessary to overcome the unforeseen design deficiency in the plant which was mentioned briefly earlier in these reasons. Even then, in Mr Benschop's view, the plant would not be operating at a first-class level of efficiency. Even greater capital expenditure would be required to achieve that.
There is also reason to question the adequacy of the provision of only $205,000 for wages. The subsequent experience of Mr Liwszyc in operating this plant, although then slightly improved, was that 12 to 14 people would be needed to maintain a 24 hour day production. The evidence indicates wages in this respect averaged between $25,000 and $30,000 a year. Even if only 12 people were employed at $25,000 a year the provision would need to be for $300,000 rather than $205,000.
A production rate of 96 tonnes per 24 hour day for 5 days per week and 48 weeks per year, at the selling price claimed of $160 per tonne, which was being achieved, would produce an annual gross income of only $3,686,400, rather than the claimed $6,400,000. Even without further adverse adjustment for wages, and an adverse adjustment for interest as indicated when dealing with the oatmill, this adjustment alone would reduce the claimed estimated annual profit as at 1984 from $951,550 to an annual loss of $1,763,150.
The claims for the years subsequent to 1984 again appear to be built on similarly unrealistic expectations. The production levels claimed could not be achieved by the plant as it was in August 1984, nor even if its then planned construction had been completed. The evidence provides no reason to conclude, therefore, that the sheep and cattle pellet mill would have been profitable in 1984, or in any year following 1984, without substantial and expensive modification as indicated by Mr Benschop.

Pig and Poultry Food Mill

The claim is based on an annual production of 5,000 tonnes. Once again this is said by Mr Bride to be at only 50per cent of operating capacity. Wages were allowed for only one person at $25,000 a year. Mr Bride's evidence once again supported these figures.
Mr Liwszyc's evidence, however, indicated that the production of this plant in 1986, before the plant was upgraded, was 70 tonnes per week which would indicate an annual production over a 48 week year of only 3,360 tonnes. This was generally supported by Mr Benschop who noted an hourly production of one to two tonnes. A production rate of 1.5 tonnes an hour for a 12 hour day over a 48 week year would indicate an annual production of 3,456 tonnes. Only after the plant was upgraded in 1986 was a production rate of 5,200 tonnes a year achieved by Mr Liwszyc. Further, it was the evidence of Mr Liwszyc that before the upgrade, the plant required six or seven people to achieve a production of 3,360 tonnes a year (70 tonnes per week). An annual production rate of 3,360 tonnes at the claimed average selling price of $240 would produce a gross return on only $806,400 rather than the claimed $1,200,000. That adjustment to the estimated income, which appears more realistic on the evidence, would reduce the claimed estimated annual profit to $1,260. Only one additional employee, ie a total of two people, would thus have the mill operating at an annual loss approaching $25,000 and as indicated when dealing with the oatmill there is also need for an enhanced provision for interest.
I am unable to conclude therefore that the pig and poultry feed mill has been shown to have been operating at a profit in 1984 and there is no reason to conclude on the evidence that in any subsequent year the plant, in its August 1984 operating condition, would have operated at a profit.

More Generally

I am not able from the ordinary accounts of the business, either to the end of May 1984 which Mr Bride accepted, or to the end of June 1984 which he queried, or other evidence, to be satisfied that any more optimistic picture of the profitability of the business as at August 1984, or of its prospects thereafter, ought to be formed. The general picture from 1980 is that while individual plants might have performed with a trading profit at times, overall the business did not ever perform at a profit. It is significant that while Mr Bride saw the sheep and cattle pellet plant as the answer to the financial problems of the business, because of its fundamental design fault it was in fact operating at a very substantial loss even at its full production capability in August 1984 and would have continued to do so unless and until it proved possible for Mr and Mrs Bride to raise a further substantial sum of capital to modify the plant.
For these reasons it has not been demonstrated that any loss of profit from the business was suffered by Mr and Mrs Bride in 1984, or in the years that have followed, by virtue of the loss of the business at the hands of the receivers and managers and at the instigation of the Bank, and by its subsequent sale.
Earlier in these reasons I have indicated my findings, despite some valuation evidence, that the price achieved for the sale of the business including its plant and the Oatmill and Stockfeed land was the best achievable market price for each of these and therefore represented their value at the time. In fact the prices achieved may well have been enhanced a little over market value because of the provision of finance by the Bank to facilitate the sale.

Other Claims for Loss

The evidence with respect to claim for the loss of the other land owned by Mr and Mrs Bride in their capacities as trustees of the Trust, ie the Winery and the Vineyard land is not very satisfactory. I have already noted that it was not established that the receivers and managers purported to enter into possession of this land on 9 August 1984. General references in the evidence suggest that at some point of time this may have occurred but the evidence of Mr Vaughan a solicitor questioned this. No finding is possible. As far as the evidence reveals the Winery land has not been sold. The claim for the Winery land is quantified at $39,000 but I have not identified any admissible evidence as to its value in 1984 or 1985 or at any time. Estate agents acting for either the Bank or the receivers and managers advertised the Vineyard land and were active in attempts to sell it. There was evidence of an auction of the Vineyard land, whether at the direction of the Bank or the receivers and managers is not established. This seems to have been late in 1984. It was passed in. Efforts to sell seem to have continued thereafter and it was only in 1986 that a sale was effected to Mr and Mrs Porter by the Bank. The claim in respect of the Vineyard land is quantified at $116,000. Again the evidence does not deal with its value at any time. The evidence does not reveal the price paid by Mr and Mrs Porter so no finding as to its value is possible. There is no reason to conclude that it was sold at less than market price.

Conclusion

For the reasons given, a case for trespass of the Oatmill land has been established against Peat Marwick Mitchell, and while reiterating the observations made earlier when considering this claim as to the desirability of amending the Statement of Claim, I would propose that damages in the sum of $500 be awarded against Peat Marwick Mitchell.
None of the other claims against Peat Marwick Mitchell or any of the claims against the Bank and the second defendants in CIV 1570 of 1989 have been made out. They will be dismissed. I make no order with respect to the third defendant in CIV 1570 of 1989 because of the procedural order identified early in these reasons.