Commonwealth Bank of Australia v White (No. 8)

[2003] VSC 360

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 5660 of 1997

COMMONWEALTH BANK OF AUSTRALIA	Plaintiff
v
PETER EVERETT WHITE	Defendant
and
THE SOCIETY OF LLOYD’S	Third Party

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	22 September 2003
DATE OF JUDGMENT:	24 September 2003
CASE MAY BE CITED AS:	Commonwealth Bank of Australia v White (No. 8)
MEDIUM NEUTRAL CITATION:	[2003] VSC 360

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Practice and Procedure – Application to strike out part of Statement of Claim in third party proceeding

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Bick QC with Ms M Loughnan	Ryrie Bridges
For the Defendant	Mr M K Moshinsky	Foster Hart
For the Third Party	Mr P Jopling QC with Dr I Hardingham QC	Freehills

HIS HONOUR:

1. In Commonwealth Bank of Australia v White (No.7) [2003] VSC 344, I dealt with that part of the third party (“Lloyd’s”) application by summons dated 25 March 2003 which sought a stay of the Third Party Proceeding. The background to this proceeding is set out in that judgment. The Court has now heard the other part of Lloyd’s summons, which in paragraph 2(a) and (b) seeks that certain parts of the defendant’s Fourth Amended Statement of Claim against the third party be struck out, alternatively that judgment be entered for the third party in respect thereof.

1. In relation to paragraph 2(a) of the summons, the third party pursued only a limited application to strike out paragraph 18K of the Fourth Amended Statement of Claim.  Paragraph 2(b) sought to strike out paragraphs 24 – 41 of the Fourth Amended Statement of Claim.

1. The argument in relation to paragraph 18K of the Fourth Amended Statement of Claim can be dealt with briefly.  The pleading alleges in paragraphs 1 – 18 causes of action in misleading and deceptive conduct contrary to s.52 of the Trade Practices Act 1974 (Cth) and s.11 of the Fair Trading Act 1985 (Vic). The damage which is alleged to flow from such misleading and deceptive conduct is set out in paragraphs 18A – 19 but, as Counsel for the defendant explained, paragraph 18K is concerned not with a claim for damages but with a claim for a declaration in relation to future loss.

1. Paragraph 18K alleges that, in relation to a matter (in respect of which it is unnecessary to set out the factual background):

“Although Equitas has reinsured all 1992 and prior years of account, there remains the potential that Names may still be liable if, for example, Equitas is unable to meet future liabilities.”

1. The defendant then goes on to allege that he may suffer further loss and damage as a result and in paragraph A(d) of the Prayer for Relief, seeks an order pursuant to s.87 of the Trade Practices Act or s.41 of the Fair Trading Act that “Lloyd’s indemnify the defendant for any underwriting losses he may hereafter be liable to pay in respect of his underwriting at Lloyds during the period 1981 – 1992”. 

1. Lloyd’s submission was simply that an allegation that there was a “potential that Names may still be liable if…Equitas is unable to meet future liabilities” was not an allegation sufficient to raise an issue under s.87 of the Trade Practices Act (or s.41 of the Fair Trading Act) that the defendant was “likely to suffer loss or damage” within the meaning of those statutory provisions.  It was common ground, on the authorities, that to establish that a person was likely to suffer loss and damage, it was sufficient to prove a real chance or a real possibility that the person might suffer loss and damage.  I accept Lloyd’s submission that the allegation that there is a “potential…if…Equitas is unable to meet future liabilities” is not an allegation of a real chance or real possibility of the defendant suffering loss and damage.  Accordingly, paragraph 18K (and, I think, paragraph A(d) of the Prayer for Relief) should be struck out.

1. Turning to the other part of Lloyd’s application seeking to strike out paragraphs 24 – 41 of the Fourth Amended Statement of Claim, Lloyd’s relied on an affidavit of Caroline Margaret Mayne sworn 9 September 2003.  Ms Mayne is an English barrister employed by Lloyd’s as the head of the litigation team of its Legal Services Department and is familiar with the practices and procedures of Lloyd’s.  Her affidavit in essence deposes that it has not at any relevant time been Lloyd’s, but rather members’ agents who organise the membership of Names in insurance syndicates of their choice and that “Lloyd’s itself did not make any recommendations as to which syndicates should be joined and had no role in placing Names on any syndicates”.  This evidence was directed to the allegations in the Fourth Amended Statement of Claim that Lloyd’s offered to the public in Victoria (including the defendant) or invited the public in Victoria (including the defendant) to subscribe for or purchase membership in Lloyd’s underwriting syndicates.  This allegation is contained in paragraph 25 of the Fourth Amended Statement of Claim where it is alleged in relation to the initial offer or invitation to the defendant in or about 1980 and wherein it is further alleged that the offer or invitation was in breach of the “interest” provisions of the Companies Act 1961 (Vic).  The allegation is further contained in paragraph 34 of the Fourth Amended Statement of Claim wherein it is alleged in relation to a period from 1982 to 1990 that Lloyd’s offered to the public (including the defendant) or invited the public (including the defendant) to subscribe for or purchase underwriting membership of Lloyd’s syndicates and wherein it is further alleged that the offer or invitation was in breach of the “prescribed interest” provisions of the Companies (Victoria) Code. 

1. Looking first at paragraph 25, it is a question of fact whether Lloyd’s made offers or invitations to the public as therein alleged.  What Lloyd’s has to show on a summary application is that there are no arguable questions of fact in relation to this allegation.  If Ms Mayne’s affidavit stood alone, that would perhaps be the case.  But I am persuaded that there is other evidence before the Court which does not enable the Court to determine this matter on a summary application.  The evidence is summarised in paragraphs 17 – 19 of the defendant’s outline of submissions, together with Annexure B to that outline.  Annexure B provides a convenient set of extracts from material contained in or exhibited to an affidavit of the defendant’s solicitor, Alan James Foster, sworn 5 March 1999.  I am not satisfied that there is no arguable evidentiary basis for the allegation either that Lloyd’s was making relevant offers or invitations, or that those offers or invitations were made to the public.  Accordingly, no parts of paragraphs 24 – 32 of the Fourth Amended Statement of Claim should be struck out on the basis of this argument. 

1. However, Lloyd’s submissions in relation to paragraphs 33 – 41 of the Fourth Amended Statement of Claim yield a different result, in my view.  Paragraph 34 of the Fourth Amended Statement of Claim refers to alleged offers or invitations to the public made at a time when the defendant was already a member of Lloyd’s.  The pleading does not identify what those offers or invitations were, save that there is a reference under the heading “Particulars” to the “several particulars sub-joined to paragraph 15 hereof”.  When one turns to the particulars to paragraph 15, there are references to a number of documents, none of which appear to relate to invitations or offers to the public in so far as it is possible to understand exactly what these particulars are referring to.  Senior Counsel for Lloyd’s referred to Corporate Affairs Commission v Australian Central Credit Union (1985) 157 CLR 201, in which it was held that there was no offer to the public or a section of the public where an offer was made to the members of a group and a number of other criteria were satisfied. Clearly enough, this is not a rule of law, but a question of fact and dependent upon all the circumstances of the case. However, as the defendant’s pleading is presently constituted, there is a bald assertion of an offer or invitation to the public which does not appear to be supported by the kind of documents which are referred to in the particulars to paragraph 15. I tend to the view that the allegation about an invitation or offer to the public in paragraph 34 is, on the present material, unsustainable, but, in any event, I do not think that paragraph 34 properly pleads the necessary material facts to support what is in reality a conclusion that offers or invitations were made to the public. Alternatively, the particulars either vitiate the paragraph or are inadequate. I think that the appropriate solution is to strike out paragraphs 33 – 41 of the Fourth Amended Statement of Claim and give the defendant leave to replead if he so wishes. That should be done within a short period of time, given the number of previous versions of this pleading and the lengthy delays in this proceeding.

1. The proceeding is also before the Court for the purpose of directions.  I am faced with a dilemma.  The plaintiff wants a trial date fixed for early next year.  The plaintiff is entitled to complain of the long delays in this proceeding which have been caused by the interlocutory warfare between defendant and third party.  The plaintiff has been ready to proceed to trial for a long time, and its case is not unduly complicated or lengthy.  An affidavit of Cullen Ross Thomson sworn 19 September 2003 deposes that there are number of witnesses for the plaintiff bank who are now quite elderly and some in poor health.  Notwithstanding the rejection by Byrne J of the plaintiff’s application to sever the third party proceeding, the time may yet arrive when this cannot be avoided in order to protect the plaintiff from being denied a fair trial simply due to the passage of time.  On the other hand, there is strength in Lloyd’s emphatic complaint that it faces a new case in the Fourth Amended Statement of Claim which requires substantial time and effort to prepare and which mirrors an important proceeding in England (the Laws proceeding – which was referred to in my previous judgment).  In addition, there is the application for leave to appeal from the order of Warren J which, it is hoped, may be heard by the Court of Appeal later this year.  Then, there is the plea of the defendant that it be protected from the risk of going to trial against the plaintiff without the possibility of immediate recovery over against the third party, should the plaintiff be successful. 

1. Taking into account the foregoing circumstances, I am, on balance, unable to accede to Lloyd’s request that it not be required to deliver a defence at this stage.  I think that directions should be given with the aim of having the third party proceeding ready for trial at the same time as the principal proceeding between the plaintiff and defendant.  I think that a trial date should be fixed in the first week of March 2004 and directions given to bring the third party proceeding to a state of readiness for that date. 

1. I will hear Counsel on the question of the precise directions required to meet the above plan of procedure.

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