Cooperatieve Centrale Raiffeisen-Boerenleenbank BA v Philips - [2011] SASC 139

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK BA v PHILIPS
[2011] SASC 139
Judgment of The Honourable Justice Kourakis
30 August 2011
CORPORATIONS - RECEIVERS, CONTROLLERS AND MANAGERS - DUTIES AND LIABILITIES - DUTIES
Application to strike out part defence - whether pleading discloses reasonable ground of defence - whether receivers, prior to appointment, were controllers for the purpose of s 420A Corporations Act 2001.
Held - application allowed - no reasonable ground of defence pleaded - receivers not controllers at relevant time for purpose of s 420A Corporations Act 2001.
Corporations Act 2001 (Cth) s 9, s 420A, referred to.
GE Capital Australia v Davis (2002) 180 FLR 250; Williams v Frayne (1937) 58 CLR 710; Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236; Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) BPR 14,360, discussed.
Shipard v Motor Accident Commission (1997) 70 SASR 240; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; Dey v Victorian Railways Commissioners (1949) 78 CLR 62; Re South Australian Government Financing Authority [2000] SASC 264; P & V Industries Pty Ltd v Porto (2006) 14 VR 1; Commonwealth Bank of Australia v Lee (1996) 22 ACSR 574; Wespac Banking Corporation v Kingsland (1991) 26 NSWLR 700, considered.

COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK BA v PHILIPS
[2011] SASC 139
Civil:

KOURAKIS J: This is an application by the plaintiff to strike out part only of the defendant’s defence. The plaintiff, Cooperatieve Centrale Raiffeisen-Boerenleenbank BA (Rabobank) carries on business in Australia as a bank. In the course of that business, Rabobank lent money to R Winery Pty Ltd (R Winery). The loan was secured by a Deed of Charge (the Charge) over the assets of R Winery and guaranteed by its director, the defendant, Philips. On 30 June 2010, R Winery was indebted to Rabobank in two separate amounts of about $A17 million and $US5 million. Rabobank demanded payment from Philips on his guarantee of the outstanding debts of R Winery by notice dated 30 June 2010. Philips has not complied with the demand.
By his defence to the action, Philips, in addition to denying the effect and enforceability of the guarantee, has pleaded set-offs. The set-offs arise out of the conduct of accountants who were first appointed as Rabobank’s agents (the agents) pursuant to the Charge and were later appointed as receivers and managers of R Winery for the purpose of realising the charged assets. However, it is only those parts of the defence which plead a set-off by reason of the conduct of the agents, as agents, and before their appointment as receiver-managers which are attacked by Rabobank. Philips pleads as a set-off the diminution in the value of the charged assets resulting from the agents’ failure to exercise reasonable care in the sale of the assets of R Winery and from their conduct which sacrificed the value of the charged assets. Rabobank contends that the set-off is untenable because the agents neither sold, nor otherwise dealt with, the assets before they were appointed receivers. So much is accepted by the defence. Moreover, Rabobank contends that the very terms of the Charge pleaded by Philips in support of his set-off establish that the agents were not controllers for the purposes of s 420A of the Corporations Act 2011 (the Act) on which Philips relies.
Rabobank’s contentions should be accepted and those paragraphs of the defence which claim a set-off based on a loss caused by the conduct of the agents, as such, before they were appointed as receivers should be struck out. My reasons follow.
The Application
Rabobank seeks an order pursuant to r 104 of the Supreme Court Civil Rules 2006 striking out paragraphs [25]-[56] and paragraphs [75]-[80] of Philips’ defence. It is those paragraphs which claim a credit by way of set-off for the depreciation of the charged assets caused by the actions of Rabobank and the agents before the agents were appointed as receivers. Rabobank’s contention is that those paragraphs of Philips’ defence are an abuse of the process of the Court in that they fail to disclose a reasonable ground of defence.
An order made pursuant to r 104 is not a final order. It does not finally determine the rights of the parties in the legal controversy which arises, wholly or in part, out of the pleaded facts and circumstances. Rather, the pleading, or part of the pleading, is struck out pursuant to r 104 precisely because it does not identify at all, or sufficiently, facts and circumstances which could possibly have the legal consequence contended by the party pleading them. Put another way, the pleaded facts and circumstances fail to give rise to a matter, or legal controversy, capable of judicial determination. Accordingly, an order striking out the pleading, or part of the pleading, does not preclude the party promulgating it from subsequently amending the pleading and relying, in part, on the facts and circumstances which had earlier been pleaded. For that reason, permission to amend may be given by way of an order ancillary to an order striking out the pleadings. Indeed, where it appears that there may be a good cause of action permission should, generally, be given to re-plead the matter.[1]
[1] Shipard v Motor Accident Commission (1997) 70 SASR 240.
The power to strike out a pleading is only to be exercised in clear and obvious cases.[2] In particular, the power should not be used to stifle claims in areas of law which are still developing.[3]
[2] General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; Dey v Victorian Railways Commissioners (1949) 78 CLR 62; Re South Australian Government Financing Authority [2000] SASC 264.
[3] P & V Industries Pty Ltd v Porto (2006) 14 VR 1.
The Defence
R Winery produced or procured wine in Australia and exported it to the United States. Philips pleads by his defence that, in early 2010, R Winery had extensive assets which included bulk and bottled wine, vineyards and other business assets including goodwill. Philips pleads that:
·those assets were secured in favour of Rabobank by securities which included registered debenture charges;
·on 2 March 2010, pursuant to the debenture charges, the plaintiff, by notice, fixed floating charges over some of the assets (the Notice);
·Rabobank “as controller of R Winery” appointed the accountants to act as its agents in order to manage the assets.
On the hearing of this application, Rabobank tendered, and I received with the consent of Philips, a copy of the Charge and the Notice to which the pleadings referred. Clause 2.2 of the Charge charges the property of R Winery to secure the due and punctual payment of all money owed to Rabobank. By cl 2.3 the Deed operates as a fixed charge over the real property, fixtures, fittings, plant and equipment and goodwill, and, as a floating charge, as regards to the remainder of the assets of the company (the charged assets). Clause 2.4 provides that R Winery must not, without the prior written consent of Rabobank, dispose of or deal with any interests in the charged assets over which the Charge operates as a fixed charge and that R Winery may only dispose of, or deal with, the remainder of the property (the floating charge property) in the ordinary course of its business and for fair value. Clause 2.5 provides that the floating charge will automatically and immediately operate as a fixed charge in respect of any asset on notice from Rabobank.
Philips pleads that, on 2 March 2010, Rabobank served the Notice which announced that, from the day of service, the Charge would operate as a fixed charge over the floating charge property. The Notice was sent under cover of a letter which advised R Winery that Rabobank had appointed named accountants “as its agents to enter any premises on which any of the Company’s property is situated, inspect such property and record information and obtain copies of records and other information relating to it.” Rabobank pleads in its reply that it appointed the accountants as its agents for limited purposes by way of an instrument dated 3 March 2010. That instrument is also before me, by consent. It authorises the agents to enter any premises on which any of the charged assets are situated, to inspect the charged assets and to collect records and/or other documents relating to the charged assets.
Philips pleads that, on 2 March 2010, Rabobank sent letters, in the same form, to various businesses which supplied goods or services to R Winery advising them that it held a fixed and floating charge over the property of R Winery. Copies of the letters referred to in the pleadings were also received on this application by consent. In them, Rabobank advises the suppliers of the appointment of the agents. The letters also refer to an “Access Deed” which Rabobank had apparently negotiated with each supplier to “enter [its] premises for the purpose of exercising any power under its charges over the property of R Winery Pty Ltd and Philips Australia Pty Ltd.”
Philips pleads that, at a meeting on 3 March 2010, Rabobank informed R Winery that the agents would supervise and oversee all aspects of R Winery’s business. Philips also pleads that Rabobank directed R Winery not to export wine to the United States without its consent, informed R Winery that it would not approve the export of wine exceeding $3,000 in value and insisted that any wine exported be paid for before, or soon after, shipping. The defence avers that the terms and conditions imposed by Rabobank were inconsistent with the basis on which Rabobank had previously dealt with R Winery, and that Rabobank was warned that the conditions imposed by it would harm R Winery’s business and goodwill.
The pleadings also refer to a letter written on 5 March 2010 by Rabobank’s solicitors to another supplier which bottled wine for R Winery. I received a copy of the letter by consent. Rabobank advised the supplier that Rabobank held a charge over all of the assets of R Winery. It informed the bottling company that “[u]nder the terms of the Bank’s charge, the Company is not permitted to dispose or deal with any interest in its property without the Bank’s prior written consent” and that Rabobank “has not consented to the bottling of any of the Company’s wine.”
Philips pleads that the delivery of the letters on 2 and 5 March 2010 resulted in the erosion of the goodwill of R Winery and that its business was “critically damaged”. The defence also avers that, after the March meeting, Rabobank refused to release funds to bottle wine to fulfil confirmed orders and that wine was only exported if approved by the agent. Philips also complains that permission to export the wine was refused even though he had proposed arrangements which would ensure that the sale proceeds were paid to Rabobank or its agent. Philips alleges that, as a result, both R Winery and Rabobank lost substantial sales and that the business and goodwill of R Winery was further damaged.
Philips pleads that, as a result, R Winery failed to make an interest payment due under one of the financial facilities with Rabobank, resulting in the appointment of the agents as receivers. By its reply to Philips’ amended defence, Rabobank pleads that it appointed the agents as receivers and managers of the property of R Winery Pty Ltd on 15 June 2010.
The legal significance of the allegations of fact I have summarised is pleaded in paragraphs [53] and [56] of the defence. Philips contends (in paragraph [53] of the defence) that Rabobank “acted unreasonably by issuing the Charge Fixing Notice and by the issuing of its directions.” Philips pleads that the actions of Rabobank pursuant to the Charge resulted in the sale of R Wineries assets in breach of s 420A of the Act thereby increasing R Winery’s indebtedness.
Philips contends in paragraph [56] of the defence:
Further, the Defendant relies upon the same material facts and conduct referred to in paragraphs 54 and 55 herein, and says the Plaintiff by its own conduct, sacrificed and impaired the value of the assets of R Winery to such an extent, that it thereby discharged any liability the Defendant may have had pursuant to the guarantee, either in whole or to the extent of the sacrificing and impairment of the assets and securities.
Philips, in a separate part of the defence, raises as a set-off the discharge by Rabobank and its agents of a debt which R Winery owed to another winery, B, by payment of the whole of the amount owing in order to procure the release of wine stock held by B. Philips admits in his defence that R Winery owed about $1.7 million to B but by paragraphs [75] to [80] of his defence, Philips pleads that R Winery had, at the time of the fixing of the Charge, a standing arrangement with B that B would continue to make and store wine for R Winery if regular weekly payments of $50,000 were made to it. Philips complains that Rabobank and/or its agents did not pay the weekly sum of $50,000 and, as a result, B served a demand for the full amount of its indebtedness. B also enforced its retention of title claims. Philips complains that, in order to secure the release of the stock, Rabobank or the agents paid in excess of $3.7 million to secure the release of wine stock held by B, which they would have obtained at a significantly lower total amount if they had continued the weekly payments of $50,000. Philips claims that in the premises:
[B]oth the Plaintiff and the Receivers and Managers have acted improperly by exposing R Winery to the claims by [B], and thereby having to pay the sum of $3.7 million plus interest to [B], thereby decreasing the market value of the assets of R Winery in breach of s 420A of the Corporations Act. The Defendant cannot provide better particulars until disclosure has been completed.
There are several conceptual difficulties with this claim but, on this application, the challenge to the pleading is limited to its sustainability against Rabobank and its agents at a time prior to the appointment of the agents as receivers and managers.
I understand the paragraphs of Philips’ defence, which I have just summarised, to plead both a claim pursuant to s 420A of the Act and a general law set-off against the sum due on the guarantee on the basis of the loss causing conduct of Rabobank and its agents, before the agents were appointed as receivers. The claim, as I understand it, is for a wrongful diminution of the value of the security which loss crystallised before that appointment. I deal with the strike-out application on that basis. It may be that all, or some of the pleaded facts, also provide an historical context to the ultimate sale of assets by the receivers but that is not the burden of the impugned paragraphs as they now stand. Even though I propose to strike out the impugned paragraphs, it will be open to Philips to seek permission to amend his defence to plead those facts in connection with the claimed set-off founded on the acts and omissions of the receivers in selling the charged assets if he is so advised.
The Act
Section 420A of the Corporations Act 2001 provides:
420A Controller’s duty of care in exercising power of sale
(1)In exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for:
(a)if, when it is sold, it has a market value—not less than that market value; or
(b)otherwise—the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.
(2)Nothing in subsection (1) limits the generality of anything in section 180, 181, 182, 183 or 184.
A controller in relation to the property of the corporation means a receiver or receiver and manager of that property or “anyone else who (whether or not as agent for the corporation) is in possession, or has control, of that property for the purpose of enforcing a charge”.[4]
[4] Corporations Act 2001 (Cth), s 9.
Remedies for Mismanagement of Securities
A guarantor may be entitled to a remedy against the creditor where the security for the debt he or she has guaranteed is sacrificed by the creditor’s wrongful conduct. In the ordinary course, if a guarantor discharges his or her obligation, the guarantor is entitled to be subrogated to the rights of the principle creditor against the security given by the debtor.[5] A guarantor will be released from his or her guarantee to the extent that the secured creditor has sacrificed that security or diminished the value which the security could have yielded. The conduct of the creditor for which that remedy is available has been variously described as “fraud or negligence” or “gross misconduct or fraud”.
[5] GE Capital Australia v Davis (2002) 180 FLR 250 at [85].
In Williams v Frayne[6] Dixon J explained:
If the guarantee is given upon a condition, whether express or implied from the circumstances, that a specific security shall be obtained, completed, protected, maintained or preserved, any failure in the performance of the condition operates to discharge the security and the discharge is complete. But otherwise the surety can complain only if the creditor sacrifices or impairs a security, or by his neglect or default allows it to be lost or diminished, and in that case the surety is entitled in equity to be credited with the deficiency in reduction of his liability.
[6] Williams v Frayne (1937) 58 CLR 710 at 738.
In GE Capital Australia v Davis[7] Bryson J explained how s 420A operated to supplement the entitlement of a guarantor of a debt to claim a set-off where a creditor sacrifices a security held over the same debt in these terms:
53 My view is that the requirement imposed on the controller by subs 420A(1) takes the place of, or it may be operates cumulatively to the obligation otherwise existing with the general law of a controller exercising power of sale in respect of property of a corporation. In so doing the section enhances the duty of the controller and the protection afforded to the corporation. This is achieved, and the apparent legislative intention is fulfilled without altering the remedies available to the corporation for breach of obligation in exercising the power of sale, and without altering the means available for obtaining remedies. Where real property subject to a mortgage has been sold and the mortgagor succeeds in establishing that there has been a sacrifice of the mortgagor’s interest in the exercise of the power of sale the mortgagor’s remedy is to be credited compensation when accounts are taken of the mortgage debt. Subsection 420A(1) alters this scheme by inserting a more stringent rule, but does not otherwise change the scheme.
…
56 In my view there is nothing to indicate that it was the intention of the legislature that subs 420A(1) should confer any right or remedy on guarantors or other persons who involve themselves contractually in consequences of the exercise of the power of sale, but the guarantor is entitled to rely on the availability to the mortgagor of a remedy, whether the remedy was that previously established by Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 or is now the remedy available to the mortgagor on breach of the duty declared by subs 420A(1); the guarantor is entitled to have an equitable remedy on the basis that the mortgage accounts are taken on whatever may be the principle truly applicable to taking mortgage accounts. In my opinion the equitable remedies which in an earlier state of the law were available to a guarantor where there was a breach of the mortgagee’s duty to a mortgagor corporation are now to be tested by reference to whether there was a breach of the duty stated in subs 420A(1).
…
92    These authoritative statements appear to me to have the effect that the surety may complain of anything of which the debtor may complain, and has further rights where the value or realisation of the security has been diminished by the creditor’s neglect or default. What is meant by neglect or default is not further defined by the authorities, but it gives more protection than was available to the debtor under Pendlebury. The guarantor has even greater protection and may be completely discharged if the creditor fails to obtain effective security which is available as in Wulff v Jay, or varies the terms of the loan or security without the guarantor’s concurrence. Where subs 420A(1) applies I am of the view that it should be applied as a fair representation of the standard of neglect or default referred to by Dixon and Brennan JJ. If the guarantors show that the mortgagors would, if they made a claim, be entitled to a remedy under subs 420A(1), the guarantors are, in my opinion, entitled to a similar remedy by way of an equitable defence to the claim against them, subject to the provisions of the guarantee.[8]
[7]    GE Capital Australia v Davis (2002) 180 FLR 250.
[8]    GE Capital Australia v Davis (2002) 180 FLR 250 at [53], [56] and [92].

Because a guarantor’s set-off is founded on conduct which derogates from the value of the security, the guarantor cannot, generally, complain of conduct of the creditor, or of a dealing with the secured property, which is authorised by the very terms of the security or the contract of guarantee.[9] However, abuse of the power of disposal might discharge a guarantor to the extent that the value of the security was not fully realised.[10]
[9] GE Capital Australia v Davis (2002) 180 FLR 250 at [85].
[10] Commonwealth Bank of Australia v Lee (1996) 22 ACSR 574; Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700 at 704-6.
No Reasonable Ground of Defence
Philips’ reliance on s 420A, on the facts and circumstances pleaded, is untenable. Before their appointment as receivers, the agents did not come within the meaning of the term “controller” because they were not in possession nor control of the charged property and because their decisions and directions were not made and given “for the purpose of enforcing a Charge”.
The meaning of the word “possession” is protean. Its precise meaning must be taken from the purpose and content of the enactment. In Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd, Mason CJ said: [11]
It is a well-settled rule of construction that in the case of a statute being a code intended to replace the common law, its meaning is to be ascertained in the first instance from its language and the natural meaning of that language is not to be qualified by considerations derived from the antecedent law. But an appeal to earlier decisions can be justified if the language of the statute is itself doubtful or if some other special ground is made out, e.g., if words used have previously acquired a special meaning which differs from their ordinary meaning. (Citations omitted.)
[11] Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236 at 243-4.
The various meanings of ‘possession’ were considered by Santow J in Horsley v Phillips Fine Art Auctioneers Pty Ltd.[12]Santow J first referred to the range of meanings of the words from effective physical and manual control, to a legal right to possession without actual custody or physical control.[13]
[12] Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) BPR 14,360.
[13] Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) BPR 14,360 at 14,371-2.
In the seminal text, Possession in the Common Law,[14] the learned authors concluded that “possession in law is a substantive right or interest which exists and has legal incidents and advantages apart from the true owner’s title.”[15]
[14] Pollock & Wright, Possession in the Common Law (Clarendon Press, 1898).
[15] Pollock & Wright, Possession in the Common Law (Clarendon Press, 1898) at 19, reproduced in Horsley at 14,371.
In Words and Phrases Legally Defined,[16] possession is defined, in part, as follows:
“Possession” may mean legal possession: that possession which is recognised and protected as such by law. The elements normally characteristic of legal possession are an intention of possessing together with that amount of occupation or control of the entire subject matter of which it is practically capable and which is sufficient for practical purposes to exclude strangers from interfering. Thus, legal possession is ordinarily associated with de facto possession; but legal possession may exist without de facto possession, and de facto possession is not always regarded as possession in law.
[16] John B Saunders (ed), Words and Phrases Legally Defined (Butterworths, 3^rd ed 1989) at 398.
Section 420A appears in that part of the Act which deals with the duties of controllers in the external administration of companies and their assets. Section 419 imposes an obligation on a person who “enters into possession or assumes control of any property of a corporation for the purpose of enforcing any charge” to pay for, or be liable for, debts he or she incurs in the course of that possession or control “for services rendered, goods purchased or property hired, leased, used or occupied.” Section 419A makes a controller of property of a corporation who takes control of third party property which a corporation used, occupied or was in possession of before the “control day” liable for any amounts payable by the corporation in connection with its agreement to use or occupy or be in possession of the property. That liability is, however, conditioned on the controller also being a “controller of the third party’s property”. Section 420A itself applies to the acts and omissions of a controller in connection with the sale of property. The purpose of s 420A, which is to burden the power of a controller to sell the property of a corporation with a duty, in itself suggests that the defining characteristic of a controller as one who has “possession or control” implies a degree of possession or control which is sufficient to remove the property from the control of the corporation so that it might be sold or otherwise dealt with.
The statutory context indicates that the words “possession” and “control” in the definition of “controller” refer to a legal right to possession, or de facto possession, which is effective against the proprietary interests of the corporation in that property. A person will be in control of the property of the corporation if he or she has a legal or de facto capacity to use, occupy, sell or otherwise dispose of the property against the wishes of the corporation.
The mere crystallisation of the Charge and the appointment of the agents for the purposes of giving or withholding consent to the disposal of the charged assets did not give Rabobank any right to, or de facto possession of, the charged assets as against R Winery. Whatever proprietary interest Rabobank had over the charged assets by reason of its right to veto a disposal of those assets by R Winery, that interest did not amount to a right to possess the charged assets to the exclusion of R Winery. The Charge itself provides that it is only enforceable on a default which brings the right of R Winery to deal with the charged assets to an end. Clause 7 of the Charge provides for enforcement of the Charge by the appointment of a receiver, who has the power to take possession of and manage, collect, get in and receive the whole or any part of the charged assets only after R Winery has defaulted. The distinction between the non-possessory interest of Rabobank before default, and the power of possession and disposition thereafter, is clearly drawn by the Charge. The basis upon which the Charge given by R Winery to Rabobank operates is consistent with the operation of a Charge pursuant to the general law.
Moreover, the decisions of Rabobank and the agents of which Philips complains were not decisions made for the purpose of enforcing the Charge. The agents could not, before their appointment as receiver-managers, exercise any power of sale. The right to veto R Winery’s use or disposal of the Charged assets is a right antecedent to the enforcement of the Charge and is, therefore, not a power of control which is exercised for the purpose of enforcement of the Charge by sale of the charged assets.
Accordingly, Philips’ defence, founded on s 420A, is bound to fail because Rabobank and the agents were not controllers in possession or control of the property; nor were they making any decisions with respect to the property for the purposes of enforcing the Charge or exercising a power of sale.
That part of Philips’ defence which relies on the equitable duty of a chargee not to sacrifice the secured property also lacks any reasonable prospects of success. As I earlier observed, the general law duty is necessarily affected by the very terms of the Charge. In this case, the Charge gives an unqualified right to the chargee to withhold consent to the disposal of any property over which the Charge operates as a fixed Charge and over any such property on which a floating Charge later becomes fixed. Given the legitimate interest of the chargee to ensure that the security for the debt is not dissipated, the circumstances in which a withholding of consent to dispose of the goods is unreasonable are likely to be rare. A refusal to consent to the disposal of perishable goods may be an example. Be that as it may, Philips has not pleaded any particular circumstances which are capable of attainting the exercise of the express power to withhold consent as an unreasonable sacrifice of the value of the charged assets.
Philips pleads no more than the withholding of consent and a consequential loss of value. The mere fact that goods lose value in a period during which a chargee or its agent refuses to allow disposal is not, by that reason alone, a sacrifice of the goods. It will often be the case that a market for goods will fluctuate. A fall in the market during the period that a chargee takes to consider how the repayment of the debt will best be achieved cannot, in itself, amount to a sacrificing of the goods.[17] A chargee will not always be in a position to know the market and business of its debtor. Some time will necessarily be required. Nor is it necessarily unreasonable to withhold consent to disposal of charged assets simply because the debtor asserts that a loss will be suffered if the goods are not immediately sold. The same considerations apply, and with greater force, to Philips’ claim that Rabobank or its agents unreasonably refused to authorise a payment from the cash assets of the chargor, or to make a payment itself, to secure the release of the stock from B.
[17] Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700 at 704-6.
Conclusion
I accept that there may be facts and circumstances surrounding the exercise of the power to withhold consent on which a set-off to Rabobank’s claim might be founded. At the very least, I am mindful that Philips should not be denied the opportunity to put such a case, notwithstanding its problematic nature, if a sufficiently particularised factual context can be pleaded. Ordinarily, permission to replead an arguable action or defence would be given contemporaneously with the order striking out the unsustainable parts of a pleading. However, it is clear from the submissions put by Philips’ counsel that he is unlikely to be in a position to fully plead the factual circumstances on which he will rely until after discovery has been made and inspection taken. For that reason I strike out the impugned paragraphs of the defence and decline to make an ancillary order.