Ekes v Commonwealth Bank of Australia

Case •

[2014] NSWCA 336

•

30 September 2014

Court of Appeal


Supreme Court


New South Wales

  • Summary available
Medium Neutral Citation: Ekes v Commonwealth Bank of Australia [2014] NSWCA 336
Hearing dates:2 June 2014
Decision date: 30 September 2014
Before: Bathurst CJ at [1]; Beazley P at [176]; Emmett JA at [177]
Decision:

(1) Leave to appeal granted.

(2) Appeal allowed.

(3) Set aside orders 1-9 of the orders made by the primary judge on 8 March 2013.

(4) Grant the appellant leave to file an amended defence in the form of the draft defence contained at pp 65-81 of the Red Book filed in the proceedings and a cross-claim filed in the form of the draft cross-claim contained at pp 84-107 of the Red Book filed in the proceedings.

(5) Remit the matter to the Common Law Division for hearing.

(6) Order the respondent pay the appellant's costs of the appeal.

(7) Costs of the motion at first instance, the subject of the appeal, otherwise be costs in the cause.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

PROCEDURE - civil - summary disposal - application to strike out defence and refuse leave to file amended defence and cross-claim - whether pleadings so obviously untenable could not possibly succeed - whether arguable that issue and Anshun estoppel and abuse of process principles do not arise

PROCEDURE - civil - leave to file cross-claim by guarantor - whether joinder of debtor necessary to plead equitable set-off also available to debtor - exceptional circumstances - summary judgment - debtor in liquidation - creditor's rights over debtor merged with judgment

EQUITY - estoppel - whether issue estoppel existed - matter had been listed for hearing - company unable to pay security for costs - proceedings dismissed by consent - whether effective abandonment of claims in proceedings

EQUITY - estoppel - issue estoppel - whether guarantor privy to principal debtor - whether inaction in earlier proceedings raises issue estoppel - whether corporate embodiment of a party in earlier proceedings is privy to earlier proceedings

EQUITY - Anshun estoppel and abuse of process - reasonableness of failure to join party in earlier proceedings - earlier proceedings dismissed by consent - prospect of inconsistent judgments bringing administration of justice into disrepute - whether any oppression or unfairness

DAMAGES - reflective loss - whether loss separate and distinct from company's loss

PROCEDURE - civil - leave to file cross- claim - exercise of discretion - flagrant disregard of court's directions - consideration of Civil Procedure Act 2005 (NSW), s 56-58 - relative prejudice to parties
Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth), ss 12DA and 12GF
Bankruptcy Act 1966 (Cth), Pt X
Civil Procedure Act 2005 (NSW), ss 56-59
Contracts Review Act 1980 (NSW)
Corporations Act 2001 (Cth), s 418A
Federal Court Rules (Cth), O35 rr 6 and 10A
Supreme Court Act 1970 (NSW), s 101(2)(l)
Trade Practices Act 1974 (Cth), ss 52, 82 and 87
Cases Cited: Bain, Public Officer v Cooper (1841) 151 ER 1243
Ballard v Multiplex Ltd [2008] NSWSC 1019; (2008) 68 ACSR 208
Blair v Curran [1939] HCA 23; (1939) 62 CLR 464
Cannon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759
Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853
Cellulose Products Pty Ltd v Truda (1970) 92 WN (NSW) 561
Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502
Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245
Chen v Karandonis [2002] NSWCA 412
Commonwealth Bank of Australia v Ekes [2013] NSWSC 1264
Covino v Bandag Manufacturing Pty Ltd [1983] 1 NSWLR 237
Effem Foods Pty Limited v Trawl Industries of Australia Pty Limited (Receivers and Managers Appointed -In Liquidation) [1993] FCA 342; (1993) 43 FCR 510
Ex parte Young; In re Kitchin (1881) 17 Ch D 668
GE Capital Australia v Davis [2002] NSWSC 1146; (2002) 180 FLR 250
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Gerard Cassegrain & Co Pty Ltd (ACN 000 342 174) v Cassegrain [2013] NSWCA 453; (2013) 305 ALR 612
Gibbs v Kinna [1998] VSCA 52; [1999] 2 VR 19
Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510
Gould v Vaggelas [1984] HCA 68; (1984) 157 CLR 215
Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231
Henderson v Henderson (1843) 67 ER 313
Hyundai Shipbuilding & Heavy Industries Co v Pournaras [1978] 2 Lloyd's Rep 502
In re South American and Mexican Company; Ex parte Bank of England [1895] 1 Ch 37
Isaacs v The Ocean Accident and Guarantee Corporation Ltd and Winslett (1958) SR (NSW) 69
John Alexander's Clubs Pty Limited v White City Tennis Club Limited [2010] HCA 19; (2010) 241 CLR 1
Johnson v Gore Wood & Co [2002] 2 AC 1
Khan v Golechha International Ltd [1980] 1 WLR 1482
Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363
Langford Concrete Pty Ltd v Finlay [1978] 1 NSWLR 14
Makhoul v Barnes (1995) 60 FCR 572
Minero Pty Ltd v Redero Pty Ltd (Unreported, Supreme Court of New South Wales, 29 July 1998)
Mondel v Steel (1841) 151 ER 1288
National Westminster Bank Plc v Skelton [1993] 1 WLR 72
Port of Melbourne Authority v Anshun Proprietary Limited [1981] HCA 45; (1981) 147 CLR 589
Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57
Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] 1 Ch 204
Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271
Redowood Pty Limited v Link Market Services Pty Limited (Formerly Known As ASX Perpetual Registrars Limited) [2007] NSWCA 286
Robert Louden Begley v The Attorney General of New South Wales [1910] HCA 69; (1910) 11 CLR 432
Sandtara Pty Ltd v Abigroup Ltd [1997] NSWSC 294; (1997) 42 NSWLR 5
SCF Finance Co Ltd v Masri (No 3) [1987] 1 QB 1028
Solak v Registrar of Titles [2011] VSCA 279; (2011) 33 VR 40
Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118
State of New South Wales v Williams [2014] NSWCA 177
Thomas v Balanced Securities Ltd [2011] QCA 258; [2012] 2 Qd R 482
Trawl Industries of Australia Pty Limited (In liquidation) v Effem Foods Pty Limited [1992] FCA 272; (1992) 36 FCR 406
Texts Cited: Andrews and Millet, Law of Guarantees, (4th ed 2005, Sweet & Maxwell)
Marks and Moss, Rowlett on Principal and Surety, (6th ed 2011, Sweet & Maxwell)
O'Donovan and Phillips, The Modern Contract of Guarantee (4th ed 2004, Thomson Lawbook Co)
Handley, Spencer Bower and Handley Res Judicata (4th ed 2009, LexisNexis)
Category:Principal judgment
Parties: Paul Ekes (Appellant)
Commonwealth Bank of Australia (Respondent)
Representation: Counsel:
D R Pritchard SC / A Macauley (Appellant)
A J McInerney SC / L T Livingston (Respondent)
Solicitors:
File Number(s):2013/344471
 Decision under appeal 
Citation:
[2013] NSWSC 1264
Date of Decision:
2013-11-01 00:00:00
Before:
Davies J
File Number(s):
2010/306145

Judgment

  1. BATHURST CJ: This is an appeal from orders made by Davies J (the primary judge) in the Common Law Division of this Court in proceedings between the respondent as plaintiff and the appellant as first defendant. Davies J ordered the appellant's defence be struck out, refused him leave to file an amended defence and cross-claim and entered judgment in favour of the respondent in the sum of $26,021,213.98.

  1. The appellant has appealed against these orders. Neither party suggested that leave to appeal against any of the orders made was necessary. However, leave to appeal is required: Supreme Court Act 1970 (NSW), s 101(2)(l). The matter is suitable for a grant of leave and leave to appeal is hereby granted.

Background

  1. The background giving rise to the orders made by the primary judge is, to say the least, tortuous. In the interests of economy I have attached to my judgment as a Schedule an Agreed Chronology which contains a detailed summary of the background. As a consequence, it will only be necessary to refer to the principal events giving rise to the appeal.

  1. The respondent is the successor to all the rights and liabilities of the former Bank of Western Australia Limited (Bankwest) including any rights Bankwest had against the appellant and any liabilities owed by Bankwest to him.

  1. In June 2007 Bankwest agreed to lend 888 Projects Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (the company) $19,640,000.00 to develop a site at 4-6 Walton Crescent, Abbotsford (the property). The facility was secured by a mortgage over the property and a charge over the assets and undertaking of the company (the charge). The appellant guaranteed payment of the facility.

  1. There were two agreed variations to the facility agreement. On 13 November 2007 the amount advanced under the facility was increased to $24,284,000.00, whilst on 16 January 2009 the repayment date was extended to 30 June 2009.

  1. The appellant and a Mr Christian Becerra were the original guarantors of the company's obligations under the facility agreement. The variation of 16 January 2009 substituted Mr Hector Ekes and 888 Projects (Marinas) Pty Ltd as guarantors in place of Mr Becerra. The appellant remained a guarantor of the loan.

  1. On 27 October 2009 the respondent issued a notice of default to the company. The notice of default alleged three events of default. First, the facility had expired and not been repaid. Second, an application to wind-up the company had been made and, third, the appellant's co-guarantor, Mr Hector Ekes, had entered into a personal insolvency arrangement under Pt X of the Bankruptcy Act 1966 (Cth).

  1. The notice stated that as a consequence the facility was immediately due and payable and the security was immediately enforceable. The notice stated that Bankwest reserved its rights to make demand for the full debt and to enforce its security.

  1. On 11 February 2010 Bankwest issued a further notice to the company referring to the earlier notice of default under the facility and stating as a result the charge had become enforceable. On the same day Bankwest appointed receivers and managers to the company.

  1. On 25 February 2010 the company commenced proceedings in the Federal Court of Australia against Bankwest and the receivers and managers by way of originating process (the Federal Court proceedings). The originating process sought declarations that the appointment of the receivers and managers was invalid and that Bankwest was not entitled to rely on the notice of default of 27 October 2009.

  1. Relevantly for the present proceedings the company also sought a declaration that Bankwest had agreed to vary the loan facility of 5 June 2007 by extending the term to 31 March 2010 or until completion of building works referred to in the facility agreement in consideration of the company making further interest payments. Alternatively it was claimed that Bankwest was estopped from denying the variation occurred.

  1. The originating process mistakenly sought a declaration that the plaintiff had breached the facility agreement. It is plain that the reference should have been to Bankwest. It also sought a declaration that Bankwest had engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth). The originating process sought damages against Bankwest for breach of contract or under s 82 of the Trade Practices Act or s 12GF of the ASIC Act.

  1. Various other forms of relief including interlocutory relief were sought against Bankwest and the receivers and managers in the originating process. The interlocutory relief sought to restrain the receivers and managers from dealing with the assets of the company and to restrain Bankwest from exercising its powers under the mortgage and charge.

  1. On 26 February 2010 Jacobson J set down an interlocutory hearing of the Federal Court proceedings on 4 March 2010 and ordered the company to pay $20,000.00 as security for costs, without prejudice to the defendants' rights to seek further security. On that day the receivers and managers gave certain undertakings not to carry out construction work or sell the property.

  1. On 2 March 2010 the company filed a Statement of Claim in the Federal Court proceedings. The Statement of Claim was amended on 9 March. The following paragraphs of the Statement of Claim are relevant for the purpose of these proceedings:

"13. On 2 April 2009, in writing, the plaintiff and Bankwest further agreed to vary the Loan Agreement ('the Third Variation') by:
(a) extending the repayment date to 10 April 2010 or alternatively to the date of completion of the Development or on a date to be agreed by the parties;
(b) requiring the plaintiff to make specified monthly interest payments to Bankwest from May to October 2009; and
(c) obtaining variations of the dates by which plaintiff's contracts of sale to purchasers of units in the Development would become unconditional to 10 April 2010.
[Particulars omitted]
...
18. Pursuant to the Third Variation to the Loan Agreement, the plaintiff was not required to repay the Loan on 30 June 2009 but on either the date of completion of the Development 10 April 2010 or on a later date to be agreed by the parties.
...
Election
20. Further and in the alternative:
(a) on 30 June 2009, Bankwest was entitled at its option pursuant to clause 10(1)(b) of the Loan Agreement to treat the Loan as immediately due and payable;
(b) Bankwest did not exercise that option on 30 June 2009;
(c) on and after 28 July 2009, Bankwest elected to exercise its option and decided not to treat the loan as immediately due and payable and instead affirmed the Loan Agreement by:
(i) accepting an interest payment of $60,000 on 28 July 2009 from the plaintiff as required by Bankwest in the emails referred to in paragraph 13(c) above; and
(ii) thereafter granting the plaintiff further accommodation under the Loan Agreement and permitting it to make further drawings of principal; and
(iii) requiring and accepting regular interest payments from the plaintiff.
(d) In the premises, Bankwest is estopped on and after 28 July 2009 from asserting that failure by the plaintiff to repay the Loan by 30 June 2009 constituted an event of default pursuant to the Loan Agreement, the Charge and the Mortgage.
Promissory Estoppel
21. Further and in the alternative:
(a) From about 2 April 2009, Bankwest represented to the plaintiff ('the Representations') that:
(i) Bankwest would extend the term of the Loan Agreement to the date of completion of the Development or a date to be agreed by the parties 10 April 2010 or until completion of the Development, whichever was the later date, and
(ii) would permit the plaintiff to make further drawings of principal,
on the condition that:
(iii) the plaintiff made specified interest payments to Bankwest; and
(iv) the plaintiff obtain variations of the dates by which plaintiff's contracts of sale to purchasers of units in the Development would become unconditional to 10 April 2010.
[Particulars omitted]
(b) In reliance upon the Representations:
(i) the plaintiff assumed that the Loan Agreement would be extended in accordance with the Representations; and
(ii) acted to its detriment.
PARTICULARS OF RELIANCE
The plaintiff:
(1) made all interest payments required by Bankwest after 30 June 2009;
(2) incurred liabilities to its building contractors working on the development
(3) made further drawings of principal under the Loan Agreement;
(4) used those drawings of principal to pay its building contractors; and
(5) varied obtained variations of the dates by which plaintiff's contracts of sale to purchasers of units in the Development would become unconditional to 10 April 2010.
(6) Further particulars will be supplied after discovery has taken place.
(c) Bankwest intended the plaintiff to act in that manner.
(d) The plaintiff will suffer severe detriment if its assumption, that the repayment date of the Loan was not extended in accordance with the Representations to 10 April 2009 or until completion of the Development, whichever is the later.
PARTICULARS OF DETRIMENT
(1) Lost profit from the development when completed.
(2) Interest paid after May 2009
(3) Principal drawn down after 20 June 2009.
(4) Further particulars will be supplied after discovery has taken place.
(e) By appointing the Receivers, the plaintiff has failed to act to avoid that detriment.
22. In the premises, Bankwest is estopped from:
(a) relying upon the Events of Default referred to in the Notices of Default; and
(b) denying that the repayment date of the loan is the date of completion of the Development or a date to be agreed by the parties 10 April 2010 or the date of completion of the Development whichever is the later.
Estoppel by Convention
23. Further and in the alternative, from 30 June 2009 the plaintiff and Bankwest agreed to conduct their business relationship upon the basis that:
(a) the term of the Loan Agreement was extended to the date of completion of the Development or a date to be agreed by the parties 10 April 2010 or until completion of the Development, whichever was the later date,
(b) Bankwest would permit the plaintiff to make further drawings of principal to enable the Development to be completed, and
(c) the plaintiff would make monthly interest payments to Bankwest, and
(d) the plaintiff would obtain variations of the dates by which plaintiff's contracts of sale to purchasers of units in the Development would become unconditional to 10 April 2010.
[Particulars omitted]
24. Alternatively, the plaintiff and Bankwest assumed that their business relationship would be conducted upon that basis, and that assumption was adopted by both of them.
[Particulars omitted]
25. In the premises, Bankwest is estopped from:
(a) relying upon the Events of Default referred to in the Notices of Default; and
(b) denying that the repayment date of the loan is the date of completion of the Development or a date to be agreed by the parties 10 April 2010 or the date of Completion of the Development whichever is the later.
...
CONTRAVENTION OF S.52 OF THE TRADE PRACTICES ACT AND THE ASIC ACT
32. Bankwest is a corporation within the meaning of the Trade Practices Act, 1974 (Cth) and the ASIC Act, 2001 (Cth).
33. Bankwest made the Representations in trade or commerce and in relation to the provision of financial services.
34. The Representations are misleading or deceptive or likely to mislead or deceive because Bankwest asserts that the plaintiff is in default of the Loan Agreement as asserted in the Notices of Default.
35. Bankwest has thereby contravened s.52 of the Trade Practices Act, 1974 (Cth) and s.12DA of the ASIC Act, 2001 (Cth).
36. To the extent that the Representations were as to future matters, the plaintiff relies on s.51A of the Trade Practices Act, and/or s.12BB of the ASIC Act.
37. The plaintiff relied upon the Representations and has suffered and will continue to suffer loss and damage
PARTICULARS
(1) Loss of profits caused by the delay in completing the Development.
(2) Penalty interest paid but not payable under the Loan Agreement.
(3) Penalty interest accrued but not paid.
(4) Further particulars will be provided in due course.
38. The plaintiff is entitled to recover damages from Bankwest pursuant to s.82 of the Trade Practices Act and/or s.12GF of the ASIC Act.
BREACH OF CONTRACT
39. In breach of the Loan Agreement as varied, Bankwest has asserted that the Charge and the Mortgage are immediately enforceable and has the appointed the Receivers.
40. The plaintiff has thereby suffered damage, and seeks damages in contract.
[Particulars omitted]
UNCONSCIENTIOUS CONDUCT
41. If Bankwest was legally entitled to enforce the Charge and the Mortgage, which the plaintiff denies, then the appointment of the receivers was an unconscientious use of that power in the light of the conduct of Bankwest set out in paragraphs 20 and 21 above.
PARTICULARS OF UNCONSCIENTIOUS CONDUCT
(1) From May 2009, by the Representations and its conduct in accepting interest payments and permitting the plaintiff to make further drawings of principal, Bankwest induced the plaintiff to assume that if it paid interest as required from time to time, Bankwest would support the Development until completion, and thereby lulled the Plaintiff into a false sense of security.
(2) On 4 August 2009, Ingrid Lipovz told the Hector Ekes that the plaintiff should disregard a notice of default
(3) On 8 February 2010, Elise Cockerell said to Hector West that no receivers had been appointed to the plaintiff thereby inducing the plaintiff to assume that Bankwest had no intention of appointing receivers.
42. The plaintiff is entitled to equitable compensation.
[Particulars omitted]
UNCONSCIONABLE CONDUCT
43. Further and in the alternative, Bankwest has in trade or commerce in connection with the supply of services and financial services has engaged in conduct that is, in all the circumstances, unconscionable.
[Particulars omitted]
44. Bankwest has thereby contravened s.51A Trade Practices Act, 1974 (Cth) and s.12CB of the ASIC Act, 2001 (Cth).
45. The plaintiff is entitled to recover damages from Bankwest pursuant to s.82 of the Trade Practices Act and/or s.12GF of the ASIC Act.
The applicant claims the relief specified in the application."

  1. On 3 March 2010 the undertaking by the receivers and managers was extended to 14 April.

  1. On 8 March 2010 Bankwest and the receivers and managers of the company filed an application for security for costs in the Federal Court proceedings and for an undertaking as to damages. On that day the proceedings were set down for a final hearing on 13-14 April.

  1. On 15 March 2010 the application for security was heard by Jacobson J who reserved judgment. On the same day the appellant resigned as a director of the company. On 16 March Jacobson J ordered the company provide a further $50,000.00 as security for costs and a further amount of $250,000.00 as security for the undertaking for damages proffered in respect of the undertakings given by the receivers and managers. The security was payable within seven days. The company failed to pay the security and the proceedings were stayed in accordance with the orders of Jacobson J.

  1. His Honour's judgment made it clear that the company's claim for relief was based on the proposition that the loan repayment date had been extended. It should be noted that the company during the hearing proffered $50,000.00 as security for the undertaking, which was rejected as inadequate.

  1. On 24 March 2010 the solicitors for Bankwest indicated to the company's solicitor that they proposed to seek orders releasing it and the receivers and managers from the undertakings which they had given to the Court, that the company pay the defendants' costs of the proceedings and that the security of $20,000.00 paid into Court by the company be released on account of such costs.

  1. On 31 March 2010 Bankwest and the receivers and managers filed a notice of motion seeking orders dismissing the proceedings, releasing them from their undertakings and authorising payment to them of the $20,000.00 security.

  1. On 12 April 2010 the company's solicitor indicated his client's consent to the orders sought with the exception of the order for payment out of the $20,000 security. By email of 13 April the company consented to the motion.

  1. On 13 April 2010 consent orders were made dismissing the Federal Court proceedings (the Dismissal).

  1. On 16 April 2010 the company was placed into liquidation.

  1. On 22 July 2010 Bankwest demanded repayment of its facility from the company.

  1. On 26 July 2010 Bankwest (who for convenience I will now refer to as the respondent) made demand under the guarantee and on 14 September commenced proceedings in the Common Law Division of this Court seeking judgment in an amount of $28,344,516.45 as money due under the guarantee.

  1. The procedural history of the proceedings is set out in the Agreed Chronology and I shall not repeat it. However, on 12 March 2012 the appellant filed a pleading entitled "Further Amended Defence" (the filed defence). That defence relevantly provided as follows (omitting underlining):

"8. In further answer to paragraph 5 of the claim, on or about 2 April 2009, the plaintiff and 888 Projects agreed to further vary the Facility by:
a) the plaintiff extending the repayment date to at least 31 November 2009;
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff.
[Particulars omitted]
...
10. After 2 April 2009, to the knowledge of the plaintiff, 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility.
11. On or about 30 July 2009, 888 Projects paid $60,000.00 interest to the Plaintiff.
12. On or about 10 August 2009, the plaintiff and 888 Projects agreed to further vary the Facility by:
a) the plaintiff further extending the repayment date to 31 March 2010 ('the Final Repayment Date');
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff.
[Particulars omitted]
13. After 10 August 2009, to the knowledge of the plaintiff, 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility.
14. On or about 12 August 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $453,549.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility. After 2 April 2009, to the knowledge of the plaintiff, 888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility.
15. On or about 24 August 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $259,841.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility.
16. On or about 10 September 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $426,343.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility.
17. On 18 September 2009, 888 Projects paid $60,000.00 interest to the plaintiff.
18. On or about 12 October 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $800,000.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility.
19. On 23 October 2009, 888 Projects paid $60,000.00 interest to the plaintiff.
20. On or about 9 November 2009 and pursuant to the agreement made on or about 10 August 2009, the plaintiff permitted a further draw down of $770,000.00 under the Facility for the purpose of meeting expenses of the project the subject of the Facility.
21. On 17 November 2009, 888 Projects paid $60,000.00 interest to the plaintiff.
22. In answer to paragraph 6(a) of the claim, the first defendant says:
a) the Final Repayment Date was 31 March 2010 and not 30 June 2009;
...
23. In answer to paragraph 6(b) of the claim, the first defendant says:
a) the Final Repayment Date was 31 March 2010; and
...
24. In answer to paragraph 6(c) of the claim, the first defendant says:
a) no event of default would arise if an order for winding up of 888 Projects was caused by an act or omission of the plaintiff of the Facility; and
...
25. In answer to paragraph 6(d) of the claim, the first defendant says:
a) that the loan together with all interest accrued and all other amounts payable under the Facility would not become immediately due and payable without the necessity for notice or demand in the event of an event of default occurring which event of default was caused by an act or omission of the plaintiff in breach of the Facility; and
...
27. The first defendant denies paragraph 7 of the claim.
28. In further to answer paragraph 7 of the claim:
a) on or about 11 February 2010, the plaintiff purported to appoint Messrs N G Singleton and S J Parberry as a receivers and managers to 888 Projects;
b) the plaintiff purported to appoint the receivers and managers consequent upon an alleged default by 888 Projects under the Facility by failing to repay in full the Facility by the alleged repayment date of 30 June 2009;
c) the purported appointment of the receivers and managers was wrongful and in breach of the Facility as the Final Repayment Date had not occurred and, alternatively, the plaintiff had waived any alleged default and, alternatively, elected to affirm the Facility as to preclude reliance on any alleged default by its conduct after 30 June 2009;
d) the purported appointment of the receivers and managers had the effect that 888 Projects could not progress and complete the project the subject of the Facility and pay its creditors;
e) the Office of State Revenue was a creditor of 888 Projects which could not be and, further and alternatively, was not paid by reason of the wrongful appointment of the receivers and managers by the plaintiff;
f) the liability for land tax the subject of the winding up Order of 888 Projects became due and payable during the period of appointment of the receiver and managers, which the receiver and managers paid late and after the due date, being a date after the winding up of 888 Projects; and
g) by reason of the failure of 888 Projects and more importantly the receivers and managers to pay the Office of State Revenue, within the demand period, the Office of State Revenue sought and obtained an order winding up 888 Projects on 16 April 2010 by order of the Supreme Court of New South Wales in proceedings No. 3703 of 2009.
29. In answer to paragraph 8 of the claim, the first defendant says:
a) that the Final Repayment Date under the Facility was 31 March 2010 and not 30 June 2009;
b) alternatively, the plaintiff had waived any alleged default, or alternatively, elected to affirm the Facility as to preclude reliance on any alleged default by its conduct after 30 June 2009; and
c) otherwise denies paragraph 8 of the claim.
30. In answer to paragraph 9 of the claim, the first defendant says:
a) the wrongful appointment of the receivers and managers by the plaintiff together with the failure by the receivers and managers to pay the outstanding Land Tax within the prescribed period to the OSR, was an act or omission of the plaintiff or its agents and/or receivers and managers which caused the winding up order to be made;
b) in the premises, the plaintiff is precluded from relying on the winding up order as a default by 888 Projects; and
c) otherwise denies paragraph 9 of the claim.
...
40. In further answer to paragraph 18 of the claim, the first defendant says:
a) the first defendant has no liability under the first guarantee as alleged in circumstances where:
i. there has been no default by 888 Projects as alleged upon which the plaintiff is entitled to rely upon; and
ii. there are no amounts owing by 888 Projects as alleged under the Facility; and
b) the plaintiff has suffered no loss because of 888 Projects' alleged insolvency and any loss suffered by the plaintiff is loss that arises as result of its own conduct in breach of the Facility."

In these circumstances liability was denied.

  1. The filed defence abandoned defences, including those based on promissory estoppel, estoppel by convention, contravention of the Trade Practices Act and unconscionable conduct, which had been made in previous versions of the defence. However, those claims were sought to be reintroduced by the proposed further defence which was considered by the primary judge (the proposed defence). They were pleaded as follows (omitting the Particulars to some paragraphs and underlining):

"Estoppels in relation to 2 April 2009
46. Alternatively to paragraph 8 above, on or about 2 April 2009, the plaintiff represented to 888 Projects and the first defendant that the plaintiff had varied the Facility by:
a) the plaintiff extending the repayment date to at least 31 November 2009;
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff.
47. After 2 April 2009, 888 Projects and the first defendant assumed that the Facility had been varied by:
a) the plaintiff extending the repayment date to at least 31 November 2009;
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff.
48. After 2 April 2009, the plaintiff induced 888 Projects and the first defendant to adopt that assumption.
Particulars
The plaintiff did not resile from the representations, permitted 888 Projects to make further drawings under the Facility, accepted interest payments from the plaintiff and did not act on any alleged event of default by 888 Projects.
49. 888 Projects and the first defendant acted in reliance on the assumption.
Particulars
888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance.
50. The plaintiff knew or intended 888 Projects and the first defendant to act in reliance on the assumption.
51. If the Facility was not further varied as alleged in paragraph 8 above, 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings and the plaintiff will have failed to act to avoid the detriment by fulfilling the assumption.
52. In the premises, the plaintiff is estopped from denying that on or about 2 April 2009, the Facility was varied by:
a) the plaintiff extending the repayment date to at least 31 November 2009;
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff.
53. Further and in the alternative, the first defendant repeats paragraph 46 above.
54. After 2 April 2009, the plaintiff, 888 Projects and the first defendant proceeded on the basis of the underlying assumption that the Facility had been varied.
55. After 2 April 2009, each of the plaintiff and 888 Projects and the first defendant has, to the knowledge of the other, accepted the assumption as being true for the purposes of the Facility and such acceptance was intended to affect their legal relations.
56. 888 Projects and the first defendant were entitled to act and have, as the plaintiff knew or intended, acted in reliance upon the assumption being regarded as true and binding.
Particulars
888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance.
57. If the Facility was not further varied as alleged in paragraph 8 above, 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings, if the plaintiff is allowed to resile or depart from the assumption.
58. In the premises, it would be unconscionable for the plaintiff to resile or depart from the assumption and the plaintiff is estopped from denying that, on or about 2 April 2009, the Facility was varied by:
a) the plaintiff extending the repayment date to at least 31 November 2009;
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff.
Estoppels in relation to June 2009
59. Alternatively to paragraph 10A above, on or about 19 June 2009, the plaintiff represented to 888 Projects and the first defendant that the plaintiff had further varied the Facility by 888 Projects making and the plaintiff accepting monthly instalments of $60,000.000 under the Facility.
60. After 19 June 2009, 888 Projects and the first defendant assumed that the Facility had been varied by 888 Projects making and the plaintiff accepting monthly instalments of $60,000.00 under the Facility.
61. After 19 June 2009, the plaintiff induced 888 Projects and the first defendant to adopt that assumption.
62. 888 Projects and the first defendant acted in reliance on the assumption.
Particulars
888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance.
63. The plaintiff knew or intended 888 Projects and the first defendant to act in reliance on the assumption.
64. If the Facility was not further varied as alleged in paragraph 10A above, 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings and the plaintiff will have failed to act to avoid the detriment by fulfilling the assumption.
65. In the premises, the plaintiff is estopped from denying that on or about 19 June 2009, the Facility was varied by 888 Projects making and the plaintiff accepting monthly instalments of $60,000.00 under the Facility.
66. Further and in the alternative, the first defendant repeats paragraph 59 above.
67. After 19 June 2009, the plaintiff, 888 Projects and the first defendant proceeded on the basis of the underlying assumption that the Facility had been varied.
68. After 19 June 2009, each of the plaintiff and 888 Projects and the first defendant has, to the knowledge of the other, accepted the assumption as being true for the purposes of the Facility and such acceptance was intended to affect their legal relations.
69. 888 Projects and the first defendant were entitled to act and have, as the plaintiff knew or intended, acted in reliance upon the assumption being regarded as true and binding.
70. 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings, if the plaintiff is allowed to resile or depart from the assumption.
71. In the premises, it would be unconscionable for the plaintiff to resile or depart from the assumption and the plaintiff is estopped from denying that on or about 19 June 2009, the Facility was varied by 888 Projects making and the plaintiff accepting monthly instalments of $60,000.000 under the Facility.
Estoppels in relation to August 2009
72. Alternatively to paragraph 12 above, on or about 10 August 2009, the plaintiff represented to 888 Projects and the first defendant that the plaintiff had further varied the Facility by:
a) the plaintiff extending the repayment date to at least 31 March 2010;
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff.
73. After 10 August 2009, 888 Projects and the first defendant assumed that the Facility had been varied by
a) the plaintiff extending the repayment date to at least 31 March 2010;
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff.
74. After 10 August 2009, the plaintiff induced 888 Projects and the first defendant to adopt that assumption.
75. 888 Projects and the first defendant acted in reliance on the assumption.
Particulars
888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance.
76. The plaintiff knew or intended 888 Projects and the first defendant to act in reliance on the assumption.
77. If the Facility was not further varied as alleged in paragraph 12 above, 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings and the plaintiff will have failed to act to avoid the detriment by fulfilling the assumption.
78. In the premises, the plaintiff is estopped from denying that on or about 10 August 2009, the Facility was varied by:
a) the plaintiff extending the repayment date to at least 31 March 2010;
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff.
79. Further and in the alternative, the first defendant repeats paragraph 72 above.
80. After 10 August 2009, the plaintiff, 888 Projects and the first defendant proceeded on the basis of the underlying assumption that the Facility had been varied.
81. After 10 August 2009, each of the plaintiff and 888 Projects and the first defendant has, to the knowledge of the other, accepted the assumption as being true for the purposes of the Facility and such acceptance was intended to affect their legal relations.
82. 888 Projects and the first defendant were entitled to act and have, as the plaintiff knew or intended, acted in reliance upon the assumption being regarded as true and binding.
Particulars
888 Projects continued to progress and incur expenses in relation to the project the subject of the Facility, made further draw downs, pay interest to the plaintiff and did not seek refinance.
83. 888 Projects and the first defendant will suffer detriment by reason of the claims made in these proceedings, if the plaintiff is allowed to resile or depart from the assumption.
84. In the premises, it would be unconscionable for the plaintiff to resile or depart from the assumption and the plaintiff is estopped from denying that on or about 10 August 2009, the Facility was varied by:
a) the plaintiff extending the repayment date to at least 31 March 2010;
b) the plaintiff permitting 888 Projects to make further drawings under the Facility for the purpose of meeting expenses of the project the subject of the Facility; and
c) 888 Projects making interest payments to the plaintiff."

  1. The appellant also sought to rely on a draft cross-claim (the cross-claim). It introduced claims under the Contracts Review Act 1980 (NSW) (the Contracts Review Act claim). It also sought declarations that the plaintiff engaged in misleading and deceptive conduct and unconscionable conduct and claimed damages for such conduct.

  1. It is unnecessary to set out any part of the pleading which relates to the Contracts Review Act claim. However, the pleading of misleading conduct and unconscionable conduct reiterated the claim that the facility agreement was varied on 2 April 2009, 19 June and 10 August or, alternatively, that the bank represented that to be the case. The cross-claim asserted that in reliance on those representations the appellant permitted draw downs on the facility, made interest payments to the respondent and made certain other payments on behalf of the company.

  1. The cross-claim pleaded that following the builder, who was retained to develop the property, abandoning the site (cross-claim at [52]) the respondent represented it would not allege a breach of the facility or require interest payments until a replacement builder was approved. It pleaded that in reliance on that representation neither the company nor the appellant took steps to further progress the project pending approval of a replacement builder or seek to refinance the facility.

  1. The cross-claim then pleaded a further representation in February 2010. This portion of the pleading was in the following terms:

"58 In or about early February 2010, to the knowledge of the Bank, 888 Projects had received an offer of finance from Investec, of $26,500,000 the purpose of which was to refinance the Facility and fund the remaining development of the Property.
59. On or about 8 February 2010, the Bank represented to 888 Projects that:
a. that the Credit Department of the Bank would likely approve the Proposed December 2009 Variation and continue to fund the Development though to completion and sale; and
b. that there was no need for 888 Projects to refinance the Facility,
(the 'February 2010 Representation'). The February 2010 Representation was partly a future representation (para (a) above) and partly a present representation (para (b) above).
60. In reliance on the February 2010 Representation, 888 Projects and Mr Ekes did not take steps to further progress the project pending approval of a replacement builder or seek to refinance the Facility."

  1. The cross-claim then pleaded that the appointment of the receivers and managers to the company was wrongful. The pleading was as follows:

"Appointment of the Receivers
61 On 11 February 2010, the Bank purposed to appoint Messrs N G Singleton and S J Parbury as receivers and managers to 888 Projects ('the Receivers').
62. The purported appointment by the Bank of the Receivers to 888 Projects was:
a. wrongful in circumstances where the repayment date of the Facility was extended to 31 March 2010;
b. without prior notice to 888 Projects or Mr Ekes as guarantor;
c. without any or any proper regard to the prior dealings between the Bank and 888 Projects and Mr Ekes including:
i. The Estate Advice and Mr Ekes' purchase of the shares of 888 Projects including entry into the Murray Mortgage; and
ii the making by the Bank and the reliance by 888 Projects and Mr Ekes on the April 2009 Representation, the June 2009 Representation, the August 2009 Representation, the December 2009 Representation and the February 2010 Representation;
d. without any or any proper regard to the state of the Development;
e. without any or any proper regard to the ability of 888 Projects to complete the Development;
f. without any or any proper regard to the ability of 888 Projects to refinance the Facility; and
g. without any or any proper regard to the effect the appointment of receivers and managers to 888 Projects would have on 888 Projects, the completion of the project the subject of the Facility and on Mr Ekes as guarantor.
63 Upon the appointment of the Receivers, 888 Projects was excluded from the site.
64 As a result of the appointment of the Receivers, 888 Projects could not, and would not have been able to, refinance the Facility and complete the Development.
65 The Bank knew, or ought to have known, that with the appointment of the Receivers 888 Projects would not have been able to refinance the Facility and complete the Development.
66 On or about late 2010, the site was sold as an uncompleted project by the Receivers.
67 On or about 2 August 2012, Ms Murray served a demand for payment pursuant to the guarantee of the second mortgage on Mr Ekes.
68 As a result of the appointment of the Receivers, Mr Ekes has suffered loss and damage as follows:
a. any liability (which is denied) to the Bank under the guarantee subject of these proceedings;
b. loss of $832,600 (being the total of payouts referred to at paragraphs 28, 30-31, 36, 39-45, 47-49 and 51; and
c. consequential liability pursuant to the Murray Mortgage: $2,700.00.
Misleading or Deceptive Conduct
69 The Bank has denied the fact and terms of the variations alleged on or about 28 April 2009 (para 22 above), 19 June 2009 (para 25 above) and 10 August 2009 (para 32 above).
70 In the event that the alleged agreements are not enforceable, each of the April 2009 Representation, the June 2009 Representation and the August 2009 Representation were untrue.
71 The December 2009 Representation and the February 2010 Representation were untrue.
72 Mr Ekes has suffered loss or damage in reliance on each of the April 2009 Representation, the June 2009 Representation, the August 2009 Representation, December 2009 Representation and the February 2010 Representation.
Particulars

(a)   any liability (which is denied) to the Bank under the guarantee subject of these proceedings;

(b)   loss of $832,600.00 (being the total of payouts referred to at paragraphs 28, 30-31, 36, 39-45, 47-49 and 51); and

(c)   consequential liability pursuant to the Murray Mortgage: $2,700,000."

  1. In the alternative, the cross-claim alleged that if the variation agreements were not enforceable, the respondent engaged in unconscionable conduct and the appellant suffered the same loss as that claimed in paragraphs [68] and [72] of the cross-claim, which I have set out above.

The primary judgment

  1. Relevantly, the primary judge dealt with three matters in Commonwealth Bank of Australia v Ekes [2013] NSWSC 1264 (the primary judgment). First, a motion brought by the respondent seeking to strike out the filed defence, second, a motion by the appellant to file a further defence (being the proposed defence) and, third, a motion by the appellant to file the cross-claim.

  1. The primary judge accepted that as the matters were argued on the basis that the filed defence should be summarily dismissed, what he described as the constraints in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 (General Steel), governed its determination. The same principles would apply to the proposed defence and to the cross-claim as it was argued leave should not be granted to file them on the basis they disclosed no arguable cause of action. In relation to the cross-claim it was argued in addition that leave should not be granted as a matter of discretion.

  1. The primary judge summarised the history of the proceedings between the filing of the filed defence and the date of the hearing of the motions. He stated (primary judgment at [58]) that there were three matters of substance to be determined; the effect of the Dismissal, the proper parties to the proceedings before him and discretionary considerations concerning the lateness of the application for leave to file a cross-claim. He said that the first issue involved matters of issue estoppel, Anshun estoppel and abuse of process (primary judgment at [56]). He noted that it was contended that the company should have been joined in the proceedings (primary judgment at [60]).

  1. The primary judge summarised the pleadings in the Federal Court proceedings. He noted that the Federal Court Rules (Cth) (now repealed) provided that the orders of the Dismissal had the same force and validity as if they had been made by the judge (Federal Court Rules Order 35 r 10A(3)). He also noted that no application had been made under Order 35 r 6 of the Federal Court Rules that the Dismissal be "without prejudice to any right of the applicant or claimant... to claim the same relief in fresh proceedings" (primary judgment at [76]-[77]).

  1. The primary judge concluded that the contention that the Dismissal did not give rise to an issue estoppel did not take account of these rules. He stated that even without these rules there would be "an issue estoppel with respect to the causes of action pleaded in those proceedings" (primary judgment at [91]). His Honour concluded (at [93]) that the filed defence and the proposed defence depended on a finding that the facility agreement was varied in April 2009 and in the following months to postpone the repayment date. He concluded that in those circumstances the question was whether the appellant could raise that issue to defeat the respondent's claim and bring a cross-claim.

  1. In dealing with the plaintiff's submission that the first defendant could have made the present claim in the Federal Court proceedings, his Honour made the following remarks:

"[98] In all those circumstances the notion of any urgency which did not enable the First Defendant to be a party to those proceedings is rejected. In any event, even if no Anshun estoppel arises against the First Defendant by reason of his failure to join in the Federal Court proceedings the further point is that the company brought the Federal Court proceedings claiming the same relief arising out of the same issues and facts as are raised in the present proceedings and that those Federal Court proceedings were dismissed. Had the First Defendant been a party to those proceedings his position here would have been largely unarguable. There would be a clear res judicata or issue estoppel. The Plaintiff's point is, however, that because the Company took the proceedings, it being the appropriate party to do so, the First Defendant is disentitled from doing so here."

  1. His Honour then noted that the appellant, not being a party to the contract, could not assert it was varied. The consequence in his opinion was that it was not open to the appellant to assert that the agreement was varied or make a claim for damages for loss suffered by the company.

  1. In dealing with the question of whether the appellant was a privy of the company, so as to be precluded from relying on any defence or claim arising out of the alleged variation of the loan facility agreed to in April 2009, his Honour referred to Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245. His Honour stated that the test for privity for an Anshun estoppel was not the same as when a cause of action or issue estoppel is raised. His Honour considered whether an Anshun estoppel would bar the appellant from defending the proceedings as a result of his failure to join in the Federal Court proceedings. This was by reason of the fact that the appellant was the controlling mind of the company. It is not entirely clear whether his Honour decided the case on that basis.

  1. The primary judge expressed the view (primary judgment at [118]) that the appellant was seeking to avail himself of defences and cross-claims available to the company to defeat the respondent's claim. He said (at [119]) that as a guarantor, the appellant would generally be entitled to rely on such claims and defences. His Honour said that in that way the appellant was making such claims through the company.

  1. The primary judge concluded that the appellant could only avail himself of such claims if they were available to the company. He said they were not available because of the conclusion of the Federal Court proceedings. He also concluded the appellant could not claim reflective loss, namely, loss which is merely a reflection of loss suffered by the company.

  1. The primary judge concluded that the appellant was precluded from claiming the losses referred to in paragraph [72](a) of the cross-claim and the equivalent paragraphs by reason of the issue estoppel which had arisen (primary judgment at [122]-[123]). He also concluded that the appellant could not claim this amount because it fell within the category of reflective loss.

  1. The primary judge also concluded that the loss in paragraph [72](b) of the cross-claim and the equivalent claim in other paragraphs could not be the subject of the cross-claim. He concluded the payments in question were made by way of loans by the appellant to the company. He stated the payments were made when there was no obligation to do so. He said in these circumstances they could not be recovered relying on what was said by Beazley JA (as her Honour then was) in Chen v Karandonis [2002] NSWCA 412 (Chen).

  1. His Honour accepted that the claim for consequential loss under the Murray mortgage (the Murray mortgage claim) could not be regarded as reflective loss.

  1. In the result the primary judge concluded that all defences and those parts of the cross-claim arising from allegations of an extension of the repayment date were unarguable. This only left the Contracts Review Act claim and the Murray mortgage claim in the cross-claim (primary judgment at [135]).

  1. The primary judge however concluded that the appellant should not be permitted to bring those claims. He concluded that the cross-claim could have been filed and served much earlier (primary judgment at [150]). He effectively rejected the proposition that the delay was caused by the plaintiff's impecuniosity (primary judgment at [151]). He referred to the description of the delay by senior counsel for the appellant as largely the appellant's fault and incredible. He said there was no satisfactory explanation for failing to file the cross-claim earlier pointing out that the appellant had many opportunities to do so (primary judgment at [153]-[154]).

  1. The primary judge described the appellant's approach to litigation as entirely inconsistent with what is required under ss 56-58 of the Civil Procedure Act 2005 (NSW). He said there was not only inordinate delay but a casual approach to court orders which might be described as contemptuous.

  1. In these circumstances he concluded that the dictates of justice required that leave to file the cross-claim should be refused. In doing so he considered the case sought to be raised under the Contracts Review Act and the Murray mortgage claims were not strong (primary judgment at [159]) and there would be considerable prejudice to the respondent (primary judgment at [161]).

  1. In these circumstances the primary judge made the orders the subject of the appeal.

The grounds of appeal and notice of contention

  1. The grounds of appeal and matters raised by the notice of contention filed on behalf of the respondent conveniently can be divided into three categories. First, what might be described as the estoppel and abuse of process grounds. These grounds are contained in Grounds 1-6, 8(a) and 10 of the amended notice of appeal and in the matters raised in the notice of contention (the estoppel/abuse of process issue). Second, Grounds 8(b) and 9, against the finding of the primary judge that what was being claimed was loss in fact suffered by the company (the reflective loss claim). Third, the appeal (Grounds 7 and 11-14) against the primary judge's finding that as a matter of discretion leave to file the cross-claim should not be granted (the cross-claim issue).

(1) The estoppel/abuse of process issue

  1. The grounds of appeal relating to this issue were as follows:

"1 His Honour erred in holding that the dismissal of the Company's proceedings in the Federal Court created an issue estoppel that prevented the Company from raising the defence and claim that it had raised in those proceedings in any subsequent proceedings: [91] and [94].
1A If, as contended by the respondent and denied by the appellant, his Honour held that the appellant was Anshun estopped by reason of his 'failure to join in the Federal court proceedings'(at [98]), his Honour erred in so finding in circumstances where: the appellant was not a party, or a necessary party, to the Federal Court proceedings; the Federal Court proceedings were dismissed prior to any hearing on the merits, or before any defence had been filed; and it was not unreasonable in the circumstances for the appellant not to have joined the proceedings.
2 His Honour erred in holding at [101] that it was not open 'to the First Defendant to assert that the contract between the Plaintiff and the Company had been varied'.
3 His Honour erred at [117] in departing from Australian Associated Motor Insurers Limited v NRMA Insurance Limited (2002) 124 FCR 518 at [74] by refusing to hold that a surety is not the privy of the principal debtor for the purposes of issue estoppel.
4 His Honour erred in holding at [119] that because the First Defendant, as guarantor, was invoking defences available to the principal debtor (the Company) against the Plaintiff, the First Defendant was 'claiming through the Company' and was, therefore, the privy of the Company, notwithstanding that the First Defendant was not a director of the Company at the time;
a. the Federal Court proceedings were dismissed by reason of the Company failing to provide security in support of an undertaking as to damages; or
b. when Company could have sought an order pursuant to Order 35 rule 6(1) of the Federal Court Rules (as they then were).
5 His Honour, therefore, erred in concluding at [120] that because the First Defendant was the privy of the Company, the First Defendant was prevented from asserting in his Defence any defence raised by the Company in the earlier Federal Court proceedings by reason of issue estoppel (specifically, any defence premised upon the allegation that the Plaintiff had extended the repayment date).
  • 888 Projects has defaulted under the Facility by failing to pay the loan on 30 June 2009;
  • 888 Projects has also defaulted under the Facility by virtue of an order for winding up being made against it;
  • BankWest had demanded from 888 Projects payment of the sum of $27,313,589.17 on 22 July 2010, and 888 Projects failed to comply with that demand;
  • Paul Ekes entered into the June Guarantee, whereby he guaranteed amounts payable by 888 Projects under the Facility to a limit of $24,900,000 plus interest, fees, costs and other expenses;
  • It was a term of the June Guarantee that Paul Ekes would guarantee payment by 888 Projects to BankWest of all amounts payable under the Facility, would pay all amounts owing on demand to a limit of $24,900,000, and would indemnify BankWest for loss suffered by reason of the insolvency of 888 Projects;
  • On 27 July 2010, BankWest demanded from Paul Ekes the sum of $27,313,589.17 and Paul Ekes has failed to comply with that demand.

  1. The statement of claim was served on Paul Ekes on 24 March 2011. No explanation was given for the delay between the time of commencing the proceedings and the service of the statement of claim. Paul Ekes filed a defence to the statement of claim on 19 May 2011. At a directions hearing on 17 June 2011, he was directed to file and serve any amended defence and any cross-claim no later than 24 June 2011. No amended defence or cross-claim was filed by that date.

  1. The Supreme Court Proceedings were on the subject of case management hearings between 1 July 2011 and 9 February 2013. During that time, amended defences were filed and drafts of a proposed cross-claim were provided.

  1. On 26 February 2013, Paul Ekes provided a draft second further amended defence and a further draft of the proposed cross-claim. On 27 February 2013, the hearing of the motion for leave to file a cross-claim continued. On that day, CBA foreshadowed a notice of motion to strike out the second further amended defence. On 9 April 2013, CBA filed a notice of motion seeking orders that the further amended defence be dismissed or struck out and that the cross-claim be dismissed or struck out.

  1. On 9 May and 10 May 2013, the hearing of the motions continued before the primary judge. On 13 May 2013, Mr Ekes filed an amended notice of motion in which he sought leave to file and serve a second further amended defence and a cross-claim. On 1 November 2013, the primary judge published his reasons for the conclusions that he had reached in relation to the various motions. On 8 November 2013, his Honour made orders to the following effect:

(1)   The further amended defence of 12 March 2012 be struck out;

(2)   Leave to file any cross-claim and further amended defence be refused;

(3)   Judgment in favour of CBA as against Paul Ekes in the sum of $26,021,231.98;

(4)   The notices of motion filed by Paul Ekes be dismissed; and

(5)   Paul Ekes pay CBA's costs of his notices of motion and CBA's costs of the Supreme Court Proceedings.

Appeal

  1. Paul Ekes filed an amended notice of appeal on 30 May 2014 and CBA filed a notice of contention on the same day. The issues raised by the amended notice of appeal and the notice of contention relate to the following matters:

  • Issue estoppel;
  • Anshun estoppel;
  • Abuse of process;
  • Damages recoverable by Mr Ekes;
  • Error in the exercise of discretion as to the proposed cross-claim.

  1. In essence, CBA contends that, by reason of the orders made in the Federal Court Proceedings, Mr Ekes is estopped from raising in his defence or cross-claim questions concerning:

  • the alleged variation of the Facility to extend the repayment date, such that there was no default, and
  • misleading and deceptive conduct in relation to the extension of the repayment date and default.

CBA contends, in the alternative, that to do so would be an abuse of process, having regard to the orders made in the Federal Court Proceedings.

  1. I have had the advantage of reading in draft form the proposed reasons of the Chief Justice for concluding that the appeal should be allowed. I agree with the Chief Justice, for the reasons given by his Honour, that Paul Ekes should have leave to file the proposed further amended defence and cross-claim. I agree with the orders proposed by the Chief Justice.

**********

Annexure (PDF)

Decision last updated: 30 September 2014

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Cases Cited

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Statutory Material Cited

8

Commonwealth Bank of Australia v Ekes [2013] NSWSC 1264
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69