EWC Payments Pty Ltd v Commonwealth Bank of Australia

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT – LIST D

S CI 2010 00683

EWC PAYMENTS PTY LTD (ACN 122 161 737) & ORS	Plaintiffs
v
COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)	Defendant

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JUDGE:	DERHAM AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	22 August 2013
DATE OF JUDGMENT:	28 January 2014
CASE MAY BE CITED AS:	EWC Payments Pty Ltd & Ors v Commonwealth Bank of Australia (No 2)
MEDIUM NEUTRAL CITATION:	[2014] VSC 4

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PRACTICE AND PROCEDURE — Amendment of Statement of Claim — Whether proposed amendments fail to disclose fairly arguable claims and are bad in law — Supreme Court (General Civil Procedure) Rules 2005, r 36.

ASSIGNMENT OF CHOSES IN ACTION — Second plaintiff incorporated in, and declared bankrupt under the laws of, Switzerland — Person in position of liquidator assigns choses in action, constituted by causes of action against defendant in this proceeding, to company incorporated in Panama, which company assigns same choses in action to first plaintiff — Whether assignments valid and effectual — Whether validity of assignments determined by the law of the place the cause of action arose or the proper law of the assignments — Whether first plaintiff has good cause of action in tort as assignee — Whether genuine commercial interest in enforcement of assignor’s claims.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr TJ North SC with him Mr PT Nugent	Madgwicks
For the Defendant	Mr AG Bell SC with him Mr CM Archibald	Gilbert & Tobin

TABLE OF CONTENTS

Introduction........................................................................................................................................ 2

Summary of the plaintiffs’ claims.................................................................................................. 3

Background Facts............................................................................................................................... 6

The Contentions................................................................................................................................. 7

Plaintiffs.......................................................................................................................................... 7
Defendant....................................................................................................................................... 8
Plaintiff in Reply.......................................................................................................................... 11

Admissibility of Opinion as to Swiss Law................................................................................. 17

Principles relating to amendment................................................................................................. 19

The Issues.......................................................................................................................................... 22

What law determines the validity of the assignments............................................................. 23

First Assignment......................................................................................................................... 23
Second Assignment..................................................................................................................... 28

Genuine Commercial Interest....................................................................................................... 30

Consideration.............................................................................................................................. 35

Conclusion......................................................................................................................................... 38

HIS HONOUR:

Introduction

The first and third plaintiffs (EWC) make application pursuant to Rule 36.01 of the Supreme Court (General Civil Procedure) Rules 2005 for leave to amend the Further Amended Statement of Claim filed 25 November 2011 (FASOC). The defendant (CBA) opposes that leave on the basis that the proposed amendments fail to disclose fairly arguable claims and are bad in law.

The second plaintiff (eWorld) has been a party from the outset of the proceeding. It was incorporated in the Canton of Geneva, Switzerland.

It is undisputed that on 15 March 2013 eWorld was declared bankrupt under the laws of the Canton of Geneva. EWC has taken an assignment of the causes of action of eWorld against CBA in this proceeding. The assignment is from a company called Internet Marketing Solutions Corp (a company apparently incorporated in the Republic of Panama) (ICMS) and is evidenced by a Deed of Assignment dated 31 May 2013 that purports to have been executed pursuant to s 127(1) of the Corporations Act2001 (Cth), but is notarised by a Notary Public in the Republic of Panama, indicating that it was executed in that country (the Second Assignment).

ICMS, in turn, was purportedly assigned the causes of action by Mr Christopher Guenther, who was appointed by the Bankruptcy Office of Geneva to act on behalf of eWorld in the Bankruptcy. That assignment is alleged to have taken place on either 7 May or 16 May 2013. The documents evidencing the assignment are in evidence[1] (the First Assignment).
[1]Exhibit 3 and 4 to the Affidavit of CA O’Bryan sworn 19 July 2013.

The amendments sought to be made will plead these assignments and enable EWC, in effect, to continue the claims previously made by eWorld, with the exception of the trade practices claim, which is agreed not to be assignable.

Summary of the plaintiffs’ claims

The FASOC presently raises three claims by EWC, one in contract, one under the Trade Practices Act 1974 and one in tort. In the case of eWorld, the claims it makes are under the Trade Practices Act 1974 and in tort. The EWC allegations form the basis of the claims later made by eWorld, which are—if allowed—now to be pursued by EWC as assignee.

The claim of eWorld is pleaded in terms of a breach of duty of care owed to eWorld by CBA. eWorld claims that the consequential loss said to flow as a result of that conduct is of the order of AU$27,000,000. The third plaintiff, Dr Starr, also makes a claim for a breach of duty of care owed to him personally by CBA.

The claims are complex. In summary only, they are as follows:

(a) EWC carried on business as an intermediary between merchants and customers involved in internet transactions from October 2006 until February 2009;

(b) eWorld was the holding company of EWC;[2]
[2]CBA tendered a copy of Corporations Form 484 which shows that from 31 July 2009 all the shares in EWC were owned not by eWorld but by the third defendant, Matthew Thomas Starr — see Exhibit “B”.

(c) the third plaintiff, Dr Starr is a director and secretary of EWC;

(d) in November 2006 EWC entered into an agreement with CBA by which EWC agreed to channel internet card payment transactions, between cardholders and various merchants with whom EWC and eWorld had contractual arrangements, to CBA for processing. The reference throughout the statement of claim to ‘EWC Merchants’ is proposed by the amendments to refer to Merchants with which EWC and eWorld had contractual arrangements;

(e) Under the agreement between EWC and CBA, EWC would be granted a certain merchant classification code which would not be changed without its consent, and complex provisions were made for the processing of transactions between EWC Merchants and card holders, including provisions for charging back to EWC disputed, invalid, unacceptable and other transactions;

(f) CBA breached the agreement by failing to provide the necessary internet facilities, failing to implement as quickly as practicable a system whereby EWC could be recognised as a merchant selling organisation or a service provider and, without the knowledge or consent of EWC, in mid-July 2008, changed the merchant code assigned to EWC;

(g) the number of charge back requests increased exponentially, the number of transactions cancelled also increased in the same way and, on 14 January 2009, CBA wrongfully gave notice of termination of its relationship with EWC; and

(h) At paragraphs 39-48 of the FASOC, eWorld and EWC allege a claim in tort against the Bank for negligence causing economic loss.

It is relevant to note the claim in tort by EWC and eWorld in a little more detail. In paragraph 39 of the FASOC it is pleaded that at all relevant times CBA knew or ought to have known that each of those companies would or could suffer foreseeable economic loss if CBA failed to take reasonable care in the performance of the services required to be performed by it under the agreement and in the exercise of any powers or discretions reposed in it by the agreement. The particulars to that allegation include the following alleged facts:

(a) The Business Plan given to CBA disclosed that eWorld had credit and payment processing businesses worldwide and that EWC was its subsidiary;

(b) CBA knew or ought to have known that the consequence of any failure by it to take reasonable care with respect to the changing of EWC’s merchant code could have adverse economic consequences for EWC because of the likely occurrence of the matters pleaded in paragraphs 9, 12(a), 13 and 14 and the particulars thereto;

(c) CBA knew or ought to have known that the consequence of any failure by it to have processing facilities which facilitated the identification of all applicable EWC merchants by their applicable descriptor could have adverse economic consequences for EWC because of the likely occurrence of the matters pleaded in paragraphs 10, 12(b), 13 and 14 and the particulars thereto;

(d) CBA knew or ought to have known that eWorld was directly concerned in the operation of EWC’s business and derived fees and commissions in respect of the EWC business. CBA’s knowledge derived from the content of the Business Plan which relevantly referred to the Edelweiss Payments Platform and the many communications between it and representatives of eWorld and by reason of its knowledge of payments made by EWC to eWorld through EWC’s accounts as managed by CBA;

(e) By reason of these matters, CBA knew or ought to have known that any adverse economic consequences to EWC would or could have adverse economic consequences to eWorld; and

(f) CBA knew of the conduct of the Scheme Rules and the fact that a Merchant Fraud Notification would have the effect of permanently barring EWC and eWorld from the industry, being an industry from which each derived income.

The plaintiffs contend that the significance of these allegations—which for present purposes are accepted as true—is that they provide a factual substratum that sets the interest of eWorld apart from a mere busybody (in the champerty and maintenance sense) coming along and seeking to profit from the assignment. The plaintiffs rely on the actual interrelationship between EWC and eWorld to give eWorld a commercial or substantial interest in the subject matter of the proceeding. EWC had been, by virtue of its contract with CBA, acting both on its own behalf and on behalf of eWorld. But for the liquidation of eWorld, this proceeding would have gone to trial on the basis of the alleged facts and circumstances which are articulated in the pleadings, and which reveal a commercial interest of eWorld in EWC’s claim. One question which arises, however, is whether these facts reveal a commercial interest of EWC in eWorld’s claim—a matter for which the plaintiffs contended and CBA resisted.

The proposed amendments to the pleadings relating to the assignment of eWorld’s cause of action are at paragraphs 49–56 of the proposed Second FASOC. In summary, EWC asserts that it has acquired title to assert eWorld’s claim against the Bank as a result of the First and Second Assignments. In addition, in the course of argument, after it had been pointed out that there was no pleading of the applicable Swiss law that the plaintiffs contended applied to the validity of the First Assignment, further paragraphs were added pleading the relevant Swiss Law.

Background Facts

On about 15 March 2013 eWorld was declared bankrupt by the Court of First Instance of Geneva,[3] and Mr Christopher Guenther was appointed by the Bankruptcy Office of Geneva to act on behalf of eWorld in the Bankruptcy.[4]
[3]Affidavit Ms O’Bryan at [4] and Exhibit CAO B1.
[4]Affidavit Ms O’Bryan at [5] and Exhibit CAO B2.

The First Assignment: On 7 May 2013, alternatively 16 May 2013, Mr Guenther sold and assigned to ICMS, for the sum of CHF 2,000, all of eWorld’s right title and interest in all claims and causes of action which it had or may have had against CBA, including its right, title and interest in this proceeding. The sale and assignment is in writing and is evidenced (and was effected) by a document dated 7 May 2013, addressed to the Supreme Court of Victoria, from Christopher Guenther, and attached a bill of sale and a document dated 16 May 2013 addressed “To whom it may concern” from Christopher Guenther.[5] ICMS is a Panamanian company.
[5]Affidavit Ms O’Bryan at [6] and Exhibit CAO B3 and CAO B4.

The Second Assignment: On about 31 May 2013 ICMS sold and assigned to EWC, for the sum of CHF 2,500, all of its right, title and interest in all claims and causes of action which it had or may have had against CBA including its right, title and interest in this proceeding. The sale and assignment is in writing and is evidenced (and was effected) by a deed dated 31 May 2013.[6]
[6]Affidavit Ms O’Bryan at [7] and Exhibit CAO B5.

The Contentions
Plaintiffs

In their initial submissions, the plaintiffs relied on the principles derived from Aon Risk Services v Australian National University.[7] They contended that:
[7](2009) 239 CLR 175.

(a) The need to amend the FASOC arose by matters beyond the control of EWC and Dr Starr, namely, the insolvency of a foreign corporation;

(b) The amendment is sought at a comparatively early stage of the proceeding. The matter has not, yet, been to mediation and no trial date has been set;

(c) The amendments will not cause any delay to the final disposition of the proceeding. Had a formal application to amend not been insisted on by the Defendant, the matter could have proceeded to mediation without any need for a formal amendment and no additional Court time would have been taken by reason of the proposed amendments;

(d) The Defendant is Australia’s largest bank. It is difficult to imagine that any particular stain is imposed on it by the proposed amendment, save that it would be exposed to a larger claim than would be the case if the amendment is disallowed;

(e) The suggestion by CBA in correspondence prior to the application being made that the proposed amendment is bad in form because it does not plead, as a material fact, the interest which the respective assignees have in the litigation, in addition to the interest acquired as a consequence of the assignment are misconceived, because:

(i) In the case of the First Assignment from eWorld’s liquidator to ICMS, it is not necessary that the assignee have any pre-existing interest in the litigation as s 477(2)(c) of the Corporations Act2001 (Cth) empowers a liquidator of an Australian company to sell or otherwise dispose of, in any manner, all or any part of the property of the company. Property includes a chose in action. It has not been suggested that different principles apply (if it were the case that Swiss law applies) to an assignment from a liquidator who is based in Geneva. The Victorian Court of Appeal, in UTSA Pty Ltd (In liq) v Ultra TuneAustralia Pty Ltd & Ors (1996) 21 ACSR 457 at 463–4 was of the opinion that there was no warrant for interpreting s 477(2)(c) of the Corporations Act as restricting the persons to whom a liquidator can sell a company’s causes of action to a party that already had an interest in the outcome of the litigation;

(ii) In the case of the Second Assignment, from ICMS to EWC, there can be no doubt as to EWC’s pre-existing interest in the litigation. It was named as the first plaintiff and is the party with whom the Defendant had its principal dealings.

Defendant

In its submissions CBA contended that it is not fairly arguable -

(a) on the proposed pleading, that eWorld’s claim in tort against CBA was assigned to EWC; and

(b) that EWC can take a valid assignment of eWorld’s tortious cause of action against it.

CBA submits that Australian law determines whether eWorld’s cause of action is assignable.[8] This, CBA submitted, follows because Australian law is the law under which eWorld’s cause of action arose.[9] It submits that all of the conduct complained of by eWorld was conduct of the Bank occurring in Australia.[10] The alleged tort was committed in Australia, and Australian law is the law under which the cause of action arose[11] and the governing law for determining the claim.[12]
[8]Bank’s submissions, para. 3.1, referring particularly to Salfinger v Niugini Mining (Australia) Pty Ltd (No. 3), [2007] FCA 1532, per Heerey J at [111]-[124].
[9]Bank’s submissions, para. 3.1.
[10]See proposed FASOC at [42] and [47].
[11] Granite Springs Pty Ltd v Intercooler Water Dispensers Pty Ltd [2000] VSC 224 at [13]-[15].
[12] John Pfeiffer Pty Ltd v Rogerson (2006) 203 CLR 503; Regie Nationale de Usines Renault SA v Zhang (2007) 210 CLR 491.

Reference was made to Poulton v Commonwealth,[13] where the High Court concluded, in obiter dicta, that a cause of action in tort is incapable of assignment. There are two exceptions to this rule that are presently relevant:
[13](1953) 89 CLR 540 at 602.

(a) First is the exception established in Trendtex Trading Corporation v Credit Suisse (Trendtex),[14] where, in relation to a claim in contract, an assignee of a cause of action will not be prevented (by principles applicable to maintenance or champerty) from enforcing it, if the assignee either has acquired a property right and the cause of action was incidental to that right, or the assignee has a genuine commercial interest in the enforcement of the assignor’s claim. There was a divergence of judicial opinion as to whether this exception applies in Australia to an assignment of a right of action in tort, a divergence which may have been settled by the decision of the High Court in Equuscorp Pty Ltd v Haxton.[15] For this reason, CBA did not contend that this exception is not fairly arguable as an exception to the rule (“the Trendtex exception”);

(b) Second is an exception arising in favour of a liquidator under s 477(2)(c) of the Corporations Act 2001. However, even if the section applied to the bankruptcy of eWorld in Switzerland, it cannot apply because eWorld is not a ‘company’ under that section: see the definition of company in s 9.[16]

[14][1982] AC 679 at 703D.

[15][2012] HCA 7; 246 CLR 498 at [51] - [53], [79] and [156].

[16]The plaintiff accepted that this was so, see Transcript p.17.

In relation to the Trendtex exception, CBA contended that it cannot apply because:

(a) There are no pleaded facts that establish a genuine commercial interest of ICMS in the causes of action assigned by eWorld to it. In consequence, it is not necessary to consider whether EWC has or could plead facts giving it an interest in the cause of action assigned by ICMS to it;

(b) There are no pleaded facts from which it can be concluded that EWC has a genuine commercial interest in the enforcement of its assignor’s (ICMS) cause of action; and

(c) In any event, EWC’s interest in the litigation does not qualify as a relevant ‘genuine commercial interest’ because to fall within the exception the assignee must have such an interest in enforcing the assignor’s claim.[17] That requirement applies to both assignments.[18]

[17]Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR148 at 153. ICM Agriculture Pty Ltd v Young [2009] FCA 109 at [123-124].

[18]Kovarfi BMT & Associates Pty Ltd [2012] NSWSC 1101 at [57].

At a more general level, CBA pointed to the distinction between the proper law of the contract or deed of assignment, on the one hand, and the assignability of the cause of action on the other. The former is governed by the applicable conflict of law rules for determining the proper law of the contract or deed, and the latter by Australian law because that is the law under which the cause of action arises. CBA submitted that the precise question arising in this application to amend is the assignability of the Australian cause of action.

CBA contended that the validity of the First Assignment is governed by Australian law and that it offends the rule of public policy against the assignment of bare rights of action, and that it does not fall within the Trendtex exception. If that is correct, there is nothing to assign under the Second Assignment, so that assignment need not be considered further.

Alternatively, if the validity of the First Assignment is governed, as the plaintiffs contended, by Swiss law and is valid under that law, the Second Assignment (the validity of which it was, in the end, agreed is governed by Australian law) also falls foul of the rule against the assignment of bare rights of action and is not saved by the Trendtex exception.

Plaintiff in Reply

EWC contended in response, in summary:

(a) The issue is whether Swiss law or Australian law governs the validity of an assignment of a cause of action in tort. The answer to that question is not, necessarily, the same as the law that governs the action more generally;

(b) The plaintiffs contend that it does not follow from the fact that Australian law is the law under which eWorld’s cause of action arose that the assignability of that cause of action must necessarily be determined by the application of Australian law. The plaintiffs contend that the issue of whether the assignment is valid is to be determined by Swiss law, or at least it is arguable that the validity of the assignment is to be determined by Swiss law;

(c) Further, even if Australian law were to determine whether eWorld’s cause of action was assignable, the assignments referred to in the proposed pleading are permissible, or at least arguably so, under Australian law.

In relation to the issue whether Swiss law or Australian law governs the validity of an assignment of a cause of action in tort, EWC submitted that:

(a) A conflict of laws issue can arise where the forum in which a proceeding is brought is asked to hear a matter which has arisen, in whole or in part, outside its territory or which involves persons who normally reside outside its territory;[19]
[19]Halsbury’s Laws of Australia, Conflict of Laws, para. 85.1.

(b) The determination of which law prevails, if there is a conflict of laws, is normally made by reference to the applicable connecting factors. A Court will generally apply the law with which the transaction has “its closest and most real connection”.[20] In the case of the effect of a transaction, key factors include where the transaction occurred[21] and the domicile of the parties to that transaction;
[20]Amin Rasheed Shipping Corp v. Kuwait Insurance Co [1984] AC 50 at 61 per Lord Diplock and at 71 per Lord Wilberforce.
[21]Halsbury’s Laws of Australia, Conflict of Laws, para. 85-10.

(c) The First Assignment (the relevant transaction in the present case) has its closest and most real connection with the law of Switzerland because:

(i) eWorld is a Swiss company being wound up in Geneva under Swiss insolvency laws;

(ii) eWorld’s cause of action against CBA vested in eWorld’s liquidator (in Geneva) upon the commencement of eWorld’s winding up;

(iii) eWorld’s liquidator is empowered, under Swiss law, to assign eWorld’s rights[22] to IMSC; and

(iv) eWorld’s liquidator, in Geneva, for reward, chose to assign to IMSC eWorld’s rights as against the Bank.

[22]This is asserted in the plaintiffs’ Outline of Submissions in Reply at 9(d) and was objected to by CBA as not supported by any evidence.

In relation to the issue of whether the validity of the assignment is to be determined by Swiss law, or at least that it is arguable that the validity of the assignment is to be determined by Swiss law, the plaintiffs referred to a range of cases where the law of the place of an assignment or transaction concerning personal property governed its validity: Republica de Guatemala v Nunez (assignment in Guatemala of rights to money deposited in a London Bank);[23] Re Anziani; Herbert v Christopherson (assignment, in Italy, of English personal property);[24] Kelly v Selwyn (assignment of reversionary interest under a will);[25] Lee v Abdy (validity of assignment of chose in action determined by the law of the place where executed);[26] Macmillan Inc v Bishopsgate Investment Trust plc and others (No 3) (applicable law for determination of the issue of priority of ownership of the shares was the domestic law of the law of the place where the shares were situated - the lex situs);[27] Alcock v Smith (negotiation of an English bill in Norway governed by Norwegian law);[28] Cammell v Sewell (the owner’s domicile governs disposition of personal property (chattels)).[29]
[23]Republica de Guatemala v. Nunez [1927] 1 KB 669.
[24](1929) 1 Ch 407.
[25][1905] 2 Ch 117.
[26]17 QBD 309.
[27][1996] 1 All ER 585.
[28][1892] Ch 238.
[29](1860) 5 H&N 728; 157 ER 1371. See also Inglis v. Robertson & Baxter [1898] AC 616 esp at 625 per Lord Watson and Hockey v. The Mother O’Gold Consolidated Mines Ltd; (1903) 29 VLR 196 esp at p. 200.

In relation to the contention that the assignments are permissible, or at least arguably so, under Australian law, the plaintiffs submitted that:

(a) a Trustee in Bankruptcy is permitted to assign a bare cause of action to a third party in order to realise, as fully as possible, the assets of the bankrupt for the benefit of the creditors;[30]
[30]Seear v. Lawson (1880) 15 Ch D 426. Guy v. Churchill (1888) 40 Ch D 481.

(b) a liquidator of a company is permitted to assign a bare cause of action to a third party;[31]
[31]UTSA Pty Ltd (In liq) v. Ultra TuneAustralia Pty Ltd & Ors (1996) 21 ACSR 457.

(c) the law of Switzerland is to the same effect, namely, that a liquidator of a company being wound up in insolvency in Geneva is empowered, under s 256 of the applicable statute, to assign to whomever he or she wishes a bare cause of action which was vested in the company prior to its liquidation;[32]
[32]See opinion of Serge Calame and Nicolas Didisheim of Meyerlustenberger | lachenal Avocats—Attorneys at Law dated 15 August 2013 - exhibit DAD-30 to Dunn Affidavit 16 August 2013.

(d) as a general proposition, an Australian Court will give effect to any act performed by a recognised foreign government within its own territory[33] without inquiring into the legality of that act under its law;[34]
[33]Re Sutherland (1922) 39 WN(NSW) 108.
[34]Aksionairnoye Obschestvo Dlia Mechanicheskoyi Obrabotky Diereva AM Luther v. James Sagor & Co [1921] 3 KB 532; Princess Paley Olga v. Weisz [1929] 1 KB 718. The decision was recently referred to, with approval, by the House of Lords: see Lucasfilm Ltd and others v Ainsworth and another [2012] 1 AC 208 at [66]. An exception to the foregoing, not relevant in the present case, is where the act in question was contrary to fundamental concepts of human rights: see Oppenheimer v. Cattermole (Inspector of Taxes) [1976] AC 249 at 278 per Lord Cross.

(e) Australian courts must act in aid of the Courts of “prescribed countries” in relation to the winding up or insolvency of foreign bodies corporate and companies.[35] Switzerland is a prescribed country.[36] In Re Chow Cho Poon (Private) Limited[37] the New South Wales Supreme Court considered s 581(2)(a) of the Corporations Act2001 (Cth), which requires Courts having jurisdiction under the Act to act in aid of external administration matters. Justice Barrett, (at [21]) observed that the compulsory nature of s 581(2)(a) leaves no room for the Court to take the view that some aspect of the legal system under which the orders were made is at odds with a like aspect of Australia's legal system;
[35]Section 581(2)(a) of the Corporations Act 2001 (Cth).
[36]Section 580 of the Corporations Act2001 (Cth); Corporations Regulation 5.6.74.
[37][2011] NSWSC 300. See also Barrett J.’s earlier decision in Independent Insurance Company Ltd [2005] NSWSC 587.

(f) the only authority cited by Justice Heerey in Salfinger v Niugini Mining (Australia) Pty Ltd (No 3)[38] in support of the proposition whether the causes of action in tort or equity are assignable is to be determined by the law under which the right or cause of action was created was Trendtex Trading Corporation v Credit Suisse.[39]But Trendtex is not authority for the proposition for which it was cited. In Trendtex the principal issue for consideration was whether a stay should be granted in respect of a proceeding commenced in England. The proper law of the agreement in question was Swiss law, even though the underlying transaction involved moneys in England. The proceeding in the English Court was stayed;
[38][2007] FCA 1532.
[39][1982] AC 679.

(g) in relation to the second assignment from ICMS to EWC, the plaintiffs accepted that as it was not a liquidator’s assignment, in order for it to be valid, or at least arguably so, it must be valid under Swiss law (if that is the proper law) or under Australian law (if that is proper law). As a general proposition there is a presumption that the law of a foreign country is the same as that of the forum unless proven otherwise.[40] Further, the onus of proof rests on the party alleging that the foreign law differs from the law of the forum;[41]
[40]Neilson v. Overseas Projects Corp of Victoria (2005) 223 CLR 331 at [125] per Gummow and Hayne JJ, and at [267] per Heydon J.
[41]Temilovski v. Australian Iron and Steel Pty Ltd [1966] 1 NSWR 279 per Moffitt AJA.

(h) in the absence of any evidence as to the law in Switzerland relating to assignments from persons other than liquidators the Court should proceed on the presumption that the law of Switzerland is the same as the law of Australia, in relation to assignments of choses in actions by persons other than a liquidator;

(i) CBA accepts that if it can be shown that an assignee of a bare cause of action has a “genuine commercial interest” in that action, the assignment is fairly arguable under Australian law;[42]
[42]Bank’s submissions, [4.4].

(j) if EWC can show that it is arguable that it has a “genuine commercial interest” in taking an assignment from eWorld, the amendment should be permitted;

(k) in determining whether an assignee has a “genuine commercial interest” in taking an assignment the Court is required to examine the “totality of the transaction”;[43]
[43]Trendtex at page 703, Ln F per Lord Roskill.

(l) in Monk v Australia & New Zealand Banking Group Ltd[44] Cohen J accepted that an interest by the assignee in the assignor’s business affairs, or the activities which the assignment may in some way protect, fell within the meaning of “genuine commercial interest”;
[44](1994) 34 NSWLR 148 per Cohen J.

(m) EWC and eWorld were the two principal companies in a group of companies through which transactions were processed by the Bank. Both EWC and eWorld were original plaintiffs in the proceeding brought in the Supreme Court, and while EWC also sues the Bank in contract, both EWC and eWorld sue the Bank in tort relying on the same factual matters and breaches. EWC and eWorld’s financial positions, in respect of the underlying subject matter of the proceeding against the Bank, were intimately related. In a practical sense, EWC was the controlling entity in the commercial relationship affecting eWorld’s financial fortunes. In so far as the relationship with CBA was concerned, eWorld depended on the actions taken by EWC;

(n) it is not necessary for EWC to plead facts from which it could be concluded that it had a pre-existing commercial interest in IMSC. Rather, if any facts are required to be pleaded, those facts go only to showing that EWC had a genuine commercial interest in eWorld’s original cause of action;

(o) CBA referred to the decision in Kovarfi v BMT & Associates Pty Ltd.[45] In that case McCallum J dismissed a claim on the basis that, whatever may be the merits of the assignment, the cause of action was statute barred.[46] Accordingly, his Honour’s comments, in respect of what needs to be shown in respect of each assignment, must be taken as dicta; and
[45][2012] NSWSC 1101.
[46]At [41].

(p) in the absence of binding authority, it is an open question as to whether, in applying the “genuine commercial interest” test, where a chain of assignments occurs, it is necessary to show-

(i) that each successive assignee had a genuine commercial interest in the original cause of action;

(ii) that each successive assignee has a genuine commercial interest in the original cause of action and a genuine commercial interest in some or all of the preceding assignees; or

(iii) that each successive assignee has a genuine commercial interest only in the assignor from whom the assignee took an assignment.

Admissibility of Opinion as to Swiss Law

The plaintiffs’ affidavit of Debra Ann Dunn exhibits an opinion of Swiss lawyers Serge Calame and Nicolas Didisheim, of the firm Meyerlustenberger Lachenal of Geneva, as to the assignability of the cause of action of eWorld against CBA under Swiss law, the validity of the First Assignment, and the assignability under Swiss law of rights which ICMS itself took on assignment.[47]
[47]See Exhibit DAD-30 the affidavit of Dunn sworn 16 August 2013.

CBA objected to the adducing of this evidence. It was submitted to be inadmissible and irrelevant. It is inadmissible because:

(a) First, the instructions for the opinion from Madgwick’s, the plaintiffs’ solicitors, are not produced (despite a request for them) and CBA has no capacity to assess those matters;

(b) Secondly, a large number of the exhibits to the opinion are in French and no translation has been provided. CBA is therefore unable to assess what assumptions have been made on the basis of those documents, what those documents would indicate and the extent to which it's appropriate to draw conclusions on the basis of them;

(c) Thirdly, nowhere in opinion is there a statement by the authors that they have been shown the expert witness code of conduct or that they intend to comply with it;

(d) Fourthly, on page 6 of the opinion (in paragraph 6) under the heading "Addressees" the authors state that the opinions expressed are solely for the use of Madgwicks Lawyers and may not be relied upon by any other person without our prior written approval. There is no indication that these lawyers have given approval for their opinion to be tendered or deployed in these proceedings and the Court cannot rely on the opinion in circumstances where the authors say that it cannot.

In addition to these matters, CBA submitted that in Part 3 of the opinion on page 3 the authors state under the heading "Scope" that the opinions relate only to the laws of Switzerland and they state that they express no opinion on the laws of any other jurisdiction and have assumed there is nothing in other law which affects their opinion. They therefore assume there is nothing in the choice of law rules which might refer the question of the assignability of an Australian cause of action back to Australian law. That is material because in the judgment of the Court of Appeal in Trendtex that was a matter which was covered by the evidence.

The opinion was not relevant, CBA submitted, because it does not address the question raised by the application, namely the assignability of the Australian cause of action. It deals in general terms with the assignability of claims under Swiss law.

This is an interlocutory application in which evidence may be given on information and belief. In my opinion there is no reason in principle why the evidence of the opinion of the Swiss lawyers should not be adduced at this stage in support of the amendment, to the extent that it does so. A decision to allow the evidence at this stage, warts and all, does not affect the ultimate issue of the state of the Swiss law. It falls to be considered with the legal arguments and if despite its shortcomings, to which I will refer, it can lay a foundation for the amendment it should be allowed at this stage.

There are many possible issues as to its ultimate admission, some of which were addressed by senior counsel for CBA, Mr Bell SC, (with him Mr CM Archibald). In light of my decision as to the ultimate issue of whether there is any basis for a genuine commercial interest of EWC in either the claim of eWorld in the proceeding, or an interest in the claim of ICMS, I do not need to express a view as to those issues.

Principles relating to amendment[48]

[48]Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 6) [2012] VSC 70, J Forrest J, provides a convenient summary of the factors.

Rule 36.01(1) of the Supreme Court (General Civil Procedure) Rules 2005 provides:

For the purpose of—
(a)determining the real question in controversy between the parties to any proceeding; or

(b) correcting any defect or error in any proceeding; or
(c) avoiding multiplicity of proceedings—
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.

The exposition of principles and relevant factors in relation to amendments to pleadings in the decision of the High Court in AON Risk Services Australia v Australian National University[49] is of general application.[50] The High Court referred to the now well-known factors, such as matters of delay, wasted costs, prejudice, case management issues and public confidence in the administration of justice.[51]
[49](2009) 239 CLR 175 (“AON”).
[50]See Trevor Roller Shutter Service Pty Ltd v Crowe [2011] VSCA 16 [42].
[51]See the judgment of Vickery J in Namberry Craft Pty Ltd v Watson, [2011] VSC 136.

CBA does not complain that the amendments should not be allowed for any of the reasons exposed in AON.[52] It contends the matter is simpler and more fundamental and turns on whether the proposed amendments to the FASOC disclose fairly arguable claims. CBA contends that they do not and the amendments sought are bad in law.
[52](2009) 239 CLR 175 (“AON”).

As J Forrest J pointed out in Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 6),[53] an amendment will not be allowed if it is “so obviously futile that it would be struck out if it appeared in an original pleading”.[54]
[53][2012] VSC 70 at [33].
[54]Horton v Jones (No 2) (1939) 39 SR NSW 305, 310. See also Commonwealth v Verwayen (1990) 170 CLR 394 at 456 per Dawson J; ABL Custodian Services Pty Ltd v Smith [2010] VSC 458 at [5-8]; ACN 074 971 109 & Anor v The National Mutual Life Association of Australasia Ltd [2010] VSC 186, [29];

It needs to be remembered, however, that on an application to amend a statement of claim the Court will not engage in an examination of the merits of the case foreshadowed by the proposed amendment, save where that amendment introduces a patently hopeless issue for determination or if the amendment has no reasonable prospect of success at trial.[55] This means that when deciding whether a party should be allowed to amend it is not the function of the Court to decide arguable and difficult questions of law or mixed law and fact, even though it may appear that the proposed added claim or defence has little chance of success.[56] The determination of the arguable and difficult claims and defences is for the judge at trial, where, as the oft cited dictum of Kirby P (as he then was) in Wickstead v Brown[57] recognises, it is more efficient and just to consider the viability of causes of action when the suggested action can be judged with a full understanding of the facts and the evidence.
[55]Civil Procedure Act 2010, s 63. Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 6) [2012] VSC 70, at [34]; See Also Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 at 35.
[56]Hall v National & General Insurance Co Ltd [1967] VR 355 at 367.
[57](1992) 30 NSWLR 1 at 5.

Further, there is nothing said in AON, nor in the Civil Procedure Act 2010 (“CPA”), which detracts from a party’s fundamental right to ventilate at trial a “real question in controversy”, as provided by r 36.01[58]—this is particularly so when an amendment is sought at a time not in close proximity to the trial.[59]
[58]Supreme Court Rules. See also ss 1, 7, 9, 48 of the Civil Procedure Act2010: “real issues in dispute”.
[59]Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 6) [2012] VSC 70, at [35].

As Croft J said in ACN 074 971 109 & Anor v The National Mutual Life Association of Australasia Ltd:[60]

The authorities are clear that pleadings are not an end in themselves and are, rather, a means of ensuring that real issues of controversy are raised for determination in a way that is procedurally fair, both to a plaintiff and a defendant. This allows claims and defences to be clearly articulated, granting parties an opportunity to present their case properly prepared, on clear notice of allegations and defences raised in the proceedings. On this basis, the authorities clearly establish that, absent extraordinary circumstances, leave to amend will be granted.[61]

[60][2010] VSC 186.

[61]Ibid [28].

Notwithstanding these well known statements of principle, which favour allowing an amendment if it is arguably sound, the party opposing the amendment is equally entitled to establish, if it can, to a necessarily high degree of certainty, by extensive argument if necessary[62] as CBA has sought to do in this case, that the proposed amendments are bad in law, or are not fairly arguable, and that they ought not to be allowed.
[62]General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130.

The Issues

There seem to me to be three issues that affect whether leave should be given;

(a) First, whether it is arguable that the validity of the First Assignment is to be determined by Swiss law, it being accepted by the plaintiffs that the validity of the Second Assignment is governed by Australian law;

(b) Secondly, if the validity of the First Assignment is governed by Swiss law and is thereby arguably valid, whether it is arguable that EWC has a genuine commercial interest or a substantial interest in the cause of action assigned to it under the Second Assignment so as to make it arguably valid under Australian law; and

(c) Thirdly, if both assignments are arguably valid, whether the proposed pleading is sufficient.

Both the first and second questions are pure questions of law to be determined on the assumption that the facts as pleaded, and proposed to be pleaded, are true.

In the course of argument concerning the aspects of the plaintiffs’ written submissions concerning the powers of a liquidator of a company and Australian Courts acting in aid of foreign Courts in an external administration matter as defined in s 581 of the Corporations Act2001, Counsel for the plaintiffs, Mr North SC, conceded, rightly in my view, that they were not relevant, and the application of the Trendtex exception was the key to the application.[63]
[63]Transcript p 17.

What law determines the validity of the assignments
First Assignment

The enforceability of the First Assignment as between the parties to it will most likely be governed by Swiss law. As the plaintiffs submitted, the determination of which law prevails, if there is a conflict of laws, is normally made by reference to the applicable connecting factors. A Court will generally apply the law with which the transaction has “its closest and most real connection”.[64] The key factors include where the transaction occurred[65] and the domicile of the parties to that transaction.
[64]Amin Rasheed Shipping Corp v. Kuwait Insurance Co [1984] AC 50 at 61 per Lord Diplock and at 71 per Lord Wilberforce.
[65]Halsbury’s Laws of Australia, Conflict of Laws, para. 85-10.

The assignment to ICMS has its closest and most real connection with the law of Switzerland for the reasons advanced by the plaintiff. I leave aside for present purposes whether eWorld’s liquidator is empowered, under Swiss law, to assign eWorld’s rights to ICMS. There was debate about the evidence supporting this assertion. That will not affect the identification of the proper law of the first assignment.

But the proper law of the First Assignment is not necessarily the law that determines the validity of the assignment of the cause of action when the question arises in an Australian proceeding.

CBA placed great reliance on the decision of Heerey J in Salfinger v Niugini Mining (Australia) Pty Ltd (No. 3),[66] which in turn relies on Trendtex. In Salfinger there were also two purported assignments of causes of action in both tort and equity by, first, an Australian company to a Canadian company and, second, by that company to the plaintiff Mr Salfinger. In each case the proper law of the contract of assignment was the Canadian Province of British Columbia. His Honour found that the assignability of a claim in tort relating to alleged wrongs which had occurred in Australia was governed by Australian law, because it is the law under which the cause of action arose, despite the fact that the relevant contracts of assignment were entered into in Canada and were expressed to be governed by the laws of British Columbia.[67]
[66][2007] FCA 1532.
[67]See also Trendtex Trading Corporation v Credit Suisse [1982] AC 679.

The plaintiffs sought to distinguish the Trendtex case. They submitted that in Trendtex the principal issue for consideration was whether a stay should be granted in respect of a proceeding commenced in England, which of course it was. All members of the House of Lords were of the opinion that the assignment of a bare right to sue, which occurred in Switzerland, and which was expressed to be governed by Swiss law, was void in England as being against public policy. All members of the Court were also of the view that the proceeding in England should be stayed and heard in Switzerland. The proper law of the agreement in question was Swiss law, even though the underlying transaction involved moneys in England. The proceeding in the English Court was stayed. But there was rather more to the proceeding than this brief account. I note that:

(a) The cause of action that was the subject of assignment was governed by English law (it was an action on a letter of credit payable in London);

(b) The agreements between Trendtex and Credit Suisse which gave rise to the assignment of the relevant cause of action were sought to be set aside in the English courts by Trendtex. It was in this context that the question of the enforceability of the assignment arose, not in the context of an attempt by the assignee to sue on the cause of action. Trendtex sought to set aside the agreement because Credit Suisse had on-sold the right of action to an unidentified third party who had profited greatly out of a settlement of the claim;

(c) The agreement sought to be set aside was agreed to be governed by Swiss law and exclusive jurisdiction was conferring on the Court of Geneva over any dispute under the agreement;

(d) Credit Suisse sought to stay the English proceeding on the basis of the exclusive jurisdiction clause;

(e) there was more to the claim to set aside the agreement than the contention that the assignment was invalid under English law. The grounds included economic duress, undue influence and breach of fiduciary duty; and

(f) Even if the assignment was invalid, it was possible that other parts of the agreement ought to receive effect. The agreement being governed by Swiss law, it was appropriate that the effect of the invalidity of the assignment on the agreement as a whole should be considered by a Swiss Court rather than an English one.[68]

[68]Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 695 (Lord Wilberforce), 696 (Lord Fraser), 704 (Lord Roskill).

This is not a case of a stay as was Trendtex. Notwithstanding that it is likely that the proper law of the First Assignment is Swiss law, the decision in Trendtex that an assignment of a cause of action of the kind in question here is void as being against public policy is good law in Australia for the purposes of this application. That is because the authority of Trendtex in Australia was confirmed by the High Court in Equuscorp Pty Ltd v Haxton.[69]
[69][2012] HCA 7; 246 CLR 498 at [51] - [53], [79] and [156].

In Equuscorp Pty Ltd v Haxton a lender to investors in a blueberry farm project assigned to its financier the rights that it had against the investors. Those rights included such rights as it had under allegedly invalid loan agreements between the lender and the investors and the restitutionary rights of the lender against the investors. French CJ, Crennan and Kiefel JJ found the assignment of the restitutionary claims to be valid because the claims were not assigned as bare causes of action but "along with contractual rights, albeit their existence is contestable" and, seemingly as an additional reason, that the financier had a "legitimate commercial interest ... in acquiring the restitutionary rights should the contract be found to be unenforceable" (at [53]). Gummow and Bell JJ held that the financier had a relevant interest because it held a charge over the assets of the lender to secure its indebtedness to the financier and "the recovery on the restitutionary claim would, as counsel put it 'fill the gap created by the debts imploding under illegality'" (at [79]). Heydon J's reasoning on this point was to the same effect (at [156]).[70]
[70]See Dover v Lewkovitz, [2013] NSWCA 452 per Macfarlan JA at [14]-[15].

In the identification of the law governing the validity of the assignment, Trendtex teaches that there is an important distinction that the plaintiffs seek to avoid. The proper law of the contract of assignment is not necessarily determinative of the validity of the assignment. As Dicey, Morris and Collins put the matter, succinctly, the assignability of the right of action in tort is governed by the law that governs the claim in tort.[71] Lord Staughton, in one of the many authorities advanced by the plaintiffs, quoted an earlier edition of Dicey and Morris[72] to much the same effect, but perhaps more clearly for present purposes: the law governing the right to which the assignment relates determines its assignability, whilst the mutual obligations of the assignor and assignee are governed by the law which applies to their contract.[73]
[71]Dicey, Morris and Collins on Conflict of Laws, 15^th Ed, Vol 2, #24-067, p.1363.
[72]The 12^th Ed, 1993, Vol 2 at p. 979.
[73]MacMillan v Bishopsgate Investment Trust Plc (No 3), [1996] 1 All ER 585 at 597.

The same position applies to the First Assignment as applied in Salfinger. Notwithstanding that the proper law of the assignments was British Columbia, Canada, the validity of the assignments fell to be determined by reference to Australian law. So too in Trendtex. That is because the law of the cause of action assigned governs the validity of the assignment.[74] It may be that there is a further reason, and that is the overriding public policy consideration. The prima facie prohibition against the assignment of bare rights of action is founded upon a public policy of precluding trafficking in litigation.[75]
[74]In the course of submissions the plaintiffs referred to the position applying to the assignment of debts and referred to an article by Mark Moshinsky (now Mark Moshinsky SC) in the Law Quarterly Review, The Assignment of Debts in the Conflict of Laws, (1992) 109 LQR 591 at 594-596 particularly. The distinction between the contractual and proprietary effects of a contract to assign a debt are analogous to the distinction between the proper law of the contract of assignment and the law governing the validity of an assignment of the chose in action in this case (and it should be noted that the assignment of debts is the subject of old law and s 134 of the Property Law Act1958 (Vic)).
[75]Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 694-695 (Lord Wilberforce).

That the law that governs the claim in tort determines the assignability of the right of action in tort is, at least, the case where the choice of law rules are the common law of Australia. However, the plaintiffs contended, and late in the argument advanced a proposed pleading which alleged, that the First Assignment and its validity were governed by Swiss law and referred to the evidence of the Swiss Lawyers identified above,[76] and in the particulars to the pleading advance the basis as being s 256 of the Swiss Federal Act on Debt Enforcement and Bankruptcy 1889, on which the Swiss Lawyers rely in their opinion.
[76]See paragraphs 27 to 30 above.

On one view that would make the plaintiffs’ contentions arguable. On the other view, when the opinion of the Swiss lawyers is looked at in some detail, the following emerges:

(a) The opinion does not identify the nature of the claim against CBA;

(b) The documents relied upon are limited to the documents emanating from the Swiss bankruptcy and the First Assignment, and do not include any material relating to the claim of eWorld in this proceeding;

(c) Importantly for present purposes, the opinion expressed is confined to the law of Switzerland and it is assumed by the authors that there is nothing in the law of any other jurisdiction that affects the opinion;[77] and

(d) the opinion of the Swiss lawyer is thus silent as to the law that governs the validity of the assignment.

[77]Paragraph 3, under the heading ‘Scope’ on page 3 of exhibit DAD-30.

In this respect it is noteworthy that in Trendtex, in the Court of Appeal, there is reference to the fact that at that time even Swiss law would leave to the law of England the question whether the assignment was valid.[78]
[78]Trendtex Trading Corporation v Credit Suisse [1980] 1 QB 629 at 652.

I therefore reject the contentions of the plaintiffs that the validity of the First Assignment is to be determined by Swiss law. That validity is to be measured by reference to Australian law. In my view, the First Assignment is therefore invalid unless saved by the Trendtex exception.

But the Trendtex exception cannot apply to the First Assignment. There is no evidence or pleading which is capable of supporting any genuine commercial interest of ICMS in the cause of action purportedly assigned to it by eWorld. I consider later the content of a genuine commercial interest.

It may therefore be strictly unnecessary to determine the validity of the Second Assignment. However, in case I am wrong in my view as to the validity of the First Assignment, I turn to consider the Second Assignment.

Second Assignment

In relation to the Second Assignment (from ICMS to EWC), the Deed of Assignment[79] is silent as to its proper law. It appears to have been made in the Republic of Panama, but the wording of both execution clauses purport to rely on s 127(1) of the Corporations Act 2001 (Cth).
[79]Exhibit CAO’B-5 to the affidavit of O’Bryan sworn 19 July 2013.

That section authorises a company to execute a document without using a common seal if it is signed by two directors of the company, a director and a company secretary of the company or for a proprietary company having a sole director who is also the sole company secretary, by that director.

In the case of this Deed, ICMS purports to have executed the Deed by a director and secretary. In the case of EWC, it purports to have been executed by the sole director and secretary, Georgina (Gina) Louisa Starr. EWC is incorporated in Victoria. The proposed amendments to the statement of claim include the allegation that ICMS is a company incorporated in the Republic of Panama.

The assignment from ICMS to EWC does not appear from the evidence to have any connection with Switzerland. It may have its closest connection to the Republic of Panama. There is no evidence as to the law of Panama in relation to assignments of choses in action of this kind. There was no dispute between the parties that as a general proposition there is a presumption that the law of a foreign country is the same as that of the forum unless proven otherwise.[80] It was not disputed that CBA had the onus of proof that the foreign law differs from the law of the forum.[81] CBA introduced no evidence that the law applicable in Panama differed from Australia. It is therefore presumed to be the same as Australia.
[80]Neilson v. Overseas Projects Corp of Victoria (2005) 223 CLR 331 at [125] per Gummow and Hayne JJ, and at [267] per Heydon J.
[81]Temilovski v. Australian Iron and Steel Pty Ltd [1966] 1 NSWR 279 per Moffitt AJA.

Accordingly, the proper law of the Second Assignment is the law of Australia. As the cause of action assigned is Australian, the validity of the assignment falls to be determined under Australian law. Thus the question in relation to the Second Assignment is whether, according to the applicable principles in Australia, the assignment of the cause of action against CBA is valid. In stating this question it is assumed that the assignment of the cause of action to ICMS is valid under Swiss law. The answer to this question turned, the plaintiff accepted,[82] on whether the Trendtex exception was satisfied in respect of that assignment.
[82]Transcript p. 16.

The questions then are:

(a) whether under Australian law eWorld’s cause of action is incapable of assignment by ICMS to EWC because EWC has demonstrated no genuine commercial interest in its assignor’s (ICMS’s ) cause of action?

(b) whether it is sufficient if EWC has a genuine commercial interest in eWorld’s cause of action; and

(c) whether EWC does have such an interest?

CBA submitted that there are no pleaded facts that establish a genuine commercial interest of ICMS in the causes of action assigned by eWorld to it, nor any pleaded facts from which it can be concluded that EWC has a genuine commercial interest in the enforcement of its assignor’s (ICMS’s) cause of action. Further, CBA submitted that EWC’s interest in the litigation does not qualify as a relevant “genuine commercial interest” because to fall within the exception the assignee must have such an interest in enforcing the assignor’s claim.[83] That requirement applies to both Assignments.[84]
[83]Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR148 at 153. ICM Agriculture Pty Ltd v Young [2009] FCA 109 at [123-124].
[84]Kovarfi BMT & Associates Pty Ltd [2012] NSWSC 1101 at [57].

Genuine Commercial Interest

The parties advanced a great many authorities relevant to the Trendtex exception. I have referred to a few in the course of referring to the arguments and the choice of law questions. I will deal with more of them here to identify whether the interest that EWC claims to have is sufficient to satisfy the exception.

In Trendtex, the assignee of the right of action (Credit Suisse) was owed money by the assignor (Trendtex) and had rights against the assignor referable to the assignor's right of action against a third party. Save for the fact that the purported assignment contemplated that the assignee might further assign the right of action (to a party that clearly did not have any genuine commercial interest in it), the House of Lords would have held that the assignment was valid because the assignee had a genuine commercial interest in the right of action, as enforcement of it against the third party would have enhanced the assignee's prospect of recovering amounts owed to it by Trendtex.[85]
[85]Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 694, 703 - 704.

In each of Trendtex and Equuscorp Pty Ltd v Haxton, the assignee had a pre-existing enforceable right against the assignor. Other instances are:

(a) Where the assignee was the sole beneficial shareholder in the assignors and had guaranteed their liability to the bank, and thereby had a right of subrogation as a result of a guarantee of the assignors’ debts: Re Daley;[86]
[86][1992] FCA 395; 37 FCR 390, 8 ACSR 395 (Heerey J). In this case it was also held that the rule against the assignment of bare rights of action did not apply to the assignment of debts; see also Dover v Lewkovitz, [2013] NSWCA 452 per Macfarlan JA at [18].

(b) Where the assignees were creditors of assignors: Beatty v Brashs Pty Ltd;[87]

(c) Where the assignment was by an insured to its insurer of causes of action in tort (and also in contract and under statute) against the supplier of allegedly defective equipment, on the basis that it supported and enlarged the existing right acquired by way of subrogation: Hazard Systems Pty Ltd v Car-Tech Services Pty Ltd (in liq).[88]

[87][1998] 2 VR 201.

[88][2013] NSWCA 314 at [15].

A number of cases have extended the circumstances constituting a genuine commercial interest beyond a pre-existing right of some kind, as follows:[89]
[89]Dover v Lewkovitz, [2013] NSWCA 452 at [19].

(a) Deloitte Touche Tohmatsu v JP Morgan Portfolio Services Ltd[90] was concerned with an agreement, alleged to be in effect an agreement to assign a right of action, under which a bank was given the benefit and control of litigation against a third party. By majority, the Court held that the bank had a genuine commercial interest in the subject right of action on the basis that it was the holding company of the owner of the shares in the company that held the right of action when the right of action arose. The factual context of the agreement under which control of the litigation was given to Westpac Banking Corporation in this case included that at the time of the cause of action arose JP Morgan Portfolio Services Ltd was a member of the Bankers Trust Group (BT group) and its shares were wholly owned by BT Australia Ltd. At the time of the litigation Westpac was the holding company and ultimate owner of the BT group;
[90][2007] FCAFC 52; 158 FCR 417.

(b) In WorkCover Queensland v AMACA Pty Limited[91] a deceased worker's estate assigned a cause of action for damages for personal injury to an insurer. McMurdo P noted that although an insurer would ordinarily have a right of subrogation to the rights of the insured, the appeal was conducted upon the basis that the insurer did not in that case have any statutory or common law right of subrogation. It was accordingly a case that proceeded upon the basis that the assignee did not have any pre-existing enforceable right against the assignor. McMurdo P held[92] that the cases pertaining to assignments of causes of action do not suggest that the concept “legitimate (or genuine) commercial interest”, requires an enforceable legal or equitable right and that WorkCover's interest in the assigned cause of action was a legitimate or genuine commercial interest, akin to an insurer's right of subrogation;
[91][2012] QCA 240. See also Dover v Lewkovitz, [2013] NSWCA 452 at [20].
[92][2012] QCA 240 at [16]-[17]. See also Gotterson JA at [66]-[68].

(c) In Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd,[93] the Full Federal Court found that an assignee had a genuine commercial interest in the subject of the assignment without relying upon the existence of any pre-existing enforceable right of the assignee against the assignor. Rather, the Court cited Deloitte v JP Morgan for the proposition that "[a] holding company has a legitimate commercial interest in the enforcement of a cause of action obtained by a company which had been one of its subsidiaries when the cause of action arose, even though the ownership of the subsidiary subsequently changes" (at [28]) and had regard to the commercial context and relationships between the parties concerned. The relationship included that the assignor was a beneficiary of a family discretionary trust of which the assignee was trustee and was the author of copyright material in respect of which rights of action for infringement were assigned;

(d) In Dover v Lewkovitz[94] the assignee was a beneficiary under a discretionary trust which indirectly owned shares in the assignor. The NSW Court of Appeal reviewed the authorities and concluded that it was not necessary that the assignee have a pre-existing enforceable right against the assignor. What was necessary was a genuine commercial interest that meant that the assignee was not an officious intermeddler or was trafficking in litigation.[95]

[93][2013] FCAFC 62.

[94][2013] NSWCA 452.

[95]Dover v Lewkovitz, [2013] NSWCA 452 at [23].

There are also cases where the finding was that there was no pre-existing genuine commercial interest of the assignee in the assignor:[96]
[96]Dover v Lewkovitz, [2013] NSWCA 452 at [24]-[25].

(a) In National Mutual Property Services v Citibank Savings[97] Lindgren J found that the assignee did not have a relevant genuine commercial interest. His Honour reached that conclusion because such interest as the assignee had arose from the same arrangement of which the impugned assignment was an essential part. The interest was thus not pre-existing;
[97][1995] FCA 1628; 132 ALR 514.

(b) In Project 28 Pty Ltd v Barr[98] the NSW Court of Appeal found that an assignee did not have a genuine commercial interest of the type found by the primary judge in that case. The primary judge had found that the assignee had not been motivated by a desire to engage in litigation funding but rather, as a developer, had acted because "it wanted to acquire the [subject land] for redevelopment". The Court held that this "mere wish" to acquire the land was "far too insubstantial and tenuous" to qualify as a relevant commercial interest. Ipp JA said in this context that such an interest must be "rights-based and not a mere hope" (at [42]). It has subsequently been held that this was intended to indicate that the commercial interest must be based upon some sound pre-existing legal status or right (whether or not the right is against the assignor). An example would be a shareholding in the assignor: Dover v Lewkovitz;[99]
[98][2005] NSWCA 240.
[99][2013] NSWCA 452 at [25].

(c) In Monk v Australia and New Zealand Banking Group Ltd[100] The assignee’s only interest was in the possibility of becoming a creditor of the bank. That is, his interest was in using the debt which might arise from the cause of action for his personal benefit. Cohen J held that the using of the debt as a set-off against the judgment debt was an example of obtaining some personal benefit. In that regard the plaintiff was in no stronger position than he would have been if he had obtained an assignment of a cause of action for negligence by a customer of the bank who claimed to have suffered injuries arising from unsafe premises. The commercial interest must go beyond a mere personal interest in profiting from the outcome of the proceedings. It requires an interest by the assignee in the assignor or its business affairs or activities which the assignment may in some way protect;

(d) In ICM Agriculture Pty Ltd v Young[101] an indirect interest as sole shareholder of a company which owned a one sixth share of the assignor did not give the assignee a genuine commercial interest of the kind required.

[100](1994) 34 NSWLR 148 at 153 (Cohen J).

[101][2009] FCA 109 at [123-124].

The prima facie prohibition against the assignment of bare rights of action is founded upon a public policy of precluding trafficking in litigation. Trendtex recognised that that policy would not be infringed if the assignee had a pre-existing genuine commercial interest in the right of action sought to be assigned. This is so whether or not that interest is constituted, or accompanied, by a pre-existing enforceable right of the assignee against the assignor. In neither type of case is the assignee acting as "an officious intermeddler".[102]
[102]Dover v Lewkovitz, [2013] NSWCA 452 at [23].

Consideration

CBA contended that under the Trendtex test, the assignee must have an interest in enforcing the assignor’s claim, in the sense of an interest in the assignor or its business affairs or activities which the assignment may in some way protect: Monk v Australia and New Zealand Banking Group Ltd.[103] As I have noted, it has been held that an indirect interest as a sole shareholder of a company that owned a share in the assignor did not constitute a genuine commercial interest by the assignee in the assignor.[104]
[103](1994) 34 NSWLR 148 at 153 (Cohen J).
[104]ICM Agriculture Pty Ltd v Young [2009] FCA 109 at [123]-[124] (Lindgren J).

CBA submitted that where there are two successive assignments, it is necessary to establish the existence of a genuine commercial interest of the first assignee in enforcing the first assignor’s claim, and a genuine commercial interest of the second assignee in enforcing the second assignor/first assignee’s claim.[105]
[105]Kovarfi v BMT & Associates Pty Ltd, [2012] NSWSC 1101 at [57] (McCallum J).

If this is correct, it is necessary for EWC to plead facts from which it can be concluded, arguably, that EWC has a pre-existing interest in IMSC or its business affairs or activities which the assignment to EWC was designed to protect.

The plaintiffs’ proposed Second FASOC does not plead any facts from which the existence of such an interest could be concluded. It contains no alleged facts as to any relationship between EWC and the assignor IMSC, let alone any interest that EWC may have in enforcing the right of IMSC in the cause of action assigned. Further, there is no evidence which might support the existence of a genuine commercial interest on EWC’s part in enforcing IMSC’s claim and which might be pleaded should leave be given. The deed of assignment is silent as to the assignee’s interest.[106]
[106]Affidavit of O’Bryan, Exhibit CAO’B-5.

EWC relied in part on the fact that in paragraph 5 of the proposed Second FASOC, which pleads the agreement between EWC and CBA, the words “and eWorld” are to be added so as to allege that EWC entered into the contract with CBA both for its own benefit and for the benefit of eWorld. In my view, that is not enough to sustain a genuine commercial interest in the cause of action of eWorld, let alone in the assignor to it, ICMS’s cause of action (if any). They are not sufficient to support the existence of some close commercial relationship between the parties such as would give EWC an interest in eWorld's claim, as opposed to an interest in its own claim.

Assuming for present purposes that the relevant question is whether EWC has an interest in eWorld's claim, as opposed to ICMS's claim, the pleaded facts only show that EWC had an interest in its own proceeding—its own cause of action - and that the interests of eWorld and EWC were parallel interests. Had it been the case that eWorld survived and EWC went into liquidation and its liquidator assigned its cause of action to eWorld, the position might have been different. A holding company may have a genuine commercial interest in the enforcement of a subsidiaries claim, either because of the ability to flow profits up to the holding company, or for some other reason. The obverse does not disclose any genuine commercial interest. Absent some special facts not presently revealed, a subsidiary has no interest in the successful prosecution of its holding company’s cause of action.

In this regard, CBA tendered, without objection, a copy of Corporations Form 484 which shows that from 31 July 2009 all the shares in EWC were owned by the third defendant, Matthew Thomas Starr, and not by eWorld.[107] There is no express definition in the pleading of what are the material times during which it is alleged that eWorld was the holding company of EWC.[108] But it is tolerably clear that those times begin in 2006 and extend at least to the time CBA terminated the agreement with EWC in January 2009. Thus, if the fact that eWorld was the holding company of EWC ‘at all material times’ were to support a pre-existing genuine commercial interest of EWC in eWorld, then at least during those relevant times that relationship existed. But at the times of the Assignments, there is no apparent relationship between eWorld and EWC. It may be that in other circumstances a holding company’s interest in its subsidiary at a time earlier than the assignment could give rise to a genuine commercial interest of the holding company (assignee) in the right of action of the subsidiary (assignor), but that is not this case.
[107]See Exhibit “B”.
[108]Paragraph 2(b) of the FASOC alleges that at all material times eWorld was the holding company of EWC.

The plaintiffs contented that in so far as the relationship with CBA were concerned, eWorld depended on the actions taken by EWC. That seems to be the substance of the cases pleaded, as the contractual position is confined to a contract between EWC and CBA. If eWorld was a party to any contract—and it is not pleaded that it was—it was through the agency of EWC. Even if it were correct that, as the plaintiffs submitted, EWC and eWorld’s financial positions, in respect of the underlying subject matter of the proceeding against CBA, were intimately related so that in a practical sense, EWC was the controlling entity in the commercial relationship with CBA affecting eWorld’s financial fortunes, that does not provide EWC with a genuine commercial interest in eWorld’s claim. At best it gave eWorld an interest in EWC’s claim. It takes the matter no further to observe, as Counsel for the plaintiffs, Mr North SC, did, that eWorld procured EWC to enter into the agreement with CBA.[109] All that shows is that eWorld had a commercial interest in the claims of EWC, and not the other way around.
[109]See paragraph 33(a) of the proposed FASOC and Transcript p.97.

The ‘interlinking’ of eWorld and EWC is itself insufficient to disclose a relevant genuine commercial interest of EWC in eWorld’s claim. Perhaps there are facts that might be adduced that Mr Starr, as the present owner of the shares in EWC, had some interest in the fruits of any successful claim as a person interested in eWorld. But there are no facts as to that disclosed. If they were, it may be doubted whether they would be sufficient as, in the words of Cohen J in Monk’s Case, the commercial interest must go beyond a mere personal interest in profiting from the outcome of the proceedings. It requires an interest by the assignee in the assignor or its business affairs or activities that the assignment may in some way protect.

Because in my view there is no genuine commercial interest of EWC in eWorld’s cause of action against CBA, it is unnecessary to decide whether—as CBA submitted—it is necessary for EWC to have an interest of that kind in ICMS’s assigned cause of action.

Conclusion

In summary, I conclude that the validity of the First Assignment is governed by Australian law, not Swiss law, and is invalid. I also conclude that the Second Assignment, the validity of which the parties agreed was governed by Australian law, is invalid, there being no basis established for a genuine commercial interest of EWC in eWorld’s cause of action against CBA, let alone any interest (if there must be one, which I do not decide) of EWC in the business or affairs of ICMS. Accordingly, the reliance of EWC on the purported assignment to it of eWorld’s cause of action against CBA is not fairly arguable and it would be futile to allow the amendments proposed.

The appropriate orders are, therefore, that the application to amend made by Summons filed 19 July 2013 is refused. It seems to me that the costs of the application should follow the event, but I will give the parties the opportunity of making submissions as to that matter.

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EWC Payments Pty Ltd v Commonwealth Bank of Australia (No 2) [2014] VSC 4

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28 January 2014