Giannakopoulos v Bank of Sydney Ltd and George Euripidou

[2018] VCC 660

IN THE COUNTY COURT OF VICTORIA
AT MELBOURNE
COMMERCIAL DIVISION Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-17-02720

Giannakopoulos & Ors	Plaintiffs
v
Bank of Sydney Ltd & George Euripidou	Defendants

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JUDGE:	His Honour Judge Woodward
WHERE HELD:	Melbourne
DATE OF HEARING:	4 May 2018
DATE OF RULING:	25 May 2018
CASE MAY BE CITED AS:	Giannakopoulos & Ors v Bank of Sydney Ltd & George Euripidou
MEDIUM NEUTRAL CITATION:	[2018] VCC 660

REASONS FOR RULING

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J Tsalanidis	G & S Lawyers
For the Defendants	Ms R Burton	Dentons

HIS HONOUR:

Decision and orders

The defendant has applied pursuant to rr 23.01 and 23.02 of the County Court Civil Procedure Rules 2008 (Vic) (“Rules”) for orders summarily dismissing, and alternatively striking out paragraphs of, the plaintiffs’ amended statement of claim filed 19 April 2018 (“ASOC”). The ASOC is deficient in a number of respects as discussed below. However, I am satisfied that at least some of the elements of the current claim can potentially form the basis of a sustainable cause of action.

On the other hand, given the extent of the reworking required, in my view, the appropriate course is to strike out the ASOC in its entirety pursuant to r 23.02 of the Rules, and give the plaintiffs leave to file and serve a further ASOC within 28 days. My preliminary view is that the plaintiffs should pay the defendants’ costs of and incidental to the defendants’ summons dated 20 April 2018 on the standard basis, in default of agreement. However, if either party considers that some other order on costs is appropriate, they may provide brief submissions to that effect and I will determine the question of costs on the papers.

The plaintiffs’ claims

The plaintiffs sue Bank of Sydney Ltd (“BOS”) and George Euripidou.  BOS was incorporated on 27 June 2000 as Laiki Australia Limited.  About a year later it changed its name to Laiki Bank (Australia) Ltd.  It changed its name again in March 2011 to Beirut Hellenic Bank Limited and then to its current name in about May 2013.  Mr Euripidou was employed as BOS’s Business Development Manager between 2000 and 2003, was the branch manager of BOS’s Oakleigh branch from 2003 to 2013 and has held the position of Regional Manager Community Business Development with BOS since 2013.

The plaintiffs allege that they first had dealings with Mr Euripidou in about 1996 when (so they allege) he was employed at the newly opened Oakleigh branch of “Laiki Bank”.  It is not clear from the material how (if at all) BOS came to assume conduct of the business of that bank branch and employ Mr Euripidou from 2000.  What is clear is that BOS cannot have been in any way involved in or responsible for Mr Euripidou’s alleged conduct at any time before 27 June 2000. 

Despite this, the plaintiffs allege (ASOC at [3]) that “at all material times” Mr Euripidou was a manager, servant or agent of BOS and that:

·    since about 1996, Mr Euripidou and after about June 2000, BOS advised and facilitated the plaintiffs to establish various bank accounts and term deposits in various currencies in Australia and in Greece (ASOC at [4]);

·    from about September 1999, Mr Euripidou and after about June 2000, BOS advised the plaintiffs to purchase shares and undertake other investments using funds held in the bank accounts and term deposits and cash (ASOC at [5]); and

·    between about April 2002 and April 2012, BOS provided a business loan to the second plaintiff (ASOC at [6]).

The plaintiffs then proceed to allege in substance:

·    that by reason of “the matters alleged in paragraphs 2 to 6 above”, a banker and customer relationship existed between BOS and the plaintiffs, giving rise to an “Agreement”, comprising various contractual duties owed by BOS to the plaintiffs (ASOC at [7]-[8]);

·    that BOS owed fiduciary duties to the plaintiffs, which arose by operation of law by reason of “the matters alleged in paragraphs 2 to 6 above”, various advices about investments alleged to have been given by BOS and Mr Euripidou and other aspects of the relationship alleged to exist between BOS and the plaintiffs (ASOC at [9]);

· in order to induce the plaintiffs to enter into “the Agreement”, BOS and Mr Euripidou represented that they would carry out banking and associated transactions relating to the plaintiffs “with their [the plaintiffs’] knowledge and authority”, the plaintiffs relied on the representation to enter into the Agreement and the representation was misleading and deceptive in breach of s12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”) (ASOC at [14]-[20]);

·    the representation is said to be partly oral and partly to be implied, with the oral part being contained in conversations between the plaintiffs and Mr Euripidou after 1996 “on his own behalf” and after about July 2001 on behalf of BOS; and

·    various ancillary matters, including breach by BOS of the Code of Banking Practice (“Banking Code”) (ASOC at [10]-[11]) and unconscionable conduct (ASOC at [21]-[22]).

Notably for present purposes, the plaintiffs’ allegation of breach of all of the alleged duties (being those alleged under “the Agreement” and under the Banking Code, as well as the fiduciary duties), appear in a single rolled-up plea at ASOC paragraph 12, followed by a series of disconnected particulars.  Further, those same particulars are adopted in their entirely as particulars of the alleged misleading and deceptive conduct (ASOC at [16]).

Defendants’ submissions

The defendants’ submissions are in four parts, which I paraphrase as follows:

(a)  the scope and duration of the alleged relationship of the parties is unclear;

(b)  the allegations relate to accounts and term deposits with banks other than  BOS;

(c)  nearly all of the alleged claims are statute barred; and

(d)  the pleading is otherwise vexatious and embarrassing, particularly as against Mr Euripidou.

Scope and duration of the alleged relationship

The gravamen of this submission is that certain events said to form the basis of the defendants’ liability pre-date BOS’s existence.  This is not simply a matter of the pleading including some background facts that might arguably be irrelevant to the claims in the proceeding, but are otherwise unobjectionable.  The pre-June 2000 facts are incorporated into paragraphs 2 to 6 of the ASOC as an integral part of a narrative of events apparently beginning in 1996 and continuing until 2008 (and possibly 2012, in the case of the second plaintiff) and then rolled-up into both the definition of “Agreement” and as particulars of BOS’s fiduciary duty. 

I agree with the defendants’ submission that this incorporation of events that allegedly occurred before BOS existed into the rolled-up allegations against BOS, is a significant obstacle to the preparation of a meaningful responsive pleading.  It would perhaps be open for BOS simply to deny the allegations, but this would not assist the clear identification of the issues in dispute and arguably offend BOS’s overarching obligations under the Civil Procedure Act 2010 (Vic) (“CPA”), notably under s23.  And BOS should not be expected itself to distil the particular factual allegations arguably attaching to it, and plead only to those.

This difficulty with the ASOC is compounded by the fact that none of the factual allegations – whether pre or post-June 2000 – manifest in claims directly against Mr Euripidou.  The only claim against him is for knowing involvement in BOS’s alleged breach of the ASIC Act.  Thus there presently seems to be no justification for pleading any of the pre-June 2000 allegations.  It appears that part of the rationale for commencing the narrative in 1996 is that the plaintiffs are uncertain when a number of the accounts referred to were first established.  However, given that many of the accounts appear to be with other banks (and any established before June 2000 would necessarily be so), this gap in the plaintiffs’ proof cannot be laid at the feet of BOS.

In my view, the plaintiffs must re-plead paragraphs 3 to 6 of the ASOC to ensure that the factual narrative for the claims against BOS are not contaminated by events pre-dating its existence.  Indeed, unless the plaintiffs are proposing to bring fresh and discrete claims against Mr Euripidou, it is difficult to see how pre-June 2000 claims have any place in the plaintiffs’ pleadings.  At best, it may be open to the plaintiffs to rely on evidence of conduct commencing before June 2000 that continued after that time with the apparent authority of BOS.  For example, Mr Euripidou may have arranged investments before that time that were renewed or were the subject of further dealings on behalf of the plaintiffs after June 2000.  But if something to this effect is alleged, it must be made clear.

Claims involving banks other than BOS

The defendants submit that even where the events alleged to form the basis of their liability to the plaintiffs are post-June 2000, some of them relate to accounts and transactions that are not held with BOS.  This of itself does not prevent the allegations from forming the basis of a sustainable claim by the plaintiffs against BOS, if the substance of the claim was that these accounts and transactions were established or undertaken on the advice of BOS (presumably through its employee Mr Euripidou).  This at least appears to be the thrust of ASOC paragraph 5.  However, ASOC paragraphs 4 and 6 are more directed to the fact of establishing accounts, including at least one BOS account (a loan account involving the second plaintiff – ASOC at [6]).

Again, the difficulty in pinning down what conduct of BOS is impugned, is compounded by the pleading in paragraph 7 to the effect that, by reason of the matters pleaded at ASOC paragraphs 2 to 6, “a banker and customer relationship existed” between BOS and the plaintiffs, which is in turn defined as the “Agreement”.  While establishing a loan account is unquestionably evidence of a typical “banker and customer” relationship (and thus a well-known species of agreement), the same cannot be said of setting up accounts with another bank or giving advice about investments and account opening arrangements.  The former would ordinarily give rise to no relationship with BOS of any kind.  The latter may indicate something much more sophisticated than a typical banker and customer relationship. 

Thus, certain of the matters alleged in ASOC paragraphs 2 to 6 might evidence a banker and customer (lender and borrower) relationship which, as a general rule, would not be treated as fiduciary.  Whereas other matters alleged have some of the hallmarks of a relationship that might arguably give rise to fiduciary duties.  In my view, BOS should not be required to plead to what could fairly be described as a grab bag of disparate allegations that are then said together to support quite distinct causes of action in both contract and equity.  The plaintiffs must re-plead these allegations including by identifying which of them give rise to the alleged banker and customer relationship and which inform or give rise to the alleged fiduciary duties.

Statute barred claims

As the defendants have submitted, this proceeding was commenced by writ and statement of claim dated  19 June 2017 and nearly all of the claims are said to have occurred more than six years earlier.  Pursuant to s5(1) of the Limitations of Actions Act 1958 (Vic) (“LAA”) (and, to the extent they apply, ss12GF(2) and 12GM(5) of the ASIC Act), such causes of action “could not be brought as at the date of the writ”.  The defendants then list each of the material facts alleged, that concern events before 20 June 2011.

However, the flaw in the defendants’ submission on this issue is exemplified by the assertion quoted above that the cause of action “could not be brought” after the limitation period has expired.  It is well established that the expiry of a limitation period bars the plaintiffs’ remedy and not the cause of action.  And, as the plaintiffs have submitted, “it is also accepted that a defendant cannot rely on a limitation of liability issue to impugn a plaintiff’s claim until such a defence is formally pleaded” (citing Commonwealth v Mewett (1995) 59 FCR 391 (per Cooper J at [398]) and Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd [2001] FCA 703, per French J at [38]). BOS is yet to file a defence in the proceeding.

Assuming for the moment that the defendants in due course seek to rely on all applicable limitation periods in defence of the claims, the plaintiffs posit three bases upon which their claims will nevertheless survive those defences.  The first is that the ASOC raises various breaches of fiduciary duties alleged to be owed to the plaintiffs by the defendants, and that breaches of equitable duties are not at law subject to any limitation period under the LAA, although a statutory limitation period may be applied by analogy.  The plaintiffs go on to refer to a number of authorities that support the proposition that an application for summary dismissal is not generally a satisfactory process for determining whether equity should apply a limitation period by analogy.  For example, White J in Issa v Issa [2015] NSWSC 112 at [79] held:

“If the circumstances of the case make it unjust to apply the statute of limitations by analogy to prevent a plaintiff from obtaining an equitable remedy arising from the defendant’s breach of fiduciary duty so that it would be against conscience for the court to apply a rule founded on the analogy, it is arguable that it would be unconscientious for the defendant to rely on the analogical application of the statute. That is not a question which should be determined on an application for summary dismissal. The resolution of the question may depend upon findings of fact in relation to the nature and extent of any breach of fiduciary duty that is established.”

There is some force in the plaintiffs’ submission on this issue.  However, in my view the plaintiffs’ claims will remain vulnerable at least to an application for summary judgment under ss62 and 63 of the CPA (assuming the relevant defences are pleaded), unless the ASOC is amended as discussed above to clearly and discretely reveal:

·    the material facts said to give rise to the relationship of influence, dependency and trust between the parties sufficient to enliven a fiduciary duty; and

·    the actions of BOS (or Mr Euripidou as its employee) said to constitute a breach of those duties.

The second basis on which the plaintiffs seek to answer the putative limitation defences is in substance that the breaches of contract alleged are, first, based on disputed issues of fact and law and, second, continuing breaches, thus engaging the principle in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 at [533] as follows:

“We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question.”

The defendants submit in substance that this is not a Wardley type case, and when the facts said to constitute the alleged breaches of the Agreement and misleading and deceptive conduct are fully revealed, it will be clear that the relevant causes of action are stale. I agree that the summary of the allegations included in the defendants’ submissions at [25]-[29] does suggest that the plaintiffs are likely to face considerable obstacles in maintaining a significant proportion of their claims in the face of a limitations defence, including on an application for summary dismissal or judgment. This is particularly so in respect of claims that face a clear statutory limitation period and do not share the inherent flexibility enjoyed by claims for equitable relief. Thus the plaintiffs will need to be particularly astute in any re-pleading of the contract and misleading and deceptive conduct claims to ensure that any breaches of agreement or representations alleged to have occurred on or after 20 June 2011 are clearly identified.

The third and final basis for avoiding the consequences of LAA defences relied on by the plaintiffs is the possible exception provided under LAA s27(b).  The plaintiffs submit that the notion of concealment of fraud contained in s27(b) includes behaviour that is unconscionable and extends to conduct that conceals the original allegedly surreptitious conduct (relying on the Court of Appeal decision in Levy v Watt (2014) 308 ALR 748, per Santamaria JA at [48], [49] and [85]. Counsel for the plaintiffs conceded in oral argument that fraud is not pleaded, but submitted that the time for the plaintiffs to allege fraudulent concealment was once the defendants plead the limitation defence. To my mind, this is a long bow for the plaintiffs to draw. There is not even a hint of fraud in the claims as currently articulated. It may be strictly correct that the pleading rules in respect of allegations of fraud are not fully engaged until reply, but the plaintiffs would need to proceed with great care if they were to press this response to any limitation defence, either in pleadings or in response to any future application for summary determination.

Vexatious and embarrassing pleading

The reasons above are probably sufficient to support the orders proposed without going into any of the defendants remaining arguments on weaknesses and deficiencies in particular paragraphs of the pleading.  However, I will take the opportunity to briefly articulate my views on each of these:

(a)  Vague “Agreement”: I have discussed above the implications for the alleged Agreement of the plaintiffs’ reliance on events preceding BOS’s initial registration. In my view, there is also force in the defendants’ criticism of the plaintiffs pleading to the effect that a banker and customer relationship operating at large, between a number of parties and over an extended period manifested as an overarching “Agreement”.  If a particular agreement is to be relied on by the plaintiffs, it should be pleaded in the orthodox fashion.  Similarly, the alleged terms of the “Agreement” require a proper foundation for implication.  While a term of care, skill and competence could fairly be said to be implied as a matter of law from the banker and customer relationship, the position in respect of the remaining alleged terms is less clear.

(b)  Fiduciary duty claims: As discussed above, the plaintiffs must plead with some particularity the features of the relationship between the plaintiffs and defendants that are said to enliven relevant fiduciary duties on the part of BOS.

(c)  Banking Code: The plaintiffs are on notice that the defendants assert that BOS did not adopt the Banking Code until 10 February 2014.  They can therefore expect that the defendants may renew their application for summary judgment on any allegations relying on the Banking Code, unless those allegations are limited to breaches after that date.

(d)  Misleading and deceptive conduct claims: I agree with the defendants that the alleged representations as currently pleaded are deficient in their expression and in their failing to identify the time and circumstances of the making of the alleged representations.  I also agree that:

·Any reliance on provisions of the ASIC Act before the introduction of those provisions on 27 September 2001, is misconceived.  There may be grounds for relying on equivalent provisions in the Trade Practices Act 1974 (Cth) before that date. If so, the pleading should be amended accordingly.

·The expression “Euripidou on his own behalf”, is not explained and does not manifest in any claim directly against Mr Euripidou.  It should either be amplified or deleted.

·The alleged representation by silence is problematic.  Among other things, it is far from clear how the defendants can both make a positive representation and, at the same time, fail to object to it.  Further, a pleading of misrepresentation by silence would ordinarily also identify circumstances giving rise to an obligation on the part of the representee to provide the information that was allegedly withheld.

The claim against Mr Euripidou

The defendants assert that there is presently no claim pleaded against Mr Euripidou and the proceeding against him should therefore be dismissed with costs. However, ASOC paragraph 17 does allege that Mr Euripidou was a person involved in BOS’s contravention of s12DA of the ASIC Act and consequential relief is sought against him in paragraphs A and D of the plaintiffs’ prayer for relief.  In those circumstances, I do not propose at this time to make orders in addition to those proposed, specifically dealing with the claims against Mr Euripidou.

Discovery

Finally, I note that the plaintiffs have submitted that “discovery is required to appreciate the plaintiffs’ claims”. While this may be a basis for deferring the provision of complete particulars, it does not justify the plaintiffs’ failure to disclose at least one viable and coherent cause of action. If the plaintiffs’ own records are so deficient that they are unable to do so, then the appropriate course would have been for them to bring an application for preliminary discovery under O 32 of the Rules. Having instead chosen to commence a proceeding, the plaintiffs must as a minimum ensure that the claims they advance are both disentangled one from the other in the manner discussed above, and uncontaminated by allegations pre-dating the existence of the principal defendant.

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Certificate

I certify that these 12 pages are a true copy of the ruling of His Honour Judge Woodward delivered on 25 May 2018.

Dated: 25 May 2018

Simone Karmis
Associate to His Honour Judge Woodward