Kelbush Pty Ltd v Australian and New Zealand Banking Group Ltd
[2015] WASC 117
•7 APRIL 2015
KELBUSH PTY LTD -v- AUSTRALIAN & NEW ZEALAND BANKING GROUP LTD [2015] WASC 117
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 117 | |
| Case No: | CIV:2488/2014 | 24 MARCH 2015 | |
| Coram: | MASTER SANDERSON | 7/04/15 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | KELBUSH PTY LTD AUSTRALIAN & NEW ZEALAND BANKING GROUP LTD |
Catchwords: | Practice and procedure Application for preaction discovery Turns on own facts |
Legislation: | Corporations Act 2001 (Cth) Rules of the Supreme Court 1971 (WA) |
Case References: | Waller v Waller [2009] WASCA 61 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
AUSTRALIAN & NEW ZEALAND BANKING GROUP LTD
Defendant
Catchwords:
Practice and procedure - Application for preaction discovery - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr M L Bennett
Defendant : Mr M F Holler
Solicitors:
Plaintiff : Bennett + Co
Defendant : Norton Rose Fulbright Australia
Case(s) referred to in judgment(s):
Waller v Waller [2009] WASCA 61
1 MASTER SANDERSON: The plaintiff seeks disclosure of categories of documents pursuant to O 26A r 4 of the Rules of the Supreme Court 1971 (WA) relating to the defendant's conduct between November 2013 and February 2014 concerning its financial arrangements with the Forge Group Ltd (Forge) and/or its subsidiary Forge Group Construction Pty Ltd (Forge Group Construction).
2 It is convenient to begin with an outline of the relevant facts. What follows is taken largely from the plaintiff's submissions. There was no dispute between the parties as to the facts.
3 The plaintiff operates the business of renting vehicles to commercial users primarily in the mining and construction sector. On or about 20 April 2012 the plaintiff entered into an agreement with Forge Group Construction. Pursuant to this agreement the plaintiff was to supply Forge with a number of rental vehicles by way of lease arrangement. The plaintiff's submissions refer to this agreement as the 'Rental Agreement'.
4 The terms of the Rental Agreement with Forge were such that:
1. Forge would produce a purchase order for the hire of vehicles;
2. Forge would then take possession of the vehicles by delivery of the vehicles to their designated site; and
3. the plaintiff would invoice monthly with payment to be made within 45 days of the invoice being registered.
5 In or around November 2013 the plaintiff became aware of Forge's financial difficulties via Forge's announcement on the Australian Securities Exchange (ASX). The application is supported by an affidavit of David Rocci sworn 27 October 2014. Mr Rocci says that on 28 November 2013 he reviewed Forge's announcement to the ASX. Relevantly that announcement read (what follows are direct quotes):
1. Net cash outflows expected in November and December 2013, resulting in a challenging liquidity position in early December 2013;
2. Australia and New Zealand Banking Group Limited ('ANZ') has agreed to provide further support to Forge Group through new facilities and certain amendments to existing debt facilities ('ANZ Debt Facilities Amendments');
3. The ANZ Debt Facilities Amendments will provide sufficient facilities to cover the liquidity challenges and strengthen Forge Group's balance sheet; and
4. [This] Allows Forge Group to continue trading on a business as usual basis, deliver its current work in hand and bid new work.
6 On 14 January 2014 Forge made a further announcement on the ASX stating that (direct quote):
1. Financiers including Australian and New Zealand Banking Group remain fully supportive of Forge Group; and
2. The ongoing and expected support provided by our financiers and other key stakeholders gives Forge Group the confidence to continue to trade on a business as usual basis and deliver on our current work in hand.
7 On 29 January 2014 Forge made a further announcement to the ASX noting (direct quote):
1. Continued support from Forge Group's financiers; and
2. ANZ continues to provide overall support to the Company through existing facilities. This support enables Forge Group to deliver on current work in hand and operate on a business as usual basis.
8 Mr Rocci says that while he had concerns in respect of the plaintiff's financial exposure to Forge he believed based on the content of the announcements quoted above that the defendant was supporting Forge through its financial difficulties and that it was otherwise 'business as usual'. Mr Rocci says for this reason and acting in reliance upon the content of the various announcements the plaintiff elected to continue the terms of the Rental Agreement with Forge. It was of the view that the continued assistance and support of the defendant meant that there was no imminent threat that Forge would be placed into liquidation or administration. The plaintiff, says Mr Rocci, was of the view that it would receive payment from Forge pursuant to the Rental Agreement.
9 Just two weeks after the announcement of 29 January 2014, quoted above, on 11 February 2014 Forge announced to the market that it had appointed administrators (Ferrier Hodgson) and the defendant had appointed receivers and managers (Kordamentha). On or about 17 February 2014 the plaintiff lodged an informal proof of debt with Forge's liquidators claiming the sum of $686,375.50.
10 Following the appointment of administrators and receivers various media articles reported that the financial 'support' given to Forge by the defendant had in fact been contingent upon Forge securing an 'equity backer' by a particular date. On or about 10 March 2014 the administrator produced a report pursuant to s 439A(4)(a) of the Corporations Act 2001 (Cth). Relevantly the report details that:
1. Forge may have been insolvent from as early as November 2013;
2. Forge was in 'crisis mode' with respect to cash management from 14 November 2013; and
3. as early as 5 November 2013 the defendant appointed Kordamentha as 'Investigative Accountants to review the Group's materials and engage with the Group on their behalf and consider the ANZ's security position'.
11 The plaintiff points out there was no disclosure in the various announcements as to the conditions upon which the 'support' was being given by the defendant. Nor did the defendant take any positive steps to correct or clarify the content of the announcements. The plaintiff says had it been aware of Forge's true financial position (namely, that the defendant's financial support was not unconditional) it would have immediately sought to terminate the Rental Agreement and effectively call in its debts. It is worth noting in passing that although the possibility of terminating the Rental Agreement is mentioned in the plaintiff's written submissions Mr Rocci does not actually say the plaintiff would have taken that step had it been aware of the conditional support of the defendant to Forge.
12 There was no dispute between the parties as to the relevant legal principles. Once again drawing upon the plaintiff's written outline of submissions the requirements of the rule are satisfied. If the plaintiff can establish:
1. that it 'may have a cause of action';
2. that the potential cause of action is against a person whose description has been ascertained;
3. that it wants to commence proceedings against the potential party;
4. after 'reasonable enquiries' it has not been able to obtain sufficient information to decide whether or not to commence proceedings;
5. at the time of making the application the plaintiff has not reached a decision about whether or not to take proceedings;
6. there are reasonable grounds for believing that the potential party has in its possession documents that may assist in making the decision; and
7. the application is supported by an affidavit which was served on the potential party.
13 As the matter was argued it was really only the first of these criteria which was in issue between the parties. When the application was first made the scope of the discovery was extensive. Just prior to the hearing counsel for the plaintiff gave notice to the defendant of an intention to apply to amend the originating summons to substantially restrict the documents the defendant would have to discover. Although counsel for the defendant did not concede this proposed amendment altered what was said to be the oppressive nature of the application the point was not seriously pressed. Equally arguments were put by the defendant in written submissions suggesting that none of the other criteria had been satisfied. But in oral submissions it was really only the issue of a cause of action which divided the parties.
14 The content of the requirement that a plaintiff 'may have a cause of action' was considered by Martin CJ in Waller v Waller [2009] WASCA 61. His Honour said:
It would ... be wrong in principle to approach the rule with an undue focus or emphasis upon the demonstration of the prospective cause of action. Thus, the jurisdictional question is whether there might be a cause of action which could be demonstrated by the provision of the documents sought. However, something more than mere assertion, conjecture or suspicion is required to enable the court to conclude that there might be such a cause of action [4].
15 The plaintiff's submissions in relation to this issue can best be summarised by actually quoting the relevant paragraphs of the written outline. They read as follows:
22 The Plaintiff believes that it may have a cause of action against the Defendant in relation to misleading or deceptive conduct (set out at paragraphs 23.1 - 23.2 below) by reason of its involvement in the making of, allowing, approving or not clarifying the content of the Announcements in contravention of the Competition and Consumer Act 2001 (Cth) and/or the Corporations Act 2001 (Cth).
23 The Plaintiff believes it is likely (but does not know or know the extent) that the Defendant was intricately involved in the financial affairs of Forge at the time of the making of the Announcements such that it may have causes of action against the Defendant arising by way of its involvement:
23.l giving rise to liability on the part of the Defendant for conduct contrary to section 18 of the Australian Consumer Law or section 1041I of the Corporations Act 2001 (Cth); alternatively
23.2 for conduct contrary to section 1041H of the Corporations Act 2001 in relation to a 'financial product' (namely, shares in Forge) on the part of the Defendant; further and alternatively
23.3 being such as to support a finding that the Defendant acted in the circumstances as a 'shadow director' of Forge between November 2013 and February 2014.
24 There is a prima facie basis for the Plaintiff's concerns for the following reasons:
24.l The Defendant (as financier and presumably pursuant to its lending terms) had appointed 'Investigative Accountants' to review and monitor the financial affairs of Forge prior to the making of the 28 November 2013 announcement;
24.2 The Defendant knew or had to have known that Forge was in 'crisis mode' with respect to its cash management priorto the making of the 28 November 2013 announcement and throughout the period up to Forge's administration; and
24.3 The management of the lending relationship between the Defendant and Forge was transferred to the Defendant's 'Lending Services' on 18 November 2013 (10 days prior to the 28 November announcement). The Siew Affidavit discloses that Siew is an Associate Director of Lending Services and responsible for managing 'accounts where either a default has occurred, or where the accounts are considered to be at a higher risk of default' [emphasis added].
25 The Plaintiff believes that by reason of its involvement in the financial affairs of Forge, the Defendant may have been involved in the making of the Announcements or alternatively that it should have sought to correct the content of the Announcements so as to reveal the true nature and status of the lending relationship between it and Forge (and indeed the financial position of Forge). The precise nature of the Defendant's involvement in making the Announcements is unknown to the Plaintiff and has not been answered despite the Plaintiff's queries to the Defendant. This knowledge is essential to enable the Plaintiff to assess the causes of action that are available to it and whether or not to commence proceedings against the Defendant. (footnotes omitted)
16 During the course of his oral submissions counsel for the plaintiff submitted there were a range of possibilities as to the involvement of the defendant through Kordamentha in the announcements. At one end of the spectrum it was possible the defendant had no involvement at all in drafting the announcements and when it became aware of the content did not take the view it was appropriate to correct any misleading impression. At the other extreme it was possible the announcements were actually drafted in conjunction with the defendant and rendered the defendant through its agents a 'de facto' or 'shadow' director of Forge. Discovery, so it was submitted, would disclose the defendant's level of involvement in the announcements.
17 In my view it must be accepted without the discovery sought the plaintiff will not be in a position to understand the defendant's involvement in the publication of the announcements. If, for instance, the defendant was directly involved in drafting the announcements then a claim may lie for misleading and deceptive conduct. On the other hand if the defendant had no involvement in drafting the announcements, but became aware they were misleading and took no steps to correct the position, then the plaintiff's claim (if it has a claim) would be somewhat different. It would have to establish there was a duty on the defendant to make disclosure and correct the record. In other words without access to the material being sought the plaintiff will not be in a position to know how it should frame a claim for misleading and deceptive conduct.
18 But that is not the end of the matter. The difficulty for the plaintiff is establishing that as a consequence of any misleading and deceptive conduct it had a right to terminate the Rental Agreement. The Rental Agreement itself appears at attachment DR2 to Mr Rocci's affidavit. It is a very simple agreement. It contains no provision which would allow for termination of the agreement in the event of financial uncertainty surrounding Forge. I have used the word 'uncertainty' advisedly. It is not unusual for a contract to contain a provision which provides for termination when a company goes into administration or liquidation (in fact this contract does not contain such a provision). But it would be most unusual for a contract to provide for termination if one party felt the other was in a parlous financial position. Consequently even if the announcements made by Forge referred to the conditional nature of the defendant's support it is difficult to see how the plaintiff's position would have been any different. It would still have been bound by the contractual arrangement it had with Forge, Forge would have been entitled to retain possession of the vehicles pursuant to the agreement and the indebtedness of Forge to the plaintiff would have continued to accrue.
19 As I indicated above this difficulty of establishing loss is not addressed by Mr Rocci in his affidavit. It is difficult to see how the plaintiff 'elected' to continue the terms of the Rental Agreement with Forge after becoming aware of the announcements. It had no basis for terminating the agreement.
20 In the circumstances then I am not satisfied the plaintiff may have a cause of action. Accordingly I would dismiss this application. The plaintiff ought pay the costs of the application including the reserve costs.
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