Leitch, D.H. v Natwest Australia Bank Ltd
[1994] FCA 89
•7 Mar 1994
g? 7~
JUDGMENT No. ........ ..,,,...., 1 , ,,,. U,... IN THE FEDERAL COURT OF AUSTRALIA
- 0
GENERAL DIVISION No. G174 of 1991 BETWEEN: DAVID HENRY LEITCH
First Auvlicant
AND: ALMA MARGARET LEITCH
Second Auulicant
GARY DAVlD LEITCH
Third Auulicant
AND: GUDE PTY LIMITED (RECEIVER &
MANAGER APPOINTED
Fourth Au~licant
AND: GLEN PACIFIC PTY LIMITED (RECEIVER & MANAGER APPOINTED)
Flfth Applicant
AND:
- NATWEST AUSTRALIA BANK LIMITED
First Respondent
m: PETER MLTRRAY WALKER
Second Resuondent
AND: GLANDORE PTY LIMITED (RECEIVER & MANAGER APPOINTED)(lN LIOUIJIATION)
Thlrd Resuondent
AND: NATWEST AUSTRALIA BANK LIMITED
Cross-Claimant
DATE OF ORDER: 7 March, 1994 AND.
% - DAVID HENRY LEITCH
First Cross-Resoondent
AND:
- GLEN PACIFIC PTY LIMITJ3D (RECEIVER
& MANAGER APPOINTED) -,
Second Cross-Resuondent
AND: GUDE PTY LTD (RECEIVER MANAGER APPOINTED)
Third Cross-Respondent
JUDGE MAKING ORDER: Cooper J. WHERE MADE: Bnsbane Attention: Judgments Clerk
Please find herewith judgment
in the matter of Leitch v.Natwest G174 of 1991, delivered
7 March, 1994. There is to be limited distribution of
this judgment.
With thanks,
MINUTES OF ORDER
THE COURT ORDERS:
1. The further hearing of the claim and cross-claim be adjourned to 20 June, 1994.
2. The applicants pay the respondents costs, if any, thrown away by the adjournment.
3. The applicants file and serve on or before 29 April, 1994 an amended statement of claim s p e c m g in respect of each applicant the relief claimed by the applicant and the matenal facts whch it is alleged gve rise to an entitlement to that relief.
4. The cross-respondents to the cross-claim file and serve on or before 29 Apnl, 1994 their defences, if any, to the cross-cla~m.
5. The applicants and cross-respondents pay the costs of the respondents and cross-claimant, if any, thrown away by the further amendment of the statement of claim and late filing of a defence to the cross-clalm.
6. The applicants pay the respondents' costs of the directions hearing on 1 March, 1994 and the notice of motion to be taxed, if not agreed.
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Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court
Rules.
IN THE FEDERAL COURT OF AUSTRALIA
OUEENSLAND DISTRICT REGISTRY
GENERAL DMSION No. G174 of 1991 BETWEEN: DAVID HENRY LEITCH
First A ~ ~ l i c a n t
m: ALMA MARGARET LEITCH
Second A~ulicant
m: GARY DAVID LEITCH
Third A ~ ~ l i c a n t
GUDE PTY LIMITED (RECEIVER &
MANAGER APPOINTED
Fourth Au~licant
AND: GLEN PACIFIC PTY LIMITED (RECEIVER & MANAGER APPOINTED)
Fifth Auulicant
AND: NATWEST AUSTRALIA BANK LIMITED
First Respondent
AND: PETER MURRAY WALKER
Second Resnondent
AND: GLANDORE PTY LIMITED (RECEIVER & MANAGER APPOINTED)(IN LIOUIDATION)
Thlrd Res~ondent
AND: NATWEST AUSTRALIA BANK LIMITED
Cross-Claimant
m: DAVID HENRY LEITCH
First Cross-Res~ondent
m: GLEN PACIFIC PTY LIMITED (RECEIVER & MANAGER APPOINTED)
Second Cross-Respondent
GUDE PTY LTD (RECEIVER & MANAGER
APPOINTED)
Third Cross-Resuondent
CORAM: Cooper J. PLACE: Brlsbane DATE: 7 March, 1994 REASONS FOR JUDGMENT The trial of this acbon was adjourned on 15 December, 1993 and is
listed to resume on 14 March, 1994. At the conclusion of the hearing in December,
1993 the respondent bank produced under subpoena the lnternal documents
containing the bank's records of the vanous advances made by the bank, dealings on the account and the calculation of mterest. Add~tionally, Gregory Willis Jones, a bank officer, produced h s own calculations of the Indebtedness of the cross-respondents to the bank whch indebtedness is the subject of the cross-clalm.
An accountant, Mr. Onus Maynes, was granted access to the
documentation in order to prepare the cross-respondents' case on the cross-claim.
Access to the documents was not for the purpose of drawng a new clalm for damages
or expanding the claim for damages already brought by the apphcant and I so advlsed
the applicants.
On 17 January, 1994 the applicants delivered a further report of Mr.
Maynes. The respondent bank has taken exception to the report for the reasons
the weight or reliability of the report and do not affect its admlss~blbty or relevance. contained in a letter dated 19 January, 1994. Many of the matters of complaint go to More importantly, the report contalns assumptions which have not been sworn to in the evidence of Mr. David Leitch gven at the last hearing and formulates a claim on behalf of the applicants, being the diminution in net worth of the applicants between
31 July, 1989 and 31 December, 1993. In the calculation of that net worth Mr. Maynes has notionally retired the debt of the respondent bank by the notional sale of certain properties and with income streams from operating businesses. In additlon to the clam for loss of net worth, there is a claim for loss of equity in Selwyn Park Hospital at Mt. Isa and a claim for the loss of value of a property at Benowa
(although Counsel says this claim will not be pressed). Previously the claim had been for :-
l. Loss of Value - "Oonavale" 2. Operating Losses - "Oonavale" 3. Loss of Profits - Selwyn Private Hospital 4. Loss of Value - Selwyn Private Hospital ......
7. Loss of Value of Hospital Bed Licenses
Logan City and Cleveland
......
10. Fees and Costs of Receiver and Manager
By theu amended statement of claim the apphcants allege an agreement
with the bank in July, 1989 breach of which was productive of loss. The loss is pleaded in paragraph 17 as fonows :-
"1% By reason of the First Respondenr's breacli, the Applica?zts suffered loss.
PARTICULARS
By retaining or taking securities over llze various properties of the Fourtll Applicant and withholding Bnance as agreed, rl~e
First Respondent prevented the Applicants and the Third
Respondent dealing with ilzeir assets uz such a way as to enable tlze completiorz of various developme~~ts on the
Applicants' aid Third Respondent's laird which would have so increased the value of tlze said land so as to enable it to be sold at a price suficient to discharge the indebtedness of tlze Applicants aid the Third Respondent, parriculars as per Onus Mavne's reuorts delivered lzerein."
As against the second respondent the receiver and manager it was
alleged :-
"26. In purported performance of hk duties as
receiver and manager of the Third Reyondent aid in reckless disregard of the right of tlze Third Respondent, flze Second Respondent has dealt with the assets so as to cause loss to the Applicants.
PARTICULARS
(a) The Second Respondeirt was appointed as a receiver and manager of Selnyir Private Hospital at Mt Isa being owned aid operated by the Third Respondent, which, at the lime of appoinmertt, was producing a itet income of $70,000.00 per moirttr; (b) Upon appoinment to tlze Selwyn Private Hospital the Second Responderzt dkmksed tlze marzagemeizt of such hospital and failed to appoint a replacement manager or, altenzatively, a competeizt replacemeizt manager, with the result that the itospital thereafter operated at a loss and was closed completely with the loss of tlze license and the value of the business
order of $A5 million; which, at the time of appoirzmerzt, was worth in the (c) The Second Respoirderrl was appointed receiver and manager of the property known as Oonavale. Since appointment, the Second Resporzdeirt has caused tlze wheat crop to be sold at a price of $1 70.00 per toilize at a linze when a price of $190.00 per tonize was readily realkable. Tlze Second Respondent has failed to provide proper nzarzagemeizt for the property resulting in the diminution in value of the property;
(d)
The Second Respoideirt was appointed receiver and manager of the Thud Resporzdent which was share fanning upon the property la~owit as Biram Stud as
since appoinment Itas failed to maintain the condition of either the larzd or the stock with ihe result that the value of the propew has diminished;
TIte Second Resoondent has caused loss and damaae, particulars o f whlch auuear in the reports of 0 J Mavne's delivered herein."
Although certain heads of loss were raised in the report of Mr. Maynes
of 1 November, 1993, no evidence or particulars of them were given and the trial proceeded on the basis of the claims set out above. Whether or not Mr. David hl tch
gave evldence which, if accepted, would support the assumptions adopted in Mr.
Mape's report of 1 November, 1993, 1s a matter for conjecture. However, proof of
the claims involves proving the realisable value of properties and the loss of the ab~lity
to reahse those values due to the conduct of the respondent bank. Addlt~onally, itrequires proof that profits were lost in the operation of "Oonavale" and the Selwyn
Pr~vate Hospital by the negligent conduct of the recelver and manager. In the claim as presently formulated m the report of Mr. Maynes of 17
January, 1994, the same losses in value and of profit are brought to account as the
cash stream to retire the bank debt. There is nothmg new in this part of the claim. Whether or not it has been proved by evidence presently before the Court is another matter. What is new is that it is sought to bring into the calculat~on the operation of the Glandore Private Hospital at Gympie and the Biram Stud at Toowoomba and to include an ambit claim for loss of net worth of the "hitch Group". In calculating that
loss there has been included the whole of a debt due to Cellway Pty. Ltd., which claim the apphcants were not been allowed to pursue on the prevlous hearing because they could not plead and particularise a claim. Additionally, the exercise now Includes the non-recoverability of third party debts due to companies in the Leltch group. A claim of this nature has never been pleaded or partlcularised. Finally, on one vlew of the report, the sum of $2,674,761 the claimed forelgn exchange loss is being brought to account as a head of loss. Any claim for a loss arising out of the foreign exchange transachon was expressly abandoned on the last hearing.
The applicants have applied to adjourn the trial due to the unavailability of Mr. Davld Leitch due to illness, for leave to call the evidence contained m Mr. Maynes' latest report and for leave to amend the statement of claim as follows :-
"23. Further or in the alternative, by reason of its breaches of contract in paragraph 15, the uizconscionable conduct in paragraph 22A, andlor the breach of the agreement in paragraph 23, the net worth of the fourtiz and fifth applicants has been reduced as particularised in the report of Onus Maynes dated 17 January, 1994':
The latest report of Mr. Maynes effect~vely seeks to set-off against the
cross-claim of the bank the damages presently claimed and quantiQ addltlonal loss
which it is sought to recover against the respondent. Such a case has not been pleaded or partlcularised and ignores the separate identlty of the companies in the "Le~tch group". For example, Glandore Pty. Ltd. is not a clalmant and is in liquidation. Neither the plead~ng nor the part~culars disclose any basis for a claim by
the fourth or fifth applicant to a set-off against the bank any sum claimed as a loss arising out of the closure of the Selwyn Hospital at Mt. Isa which, on the evidence, was operated by Glandore Pty. Ltd.
The amendment proposed is totally Inadequate and fails to address the
matters raised above. The respondent bank is entitled to know the case which it has to meet. Although part of the damages claim remains, the claims in the latest report are wider and new. If the defence to the cross-clalm is a set-off, then it should be specifically pleaded settmg out the basis upon which an entitlement to set-off is claimed. A perusal of the court 6le shows that no defence to the cross-claim of the bank has ever been filed.
It is obvious that the basis of the applicants' defence to the cross-claim
must be pleaded. To the extent to which it relles on the matters contained in Mr. Maynes' latest report, there IS a likelihood that Mr. David Leitch will have to be
recalled to gve evidence and, to the extent to which the set-off must be particularised,
instructions obtained from Mr. Leitch.
The medical evldence is that Mr. Leitch will not be fit to give evldence
or instructions for approximately two months. Although Mr. Leitch does not hold a position m elther of the fourth or fifth applicants, I am satisfied on the evidence I
have heard that Mr. Leitch was the driving force behind the companies and that he is
the only person who can give the relevant instructions.
If the applicants are to be given leave to file a defence to the cross-
--claim, which will set-off the damages now claimed in the applicants' application, then the relief claimed and the matenal facts which it is alleged make out a cause of action entitling the applicants or any of them to an award of damages on some basis other than contamed in the report of Mr. Maynes of 1 November, 1993 must be pleaded.
The respondent bank has submitted that no adjournment ought to be
granted nor leave to amend gven because the respondents would be prejudiced by
having to prepare to meet a new case. It was further submitted the applicants had
not shown that they could not proceed to have the matter fairly ht~gated on the basis of the case as pleaded and claimed to date. The difficulty wth such an approach is that the defence to the cross-claim is not pleaded in any sensible manner. As the matter now stands, the only pleaded right to a set-off IS in relabon to the first-named apphcant, Mr. David hitch, who 1s no longer a party to the proceedings (see paragraph 30 of the amended statement of claim) and the only denial of liab~llty by the "applicants" generally is in paragraph 31 of the amended statement of claim, whch reads :-
"31. By reason of the maners herein alleged, tlzere are no monies owing by tlze Applicants or any of zhem to the
First Respoizdeni."
The only relief sought m the application which would relieve the
apphcants from payment of monies otherwise payable is the obtaming of an order under section 87 of the Trade Practices Act 1974 reheving the applicants from liabil~ty
for the loans pleaded.
The case as presently pleaded seeks damages for the total loss alleged
to have been suffered without giving credit for the principal and interest properly payable to the bank. There is a real question whether any of the remaimng
applicants can maintain a cause of action where the relevant contracting party or owner crf the property is another non-clairmng company. In consequence there is a
real risk that the claims as pleaded and advanced do not result in a remedy to the
remaining applicants which 1s an answer to the cross-claim of the bank.
Order 13 Rule 2 of the Federal Court Rules provides :-
I I
All necessary arnerzdrnents shall be made for the purpose of determining the real questions raised by or othenvire depending on the proceeding, or of correcting any defect or error in any proceeding, or of avoiding multiplicity of proceedirtgs".
As to the operation of the rule, the Full Court s a ~ d m Londish v. Gulf
Pac~fic Ptv. Ltd. (1993) 117 ALR 361 at 374 - 375 :-
"While the rule refers to 'error', and B O W ~ ~ W in CZopper v. Sm* supra, said tlte object of the courts was not to punish
for mistakes, a distinctiorz should be seen between the case of an applica~tt for leave to amend who k not at fault, or whose fault is slight, and the case of an applicant for an indulgence sought to cover the corxequences of the careless or incompetent conduct of lzis proceeding in the court. Since
k plauzly intended by the rule to grant relief even in cases
of tlte latter kind, tlte former have a claim a fortiari,
discretion. Fairness may require, too, sorne bala?zcing of although still dependent upon the exercise of a judicial indulgences granted to each side'! Counsel for the applicants submits that the position they are presently m
results from the bank not making avallable the internal documents of the bank until trial of the actlon. It was submitted that the applicants could not properly formulate their clam until they had the details of the advances and the interest claimed. I do not accept this submission. The material was made avallable to enable the applicants
to check the mechamcs and quantum of the bank's claim on the cross-claim. The only relevance to the applicants' claim for relief is that there is now a figure whch the applicants say is the proper sum due and payable agmst whch the notional achevable sales and income flows, whch it is alleged the applicants' loss, can be set- off. What the apphcants now seek to do is to set-off the damages claim as it existed in November, 1993 against the cross-claim and claim additional damages on the basis
of a loss of net worth of the group.
In my mew the justice of the situation requlres that the applicants plead
and particularise the relief which each apphcant claims to be entitled to and the basis of that entitlement on their application, and that the cross-respondents plead and particularise their defence, if any, to the cross-claim.
The pleadings as they stand do not raise the true issues which the
applicants wish to raise, nor do they fairly appraise the respondents of the case which they have to meet. If the pleadings are not put m order there exlsts a real risk that the trial will miscarry or at the time of final addresses there will be major disputation
that at that stage, if the issues are not now clearly defined, an apphcation will be as to the real issues, proof of them and any entitlement to relief. I am also concerned made to re-open the case. The case is not ready to proceed further on 14 March, 1994 on the
present pleadings. The need for the adjournment is not the sudden illness of Mr. David Leitch. HIS Illness simply compounds the problem. The adjournment is necessary because the applicants have failed to properly prepare or plead their case on the claim or cross-claim and have slnce the last hearlng taken the opportunity to re-formulate their claim and answer the cross-claim in an accountant's report. The applicants must pay the respondents' costs thrown away by the adjournment. Likewise the applicants need to re-plead and to plead to the cross-claim arises from a
failure to properly prepare and formulate the case which the applicants desire to put
prior to the commencement of the trial m December. The apphcants must also pay
the costs of the respondent thrown away by the amendments.
THE COURT ORDERS:
1. The further hearing of the claim and cross-claim be adjourned to 20 June, 1994.
2. The applicants pay the respondents costs, if any, thrown away by the
adjournment.
3. The applicants file and serve on or before 29 April, 1994 an amended
statement of clalm spec~fying in respect of each apphcant the relief claimed by the apphcant and the material facts whch it is alleged give
rise to an entitlement to that relief.
4. The cross-respondents to the cross-clalm file and serve on or before 29
April, 1994 their defences, if any, to the cross-clam.
5. The applicants and cross-respondents pay the costs of the respondents
and cross-claimant, if any, thrown away by the further amendment of
the statement of claim and late filing of a defence to the cross-claim.
6. The applicants pay the respondents' costs of the directions hearing on 1
March, 1994 and the notice of motion to be taxed, if not agreed.
I certitj that this and the preceding eleven (11) pages are a true copy of the reasons for judgment herein of his
Honour Mr. Justice Cooper. S 1 Date: 7 March, 1994
Counsel for the Applicants: Mr. Curran Solicitors for the Applicants: Hewlett & Co. Counsel for the Respondent: Mr. L. Kelly Solicitors for the Respondent: Smits Leslle Banvick Date of Hearing: 4 March, 1994 Place of Hearing: Brisbane Date of Judgment: 7 March, 1994
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