Pekell Delaire Holdings Pty Ltd v Bendigo and Adelaide Bank Limited
[2016] VSC 570
•21 September 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2016 02022
| PEKELL DELAIRE HOLDINGS PTY LTD (ACN 059 749 316)IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE DELIS FAMILY TRUST | Plaintiff |
| v | |
| BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178) | Defendant |
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JUDGE: | RANDALL AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 August 2016 |
DATE OF JUDGMENT: | 21 September 2016 |
CASE MAY BE CITED AS: | Pekell Delaire Holdings Pty Ltd v Bendigo and Adelaide Bank Limited |
MEDIUM NEUTRAL CITATION: | [2016] VSC 570 |
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CORPORATIONS – Corporations Act 2001 (Cth) – Application to set aside statutory demand – Section 459 – Group proceedings – Part IVA of the Supreme Court Act 1986 (Vic) – Whether settlement of group proceedings bars a group member from relying upon genuine dispute or genuine offsetting claim.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Rubenstein | Livaditis & Co. Lawyers & Consultants |
| For the Defendant | Mr D C Gration | Turks Legal |
HIS HONOUR:
The Statutory Demand
On 25 May 2016, the plaintiff, Pekell Delaire Holdings Pty Ltd (‘PDH’), made application by originating process pursuant to s 459G and s 459J of the Act for an order that the demand be set aside. PDH relies on affidavits of one of its directors Peter Delis sworn 24 May 2016 and 2 August 2016.
The defendant, Bendigo and Adelaide Bank Limited (‘BAB’), opposes the application and relies on affidavits of Stephen Flamer-Smith sworn 8 July 2016 and 5 August 2016.
On 10 May 2016, PDH, was served with a statutory demand dated 4 May 2016 by BAB. The demand was accompanied by an affidavit of Karyn Lee Pokarier sworn 4 May 2016 which verified the demand in compliance with s 459E(3). The demand claims that PDH owes BAB $53,580.33.
The schedule to the demand describes the composition of the debt claimed as follows:
Description of the Debt
Amount of the Debt
Debt owed by the Company to the Creditor pursuant to a Loan Deed dated 15 June 2006 (Contract No. EV00012364) between Great Southern Finance Pty Ltd (GSF) and the Company.
The Creditor is the beneficiary of all of GSF’s rights pursuant to the Loan Deed by reason of a series of assignments of those rights to the Creditor pursuant to the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth).$27,652.27
Debt owed by the Company to the Creditor pursuant to a Loan Deed dated 2 October 2008 (Contract No. EV00012350) between Great Southern Finance Pty Ltd (GSF) and the Company. The Creditor is the beneficiary of all of GSF’s rights pursuant to the Loan Deed by reason of a series of assignments of those rights to the Creditor and/or a transfer of those rights to the Creditor pursuant to the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth).
$25,928.06
TOTAL
$53,580.33
Issues
The plaintiff contends that the statutory demand is vitiated by defects and, in any event, it has raised sufficient grounds to establish a genuine dispute or genuine offsetting claim by reason of misleading and deceptive conduct attendant upon entry into each of the loan deeds which are the basis for the debt set out in the schedule to the statutory demand. However, in the end, whether or not I set aside the statutory demand is dependent upon the operation of Part 4A of the Supreme Court Act 1986 (Vic). BAB submits that any defence or offsetting claim is barred by a deed of settlement approved by this Court. If the deed does not operate as a bar, BAB concedes that the statutory demand ought to be set aside on the basis of a genuine offsetting claim.
Background
In July 2006 PDH relevantly made application to Great Southern Plantation Projects for two grove lots in the Great Southern Organic Olives Income Project and for four vine lots in the Great Southern Wine Grape Income Project. Each of those applications were accompanied by applications for term finance whereby each total investment amount was to be funded by Great Southern Finance Pty Ltd (‘GSF’). Each application for term finance included a provision appointing GSF and specified officers of that company as attorney of PDH to enter into and complete loan agreements. That was subsequently done by the appointed attorneys. Funds were advanced for the managed interests on the basis of repayment in seven years of principal and interest. The loans were subsequently assigned and ultimately transferred to BAB.
In 2011, a number of group proceedings against Great Southern Managers Australia Limited (‘GSMAL’) and others were prosecuted. Relevantly, issues about the 2006 Olives Managed Investment Scheme were prosecuted in proceeding No. S CI 2011 05049 in which Samantha Murray was the lead plaintiff. Issues with respect to the 2006 Wine Grape Managed Investment Scheme were prosecuted in No. S CI 2011 04916. Again Samantha Murray was the lead plaintiff. PDH was recorded as a ‘group member’ in relation to each of those proceedings. On 11 December 2014, Croft J approved settlement of group proceedings (including S CI 2011 05049 and S CI 2011 04916) in the terms contained in a deed of settlement executed by the parties on 23 July 2014. The defendant submits that the deed of settlement executed by the parties on 23 July 2014 operates as a bar to the contention that there is a genuine dispute or genuine offsetting claim.
PDH’s evidence
In his affidavit of 24 May 2016, Mr Delis deposes that he and his wife are the two directors of PDH which is the trustee of his family trust. He states that the statutory demand was served on the registered office of PDH on 10 May 2016. The day before PDH received the demand, a notice of default was served together with a demand under a guarantee directed to Mr Delis and his wife in respect of PDH’s obligations dated 4 May 2016 at its registered office.
The demand relates to investments made by PDH in managed investment schemes offered by GSMAL and its related finance arm, GSF. Mr Delis states that until he received the demands in May, neither he nor PDH had received any notice relating to default of the outstanding debt. He states that he believes that PDH only received statements about these investments twice a year. The most recent statement he has received was for the year ending 30 June 2015. Mr Delis states he is not aware how it is said that the amounts set out in the schedule to the statutory demand are said to be due and payable or whether the amounts are said to be principal, interest or penalties or the basis for their calculations.
Mr Delis’ solicitors have since obtained copies of the two loan deeds specified in the schedule to the demand. The first loan deed, dated 15 June 2006,[1] bares the identifier ‘O01450’ in the top right hand corner of the first schedule of the document. However, he states the description of debt for the loan deed dated 15 June pursuant to which $27,652.27 is demanded is identified in the schedule to the statutory demand as being in respect of contract EV00012364. He states that he does not know what this is a reference to and he is unable to say that the liability for the alleged debt under the loan deed of 15 June 2006 is the same as contract EV00012364.
[1]Exhibit PD-8.
The second loan deed, dated 2 October 2008,[2] bares the identifier VO1682 on the top right hand corner of the first schedule to the document. It does not bare the identifier EV00012350 specified in the description of debt for the loan deed of 15 June 2006 pursuant to which $25,928.06 is demanded. He states that he is therefore unable to say that the liability for the alleged debt under the second loan deed of 2 October 2008 is the same as contract EV00012350.
[2]Exhibit PD-11.
In addition, Mr Delis states that the descriptions of the debts in the schedule of the demand each contend that ‘the creditor is the beneficiary of all of GSF’s right to the loan deed by reason of a series of assignments of those rights to the creditor and/or a transfer of those rights to the creditor pursuant to the Financial Sector (Transfer Of Business And Group Restructure) Act 1999 (Cth).[3] Mr Delis states that PDH has not been notified of any assignment of the rights of GSF pursuant to any of the alleged loan deeds and that the first that PDH heard of any assignment was the reference in the schedule to the statutory demand. He states that PDH does not agree to any such assignment. PDH did not demonstrate any necessity to agree to or consent to the assignments.
[3]This legislation is more properly described as the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth).
The application for term finance with respect to the Olive Grove MIS is dated 11 July 2006. The loan deed with respect to the Olive Grove MIS was executed by PDH by GSF pursuant to the power set out in the application for term finance. However, the loan deed is dated 15 June 2006 which predates the application for term finance. As at 15 June 2006 there was not any power of attorney appointed by PDH who had the necessary authority to execute the loan deed.
The loan deed executed by the attorneys under power for the Wine Grape MIS suffers the opposite vice. The application for term finance was completed on 11 July 2006, however, the relevant loan deed was not executed until 2 October 2008. The Wine Grape MIS loan deed was one of the loan deeds purportedly assigned by GSF to ABL Nominees Pty Ltd in its capacity as trustee for the Lighthouse Trust No.12 with effect from 1 September 2007. The Wine Grape MIS loan deed had not been executed by the parties as of that date.
Mr Delis suggests that these matters amount to defects in the demand.
In addition Mr Delis states that PDH has a complete defence to the claims by GSMAL and GSF (and therefore any alleged assignee) for payment in respect of the investments in schemes operated by GSMAL. He contends that the defence arises from misrepresentations made by officers and agents of GSMAL and GSF prior to the investments by PDH.
Mr Delis states that before PDH decided to invest in the schemes offered by GSMAL, he met with Mr Ron Bray who introduced himself as a financial advisor and authorised representative of GSMAL and GSF. Mr Bray promoted what Mr Delis describes as the Great Southern Schemes to him. Mr Bray told him that:[4]
[4]These five matters are collectively referred to by Mr Delis as the representations.
(a) Money borrowed by PDH under the proposed loans linked to the investment in the schemes would be advanced by GSF to GSMAL and applied solely to pay the application money for grove lots;
(b) The value of the lots would not decrease as all of the projects were fully fundable and sustainable by upfront application monies which would pay for the development and establishment of the projects, and the rent and management fees for subsequent years would be applied only to the relevant projects;
(c) PDH would obtain an annuity of income and tax benefits;
(d) It was highly unlikely the projects would fail given they were fully funded by upfront application monies;
(e) In the unlikely event that any of the projects failed, PDH would not be pursued by GSF for payment of monies owing under the loan because GSF had engaged industry experts to maximise the value of the lots and the stock issued from the lots could be issued as security for the loan.
Mr Delis states that the representations and other statements similar to the representations were made to him on many other occasions by Mr Bray and other staff of GSMAL and GSF and in his affidavit describes six specific occasions. He also points to other representations made in regard to the schemes. Mr Delis states that he also met on a number of promotional visits and seminars with Mr John Young, who was introduced to him as the managing director of the Great Southern Group of companies. He states Mr Young also made statements to the same effect as the representations. Mr Young also stated that the current yields for the projects were satisfactory and the expected yields return and growth patterns would be sustainable given that the Great Southern Group had minimised risk. Mr Delis states that he believed these representations were true or reasonably based when he caused PDH to invest in the projects offered by GSMAL and to apply for loans offered by GSF. He now believes that the representations were false or misleading or not made on a reasonable and proper basis.
Mr Delis’ belief on that regard is based on, inter alia, information that he has been able to obtain from a range of sources including reports from liquidators, media reports, outcome of legal proceedings and information that his lawyers have been able to collect that:
(a) The entirety of the monies borrowed by PDH under the alleged loan and advanced by GSF was not applied solely to pay the application money for the lots;
(b) The value of the lots decreased and did not increase (as the monies were not used to pay for the development and establishment of the projects and the rent and management fees were subsequent years were not applied only to the relevant projects);
(c) The projects were not fully funded by upfront application money;
(d) The projects did fail and GSMAL and GSF went into liquidation on 19 November 2009;
(e) There was little or no value in the lots or their produced to stand as valuable security for the loans; and
(f) GSF or the alleged assignee is seeking to recover the loans from investments that are valueless and do not provide any valuable security to off-set the loan.
In addition, Mr Delis states that PDH has not received any correspondence, proof or certification that the loan monies were applied to purchase and plant the product specified in each prospectus. In addition, he states it was never disclosed to him that the loan book of GSF would ever be sold to third parties at a discount rate. Rather, when questions were asked about the possibility of loan defaults, Mr Bray told him that any defaulting investor would be liable to the Great Southern Group, which had the option to take over the default investors’ lot or product at a discounted rate. Mr Bray stated that if Great Southern could not take over all the defaulting loans in respect of lots, then those lots would go to tender to the highest bidder from the pool of existing investors. Mr Delis states that he made an unsuccessful bid for a woodlot prior to the collapse of GSMAL. He states that based on these matters he believes that PDH has a defence to any claim for recovery by reason of misleading or deceptive representations made by Mr Bray and Mr Young. He states that he would instruct his lawyers to defend any proceedings issued by GSF or any alleged assignee.
He states PDH is currently subject to debt recovery proceedings in respect of loans for later Great Southern Olive and HVT projects that were allegedly assigned to another financier, Javelin Asset Management. He states that he has instructed his lawyers in that proceeding to vigorously defend the claim. He states that a similar defence to the one taken in that proceeding would be taken in any claims made by BAB.
BAB’s evidence in opposition
In his affidavit of 7 July 2016, Mr Flamer-Smith states that he is a team manager employed by BAB in the Legal and Resolutions Great Southern Collections section. He states that he has had access to and examined the information contained in the books of account, files, electronic and other systems maintained by BAB[5] along with the documents used by BAB in the ordinary course of business in relation to the defendant.
[5]In his affidavit Mr Flamer-Smith speaks of being employed by the plaintiffs. The context of the statement makes clear that this is obviously a transposition of the plaintiff and the defendant.
He states that on or about 11 July 2006, PDH executed an application for Term Finance with GSF to borrow money to acquire an interest in the Great Southern 2006 Organic Olives Income Project Managed Investment Scheme (‘the 2006 Olives MIS’).[6]
[6]Exhibit SF-1.
The first application, inter alia, appointed GSF as PDH’s attorney to execute a loan deed on behalf of PDH in the form attached to the first application.
On about 15 June 2006, GSF, for itself and as attorney for and on behalf of PDH, entered into a loan deed (‘the first loan deed’).[7] Mr Flamer-Smith deposes that on or about 15 June 2006, GSF loaned PDH $16,243.33 pursuant to the first application and the first loan deed. The terms of the first application and the first loan deed required PDH to make repayments in accordance with the repayment schedule attached to the first loan deed.
[7]Exhibit SF-2.
After the execution of the first loan deed, the rights under the first loan deed were assigned as follows:
(i) with effect from 1 September 2007, GSF assigned all of its rights under the first loan and the first loan deed to ABL Nominees Pty Ltd in its capacity as the trustee of the Lighthouse Trust No 12 (‘ABL Nominees’);
(ii) ABL Nominees in its capacity as trustee of the Lighthouse Trust No 12 then assigned all of its rights under the first loan and the first loan deed to Adelaide Bank Limited (‘ABL’);
(iii) ABL then transferred all of its rights under the first loan and the first loan deed to BAB;
(iv) on or about 30 April 2009, BAB and GSL notified PDH by a letter of that date sent to a post office box that the first loan had been transferred to BAB.
Mr Flamer‑Smith exhibits the letter directed to PDH dated 30 April 2009.
Mr Flamer-Smith states that since 31 October 2009, PDH has failed to make any monthly repayments in accordance with the terms of the first loan deed. Mr Flamer‑Smith states that this failure to make repayments was a breach of the first loan application and the first loan deed. He states that by reason of this breach BAB was entitled under the first application and the first loan deed to demand immediate repayment of the moneys payable under the first loan.
Mr Flamer‑Smith states that on or about 11 July 2006, PDH executed an application for term finance with GCF to borrow money to acquire an interest in the Great Southern 2006 Wine Grape Income Project Managed Investment Scheme (‘2006 Wine Grape MIS’).[8] The second application, like the first, appointed GSF as PDH’s attorney to execute a loan deed on behalf of PDH in the form attached to the second application. On or about 2 October 2008, GSF, for itself and as attorney on behalf of PDH, entered into a loan deed (‘the second loan deed’).[9] On or about 15 June 2006, GSF loaned PDH the sum of $15,839.33 pursuant to the second application in the second loan deed (‘the second loan’). Mr Flamer‑Smith states that the terms of the second application and the second loan deed required PDH to make repayments in accordance with the repayment schedule attached to the second loan deed. There then followed the same series of assignments, which occurred in respect of the second loan deed, as described in paragraph 26 hereof.
[8]Exhibit SFS-4.
[9]Exhibit SFS-5.
Mr Flamer-Smith states that, since 31 October 2009, PDH has failed to make monthly repayments in accordance with the second loan deed and that this constitutes a breach of the second loan application and the second loan deed. Mr Flamer-Smith states that BAB was entitled to demand immediate repayment of the monies payable under the second loan for this reason.
Mr Flamer-Smith then moves to the subject of the Great Southern Group proceeding. PDH was a member of the 2006 Olives MIS and the 2006 Wine Grape MIS. He states that these schemes were the subject of the group proceedings in this Court in Samantha Murray v Great Southern Managers Australia Limited & Others[10] and Samantha Murray v Great Southern Managers Australia Limited & Others[11] respectively. Mr Flamer-Smith states that PDH did not opt out of either group proceeding pursuant to s 33J of the Supreme Court Act 1986. He states that as a consequence PDH was a ‘Group Member’ as that term is used in the decision of Justice Croft in Clarke (as trustee of the Clarke Family Trust) v Great Southern Finance Pty Ltd (rec and mgr apptd) (in liq) (‘the Great Southern Decision’).[12] Mr Flamer-Smith states that in the Great Southern Decision Justice Croft approved a deed of settlement pursuant to s 33V(1) of the Supreme Court Act 1986 and gave the plaintiffs in the group proceedings the authority of the Group Members to enter into and give effect to the deed of settlement and the transactions contemplated by its terms on behalf of Group Members. PDH is listed as an ‘M + K Client’ in page 70 of schedule 4 to the deed of settlement.[13] Mr Flamer-Smith exhibits copies of the orders of Justice Croft made on 11 December 2014[14] and a copy of the deed of settlement executed by the Great Southern Companies.[15]
[10]S CI 2011 05049.
[11]S CI 2011 04916.
[12][2014] VSC 516.
[13]Exhibit SFS-7.
[14]Exhibit SFS-6.
[15]Exhibit SFS-7.
The terms of the deed of settlement provide that:
(a) In clause 4.1.4, ‘the Lead Plaintiffs for and on behalf of themselves and all Group Members acknowledge and admit the validity and enforceability of the Lead Plaintiffs’ loan deeds and the Group Member’s loan deeds’;
(b) In clause 4.1.10, ‘the Lead Plaintiffs for and on behalf of themselves and on behalf of all Group Members release the BEN parties and their Related Entities from all claims; and
(c) In clause 4.1.13, ‘each of the BEN parties and their Related Entities may plead this deed as a bar or defence to any claim or action (including a claim for costs) brought by any of the … Group Members’.
Mr Flamer-Smith exhibits a copy of a bank statement showing the amount owing by PDH in respect of the first loan at 21 June 2016 as being $28,515.67.[16] He also exhibits a copy of a bank statement showing the amount owing by PDH in respect of the second loan at 21 June 2016 as being $26,759.21. Mr Flamer-Smith states that statements are issued in January and July of each year and PDH was last issued with a statement for each loan in January 2016. In his first affidavit, Mr Delis states that the last statement that he received in respect of the loans was one of June 2015. The statements exhibited to Mr Flamer-Smith’s affidavit are on Bendigo Bank stationery and show how the amount is made up by reference to interest and overdue interest. It appears that overdue interest is charged on and from 1 March 2010 on both accounts. For 15 June 2006, contract number EV00012364 loan, the amount claimed, $27,652.27 appears on the account statement as being owing as of 1 May 2016. Similarly the amount claimed in the demand for the loan dated 2 October 2008, contract number EV00012350, the amount claimed of $25,928.06 is noted on the statement for that account as being owing as of 1 May 2016.
[16]Exhibit SFS-8.
Mr Flamer-Smith states that in respect of the loan reference numbers issued referred to by Mr Delis that the reference numbers, EV00012364 and EV00012350 referred to in the statutory demand and in paragraphs 9, 10 and 11 of Mr Delis’ affidavit are the ‘contract numbers’ that were allocated to the first loan and the second loan by Great Southern. He states that it can be seen from the first schedule to the first loan deed that the first loan has been allocated loan number O01450. This is the same as the loan repayment schedule number appearing on the statement at exhibit SF-7.
He also states that it can be seen from the first schedule of the second loan deed that the second loan has been allocated the designation loan number VO1682. This is the same as the loan repayment schedule number appearing on the statement at exhibit SF-8. Mr Flamer-Smith also exhibits[17] copies of notices of demand dated 11 January 2010 sent to PDH which refer to both the contract and loan numbers for the first and second loans respectively.
[17]Exhibit SFS-10; Exhibit SFS-11.
Mr Delis’ affidavit of 2 August 2016
Mr Delis states in his affidavit that PDH was not a client of M+K Lawyers in any of the Great Southern Group proceedings. He asserts that PDH opted out of the group proceedings in respect of the Great Southern Managed Investment Schemes in which it had made investments. He states that in about March 2012 PDH received a document advising it of the ability to opt out of the various Great Southern Group proceedings which contained a schedule identifying the different proceedings. He states that on or about 23 March 2012, he completed and signed the opt out notices for the group proceedings and gave those with a covering letter to his personal assistant at the time, a Ms Veronique Villemin for sending to the Court via post. He states that he has made inquiries with Veronique Villemin and she has told him and he believes that she posted the opt out notices to the Court on or about 23 March 2012. He retained copies of the opt out notices and those are exhibited to his affidavit.[18]
[18]Affidavit of Peter Delis dated 2 August 2016 exhibit PD-2.
He states that it was his intention upon sending the opt out notices that PDH would opt out of all group proceedings related to any investment it had made in the Great Southern Managed Investment Schemes. He did not receive a response or acknowledgement from the Court after sending the opt out notices however, he thought nothing about this and thought it was the end of the matter. He considered that PDH was no longer part of the group proceedings.
He states that another financier of PDH Great Southern Investments, Javelin Asset Management Pty Ltd has accepted that PDH opted out of the group proceedings and has withdrawn statutory demands on that basis.
Affidavit of Stephen Flamer-Smith of 5 August 2016
Mr Flamer-Smith addresses this affidavit to Mr Delis’ claim that PDH was not a Group Member in the Great Southern group proceedings because it had opted out. In his earlier affidavit he had stated that PDH was a group member and had not opted out. He states the basis on which he said that PDH had not opted out was that he had examined the spreadsheet provided by the Court showing Group Members from whom opt out notices had been received. PDH’s name did not appear on the spreadsheet. The spreadsheet is exhibited to his affidavit.
Further material
By leave, other material was admitted into evidence. That other material included:
(a) a copy affidavit of Veronique Villemin made 29 May 2015. That affidavit dealt with MIS loans which had been assigned to Javelin Asset Management Pty Ltd. There was an issued raised as to whether opt‑out notices had been provided to this Court. After setting out normal procedures, Ms Villemin deposed:
If Mr Dallas asked me to mail out a document on 23 March 2012, I have no reason to believe that I would not have mailed the document to the address at the address provided by Mr Dallas on 23 March 2012.
This statement is neither consistent with, nor as strong as the information and belief set out in Mr Dallas’ affidavit referred to in paragraph 36 hereof.
(b) an affidavit deposing as to contemporaneous notification to group members of Croft J’s order approving the settlement;
(c) further amended statements of claim in each of S CI 2011 04916 and in S CI 2011 05049. Each is formulated in similar terms and principally seeks relief that the loan deeds entered into between GSF and any group member are void or otherwise enforceable. The platform for the relief is narrow in compass. It is based upon what I will loosely describe as complaints about the relevant product disclosure statements and characterisation of provisions therein as being misleading or deceptive. Each of the further amended statements of claim specifies common issues of fact and law as required by s 33H(2)(c) of the Supreme Court Act. It would be fair to say that the common issues of fact and law again centred upon the product disclosure statement;
(d) amended defences filed in S CI 2011 04916 and S CI 2011 05049. Apart from pleading contributory negligence and proportionate liability, the BAB parties, by their defences, did not expand the issues beyond those arising out of the relevant product disclosure statements.
PDH’s submissions
In his submissions, Mr Rubenstein, counsel for PDH contended that the identity and makeup of the alleged debts is unclear in the schedule. The schedule does not match the alleged debt to any specific GSMAL investment and it does not set out how the alleged debts have been calculated. There is no identification of whether the alleged debt is principal only, whether it is a combination of principal interest and if the latter, how much is principal and how much is interest and whether the amount includes a component of penalty interest.
He submits that the affidavit accompanying the demand is equally unhelpful. It is sworn by Ms Pokarier who is a Team Manager (Legal and Resolutions) of BAB who deposes that she has knowledge of the facts relevant to this matter and that she has inspected the business records of BAB in relation to PDH’s accounts with BAB. She does not identify the alleged accounts and provides no detail as to how the alleged debts have been calculated.
Mr Rubenstein also submitted that the ‘contract numbers’ are identified in the schedule – EV00012364 and EV00012350 respectively do not match the numbers imprinted on the schedules to the corresponding loan deeds (O014550 and VO1682 respectively).
These deficiencies are overcome by the documentation to which I have referred, exhibited to Mr Flamer-Smith’s affidavit. Mr Delis has himself stated that he received statements in respect of the two accounts in June of last year. It can be assumed that the statements are, in the same form, as exhibited to Mr Flamer-Smith’s first affidavit. Those statements set out the whole history of the accounts from their commencement including when default interest began to be charged. It cannot be considered to be a requirement that the statutory demand set out all of those transactions in the schedule and it is clear now how the respective amounts claimed on the first and second loans were arrived at.
It is also submitted that the loan deeds have not been executed by the directors of PDH and have been executed by Mr Young and Mr Rhodes, who were officers of GSF pursuant to a purported power of attorney.
Mr Rubenstein also refers to the fact that the loan deed corresponding to the investment for the 2006 Organic Olives Income Project is purported to be executed on 15 June 2006. However, he notes PDH did not make application for finance for that project until 11 July 2006. He submits that it follows then that the loan deed was executed before the application for finance and before the grant of the power of attorney by PDH. Mr Rubenstein says the loan deed was not validly executed by PDH and is unenforceable, rendering the description and identification of that debt in the statutory demand fatally flawed. He says that the position in regard to the second loan is also fatally flawed. The second loan deed is executed on 2 October 2008, more than two years after the execution of the corresponding application for finance on 11 July 2006. The assignment of the second loan deed is impossible as the loan deed was not executed until 2 October 2008 over a year after the alleged effective date of the assignment.
Although I am satisfied that each of Mr Young and Mr Rhodes were ordinarily the appropriate persons to execute the loan deeds under power, for the reasons set out hereafter, I do not need to decide the issue but if I were required to do so in isolation, I would conclude that the execution of the first loan agreement required further investigation. The circumstances of the purported assignment of the second loan agreement also requires investigation.
As to the alleged genuine dispute and offsetting claim Mr Rubenstein made reference to the alleged misrepresentations. He contended that PDH has a genuine defence and/or offsetting claim based on a misleading and deceptive conduct case to any claim made against it by BAB. He has pleaded such a case in a proceeding brought against PDH by Javelin Asset Management and it is his intention to have PDH defend any claim bought by BAB in respect of the debts on a similar basis. Mr Rubenstein says that on an application of the authorities, it is clear that this defence is genuine and has prima facie plausibility.
Mr Rubenstein says that there are two responses to contention that the settlement agreement entered into in the Great Southern Group Proceedings, which agreement was approved by Justice Croft pursuant to s 33V(1) of the Supreme Court 1986, PDH is precluded from defending against any claim by BAB for repayment of the alleged debt and is taken to have acknowledged the validity and enforceability of the loan deeds.
First, he contends that PDH opted out of the Great Southern Group Proceedings, it is therefore not bound by the settlement agreement and the subsequent approval by the Court. As such it is not subject to any Anshun or issue estoppel that might arguably have arisen, had it been a group member.
As against this, PDH does not appear on the list of parties that have opted out of the Group Proceedings. The evidence of his personal assistant that he posted the notice is not direct, but rather hearsay evidence that it was posted to the Court and no explanation has been given as to why that person did not swear an affidavit in that regard. Mr Delis did not seek confirmation that the notices had been received by the Court.
Second, Mr Rubenstein submits in the alternative that even if the steps taken by PDH to opt out of the Group Proceedings were not effective under s 33J of the Supreme Court Act 1986 that BAB nonetheless is not able to enforce the settlement agreement against PDH with respect to any individual defences as distinct from defences to common issues that were the subject of the various Great Southern Group Proceedings. He states that this issue has recently been the subject of consideration in proceedings in both the Court of Appeal and in the Federal Court of Australia. On the question of whether group proceedings were subsequently bound by a Court approved settlement agreement with terms similar in effect to the current settlement agreement and therefore could not raise defences to recovery actions, in Timbercorp Finance Pty Ltd (In Liquidation) v Collins; Timbercorp Finance Pty Ltd (In Liq) v Tomes (‘Timbercorp’),[19] Warren CJ in a joint judgment with Santamaria and McLeish JJA held that:
…While pt 4A expressly provides for a statutory estoppel in respect of any determination of the common questions of law and fact, it does not provide for any estoppel in respect of claims peculiar to a group member that were not advanced in the group proceeding. Whether there will be an Anshun estoppel depends upon a ‘merits-based’ assessment taking into account all the circumstances of the case. The respondents are not to be taken as having abandoned their individual defences by reason of not having raised them in the group proceeding, or not having opted out of the group proceeding. Finally, estoppels may bind parties and their privies. However, the group members were not privies of the plaintiff in respect of their unpleaded claims and defences and are not to be taken as having abandoned their individual defences by reason of the plaintiff not having raised them as claims in the group proceeding.
[19][2016] VSCA 128.
Further, Mr Rubenstein submitted in the recent Federal Court of Australia decision of Kelly v Willmott Forests Ltd (in liq) (No 4),[20] Murphy J refused to approve a settlement deed that contained similar provisions to that in the Great Southern Group Proceedings settlement agreement and has criticised approval of settlements that are engineered to shut out group members from maintaining individual claims and/or defences that were not part of the common issues raised in the group proceeding. Thus, Mr Rubenstein submitted that even if PDH remained a group member of the Great Southern Proceedings it is not shut out from raising its individual defences and that the specific loan deeds are unenforceable on the basis of the misrepresentations referred to. I am satisfied that the statement of group issues set out in each further amended statement of claim does not capture the defences or the offsetting claims personal to PDH.
[20][2016] FCA 323.
BAB’s submissions
In his submissions, Mr Gration, counsel for BAB, in regard to the alleged uncertainty as to the debts claimed, refers to the copy of the notices of demand sent to PDH on 11 January 2010 with respect of the loans the subject of the statutory demand.[21] Mr Gration submits that the six monthly bank statements sent to the plaintiff by BAB, the most recent examples are at exhibits SFS-8 and SFS-9 record the charging of overdue interest since PDH’s failure to meet those demands.
[21]Exhibit SFS-10; Exhibit SFS-11.
As to the alleged defects on the contract numbers, he made reference to Mr Flamer-Smith’s evidence. The contract numbers in the demand are the numbers that were allocated to PDH’s loans by Great Southern.
Mr Delis states that he has not been notified of the assignment of PDH’s loans to BAB and have not agreed to any such assignment. Mr Gration points to a copy of the notification to PDH of the assignment of the 30 April 2009 loans.[22] It was not necessary that PDH agreed to the assignment. Clause 17 of each of the loan deeds committed the lender to assign or transfer its rights under the loan deed. Mr Gration submitted that the debts that are the subject of the statutory demand are properly specified for the purpose of s 459E of the Act.
[22]Exhibit SFS-3.
Mr Gration’s submissions then turn to the subject of the Group Proceedings. He contended that the most substantive matter raised by PDH is that it says that it has a complete defence to BAB’s claims by reason of the misrepresentation made by officers and agents of GSMAL and GSF before PDH invested in the managed investment schemes offered by GSMAL. Mr Delis has contended that PDH was not a group member because it had opted out of those proceedings; Mr Delis also says that PDH was not a client of M+K Lawyers in the group proceeding. As to these matters, BAB says that first a written notice was required to be sent or delivered to the Prothonotary’s Office in appropriate form by 4pm on 27 April 2012. The notice Mr Delis says was sent did not arrive at the Prothonotary’s Office by that date or at all. PDH has never applied pursuant to s 33J(3) of the Supreme Court Act 1986 for an extension of time to opt out of the Group Proceedings even after it became aware in the Javelin proceeding referred to in his evidence that no opt out notice had been received.
Secondly, Mr Delis’ hearsay evidence from his affidavit that Ms Villemin told him that she posted the opt out notices is inconsistent with PDH’s evidence in the Javelin proceeding. Ms Villemin’s evidence went no higher than if Mr Delis had asked her to post a document she had no reason to believe she would not have done so. Mr Gration contends that in the circumstances, little or if any weight should be given to Mr Delis’ evidence as to the posting of the opt out notices.
Thirdly, Mr Delis’ statement in paragraph 3 of his affidavit that PDH was not a client of M+K Lawyers in the group proceedings is contradicted by it being listed as an M+K client in the deed of settlement. There is no reason that PDH would have been listed in the deed of settlement as an M+K client had it not been a client of MK Lawyers.
Fourthly, and in any event, the opt out notices that Mr Delis says that PDH sent do not purport to opt out of Samantha Murray v Great Southern Managers Australia Limited (S CI 2011 04916), which is the group proceeding relevant to the second loan and PDH’s investment in the 2006 Wine Grape MIS. Therefore, Mr Gration contends that PDH was a group member in the Great Southern Group Proceedings and is bound by the deed of settlement in those proceedings.
Mr Gration submitted that the defences that PDH says are available to it cannot be maintained by reason of the settlement of the Great Southern Group Proceedings. He states that as contended by Mr Flamer-Smith in his first affidavit at paragraph 26, PDH is bound by the Great Southern deed of settlement[23] and therefore has:
(a) Admitted the validity enforcement of its loan deeds (clause 4.1.4); and
(b) Released the BAB more claims as defined in the deed of settlement which includes any claim made by a cross-claim (clause 4.1.10).
[23]Exhibit SFS-7.
In addition, clause 4.2 of the loan deeds[24] provides that:
The Borrower must pay all amounts payable to the Lendor due under this document without any deduction, withholding, set off or counterclaim whatsoever, whether the benefit of a deduction, withholding, set off or counterclaim is alleged to exist in favour of the Borrower as against the Lendor in any capacity whatsoever or any other person including any assignor of the lendor’s interest under this document …
[24]Exhibit SFS-2; Exhibit SFS-5.
In Timbercorp, the Court of Appeal disagreed with Croft J that group members would always be precluded from raising individual claims and defences unless they had opted out. The Court of Appeal held that whether this was the case in respect of any particular defendant or particular claim was to be determined on the merits and with regard to whether or not it was unreasonable for the defendant not to have raised the claim or defence in the group proceeding. Mr Gration referred to paragraph 186 of the Court of Appeal’s judgment where it stated:
The above conclusion might be thought to be at odds with views expressed by members of this Court in the Great Southern proceeding.[25] To the extent that those were views expressed about the general position under pt 4A of the Act, it follows from what we have said above that we respectfully disagree. It should be noted, however, that each case turns on its facts. In Great Southern, the language of the opt out notice was cast in different terms,[26] and particulars had not been provided of the individual claims or defences which it was contended could be barred by the settlement.[27] The decisions reached by the Court must be understood in that context.
[25]Clarke v Great Southern Finance Pty Ltd (in liq) [2014] VSC 569; Clarke v Great Southern Finance Pty Ltd (rec and mgr apptd) (in liq) [2014] VSC 516.
[26]Ibid [94].
[27]Ibid [119]; Clarke v Great Southern Finance Pty Ltd (in liq) [2014] VSC 569 [54].
Mr Gration submitted that as such, PDH cannot raise defences which are inconsistent with the deed of settlement and, in particular, it cannot allege that the loan deeds are not valid and binding or that it has an offsetting claim against BAB. Mr Gration added that the PDH may or may not have claims against GSMAL or GSF or their respective officers or agents by reason of the misrepresentations. However, those claims do not affect or alter the obligation of PDH to repay the loans to BAB.
In the Timbercorp decision (referred to by Mr Rubenstein) part of Justice Croft’s reasoning and approving the Great Southern deed of settlement was that his Honour considered that if a group proceeding went to judgment then individual group members would not be able to bring subsequent claims or defences regarding their loan deeds.[28] As such, Croft J did not consider the fact that the deed of settlement deprived group members of the ability to raise individual claims and defences with respect to the validity enforcement of their loan deeds as to be a reason why he should not approve the deed of settlement. The question of whether group members are precluded from raising individual claims and defences not raised in the group proceeding has been considered in other cases concerning agricultural and forestry managed investment schemes including Kelly v Willmott Forests (in liq) (No 4)[29] referred to by Mr Rubenstein.
[28]Clarke as Trustee of the Clarke Family Trust & Others v Great Southern Finance Pty Ltd (rec and mgr apptd)(in liq) [2014] VSC 516 [132].
[29][2016] FCA 323.
Mr Gration submits that the Court of Appeal’s disagreement in Timbercorp with some of the reasoning that led to the approval of the Great Southern Deed of Settlement does not affect the validity of the deed. It remains a valid deed, binding all the parties to the group proceeding and all group members who did not opt out, including PDH. PDH cannot now reopen issues which have been settled by the deed of settlement.
Mr Gration also placed reliance upon order 2 of Croft J’s order of 11 December 2014. He submitted that the authority referred to therein included the authority to bind the group members, namely the plaintiffs in the group proceeding have the authority of the ‘Group Members … to give effect to the deed of settlement and the transactions contemplated thereby for and on behalf of the Group Members.’ Mr Gration submitted that the authority thereby conferred by order reinforced the concept that PDH was bound by the provisions of the settlement deed. He further submitted that the order was valid and appropriate until set aside. Principles with respect to s 459G
In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd[30] Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) said:[31]
No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the ‘ultimate question’ of the existence of the debt should not be compromised.
Her Honour further outlined the evidentiary requirements with respect to making out a s 459H claim:[32]
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice. …
[30][2008] VSCA 70.
[31]Ibid [57].
[32]Ibid [71].
In Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd,[33] Barrett J said:[34]
…The [applicant] will fail in [the] task [of establishing a genuine dispute] only if … the contentions upon which it seeks to rely … are so devoid of substance that no further investigation is warranted. Once the [applicant] shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the [applicant], it must find that a genuine dispute exists, even where any case apparently available to be advanced against the [applicant] seems stronger.
[33][2002] NSWSC 411.
[34]Ibid [23].
I also note that Cohen J, in Delnorth Pty Ltd v State Bank of New South Wales,[35] said:[36]
Although questions of disputed fact will not be decided on an application to set aside a statutory demand, the issue of whether there is a genuine dispute can be resolved on that application when the question arises on a short point of law or the construction of documents or agreed facts.
[35](1995) 17 ACSR 379.
[36]Ibid [384].
Settlement of group proceedings
A group proceeding commenced pursuant to s 33C does not require the consent of a person to be group member (save in limited circumstances) but a group member may opt out of a group proceeding.[37] The endorsement must, in addition to any other matters required by the Rules –
[37]Supreme Court Act 1986 (Vic) s 33J.
(a) describe or otherwise identify the group members (but it is not necessary to specify the name or number) to whom the proceeding relates; and
(b) specify the nature of the claims made on behalf of the group members and the relief claimed; and
(c) specify the questions of law or fact common to the claim of the group members.[38]
[38]Supreme Court Act 1986 (Vic) s 33H.
Section 33ZB provides as follows:
Effect of judgment
33ZB A judgment given in a group proceeding –
(a)must describe or otherwise identify the group members who will be affected by it; and
(b)subject to s 33KA, binds all persons who are such group members at the time the judgment is given.
The exception in s 33KA is not relevant to the question in issue in this proceeding. Notwithstanding what I have set out in relation to s 33ZB, the group proceedings did not proceed to judgment. It was settled, and that settlement was approved by Croft J. Section 33V deals with settlement.
Section 33V
(1)A group proceeding may not be settled or discontinued without the approval of the Court,
(2)if the Court gives such approval, it may make orders as it thinks fit with respect to the distribution of any money, interest, paid under a settlement or paid into court.
On 11 December 2014, Croft J made the following orders:
1.Settlement of the Group Proceedings in the terms contained in the deed of settlement executed by the parties on 23 July 2014 … (deed of settlement) is approved pursuant to s 33V(1) of the Supreme Court Act 1986.
2.The plaintiffs in the Group Proceedings have the authority of the ‘Group Members’ (as that term is defined in each of the Group Proceedings), nunc pro tunc, to enter into and give effect to the deed of settlement and the transactions contemplated thereby for and on behalf of the Group Members.
…
The deed of settlement was executed relevantly by BAB, the appropriate lead plaintiffs, and by McPherson & Kelly Lawyers Pty Ltd (‘M+K’). M+K entered into the terms in relation to a counterclaim proceeding, which is neither relevant in this proceeding, nor in relation to a covenant not to act. Clause 13.1 provided:
… on and from the date of this Deed, M+K agrees not to act, represent or otherwise assist any person in the commencement of any further proceeding in any jurisdiction against the VEN parties (BAB et cetera) … in respect of, arising out of, or in connection with the contents of or facts giving rise to, the PDS, the loan agreements, the schemes, the allegations made in or the facts giving rise to each of the proceedings …
Relevant provisions of the deed
Relevant provisions of the deed were as follows:
(a) ‘Claim’ means any claim, demand, action, suit … whether by original claim, cross‑claim, claim for contribution or otherwise whether presently known or unknown and whether arising at common law, in equity, under statute or otherwise and whether involving a third party or party to this Agreement and all liabilities, losses, damages, … of whatever description (whether actual, contingent or prospective) arising out of, or in connection with the contents of or the facts giving rise to, the PDSs, the Loan Agreements and/or the allegations made in or the facts giving rise to each of the Proceedings;[39]
[39]Clause 1 – Definitions and interpretations.
(b) ‘Loan Agreements’ means the loan agreements under which moneys were advanced to Scheme Members to finance their interest in managed investment schemes of which GSMAL … is or was the responsible entity;[40]
[40]Clause 1 – definitions.
(c) ‘on and from the Approval Date, all Claims against the BEM parties (BAB) … will be settled as follows:
4.1.1 the BEM parties (BAB) agree to waive Interest Relating to Overdue Amounts accrued and unpaid as at the approval date, in respect of the Loan Deeds of:
4.1.1.1 the lead Plaintiffs;
4.1.1.2 Group Members; and
… ‘
insofar as those loans are between those persons and the BEM parties.
(d) the lead plaintiffs for and on behalf of themselves and all Group Members acknowledge and admit the validity and enforceability of the Lead Plaintiffs’ Loan Deeds and the Group Members’ Loan Deeds;[41]
(e) the Lead Plaintiffs for and on behalf of themselves and on behalf of all Group Members release the BEM parties (includes BAB) … from all Claims;[42]
(f) each of the BEM Parties (includes BAB) … may plead this Deed as a bar or defence to any claim or action … brought by any of the … Group Members … relating to a Claim.’[43]
[41]Clause 4.1.4.
[42]Clause 4.1.10.
[43]Clause 4.1.13.
The notice provided to Group Members[44] relevantly set out the following:
[44]Affidavit of Delis dated 2 August 2016 Exhibit PD-1.
As a Group Member, unless you choose to opt out of the Great Southern Group Proceeding(s), one or more of the Great Southern Group Proceeding(s) will determine your rights, if any, to compensation or other relief.
…
What happens if you do not OPT OUT
If you are a Group Member and do not give notice to opt out by 4.00pm on 27 April 2012, you will be taken to have not opted out. Accordingly, under Australian law, you will be bound by the outcome of the Great Southern Group Proceeding(s) which affects you and any settlement, judgment or determination made in it. If the Great Southern Group Proceeding(s) is unsuccessful, you will not be able to make claims in other proceedings in relation to the matters the subject of the Great Southern Group Proceeding(s).
The Schedule A opt out notices specify the member’s name and the proceeding number in relation to the opt out.
In Kelly v Willmott Forests Ltd (in liq) (No 4),[45] Murphy J declined to follow Croft and Judd JJ. Whilst Murphy J recognised each decision turned on its own facts, His Honour agreed with Robson J and disagreed with the statements by Croft & Judd JJ in Clarke No. 2 and Clarke No. 4.[46]
[45]Timbercorp Finance Pty Ltd (In Liquidation) v Collins; Timbercorp Finance Pty Ltd (In Liq) v Tomes [2016] FCA 323.
[46]Kelly v Willmott Forests Ltd (in liq) (No 4) [2016] FCA 323 [151].
Murphy J did not accept that a ‘necessary corollary’ of the right to opt out is that class members who not do so must be taken to have accepted that the claims pleaded in a class action represents all claims ‘reasonably available’ to them.[47]
[47]Ibid [152].
In Timbercorp,[48] the Court of Appeal dismissed the appeal from Robson J which had been referred to by Murphy J in the Willmoth Forests case.[49] In doing so, the Court of Appeal disagreed with Croft J. The Court of Appeal said:
[13] The only essential conditions that must be satisfied for the commencement of a group proceeding are those contained in s 33C(1) of the Act; if those conditions are met, there is nothing to prevent plaintiffs from raising issues for determination in which they have no interest. Further, the Court has power to permit any group member to draw ‘remaining questions’ to its attention pursuant to s 33Q(1). A group member may be ‘Anshun estopped’ only if it was unreasonable for him or her not to have raised, during the group proceeding, some claim other than the common questions of law or fact. However, it does not follow that the failure by a group member to opt out and/or to use s 33Q to draw the Court’s attention to any claim that is peculiar to that group member means that the group member will be automatically precluded from raising that claim in later proceedings. While pt 4A expressly provides for a statutory estoppel in respect of any determination of the common questions of law and fact, it does not provide for any estoppel in respect of claims peculiar to a group member that were not advanced in the group proceeding. Whether there will be an Anshun estoppel depends upon a ‘merits-based’ assessment taking into account all the circumstances of the case. The respondents are not to be taken as having abandoned their individual defences by reason of not having raised them in the group proceeding, or not having opted out of the group proceeding. Finally, estoppels may bind parties and their privies. However, the group members were not privies of the plaintiff in respect of their unpleaded claims and defences and are not to be taken as having abandoned their individual defences by reason of the plaintiff not having raised them as claims in the group proceeding.
[48][2016] VSCA 128.
[49]On 20 July 2016, special leave to appeal was granted by the High Court. The appeal is extant.
At [112] to [117] the Court of Appeal considered estoppel, Anshun estoppel and abuses of processes.
[112] It had also been contended that the failure of the plaintiff in the group proceeding to raise a particular claim meant that he would be estopped from raising that claim in a later proceeding and that, in so far as the group members were privies of the plaintiff, his failure had the consequence that the group members could not raise individual claims in a subsequent proceeding because they were privies of the plaintiff. The primary judge rejected those contentions. The primary judge accepted that the plaintiff in a group proceeding may be subject to an Anshun estoppel and that s 33ZB made express provision for the treatment of group members as if they were parties. However, the section had a limited operation and did not express any broader policy with respect to the preclusion of group members from bringing subsequent claims or defences.
[113] The judge held that group members were not subject to estoppel as privies of the plaintiff because: (a) the group members did not authorise the plaintiff to represent them; (b) the plaintiff was not subject to fiduciary duties owed to group members; (c) the plaintiff is not required to consider the wider interests of group members; (d) the procedures contained in pt 4A do not adequately guard against collateral risks of representation; (e) pt 4A does not require group members to be informed of any preclusive effects of potential estoppels; (f) if group members and the plaintiff were held to be privies, there was a real risk that, in pursuing his or her own interests, the plaintiff might unwittingly preclude the future enforcement of other rights or obligations of far more value to group members; and (g) in so far as a plaintiff may not share the individual claim of a group member, the plaintiff may be prevented from pursuing the interests of a group member.[50]
[114] The judge also considered the matter on the contrary assumption that the plaintiff in the group proceeding was the common law privy of the respondents. Once more, he found no unreasonableness on the part of the respondents: (a) they had no control of the plaintiff in his conduct of the group proceeding and they had no entitlement to be heard or take part;[51] (b) the plaintiff was under no obligation to take into account their interests and could run the group proceeding in a way that was contrary to those interests;[52] (c) the plaintiff could not propound the individual respondents’ claims as they did not have the commonality required by s 33C;[53] and (d) to deny the respondents the ability to run their defences would be to derogate from their basic common law right to have an opportunity to present evidence and arguments.[54]
[115] The judge also considered the matter on the hypothesis that group members were able to raise for directions the defences they now seek to propound.[55] Even in that situation, the judge held that Anshun estoppel would not apply as (a) even if group members had an entitlement to seek directions, the Court was under no obligation to give any directions for the determination of the individual claims;[56] (b) pt 4A neither expressly nor impliedly requires all individual claims to be determined in the group proceeding;[57] and (c) even if the opt out notice had provided an appropriate warning about Anshun estoppel, pt 4A does not treat group members as if they were parties except to the extent provided for in s 33ZB.[58] In reaching his conclusion, the primary judge disagreed with the reasoning of Judd J in Clarke v Great Southern Finance Pty Ltd (in liq)[59] and Croft J in Clarke v Great Southern Finance Pty Ltd (rec and mgr apptd) (in liq).[60] The primary judge considered that too much force should not be given to the opt out procedure: ‘there are myriad reasons why a group member may fail to opt out’.[61]
[116] Since the decision of the primary judge, and after the oral hearing in this Court, a judge in the Federal Court has adopted the approach favoured by the primary judge in preference to the two decisions just mentioned.[62] That case, like the other two, concerned applications for approval of a compromise in group proceedings. Naturally, the circumstances of each proceeding are very different. We have found the reasoning in each of these decisions to be helpful but have chosen, in light of the length of these reasons, not to canvass what was said in them in any detail.
[117] Finally, the primary judge found that the respondents were not prevented from raising their pleaded defences by operation of the principles of abuse of process.[63]
…
[50]Timbercorp Finance Pty Ltd (In Liquidation) v Collins; Timbercorp Finance Pty Ltd (In Liq) v Tomes [2016] VSCA 128 [572]–[580].
[51]Timbercorp Finance Pty Ltd (In Liquidation) v Collins; Timbercorp Finance Pty Ltd (In Liq) v Tomes [2016] VSCA 128 [630]–[632].
[52]Ibid [633].
[53]Timbercorp Finance Pty Ltd (In Liquidation) v Collins; Timbercorp Finance Pty Ltd (In Liq) v Tomes [2016] VSCA 128 [634].
[54]Ibid [635].
[55]Ibid [657].
[56]Ibid [660].
[57]Ibid [662].
[58]Ibid [663]–[664].
[59][2014] VSC 569.
[60][2014] VSC 516.
[61]Clarke v Great Southern Finance Pty Ltd (rec and mgr apptd) (in liq) & ors [682]; See generally at [665]–[682].
[62]Kelly v Willmott Forests Ltd (in liq) (No 4) [2016] FCA 323 [199]–[247] (Murphy J).
[63]The primary judge did not make any finding that M+K were retained to deal with their clients’ individual claims. See reasons at [716].
At [212] to [213] the Court of Appeal considered if the group members were privies of the lead plaintiff as follows:
Were the group members privies of the plaintiff?
212.The final submission of Timbercorp was that the respondents were privies of the plaintiff in the group proceeding and that the plaintiff was subject to Anshun estoppel which therefore also bound the respondents.
213.The analysis of pt 4A set out above shows also that the group members in the group proceeding were not privies of the plaintiff in respect of unpleaded claims and defences, and that Tomlinson does not hold otherwise. The plaintiff was not the agent of the group members; nor was he their fiduciary. The group members had no control over the conduct by the plaintiff of the group proceeding.[64] They have no enforceable rights against him in the event that they consider that he has not advanced, or not properly advanced, their unpleaded claims. In advancing their amended defences, the group members are not claiming ‘under or through’ the plaintiff in the group proceeding. It is true that, by reason of the provisions of pt 4A, the plaintiff represented group members in that proceeding. And, to the extent of that representation, group members, in so far as they take its benefit, must also share in its burden. Nevertheless, the plaintiff did not represent group members in respect of their unpleaded defences and claims.
[64]The possibility of the Court giving group members the ability to make submissions in aid of the exercise of powers such as those conferred by s 33Q is not germane for present purposes.
Conclusion
I have cited extensive passages from Timbercorp as the same usefully identifies principles or issues which might be germane in any recovery proceeding which might be filed by BAB hereafter.
From the passages I have distilled the following insofar as the principles or issues relate to this application to set aside a statutory demand:
(a) there is a distinction between settlement of and a judgment in a group proceeding. While s 33ZB operates with respect to a judgment, there is no equivalent provision which bears upon settlement;
(b) the failure to opt out may not be fatal. The records of this Court lead to the conclusion that PDH remained a group member. The onus is upon PDH to demonstrate otherwise. In any event, I decline to determine the issue of whether or not PDH had attempted to opt out and what ensues from such attempt. I do not need to determine that issue given the conclusions in this judgment;
(c) lead plaintiffs are not the privies of group members. The lead plaintiffs did not represent the group members in respect of unpleaded defences and claims;
(d) the lead plaintiffs could not propound the individual group members’ claims as such claims do not have the commonality required by s 33C;
(e) a settlement by the lead plaintiffs will not have any binding effect on group members except insofar as group members take the benefit, they must also share in its burden. That is, settlement may be binding in respect to the group issues;
(f) in considering whether an Anshun estoppel might apply, careful consideration needs to be given to the form of the opt out notice. In this particular instance the opt out notice did not clearly specify all the consequences of opting out;
(g) even if the opt out notice had provided an adequate warning about Anshun estoppel, Part 4A does not treat group members as if they were parties except to the extent provided for in s 33ZB.
I determine that order 2 made by Croft J on 11 December 2014 does not detract from the principles or issues referred to in the preceding paragraphs. Part 4.3A does not require a judge approving a settlement of a group proceeding to pronounce any orders about the authority of lead plaintiffs to bind group members. BAB has submitted that an order of this Court is binding until set aside. That may be the case but it is still genuinely arguable that notwithstanding the order approving regard must still be had to whether or not the same precludes the plaintiff from raising a defence or off-setting claim personal to it.
Since dictating these reasons, the Court of Appeal published its judgment in Byrne v Javelin Asset Management Pty Ltd.[65] In Byrne the Court set out that:
…there are many instances… where the Court has made an order authorising a plaintiff to enter into and give effect to the settlement on behalf of group members.[66] Again, s 33ZF is an available source of power for such an order. In approving the present deed of settlement, Croft J ordered, among other things, that the plaintiffs in the group proceedings ‘have the authority’ of the group members ‘nunc pro tunc, to enter into and give effect to the deed of settlement and the transactions contemplated thereby for and on behalf of’ the group members.
In the circumstances, it is not necessary to decide whether, in the absence of an order such as those that might be made under s 33ZF, a settlement of a group proceeding is binding upon group members once approved by the Court, by operation of s 33ZB. It suffices that the present settlement was binding on group members by virtue of the orders made by the Court in this particular case.
[65][2016] VSCA 214.
[66]See many of the above cases and also Camilleri v Trust Company (Nominees) Ltd [2015] FCA 1468; City of Swan v McGraw-Hill Companies Inc (2016) 112 ACSR 65, 75 (Wigney J).
In Byrne, the Court of Appeal seems to elevate the status of a settlement to a judgment by virtue of the order pursuant to s 33ZF. That would lend weight to Mr Gration’s submissions as to the binding effect of the terms of settlement. However, I note that the Court of Appeal did not appear to approach the issue in the same manner as developed by the Court of Appeal in Timbercorp. In Byrne, the Court of Appeal did not dwell upon the issues raised in Timbercorp.
This is not one of those cases referred to by Cohen J where the determination of a ‘short point of law’ is germane. I find it difficult to rationalise the Timbercorp decision with that of Byrne. However, I do not need to resolve the apparent tension. It is sufficient to identify the issue of the bar as being genuinely arguable and warranting further investigation.
It follows that the statutory demand dated 4 May 2016 is set aside. The defendant pay the plaintiff’s costs of and incidental to the application including reserved costs on a standard basis.
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