Pioneer Park Pty Limited v ANZ Banking Group Limited

[2005] NSWSC 832

CITATION:	Pioneer Park Pty Limited (in liquidation) v ANZ Banking Group Limited; Clifford John Carpenter v ANZ Banking Group Limited; Merlo Australia Pty Limited & Ors v Australia and New Zealand Banking Group Limited; Australia and New Zealand Banking Group Limited v Clifford John Carpenter [2005] NSWSC 832
HEARING DATE(S):	16/08/05
JUDGMENT DATE :	18 August 2005
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Security for costs ordered. Application for separation of liability and quantum rejected. Pleadings not demurrable.

CATCHWORDS:	Practice and Procedure - Overriding Purpose Rule - Security for costs - Application to strike out pleadings - Application for separate determination of liability and quantum - Principles
LEGISLATION CITED:	Fair Trading Act 1987 (NSW) Supreme Court Act 1970 (NSW) Trade Practices Act 1974 (Cth) Civil Procedure Act 2005 (NSW)
CASES CITED:	Australian National Industries Ltd v Spedley Securities Ltd (In Liquidation) (1992) 26 NSWLR 411 Bell Wholesale Co Ltd v Gates Export Corporation (No. 2) (1984) 2 FCR 1 Century Medical v THLD [2000] NSWSC 5 Demagogue v Ramensky (1992) 39 FCR 31 Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564; [2004] NSWSC 664 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 Hession v Century 21 South Pacific (1992) 28 NSWLR 120 Idoport Pty Limited v National Australia Bank Ltd [2000] NSWSC 1215 Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; 109 ALR 638 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 Oshlack v Richmond River Council (1998) 193 CLR 72 Perre v Apand Pty Ltd (1999) 198 CLR 180 P S Chellaram & Co v China Ocean Shipping Co. (1991) 9 ACLC 1603 Story of Sydney Pty Ltd v Ling (unreported, Supreme Court of New South Wales 14 November 1994; Rolfe J) Tallglen v Pay TV Holdings (1996) 22 ACSR 130 Tepko Pty Ltd v Water Board (2001) 206 CLR 1 Yandil Holdings Pty Ltd v Insurance Company of North America (1985) 3 ACLC 542
PARTIES:	Pioneer Park Pty Limited (Plaintiff 50156/04) Clifford John Carpenter (Plaintiff 50163/04; Defendant 50118/05) Merlo Australia Pty Limited (Plaintiff 50096/05) Australia and New Zealand (ANZ) Banking Group Limited (Defendant 50156/04; 50163/04; 50096/05; Plaintiff 50118/05)
FILE NUMBER(S):	SC 50156/04; 50164/04; 50096/05; 50118/05
COUNSEL:	Mr J Garnsey QC, Mr B Connell (Pioneer Park Pty Ltd, Clifford John Carpenter; Merlo Australia) Mr J Thomson (Australia and New Zealand (ANZ) Banking Group Limited)
SOLICITORS:	PMF Legal (Pioneer Park Pty Ltd, Clifford John Carpenter; Merlo Australia) Minter Ellison (Australia and New Zealand (ANZ) Banking Group Limited)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Thursday 18 August 2005

50156/04 Pioneer Park Pty Limited (in liquidation) v Australia and New Zealand Banking Group Limited
50163/04 Clifford John Carpenter v Australia and New Zealand Banking Group Limited
50096/05 Merlo Australia Pty Limited v Australia and New Zealand Banking Group Limited
50118/05 Australia and New Zealand Banking Group Limited v Clifford John Carpenter

JUDGMENT

The state of these sets of proceedings

1 The judgment delivered on 27 May 2005 ([2005] NSWSC 498) set out the genesis of the instant litigation and described 'the litigious war'. It is unnecessary to repeat what appears in that judgment. The acronyms used are repeated.

2 The occasion for this further judgment broadly concerns the following issues:

· On 22 June 2005 a further Summons was filed in the Commercial List of this Court [50096 of 2005] ["the third Commercial List proceedings" or "the Merlo proceedings"]. The parties are:

- Merlo Australia Pty Ltd [the first plaintiff], Merlo Wholesale Pty Ltd [the second plaintiff] and Domino Hire Pty Ltd [“Domino Hire”] [the third plaintiff];

- ANZ [the defendant].

· By notice of motion filed on 22 May 2005 ANZ seeks:

- to strike out the summons in the Merlo proceedings;
- security for costs in the Merlo proceedings.

· By notice of motion filed on 17 December 2005 ANZ seeks to strike out parts of the first Commercial List summons;

· By notice of motion filed on 14 March 2005 ANZ seeks to strike out parts of the second Commercial List summons

· By notice of motion filed on 16 August 2005 Pioneer seeks orders that liability issues be heard and determined prior to the determination of quantum issues, either by case management directions or by an order being made pursuant to Uniform Civil Procedure Rules: Part 28 Rule 28.2 for separate determination of liability and quantum.

3 Additionally as the 27 May 2005 judgment made clear, a number of 'tidying up' matters required and still require attention consistent with the dictates of the Overriding Purpose Rule and also with section 57 of the Civil Procedure Act [“CPA”] (cf the earlier judgement at [67]-[76]).

Matters now clarified

4 It is appropriate to first note that a considerable degree of clarification has now emerged. I refer here to the concession by the Pioneer parties [in this judgment also regarded as including the Merlo companies and Domino Hire] to the effect that the issues on liability are effectively substantially identical in each of the first, second and third Commercial List proceedings and in the former District Court proceedings now removed into the Commercial List of this Court (submissions at [24]). Even without that concession it is plain enough that the issues on liability are effectively substantially identical or at least identical to such an extent that the principled exercise of the Court's discretion, consistently with the Overriding Purpose Rule and section 57 of the CPA, mandates a case management which would see all of the suits heard together.

Case management of final hearing

5 There are substantial difficulties in acceding to the application by the Pioneer parties for a separation of liability from quantum. These are pointed up by the submissions of ANZ.

The principles applicable to whether or not Part 28 Orders may be made

6 ANZ's submissions in relation to the principles concerning whether or not a Part 28 case management approach should be adopted are accepted in what follows:

· Generally speaking all issues should be tried at the same time:

“The attraction of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue or relevant to others, and they all overlap.

The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the courts, rather than the parties’, interests.

Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues make give rise. Indeed that would occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single issues trials should, in our opinion, only be embarked upon when the utility, economy and fairness to the parties are beyond question.”
( Tepko Pty Ltd v Water Board [2001] HCA 19; 206 CLR 1 at [168] – [170])

· Further, as Callinan J pointed out that in Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180 at [436]:

“Care does need to be taken in deciding whether to conduct separate trials of different issues. It sometimes happens they may turn out to be productive of the disadvantages of delay, extra expense, appeals and uncertainty of outcome which they are intended to avoid. In tort cases in which damage is the gist of the action, it will generally be undesirable to accede to requests for them, or to order them, unless all parties accept that compensable damage has been sustained by the plaintiffs or applicants as the case may be.”

· Those comments are obviously applicable also to claims for damages based on alleged misleading or deceptive conduct under the Trade Practices Act [“TPA”] and/or the Fair Trading Act [“FTA”].

· The principles applicable to the separate determination of issues are summarised in Idoport Pty Limited v National Australia Bank Ltd [2000] NSWSC 1215 (15 December 2000). The various features identified in that judgment as tending to render separate determination inappropriate, are all present in this case. In particular:

- there are intertwined issues of fact or law between the separated question and the other questions such that the determination of the separate question will not have any substantial effect upon the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation;
- where there is a commonality of witnesses and issues of credit as between the separate issue and other issues in the case which will or may necessitate a ruling on the credit of one or more of the common witnesses, thus possibly precluding the same judicial officer from again dealing with the matters going to the credit of the common witness in accordance with the decision of the Court of Appeal in Australian National Industries Ltd v Spedley Securities Ltd (In Liquidation) (1992) 26 NSWLR 411; Story of Sydney Pty Ltd v Ling (unreported, Supreme Court of NSW 14 November 1994 per Rolfe J) Century Medical v THLD [2000] NSWSC 5;
- there is a possibility that the resolution of the separate issue will not finally determine the issue but will merely result in an appeal from that decision in relation to that separate issue, creating a multiplicity of the proceedings interruption to the court and undesirable fragmentation of the proceedings.

· Further, as Giles CJ in Comm.D (as his Honour then was) explained in Tallglen v Pay TV Holdings (1996) 22 ACSR 130 at 142:

“It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties dispute.”

7 Having closely examined the respective submissions on the Pioneer Parties applications for separate determination I have come to the clear conclusion that in these sets of proceedings the proper and principled exercise of the relevant discretion is to reject the application for a Part 28 separate order regime. By far and away the most significant factor justifying the propriety of taking this approach is the fact that the evidence of Mr Carpenter is likely to be critical both as to liability and as to damages/quantum in a number of ways. For the same reason the application for initial determination (outside of a Part 28 regime) of issues on liability is rejected. A Judge may in such a scenario be faced with having accepted the credit of witness A on tranche 1, yet be forced on tranche 2 to hold that the witness was unreliable, casting grave doubt on the liability finding. The hearing would abort.

8 The written submissions of ANZ in this regard were inter alia in the following terms:

· In the present case it is apparent that the evidence of Mr Carpenter will be critical both as to liability and as to damages in a number of ways. Further, his credit will be an issue in both aspects.

· For example, notwithstanding the evident history of otherwise comprehensive documentation of facilities, Mr Carpenter relies on a contentious oral extension supposedly granted by the accounts manager on 12 August 1998. There is also a contentious issue as to whether the annual review variation letter dated 3 March 1997 became part of the facility documentation. Other contentious issues relate to communications between various officers of the bank and Mr Carpenter in the period of September and October 1998.

· Mr Carpenter’ s credit (and his evidence) appears to also be of significance in relation to the defaults upon which the bank relies including insolvency (paragraphs 35 – 37 of the defence), failure to pay (38 – 48 of the defence), material adverse change (paragraphs 49 – 65 of the defence), breach of gearing covenant (paragraphs 66 – 71 of the defence) and failure to provide signed and audited accounts (paragraphs 72 and 73). Mr Carpenter’s evidence is also material to the estoppel upon which the bank relies (paragraphs 74 – 82 of the defence).

· So far damages are concerned, the financial health of Pioneer Park and its associated entities in the period that the bank alleges it was insolvent, and in the period the bank alleges it suffered a material adverse change in its financial circumstances are directly relevant to the quantification of any damages of the type claimed in the Pioneer Park proceedings, in particular alleged damages arising from loss of profit and destruction of the business and undertaking of Pioneer. The significant losses recorded by Pioneer for the financial year ended 30 June 1998 (see paragraph 52 of the defence), and the explanation for such losses, clearly impact on the quantification of any damages and that Mr Carpenter’s evidence concerning theses matters is material to that exercise. Mr Carpenter’s evidence about the industrial disputation which occurred in the financial year ended 30 June 1998 and apparently continued thereafter, is also obviously germane to any quantification of loss of profits or loss of business.

· Further, Mr Carpenter’s ability and capacity as a business manager, and the style of his management, are clearly factors which would need to be taken into account in assessing the prospects for the business and its future profitability (if any) had the bank not withdrawn its facilities. Those issues also feed into the question of whether Pioneer Park was likely to be able to continue to service the facilities had the facilities been continued. Mr Carpenter’s evidence about his failure to obtain refinance of the ANZ’s facilities, notwithstanding many assurances in late 1998 and early 1999 that he would arrange that refinance, is also likely to be material to quantifying any damages allegedly suffered by Pioneer.

· Mr Carpenter’s conduct in 1998 in relation to the manner in which he dealt with industrial disputation and the unions, in the context of industrial disputes which remained unresolved, is likely to have a significant bearing on the future prospects for Pioneer Park’s business had it not been shut down. Further, Mr Carpenter’s decision to have Pioneer Park enter into a share purchase through which it lost about $800,000 in a transaction with a related party (see paragraph 53 of the defence) plainly has a bearing on how much any future profits which might have been derived from Pioneer’s ordinary business, should be discounted for contingencies. Mr Carpenter’s evidence about the AMP share sale transaction will also be material in this regard.

· The expert evidence which both parties anticipate putting on in relation to Pioneer’s breaches (which goes to liability) is also material to any assessment of loss or damage. It is envisaged that the same experts would be used relating to those issues both as to liability and as to quantum. Certainly, the same or very similar expertise is required and there is obviously a substantial overlap in the financial information which the experts will need to review for the purpose of addressing the liability issues on the one hand, and the quantification issues on the other.

· It is obviously illogical and inefficient for the experts to engage in that exercise on two different occasions. It is illogical and inefficient for the forensic presentation and analysis of that material (including cross-examination of experts) to occur on two different occasions.

9 Whilst it is unnecessary for the purposes of this judgment to do more than note these submissions, it is clear enough that even if some only of the propositions in the submissions be accurate there would be an insuperarable difficulty with the Court making a formal Part 28 order. The centrality of Mr Carpenter’s evidence is plain.

10 For precisely the same reasons the application for a ‘case management’ procedure separating liability (and a determination of such) and quantum (with a determination of such) requires to be rejected.

Security for costs

11 The Pioneer Parties have contended that no further orders for provision of additional security for costs are appropriate in the principled exercise of the Court's discretion for the following suggested reasons:

· Pioneer and Merlot cannot fund the Pioneer and the Merlot litigation from their own resources if an order for security is made and cannot do so even if they rely on any other resources available to them (the company's shareholders or creditors).

· Mr Carpenter has been assisted by benefactors who for personal reasons have given and made available non-recourse (in the event of failure) interest-free loans are not obliged to do so and who are not shareholders or creditors of and who do not otherwise stand behind Pioneer or Merlot and who have no interest in the litigation or its proceeds.

· The Court has been fully informed, so far as can reasonably be done, of the situations and resources of all relevant corporations (Pioneer, Merlot and Domino Hire, and Retreat) and of the redeemable preference shareholders of Retreat (Mr Carpenter’s ex-wife, and his independent adult children).

· The making of any further order for security will stultify Merlot’s and Domino Hire’s claims in the Merlot proceedings.

Dealing with the issue

12 It is possible to deal with the security for costs issue fairly shortly.

13 The principles were closely examined in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [44] et seq (see also the 27 May judgment at [50] – [52]).

14 I accept as of substance and adopt the following propositions to be found in the written submissions of ANZ:

· “the foundation for the court exercising its discretion whether to order security for costs, is established. Proof of the plaintiff’s unsatisfactory financial position is also a substantial factor in the exercise of the court’s discretion: Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [20] and [56] – [57] per Einstein J; Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664 at [35] and [36] per Austin J.

· An order for costs is made to indemnify the successful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 per McHugh J. Security for costs orders are made to protect the defendant against the risk of being deprived of the benefit of a costs order made for that purpose, if the defendant is successful.

· The merits of the underlying claims are generally regarded as a neutral factor and the court usually assumes that the claims are bona fide and arguable and does not embark on a more detailed consideration of the merits: Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40–972 at 50 – 636 per Hill J; Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 at 624 per Ormiston J; Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664 at [37] – [38] per Austin J.

· However, where it is alleged by the plaintiff that the company’s impecuniosity was caused by the wrongdoing of the defendant, the court may form a provisional view of the strength of the plaintiff’s case. In this context, the onus is on the plaintiff company to establish that the defendant caused the company’s impecuniosity. The plaintiff must prove “economic causation”. It is not enough to prove that the defendant’s conduct contributed to the company’s lack of funds. The test is whether, but for what was alleged to have been the defendant’s conduct, the plaintiff would have been solvent. This will usually require evidence of the plaintiff’s financial health before the wrongdoing occurred.

· There is no evidence about the plaintiff’s financial health before the alleged wrongdoing occurred and no satisfactory demonstration by the plaintiff that its impecuniosity was caused by the defendant’s alleged wrongdoing.

· If the plaintiff asserts that an order for security for costs would stultify the proceedings, it is necessary for the plaintiff to establish that those who stand behind the corporate plaintiff and who will benefit from the litigation if it is successful are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those who the litigation will benefit and to prove the necessary facts: Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4 per Sheppard, Morling and Neaves JJ; P S Chellaram & Co v China Ocean Shipping Co. (1991) 9 ACLC 1603 at 1605 per McHugh J; Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664 at [74]; Yandil Holdings Pty Ltd v Insurance Company of North America (1985) 3 ACLC 542 at 545 per Clarke J; Idoport Pty Ltd v National Australia Bank [2001] NSWSC 744 at [50] per Einstein J; Hession v Century 21 South Pacific (1992) 28 NSWLR 120 at 123 per Meagher JA (with whom Kirby P and Cripps JA agreed).”

15 As to the submissions put by the Pioneer Parties concerning the suggested relevance of the so-called ‘litigious war’ it is unnecessary to do otherwise than to repeat paragraphs 59 to 62 of the May judgment.

59. “It is difficult to perceive what if any relevance the above-described litigious war has in terms of the motion for security for costs presently before the Court. Mr Garnsey did emphasise the matter on a number of occasions through his submissions. The submission is that "[t]he Bank is an advocate of groundhog day" [transcript 59. 21]. According to the Oxford English Dictionary:

"Ground-hog Day - for on that day the ground-hog comes annually out of his hole, after a long winter nap, to look for his shadow. If he perceives it, he retires again to his burrow, which he does not leave for six weeks weeks necessarily of stormy weather. But if he does not see his shadow, for lack of sunshine, he stays out of his hole till he can, and the weather is sure to become mild and pleasant".

60. Accordingly I take Mr Garnsey to be submitting that ANZ intends to refrain from being forced into a hearing date of the first Commercial List proceedings for the foreseeable future: that is to say intends to avoid a hearing on the merits if possible. The contention is that ANZ has improperly been about no more and no less than a barefaced attempt to stop the proceedings in their tracks.

61. Had there been any question of an abuse of process allegation that of course would need very careful attention. There is no such allegation of which I am aware. In the result it does not appear to me that the litigious war can play any material part in the decision on the proper exercise of the discretion to award or to withhold a security for costs order.

62. Having said that it is appropriate to at least note the submissions which came forward from ANZ denying its characterisation as "the true aggressor". Those submissions were as follows:

“Pioneer Park has put the submission that the Bank is the true aggressor and has attempted to prevent the hearing of the claim on its merits. There is a clear difference between the District Court proceedings and the Supreme Court proceedings. It clear from the evidence and nature of the proceedings that it is the company, on Mr Carpenter’s instructions, that is the true aggressor in the Supreme Court proceedings.

By contrast, the District Court proceedings were commenced by the Bank to pursue money owed by Mr Carpenter as guarantor for Pioneer Park to the Bank.

As to who is the “aggressor”, the following further points should be noted:

Mr Carpenter has commenced a number of unsuccessful applications himself, being his action to remove Mr Thomas (heard by Austin J) and the unsuccessful attempt to examine Mr John McFarlane (the Chief Executive Officer of the Bank).

Mr Carpenter will have incurred considerable costs in pursuing his examinations of the Bank's current and former officers. The examinations were commenced and conducted by him at his own instigation (quite apart from any applications in which the Bank or its solicitors were involved). They involved numerous examinations over several days [Yet we are now told by Mr Carpenter’s legal representatives, that “the issues raised on liability are based principally on documents, with only a relatively small issues [sic] of disputed fact, not relating to damages.” (Quoted from the first paragraph numbered 6 in Pioneer’s written submissions dated 10 May 2005.) Mr Carpenter seems to want it both ways]. On any view Mr Carpenter was the aggressor so far as the examinations were concerned. The position does not change because the Bank sought to oppose them.

In the District Court proceedings, it is difficult to see that the Bank is a true aggressor as was submitted by Mr Carpenter, even if it might formerly have been so characterised. The Bank agreed with Mr Carpenter to stay those proceedings pending the outcome of the Supreme Court proceedings, which course of conduct was entirely appropriate and reasonable. That approach remains entirely appropriate and reasonable.”

The evidence on the security for costs motion

16 This evidence can be dealt with very briefly.

17 There is no issue but that the plaintiffs in the Merlo proceedings will be unable to pay a costs order in the event that the Merlo proceedings are unsuccessful.

Derriwong Investment Trust

18 The position with respect to Domino Hire in terms of the evidence before the Court is unsatisfactory. The Carpenter Group structure [in chart format] was set out in the May judgment (at [28]). All the shares in Domino Hire were shown as held by the Derriwong Investment Trust. Mr Carpenter had deposed that:

· Derriwong Investment Trust does not have a bank account and that it’s only asset comprised shares in Domino Hire;

· Domino Hire had a deficiency in net assets of $355,000 as at 30 June 2004 and does not conduct any other activity;

· He has endeavoured to find a copy of the Trust Deed but been unsuccessful in that regard;

· The Trust is a discretionary trust;

· So far as he is aware, he is one of the beneficiaries of the Trust.

19 As was conceded by Mr Garnsey QC, a course open to the Court is to regard Mr Carpenter as one of the beneficiaries of the Trust and, in the event that a security for costs order be made, to therefore “draw him in”. [Transcript 67.9].

20 The short position is that in the event of Merlo succeeding in the new proceedings and recovering $26 million, outside of the unsatisfactory state of the above described evidence the Court is entirely in the dark as to which person or persons as a matter of practicality would be the ultimate beneficiaries of all or some of that verdict.

Retreat Pty Ltd

21 Mr Carpenter in his affidavit of 12 August 2005 has updated the affidavits which were previously before the Court. The position as set out in the earlier judgment concerning the shareholder in Retreat has not changed. However Mr Carpenter now deposes that:

· insofar as he seeks in the current litigation “to obtain a successful result for the plaintiff”, he seeks to benefit the creditors and contributories, namely Retreat;

· as a director of the plaintiff, it is his wish to restore the plaintiff’s losses for the benefit ultimately of the creditors, firstly and then to benefit his ex-wife and children as shareholders of Retreat;

· none of the creditors or shareholders have ever been asked to provide funds for [or have provided funds for], or have taken any part in the litigation whether directly or indirectly;

· he is also concerned to restore his own reputation which has been adversely affected by the liquidation of the plaintiff.

· he has been assisted when short of funds, from time to time [because of his personal relationship with them], by advances of moneys from the late Robert Henderson and David Henderson (or companies associated with them) - which have been made interest-free and without their being under any obligation to make the advances which are only to be repaid on the successful conclusion of the litigation;

· he does not presently expect the Henderson assistance to be continued because of the difficulties and delays in obtaining a date for trial and as a result of the many applications of the ANZ;

· he is not able to raise large amounts of cash in a short timeframe or to provide security for costs of the magnitude required by the last judgment.

Life Insurance Policies

22 In detailing his assets he has identified a number of life insurance policies held with AMP, the total surrender value of which is $365,999.00.

Late commencement of Merlo proceedings

23 As the Merlo proceedings were commenced only after the delivery of judgment on the first security for costs application, the instant application for additional security concerning the new proceedings must take into account the extent to which the central issues to be litigated in the new proceedings are virtually precisely the same as the central issues to be litigated in the first and second Commercial List proceedings. Whilst it is quite plain that the core issues which underpin the Merlo proceedings simply mirror the issues pleaded in the first Commercial List proceedings, it is also clear that there are a number of disparate issues which arise in the new proceedings. These are identified in paragraph 26 of the affidavit of Mr Beaton made on 20 July 2005 in the following terms:

“(a) the circumstances in which the Bank provided financial accommodation to Merlo Australia and Merlo Wholesale and whether this constituted misleading and deceptive conduct (paragraphs 59 - 69 and 77 - 78 of the summons);

(b) the Bank's conduct in relation to the facilities of Merlo Australia and Merlo Wholesale during and after December 1998 and whether this constituted a breach of the terms and conditions of the agreement with the Bank (paragraphs 71 - 76 of the summons);

(c) the termination of arrangements between Merlo SPA and Merlo Wholesale and Merlo Australia as pleaded in paragraphs 79 and 80 of the summons;

(d) what, if any, loss or damage Merlo Wholesale suffered, which alleged damage is presently particularised as 'loss on stock of machines and spare parts due to loss of agency following withdrawing of letter of credit facility and liquidation of [Pioneer]' in the sum of $1,000,000;

(e) what, if any, loss or damage Merlo Wholesale suffered, which alleged damage is presently particularised as 'loss of agency following withdrawal of letter of credit to Merlo Wholesale Pty Ltd and liquidation of [Pioneer]' in the sum of $20,000,000;

(f) what, if any, loss or damage Domino Hire suffered, which alleged damage is presently pleaded to be $6,520,800.”

24 Mr Beaton was cross-examined this evidence including the following:

“Q. And what particular matters, or at least are you in a position to suggest any particular matters that might be forthcoming from Merlo SPA about the relationship which would assist the bank in meeting a claim for damages?

A. …I am hypothesising to some extent here, but I would expect that there would be evidence about the degree of satisfaction that Merlo SPA had with their arrangements with Merlo Australia and Merlo Wholesale, whether or not there was some suggestion that those arrangements might be continued into the future, the stand order to which Merlo Wholesale and Australia performed their contractual obligations to Merlo SPA, because all of these matters will go to the future of the value of the business which Merlo says that it has lost…

WITNESS: There is a large piece of work there identified in relation to interviewing officers of Merlo in Italy. Now, as I indicated we would issue a subpoena and we would probably approach Merlo to speak to them about the arrangements that they had with Merlo Australia and Merlo Wholesale, to the extent they were satisfied with those arrangements and circumstances going to the termination of the importation and distribution arrangements.

GARNSEY: Q. And, again, you don't know whether that would result in anything to help the bank's case or to result in evidence to court?

A. Well, I know that if they gave information which suggested that there were some concerns over the future of their relationship with Merlo Australia or Merlo Wholesale, that that would be critical and highly relevant to the issue of damages…

Q. It is correct to say, isn't it, that your approach to the additional work that has to be done is an approach which leaves no stone unturned?

A. The claim facing the bank is in the order of $26 million if you include the claims by Domino Hire and both the Merlo companies. It would be prudent and appropriate, in advising the bank in relation to response to those claims, to investigate the substance of the business which was alleged to have been destroyed. That will necessarily involve understanding the financial affairs of the Merlo businesses that were said to have been destroyed, both in relation to their conduct and performance up and to the date of the relevant actions by the bank and also to determine what sort of future performance that those businesses were capable of generating.”
[Transcript 51-53]

Stultification

25 There is no substance in the submission that on the evidence the plaintiffs in the Merlo proceedings have established that ANZ caused their impecuniosity nor that the making of any further order for security will stultify the prosecution of the Merlo proceedings.

Decision

26 I have no doubt but that the discrete issues will require extremely careful examination. ANZ is entitled to carefully examine the discrete issues and is entitled to some real measure of security for costs of and occasioned by the additional issues which will be litigated as part of the new case. The quantum of the claim [$26 million] is of a very high order indeed.

27 In the proper exercise of the Court’s discretion it is permissible to take into account the fact that following the handing down of the May judgment, directions have been given [and will be added to] resulting in there being heard together:

· the ANZ proceedings[formerly the District Court proceedings 1486/00 now transferred into the Commercial List by consent];

· the first Commercial List proceedings;

· the second Commercial List proceedings;

· the third Commercial List proceedings.

28 Hence at least one of the suits, namely the second Commercial List proceedings have, as their moving party, an individual, Mr Carpenter, against whom no application for security for costs has been made. The presence of an individual plaintiff may be taken into account in the weighing up of discretionary considerations where other orders for security are made against corporate plaintiffs. That this is the case is at least made plain from the judgment of Austin J in Fiduciary Ltd v Morning Star Research Pty Ltd (2004) 208 ALR 564.

29 ANZ seeks an order for security for costs in relation to the Merlo proceedings of $460,950. In my view this claim is, in all of the circumstances, excessive in the extreme.

30 The principled exercise of the Court’s relevant discretion is to order that an additional sum of $75,000 be paid by the Merlo parties as security for the additional costs qua discrete issues. That sum is to be paid in two tranches, the first an amount of $30,000 to be paid within six weeks and the second by way of the balance to be paid in 12 weeks.

31 As on the occasion of the earlier judgment the discretion is exercised taking into account all of the relevant considerations and bearing in mind the acceptance in the authorities for an appropriate reduction for uncertainties.

Limitations issues in respect of the Merlo proceedings

32 The ANZ has contended that the Merlo proceedings, insofar as they press causes of action under the TPA and the FTA, should be dismissed for the reason that the material causes of action are statute barred. ANZ however concedes that ascertaining the time when damage has occurred is a question of fact in each case, this being a reason why courts except in clear cases, are generally reluctant to strike out proceedings prior to a hearing on the basis that they are statute barred.

33 In my view the complexities thrown up by the pleadings in the several sets of proceedings to be heard together and the special difficulties in ascertaining in vacuo what was the date when damage or loss was first suffered, mean that the principled exercise of the Court’s discretion is to dismiss the application for a strike out based on the limitation issues.

Strike out application - no cause of action disclosed by Domino Hire

34 There is no substance in the strike out application grounded upon the proposition that there is no cause of action disclosed by Domino Hire in the Merlo summons. Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 is authority for the proposition that once causation is established, neither the amount recoverable under TPA s82 (1) nor the orders that might be made under s 87 are limited by analogy with breach of contract, tort or equitable remedies. The matter was put as follows in the judgment of Gummow J at 528-529:

“The place of s 82 in the TP Act

[99] The TP Act is a fundamental piece of remedial and protective legislation which gives effect to "matters of high public policy" [128] . It is to be construed so as "to give the fullest relief which the fair meaning of its language will allow" [129] .

[100] Section 82 applies across a spectrum of diverse legal norms created by Pts IV and V. A number of these will have no direct analogue in the general law. Given the objective of the legislation that is not surprising. However, it does emphasise the need for caution against treating a provision such as s 82 "as a mere supplement to or eking out of" pre-existing law [130] . To the contrary, as Mason P put it, the courts should not be "fearing to move far from the familiar coastline of traditional common law and equitable approaches" [131] .

[101] In Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [132] , Lockhart J said:

"Section 82 is the vehicle for the recovery of loss or damage for multifarious forms of contravention of the provisions of Pts IV and V of the [TP] Act. It is important that rules laid down by the courts to govern entitlement to damages under s 82 are not unduly rigid, since the ambit of activities that may cause contravention of the diverse provisions of Pts IV and V is large and the circumstances in which damage therefrom may arise will vary considerably from case to case.

What emerges from an analysis of the cases (and there are many of them) is that they do not impose some general requirement that damage can be recovered only where the applicant himself relies upon the conduct of the respondent constituting the contravention of the relevant provision.

Also, a perusal of the provisions of Pts IV and V, the contravention of which gives rise to an entitlement to an applicant for compensation for loss or damage, points to the conclusion that applicants may claim compensation when the contravener's conduct caused other persons to act in a way that led to loss or damage to the applicant.”

35 The pleading uses the words “as a consequence” (in [81]), hence plainly addressing causation

36 The holding is that the pleading is not demurrable.

Challenge to representational pleading

37 ANZ also mounted a challenge to the sundry pleadings pursued by the respective Pioneer Party plaintiffs in terms of a representational case. ANZ contended that these pleadings were defective as the sole representational claim are said to have relied [and relied only] upon the terms of contractual documents signed by the parties (or which bound them), being documents which upon examination, did not include the suggested representations. The submission is misconceived as it fails to do justice to the full template of the respective summonses read as a whole. The alleged misleading and deceptive conduct in relation to Pioneer constitutes the contraventions of the TPA upon which the other Pioneer plaintiffs rely for their respective claims to damages pursued under the TPA and FTA. Hence paragraph’s C6 – C58 of the Merlo Summons correspond to paragraphs 4 – 47 of the Pioneer Summons.

38 It suffices for present purposes to simply set out Pioneer’s written submission (at [13]):

“That submission mistakes and mis-states Pioneer’s case. The case is pleaded in paragraph C48 and 49 of the Amended Summons. The case is (as a very general summary) based on misrepresentations, omissions and unjustified conduct, to the effect that ANZ misrepresented to Pioneer a contractually binding fixed 5 year term, while believing that it could and intending that it would conduct itself on the basis of a term from annual review to annual review and did so, and failed to inform Pioneer of its belief, or conduct, until purported termination of the advances and the wrongful appointment of Administrators. This is a case based not only on contractual promises but on a total course of conduct, involving additionally acts and omissions and silence. It is well within the class of cases contemplated in Demagogue v Ramensky (1992) 39 FCR 31; Fraser v NRMA Holdings Ltd (1995) 55 FCR 452, especially at 453; Miller, Trade Practices Act , 2005 ed, pages 496-501).”

39 This challenge to the summonses is rejected.

Amended particulars in Merlo proceedings

40 ANZ had applied for a stay of the second Commercial List proceedings as not raising an arguable case as Mr Carpenter could not make a claim in damages against ANZ going beyond that of Pioneer. That matter no longer remains contentious as Mr Carpenter has withdrawn the particulars previously included in the relevant summons and proposes to amend to provide an alternate set of particulars. ANZ has accepted this position.

Short minutes of order

41 The parties are to bring in short minutes of order.

I certify that paragraphs 1 - 41
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 18 August 2005

___________________
Susan Piggott
Associate

18 August 2005