Southern Cross Airlines Holdings Ltd v Westpac Banking Corp
[1997] FCA 886
•5 SEPTEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 15 of 1994
BETWEEN: SOUTHERN CROSS AIRLINES HOLDINGS LIMITED
(IN LIQUIDATION)
ACN 006 982 387
ApplicantAND: WESTPAC BANKING CORPORATION
ARBN 007 457 141
RespondentWESTPAC BANKING CORPORATION
First Cross-claimantSOUTHERN CROSS AIRLINES HOLDINGS LIMITED
(IN LIQUIDATION)
ACN 006 982 387
First Cross-respondentWESTPAC BANKING CORPORATION
Second Cross-claimantSIR LEO HIELSCHER
Second Cross-respondentBRIAN HARVEY BADEN POWELL
Third Cross-respondentLEONARD THOMAS GEORGE HEARD
Fourth Cross-respondentDAME MARGARET GEORGINA CONSTANCE GUILFOYLE
Fifth Cross-respondentLEIGH MASEL
Sixth Cross-respondentDAVID SAMUEL COATS
Seventh Cross-respondentJAMES GRAHAM AMBROSE TUCKER
Eighth Cross-respondentWESTPAC BANKING CORPORATION
Third Cross-claimantARTHUR ANDERSEN (A FIRM)
Ninth Cross-respondent
JUDGE: RYAN J DATE OF ORDER: 5 SEPTEMBER 1997 WHERE MADE: MELBOURNE (HEARD IN BRISBANE)
THE COURT ORDERS THAT:
Within 21 days of this Order the respondent file and serve an affidavit making further and better answers to the following interrogatories administered for its examination on behalf of the applicant:
5(c)
56(f)
70(a) and (b) confined to supervision or monitoring by Alexander
71 confined to the calculation of a TAE by Alexander or some officer of the respondent (other than Tingiri) who reported to Alexander.
The costs of each party of and incidental to the motion on notice filed 22 March 1996 be costs in the cause.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Rules.
IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 15 of 1994
BETWEEN: SOUTHERN CROSS AIRLINES HOLDINGS LIMITED
(IN LIQUIDATION)
ACN 006 982 387
ApplicantAND: WESTPAC BANKING CORPORATION
ARBN 007 457 141
RespondentWESTPAC BANKING CORPORATION
First Cross-claimantSOUTHERN CROSS AIRLINES HOLDINGS LIMITED
(IN LIQUIDATION)
ACN 006 982 387
First Cross-respondentWESTPAC BANKING CORPORATION
Second Cross-claimantSIR LEO HIELSCHER
Second Cross-respondentBRIAN HARVEY BADEN POWELL
Third Cross-respondentLEONARD THOMAS GEORGE HEARD
Fourth Cross-respondentDAME MARGARET GEORGINA CONSTANCE GUILFOYLE
Fifth Cross-respondentLEIGH MASEL
Sixth Cross-respondentDAVID SAMUEL COATS
Seventh Cross-respondentJAMES GRAHAM AMBROSE TUCKER
Eighth Cross-respondentWESTPAC BANKING CORPORATION
Third Cross-claimantARTHUR ANDERSEN (A FIRM)
Ninth Cross-respondent
JUDGE: RYAN J DATE: 5 SEPTEMBER 1997 PLACE: MELBOURNE (HEARD IN BRISBANE)
REASONS FOR JUDGMENT
By a notice of motion, the applicant, Southern Cross Airlines Holdings Limited (in Liquidation) (“Southern Cross”) seeks an order that the respondent, Westpac Banking Corporation, (“Westpac”) provide further and better answers to certain interrogatories administered for its examination on behalf of Southern Cross.
By its substantive application to this Court, Southern Cross has alleged that it has suffered substantial damages as a result of various transactions between 30 June 1992 and 18 July 1992 in the operation of a trading account maintained by Southern Cross with Westpac. It is sought to fix Westpac with liability for those losses by establishing that it has been guilty of negligence, breach of contract, and knowing involvement in breach of fiduciary duty as well as misleading and deceptive conduct in contravention of the Trade Practices Act 1974 and aiding and abetting a breach of s 205 of the Corporations Law. Two officers of Westpac have been identified in the amended statement of claim as responsible for the acts and omissions alleged against it. The first is Robert Charles Tingiri (“Tingiri”) described as a Senior Manager, Corporate Banking and later, a Senior Manager, Institutional Banking, with responsibility for about 22 corporate customers including Southern Cross. The other officer of Westpac implicated by the amended statement of claim is Peter Bruce Alexander (“Alexander”) described as a Senior Manager employed by Westpac to whom Tingiri reported.
The amended statement of claim further alleges that Douglas Edward Reid (“Reid”), a director and shareholder of Southern Cross, was himself a customer of Westpac and a shareholder or director of other companies which were themselves Westpac customers. The applicant’s pleading then goes on to identify three transactions. As to the first, “the Bill of Exchange Transaction”, it is alleged that, on or about 30 June 1992, Westpac honoured a bearer bill in Reid’s name having a face value of $5,000,000 maturing on 2 July 1992. The funds for the acquisition of the bill of exchange had come from Southern Cross’s account with Westpac No 10-7415 which, on or about 30 June 1992, was debited to the extent of $4,998,178.75. On maturity, the proceeds from the bill were paid into various Westpac accounts in the name of, or controlled by, Reid.
The second transaction, “the Apogee Transaction” is alleged to have comprised the following steps:
10.On or about 3 July 1992 Account No. 10-7415 was debited with the sum of $4,462,500.00.
11.On or about 3 July 1992 the sum of $4,462,500.00 referred to in paragraph 10 herein was telegraphically transferred to an account in New York at the Chase Manhattan Bank Account No. 0391160181 for Apogee Finance Group Inc.
12.At all material times Apogee Finance Group Inc. was a sub-underwriter to J.B. Were & Son in respect of the public float of the Applicant’s shares (“the float”).
13.The sum of $4,462,500.00 was used by Apogee Finance Group Inc. to acquire shares of the Applicant in the float.
As to the third “Bank Cheque Transaction”, it is alleged that on or about 17 July 1992, Southern Cross’s Account No. 10-7415 with Westpac was debited as a result of cheques having been drawn for sums of $500,000, $87,000 and $1,013,500 to purchase a bank cheque issued by Westpac in favour of Southern Cross in the sum of $1,600,500 which was deposited into another account numbered 86-2912 and used to purchase shares in Southern Cross in the names of some 14 individuals, including Reid who is alleged to have been allotted 2,800,000 shares in this way. The other individuals are alleged to have been similarly allotted between 50,000 and 14,000 shares each.
Reid is alleged to have brought about the Bill of Exchange Transaction fraudulently and without the authority of Southern Cross by writing letters of instructions to Tingiri supported by documents forged by Reid. Reid is further alleged to have arranged the Apogee Transaction knowing that it was unlawful for the funds of Southern Cross to be used for the acquisition of shares in itself. Similarly, Reid is alleged to have instigated the Bank Cheque Transaction by misrepresenting to another officer of Southern Cross the purpose for which the bank cheque was to be used and knowing that it was unlawful for Southern Cross to provide funds for the purchase of shares in its own float. The involvement of Tingiri in Reid’s unlawful conduct is pleaded in these paragraphs:
22.Tingiri failed to enquire in respect of the transactions and instructions referred to in paragraphs 6 to 20 inclusive herein.
23.Tingiri knew that Reid gave or caused to be given instructions with respect to the transactions referred to in paragraphs 6 to 19 inclusive herein.
24.Tingiri knew that the transactions referred to in paragraphs 6 to 19 inclusive herein were in breach of the duties Reid owed to the Applicant.
25.Tingiri knowingly aided and assisted Reid to carry out the transactions referred to in paragraphs 6 to 19 inclusive herein.
The amended statement of claim also contains a claim in conversion in respect of the Bill of Exchange Transaction formulated as follows:
26.The proceeds of the mature Bill of Exchange were the property of the Applicant and the collection of those proceeds and the crediting of them to Reid’s accounts was effected without the authority, consent or permission of the Applicant and in a manner inconsistent with the Applicant’s rights.
By its further amended defence to the amended statement of claim, Westpac, in response to an allegation that Reid dishonestly instigated the impugned transactions without the authority of Southern Cross, has pleaded:
21.As to paragraph 21 of the amended statement of claim the respondent:
...
(b)says that the applicant, by its board of directors, had delegated to Reid the conduct of the applicant’s business including:
(i)the operation and monitoring of the applicant’s banking arrangements with the respondent;
(ii)the negotiations between the applicant and Apogee in respect of aircraft leases.
(ba)says that the acts and omissions of Reid referred to in paragraphs 5 to 20 of the amended statement of claim were the acts and/or omissions of the applicant, or alternatively were acts and/or omissions for which the applicant was and is vicariously liable.
(c)says that it was authorised by the applicant to collect the proceeds of the bill of exchange and credit them to the accounts referred to in paragraph 9 above.
(d)says it was authorised to accept Reid’s instructions in relation to the operation of account no. 10-7415 by virtue of the terms of the written account operating authority given by Reid on behalf of the applicant to the respondent dated 25 February 1992;
(e)says, further:
(i)in relation to each of the transactions referred to in paragraphs 14, 15 and 16 of the amended statement of claim, that each of the cheques was counter-signed by Leonard Heard, a director of the applicant and its director of operations; and
(ii)in relation to the cheques referred to in paragraphs 15 and 16, the cheques were signed by Heard with the intention that they be deposited in the float account referred to in paragraph 18 of the amended statement of claim to pay for shares to be issued to some or all of the persons referred to in paragraph 19 of the amended statement of claim.
Paragraph 21A of the further amended defence contains this alternative plea:
21A.Alternatively, if Reid did not have the applicant’s authority to cause the transactions referred to in paragraphs 5 to 19 of the amended statement of claim the respondent says that Reid had ostensible authority to cause those transactions and further or alternatively that the applicant is estopped from denying that Reid had that authority, in that:
(a)the applicant, by Sir Leo Hielscher and Heard knew, no later than 18 May 1992, that Reid had altered the account operating authority, which previously required signature by two directors jointly, to one which permitted Reid alone and two other non-directors (Reid’s secretary, Elizabeth Collins, and one Helen Andrews) jointly, to operate the account referred to in paragraph 5 herein;
(b)further or alternatively, the respondent, by each member of its board of directors, knew or ought to have known that Reid could operate the account on his own at all times after March 1992 and that he was doing so;
(c)the applicant failed to instruct the bank to cease acting on the instructions of Reid or Collins and Andrews;
(d)by that conduct the applicant impliedly represented to the respondent that Reid had the applicant’s authority to give instructions to the respondent with respect to the account and to draw on it;
(e)in reliance on the applicant’s conduct and the said representation the respondent acted to its detriment by:
(i)accepting and acting on instructions from Reid in respect of the account in relation to the transactions referred to in paragraphs 5 to 19 of the amended statement of claim;
(ii)honouring cheques drawn by Reid on the account;
(iii)refraining from making any inquiry in relation to Reid’s instructions;
(f)the respondent also relies on the matters alleged in paragraph 21B below.
The matters alleged in para 21B include the following:
(a)At all material times:
(i)Reid appeared from returns lodged under section 242 or 335 of the Corporations Law, to be a director of the applicant;
(ii)Reid was held out by the applicant to be:
(A)an executive director of the applicant; or
(B)the principal executive officer of the applicant.
PARTICULARS
The respondent refers to and repeats the allegations in paragraphs 21 and 21A hereof.
(b)At all material times, the kind of business carried on by the applicant was that of:
(i)a company seeking to acquire the assets of an airline operator, and
(ii)a company seeking the investment of money by the public for the purpose of carrying on the business of an airline operator.
(c)The respondent was entitled to assume that Reid had authority to exercise the powers and perform the duties customarily exercised or performed by:
(i)a director;
(ii)an executive director; or
(iii)the principal executive officer
of a company carrying on a business of the kind carried on by the applicant.
...
(e)At all material times, Reid was held out by the applicant to be an officer, or alternatively an agent of the applicant whose powers or duties in fact, or customarily, included acting on behalf of the applicant in transactions such as those referred to in the amended statement of claim, or in sub-paragraph (d).
PARTICULARS
The respondent refers to and repeats the particulars provided under paragraphs 21 and 21A hereof.
I shall consider separately and in order each of the interrogatories for which Southern Cross contends further answers should be compelled.
Interrogatory 5(c)
Interrogatory 5 with Westpac’s answers interpolated in bold italics is in these terms:
Look at the document annexed hereto and marked “A” and state:
(a)is the document a copy of the account operating authority referred to in paragraph 21(c)(ii) of the defence?
Yes, but not an accurate or a complete copy.
(b)did the bank rely upon this document as the authority of Douglas Edward Reid or Elizabeth Collins to operate an account of the bank numbered 107415 on behalf of Southern Cross in relation to any of the transactions referred to in the statement of claim?
Yes.
(c)if the answer to interrogatory (b) is an affirmative one, in relation to each transaction who on behalf of the bank so relied upon that document and in what respect did he or she rely on it?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material and seeks the identity of the bank’s witnesses.
It will be recalled that sub-para (ii) of the particulars appended to para 21(c) and para 21(d) of the further amended defence invoke “the terms of a written account operating authority dated 25 February 1992 signed by Reid on behalf of the applicant”. The account operating authority enquired after by interrogatory 5 bears that date. The principal criticism made on behalf of Southern Cross of Westpac’s answer to interrogatory 5(c) is that it fails to respond to what is said to be the critical issue of whether Tingiri or Alexander on behalf of Westpac relied on the account operating authority of 25 February 1992.
It was further submitted on behalf of Southern Cross that the objection that interrogatory 5(c) seeks the identity of Westpac’s witnesses could not be sustained. In the same context, it has been pointed out that Westpac was able to give particulars subjoined to para 21A(e) of its defence identifying Tingiri and a Mr Woods as the persons to whom it was represented that Reid had a continuing authority from Southern Cross. Paragraph 21A(f) of the amended defence by way of supplementing the plea of estoppel recites that:
(f)the respondent also relies on the matters alleged in paragraph 21B below.
Paragraph 21B includes in sub-para (e) an allegation that Reid was at all material times held out to be an officer or agent of Southern Cross whose powers or duties in fact, or customarily included acting on its behalf in transactions such as the impugned transactions. By way of particulars to sub-para 21B(e), Westpac “refers to and repeats the particulars provided under paragraphs 21 and 21A hereof.”
On behalf of Westpac it has been argued that para 21(c) of the amended defence pleads the written account operating authority dated 25 February 1992, not as a matter of historical fact founding an estoppel, but as a matter of contract, so that the question of whether any particular bank officer relied on a representation embodied in the account operating authority as to the authority possessed by Reid is irrelevant. Had Westpac’s reliance on the bank operating authority been confined to what is pleaded in para 21(c) I would have upheld Westpac’s contention in this respect. However, it is clear from the scheme of the pleading summarized above that the bank operating authority is also relied on by way of incorporation by reference as supporting the pleas of estoppel and authority by holding out in paras 21A and 21B.
In those circumstances, I consider that Southern Cross is entitled to know whether Tingiri or Woods or any employee of Westpac reporting to either of them relied on the account operating authority dated 25 February 1992 in allowing any of the impugned transactions to proceed to completion. I shall therefore order a further answer to interrogatory 5(c).
Interrogatory 6
This interrogatory, again with Westpac’s answers interpolated in bold italics, is in these terms:
(a)Did the bank have any policy or practice in relation to public companies that required signatories of the company’s bank accounts to be directors or other officers of the company?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, fishing and not sufficiently material.
(b)if the answer to interrogatory (a) is an affirmative one, what was such policy or practice?
It is unnecessary to answer.
(c)did the bank have any policy or practice which required any documentary evidence to be provided to it by a public company before a person would be accepted or recognised by the bank as an authorised signatory on the company’s account?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, fishing and not sufficiently material.
(d) if the answer to interrogatory (c) is an affirmative one then state:
(i)what was such policy or practice?
It is unnecessary to answer.
(ii)what was the nature of the documentary evidence required?
It is unnecessary to answer.
Interrogatory 6(a) is said to be made relevant to the action by para 28A of the amended statement of claim which alleges:
Tingiri ought to have enquired of a director of the Applicant other than Reid:
(a)whether the Applicant gave its authority to debit Account No. 10-7415 in the sum of $4,998,178.75 on or about 30 June 1992;
(b)whether the Applicant gave its authority for the proceeds of the Bill of Exchange to be paid to Reid’s accounts;
(c)whether the Applicant gave its authority for the debiting of Account No. 10-7415 in the sum of $4,460,500 on or about 3 July 1992;
(d)whether the Applicant authorised the telegraphic transfer of the sum of $4,460,500 to the account of Apogee Finance Group Inc. on or about 3 July 1992.
(e)whether the Applicant agreed to the sum of $4,460,500.00 being used to purchase shares in the Applicant;
(f)whether it was lawful for funds from the Applicant’s account to be used to fund the purchase of shares in the float;
(g)whether the Applicant agreed to cheques numbered 034189, 034191 and 034192 referred to in paragraphs 14, 15 and 16 being used to purchase shares in the Applicant;
(h)whether the Applicant gave its authority for the debiting of Account No. 10-7415 in respect of those cheques.
It seems to be common ground that the two signatories, other than Reid, to the account operating authority enquired after by interrogatory 5 were a Ms Andrews and a Ms Collins, neither of whom was a director, officer or employee of Southern Cross. Accordingly, it is contended on behalf of the applicant that Tingiri should have enquired of some director, other than Reid, whether Reid had authority to arrange the impugned transactions.
The existence of a policy or practice of the kind enquired after by interrogatory 6(a) is said to bear on whether it was reasonable for Tingiri to have made the enquiries which para 28A of the amended statement of claim suggests he should have made. As well, it was said that the existence or otherwise of such a policy or practice was relevant to Westpac’s defence of estoppel pleaded in para 21A of its further amended defence.
It is not pleaded that a practice or policy like that enquired after by interrogatory 6 was a yardstick or measure of the care required to be exercised by a bank through its officers like Tingiri. Nor has it been pleaded that Westpac, or trading banks generally, have promulgated any such practice or policy in a way calculated to provide support for the plea of ostensible authority raised by para 21A of the amended defence. In these circumstances, I am not persuaded that the suggested practice or policy is sufficiently relevant to the issues and the action as presently constituted. I shall not order a further answer to interrogatory 6.
Interrogatory 12(d)
Interrogatory 12 and Westpac’s answer to it are in these terms:
Look at the document annexed hereto and marked “G” and state:
(a)is this a copy of a bank document?
Yes.
(b)did the original of this record a debit of an amount of $4,998,178.75 to an account of the bank numbered 107415, which amount was used to purchase a bank bill?
Based on the information available to me, I believe so.
(c)did a bank officer sign the original of this document?
Based on the information available to me, I believe so.
(d)if the answer to interrogatory (c) is an affirmative one who was the bank officer?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material and seeks the identity of the bank’s witnesses.
(e)did Tingiri know of the document on or about 30 June 1992?
I do not know.
The document enquired after by interrogatory 12 is apparently an internal Westpac direction or withdrawal slip requiring the amount of $4,998,178.75 to be paid from Account No 10-7415 to the credit of Reid. It is said on behalf of Southern Cross that the identity of the bank officer who signed that form (concededly not Tingiri) is relevant to the question of whether Tingiri approved the Bill of Exchange Transaction.
It is said on behalf of Westpac that interrogatory 12(d) is only made arguably relevant by para 25 of the amended statement of claim in which it is pleaded that “Tingiri knowingly aided and assisted Reid to carry out” the impugned transactions. However, Counsel for Westpac point to interrogatory 74 by which Southern Cross has asked:
Were any of the following transactions referred to in the statement of claim and defence approved by a bank officer:
(a)the debiting of Account No 10-7415 in the sum of $4,998,178.75 on 30 June 1992.
Westpac has answered interrogatory 74(a), yes. In response to interrogatory 74(j) asking it, in respect of each approval enquired after by the preceding parts of that interrogatory, to identify the bank officer who approved the transaction, Mr Habgood, the Commercial Manager who has sworn the answers on behalf of Westpac, has deposed:
Based on the information available to me, in each case Tingiri.
Accordingly, it is submitted on behalf of Westpac that, having obtained the admission that Tingiri is believed to have approved the debiting of account number 10-7415 with $4,998,178.75, it is irrelevant whether a subordinate bank officer signed or countersigned the withdrawal slip to effect that debit. I uphold that submission and, accordingly, shall not order a further answer to interrogatory 12(d).
Interrogatory 16(c) and (g)
Interrogatory 16 is in eight parts which, as answered by Westpac, are:
Look at the document annexed hereto and marked “K” and state:
(a)is the top of the two documents copied onto that document a copy of a deposit slip for an amount of $400,000 to an account number 769910 in the name of D.E. Reid dated 2 July 1992?
Yes.
(b)did a bank officer sign the original of the document referred to in interrogatory (a)?
Based on the information available to me, I believe so.
(c)if the answer to interrogatory (b) is an affirmative one, who was that bank officer?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material and seeks the identity of the bank’s witnesses.
(d)did Tingiri know of the document on or about 2 July 1992?
Based on the information available to me, I believe he did not.
(e)is the bottom of the two documents copied on that document a copy of a deposit slip for an amount of $4,570,000 to an account number 769582 in the name of D.E. Reid dated 2 July 1992?
Yes.
(f)did a bank officer sign the original of the document referred to in interrogatory (e)?
Based on the information available to me, I believe so.
(g)if the answer to interrogatory (f) is an affirmative one, who was that bank officer?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficient material and seeks the identity of the bank’s witnesses.
(h)did Tingiri know of the document on or about 2 July 1992?
Based on the information available to me, I believe he did not.
Annexure K to that interrogatory comprises two Westpac deposit forms each dated 2 July 1992 apparently facilitating the crediting to Reid’s account of $400,000 and $4,570,000. The identity of the bank officer who signed each of those forms is said to be relevant to the issue of whether and what Tingiri knew of the part played by Reid in the Bill of Exchange Transaction. It is conceded that the deponent on behalf of Westpac has sworn in answer to Parts (d) and (h) of interrogatory 16 to a belief that Tingiri did not know on 2 July 1992 of the existence of either deposit slip. However, Southern Cross presses for a responsive answer to Parts (c) and (g) on the ground that the identification of the bank officer who signed each deposit form may support a case that Tingiri should have known of these aspects of the transaction.
Counsel for Westpac has pointed to the fact that it has admitted the crediting on or about 2 July 1992 of the amounts of $400,000 and $4,570,000 to Reid’s accounts and has further by its answer to interrogatory 74(c) and (j) admitted that those transactions were approved by a Westpac officer believed to have been Tingiri. It is therefore submitted that the identity of some other, subordinate, officer who may have signed the deposit forms is irrelevant. Consistently, with my ruling in respect of interrogatory 12(d) I agree and shall not order a further answer to interrogatory 16(c) or (g).
Interrogatory 18(b), (c), (d) and (e)
The whole of interrogatory 18 as answered on behalf of Westpac is:
(a)What does the expression “Total Assessed Exposure” when used by the bank in reference to an account, or a group of accounts, mean?
It is intended to mean the sum of credit exposures for a given client or client group in all divisions and subsidiaries of the Westpac group. A credit exposure is the higher of either the limit (committed or uncommitted) or the outstanding amount (both of which are assessed in terms of the relevant product policies) in respect of each facility or product provided to a given client or client group.
(b)what was the actual TAE of the Decer Ceder Group as at 1 May 1992?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material, oppressive, fishing and embarrassing.
(c)state how the TAE referred to in answer to interrogatory (b) was calculated by reference to:
(i)the amount of the balance in each account of the Decer Ceder Group;
It is unnecessary to answer.
(ii)the amount of any other item (identifying the item) which the bank as a matter of practice would include in assessing TAE which would not appear in the balance of those accounts.
It is unnecessary to answer.
(d)state whether the TAE referred to in answer to interrogatory (b) included any foreign currency debt of Reid?
It is unnecessary to answer.
(e)if the answer to interrogatory (d) is a negative one, then state what, if any, foreign currency debt was owing by Reid at that time?
It is unnecessary to answer.
The reference to the Decer Ceder Group is apparently to a group of private companies or other entities controlled by Reid which also maintained accounts with Westpac. It cannot be regarded as confined to accounts in the name of Decer Ceder Health Care Group Pty Ltd which was abbreviated to “the Decer Ceder Group” in para 3(d) of Westpac’s amended defence. A Westpac document elicited in the course of discovery which was dated 1 May 1992 and signed by Tingiri records that the TAE of the Decer Ceder Group as having been $4,650,000. Parts (b), (c), (d) and (e) of interrogatory 18, I have been told, are directed to establishing that the TAE of $4,650,000 may have been knowingly understated by Tingiri thereby providing him with a motive for rehabilitating the accounts of Reid and his associated companies as soon as possible without minute scrutiny as to whether that was being achieved at the expense of Southern Cross. Alternatively, it is put that, if the TAE of the Decer Ceder Group had been as stated in the document of 1 May 1992, that heavy indebtedness of Reid’s private companies should have alerted Tingiri to the need to make further enquiries into Reid’s authority from Southern Cross to arrange the impugned transactions.
As to the objection that Parts (b), (c), (d) and (e) of this interrogatory are oppressive, Counsel for Southern Cross has referred to the judgment of Woodward J in Aspar Autobarn Co-operative Society v Dovala Pty Ltd (1987) 16 FCR 284 where it was observed, at 287:
The word “oppressive” in ground (b) of the rule means, I think, unfair, or unreasonable, in the sense that a good deal too much is expected of the party questioned. It may be that the details sought would take many hours to extract from records and would only be relevant to some side issue in the case. Or the question may be so ambiguous that it would be unfair to expect the party questioned to make assumptions about its meaning. Or the question may cover a wider geographic area or a longer period of time than is reasonably necessary in readying the case for trial. There are many questions which might be admissible in cross-examination, but are by their very nature inappropriate, and thus oppressive, in interrogatories. Questions going to credit or to motive are obvious examples.
Thus it can be seen that the types of question which may properly be objected to as “oppressive” are many and varied. Each contested instance will have to be resolved on the basis of the court’s general impression as to what is reasonable. In reaching a conclusion, the court may find that the particular interrogatory or answer takes colour from those surrounding it. Thus an apparent attempt to pose clear and precise questions, related directly to the particular case, should be treated more sympathetically than one bearing the hallmark of mass-production. Similarly a demonstrated willingness to answer questions in a helpful way will lend credence to a particular objection.
Counsel for Westpac has pointed to interrogatory 17 which enquired after the document dated 1 May 1992 in the following terms and elicited the following answers:
Look at the document annexed hereto and marked “L” and state:
(a)is that a copy of a bank document?
Yes.
(b)did Tingiri sign the original of that document?
Based on the information available to me, I believe so.
(c)did Tingiri prepare or cause to be prepared the original of that document?
Based on the information available to me, I believe so.
(d)by reference to account names and numbers, what accounts were included within the “Decer Ceder Group” as referred to in that document?
I do not know. However, based on the information available to me, I believe that that phrase could be a reference to some combination of accounts #769582 ‘Mr Douglas Edward Reid’; #769910 ‘Mr Douglas Edward Reid Decer/Ceder Account’; #769937 ‘Mr Douglas Edward Reid Ulupna Island Account’; #313884 ‘Mr Douglas Edward Reid Spingvale (sic) Pastoral Account; #105620 ‘Australian Diet Center Pty Ltd’; #769902 ‘Carina Eveline Reid’.
It has been contended on behalf of Westpac that in the absence of some accepted, or pleaded, constitution of the “Decer Ceder Group” it is oppressive to require an answer to interrogatory 18(b). The nearest the amended statement of claim comes to making relevant the state of the accounts of the Decer Ceder Group with Westpac is para 28A which alleges:
Tingiri ought to have enquired of a director of the Applicant other than Reid:
(a)whether the Applicant gave its authority to debit Account No. 10-7415 in the sum of $4,998,178.75 on or about 30 June 1992;
The particulars appended to that sub-para include the following:
Tingiri knew or ought to have known:
(i)No person other than Reid physically gave instructions to Tingiri in relation to the Bill of Exchange transaction;
(ii)The Bill of Exchange transaction was patently for the personal benefit of Reid;
(iii)Reid was heavily personally indebted to the Respondent;
If the state of the accounts of the Decer Ceder Group is said to have contributed to the “heavy indebtedness” of Reid to Westpac, I consider that the nature of that contribution should have been indicated in the pleadings. Further, because of the unspecified composition of the Decer Ceder Group, it is oppressive to require Westpac to speculate as to which entities constituted it and then to calculate the actual TAE as at 1 May 1992 of the Group as assumed to be constituted. For these reasons, I decline to require a further answer to any part of interrogatory 18.
Interrogatory 20
This interrogatory and the answer to it are:
(a)What was the actual TAE of the Decer Ceder Group as at 10 June 1992?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material, oppressive, fishing and embarrassing.
(b)state how the TAE given in answer to interrogatory (a) was calculated by reference to:
(i)the amount of the balance of each account in the Decer Ceder Group;
It is unnecessary to answer.
(ii)the amount of any other item (identifying the item) included in assessing TAE which is not included in the balance of those accounts?
It is unnecessary to answer.
(c)state whether the TAE referred to in answer to interrogatory (a) includes any foreign currency debt of Reid?
It is unnecessary to answer.
(d)if the answer to interrogatory (c) is a negative one, then state what, if any, foreign currency debt was owing by Reid at that time?
It is unnecessary to answer.
This interrogatory also enquires after the TAE of the Decer Ceder Group, this time as at 10 June 1992. That is the date of a Westpac internal memorandum signed by Tingiri which records a meeting with Reid and notes the TAE of the Group as being $4.65M. For reasons similar to those advanced in support of a further answer to interrogatory 18(b), (c), (d) and (e), Counsel for Southern Cross contended that it is entitled to seek to establish the maintenance of TAE at $4.65M between 1 May 1992 and 10 June 1992 to anticipate a contention that on either date there had been a mistake about the level of Westpac’s exposure to the Decer Ceder Group. It is further put that the selection of a date at which the TAE was actually calculated and recorded by Westpac precludes this interrogatory from being oppressive.
For reasons explained above in relation to interrogatory 18(b), (c), (d) and (e), I have not been persuaded to order further answers to this interrogatory. It is obvious from the answer to interrogatory 17 that the deponent on behalf of Westpac has been unable to ascertain the identity of each account regarded as having been operated by the Decer Ceder Group for the purpose of calculating the TAE of the Group as at 1 May 1992. I therefore consider that it would be oppressive to require Westpac to answer a similar interrogatory directed to the TAE of the Group as at 10 June 1992.
Interrogatory 49(e)
This interrogatory also enquires about the TAE of the Decer Ceder Group in terms identical to interrogatory 20(a) but is predicated on the earlier date of 4 March 1992 when another internal Westpac document, also signed by Tingiri, records the TAE as being at the higher level of $6.65M. A responsive answer to this part of interrogatory 49 is sought on similar grounds to those discussed above in relation to interrogatories 18 and 20 but for reasons already explained in respect of those interrogatories will not be ordered.
Interrogatory 56(e) and (f)
This interrogatory is also directed to an internal Westpac document. It is dated 1 May 1992 and records a reduction of $2,000,000 in the TAE of the Decer Ceder Group from the $6.65M noted in the memorandum of 4 March 1992 enquired after by interrogatory 49(e). The document annexed to interrogatory 56, also signed by Tingiri, contains the following recital:
Facilities have reduced as above in terms of arrangements.
Proceeds represent part of the monies due to Reid from Southern Cross Airlines (SCAL) and as previously agreed the Assignment from SCAL has been extinguished from our security position.
Parts (e) and (f) of interrogatory 56 and the answers thereto are:
(e)what was the TAE of the Decer Ceder Group as at 1 May 1992?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material, oppressive, fishing and embarrassing.
(f)was any reduction of $2,000,000.00 in the TAE of the Decer Ceder Group made between February and 1 May 1992 and, if so, identify the credits by which the reduction was achieved?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material, oppressive, fishing and embarrassing.
Although disclaiming any allegation of fraud or dishonesty against Tingiri, Southern Cross contends that it should be entitled to explore whether the reduced TAE recorded on 1 May 1992 represented a figure properly calculated in accordance with Westpac’s practices. That was said to bear on the issue of negligence constituted by a lack of proper vigilance on the part of Tingiri.
For reasons already explained in relation to the corresponding parts of interrogatories 18, 20 and 49, I uphold the objection taken by Westpac to answering part (e) of this interrogatory. However, I consider that Westpac should be required to answer part (f) if it is able to do so after making proper enquiries. An answer to part (f) does not require identification of each constituent account comprised in the Decer Ceder Group. It requires only an acknowledgement whether or not an account or accounts apparently forming part of the Group have been credited to an extent of $2,000,000 between February and 1 May 1992. A substantive answer which may be given to that question has sufficient relevance to the negligence imputed to Tingiri to overcome the objection taken in answer to part (f) of this interrogatory.
Interrogatory 70(a) and (b)
The whole of interrogatory 70 and Westpac’s answer to it are cast as follows:
In relation to the accounts referred to in interrogatory 1:
(a)who, if anyone at the bank, apart from Tingiri, in the period 31 July 1991 to 31 July 1992 supervised or monitored such accounts?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material, fishing, and seeks the identity of the bank’s witnesses.
(b)for each such person identified in answer to interrogatory (a), state:
(i)what supervision or monitoring of such accounts such person performed?
(ii)when such supervision and monitoring was performed?
It is unnecessary to answer.
The accounts enquired after by interrogatory 1 were six in number, one in the name of Reid, one in the name of Reid or Decer/Ceder and one each in the name of Reid or one other specified entity. The last two accounts enquired after were that numbered 10-7415 in the name of Activeforce Ltd or Southern Cross Airlines Ltd or Southern Cross and that numbered 862912 in the name of Southern Cross Float Trust Account.
This interrogatory is said to be relevant to the issue of whether Alexander exercised any supervisory or monitoring function in relation to Southern Cross’s accounts with Westpac. Counsel for Southern Cross has pointed out that Westpac has admitted that Alexander supervised Tingiri’s conduct of the accounts of Reid and entities associated with him but has not made a corresponding admission in respect of the accounts of Southern Cross itself.
Supervision or monitoring by Alexander is said to be made relevant by the allegations of negligence made against him by these paragraphs of the amended statement of claim:
28COn or about 3 July 1992 Alexander:
(a)knew that the Bill of Exchange transaction had been effected;
(b)was concerned as to its propriety.
Particulars
Memorandum of Alexander headed “Staff Confidential” dated 30 June 1992.
28DAlexander ought to have enquired of a director of the Applicant other than Reid as to:
(a)whether the Applicant gave its authority to debit Account No. 10-7415 in the sum of $4,998,178.75 or on about 30 June 1992;
(b)whether the Applicant gave its authority for the proceeds of the Bill of Exchange to be paid to Reid’s accounts.
28EAlexander failed to make either of the enquiries referred to in paragraph 28D.
I consider that a further answer should be required to interrogatory 70(a) and (b) on the understanding that those parts of this interrogatory are confined to Alexander. I regard the interrogatory limited in that way as relevant to the duty of care imputed to Alexander by para 28D of the amended statement of claim. Such a limitation also overcomes the objection taken to interrogatory 70(a) that it seeks the identity of Westpac’s witnesses.
Interrogatory 71
This interrogatory revisits the question of the TAE. The text of the interrogatory and Westpac’s answer is:
In relation to the accounts referred to in interrogatory 1, state whether anyone at the bank, apart from Tingiri, from the period 31 July 1991 to 31 July 1992:
(a)performed a calculation of the TAE of such accounts?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material and seeks the identity of the bank’s witnesses.
(b)had the responsibility or duty, according to the policies of the bank, to perform such calculations?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material and seeks the identity of the bank’s witnesses.
(c)if the answer to interrogatory (a) is an affirmative one, identify:
(i)the person or persons who performed such calculations;
(ii)the accounts in respect of which such calculations were performed;
(iii)the date upon which such calculations were performed;
(iv)the place in the bank’s records where such calculations were recorded.
It is unnecessary to answer.
The applicant’s case for a responsive answer rests on the contention that it would disclose whether or not Alexander calculated the TAE in respect of any of Reid’s personal or private company accounts or the accounts of Southern Cross. However it be answered, so it is said, a response would bear on the issue raised by the pleadings of whether Alexander should have made enquiries of persons other than Reid before allowing any of the impugned transactions to be consummated.
For reasons explained in relation to interrogatory 70, I consider that this interrogatory may elicit an answer which is relevant to the issue of Alexander’s negligence raised by para 28D of the amended statement of claim. A responsive answer should therefore be made to it but confined to a calculation of the TAE by Alexander or some bank officer, other than Tingiri, who reported to Alexander.
Interrogatory 73(d)
This interrogatory, like interrogatory 6 discussed above, enquires about a policy of Westpac which is said to be made relevant by the allegation in the amended statement of claim that Southern Cross had never authorized, or agreed with Westpac, that its account should go into overdraft. Parts (c) and (d) of interrogatory 73 and the answers to them are:
(c)in relation to the account of the Applicant with the bank numbered 10-7415, was it the policy or practice of the bank that the approval of a bank employee was ever required before a debit could be transacted on that account which would have the effect of putting the account into a debit balance?
Yes.
(d)if the answer to interrogatory (c) is an affirmative one,
(i)state what was the policy or practice?
Generally, the practice was to the effect stated in (c) above.
(ii)who were the bank officers, in relation to that account, who were able to give such approval?
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, fishing, not sufficiently material and seeks the identity of the bank’s witnesses.
It is said that it is not oppressive to require Westpac to identify, from a presumably small class of officers who might have authorised Account No 10-7415 to be overdrawn which officers would have been the ones to have given the authorization. It should be pointed out that the question is hypothetical because Westpac has, by its answer to interrogatory 73(a) denied the existence of any arrangement for that account to go into overdraft. Nevertheless, by its answer to interrogatory 74, Westpac has admitted that Account No 10-7415 was debited on 30 June 1992 in the amount of $4,998,178.75, on or about 3 July 1992 in the amount of $4,462,500 and in the three amounts of $500,000, $87,000 and $1,013,500 on 17 July 1992, in each case with the approval of a bank officer believed to have been Tingiri.
In the light of those answers to other interrogatories, I regard it as unnecessary to require a further answer to interrogatory 73(d)(ii).
Interrogatories 83(c) and 84(c)
These interrogatories have been asked and answered in identical terms in relation to two separate documents. Interrogatory 83 and the answers to it are reproduced:
Look at the document annexed hereto and marked with the letters “BQ” and state:
(a)is this a copy of a bank document?
Yes.
(b)did any bank officer sign the original of this document?
Yes.
(c)if the answer to interrogatory (b) is an affirmative one, state the name or names of each bank officer.
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, not sufficiently material and seeks the identity of the bank’s witnesses.
The document marked BQ is an internal Westpac request dated 17 July 1992 for the issue of a bank cheque payable to Southern Cross in the sum of $1,600,500. The document marked BR enquired after by interrogatory 84 is the bank cheque itself bearing the same date.
It is said that Southern Cross should be able to explore the extent of Tingiri’s actual or constructive knowledge of the Bank Cheque Transaction by establishing which Westpac officer signed or countersigned the request and the bank cheque itself and where he or she stood in the reporting hierarchy in relation to Tingiri.
By para 25 of the amended statement of claim, it is alleged that Tingiri knowingly aided and assisted Reid to carry out the impugned transactions including the Bank Cheque Transaction. The particulars of that allegation include the statement that Tingiri approved:
(ix)the drawing of the Bank Cheque on or about 17 July 1992.
The substantive allegation in para 25 has simply been denied by Westpac in its amended defence although the allegation in para 17 of the amended statement of claim that the bank cheque was drawn by Westpac and purchased with cheques drawn on Account No 10-7415 has been admitted. Thus what has been denied is that Tingiri knowingly aided and abetted Reid in carrying out the Bank Cheque Transaction. Accordingly, the identity of the bank officer who actually signed the bank cheque or the requisition for it is conceivably relevant to Tingiri’s knowledge of the drawing of that bank cheque. However, Westpac, by its answer to interrogatory 74(j) has admitted that the drawing of the bank cheque was approved by a bank officer believed to have been Tingiri. In those circumstances, it is unnecessary to require a responsive answer to part (c) of interrogatory 83 or interrogatory 84.
Interrogatory 85
This interrogatory and the objections taken to answering each part of it are:
In relation to the accounts referred to in interrogatory 1:
(a)identify the documents, if any, which Alexander saw between 30th April 1992 and 31st July 1992 in relation to the balance of any of the accounts.
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, fishing and not sufficiently material.
(b)state whether the documents referred to in interrogatory 85(a) seen by Alexander showed any such account (identifying which account) as being in order.
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, fishing and not sufficiently material.
(c)if any account was not shown as being in order state what enquiries, if any, were made by Alexander in respect of the state of each such account.
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, fishing and not sufficiently material.
This interrogatory was said on behalf of Southern Cross to be relevant to the allegation, denied by Westpac, that Alexander as at 3 July 1992 had been concerned about the propriety of the Bank Cheque Transaction. That allegation is founded on a “Staff Confidential” memorandum written by Alexander on 30 June 1992 which contained the following passages:
I have long been concerned about Bob’s relationship with Reid, founder of Southern Cross Airlines. It is probably more than two years ago when I first suggested that the exposure of - then - some $5M which Bob was carrying in his portfolio be transferred to the retail or private bank. Bob subsequently tried to, but without success.
...
... I inquired of him, “Where is the Southern Cross exposure?”. It transpired that he had advised/agreed to lend an additional $5M to Reid for two days against lodgment of a bearer bond (apparently for $5M) which is an asset of Southern Cross Airlines. Bob was unable to satisfy me as to the clear purpose of the additional $5M, or why Southern Cross assets were being held - without formal writings - to support Reid’s personal borrowings.
(N.B.: Reid’s exposure, prior to this transaction, is approximately debt $4M.) I reminded Bob that Southern Cross Airlines is now a public listed company and expressed my concerns and reservations as to the transaction. I told him he did not have the discretion to approve the $5M, and also told him I was not prepared to approve it under my discretion. (In any case, I believe it is beyond my discretion, given the low grade.) Bob advised that he had done a file note; I requested he advise the General Manager of his approval of the $5M this evening. (Our discussion took place at approximately 4.45 pm).
I expressed my disappointment to Bob, given that I have stressed “no surprises” and that he is well aware of my concern generally as to the Reid exposure. He undertook to speak to the General Manager tonight.
It is said that interrogatory 85 is an appropriate means of establishing what enquiries, independently of questioning Tingiri, Alexander made, or ought to have made, in relation to the accounts of Reid and his private companies in a limited time leading up to the impugned transactions when the state of those accounts was exciting concern.
It is true that there is no specific allegation in the amended statement of claim that Alexander failed to make a particular enquiry into whether any account of Reid or his private companies was in order. However, it is pleaded in para 28C that on or about 3 July 1992 Alexander was concerned as to the propriety of the Bill of Exchange Transaction. By way of particulars of that allegation reference is made to “Memorandum of Alexander” headed “Staff Confidential” dated 30 June 1992.
It may be relevant to the allegation of Alexander’s negligence whether or not between 30 April and 31 July 1992 he was aware of the state of any of the specified accounts and, if he was aware, whether he took any action apart from writing the memorandum reproduced above. However, I consider that by asking broadly whether Alexander saw any documents in relation to the balance of any of the specified accounts, interrogatory 85 is cast too wide. That vice is compounded by predicating parts (b) and (c) on any of such accounts having been shown or “not shown” as “being in order”. The concept of being “in order” is not defined in the pleadings or elsewhere in the interrogatories. For these reasons, I have not been persuaded to order a further answer to interrogatory 85.
Interrogatories 87 and 88
These interrogatories and the answers to them are in the following terms:
87.Did the bank have in place between 31st July 1991 and 31st July 1992 any system of reporting accounts which were out of order applicable to the accounts referred to in interrogatory 1, if yes:
(i)describe the system;
(ii)describe the monetary limits if any, imposed on the reporting obligation.
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, fishing and not sufficiently material.
88.Did the bank have in place between 31st July 1991 and 31st July 1992 any system of reporting foreign currency transactions which were out of order, if yes:
(i)describe the system;
(ii)describe the monetary limits if any, imposed on the reporting obligation.
The respondent objects to answering this part of this interrogatory on the grounds that it is irrelevant, fishing and not sufficiently material.
It is conceded on behalf of Southern Cross that there is no allegation in its pleadings of non-compliance with an established reporting system. However, the request for responsive answers to these interrogatories is supported by suggesting that they might substantiate the allegations which have been made of a deliberate omission by Tingiri to make appropriate enquiries and a negligent failure by Alexander to establish for himself the true difficulties which were besetting the accounts of Reid and his private companies at the relevant time.
These interrogatories partake of the vice mentioned in relation to interrogatory 85 that they are predicated on the undefined concept of an account or transaction being “out of order”. Furthermore, the reporting system enquired after is not sufficiently relevant to the acts or omissions pleaded as constituting the negligence of Tingiri or Alexander for these interrogatories to relate to a matter in question in the sense contemplated by O 16 r 6(3) of the Rules of this Court. I therefore decline to order a further answer to either interrogatory 87 or 88.
Conclusion
In the result, further answers will be ordered to four interrogatories, 5(c), 56(f), 70(a) and (b) and 71 out of some fourteen interrogatories or pairs of interrogatories to which further answers have been sought. Having regard to the limited success which has attended the motion on notice filed on behalf of Southern Cross, it is inappropriate that there should be an order in respect of the costs of that motion having present effect. I shall order that the costs of each party of and incidental to the motion be costs in the cause.
I certify that this and the preceding twenty-seven (27) pages are a true copy of the Reasons for Judgment of the Honourable Justice Ryan.
Associate:
Dated: 5 September 1997
Counsel for the Applicant: Mr L Kelly Solicitors for the Applicant: Flower & Hart Counsel for the Respondent: Mr P Keane, QC
with Mr J SheahanSolicitors for the Respondent: Mallesons Stephen Jaques Date of Hearing: 26 April 1996 Date of Judgment: 5 September 1997
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