Stanich v BankWest a Division of Commonwealth Bank of Australia
[2019] WASC 357
•8 OCTOBER 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: STANICH -v- BANKWEST A DIVISION OF COMMONWEALTH BANK OF AUSTRALIA [2019] WASC 357
CORAM: ALLANSON J
HEARD: 11 SEPTEMBER 2019
DELIVERED : 8 OCTOBER 2019
FILE NO/S: CIV 3082 of 2018
BETWEEN: GARY MICHAEL STANICH
Plaintiff
AND
BANKWEST A DIVISION OF COMMONWEALTH BANK OF AUSTRALIA
Defendant
Catchwords:
Practice and procedure - Where defendant applied for summary judgment - Where plaintiff shareholder of company to which defendant provided financial facilities - Whether plaintiff's claims are for wrongs to company - Where the plaintiff has standing to bring action - Whether losses claimed are separate losses or reflective of losses suffered by the company
Practice and procedure - Where plaintiff commenced action on causes of action then vested in his trustee in bankruptcy - Where trustee assigned causes of action after the action had been commenced
Practice and procedure - Where defendant applies to strike out statement of claim - Where plaintiff unrepresented - Where pleading does not clearly distinguish possible personal claims from claims of the company - Where pleading does not disclose a reasonable cause of action or may prejudice, embarrass or delay the fair trial of the action - Whether plaintiff may re-plead or judgment should be entered for the defendant
Legislation:
Australian Consumer Law
Corporations Act 2001 (Cth), s 236, s 237
Rules of the Supreme Court 1971 (WA), O 20 r 19
Result:
Summary judgment application granted in part
Strike out application granted in part
Category: B
Representation:
Counsel:
| Plaintiff | : | In person |
| Defendant | : | S K Dharmananda |
Solicitors:
| Plaintiff | : | In person |
| Defendant | : | Corrs Chambers Westgarth |
Case(s) referred to in decision(s):
Agar v Hyde (2000) 201 CLR 552
Aikman v Owners of Strata Plan 48817 – 17 Dolphin Drive Mandurah [2016] WASC 380
Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union of Workers Western Australian Branch v Bell-A-Bike Rottnest Pty Ltd [2005] WASCA 157
Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279
Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256
Blakeley v Cook [2001] WASCA 208
Chahwan v Euphoric Pty Ltd [2008] NSWCA 52 [
Cryeng Pty Ltd v Loyola [2011] FCA 956
Emerton Pty Ltd v Referral Marketing Services Pty Ltd [2008] NSWSC 1349
Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486
Foss v Harbottle (1843) 2 Hare 461; 67 ER 189
Gould v Vaggelas [1984] HCA 68; (1984) 157 CLR 215
HPM Pty Ltd v Fear [2002] WASCA 249
Hu v PS Securities Pty Ltd t/as Trustee of Joseph Family Trust [2011] NSWSC 303
Johnson v Gore Wood & Co [2002] 2 AC 1
Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392
Loyola v Cryeng Pty Ltd [2012] FCAFC 71
Mutual Life & Citizens' Assurance Co Ltd v Evatt [1970] UKPCHCA 2; (1970) 122 CLR 628
Nobarani v Mariconte [2018] HCA 36; (2018) 92 ALJR 806
NSW Lotteries Corporation Pty Ltd v Kuzmanovski [2011] FCAFC 106
Nyoni v Patterson [2012] WASCA 171
Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] 1 Ch 204
Rajski v Scitec Corporation Pty Ltd (Unreported, NSWCA, 16 June 1986)
Rolfe v Investec Bank (Australia) Ltd [2014] VSCA 38
Seafolly Pty Ltd v Madden (No 4) [2014] FCA 980; (2014) 320 ALR 763
Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118
Stone v ACE-IRM Insurance Broking Pty Ltd [2003] QCA 218
Thorne v Kennedy [2017] HCA 49; (2017) 263 CLR 85
ALLANSON J:
The plaintiff, Gary Michael Stanich, commenced this action against Bankwest (the Bank) by a writ filed on 3 December 2018. The writ bears an indorsement of claim 'for $2,627,205.64 as per the attached Statement of Claim'. A statement of claim was filed the same day.
The plaintiff pleads that he was a director and shareholder of Cassius Holdings Pty Ltd and Tocoan Pty Ltd from 21 December 2007, and a shareholder of Prodale Pty Ltd from 14 September 2011.[1] He was an employee of Prodale and Tocoan from March 2005. His claim relates to dealings between the Bank and the three companies between 2006 and 2011.
[1] Statement of claim [1]. The evidence is that he became a director of Cassius in October 2007 and of Tocoan in February 2008: see supplementary affidavit of Michelle Leanne Dean affirmed 1 March 2019, MLD 5, 51, and MLD 7, 72.
It is also relevant that, on 13 November 2007, the plaintiff provided a small business and consumer guarantee and indemnity to the Bank in respect of Prodale's obligations to the Bank.[2]
[2] Affidavit of Ms Dean, affirmed 21 December 2018, MLD 12.
Each of the companies was deregistered in 2016.
The plaintiff seeks relief including compensation, orders that guarantees he had given to the Bank be set aside, indemnification for possible tax liabilities, declarations, and an order that money received by the Bank as penalty interest be returned to Prodale to repay directors' loan accounts.[3] It will be necessary to consider the relief claimed in greater detail later in these reasons.
[3] Statement of claim [77], [105], [115] ‑ [117].
The application for summary judgment and to strike out the statement of claim
The Bank filed a memorandum of appearance on 13 December 2018. On 21 December 2018, the Bank filed a chamber summons seeking orders that:
1.Judgment be entered for the Defendant on the basis that the action is frivolous, the Defendant has a good defence, and the action should be disposed of summarily pursuant to Order 16 rule 1 of the Rules of the Supreme Court 1971 (WA) (Rules).
2.Alternatively to order 1 above, pursuant to Order 20 rule 19(1)(a) and (c) of the Rules, the statement of claim dated 3 December 2018 be struck out in its entirety because it does not disclose a reasonable cause of action.
3.The Plaintiff pay the Defendant's costs.
Consistently with the basis on which the Bank sought summary judgment, it adduced limited evidence.
The affidavit in support of the application was affirmed by Michelle Leanne Dean on 21 December 2018. Ms Dean attached documents showing that the plaintiff was in bankruptcy between 22 March 2013 and 23 March 2016;[4] and documents showing the current status of each of the companies.[5] Ms Dean also attached seven letters of offer that are referred to in the statement of claim and relate to two facility agreements entered into, on about 12 January 2006 (First Advance Facility) and 21 December 2007 (Second Advance Facility), by Prodale, as borrower, and the Bank. The plaintiff was one of several guarantors to each Advance Facility.
[4] Affidavit of Ms Dean, affirmed 21 December 2018, MLD 1.
[5] Affidavit of Ms Dean, affirmed 21 December 2018, MLD 2, MLD 3 and MLD 4.
The Bank relied also on a supplementary affidavit of Ms Dean, affirmed 1 March 2019. The supplementary affidavit updated some information but does not need to be considered in any detail.
The plaintiff relied on three affidavits, sworn 12 April 2019, 29 August 2019, and 16 September 2019. The first of those affidavits addressed some of the facts behind his claims. The second affidavit deposed to two matters: an assignment to the plaintiff by his trustee in bankruptcy; and the proceedings in this court to re-register Prodale. The third affidavit was filed after the hearing, to supplement the evidence regarding the assignment.
The defendant's case in outline
The Bank submitted that the plaintiff's claims should be summarily dismissed and judgment given for the defendant because:
(a)they are claims which belong to the companies, not to the plaintiff; and
(b)if any of the claims are the plaintiff's, those claims vested in the bankruptcy trustee on the plaintiff's bankruptcy, and cannot be maintained, so the proceeding is a nullity.[6]
[6] Defendant's written submissions [1]; see also Bankruptcy Act 1966 (Cth), s 58(1)(a), s 116.
The Bank also submitted that the statement of claim should be struck out because, on the facts pleaded, no action was reasonably open to the plaintiff as a matter of law.
The arguments based on the plaintiff's bankruptcy have now fallen away. On 29 May 2019, the plaintiff's trustee in bankruptcy assigned to him any causes of action that he had against the Bank.[7]
[7] Affidavit of Mr Stanich, sworn 29 August 2019, GM 24; affidavit of Mr Stanich, sworn 16 September 2019.
The plaintiff only filed evidence of the assignment on 2 September 2019, and then attached only an extract from the deed of assignment to his affidavit. The extract was not sufficient to show that the claims against the Bank had been assigned. Because the plaintiff is a litigant in person, I permitted him to hand up a complete copy of the deed of assignment at the hearing. The plaintiff filed a further affidavit, dated 16 September 2019, attaching a deed of assignment by which the Official Trustee in Bankruptcy assigned to the plaintiff its rights, remedies, title and interest in the causes of action against the Bank.
The action was defective when commenced, but it is not a nullity.[8] The Bank accepted that, as a result of the subsequent assignment, summary judgment should not be granted solely on the basis of the plaintiff's standing to sue for claims that had vested in his trustee.
[8] Stone v ACE-IRM Insurance Broking Pty Ltd [2003] QCA 218; Rolfe v Investec Bank (Australia) Ltd [2014] VSCA 38 [86].
The deed of assignment does not wholly dispose of the current application for summary judgment. Even if the plaintiff may now have assigned to him his personal rights of action, the Bank contended that the plaintiff is suing on causes of action for wrongs done to the three companies. The Bank submitted that the proper plaintiff to bring an action in respect of a wrong done to a corporation is the corporation itself, and individual shareholders or office holders have no standing to bring such proceedings.[9] Further, the damages claimed by the plaintiff are reflective of losses alleged to have been suffered by the companies ‑ in particular by Prodale.
[9] Foss v Harbottle (1843) 2 Hare 461; 67 ER 189; Aikman v Owners of Strata Plan 48817 – 17 Dolphin Drive Mandurah [2016] WASC 380 [133].
The plaintiff's response
The plaintiff submitted that this is not a clear case, and that there are serious questions in his statement of claim to be tried. In particular, he referred to the claims for contravention of the Australian Consumer Law.
In response to the argument that the claims he seeks to pursue are claims of the companies, the plaintiff referred to a pending application (by John Francis Blake, a shareholder and director of Prodale) to re‑register Prodale. The plaintiff said that he would then apply for leave pursuant to s 236 and s 237 of the Corporations Act 2001 (Cth) to bring a derivative action.
The Australian Securities and Investments Commission has advised that it will not oppose Mr Blake's application for reinstatement of Prodale if certain conditions are satisfied. Those conditions include that the company, if reinstated, continues to be in liquidation.[10]
[10] Affidavit of Mr Stanich, sworn 29 August 2019, GMS 27.
The plaintiff opposed his claims being struck out or summary judgment being entered while the court processes for reinstatement of Prodale were still taking their course and before he had the opportunity to develop his defences to the Bank's claims. Alternatively, the plaintiff referred to the fifth exception to the rule in Foss v Harbottle,[11] and said that he should be permitted to proceed where it is in the interests of justice or to correct an injustice.[12]
[11] Permitting shareholders to sue in the name of the company 'where justice requires'.
[12] Affidavit of Mr Stanich, sworn 29 August 2019 [33] ‑ [35].
The re-registration of Prodale cannot assist the plaintiff in the present action. If Prodale is re-registered with a liquidator appointed, it will be for the liquidator to decide whether to take action on behalf of the company.
The reliance on an exception to the rule in Foss v Harbottle also meets two hurdles. The first is that none of the companies is presently registered. The second hurdle, described by the court in Blakeley v Cook as 'insurmountable', is that it is for the liquidator, not a shareholder or former director, to take action on behalf of a company in liquidation.[13] Although the court retains the inherent jurisdiction to grant leave to proceed where a company is in liquidation,[14] it is only where the liquidator, after due consideration, is unwilling or unable to institute proceedings for the company that it might be appropriate for the court to allow a creditor or contributory to do so.[15]
[13] Blakeley v Cook [2001] WASCA 208 [12]; HPM Pty Ltd v Fear [2002] WASCA 249 [19].
[14] Chahwan v Euphoric Pty Ltd [2008] NSWCA 52 [124].
[15] Emerton Pty Ltd v Referral Marketing Services Pty Ltd [2008] NSWSC 1349 [11]; Hu v PS Securities Pty Ltd t/as Trustee of Joseph Family Trust[2011] NSWSC 303 [35].
The critical question on which much of this application turns is whether the causes of action pleaded by the plaintiff are for alleged wrongs done to Prodale. If they are, he has no standing to proceed on them.
A distinct question is whether each claimed loss is, in substance, a separate loss to the plaintiff arising from the wrongdoing of the Bank. The plaintiff, as a shareholder, cannot himself recover for losses that were actually suffered by Prodale or one of the other companies, even where that has caused him a personal loss as a result of the diminution in the value of his shareholding, loss of dividends, or other payments which he might have obtained from the company if it had not been deprived of its funds. The plaintiff must show that he has suffered a loss 'separate and distinct from that suffered by the company' caused by a breach of a duty independently owed to him.[16]
[16] Johnson v Gore Wood & Co [2002] 2 AC 1, 35 ‑ 36, 66 ‑ 67; see also Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] 1 Ch 204, 222 ‑ 223; Gould v Vaggelas [1984] HCA 68; (1984) 157 CLR 215, 219 ‑ 220.
Summary judgment and strike out
On the application for summary judgment, it is for the Bank to show that there is no serious question to be tried on the causes of action raised by the plaintiff.[17] Summary judgment will only be given where there is a high degree of certainty about the ultimate outcome of the proceedings. The question is whether, on the material before the court, it has been shown that the plaintiff's claim must fail at trial. Summary judgment may be given for part only of a claim.
[17] Agar v Hyde (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46]; Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118 [51] - [55].
Different questions arise on the application to strike out. A statement of claim should define with clarity and precision the issues or questions which are in dispute between the parties and fall to be determined by the court.[18] What is needed to satisfy the requirement for a clear statement of the case will depend upon the nature of the allegations made.
[18] Nyoni v Patterson [2012] WASCA 171 [36] ‑ [38]; Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279, 286 ‑ 287; Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 [26].
The question is whether it would be open to the plaintiff, on the current pleadings, to prove facts at the trial which would constitute a cause of action.[19] If the facts pleaded conceivably give rise to relief, then the cause of action should be held to be reasonable.[20]
[19] Mutual Life & Citizens' Assurance Co Ltd v Evatt [1970] UKPCHCA 2; (1970) 122 CLR 628, 631.
[20] Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union of Workers Western Australian Branch v Bell-A-Bike Rottnest Pty Ltd [2005] WASCA 157 [54].
The plaintiff is not represented in these proceedings. I have tried to make proper allowance for the disadvantage that he suffers. But his claim is complex and he seeks a substantial award of damages. There are limits to the allowance that the court can or should make. The High Court has recently cited with approval the passage in Rajski v Scitec Corporation Pty Ltd where Samuels JA said:
... the absence of legal representation on one side ought not to induce a court to deprive the other side of one jot of its lawful entitlement ... An unrepresented party is as much subject to the rules as any other litigant. The court must be patient in explaining them and may be lenient in the standard of compliance which it exacts. But it must see that the rules are obeyed, subject to any proper exceptions. To do otherwise, or to regard a litigant in person as enjoying a privileged status, would be quite unfair to the represented opponent.[21]
[21] Rajski v Scitec Corporation Pty Ltd(Unreported, NSWCA, 16 June 1986) [27]; Nobarani v Mariconte [2018] HCA 36; (2018) 92 ALJR 806 [47].
The plaintiff's case in outline
The three companies - Prodale, Cassius Holdings and Tocoan ‑ were in the business of hotel and nightclub management and owned and operated licensed premises in Bunbury (the Reef Hotel) and in Geraldton.[22]
[22] Statement of claim [6].
In May 2005, the plaintiff began working as a manager of the Reef Hotel for Tocoan.[23]
[23] Affidavit of Mr Stanich, sworn 12 April 2019 [12] ‑ [13].
In 2006, the plaintiff was offered the opportunity to purchase 25% of the B class shares of Tocoan for $60,000, which he was to pay off over time.[24] Later, the plaintiff purchased 25% of the C class shares in Tocoan, again for $60,000.[25] He was appointed a director in February 2008.[26]
[24] Affidavit of Mr Stanich, sworn 12 April 2019 [14] ‑ [16].
[25] Affidavit of Mr Stanich, sworn 12 April 2019 [24].
[26] Affidavit of Mr Stanich, sworn 12 April 2019 [17].
In 2007, the plaintiff purchased 25% of the issued ordinary shares in Cassius Holdings. He was appointed a director of Cassius Holdings in October 2007. [27]
[27] Affidavit of Mr Stanich, sworn 12 April 2019 [27] ‑ [28].
In December 2011, the plaintiff purchased two ordinary shares in Prodale.[28]
[28] Affidavit of Mr Stanich, sworn 12 April 2019 [29].
In about November 2005, Prodale entered into a contract to purchase a property in Victoria Street Bunbury to build a new hotel. Through a mortgage broker, Prodale secured finance from the Bank. [29]
[29] Statement of claim [8]-[11].
On 12 January 2006, Prodale entered into a First Advance Facility agreement with the Bank.[30] On 16 December 2008, and again on 15 September 2010 and 22 March 2011, the Bank offered by letter to replace the First Advance Facility.[31]
[30] Statement of claim [13].
[31] Statement of claim [15] ‑ [17].
In about October 2007, Prodale entered into a contract to purchase the Geraldton hotel, the adjoining nightclub, and an adjoining property.[32]
[32] Statement of claim [19].
In July 2007, an employee of the Bank, Mr Earl assumed the role of financial adviser to the companies.[33]
[33] Statement of claim [21] ‑ [22].
Prodale entered into a Second Advance Facility agreement on 21 December 2007.[34]
[34] Statement of claim [23].
In about November 2007, Mr Earl informed Prodale and its directors that the First Advance Facility would roll over until the Second Advance Facility was finalised in 2020. [35]
[35] Statement of claim [24] ‑ [25].
On 27 June 2008, and again on 16 December 2008, the Bank offered to replace the Second Advance Facility.[36]
[36] Statement of claim [27] ‑ [28].
On 15 September 2010, the Bank offered to replace the Second Advance Facility, and Prodale executed that variation on or about 18 October 2010.[37]
[37] Statement of claim [30] ‑ [31].
On 22 March 2011, the Bank offered to replace the Second Advance Facility, on the same terms save that it was to be repaid by 31 July 2011. Prodale executed the letter of offer on about 18 April 2011.[38]
[38] Statement of claim [33], [35].
The effect of the offer of 22 March 2011 was to cancel the Second Advance Facility. The Bank did not inform Prodale that it intended to cancel the facility.[39]
[39] Statement of claim [34].
The plaintiff entered into personal guarantees to the Bank.[40] He does not allege that the Bank has called on the guarantees. On the present action the question does not arise whether the plaintiff could plead these matters in defence of any claim by the Bank, based on the guarantee.
[40] Statement of claim [39].
On 10 December 2012, the Bank appointed receivers and managers.[41]
[41] Statement of claim [78].
The receivers and managers sold properties in Geraldton and Bunbury.
The submissions made on behalf of the Bank identified nine possible causes of action. I will follow those headings for the purpose of organising these reasons. There is a degree of overlap between the different claims and some uncertainty regarding whether particular facts are pleaded as separately giving rise to a claim or as material to another cause of action.
No consideration
The plaintiff pleads that the variations to and replacement of the Second Advance Facility on 16 December 2008, 18 October 2010 and 18 April 2011 were of no effect 'because there was no consideration passing from [the Bank] to Prodale'.[42] He pleads that the Second Advance Facility continued to run for 156 months from the original draw down and had not expired.[43]
[42] Statement of claim [29], [32], [36].
[43] Statement of claim [37].
The statement of claim does not set out how these allegations resulted in any loss or damage, although I infer that the allegation is that the Bank wrongly cancelled the Second Advance Facility by requiring it to be repaid in July 2011.
In his affidavit, sworn 12 April 2019, the plaintiff elaborated on this claim. He said that he believes the variations are both void and that the contract of 16 December 2008 is still in force, the loan had not expired, and the Bank was not entitled to appoint receivers and managers. He alleged that the receivers and managers trespassed on Prodale's property and took control of assets illegally.[44]
[44] Affidavit of Mr Stanich, sworn 12 April 2019 [98] ‑ [100].
If there is a claim for losses which stem from the variations and replacement of the Second Advance Facility, that claim rests with Prodale and not with the plaintiff. The plaintiff's pleading does not identify any cause of action for a wrong done to him that arises out of the variations to or replacement of the facility.
The Bank also submitted that the claims cannot be maintained in fact, as in each case there was consideration, either in extending the period of interest only payments or, by the letter of 22 March 2011 (which was accepted on 18 April 2011), removing the requirement for scheduled repayments of principal and interest, and extending the expiry date for the Second Advance Facility from 31 March 2011 to 31 July 2011.[45]
[45] Defendant's submissions [54] ‑ [58].
In short, the Bank has a good defence on the facts. I accept the Bank's submission which is supported by the terms of the extension letters.[46]
Breach of fiduciary duty
[46] Affidavit of Ms Dean, 21 December 2018, 67, 121, 142.
The plaintiff pleads that Mr Earl assumed the role of financial adviser to the three companies,[47] and that he owed a fiduciary obligation to them.[48] There is no plea that Mr Earl owed any fiduciary duty to the plaintiff.
[47] Statement of claim [22]. See also statement of claim [46], [47].
[48] Statement of claim [41].
The plaintiff pleads that the Second Advance Facility was entered into on representations and financial advice given by Mr Earl.[49]
[49] Statement of claim [24].
The claim that Mr Earl, and through him the Bank, breached fiduciary obligations to the three companies cannot be relied upon by the plaintiff as giving him a cause of action against the Bank. It is not clear, however, that the plaintiff separately claims relief for breach of fiduciary duty. The existence of a fiduciary duty is pleaded as material to the claim for misleading or deceptive conduct, and to the extent that the plaintiff seeks relief for its breach he seeks compensation and orders under the Australian Consumer Act.
Misleading or deceptive conduct
The plaintiff's evidence
In his affidavit sworn 12 April 2019, the plaintiff said that Mr Mann put together a prospectus for the Bank.[50] He saw Mr Mann alter the turnover figures for the Geraldton business by increasing the anticipated income by $500,000 a year, and also increasing the income on the existing businesses in Rockingham and Bunbury.[51] Mr Mann told him that he was acting at the request of Mr Earl to 'help Earl get the loan over the line'.[52]
[50] Affidavit of Mr Stanich, sworn 12 April 2019 [41].
[51] Affidavit of Mr Stanich, sworn 12 April 2019 [46] ‑ [50].
[52] Affidavit of Mr Stanich, sworn 12 April 2019 [48].
The plaintiff said that Mr Earl did not tell him that the modified earnings figures would form part of the loan contracts he was guaranteeing. Despite his evidence that he saw Mr Mann alter the figures, the plaintiff asserted that Prodale did not know the figures would form part of the loan contract.[53]
[53] Affidavit of Mr Stanich, sworn 12 April 2019 [51].
The plaintiff gave the following evidence about entering the guarantee:
55.In late December 2007 I was asked by [Mr] Mann to sign a guarantee for the Geraldton loan. I remember clearly at the time that I questioned why, when I had no interest in Prodale or the Geraldton properties.
56.Mann explained that as I had an interest in the licenses I was an integral part of the businesses it was required by the bank.
57.At no time was my guarantee explained to me by anyone from the Bank.
58.At no time did I receive any legal advice about my guarantee and the implications of the guarantee. At no time did the Bank tell me or direct me to get legal advice.
59.I now know that I signed the guarantee for Prodale for $3.4 m when I had no interest in Prodale or its assets.[54]
[54] Affidavit of Mr Stanich, sworn 12 April 2019 [55] ‑ [59].
The guarantee was increased to $3.52 million in July 2008.[55]
[55] Affidavit of Mr Stanich, sworn 12 April 2019 [60].
The plaintiff said that, at a directors meeting in September 2010, he was asked to sign another guarantee for Prodale. He did not speak to anyone from the Bank, nor was he advised to get legal advice.[56] In April 2011, Mr Blake, another director, gave the plaintiff another two documents that contained guarantees for Prodale. Again the plaintiff did not speak to anyone from the Bank and no one advised him to get legal advice.[57] The plaintiff said he felt compelled to sign the guarantee even though he did not really want to.[58]
[56] Affidavit of Mr Stanich, sworn 12 April 2019 [65] ‑ [66].
[57] Affidavit of Mr Stanich, sworn 12 April 2019 [69] ‑ [71].
[58] Affidavit of Mr Stanich, sworn 12 April 2019 [72].
The plaintiff said that when he gave the guarantee he had no or few assets, and the Bank made no inquiries about his financial position.[59]
[59] Affidavit of Mr Stanich, sworn 12 April 2019 [73] ‑ [75].
The plaintiff relies on the guarantee as giving him a direct relationship to Prodale and the loan.
The pleading
The pleaded claim, in essence, is that Mr Earl engaged in misleading or deceptive conduct by representations he made in or about September 2007 to secure the Second Advance Facility,[60] and in December 2007 by further advice and 'deliberately withholding the real situation'.[61] The plaintiff pleads that Mr Earl's conduct removed his ability to make an informed decision prior to entering into the Second Advance Facility guarantee.[62]
[60] Statement of claim [44].
[61] Statement of claim [45].
[62] Statement of claim [45(b)(v)].
The plaintiff seeks compensation in the form of damages, and an order that the guarantee he gave be set aside.[63]
[63] Statement of claim [48].
It is convenient, at this point, to consider the other claim under the Australian Consumer Law.
Duress and undue influence
The plaintiff pleads that statements made by officers of the Bank, in or about February 2011, included threats of financial ruin and destruction of the three companies. He pleads a series of statements that were apparently directed to having Prodale take its business elsewhere. The plaintiff alleges that those threats of financial ruin were unconscionable conduct.[64]
[64] Statement of claim [97] ‑ [103].
The plaintiff pleads that the statements and representations 'caused duress and undue emotional stress of financial ruin' and that the conduct was unconscionable. He seeks relief including compensation for damages, and that the guarantee he gave to the Bank be set aside.[65]
Conclusion on Australian Consumer Law claims
[65] Statement of claim [104] ‑ [105].
The Australian Consumer Law provides remedies, including damages and compensation for a person who has suffered loss as a result of conduct of another person which contravenes the Act. The plaintiff pleads that the consequence of the conduct in breach of the Australian Consumer Law, either by misleading or deceptive conduct or unconscionable conduct, is that he should be paid compensation for:
(1)loans he made to Prodale and Cassius Holdings;
(2)payments he made for share of business of the three companies;
(3)loss of asset value (of the companies' assets);
(4)future loss of income;
(5)psychological pain and suffering;
(6)loss of prestige and lifestyle.[66]
[66] Statement of claim [115] ‑ [116].
The plaintiff also claims relief related to his guarantee, but it is not apparent on the pleading how the conduct that he alleges to be misleading or unconscionable affected the giving of that guarantee.
To the extent that the claim under the Australian Consumer Law alleges that Prodale, Cassius Holdings, or Tocoan suffered loss, the plaintiff has no standing to bring the claim.
The Bank further submitted that the losses the plaintiff claims ‑ the loans and payments to the companies, loss of asset value, future loss of income ‑ are properly characterised as consequential to the diminution of the value of the plaintiff's shareholding. I agree with the submission. None of those losses is said to result from a separate wrong done to the plaintiff, but are the consequences of the financial collapse of Prodale, in particular, and the two other companies.
But not all of the losses that the plaintiff sets out in statement of claim [115] are necessarily losses suffered by or reflective of losses suffered by the companies. The plaintiff also claims for psychological pain and suffering and loss of prestige and lifestyle. Damages may be awarded under the Australian Consumer Law for harm caused to commercial reputation.[67] Damages have also been awarded for disappointment and injury to feelings.[68]
[67] Cryeng Pty Ltd v Loyola [2011] FCA 956 [97]; Loyola v Cryeng Pty Ltd [2012] FCAFC 71 [71]; Seafolly Pty Ltd v Madden (No 4) [2014] FCA 980; (2014) 320 ALR 763 [57].
[68] NSW Lotteries Corporation Pty Ltd v Kuzmanovski [2011] FCAFC 106 [122] ‑ [123].
The plea does not sufficiently set out what separate loss the plaintiff suffered, or how any loss he suffered was caused by the conduct of Mr Earl or the Bank, or by the duress and undue influence alleged to have occurred in 2011. Further, the plea does not identify when those losses occurred.
Finally, I have considered whether the plea raises a claim of duress, undue influence, or unconscionable conduct according to the principles of common law and equity.[69]
[69] See Thorne v Kennedy [2017] HCA 49; (2017) 263 CLR 85 [26] - [40]; Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392.
If the plaintiff has a claim to set aside a transaction on one or more of those grounds, in merely setting out the statements alleged to have been made and claiming those statements caused duress and undue emotional stress, the statement of claim does not sufficiently state it.
Penalty interest claim
The plaintiff alleges that, on 10 August 2011, the Bank illegally applied a penalty interest on Prodale for the First and Second Advance Facilities. He alleges that the Bank had no authority to apply penalty interest rates as there were no arrears in payments and the Bank gave no notification of breach.[70]
[70] Statement of claim [69] - [70].
The cause of action, presumably, is for breach of the terms of the Advance Facilities, and perhaps for restitution.
The plaintiff alleges that the penalty interest was an unjust enrichment for the Bank and seeks an order that the penalty interest be returned to Prodale 'to repay directors loan accounts'.[71]
[71] Statement of claim [77].
The statement of claim discloses no basis upon which the plaintiff can claim any loss based on the payment of penalty interest by Prodale. If there is a cause of action, it is Prodale's. If there is a claim in restitution for the return of penalty interest, it is Prodale's claim.
The plaintiff, in his plea, links the restitution of penalty interest to the repayment of the directors' loan accounts. Leaving aside whether this is a claim for a reflective loss, the plaintiff does not plead that he was a director of Prodale, and on the evidence he was not. Even if there is a cause of action arising out of the payment of penalty interest, it does not give the plaintiff a claim.
The appointment of receivers and managers
On 10 December 2012, the Bank appointed receivers and managers who took control of properties of the companies in Geraldton and Bunbury.[72] The plaintiff alleges that the receivers and managers illegally entered upon the properties and took control of them, refused the directors of the companies their right of entry to any of the properties or businesses, and trespassed upon the property of the companies.[73]
[72] Statement of claim [78] ‑ [79].
[73] Statement of claim [80].
The plaintiff seeks a declaration that the receivers were appointed without proper cause or authority and that they committed trespass.[74]
[74] Statement of claim [85].
It is the legal right of possession which the law protects by an action in trespass. The proper plaintiff in an action for trespass is the person who was in possession at the time of the trespass, or a person who has a right to possession.
The plaintiff does not plead who was in possession, although he does plead that the trespass was upon the property of Prodale, Cassius Holdings and Tocoan.[75] On the pleaded case, if there was a trespass, it was a wrong to the three companies. The plaintiff does not allege a separate wrong to him personally, and the alleged trespass does not give him a cause of action.
[75] Statement of claim [80].
The plaintiff also seeks compensation for his losses in relation to his shareholding in the companies, and for repayment of a loan account in the accounts of Prodale.
The plaintiff's claim for repayment of his loan account appears to be based solely on his status as a creditor of Prodale. There is no basis in law for such a claim.
The claim for compensation or damages in relation to the plaintiff's shareholding is not a claim for a breach of a duty independently owed to him. It is a claim for losses reflective of the losses suffered by the companies and cannot be maintained.
Failure to register a charge
The plaintiff pleads that the Bank failed to register a charge over the assets of Prodale, with the result that the charge was 'void over the assets owned by Prodale', and the Bank could not appoint receivers under it.[76]
[76] Statement of claim [86] ‑ [92].
It is, in my opinion, unnecessary to go further into the facts of this claim. As for the claim in trespass, if there was a wrong in the appointment of the receivers, the companies hold the cause of action for a wrong done to them. The plaintiff pleads no facts that would establish a separate claim on his own behalf.
The actions of the receivers and managers
The plaintiff alleges that the receivers and managers appointed by the Bank failed to achieve the best price for the Geraldton property or the hotel in Bunbury. He alleges other breaches by the receivers and managers. The plaintiff alleges that the conduct of the receivers and managers are attributable to the Bank and that they were agents of the bank and not of the three companies.[77]
[77] Statement of claim [106] ‑ [112].
The plaintiff seeks compensation, and an order that the guarantee given in favour of the Bank be set aside.[78]
[78] Statement of claim [113] ‑ [114].
The allegation is of a wrong done to one or more of the companies and does not give rise to a separate cause of action for the plaintiff either as a director, employee or shareholder.
The plaintiff pleads no facts that could give rise to a cause of action for him personally, or which show any relationship between the conduct of the receivers and managers and his guarantee.
Claims under the Code of Banking Conduct
The plaintiff pleads that the General Terms of Lending 2007 were incorporated in the Advance Facilities, and applied relevant provisions of the Code of Banking Conduct to those agreements.[79]
[79] Statement of claim [49] ‑ [50].
The plaintiff alleges that the Bank failed to inform him that it intended to cancel the First and Second Advance Facilities, as required by s 28.4(c) of the Code.[80] He alleges further breaches of the Code by the Bank failing to give effective disclosure of information, not acting in a consistent and ethical manner, and behaving unethically in its behaviour towards Prodale.[81] In particular, the plaintiff alleges that the Bank:
(1)failed to disclose that the variation of terms in the letters of offer, dated 15 September 2010 and 22 March 2011, included an alteration to the expiry date of the Advance Facilities;[82]
(2)acted unethically towards Prodale in the conduct of Mr Antonio, the misleading and deceptive conduct of Mr Earl, and the duress by Mr Natham and Mr Vanderputt;[83]
(3)failed to notify Prodale or the plaintiff about the change to the expiry date of the Advance Facilities;[84]
(4)failed to exercise due care and skill in applying credit assessment methods and in forming their opinion about the ability of Prodale to repay the loan or the ability of the plaintiff or the other guarantors to pay under their guarantees, and in lending to Prodale without considering the real ability of Prodale to repay the loans;[85]
(5)failed to include a statement that the Code applied to guarantee documents in any of the letters of 15 September 2010 and 22 March 2011.[86]
[80] Statement of claim [40].
[81] Statement of claim [52] ‑ [54].
[82] Statement of claim [52].
[83] Statement of claim [54].
[84] Statement of claim [56].
[85] Statement of claim [59] ‑ [60].
[86] Statement of claim [63].
The Code describes itself in cl 1.1 as a 'voluntary code of conduct which sets standards of good banking practice for [the Bank] to follow when dealing with persons who are, or who may become, our individual and small business customers and their guarantors'.
Although not clearly stated, the statement of claim sufficiently alleges that the relevant provisions of the Code were incorporated into the agreements between the Bank and Prodale, and into the guarantees, including that given by the plaintiff.
To the extent the plaintiff alleged a wrong was done to Prodale or a loss was suffered by Prodale, the plaintiff has no claim.
Some of the claims under the Code relate to the guarantee and to the plaintiff's personal contract with the Bank. They are not pleaded with any clarity but appear to be based on causes of action now assigned to the plaintiff.
Conclusion
The basis on which the Bank brought the application for summary judgment, and the written submissions it filed, relied on the comprehensive scope of two arguments: the plaintiff could not pursue claims on behalf of the companies; and any personal claims had vested in his trustee.
To the extent that it is possible to identify claims that, as pleaded, can only be claims of the companies, or can only be claims for losses that are reflective of the losses suffered by the companies, there should be summary judgment.
On that basis, I am satisfied:
(1)Judgment should be entered on the penalty interest claim, and the claims relating to the appointment and actions of the receivers and managers (including the claim for failure to register a charge). That is, there should be summary judgment on those claims in statement of claim [69] to [96], and [106] to [112].
(2)There should be judgment for the Bank on the claim to set aside variations to the Advance Facilities on the 'no consideration' plea in statement of claim [29], [32] and [36].
There is no arguable basis for the plea that the plaintiff was owed a fiduciary duty by the Bank, through Mr Earl, but no separate claim appears to be made for breach of fiduciary duty.
None of the other claims is sufficiently pleaded to enable me to discern to what extent the claim may be a personal claim for personal losses or for relief relating to the guarantee. The pleading either does not disclose a reasonable cause of action,[87] or may prejudice, embarrass or delay the fair trial of the action.[88] It cannot be permitted to stand in its present form. But I am not satisfied ‑ particularly having regard to the limited basis on which this application was brought ‑ that I should either grant judgment on those parts of the claim or refuse leave to re‑plead.
[87] Rules of the Supreme Court 1971 (WA) O 20 r 19(1)(a).
[88] Rules of the Supreme Court 1971 (WA) O 20 r 19(1)(c).
I would strike out the balance of the statement of claim.
If the plaintiff wishes to re-plead, he must confine the plea to personal causes of action against the Bank and to losses that are separate and distinct from those suffered by the company and caused by a breach of a duty independently owed to him. The claims currently pleaded in statement of claim [115] and [116] for compensation for loans and payments that the plaintiff made to the companies, loss of asset value, and loss of income, are not losses for which he can recover.
I will hear the parties on the orders that should be made to give effect to these reasons.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CG
Associate to the Honourable Justice Allanson
7 OCTOBER 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: STANICH -v- BANKWEST A DIVISION OF COMMONWEALTH BANK OF AUSTRALIA [2019] WASC 357 (S)
CORAM: ALLANSON J
HEARD: ON THE PAPERS
DELIVERED : 24 OCTOBER 2019
FILE NO/S: CIV 3082 of 2018
BETWEEN: GARY MICHAEL STANICH
Plaintiff
AND
BANKWEST A DIVISION OF COMMONWEALTH BANK OF AUSTRALIA
Defendant
Catchwords:
Costs - Where defendant awarded summary judgment in part and strike out in part - Where plaintiff unlikely to be able to meet an order for costs - Whether costs should be fixed or taxed - Whether costs should be payable forthwith
Legislation:
Legal Profession (Supreme court) (Contentious Business) Determination 2016 (WA), sch item 10
Rules of the Supreme Court 1971 (WA), O 66 r 10
Result:
Costs orders made
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | In person |
| Defendant | : | Corrs Chambers Westgarth |
Case(s) referred to in decision(s):
Brookvista Pty Ltd v Meloni [2009] WASCA 180
Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738
Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Corrs Chambers Westgarth [2011] WASC 44
MacMahon Contractors Pty Ltd v Woodside Energy Ltd [No 2] [2009] WASC 11
ALLANSON J:
On 8 October 2019, on the defendant's application for summary judgment or to strike out the statement of claim, I made orders entering judgment for the defendant on part of the plaintiff's claim and striking out the balance. Mr Stanich was unable to attend the judgment delivery, and I made orders programming the defendant's application for costs to be dealt with on the papers.
On 15 October 2019, the defendant filed submissions supported by an affidavit of Ms Michelle Leanne Dean, affirmed that day.
Mr Stanich filed submissions and an affidavit the following day.
The defendant's application
The defendant applies for an order that the plaintiff pay the defendant's costs of the application for summary judgment and strike out fixed in the sum of $18,414 payable forthwith.
In her affidavit in support of the application, Ms Dean attached a schedule of the time cost in a narrative of the work done and charged by the solicitors for the defendant, and also the work done and costs charged by senior counsel.
The defendant asks the court to fix an amount which is less than the amount in item 10(a) of the Legal Profession (Supreme Court) (Contentious Business) Determination 2018 for proceedings in chambers. It is less than half the defendant's actual cost of the application.
In support of the order, the defendant referred to the following matters:
(1)before bringing the application, on 17 December 2018, it wrote to the plaintiff putting him on notice that he had no sufficient standing to bring the claims and may be ordered to pay the defendants costs;
(2)on 14 February 2019, the defendant again wrote to the plaintiff regarding his prospects of success and put him on notice that he may be liable for its costs.
The defendant submits that this was an 'unusually heavy' matter by reference to the length and detail in the statement of claim, the submissions and affidavits. While the number of pages and paragraphs in documents filed is not an accurate guide to the complexity of the matter, I accept the defendant's submission that this was not a typical or median matter. In part this was the result of the number of claims pleaded, relating to events over several years. It was necessary to identify each separate cause of action pleaded and whether it was properly characterised as a claim that could only be brought by the companies, a claim which could be brought by the plaintiff but which had vested in his trustee in bankruptcy, or a claim for personal injury of a kind which had not vested in the trustee.
Further, it was only in his affidavit sworn 29 August 2019 (filed on 2 September 2019) that the plaintiff adduced evidence of the assignment to him by his former trustee in bankruptcy. That assignment was executed on 29 May 2019, after the defendant had filed its affidavits and submissions.
The plaintiff's submissions
The plaintiff filed an affidavit sworn 14 October 2019 and submissions. He said that he wishes to re-plead his statement of claim for personal causes of action against the defendant and for losses that are separate and distinct from those suffered by the companies. He submitted that costs should be in the cause until the matter is finally determined. Otherwise, the plaintiff submitted that he was 'caught up in technicalities and other roadblocks', so that it was not possible for him to even put his case.
Fixing costs
The principles to be applied in fixing costs were stated by Newnes JA in Brookvista Pty Ltd v Meloni[89]
…It was not in issue that when a costs order is made, the court may fix the amount of the costs payable rather than order that they be taxed. The purpose of fixing costs is to avoid the expense and delay involved in taxation. Consistent with that objective, in fixing the sum the court will not subject the costs to the detailed scrutiny often applied in taxation of costs. It is appropriate instead to apply a 'much broader brush' than would be applied on a taxation: see Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228; (2005) 215 ALR 788 [197] ‑ [200]; Hadid v Lenfest Communications Inc [2000] FCA 628 [35].
But in fixing the amount of the costs, the approach of the court should be 'logical, fair and reasonable': see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119, 123; Nine Films and Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046 [8]. And the power to award a fixed sum should only be exercised when the court considers that it can determine the amount of the costs fairly. That means the court must have available to it sufficient material that it is confident it can arrive at an appropriate sum: see Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 [22].
[89] Brookvista Pty Ltd v Meloni [2009] WASCA 180 [26] ‑ [27].
The defendant submitted that one of the circumstances in which the power to fix costs may be exercised is where it appears that the party obliged to pay the costs would not be able to meet the liability likely to result from the assessment.[90] In those circumstances, it would disadvantage the successful defendant by requiring it to incur the additional costs of an assessment or taxation.
[90] Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 [21].
There is good reason in this case to believe that the plaintiff will not be able to meet an order for the costs of the application. He has referred in court to the financial difficulties he incurred in attempting to purchase an assignment of actions from his former trustee. In his affidavit sworn 12 April 2019, in response to the summary judgment application, the plaintiff said that, since his discharge bankruptcy, he was employed in a carpet cleaning company at minimum wage.
I accept that there would be clear advantages in fixing costs. I would fix costs if satisfied that I could determine the amount fairly. But I am not confident, on the material before the court, that the amount which I am asked to fix is 'logical, fair and reasonable'.
Costs may be dealt with by the court at any stage of the proceedings, and the court may order the costs to be paid forthwith notwithstanding that the proceedings are not concluded.[91]
[91] Rules of the Supreme Court 1971 (WA) O 66 r 10(1).
The general rule, where an order for costs is to be made against a party in interlocutory proceedings, is that the costs will be fixed and ordered to be paid forthwith or by a particular date.[92] The fact that the costs are to be taxed rather than fixed does not alter the power to order that they be paid forthwith.[93]
[92] Consolidated Practice Directions, 4.7.1 [3].
[93] See, for example, Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Corrs Chambers Westgarth [2011] WASC 44 [35]; MacMahon Contractors Pty Ltd v Woodside Energy Ltd [No 2] [2009] WASC 11.
The defendant was successful on the application. The plaintiff should pay the defendant's costs of the application, to be taxed. Even though costs are to be taxed, I will order that they be taxed and payable immediately and not await the determination of the action.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CG
Associate to the Honourable Justice Allanson
24 OCTOBER 2019
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