The Bell Group Ltd (In Liq) v Westpac Banking Corporation - [2001] WASC 315

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: THE BELL GROUP LTD (In Liq) & ORS -v- WESTPAC BANKING CORPORATION & ORS [2001] WASC 315

CORAM: OWEN J

HEARD: 16-20 OCTOBER & 23-27 OCTOBER 2000

DELIVERED : 19 NOVEMBER 2001

FILE NO/S: CIV 1464 of 2000

BETWEEN: THE BELL GROUP LTD (In Liq) (ACN 008 666 993)
First Plaintiff
THE BELL GROUP LTD (In Liq) AS TRUSTEE FOR DOLFINNE PTY LTD (In Liq)
THE BELL GROUP LTD (In Liq) AS TRUSTEE FOR INDUSTRIAL SECURITIES PTY LTD
THE BELL GROUP LTD (In Liq) AS TRUSTEE FOR MARANOA TRANSPORT PTY LTD
THE BELL GROUP LTD (In Liq) AS TRUSTEE FOR NEOMA INVESTMENTS PTY LTD
Second Plaintiffs
BELL GROUP FINANCE (In Liq) (RECEIVER AND MANAGER APPOINTED)
Third Plaintiff
BELL GROUP (UK) HOLDINGS LTD (In Liq) (IN ADMINISTRATIVE RECEIVERSHIP)
Fourth Plaintiff
BELL PUBLISHING GROUP PTY LTD (In Liq)
Fifth Plaintiff
BELL GROUP NV (In Liq)
Sixth Plaintiff
AMBASSADOR NOMINEES PTY LTD (In Liq) and OTHERS
Seventh Plaintiffs
GEOFFREY FRANK TOTTERDELL AS LIQUIDATOR OF FIRST PLAINTIFF AND OF FIRST, SECOND, THIRD, FIFTH, NINTH, TENTH, ELEVENTH, THIRTEENTH, FOURTEENTH, SIXTEENTH, SEVENTEENTH AND NINETEENTH NAMED SEVENTH PLAINTIFFS
Eighth Plaintiff
ANTONY LESLIE JOHN WOODINGS AS LIQUIDATOR OF THE THIRD PLAINTIFF, FIFTH PLAINTIFF AND OF THE FOURTH, SIXTH, SEVENTH, EIGHTH, TWELFTH, FIFTEENTH, EIGHTEENTH NAMED SEVENTH PLAINTIFFS
Ninth Plaintiff
GARRY JOHN TREVOR AS LIQUIDATOR OF THE SIXTH PLAINTIFF
Tenth Plaintiff
AND
WESTPAC BANKING CORPORATION (ACN 007 457 141)
First Defendant
SOCIETE GENERALE AUSTRALIA LTD
NATIONAL AUSTRALIA BANK LTD
HONGKONGBANK OF AUSTRALIA LTD
STANDARD CHARTERED BANK AUSTRALIA LTD
COMMONWEALTH BANK OF AUSTRALIA
Second Defendants
LLOYDS BANK PLC
BANCO ESPIRITO SANTO E COMERCIAL DE LISBOA
BANK FUR GEMEINWIRTSCHAFT AG
THE GOVERNOR AND COMPANYOF THE BANK OF SCOTLAND
CAISSE NATIONALE DE CREDIT AGRICOLE
CREDITANSTALT-BANKVEREIN
CREDIT LYONNAIS
DRESDNER BANK AG
KREDIETBANK NV
SKOPBANK
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
THE GULF BANK KSC
GENTRA LTD (FORMERLY ROYAL TRUST BANK)
BANQUE INDOSEUZ
Third Defendants
EQUITY TRUST (CURACAO) NV
Fourth Defendant

FILE NO/S :CIV 2061 of 1996

BETWEEN :COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
First Plaintiff
NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937)
Second Plaintiff
SOCIETE GENERALE AUSTRALIA LTD (ACN 002 093 021)
Third Plaintiff
STANDARD CHARTERED BANK AUSTRALIA LTD
Fourth Plaintiff
WESTPAC BANKING CORPORATION (ARBN 007 457 141)
Fifth Plaintiff
HONGKONGBANK OF AUSTRALIA LTD (ACN 006 434 162)
Sixth Plaintiff
BANCO ESPIRITO SANTO E COMERCIAL DE LISBOA
BANK FUR GEMEINWIRTSCHAFT AG
THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND
CREDITANSTALT-BANK VEREIN
CREDIT LYONNAIS
DRESDNER BANK AG
BANQUE INDOSEUZ
Seventh Plaintiffs
LLOYDS BANK PLC
CAISEE NATIONALE DE CREDIT AGRICOLE
GENTRA LTD (FORMERLY ROYAL TRUST BANK)
KREDIETBANK NV
GULF BANK KSC
DG BANK DEUTSCHE GENOSSENSCHAFTBANK
Eighth Plaintiffs
AND
THE LAW DEBENTURE TRUST CORPORATION PLC
First Defendant
THE BELL GROUP LTD (ACN 008 666 993)
Second Defendant
GEOFFREY FRANK TOTTERDELL
Third Defendant
BELL GROUP FINANCE PTY LTD (In Liq) (RECEIVER AND MANAGER APPOINTED) (ACN 009 165 182)
Fourth Defendant
ANTONY LESLIE JOHN WOODINGS
Fifth Defendant
STATE GOVERNMENT INSURANCE COMMISSION OF WESTERN AUSTRALIA
Sixth Defendant
(BY ORIGINAL ACTION)
THE LAW DEBENTURE TRUST CORPORATION PLC
STATE GOVERNMENT INSURANCE COMMISSION OF WESTERN AUSTRALIA
Plaintiffs
AND
AUSTRALIAN CONSOLIDATED INVESTMENTS LTD (ACN 008 670 924)
GODINE DEVELOPMENTS PTY LTD (ACN 009 237 307)
BELL RESOURCES DEVELOPMENTS PTY LTD (ACN 009 152 569)
First Defendants
LLOYDS BANK PLC
Second Defendant
W A GLENDINNING & ASSOCIATES PTY LTD (ACN 008 762 721)
W U INVESTMENTS PTY LTD
EXPECTATION PTY LTD
Third Defendants
COMMONWEALTH OF AUSTRALIA
Fourth Defendant
WESTPAC BANKING CORPORATION
Fifth Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Pleadings - Amendment to statement of claim - Turns on own facts

Legislation:

Nil

Result:

Application allowed in part

Category: B

Representation:

CIV 1464 of 2000

Counsel:

First Plaintiff                :     Mr R M Robson QC & Mr J T Svehla
Second Plaintiffs           :     Mr R M Robson QC & Mr J T Svehla
Third Plaintiff               :     Mr R M Robson QC & Mr J T Svehla
Fourth Plaintiff             :     Mr R M Robson QC & Mr J T Svehla
Fifth Plaintiff                :     Mr R M Robson QC & Mr J T Svehla
Sixth Plaintiff               :     Mr R M Robson QC & Mr J T Svehla
Seventh Plaintiffs          :     Mr R M Robson QC & Mr J T Svehla
Eighth Plaintiff             :     Mr R M Robson QC & Mr J T Svehla
Ninth Plaintiff               :     Mr R M Robson QC & Mr J T Svehla
Tenth Plaintiff              :     Mr R M Robson QC & Mr J T Svehla
First Defendant             :     Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Second Defendants : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Third Defendants : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Fourth Defendant : No appearance

Solicitors:

First Plaintiff                :     Blake Dawson Waldron
Second Plaintiffs           :     Blake Dawson Waldron
Third Plaintiff               :     Blake Dawson Waldron
Fourth Plaintiff             :     Blake Dawson Waldron
Fifth Plaintiff                :     Blake Dawson Waldron
Sixth Plaintiff               :     Blake Dawson Waldron
Seventh Plaintiffs          :     Blake Dawson Waldron
Eighth Plaintiff             :     Blake Dawson Waldron
Ninth Plaintiff               :     Blake Dawson Waldron
Tenth Plaintiff              :     Blake Dawson Waldron
First Defendant             :     Freehills
Second Defendants       :     Freehills
Third Defendants          :     Freehills
Fourth Defendant          :     No appearance

CIV 2061 of 1996

Counsel:

First Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Second Plaintiff : M T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Third Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Fourth Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Fifth Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Sixth Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Seventh Plaintiffs : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Eighth Plaintiffs : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

First Defendant             :     Mr A R Beech & Ms A Hamersley
Second Defendant         :     Mr R M Robson QC & Mr J T Svehla
Third Defendant           :     Mr R M Robson QC & Mr J T Svehla
Fourth Defendant          :     Mr R M Robson QC & Mr J T Svehla
Fifth Defendant            :     Mr R M Robson QC & Mr J T Svehla
Sixth Defendant            :     Mr A R Beech & Ms A Hamersley

Solicitors:

First Plaintiff                :     Freehills
Second Plaintiff            :     Freehills
Third Plaintiff               :     Freehills
Fourth Plaintiff             :     Freehills
Fifth Plaintiff                :     Freehills
Sixth Plaintiff               :     Freehills
Seventh Plaintiffs          :     Freehills
Eighth Plaintiffs            :     Freehills
First Defendant             :     Edgar & Co
Second Defendant         :     Blake Dawson Waldron
Third Defendant           :     Blake Dawson Waldron
Fourth Defendant          :     Blake Dawson Waldron
Fifth Defendant            :     Blake Dawson Waldron
Sixth Defendant            :     Edgar & Co

Case(s) referred to in judgment(s):

Agip (Africa) Ltd v Jackson [1990] 1 Ch 265
Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd [1995] 57 FCR 360
Australian Growth Resources Corporation Pty Ltd v Van Reesema (1988) 13 ACLR 261
Bell Group Ltd v Westpac Banking Corporation (2000) 104 FCR 305
Brady v Stapleton (1952) 88 CLR 322
Breen v Williams (1996) 186 CLR 61
Cadogan v Cadogan (1977) 3 All ER 831
Chew v The Queen (1992) 173 CLR 626
Cohen v Cohen (1929) 42 CLR 91
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Commonwealth Bank of Australia & Ors v The Law Debenture Trust Corporation plc, unreported; SCt of WA (Templeman J); Library No 980023; 27 January 1998
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82
Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10
General Steel Industries Industries Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125
Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483
Home Office v Harman [1983] 1 AC 280
Hospital Products Ltd v United States Surgical Corporation & Ors (1984) 156 CLR 41
Howard Smith Ltd v Ampol Petroleum Ltd [1974] 48 ALJR 5
J L Holdings Pty Ltd v Queensland (1997) 189 CLR 146
La Rosa; Ex parte Norgard v Rocom Pty Ltd
Mann v Medical Defence Union Ltd, unreported, FCA (Ryan J); VG 131/1993; 7 February 1997
Marchesi v Barnes (1970) VR 434
Miller v Scorey [1996] 3 All ER 18
Mills v Mills (1937-38) 60 CLR 150
Morgan v Banning (1999) 20 WAR 474
National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd, unreported, Federal Court of Australia (Lindgren J); 564/98; 28 May 1998
Ngurli Ltd v McCann (1954) 90 CLR 425
Nocton v Lord Ashburton [1914] AC 932
Permanent Building Society (In Liquidation) v Wheeler (1994) 11 WAR 187
PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515
R v McNeil (1922) 31 CLR 76
Re New World Alliance Pty Ltd; Sycotex Pty Ltd v Baseler (1994) 122 ALR 531
Re Wakim; Ex parte McNally (1999) 198 CLR 511
Renowden v McMullin (1970) 123 CLR 584
Richard Brady Franks Ltd v Price (1937) 58 CLR 112
Royal Brunei Airlines v Tan [1995] 2 AC 378
South West Forest Defence Foundation v CALM (1996) 131 FLR 225
Spies v The Queen (2000) 201 CLR 603
Sybron Corporation v Barclays Bank plc [1985] 1 Ch 299
United Dominions Corporations Ltd v Brian Pty Ltd (1985) 157 CLR 1
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285

Case(s) also cited:

Abela v Giew (1964) 81 WN (Pt 1) (NSW) 344
ACIL v Woodings (1996) 16 WAR 388
Agar v Hyde [2000] HCA 41
Agip (Africa) Ltd v Jackson (1990) Ch 265
Amon v Raphael Truck and Sons Ltd [1956] 1 QB 357
Anshun v Port Melbourne Authority (1981) 174 CLR 589
Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; 11 May 2000
Atkinson v Fitzwalter [1987] 1 WLR 201
Australasian Conference Assoc Ltd v Mainline Constructions Pty Ltd (1978) 141 CLR 335
Australian Insurance Brokers Ltd v Hudig Langeveldt Pty Ltd (No 2) (1991) 7 WAR 343
Australian Insurance Brokers Ltd v Hudig Langeveldt Pty Ltd [1988] WAR 44
Baker v Official Trustee, FCt Fed C of A; 3 August 1995
Banque Commerciale v Akhil Holdings Ltd (1990) 169 CLR 279
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567
Barton v Official Receiver (1984) 4 FCR 380
Betjemann v Betjemann [1895] 2 Ch 474
Bakewell v Deputy Federal Commission of Taxation (SA) (1937) 58 CLR 743
Borlands Trustee v Steel Brothers & Co Ltd [1901] 1 Ch 279
Brady v Stapleton (1952) 88 CLR 322
Breen v Williams (1996) 186 CLR 71
Brickfield Properties Ltd v Newton (1971) 1 WLR 862
Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Caboche v Ramsay (1993) 119 ALR 215
Cadogan v Cadogan [1977] 3 All ER 831
Cannane v J Cannane Pty Ltd (1998) 192 CLR 557
Carson v Wood (1994) 34 NSWLR 9
Commonwealth of Australia v White [1999] VSC 262
Cohen v Cohen (1929) 42 CLR 91
Coles Myer v FCT (1993) 176 CLR 640
Coles Myer v FCT [1991] 91 ATC 4087
Commercial Bank of Australia v Amadio (1983) 46 ALR 402
Commonwealth v Duncan [1981] 81 ATC 4228
Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455
Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1
Consul Development Pty Ltd v DPC Estates (1975) 132 CLR 373
Dare v Pulham (1982) 148 CLR 658
Deputy Federal Commissioner of Taxation (Vic) v Jones (1998) 98 ATC 4374
Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234
Dougherty v Nationwide News Pty Ltd (1967) 86 WN (Pt 1) (NSW) 181
Dye v Griffin Coal Mining Co (1998) 19 WAR 431
Earl of Chesterfield v Janssen (1751) 28 ER 82
Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10
Ex parte Mackay; In re Jeavons (1873) LR8 Ch App 643
Federal Deputy Commissioner of Taxation v Woodings (1995) 16 ACSR 266
Fernance v Nominal Defendant (1989) 17 NSWLR 710
Fluor Australia Pty Ltd v The State Energy Commission of Western Australia; unreported; SCt of WA; Library No 6682; 10 April 1987
Foamlite Australia Pty Ltd v Campbell & Skilled Engineering Pty Ltd, unreported; FCt SCt of WA; Library No 7686; 31 May 1989
GNB Battery Technologies v Nicholson (Singapore) Pte Ltd, unreported; VSC; 17 November 1977
Goldberg v Western Continental Corporation Ltd, unreported; SCt of WA; Library No 8644; 18 December 1990
Hall v Dyson 117 ER 1481
Hamersley Iron Pty Ltd v Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union of Workers - Western Australian Branch [2000] WASC 66
Henderson v Henderson (1948) 76 CLR 529
Home Office v Harman [1983] 1 AC 280
Homestyle Pty Ltd v City of Belmont [1999] WASC 59
Hospital Products Ltd v United States Surgical Corporation & Ors (1984) 156 CLR 41
Hyde v Agar (1998) 45 NSWLR 487
In re Johns, Worrell v Johns [1928] Ch 737
In Re McHenry; McDermott v Boyd [1894] 3 Ch 290
Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16
Krakowski v Eurolynx (1995) 183 CLR 563
La Rosa; Ex Parte Norgard v Rocom Pty Ltd (1990) 21 FCR 270
Lawley v Hooper (1745) 3 Atk 278
Levy v Victoria (1997) 189 CLR 579
Lipkin Gorman v Karpnale Ltd [1992] 4 All ER 331
Londish v Gulf Pacific (1993) 45 FCR 128
In re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 5 ACSR 587
Mackintosh v Pogose (1895) 1 Ch 505
Mann v Medical Defence Union Ltd, FCA(Vic); 7 February 1997
Marchesi v Barnes [1970] VR 434
Marlborough Harbour Board v Charter Travel (1989) 18 NSWLR 223
McLoughlin v Smit Tak Towage (1995) 13 SR(WA) 208
Miller v Scorey [1996] 3 All ER 18
Mills v Mills (1938) 60 CLR 150
Morgan v Banning (1999) 20 WAR 474
Muschinski v Dodds (1985) 160 CLR 583
National Commercial Bank & Anor v Wimborne & Ors (1979) 11 NSWLR 156
National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd, unreported; FCA (NSW); 28 May 1998
NCSC v Monsoon Nominees Pty Ltd (No 3) (1990) 9 ACLC 66
Nerot v Wallace 100 ER 432
News Ltd v Australian Rugby Fotoball League (1996) 64 FCR 410
O'Keefe v Williams (1910) 11 CLR 171
O'Regan v Phillips, unreported; SCt of NSW; 31 July 1992
Official Assignee v NZI Life Superannuation Nominees Ltd [1995] 1 NZLR 684
Official Trustee v Alvaro (1996) 66 FCR 372
Overmeire v National Commercial Banking Corporations of Australia, unreported; SCt of WA; 29 May 1986
Pascoe Ltd (In Liq) v Lucas (1998) 27 ACSR 737
Pascoe Ltd (In Liq) v Lucas (1999) 33 ACSR 357
Price v Parsons (1936) 54 CLR 332
Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34
Re Apex Supply Co Ltd [1941] 3 All ER 473
Re Fiorino, unreported; Fed C of A; 14 April 1994
Re La Rosa; Ex parte Norgard v Rocom Pty Ltd (1990) 21 FCR 270
Williams v Lloyd (1934) 50 CLR 341
Reddaway v Banham [1896] AC 199
Renowden v McMullin (1970) 123 CLR 584
Richard Brady Franks v Price (1937) 58 CLR 112
Royal Brunei Airlines Sdn Bhd v Philip Tan Kok Ming [1995] 2 AC 378
Sims v Thomas [1814] 113 ER 916
Skin-Plex Laboratories PtyLtd v Baker [1999] WASC 81
Smith v Salzmann 156 ER 228
Smith v Town & Country Bank, unreported; SCt of WA; 18 December 1997
Soar v Ashwell [1893] 2 QB 390
State of South Australia v Peat Marwick Mitchell & Co (1997) 24 ACSR 231
Stone James v Pioneer Concrete WA Pty Ltd [1985] WAR 233
SW Forest Defence Foundation v CALM (1996) 131 FLR 225
Taylor vDeputy Federal Commissioner of Taxation (Vic) (1987) 18 ATR 715
The Bell Group Ltd & Ors v Westpac Banking Corporations & Ors (2000) 173 ALR 427
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394
The State of Queensland & Anor v J L Holdings Pty Ltd (1997) 189 CLR 146
Timber Engineering v Anderson (1980) 2 NSWLR 488
Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323
Trustee of the Property of James Neil Donovan and Noel Edward Stock v Stock Exchange of Melbourne Ltd [1975] VR 139
United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Williams v The Society of Lloyds [1994] 1 VR 274
Fuller, Re (1998) 86 FCR 85
Woodhead Australia v The Paspalis Group (1991) 103 FLR 122

OWEN J

This is an application by the plaintiffs to amend the statement of claim in an action in which, among other things, they seek to set aside certain securities which the companies had granted in favour of the defendants. The defendants have also sought leave to amend their defence and counterclaim. These reasons deal only with the application to amend the statement of claim.

Background

The background that I am about to outline comes largely (although not entirely) from material provided by the plaintiffs. It therefore reflects the case as the plaintiffs presently see it. I have used this material to set the scene, as it were. What is contained in this section should not, therefore, be regarded as findings of fact and nor, to the extent that it relies on interpretations of documents or events, should it be taken as indicating that I have formed a view to that effect.
The plaintiffs are numerous companies within the Bell Group of companies. Most of them are in liquidation. Others of the plaintiffs are the liquidators of one or more of the companies. The defendants fit into three categories. Some of them constitute a syndicate of Australian Banks (which I will call "the Australian Banks") that loaned moneys to the plaintiff companies or some of them. Another group of defendants is a syndicate of overseas Banks (which I will call "the Lloyds Syndicate") which also loaned moneys to the plaintiff companies or some of them. Another defendant is a corporation which is a director of one of the plaintiff companies.
The case involves a transaction by which control of assets of the Bell Group of companies was granted to certain Banks which were unsecured creditors of three companies only in the Group. Those companies were The Bell Group Ltd ("TBGL"), Bell Group Finance Pty Ltd ("BGF") and Bell Group (UK) Holdings Ltd ("BG(UK)"). Another company in the group was Bell Group NV ("BGNV"), which acted as a financier to other group members. The plaintiffs say that the transaction was entered into when TBGL and BGF were unable to repay loans owed to certain Australian Banks and that the Banks knew they were obtaining an advantage at the expense of other unsecured creditors. The plaintiffs also say that the directors effected the transaction in breach of their duties to companies within the Group at the expense of the other unsecured creditors and in the interest of the ultimate shareholder of the Group, Bond Corporation Holdings Ltd ("BCH") and Alan Bond. It is alleged that the Banks knowingly participated or assisted in the breaches of duties by the directors.
The critical transactions by which the Banks took security over the assets of the various companies occurred in January 1990. I will adopt the terminology used in the proposed amended statement of claim by which the transactions are referred to as "Transactions" and the series of transactions is referred to as "the Scheme". It will be convenient for me, at this point, to set out the text of par 19A of the proposed amended statement of claim because it encapsulates what this litigation is all about:
"The Banks and [companies in the Bell Group] were parties to a scheme (hereafter called the 'Scheme') constituted by a series of transactions (each, a 'Transaction') entered into during the period from about 8 January 1990 to about 31 July 1990 (the 'Scheme Period'), effected by or required by the instruments pleaded in [nominated paragraphs] whereby all significant and worthwhile assets of [companies in the Bell Group] were made available to the Banks for repayment of the debts owed to the Banks by BGF and BG(UK) in priority to the claims of all other creditors and future creditors of [companies in the Bell Group] (save for certain immaterial exceptions)."

In October 1987, TBGL was the parent company of a group of companies ("the Bell Group") controlled by the late Robert Holmes à Court. The Bell Group held investments in other listed companies. One of its investments was a minority interest of some 39.4 per centum in Bell Resources Limited ("BRL"), another public listed company controlled by Holmes à Court. BRL later changed its name to Australian Consolidated Investments Ltd ("ACIL"). I will use the designations "BRL" and "ACIL" interchangeably as the context requires.
Prior to the October 1987 stock market crash, Holmes à Court, through his companies, had sought to take over BHP. At one stage his interests had amassed over 40 per centum of BHP's share capital. After the October 1987 share crash, Holmes à Court abandoned his plans to take over BHP. He set about selling investments and discharging debts. By August 1988, Holmes à Court had managed to bring the bank debt of the Bell Group down to some $1.3 billion. BRL also realised assets and had cash in excess of $1 billion.
BCH was a public listed company controlled by Alan Bond through his private company Dallhold Investments Pty Ltd ("Dallhold"). Between May and August 1988, BCH acquired a majority shareholding in TBGL and gained effective control of BRL. BCH had approximately 57.6 per centum of BRL through TBGL's shareholding in BRL and other direct and indirect holdings in BRL. In August 1988 (after BCH obtained control of the Bell Group) Mr Peter Mitchell and Mr Anthony Oates were appointed directors of TBGL at the request of BCH and as representatives of BCH. On or about 13 October 1988, Mr David Aspinall was appointed managing director and chief executive of TBGL at the request of BCH and as a representative of BCH. He remained in those positions until at least November 1990.
Until about 1 January 1990, Aspinall was an employee of BCH and on or about 1 January 1990, became an employee of Western Australian Newspapers Ltd ("WAN"). At that stage WAN was also a member of the Bond Group. Messrs Oates and Mitchell were employees of BCH. Messrs Mitchell, Oates and Aspinall were directors of other Bond companies. They were receiving or entitled to receive fees and salaries in respect of their positions as officers of BCH and other Bond companies including certain of the Bell Group. They also had significant share interests in BCH and other Bond companies.
The plaintiffs' case is that once BCH had gained control of the Bell Group and the BRL Group, the Bond Group interests set about accessing the $1 billion odd in cash from BRL.
The Bell Group, which BCH took over, had two main classes of financiers, namely convertible bondholders and Banks. The convertible bondholders were owed some $550 million. There were five bond issues:
1.First BGNV issue
In December 1985 bonds with a value of $75,000,000 were issued by BGNV to the public. The proceeds were on‑loaned by BGNV to TGBL.
2.TBGL Issue
In December 1985 bonds with a value $75,000,000 were issued by TBGL to Heytesbury Securities Limited.
3.Second BGNV issue
In May 1987 bonds with a value of $175,000,000 were issued by BGNV to the public. The proceeds were on‑loaned by BGNV to BGF.
4.BGF Issue
In May 1987 bonds with a value of $75,000,000 were issued by BGF to Heytesbury Securities Limited.
5.Third BGNV issue
In July 1987 bonds with a value of £75,000,000 were issued by BGNV to the public. The proceeds were on‑loaned by BGNV to BGF.
The terms of each bond issue differed slightly. Under each BGNV issue, TBGL guaranteed the liability of BGNV. Under the BGF issue, TBGL guaranteed the liability of BGF. The bonds were convertible into shares in TBGL on certain terms. If not converted, the bonds were redeemable. Under each bond issue The Law Debenture Trust Corporation plc ("LDTC") acted as trustee for the bondholders.
As I have said, Holmes à Court had reduced the bank debt to some $1.3 billion by the time the Bond Group interests took over the Bell Group. The reduction was effected through asset sales.
By the end of 1989, approximately $132,000,000 was owed to six Australian Banks in varying amounts. About £60,000,000 (approximately $131,000,000) was owed to the Lloyds Syndicate Banks. The amounts owed to the Australian Banks were owed under various facilities. None were secured. They were all due for repayment by the end of July 1989. The amounts owed to the Lloyds Syndicate Banks were owed under a single agreement entitled the Restated Lloyds Facility Agreement dated 27 August 1987. This loan was also unsecured. It was repayable in May 1991.
It follows, according to the plaintiffs, that both the bonds and the bank debt were unsecured. However, in 1987, TBGL had entered into a Negative Pledge Guarantee with the Banks under which TBGL was bound to ensure that neither it nor any of its relevant subsidiaries would grant security (save for immaterial exceptions) without the consent of each bank which was a party to that Negative Pledge Guarantee.
At the material time there were two main assets of the Bell Group. One asset was the shareholdings in BRL (ACIL). The other was the shareholdings in Bell Publishing Group Pty Ltd ("BPG"), which controlled "the West Australian" newspaper, other newspapers and a printing works called Bell Group Press. A feature of the asset and liability structure of the Bell Group was that the borrowing companies (BGF from the Australian Banks and BG(UK) from the Lloyds Syndicate) did not hold these two main assets of the group. The parent, TBGL, was the guarantor of these borrowings.
Once BCH had assumed control of the Bell Group it took over the treasury and administrative functions of the latter. The plaintiffs say that by the beginning of 1989, BCH realised that it would not be able to repay the Bell Group's Australian Bank facilities as they fell due. BCH set about the task of refinancing the obligations to the Australian Banks. In about March 1989, BCH approached the Lloyds Syndicate Banks to release TBGL from the negative pledge structure so that the Australian Bank loans could be refinanced on a secured basis. Further, BCH approached the Australian Banks seeking an extension of their facilities. Neither the Lloyds Syndicate Banks nor the Australian banks agreed to these requests.
At the same time, BCH was coming under quite substantial financial pressure from other sources. In 1988, BCH had embarked on a take over scheme for a United Kingdom based company called Lonrho. Lonrho resisted the attempt and in November 1988, released a detailed report on the finances of the Bond Group (including the Bell Group) entitled the "Lonrho Report". The report alleged that both the BCH Group and the Bell Group were insolvent. In May 1989, BCH was the subject of a current affairs television report on the programme called "Four Corners". In the programme queries were raised about many aspects of the company's 1988 accounts and adverse comments were made about its financial position.
In April 1989, BRL released its half yearly accounts. They disclosed substantial borrowings by BCH. In May 1989, BCH announced the sale of its brewing assets to BRL. The agreement proposed was that the borrowings from BRL would be converted into a $1.2 billion deposit on the purchase of the brewing assets.
The Banks allege that in order to avoid a winding‑up of the Bell Group of companies the directors believed that it was necessary to consider and implement a restructuring of the financial position of each company in the Bell Group of companies.
The next part of this background includes a recitation of some material concerning what the plaintiffs say is the financial predicament of BCH and the Bond group of companies generally. It may seem a little strange that this material finds its way into the background of a dispute about the Bell Group. However, some persons were directors of both Bell and Bond companies. The plaintiffs wish to amend the statement of claim to allege that the directors acted in a conflict of interest situation, namely that they were acting in the interests of Bond companies rather than Bell companies. Accordingly, the plaintiffs see the financial position of the Bond companies as relevant. I have also included material about publicity given to these matters and to the activities of the Banks during this period. This material is seen as relevant to, among other things, the state of knowledge of the Banks. To the extent that this litigation involves claims under the Barnes v Addy principle, the Banks state of knowledge is an issue.
BCH had a corporate planning and development department which was headed by Mitchell. In May 1989, BCH reviewed its financial position and concluded that there was a possibility of restructuring the entire group. The restructuring proposal included asset sales and the repurchase of bonds which had been issued by BCH, TBGL and BRL at a discount. Under the May review, it was proposed to repurchase the Bell Group bonds (with a face value in excess of $500 million) for some $87,300,000. BCH concluded that if it was able to carry out the proposed restructure the Bond Group would have a net worth of some $1.1 billion. Without the restructure it would be insolvent.
From about at least May 1989 until well into 1990, BCH actively examined proposals for restructuring the Group developed by Mitchell's planning and development department. Each proposal had a common element. The bonds that had been issued by the BCH Group, the Bell Group and the BRL Group were selling at a significant discount to face value. The proposals involved acquiring the bonds at a discounted value, thereby generating shareholder value. The proposals went by a variety of names including Project Benjamin (dated 27 July 1989), Project Phoenix (26 August 1989), the Lebow Proposal (29 January 1990) and the Bond/Bell Group Restructure of February 1990.
The intention of the Bond Group to restructure was widely publicised and was a matter of public record. It was formally announced on 20 October 1989. The intention of BCH to repurchase the bonds issued by BGNV and TBGL (among other companies) was referred to in the auditors report included in the BCH annual accounts dated 13 November 1989.
On 18 December 1989, the Board of BCH met and discussed restructuring proposals for BCH. The Board instructed Aspinall to liase with Mr Mitchell in the preparation of a letter to Mr Clarke of the National Australia Bank "seeking the bank's continuing support during this difficult period and stressing the importance of Bond Corporation's continuing existence". On 5 February 1990 the "Phoenix" proposal was considered by the board of BCH. Price Waterhouse was retained to review its feasibility. The further restructure proposal dated 8 February 1990 provided (among other things) for the purchase of the Bell Group bonds at a discount.
The plaintiffs says that at no time prior to 26 January 1990 did the directors of TBGL develop a financial restructuring proposal for the Bell Group independent of the proposal put forward by BCH for the Bell Group. According to the plaintiffs, at all times prior to 26 January 1990 the restructuring proposal was viewed by the Bell Group directors (to the extent that they considered the restructuring at all) from the point of view of BCH, rather than from the point of view of the Bell Group and its creditors.
Until July 1989, the attempts to renegotiate the bank loans to the Bell Group had been carried out by Oates (the Chief Financial Officer of BCH) and Mr Simon Farrell, an employee of BCH. In July 1989, Mr Peter Beckwith (the Chief Executive Officer of BCH) instructed Aspinall and Mr Colin Simpson (Aspinall's Executive Assistant) to sort out the bank loans to the Bell Group.
In July 1989, Simpson met with the Australian Banks to seek an extension of the bank loans. Some of the Banks raised the need for security during these meetings. At the same time, Oates once again approached the Lloyds Syndicate Banks to seek to dismantle the negative pledge structure.
On 6 September 1989, the Commonwealth Bank of Australia ("CBA") (one of the Australian Bank lenders) demanded repayment by BGF of some $12,000,000. On 14 September the Bank made a demand on TBGL under its guarantee. On 20 September 1989 the demands were withdrawn. The plaintiffs say that BGF and TBGL were unable to meet the demands but that the Bank decided to pursue security as the best option. Extensive negotiations took place between the Banks and TBGL. The Australian Banks wanted security. The Lloyds Syndicate Banks were not prepared to dismantle the negative pledge structure unless they received a similar security to that being offered to Australian Banks.
The plaintiffs allege that one issue which concerned the Banks was whether the existing facility should be discharged and a new facility with security granted or whether the existing facility should be extended on security. The Banks were advised that to grant a fresh security could expose them to the double jeopardy of the discharge of the existing facilities being regarded as a voidable preference and the danger of the security for the new facility being set aside. The Banks retained various solicitors to assist them in the negotiations to obtain security over the assets of the Bell Group. Allen & Overy and Mallesons Stephen Jaques (London) acted for the Lloyds Syndicate Banks. Parker & Parker acted for the Australian Banks. Ultimately, the three firms of solicitors advised all Banks. Mallesons (Australia) acted for one of the Australian Banks, Standard Chartered Bank Australia Limited ("SCBAL").
In September 1989, the Banks also received a cash flow from the Bell Group for the period from July 1989 which disclosed that BPG's cashflow (the only then material operating enterprise of the Bell Group) was not sufficient to meet the interest commitments of the Bell Group to the Banks and bondholders. It also revealed that the receipt of the full proceeds of the sale of certain shareholdings and the receipt of dividends and management fees relating to shareholdings in ACIL and other nominated companies was critical to meet the shortfall of the cashflow.
The plaintiffs allege that at this time, each Australian Bank:
(a)wanted its loan repaid and did not wish to extend the loan;
(b)believed the other Australian Banks also wanted their loans repaid and did not wish to extend their loans;
(c)was aware the Bell Group was unable to repay all or any significant part of the Australian Bank loans and believed that no Australian Bank would stand by and allow another to be repaid without a commensurate repayment of its own loans; and
(d)was aware the Bell Group of companies could not provide it with security without the consent of all the Banks and that no bank would consent unless it too received security.
It was then proposed that the Australian Banks accept security by the Bell Group (the securities to be shared by the Lloyds Syndicate Banks) and that they extend their loans to May 1991. The proposal envisaged that the Bell Group of companies would reduce the bank loans by approximately $60,000,000 prior to May 1991 and that they would refinance the bank loans at that time.
The plaintiffs say that the choice faced by the Australian Banks was to press for payment, which inevitably would have led to the liquidation of the group in which the Banks would prove as unsecured creditors, or to extend their loans on security. The latter option may have been effective to give the Banks priority over the other unsecured creditors. At worst (or so the Banks were then advised by their lawyers), it may have left the Banks as unsecured creditors. In other words, the Banks were being offered a transaction which could improve their prospects of recovering their loans at the expense of other creditors but not leave them worse off. This is a central feature of the plaintiffs' case against the Banks.
From about late September 1989, the Banks worked together to agree on common terms and conditions. A meeting was held on 4 October 1989 attended by representatives of all the Banks. Among other matters, the meeting discussed the formulation of common terms and conditions under which all the Banks could continue their existing facilities. The meeting formulated a revised terms. This document was refined from time to time until the execution of the transaction documents.
Meanwhile, the pressure on the Bond Group continued to mount. On 18 September 1989, the National Australia Bank Ltd ("NAB") appointed investigating accountants as syndicate representatives to inspect books and records of Bond Brewing Holdings Group. Further, on 20 October 1989, BCH announced a loss of $980,000,000 which was the then largest corporate loss in Australian history.
On 21 October 1989, Alan Bond announced to the public the proposal to buy back bonds at a discount and thereby save the group. On 27 October 1989, the Banks received a formal opinion from senior counsel on the proposal for the Banks to take security over the assets of the Bell Group. The advice was given on the assumption that the security providers were presently insolvent and would eventually be wound up. Senior counsel advised, inter alia, that if both assumptions were correct, it would not avail the Banks either to extend the existing facilities or to discharge the existing facilities and grant new facilities with security.
On 16 November 1989, BCH issued its annual report. The auditor's report was heavily qualified in relation to the carrying value of numerous assets. It stated that unaudited information indicated that BCH and the Group's losses were continuing. The auditors stated that "there is some doubt that BCH and the BCH Group will be able to continue as a going concern".
During December 1989, several matters of significance occurred. On 4 December 1989, SCBAL terminated its facility with BGF and made demand on BGF for immediate payment of the debt owed by BGF to SCBAL. On 7 December 1989, SCBAL made further demand on BGF for payment of its debt and issued a statutory demand under s 364(2) of the Companies (Western Australia) Code, which is the predecessor to Div 2 of Pt 5.4 of the Corporations Law. On about 8 December 1989, SCBAL informed TBGL that BGF had failed to pay the amount demanded and made demand on TBGL for immediate payment under its guarantee. On about 11 December 1989, SCBAL made further demand on TBGL for payment of its debt and issued a statutory demand. The indebtedness of BGF to SCBAL was not repaid in accordance with the demands.
Aspinall wrote to SCBAL asking it to withdraw the demand notices. He said that if they were not withdrawn by 18 December 1989 an event of default would arise under some of the existing facility arrangements. This could lead to a call up of the Banks' loans and of Bell group convertible bond issues. Aspinall also informed SCBAL that certain subordinated debts would either share in any receivership or liquidation on the same level as the existing bank debt or would rank ahead of the existing bank debt. Aspinall also told SCBAL that if the letters of demand and notices were not withdrawn by 18 December 1989, the directors were bound to notify an event of default to LDTC as trustee for the BGNV bondholders.
SCBAL took legal advice on the substance of Aspinall's suggestion that the Banks may rank pari passu with the bondholder debts. Their advice was that whilst it was unlikely that the subordinated debt would rank ahead of unsecured creditors, there was a risk that it may rank equally with unsecured creditors. SCBAL instructed its solicitors to withdraw the notices. Formal notice to that effect was given by SCBAL's solicitors on 19 December 1989.
The plaintiffs allege that the failure by TBGL to comply with SCBAL's demand gave rise to an event of default under the terms of the three BGNV Trust Deeds and that at least Simpson, SCBAL and Mallesons were aware of this. This default was not notified to LDTC. The plaintiffs also allege that the possibility of the subordinated debt ranking at least equally with the claims of unsecured creditors was, and continued to be, a matter of concern to the Banks as the restructuring proposal was being negotiated. It was the subject of on‑going legal advice and opinion and of inter‑Bank and intra‑Bank communications.

Another matter which occurred in December 1989 was that the Bond Group lost control of BRL and with it access to management fees. In late November or early December 1989, companies associated with the Adsteam group had sought to have a receiver appointed. The Bond Group settled the proceedings by surrendering control over BRL to an independent board of directors.
December 1989 also saw the occurrence of what came to be referred to as the Academy transaction. In substance, TBGL caused a subsidiary of BRL to purchase the issued share capital of Academy Investments No 2 Pty Ltd ("Academy") from TGBL for about $100,000. Another subsidiary of BRL advanced about $26,000,000 to Academy to enable it to repay some of the debt that Academy owed to TGBL. The plaintiffs say that the assets owned by Academy were worthless and that it was wrong for the directors to have caused BRL's subsidiaries to enter into the transaction. The plaintiffs also say that TGBL needed the $26,000,000 in part to pay interest on the on‑loan of the First BGNV Issue to BGNV and to pay approximately $8,250,000 to LDTC for interest due on the TBGL issue. After the independent directors were appointed to BRL they sought repayment of the monies and ultimately issued a statutory demand to TBGL.
The plaintiffs allege that prior to 26 January 1990, the advice given to the Banks, and accepted, was that there was a risk the security transactions may be set aside. However, the Banks would be no worse off if that were to happen than if they did not enter into the transactions.
On 29 December 1989, receivers were appointed by the Supreme Court of Victoria to the Bond Brewing Holdings Ltd brewing operations on the application of NAB. As a result, the shares of BCH and BRL were suspended from trading by the ASX. Before the receiver was appointed NAB had been warned by the solicitors for the Bond Brewing companies that it would cause defaults to arise under a number of BCH's bond issues as well as its bank debt and their likely acceleration.
In early January 1990, the US bondholders of Bond Brewing Holdings sought repayment of approximately $US510,000,000.
On 8 January 1990, the Banks commenced to enter into the documents necessary to give effect to the Scheme. They entered into a Security Trust Deed and Inter Creditor Agreement under which, inter alia, Westpac agreed to act as trustee for and as agent for the Australian Banks and the Lloyds Syndicate Banks.
On 26 January 1990, BGF, TBGL, and the Australian Banks entered into the Australian Banks Supplemental Agreement ("ABSA") and the Australian Banks Facilities Agreement ("ABFA"). BGF, TBGL, BG(UK), the Lloyds Syndicate Banks and Westpac entered into an agreement dated 26 January 1990, and entitled Lloyds Supplemental Agreement No 2 ("LSA No 2"). By those agreements, those companies and others agreed with the Banks that, subject to certain conditions, the indebtedness to the respective Banks should be governed by the terms of those agreements and certain other instruments that were contemplated by their terms. In substance, the Banks extended their loans until 31 May 1991 and took security over all the worthwhile assets of the Bell Group. Various security documents were thereafter entered into to give effect to these arrangements.
By a subordination deed dated 15 February 1990, certain companies (including TBGL and BGF) entered into a subordination agreement with the Banks whereby each agreed that until the Banks' debt had been repaid they would:
(a)subordinate rights and claims as a creditor of certain of the Bell Group companies to any rights and claims by the Banks against such companies;
(b)not demand any moneys owing or seek to enforce their rights or claims against the Bell Group companies without the consent of the Banks until liquidation of that company; and
(c)hold on trust for the Banks any payment received as creditor prior to such liquidation and any distributions received in any such liquidation.
Another central element of the plaintiffs' case is that although the Scheme documents provided for the extension of the Australian Bank loans and the Lloyds Syndicate loans to 31 May 1991, it was evident before 26 January 1990 that the Bell Group would not be able to observe the agreements entered into. The terms of the transactions were such that the affairs of the Bell Group effectively would fall under the control of the Banks as soon as the security was given and at the latest by May 1990.
The plaintiffs allege that by 26 January 1990 many of the Bell Group companies including TBGL, BGF, BGNV and BG(UK) were insolvent, or alternatively were nearly insolvent, of doubtful solvency or would inevitably become insolvent. The grounds for so alleging are extensively pleaded and particularised. For example, the plaintiffs say that the borrowers in the Bell Group could not repay the Banks although the Banks wished to be repaid. Further, because of their guarantees and subordinations, other non‑borrower Bell Group Companies such as BPG, secured their assets in favour of the Banks as part of the refinancing agreements and become insolvent. The plaintiffs also allege that the Banks were aware of the events which needed to occur for the Bell Group to be able to pay its debts.
In February 1990, a meeting of all the Bank representatives was held in Perth. This was convened by Westpac to inquire into the status of the subordinated bonds and to establish how the Bell Group would perform over the ensuing months. The plaintiffs say that the Banks were aware that in order to support existing debt structure through to 31 December 1990 there would need to be asset sales and repayments of loans by Bond Group companies. According to the agreement with the Banks, however, any proceeds from asset sales would have to be paid to the Banks. The plaintiffs say, therefore, that it was obvious the Bell Group would not meet its obligations even in the short term unless the Banks waived their rights under the agreements. The survival of the Bell Group in the whole of the ensuing twelve months was completely in the Banks' hands.
On 31 July 1990, BGNV entered into a subordination agreement with the Banks (the "BGNV Subordination Deed") in like terms to that referred to previously in respect of the debts owed to it by TBGL and BGF, each of whom had provided security to Westpac, as trustee for and agent for the Banks. Under the terms of the initial transaction documents, TBGL had agreed to use reasonable endeavours to procure BGNV to enter into the subordination deed.
As at 26 January 1990, the Bell Group had significant external creditors other than the Banks. These included (in approximate amounts) $550,000,000 to bondholders, $120,000,000 to the Deputy Commissioner of Taxation, $22,500,000 to Godine Developments Pty Ltd, $168,500 to the State Government Insurance Commission and $56,000 in declared but unpaid dividends. In relation to tax, an audit had been commenced in 1989. By 26 January 1990, tax assessments of about $34,000,000 had issued and officers of the department had foreshadowed further assessments to the Bell Group for about $63,000,000. Eventually, the additional assessments were issued in an amount of approximately $83,000,000.
On or about 12 February 1990, Bell Group Press was sold for approximately $25,800,000. The initial arrangement was for the proceeds to be held by Westpac and distributed to the Banks at the end of February 1990. The Banks, however, waived the obligation and allowed about $9,000,000 to be deducted to meet termination payments and other costs and expenses with the balance of the money held over until 30 March 1990. At the end of March, the Banks waived their rights to this sum and held it over to 30 April 1990. On 11 May 1990, the Banks permitted those moneys to be used to meet the liability of BGNV and BGF for interest in respect of the Second BGNV Issue of $17,500,000 and the BGF Issue of $7,500,000 that had been due on 4 May 1990.
It is now necessary to go back to July 1989. On 13 July 1989, LDTC made its first request of the Bell Group for certificates of solvency for each of the bond issues. Previously, LDTC had requested compliance certificates. The insolvency certificates were requested "in light of concerns which have been expressed to us on behalf of certain holders of bonds convertible into shares of the guarantor and in the light of current press comments".
The form of certificate sought was refused by the Bell Group. In particular, LDTC had sought a certificate that BGNV, BGF and TBGL were solvent. Ultimately, on 19 October 1989, LDTC was provided with certificates of solvency as follows:
"The company certifies that it is able to pay its debts and meet its obligations in respect of the Trust Deed as and when they fall due and the realisable value of the company's assets exceeds the amounts of its liabilities, including prospective and contingent liabilities".
Further certificates of solvency were sent dated 11 December 1989. Certificates of solvency were requested again by LDTC as at 31 December 1989. On 22 January 1990, LDTC wrote to TBGL requesting certificates of compliance "in the usual form in view of recent events". Compliance certificates dated 24 January 1990 were sent by the Bell Group.
The plaintiffs allege that information was deliberately withheld from LDTC by the Bell Group companies contrary to their obligations under the trust deeds. It is also alleged that the Banks (or some of them) were aware that relevant information was not being given to LDTC.
After 3 July 1990, several attempts were made to restructure the Bell Group. None of the attempts came to fruition. Eventually the companies collapsed. By April 1991 defaults had been committed under the terms of the Scheme documents. On 18 April 1991 the Banks appointed receivers and managers to BGF and BPG. The receivers and managers proceeded to sell assets. They obtained some $226,000,000 from the publishing and printing assets. In addition, Westpac, as trustee of agent for the Banks sold the ACIL shares under share mortgages for about $60,000,000. There were some other recoveries made by the Banks, for example about $900,000 from debtors of BGF. The monies have been distributed to the Banks.
In July 1991 Mr Geoffrey Totterdell of Price Waterhouse was appointed liquidator of TBGL. In March 1993 Mr Antony Woodings was appointed as liquidator of BGF. From time to time other companies in the Bell Group have been wound up.

The Proceedings Generally

On 18 December 1995 the plaintiffs commenced these proceedings by application in the Federal Court. On 16 October 1996 the first version of the statement of claim was filed. The parties are, by and large, the same as they are at present except that Aspinall, Oates, Mitchell, Bond and other persons were sued in their capacity as directors of various companies.
The gravamen of the claims as outlined in the original statement of claim had many of the central features of the claims that are now advanced. It involved allegations that at the time when the Banks took the securities the Bell Group companies were insolvent. By causing the companies to grant the securities the directors were in breach of their duties. There were further breaches of duty by the holders of shares in ACIL. It was alleged that the Banks knew of the breaches of duty and they knowingly participated in, and knowingly received benefits of, those breaches. There are additional and other claims by reason of which the plaintiffs alleged the Banks were liable to repay the proceeds from the asset realisations and were liable also in damages.
At some point (and for reasons that are not relevant for the purposes of this application) the proceedings were discontinued as against the directors. The statement of claim underwent refinement and amendment. On 19 May 1997 the Banks lodged a defence and counterclaim. There is no need, at this stage, to describe the defence in detail. It is sufficient to say that the Banks challenge the assertions made by the plaintiffs as to the status of the subordinated debt with a consequent impact on the position brought about by the entry into the Scheme documents on 26 January 1990. The Banks also challenge the assertion that the directors had acted in breach of their duties or that the Banks were aware they had done so. It is put that the Banks believed or were reasonably entitled to believe that the directors were of the view that entry into the Scheme documents provided the Bell Group with real and substantial benefits. It is also put that the Banks did not know that the Bell Group companies were insolvent.
In the counterclaim the Banks call in aid s 52 of the Trade Practices Act 1974 (Cth). They say that between 1985 and 1989 TGBL, BGNV and BGF represented to them that their liabilities arising from the bond issues were subordinated to, and ranked behind, the indebtedness of the companies in the group to the Banks. If, as is alleged by the plaintiffs in the statement of claim, the on‑loans were not subordinated, the representations were misleading and deceptive. Further, if the Scheme documents are liable to be set aside because of the unsubordinated status of the on‑loans the Banks have suffered loss and damage as a result of the misleading conduct.
The proceedings were under management by Carr J in the Federal Court of Australia. On 16 June 1999 his Honour commenced to hear an application by the plaintiffs to amend the eighth amended statement of claim. There was also listed for hearing a motion by the Banks for leave to amend their defence and for leave to proceed with the cross‑claim. On 17 June 1999 the High Court handed down its decision in Re Wakim; Ex parte McNally (1999) 198 CLR 511. Due to the jurisdictional uncertainties that the decision raised, the proceedings before Carr J came to an abrupt halt. Shortly thereafter the parties took out a series of fresh motions to ascertain whether the Federal Court had jurisdiction to hear the action and, even if it did, whether the matter should be cross‑vested to this Court. In April 2000 Carr J decided that although the Federal Court did have jurisdiction, this Court was the more appropriate forum and that the action ought to be transferred: Bell Group Ltd v Westpac Banking Corporation (2000) 104 FCR 305. I should add that in June 1999 (and subject to the amendments that were the subject of the June listing) the action was close to being ready for trial. In fact a trial had previously been listed to commence in August 1998 but it was adjourned. The reasons for the adjournment are not now material but I think they included doubts about the finality of the pleadings and other matters having an impact on the readiness of the action to go to trial at that stage.
There is a further piece of background material which I should recite. On 1 October 1996 the Banks commenced an action in this Court (CIV 2061 of 1996) against LDTC, TGBL, BGF, Totterdell, Woodings and the State Government Insurance Commission (which has since changed its name to "Insurance Commission of Western Australia") ("ICWA"). The action concerns the TGBL bonds issued in December 1985 and the BGF bonds issued in 1987. On 25 July 1988 TBGL and BGF respectively entered into trust deeds with LDTC and the bondholder in relation to the terms of the bond issues. The trust deeds permitted LDTC (as trustee) to make modifications to the deed with the approval of TGBL or BGF as the case may be. The deeds also contained certain promises which, according to the Banks, were for the benefit of unsubordinated non-bondholder creditors. On 28 July 1988 the subordinated bonds were acquired by ICWA.
LDTC, at the request of ICWA, had executed certain supplemental deeds which purported to vary or modify the trust deeds. However the supplemental deeds were not to become effective unless they were executed by the liquidators of TBGL and BGF respectively. The Banks seek declarations against LDTC, ICWA, TBGL, BGF and their respective liquidators that in executing the supplemental deeds, LDTC has acted improperly in a number of respects. It is also alleged that the liquidators would be acting improperly if they executed the deeds. The plaintiffs seek injunctions to restrain LDTC from giving effect to the supplemental deeds and to restrain the liquidators from executing them. It is alleged against the liquidators that the execution by them of the supplemental deeds, on behalf of TBGL and BGF respectively, would involve a breach by TBGL of the Scheme documents entered into in January 1990. In their respective defences, all the defendants have contended, in effect, that the Scheme documents are void or voidable and that they should be set aside. This, of course, is the same issue that arises in the CIV 1464 of 2000.
In Commonwealth Bank of Australia & Ors v The Law Debenture Trust Corporation plc, unreported; SCt of WA (Templeman J); Library No 980023; 27 January 1998 , the Court acceded to an application by the Banks that the proceedings be stayed generally pending finalisation of the (then) Federal Court proceedings. For all practical purposes the action remained dormant under the stay until the directions process took hold in this Court after the transfer of CIV 1464 of 2000. I mention it here because it is relevant to what has come to be referred to as the "overlap issues" between the two actions.

The Application to Amend – General Considerations

Not surprisingly, the statement of claim and the defence and counterclaim have undergone constant change. The statement of claim was amended once without leave and further with leave on 10 February 1997, 16 May 1997, 12 August 1997, 1 October 1997, 24 June 1998, and 24 December 1998. The pleading that is current is the "seventh amended statement of claim" (which I will call "7ASC"). What is before me is an application to bring into existence "the eighth amended statement of claim". I will refer to it as "8ASC". The minute detailing the proposed further amendments is not the first minute filed in relation to the eighth amended statement of claim. The defence and counterclaim has also been subject to regular review. It has been amended by leave granted on 12 August 1997, 2 October 1997, 20 October 1997, 24 June 1998 and 12 March 1999. An application to amend further the defence and counterclaim in accordance with a minute dated 14 July 2000 is extant. The further and better particulars of each of the statement of claim and the defence and counterclaim are voluminous and have, themselves, undergone revision from time to time. Some of those amendments have been in response to amendments made to the statement of claim. But there are some respects in which the approach taken by the Banks has itself altered. I am not reciting this history by way of criticism of the parties or their advisers. It simply reflects the complexity of the legal and factual issues with which the collapse of the Bell Group has been beset. It is a complexity which I fully appreciate.
The face of litigation has changed over recent decades. Commerce has become more complex and so too have the dispute resolution procedures that have to be employed when things go wrong. There is a need properly to manage a scarce public resource, namely the judicial and administrative functions of the courts. This has brought to the surface tensions between the imperatives of case management and the desirability of allowing a party to bring before the court the dispute that it really wants to air. Nowhere are these tensions better illustrated than in the decision of the High Court in J L Holdings Pty Ltd v Queensland (1997) 189 CLR 146. A myriad of considerations intrude into the decision making process when a judicial officer is asked to permit a party to amend its pleadings. Does the amendment disclose a cause of action known to law? Is it set out in a way that it is not embarrassing? What affect will the change have on the way the parties prepare for trial? Will it result in an unreasonable delay in bringing the matter to trial? Why was the new matter not included in the pleading at the outset or at an earlier time? Will the other party be prejudiced by the change, either because of the delay or the nature of the new material or for any other reason?

In the end, however, it all comes down to one simple point: the interests of justice. The pleadings should not be allowed to fetter or prevent an adjudication of the real issues between the parties. But nor should the interests of fairness to parties affected by a proposed amendment be ignored. The judicial officer is called upon to exercise a discretion. He or she must make a value judgment and must strike a balance between the competing interests. This can only be done according to the facts of the individual case.
The reason for having pleadings is well known. Put succinctly it is to delineate and confine the issues so that the parties will know the case they have to meet. The principles governing applications to amend are well known but I think it is necessary to say a little bit about them.
The plaintiffs wish to amend the statement of claim. The proposed amendments are many and various. The Banks oppose many of the amendments. They do so on the grounds that they do not disclose a reasonable cause of action, they are embarrassing and they may prejudice or delay the fair trial of the action. Not all of those bases apply to each of the proposed amendments.
In deciding whether to allow an amendment the judicial officer must decide whether there is a reasonably arguable cause of action. In this respect the task is very similar to that which the courts adopt in deciding whether to dismiss an action or claim summarily or to strike out a pleading or claim. The dicta of Barwick CJ in General Steel Industries Industries Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125 has long been the benchmark that the courts use. The jurisdiction summarily to terminate an action (or to deny the right to bring a claim at all) is to be sparingly employed and is not to be used except in a clear case where the court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. The authorities uniformly adhere to the view that a plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind it brings, unless the lack of a cause of action is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them (the pleadings) to stand would involve useless expense". At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or "so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; "so to speak apparent at a glance". As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court. But although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. As Dixon J put it in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91:
"A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process."
In General Steel Industries, Barwick CJ concluded his remarks by saying that great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, the exercise of the jurisdiction need not be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.
In other words the test whether the plaintiffs can demonstrate a reasonable cause of action is not whether, assuming they establish the underlying factual basis, they will or must succeed at trial but whether they could do so.
Looked at in its own right this action is just another piece of commercial litigation. However, it has assumed gargantuan proportions. It arose from one of the more notorious episodes in Australian commercial history. It has attracted the interest of the public. It is no secret that the Government of Western Australia, or perhaps more accurately one of its agencies is involved in the funding arrangements of the plaintiffs. At first glance that might indicate the proceedings are imbued with an element of the public interest, as opposed to matters that are of interest to the public (which is a different concept). I do not think the litigation can properly be seen as catering to the public interest in that sense. The involvement of the Government might equally be seen as furthering the commercial interests of the agency.
There is a great deal at stake for all parties. If the plaintiffs are successful the amount which the Banks will have to pay by way of disgorgement of the proceeds from the realisation of the assets and (perhaps) damages will be very significant. It will make a significant difference to the return that creditors will, or may, receive. The allegations made against the Banks are serious. It is no small thing for banks with an international presence and widespread operations to be accused of participating knowingly in a breach by directors of duties which they (the directors) owed to (among others) public companies. Apart from the sheer size of the payout with which they would be faced, the Banks also have a commercial reputation to protect.
Whatever may have been the position in 1998, the fact is that the pleadings have not yet closed. The identity of the parties who or which ought to be before the court is not even finalised. Estimates of the time that the trial will take vary from eight months to something considerably longer. Even if it is only eight months the court schedules are such that hearing dates could not be allocated at short notice. Accordingly, there will be a reasonable time before trial within which to accommodate the additional lines of inquiry and interlocutory processes and general preparation that will inevitably be brought about by the amendments.
The question of embarrassment, as it applies in the circumstances of this case, relates to the from of the proposed amendments. They must be enunciated in a way that permits the Banks to know precisely the case they have to meet. Prejudice can take many forms. It may arise, for example, because the passage of time will effectively deny the Banks an opportunity to investigate the factual basis and to gather evidence to meet it.
Taking into account all of the circumstances I have come to the view that if the plaintiffs can demonstrate an arguable cause of action that is pleaded in a way that is not embarrassing, I should lean towards allowing the amendments unless the Banks can demonstrate prejudice that cannot be cured by reasonable activity and efforts. Having heard the argument, senior counsel for the plaintiffs indicated that there were aspects of the statement of claim that could have been more happily phrased and that they would be changed to accommodate some of the objections raised by senior counsel for the Banks. I have also taken that matter into account.
I propose now to examine each of the broad areas that are the subject of the proposed amendments. Before doing so I wish to make some further general comments about the proposed pleading. The plaintiffs assert that it does not withdraw material facts, claims for relief or causes of action contained in 7ASC but that it does add further factual material and additional causes of action. In the main I think this is correct. The minute of 8ASC is not easy to read. In some instances, paragraphs from 7ASC have been renumbered, relocated and changed. Paragraphs 60 and 61 from 7ASC are examples. Some of the substantive paragraphs have been removed from the statement of claim and included in the further and better particulars, which is a separate document. Paragraphs 62 and 63 are examples. This has made the task following the text of the proposed amendments a little difficult. That is why in these reasons it will not always appear clearly whether individual passages were or were not in the previous pleading. It also explains why, when I am describing material facts, I have not always identified the paragraph number (whether in the minute of the statement of claim or the particulars) where it is to be found.
There are several versions of the minute of 8ASC. The one that is in the cleanest form extends to 120 pages. The accompanying particulars are over 500 pages in length. I started this exercise by attacking the pleading and particulars line by line and examining each objection that had been taken. It proved an impossible task. I have therefore taken a more general approach and have not dealt with every point. I hope that I have covered all of the items of principle and enough of the issues of form to enable the parties to reassess their respective positions in relation to the statement of claim.

The Equitable Fraud Claim – Factual Basis

It might properly be said that the most significant change which the plaintiffs wish to make in the pleadings relates to the addition of a claim sounding in equitable fraud. It will be convenient to commence with this proposed change. Equitable fraud, as a discrete cause of action, is not present in 7ASC although the plaintiffs assert that it does not extend the range of factual issues to any great extent. The Banks dispute this characterisation of the position.
Any comments that I make that are of a general nature run the risk of inaccuracy due to oversimplification of a complex legal and factual matrix. However, I think it is fair to say that the plaintiffs case as disclosed in 7ASC is largely a Barnes v Addy claim. It is predicated on a breach of fiduciary duty by the directors of the relevant companies. During the hearing reference was sometimes made to "misconduct" by the directors. If I use that term in these reasons I am doing so as a shorthand way of referring to a breach of fiduciary duty. It is trite to say that if there were no breach of a fiduciary duty it is difficult to see how the Banks could be liable, at least under that head. What I propose to do is examine the equitable fraud claim in a broad sense and then return to specific issues relating to the pleading of directorial misconduct.
The breaches of fiduciary duty alleged against the directors in, and which underpin the claims made in, 7ASC can broadly be described as lack of corporate benefit to the companies entering in to the transactions, failure of the directors to take into account the interests of creditors and the furtherance of an improper purpose. The 8ASC adds an allegation of a further instance of breach of duty, namely a conflict of interest. It also extends the claim to all companies coming within the definition "Bell Participant", namely any Bell group company that entered into a Transaction. Those companies within the Bell Group that are plaintiffs and those which were part of the Bell Publishing group were already caught by 7ASC. This now includes other companies within the Bell Group which entered into a Transaction but which were neither a plaintiff nor part of the Bell Publishing group. The allegations of misconduct against the directors are expanded to include participation in an equitable fraud.
In pleading the equitable fraud claim the plaintiffs call in aid the allegations in par 111 to par 126 and go on to say in par 65M (leaving out marked changes from the various minutes of 8ASC) :
"65M.Further, or alternatively, by reason of the matters pleaded in paragraphs 1 to 65K and paragraphs 111 to 125 the Scheme and the Transactions effected under the Scheme constituted:
(d)an imposition and deceit on the Bell Participants and their creditors (save for the Banks), future creditors or indirect creditors including LDTC as trustee for the BGNV Bondholders;
(e)an inequitable and unconscientious bargain upon each Bell Participant and/or
(f)a fraud on the insolvency laws;
and thereby, or in any event, was an equitable fraud entitling some or all of the first to twelfth plaintiffs to the relief claimed in the prayer for relief."
The relief claimed in the prayer for relief is, itself, broad ranging but includes, relevantly, a claim for equitable compensation. The reference to "first to twelfth plaintiffs" is to all current plaintiffs. Paragraphs 108 to 125 plead a similar equitable fraud claim on behalf of LDTC. This will depend on the fate of the application to join LDTC as the thirteenth plaintiff. Within par 111 to par 126 there is further incorporation of par 87 to par 89 and par 108 to par 110. In other words almost every allegation of fact in the pleading is called in aid of the equitable fraud claim. I have no intention of setting them out in detail, although I will return to some of them a little later. The plaintiffs conceded that the equitable fraud claim was, at least in part, designed to anticipate and meet the aspects of the Banks' defence and counterclaim, including that :
(a)the directors acted properly in entering into the Transactions as they believed and it was the fact, that the Transactions provided time to restore value to assets, enable the sale at reasonable value of those assets, explore the possibility of a restructuring of the financial position of the Bell Group;
(b)creditors or shareholders ratified any breach;
(c)there was an estoppel arising from representations contained in the minutes of directors' meetings provided to the Banks;
(d)there was a representation that the BGNV on‑loans were or would be treated as subordinated, (being the basis of the Bank's estoppel and misleading and deceptive conduct claims);
(e)the Australian directors acted and were entitled to act on the basis that the BGNV on‑loans were subordinated.
There are, of course, rules or conventions that frown on anticipatory pleadings. However, in the peculiar circumstances of this case I do not think the usual vices apply. From the plaintiffs' submissions, I think the following is an adequate summary of factual basis which, if established, could justify the allegation of an imposition or deceit on the Bell Participants and on external creditors:
(a)the financial condition of the Bell Group prior to the Transactions and the Scheme;
(b)the fact that immediately prior to the Transactions and the Scheme, the Bell Participants faced a situation where they would be wound up or have their assets liquidated unless they entered into a valid and effective restructuring of their financial position;
(c)the Transactions and their terms, including that by the security documents the Banks obtained security over all significant and worthwhile external assets as well as all significant intra Bell Group shareholdings and that all known intra Bell Group creditors of such security providers subordinated the debts owed to them by such security providers;
(d)the need for the Banks (the Australian Banks previously had no arrangements inter se and previously had no connection with the Lloyds Syndicate Banks) which were unsecured creditors of only three companies in the Bell Group (TBGL, BGF and BG(UK)) to enter into agreements to combine together for their common benefit as a class;
(e)the entry into the Scheme by the Banks and the Bell Participants;
(f)the detrimental and prejudicial effects of the Transactions and the Scheme upon creditors of the Bell Group, in particular external creditors, other than the Banks;
(g)the awareness of directors of the Bell Participants and the Banks of these matters;
(h)the breaches of fiduciary duties committed by some or all of the directors of the Bell Participants (which are alleged in pars 36A to 36P, 39A to 39E, 46 and 47 of 8ASC);
(i)the steps taken by the directors and the Banks to facilitate the entry into the Transactions and the Scheme by not calling up debts owed to the Banks and by information not being provided to LDTC as trustee for the BGNV Bondholders so as not to trigger a situation where those Transactions and the Scheme may not have been entered into or may have been opposed by LDTC; and
(j)the steps taken by the directors and the Banks between January 1990 and September 1990 to the same end.
What this leads to, the plaintiffs submit, is that the steps taken to restructure the financial position of the Bell Group which encompassed steps to buy back the public debt (which included the debts owed to the BGNV Bondholders), were to the advantage of the Banks as a class of creditors of a limited number of companies within the Bell Group and to the inevitable or probable detriment of other creditors. The arrangements were imposed on the Bell Participants and their external creditors without their consent and in a situation in which they would be detrimentally and prejudicially affected. All this occurred, the plaintiffs submit, in a context of actual or inevitable insolvency of the Group and where the external creditors were not told of matters which the directors and the Banks knew, believed or suspected about the financial position of the Group or what they intended to achieve from the Transactions. All of this amounts to misconduct by the directors and the Banks were aware of it.
The plaintiffs allege that in these circumstances and given the financial position of the Group and the terms and effects of the Transactions, for the debtors and some creditors (namely, the Banks) to enter into a private arrangement encompassing not only the debtors but also companies related to the debtors and without informing other creditors, constitutes an imposition and deceit.
The plaintiffs further assert (for similar reasons) that the Scheme and the Transactions constituted an inequitable and unconscientious bargain upon each of the Bell Participants and a fraud on the insolvency laws.

Equitable Fraud – Some Relevant Legal Principles

The equitable fraud claim is based on the fourth category of fraud mentioned in Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82 where Lord Hardwicke LC said, at 100:
"A fourth kind of fraud may be collected or inferred in the consideration of this court from the nature and circumstances of the transaction, as being an imposition and deceit on the other persons not parties to the fraudulent agreement."
Counsel for the Banks submitted that this category of fraud has as its foundation the knowing misrepresentation, by the transaction or agreement, of the true nature of the relationship and rights and obligations of the parties to that transaction or agreement, to third parties who are interested in and rely on their understanding of the transaction or agreement. Counsel for the plaintiffs submitted that it was not so limited and referred to the dicta of Viscount Haldane LC in Nocton v Lord Ashburton [1914] AC 932, at 952-54:
"But in addition to this concurrent jurisdiction, the Court of Chancery exercised an exclusive jurisdiction in cases which, although classified in that Court as cases of fraud, yet did not necessarily import the element of dolus malus. The Court took upon itself to prevent a man from acting against the dictates of conscience as defined by the Court…'. … In Chancery the term 'fraud' thus came to be used to describe what fell short of deceit, but imported breach of a duty to which equity had attached its sanction. What was laid down by Lord Eldon in this House in Bulkley v Wilford explains the nature of the duty. … But when fraud is referred to in the wider sense in which the books are full of the expression, used in Chancery in describing cases which were within its exclusive jurisdiction, it is a mistake to suppose that an actual intention to cheat must always be proved. A man may misconceive the extent of the obligation which a Court of Equity imposes on him. His fault is that he has violated, however innocently because of his ignorance, an obligation which he must be taken by the Court to have known, and his conduct has, in that sense, always been called fraudulent, even in such a case as a technical fraud on a power ... What it really means in this connection, is not moral fraud in the ordinary sense, but breach of the sort of obligation which is enforced by a Court that from the beginning regarded itself as a Court of conscience …"

The banks also cited Miller v Scorey [1996] 3 All ER 18. However, that was a case where the documents were used to commence an entirely fresh action. That is not this case.
I do not wish to get into the argument that developed between the parties about who should have disclosed the relevant issues and whether, as contended for by the plaintiffs, the Banks should have taken out an application alleging a civil contempt action by the plaintiffs. It seems to me that the critical issue is whether, to use the phrase adopted by Ryan J, the proposed use bears a reasonable relation to the prosecution of the case sought to be made. It is not hard to see why his Honour would have concluded that an action for defamation was fundamentally different from one sounding in breach of contract. Here, LDTC was not a complete stranger to the subject matter of the action as pleaded in 7ASC. The liabilities to the BGNV bondholders are an essential part of that pleading. As I have already said, there is a similarity in the factual matrix from which the proposed causes of action in equitable fraud are said to spring for the plaintiffs and for LDTC.
I am satisfied, in the circumstances of this case, that the use of the discovered documents for the purpose of joining LDTC as a party for it to assert a cause of action is not a contravention of the implied undertaking. I should not be taken as saying that this will be the result in every case. Each case must be judged according to its own peculiar fact circumstances. The place which discovery holds in the litigation process and the integrity of that process must not be undermined. Nonetheless, in this case I think there is a close nexus between the relevant interests. The documents were not used for a collateral or improper purpose.

Prejudice – General Considerations

This brings me to, arguably, the most important consideration that I have to bring to bear on this application. It is whether the amendments that have been proposed will cause serious prejudice to the Banks which cannot be cured by an order for costs or some other remedial process.
Not surprisingly, the parties adopted diametrically opposed positions on this issue. Using more than a little hyperbole, the plaintiffs contended that the amendments would cause little more than a "blip" in the steady progress of preparation for trial. The Banks pressed the view that the whole process would come to a grinding halt. It seems to me that the true position is somewhere in between the two extremes.
A contributing factor to the delay in getting this judgment delivered has been the compulsion I felt to attend seriously to the welter of material which bore on the prejudice issue. The plaintiffs relied on affidavits of Ian Adrian (4 August 2000), Christopher Duffett (31 May 2000 and 3 August 2000), Leta Rayney (4 August 2000), Gary Trevor (3 August 2000), Ashley Wharton (4 August 2000, 8 September 2000 and 11 September 2000), Richard Wilson (3 August 2000) and Antony Woodings (31 May 2000, 4 August 2000 and 11 September 2000). The primary affidavits relied on by the Banks, at least on this issue, are those of Steven Paterniti (12 June 1998, 4 August 2000 and 8 September 2000). Some of these affidavits relate to the reasonableness of the causes of action propounded by the plaintiffs but most of them have something to say about the question of prejudice. The material takes up many lever‑arch files.
Ideally I would have related the question of prejudice to each of the areas in which amendments were sought. That is the way in which I commenced to write the reasons. However, I found it difficult to do so because of the repetitive charges and counter-charges flowing from the material. Had I continued down that path reasons for judgment that are already far too long were in danger of becoming unmanageable. All of this on an interlocutory application. I am saying this so that the parties will understand the way I have structured the reasons. I do not propose to examine each individual claim of prejudice and the countering explanation. Rather, I will attempt to take a somewhat broader view by reference to a few discrete areas. In this way, I hope to demonstrate that the general conclusion to which I have come is one based on a proper examination of the materials even though not every factual plank in the reasoning process will be exposed.
The plaintiffs complained about difficulties which they say were occasioned by the Bank's approach to discovery and reluctance to waive legal professional privilege. The materials are contained in the affidavits Wharton (8 September 2000) and Paterniti (12 June 1998 and 8 September 1998). In turn the Banks were not without their complaints as to the way the plaintiffs have conducted the case generally and this application in particular. I usually find that type of argument difficult to resolve because affidavits often do not reveal the real flavour of what was occurring behind the scenes. This case has been no exception. I do not think the approach of the Banks to discovery and privilege, given the nature of the litigation and the context of the dispute, was particularly surprising or deserving of adverse comment. Nonetheless, and without attributing any fault or blame, I can see how it would have made the plaintiffs task more difficult.
I have no doubt that the amendments that I propose to allow will cause further work for the parties, particularly the Banks. It is inevitable that this should be the case. I do not think it could seriously be argued that any (or at least any substantial portion of the work done to date) will turn out to have been without utility. The basic arguments in the case remain the same: what was the financial position of the companies when the Scheme was entered into, how did the Scheme come about and what was its effect on the companies concerned and on other interested parties. It will inevitably be the case that some of the work that has been done will have to be revisited. In the form in which it was done, it may no longer be apposite. However, that does not mean the work itself has been useless. It will have to be reassessed and supplemented but the basic material remains relevant. The real question is the extent of the reassessment and supplementation.

Prejudice – The Banks Contentions

What follows is, I think, a convenient summary of the main points raised by the Banks in their submissions concerning prejudice.

Discovery

Counsel for the Banks made a number of points concerning discovery.
Existing discovery is almost complete. It has been organised on the basis of informal discovery by categories in relation to particular dates and particular time limits.
Discovery has been a long, involved and laborious process. Many issues have been raised. Many disputes have occurred. Those disputes have taken a long time to resolve. In the time when the action was in the Federal Court there were some 66 meetings between the parties in an effort to resolve disputes.
Inspection has been on the basis of the pleaded issues and documents have been reviewed against the pleaded issues.
4. Where there has been a need to obtain documents from third parties, the requests for documents have been deliberately limited to the pleaded issues. Counsel for the Banks referred, by way of example and in relation to the Bond reconstruction proposals, to the affidavit evidence in relation to the history of attempts to obtain documents from BCH and its liquidators: par 183 and par 185 of the Paterniti affidavit.
5. The Banks' solicitors had put together a legal team specifically for the purpose of discovery. They had a team but it has now been disbanded. They had an efficient system. They will now have to assemble another team, or attempt to re‑gather the same people. There is consequent disruption and it affects the preparation of the remainder of the case.
The Banks take issue with the plaintiffs assessment that the need for further discovery will be limited. The Banks contend that there will be significant further discovery and we set out where that arises by way of example.
The Banks apprehend that the amendments will lead to a request for general discovery. To date discovery has been conducted on a limited and largely informal basis.
There will be difficulty in locating documents, especially form third parties. People move, things get destroyed and people tend to regard things as irrelevant as time passes.
All of this means the Banks will have to revisit their existing documents and inspect them again based upon these new issues. That could have been done before if the issues had been raised at an earlier time: Paterniti pars 189 to 195.

Delay

The Banks say that the proceedings will be delayed by these amendments. They estimate the delay at 18 months. They also estimate that it will extend the length of the trial by many months.

Compensation

In the Banks view they cannot be compensated by a party and party costs order and nor will they receive value for the additional administrative costs and inconvenience occasioned by the delay.

Interest

Interest is claimed at a compounding rate and there are, hanging in the air, serious allegations of misconduct.

Co‑operation of Witnesses

The Banks have a serious apprehension about the effect of further delay and the taking up of new issues on the co‑operation of witnesses in this case. Witnesses tend to get tired of people coming back to them and dealing with stale and old events. It is never possible to guarantee co‑operation but if co‑operation is lost the prejudice is considerable.

Non‑Responsive Affidavit

The Banks contend that the Wharton affidavit in response to the Paterniti affidavit does not in any real way deal with the issues raised as to prejudice. The state of affairs against which the application should be viewed is set out in par 8 of the Banks' written outline of submissions.

Readiness for Trial

The Banks say there have already been two trial dates set but aborted. Leaving this application and the "13A defence" to one aside, the pleadings had effectively closed and the evidence had been prepared. The plaintiffs gave the Banks notice that they wished to supplement their evidence and the Banks say they exercised reasonable diligence to press for details. They say they have had no meaningful response since the middle of 1988. Similarly, when the amendments were proposed the Banks pressed for details and have received no meaningful response. They point out that the minute before the Court is the sixth version of proposed amendments to 7ASC.

Burden of Persuasion

Counsel for the Banks submitted that the plaintiffs bore the burden of persuasion that the amendments would not cause prejudice and had not satisfied that burden.

Prejudice and Discretionary Factors – Conclusions

I have given very careful consideration to all of the matters raised by the Banks and have reviewed the material with them in mind. As I have already said, there undoubtedly are new matters and they will require further work. They will require work already done to be reviewed and, at least in part, to re‑cast it.
The plaintiffs submit that a significant number of the amendments are a reformulation of or arise out of material facts already pleaded. In the body of these reasons I have traced through many of the major areas. I mention, by way of examples, the material in pars 69 to 83 and Pt III of the plaintiffs' consolidated submissions. In other areas, the plaintiffs say that in structuring the new plea they have relied on documents already discovered in the proceedings. Examples are to be found in pars 112 and 165 of the plaintiffs' submissions.
There is a plea relating to the financial restructuring of the group. It is raised in the defence. I accept what has been put by the plaintiffs that the addition of the words "valid and effective" have a limited meaning. It is not, as the Banks appeared initially to apprehend, a situation where they will have to deal with positive assertions of various "valid and effective restructuring" scenarios. The proposed Bond restructuring involving buying back of the bonds was already an issue. The relationship of the Bell Group and their directors with their parent company is new but many of the issues are public knowledge and would not require detailed investigation. The SCBAL demand and the waivers by the Banks were issues raised in the existing pleadings. The financial affairs of the group have always been a central factor. It is true that there will have to be a shift of focus due to the extension of the solvency (or insolvency) allegations to the Scheme period rather than simply on 26 January 1990 but the essential elements are the same.
The Banks appeared also to apprehend that, in relation to the Bond reconstruction plea, they would be obliged to investigate a whole range of proposals. That is not the case. The only proposals encompassed by the pleadings are those involving Bell Group companies and a buy back of the BGNV bonds.
There are new matters that will require attention. The conflict of interest issues are a case in point. However, the identity of the players is the same. What the directors did, or are alleged to have done, is the same. What has changed is its legal characterisation. Of course, if the allegation is of conscious wrongdoing then the state of mind of the players assumes additional importance and I accept that the passage of time can cause difficulties with recollection. But as the underlying transactions on which the case turns are the same it is difficult to believe that the players have not turned their mind to what really motivated them at the time.
The LDTC involvement is a new matter. However, I would have thought that its involvement as a trustee for the BGNV bondholders would have been part and parcel of the preparations to date. Certainly, the involvement of the Banks in the steps taken to facilitate and protect the Scheme will require investigation. So too will the financial case on which the plaintiffs claim for traceable product. However, in the first instance it will be up to the plaintiffs to show how they can avoid the problems of the identification issue.
In the end it is, like so many things in the law, a question of balance. A judicial officer confronted with a task such as I have to perform has to stand back from the welter of material and consider where the interests of justice lie. When I say "stand back from" the material I am not suggesting that it be ignored or that, for any reason, it should not be given the weight that it deserves on proper analysis. What I am saying is that, having carried out the analysis, it is necessary to take an objective view of conflicting accounts. I have come to the view that the new material, that is, material that was not present in any form in the pleadings before 8ASC, while not insignificant is not such as to place an undue burden on the Banks.
I believe there are steps that can be taken to ameliorate the prejudice somewhat. For example, the apprehension of the Banks that they may be vulnerable to a general discovery order overlooks the fact that this is a matter within the control of the Court. This is, it seems to me, a quintessential case for limited discovery. A party wishing to embark on a wide ranging search for any documents that are directly or indirectly relevant to a fact in issue would carry a heavy burden of satisfying the Court that it was appropriate to do so. If, during the course of further discovery or proofing of witnesses the loss or destruction of documents or the inability or incapacity of a witness to give relevant testimony becomes a real problem it can be addressed at the time.
I should add that I had prejudice firmly in mind in disallowing the proposed amendments that would have caused a movement away from 26 January 1990 as the critical date at which to assess the solvency of the various companies within the Bell Group.
I appreciate the difficulties that legal firms face in conducting large scale litigation of this nature. The greater the familiarity that an operator has with a matter the more effective that person is in arranging matters such as discovery. To reassemble a team with the requisite familiarity, or to train one up to the necessary standard will not be easy. However, I doubt it would be beyond the capacity of a competent and experienced litigation solicitor of the standing that I have seen in this case.
I accept also the proposition that costs orders are not a panacea that cures all ills. However, the discretion residing in the Court in relation to costs is very broad. The fact that there is additional work and some prejudice is a factor that will weigh heavily with me when I come to decide how the costs of this (and related) applications will be handled. There will undoubtedly be additional administrative costs on the Banks. But that is a function of their involvement in the litigation. I do not say that in a pejorative sense either. They did not choose to become embroiled in this matter and may eventually be found to have acted in an entirely proper fashion. In the meantime they will have to bear the inconvenience and extra cost that is entailed. I have not ignored it as a factor. It is one of the myriad of considerations that I have taken into account.
It is interesting to compare the submissions made by the respective parties as to the course the litigation has taken. I have already mentioned the Banks' reliance on the matters set out in par 8 of their written submissions. In Pt XIII and Pt XX of the plaintiffs' consolidated submissions a quite different picture is painted. As I have already said, I am not sure what I can make of this material. In relation to the burden of persuasion there was charge and counter‑charge as to who should have (and did not) adduce evidence in a proper form to articulate and support the case they wished to make on prejudice. While the complaints may have had force in a technical sense I have preferred a broad approach which permits the material to be looked at in an objective way and according to its tenor.
It may seem a strange thing to say but it is still early days. The defence and counterclaim has not been finalised and nor has the reply. There is time for the party affected by the proposed amendments to reconsider its position and plead to the altered case.
The plaintiffs have satisfied me that the prejudice the Banks will suffer is not so great as to require that I refuse leave to amend. This conclusion has been reached as a balancing exercise. I did not arrive at it without careful thought and some hesitation.

LDTC Revisited

Taking everything into account I am satisfied on the criteria in O 18 r 6 that LDTC ought to be joined as a party. There is nothing I wish to add to what I have already said about LDTC. To the extent that O 10 needs to be taken into account, I believe the required nexus has been demonstrated. I adopt, generally, the contentions made in par 42 and following of the plaintiffs' consolidated submissions.

Relief

Junior counsel for the plaintiffs explained, in summary form, the changes to the prayer for relief between 7ASC and 8ASC as follows. There is no claim for equitable compensation made by LDTC. The claims for equitable compensation are those in par 65N. Insofar as LDTC seeks relief, it is to have the transaction set aside and to have monetary compensation provided to "the Plaintiff Bell Companies". The prayer for relief in 7ASC starts with particular claims by BGF, claims by TBGL, claims by ACIL shareholders, and then miscellaneous claims. It then moves on to the Bankruptcy Act claims.
These claims are maintained in 8ASC. Additional ancillary relief is sought. New monetary claims are made in respect of interest and the re‑categorisation of bank fees. Counsel acknowledged that there were differences in the way some of the relief is expressed in 7ASC and the additional relief in 8ASC "but they are not somehow creating some entirely new case". This is, I think, putting it in the best light for the plaintiffs. Nonetheless, I do not think there is anything seriously wrong with the way the prayer for relief has been framed.

In relation to the equitable fraud claim, each plaintiff seeks to set aside the Transactions to which it was a party and each other Transaction. As counsel put it, "the nub of the relief is to seek to undo the transactions, have the money put back to the identified plaintiffs and to allow the administration of the winding ups to occur".
I think the Banks main concerns with the prayer for relief relate to the way the monetary claims have been phrased. In particular they are concerned about the claims for account and those that speak in tracing remedies. I have ruled that despite the evident problems thrown up by the identification issue the plaintiffs' claims that sound in the imposition of an equitable charge or lien and in relation to "traceable product" are arguable. Having done so, I do not think the form in which the prayers for relief are expressed raises any additional concerns.
Similarly, if, as I have ruled, the equitable fraud claim is to go forward, there seems to me to be nothing objectionable in the way that the prayer for relief has been framed. Whether the plaintiffs can make good their entitlement to relief in those forms or at all is, of course, a matter for trial.

Conclusion

I will permit the plaintiffs to amend the statement of claim in the way, and to the extent, outlined in these reasons. At page 906 of the transcript counsel for the plaintiffs indicated that the pleading would be revisited in any event to accommodate some of the matters raised by counsel for the Banks during argument. It will be necessary for the plaintiffs to bring in a fresh minute.
I will hear the parties as to the orders that should be made.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: THE BELL GROUP LTD (In Liq) & ORS -v- WESTPAC BANKING CORPORATION & ORS [2001] WASC 315 (S)

CORAM: OWEN J

HEARD: 22 NOVEMBER 2001

DELIVERED : 19 DECEMBER 2001

SUPPLEMENTARY
DECISION :19 DECEMBER 2001

FILE NO/S: CIV 1464 of 2000

BETWEEN: THE BELL GROUP LTD (In Liq) (ACN 008 666 993)
First Plaintiff
THE BELL GROUP LTD (In Liq) AS TRUSTEE FOR DOLFINNE PTY LTD (In Liq)
THE BELL GROUP LTD (In Liq) AS TRUSTEE FOR INDUSTRIAL SECURITIES PTY LTD
THE BELL GROUP LTD (In Liq) AS TRUSTEE FOR MARANOA TRANSPORT PTY LTD
THE BELL GROUP LTD (In Liq) AS TRUSTEE FOR NEOMA INVESTMENTS PTY LTD
Second Plaintiffs
BELL GROUP FINANCE (In Liq) (RECEIVER AND MANAGER APPOINTED)
Third Plaintiff
BELL GROUP (UK) HOLDINGS LTD (In Liq) (IN ADMINISTRATIVE RECEIVERSHIP)
Fourth Plaintiff
BELL PUBLISHING GROUP PTY LTD (In Liq)
Fifth Plaintiff
BELL GROUP NV (In Liq)
Sixth Plaintiff
AMBASSADOR NOMINEES PTY LTD (In Liq) and OTHERS
Seventh Plaintiffs
GEOFFREY FRANK TOTTERDELL AS LIQUIDATOR OF FIRST PLAINTIFF AND OF FIRST, SECOND, THIRD, FIFTH, NINTH, TENTH, ELEVENTH, THIRTEENTH, FOURTEENTH, SIXTEENTH, SEVENTEENTH AND NINETEENTH NAMED SEVENTH PLAINTIFFS
Eighth Plaintiff
ANTONY LESLIE JOHN WOODINGS AS LIQUIDATOR OF THE THIRD PLAINTIFF, FIFTH PLAINTIFF AND OF THE FOURTH, SIXTH, SEVENTH, EIGHTH, TWELFTH, FIFTEENTH, EIGHTEENTH NAMED SEVENTH PLAINTIFFS
Ninth Plaintiff
GARRY JOHN TREVOR AS LIQUIDATOR OF THE SIXTH PLAINTIFF
Tenth Plaintiff
AND
WESTPAC BANKING CORPORATION (ACN 007 457 141)
First Defendant
SOCIETE GENERALE AUSTRALIA LTD
NATIONAL AUSTRALIA BANK LTD
HONGKONGBANK OF AUSTRALIA LTD
STANDARD CHARTERED BANK AUSTRALIA LTD
COMMONWEALTH BANK OF AUSTRALIA
Second Defendants
LLOYDS BANK PLC
BANCO ESPIRITO SANTO E COMERCIAL DE LISBOA
BANK FUR GEMEINWIRTSCHAFT AG
THE GOVERNOR AND COMPANYOF THE BANK OF SCOTLAND
CAISSE NATIONALE DE CREDIT AGRICOLE
CREDITANSTALT-BANKVEREIN
CREDIT LYONNAIS
DRESDNER BANK AG
KREDIETBANK NV
SKOPBANK
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
THE GULF BANK KSC
GENTRA LTD (FORMERLY ROYAL TRUST BANK)
BANQUE INDOSEUZ
Third Defendants
EQUITY TRUST (CURACAO) NV
Fourth Defendant

FILE NO/S :CIV 2061 of 1996

BETWEEN :COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
First Plaintiff
NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937)
Second Plaintiff
SOCIETE GENERALE AUSTRALIA LTD (ACN 002 093 021)
Third Plaintiff
STANDARD CHARTERED BANK AUSTRALIA LTD
Fourth Plaintiff
WESTPAC BANKING CORPORATION (ARBN 007 457 141)
Fifth Plaintiff
HONGKONGBANK OF AUSTRALIA LTD (ACN 006 434 162)
Sixth Plaintiff
BANCO ESPIRITO SANTO E COMERCIAL DE LISBOA
BANK FUR GEMEINWIRTSCHAFT AG
THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND
CREDITANSTALT-BANK VEREIN
CREDIT LYONNAIS
DRESDNER BANK AG
BANQUE INDOSEUZ
Seventh Plaintiffs
LLOYDS BANK PLC
CAISEE NATIONALE DE CREDIT AGRICOLE
GENTRA LTD (FORMERLY ROYAL TRUST BANK)
KREDIETBANK NV
GULF BANK KSC
DG BANK DEUTSCHE GENOSSENSCHAFTBANK
Eighth Plaintiffs
AND
THE LAW DEBENTURE TRUST CORPORATION PLC
First Defendant
THE BELL GROUP LTD (ACN 008 666 993)
Second Defendant
GEOFFREY FRANK TOTTERDELL
Third Defendant
BELL GROUP FINANCE PTY LTD (In Liq) (RECEIVER AND MANAGER APPOINTED) (ACN 009 165 182)
Fourth Defendant
ANTONY LESLIE JOHN WOODINGS
Fifth Defendant
STATE GOVERNMENT INSURANCE COMMISSION OF WESTERN AUSTRALIA
Sixth Defendant
(BY ORIGINAL ACTION)
THE LAW DEBENTURE TRUST CORPORATION PLC
STATE GOVERNMENT INSURANCE COMMISSION OF WESTERN AUSTRALIA
Plaintiffs
AND
AUSTRALIAN CONSOLIDATED INVESTMENTS LTD (ACN 008 670 924)
GODINE DEVELOPMENTS PTY LTD (ACN 009 237 307)
BELL RESOURCES DEVELOPMENTS PTY LTD (ACN 009 152 569)
First Defendants
LLOYDS BANK PLC
Second Defendant
W A GLENDINNING & ASSOCIATES PTY LTD (ACN 008 762 721)
W U INVESTMENTS PTY LTD
EXPECTATION PTY LTD
Third Defendants
COMMONWEALTH OF AUSTRALIA
Fourth Defendant
WESTPAC BANKING CORPORATION
Fifth Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Pleadings - Amendment to statement of claim - Turns on own facts

Legislation:

Nil

Result:

Leave to amend granted

Category: B

Representation:

CIV 1464 of 2000

Counsel:

First Plaintiff                :     Mr R M Robson QC & Mr J T Svehla
Second Plaintiffs           :     Mr R M Robson QC & Mr J T Svehla
Third Plaintiff               :     Mr R M Robson QC & Mr J T Svehla
Fourth Plaintiff             :     Mr R M Robson QC & Mr J T Svehla
Fifth Plaintiff                :     Mr R M Robson QC & Mr J T Svehla
Sixth Plaintiff               :     Mr R M Robson QC & Mr J T Svehla
Seventh Plaintiffs          :     Mr R M Robson QC & Mr J T Svehla
Eighth Plaintiff             :     Mr R M Robson QC & Mr J T Svehla
Ninth Plaintiff               :     Mr R M Robson QC & Mr J T Svehla
Tenth Plaintiff              :     Mr R M Robson QC & Mr J T Svehla
First Defendant             :     Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Second Defendants : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Third Defendants : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Fourth Defendant : No appearance

Solicitors:

First Plaintiff                :     Blake Dawson Waldron
Second Plaintiffs           :     Blake Dawson Waldron
Third Plaintiff               :     Blake Dawson Waldron
Fourth Plaintiff             :     Blake Dawson Waldron
Fifth Plaintiff                :     Blake Dawson Waldron
Sixth Plaintiff               :     Blake Dawson Waldron
Seventh Plaintiffs          :     Blake Dawson Waldron
Eighth Plaintiff             :     Blake Dawson Waldron
Ninth Plaintiff               :     Blake Dawson Waldron
Tenth Plaintiff              :     Blake Dawson Waldron
First Defendant             :     Freehills
Second Defendants       :     Freehills
Third Defendants          :     Freehills
Fourth Defendant          :     No appearance

CIV 2061 of 1996

Counsel:

First Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Second Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Third Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Fourth Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Fifth Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Sixth Plaintiff : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Seventh Plaintiffs : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

Eighth Plaintiffs : Mr T M Jucovic QC, Mr J L B Allsop QC &
Mr A V McCarthy

First Defendant             :     Mr A R Beech & Ms A Hamersley
Second Defendant         :     Mr R M Robson QC & Mr J T Svehla
Third Defendant           :     Mr R M Robson QC & Mr J T Svehla
Fourth Defendant          :     Mr R M Robson QC & Mr J T Svehla
Fifth Defendant            :     Mr R M Robson QC & Mr J T Svehla
Sixth Defendant            :     Mr A R Beech & Ms A Hamersley

Solicitors:

First Plaintiff                :     Freehills
Second Plaintiff            :     Freehills
Third Plaintiff               :     Freehills
Fourth Plaintiff             :     Freehills
Fifth Plaintiff                :     Freehills
Sixth Plaintiff               :     Freehills
Seventh Plaintiffs          :     Freehills
Eighth Plaintiffs            :     Freehills
First Defendant             :     Edgar & Co
Second Defendant         :     Blake Dawson Waldron
Third Defendant           :     Blake Dawson Waldron
Fourth Defendant          :     Blake Dawson Waldron
Fifth Defendant            :     Blake Dawson Waldron
Sixth Defendant            :     Edgar & Co

Case(s) referred to in judgment(s):

The Bell Group Limited (In Liq) & Ors v Westpac Banking Corporation & Ors [2001] WASC 315

Case(s) also cited:

Banque Commerciale SA (In Liq) v Akhil Holdings Ltd (1990) 169 CLR 279
BCCI v Akindele [2001] Ch 437
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Commonwealth Bank of Australia v Ridout Nominees Pty Ltd [2000] WASC 37
Kinsela v Russell Kinsela Pty Ltd (In Liq) (1986) 4 NSWLR 722
Koorootang Nominees Pty Ltd v Australian and New Zealand Banking Group Ltd [1998] 3 VR 16
Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] 2 WLR 170
Nicholson v Permakraft (NZ) Ltd (In Liq) (1985) 3 ACLC 453
Pyramid Building Society (In Liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188
Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378
Spies v R (2000) 201 CLR 603
Sycotex Ltd v Baseler (1994) 122 ALR 531

OWEN J: The reasons in The Bell Group Limited (In Liq) & Ors v Westpac Banking Corporation & Ors [2001] WASC 315 ("the earlier reasons") disclose my general approach to the application by the plaintiffs for leave to amend the writ and the statement of claim. At a directions hearing on 22 November 2001 I requested the plaintiffs to bring in a fresh minute of proposed amended statement of claim:
(a)incorporating changes that counsel had indicated the plaintiffs were prepared to make to accommodate some of the objections raised by the defendants; and
(b)to bring the pleading in line with the earlier reasons.
I made this request so that I could satisfy myself that the Eighth Amended Statement of Claim (as the pleading will become) would be in accord with what I had intended to convey in the reasons. I also wished to give the defendants an opportunity to consider the final form of the proposed pleading.
The plaintiffs have filed a document entitled "Minute of Plaintiffs' Eighth Amended Statement of Claim" dated 7 December 2001 ("the Minute"). The document was accompanied by two lever arch files constituting the particulars to the statement of claim. The defendants filed a memorandum dated 14 December 2001 in which they raised four matters which were of concern to them. The plaintiffs filed a memorandum dated 7 December 2001 in which they responded to the defendants' concerns.
I have considered the Minute, the particulars and the memoranda. These reasons, which are supplementary to those contained in [2001] WASC 315, deal with the four matters of concern raised by the defendants. My reading of the materials did not alert me to other areas in which the Minute is not consistent with the earlier reasons. These reasons constitute the finalisation of the application for leave to amend the writ and the statement of claim.

The State of Mind of the Directors

I made it clear in the earlier reasons and at the November 2001 directions hearing that I understood the plaintiffs not to be alleging conscious wrongdoing on the part of the directors. In my view pars 39A, 39C and 39D and the particulars accord with that understanding.
One of the defendants' concerns is the reference in the particulars to a "lack of a genuine belief" in a state of affairs. My recollection is that the Seventh Amended Statement of Claim (a document that I do not have available at the moment) contained similar references. As I understand it there was no suggestion that it imported an element of conscious wrongdoing into that version of the pleading. I see no reason why the Minute should be differently interpreted.
The problem is exemplified by the allegation that the directors exercised powers for an improper purpose. This can arise in a number of ways. For example, an objector may allege the power was exercised for purpose "A" (which on any view of it is improper) while the directors may say that it was done for purpose "B", a totally legitimate purpose. A different argument may arise if the claimant and the directors are of one mind as to what the purpose was but they part company on the question whether it was improper. In that case the purpose may be found to be improper, in which case the directors may be liable. But this does not mean that they have pursued an improper purpose knowing the purpose to be improper. That would involve conscious wrongdoing. There may be other possibilities and combinations.
All that need be said is that I interpret the pleading as not involving an allegation of conscious wrongdoing in the sense that I have outlined. I will hold the plaintiffs to that interpretation.
In my view pars 39A, 39C, 39D of the Minute and the accompanying particulars can stand.

The Equitable Fraud Claim

The equitable fraud claim is primarily to be found in pars 65M and 65MA. It is advanced on alternative bases. First, that nominated conduct is a deceit and imposition on Bell Participants and their creditors. This needs no further comment. Secondly, the Scheme and the Transactions constituted an inequitable and unconscientious bargain. This is contentious.
The gravamen of the second basis for the unconscionability claim is to be found in the particulars to par 65MA. I have considered carefully the matters raised in pars 22 to 29 of the defendants' memorandum of 14 December 2001. I acknowledge that the pleading is not perfect, although I am not sure how, in relation to pleadings, perfection can ever be assessed. My concern in the earlier reasons was that it was unclear exactly what the plaintiffs were saying about the myriad of material facts which were incorporated by reference and which, on the plaintiffs' case, rendered the bargain inequitable. In my view, that problem has now been cured. The defendants are made aware how it is said various circumstances affected individual or nominated companies.
In my view enough is disclosed in the particulars in order for the Banks to know the case they have to meet. I am also satisfied on the matters raised in pars 28 to 30 of the plaintiffs' memorandum, that the proposed plea avoids serious embarrassment or oppression to the defendants. Whether the matters contained in the particulars, if made out, are sufficient to ground a finding that the bargain was inequitable ought to be left for trial.

The Limitation Issues

I thought I had made my position on the limitation issues relatively clear in the earlier reasons. I propose to stand over for consideration by the trial Judge all issues relating to limitation defences.
These problems can, and probably will, arise in three ways. First, whether some or all of the matters raised in the Eighth Amended Statement of Claim constitute new or fresh causes of action. Secondly, if so, what is the applicable limitation period? In relation to equitable claims, this may involve arguments about analogous causes of action at law. Thirdly, if there is a new or fresh cause of action does it arise out of the same or substantially the same factual matrix as previously pleaded?
As I said in the earlier reasons, all of these matters are best left to trial. I have considered carefully the material in pars 30 and 31 of the defendants' memorandum and pars 31 to 34 of the plaintiffs' response. I am afraid I do not fully understand the difference between the approaches advocated by the respective parties. In any event par 31 of the defendants' memorandum accurately reflects what I had in mind as the appropriate order.

Wilful Blindness

The defendants are concerned about the particulars to par 59TA(b). That paragraph pleads:

"Prior to the February meetings, with the knowledge, belief and suspicion which they held … , the Banks… refrained from seeking any or any adequate information about any schemes to restructure the financial position of the Bell Participants and the position of those companies' creditors, future creditors and shareholders in any such scheme."

Particular (b)(i) sets out five areas in which, according to the plaintiffs, the defendants abstained from making inquiries. Particular (b)(ii) sets out what the plaintiffs say inquiries, had they been made, would have revealed. The third particular alleges that the inquiries would have been made by "honest and reasonable persons in the position of" the defendants. In the fourth particular the plaintiffs give notice they will seek to have an inference drawn that the defendants abstained from inquiry because they believed or suspected (not that they knew) that the position was as set out in particular (b)(ii). Finally, there are set out two identified memoranda and an alleged banking practice (known to one of the defendants) as matters on which the plaintiffs wish to rely.
I am attracted to the argument raised by the plaintiffs that:
(a)the particulars do not represent a change in the case argued on the amendment application;
(b)they narrow the case by limiting the matters in relation to which it is said the defendants abstained from making inquiry; and
(c)at least to some extent the matters cover what is already in issue in par 62AA of the defence.
I do not believe that the particulars raise issues that are not in accord with par 59TA(b) of the Minute or that are not within the confines of the arguments raised during the hearing of the amendment application. Nor do I think they are embarrassing or otherwise defective in form.

Conclusion

There will be leave to amend in accordance with the Minute and the particulars as contained in the two lever arch files. The order should be extracted accordingly but it will speak from today. It should provide for the limitation issues to be deferred to the trial Judge.
The programme for dealing with the outstanding interlocutory applications was set at the directions hearing on 22 November 2001. Once that programme has been completed the arrangements for management of the action can be reviewed.