Supreme Court New South Wales

• Medium Neutral Citation: Investec Bank (Australia) Limited -v- Giuseppe Romeo [2012] NSWSC 1043
• Hearing dates: 31 August 2012
• Decision date: 31 August 2012
• Jurisdiction: Equity Division - Commercial List
• Before: Hammerschlag J

Decision

Motion dismissed. Defendants to pay plaintiff's costs

• Catchwords: PRACTICE AND PROCEDURE - application for determination of liability issues before quantum - relevant considerations
• Legislation Cited: Competition and Consumer Act 2010 (Cth); Contracts Review Act 1980 (NSW); Uniform Civil Procedure Rules 2005 (Cth); Civil Procedure Act 2005 (NSW)
• Cases Cited: Tallglen v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130; Tepko Pty Ltd v Water Board (2001) 206 CLR 1
• Category: Procedural and other rulings
• Parties: Investec Bank (Australia) Limited ABN 55 071 292 594 - Plaintiff; Giuseppe Romeo - First Defendant; Anna Maria Romeo - Second Defendant
• Representation: Counsel: J.E. Hynes - Plaintiff; R.E. Dubler SC - Defendants; Solicitors: Henry Davis York - Plaintiff; Proctor Phair Lawyers - Defendants
• File Number(s): 2011/289822

EX TEMPORE Judgment

1 The plaintiff bank lent the defendants a significant amount of money pursuant to two facilities. The defendants defaulted and the plaintiff sues them in debt for in excess of $7 M. The proceedings were commenced on 8 September 2011.

2 The defendants admit the debt. They cross-claim for damages pursuant to the Competition and Consumer Act 2010 (Cth) based on what they allege were representations made by the bank and in respect of conduct on the part of the bank which they say was unconscionable. They seek orders declaring the facilities void. They also cross-claim for orders pursuant to s 7 of the Contracts Review Act 1980 (NSW). I shall refer to them in their capacity as defendants as well as cross-claimants as the defendants.

3 Directions hearings were held on 31 September 2011, 14 October 2011 (when McDougall J ordered the defendants to pay the plaintiff's costs of the day), 28 October 2011, 16 November 2011, 2 December 2011, 3 February 2012 (when the defendants were, by consent, ordered to serve all of their affidavits by 22 May 2012), 20 April 2012, 1 June 2012 (when the date upon which the defendants were to serve their evidence was extended to 17 July 2012), 20 July 2012 (when the date for the service of evidence was extended to 4.00 pm on 10 August 2012 and on which occasion I ordered that they not be entitled to rely on any evidence not served in accordance with that direction without special leave of the Court), 17 August 2012 and today.

4 The defendants have served lay evidence but have served no expert evidence. They will undoubtedly need expert evidence, at least on quantum.

5 A brief précis of the case is appropriate.

6 The defendants owned and operated a restaurant, function centre and motel known as Pasadena on Pittwater at 1858 Pittwater Road, Church Point. They also operated a business there known as Church Point Cellars. In addition, they held the leasehold over land at 1860 Pittwater Road, where they conducted a business known as the Waterfront Store.

7 The moneys were lent to them by the plaintiff with a view to them redeveloping the Pasadena property and the Waterfront Store property by constructing on the Pasadena property residential units, a new restaurant, bottle shop, function centre, motel and related retail space and by refurbishing the Waterfront Store.

8 The defendants say that various representations were made by a bank officer, Mr Hamman, including that the bank would likely support their financial needs to permit the development to take place. They plead implied terms that the bank would act in good faith and reasonably, would not act to stop funding or terminate the facilities in a manner which was harsh, unconscionable or unreasonable or for extraneous purposes and that the bank would not rely on alleged breaches caused or contributed to by it in breach of the facilities or calculated to cause them to be in breach of them.

9 They plead an additional set of representations by the bank officer to the effect that when the Waterfront Store development was at lock up stage, urgent payment was required to permit fit out before Christmas to enable Christmas trading and that representations were made that the bank would support them if, instead of paying the bank interest which they owed it, they used their resources rather to get the store ready for trading. They say that the bank waived its right to insist on strict compliance with deadlines for payment, that they went on to default and the bank insisted on its rights, that they terminated their funding. They say they were not able to develop the Pasadena property and to resume the business which they had there.

10 Amongst others, they allege that they suffered damage by way of loss of profits from being unable to complete the refurbishment and to recommence trading at the store until about May 2009, that they were unable to develop (and sell) residential units at the Pasadena property which would have yielded a profit of over $14 M, that they lost the value of both the goodwill of the Pasadena on Pittwater business and the goodwill of the Church Point Cellars business.

11 By Motion filed on 24 August 2012, they now seek an order pursuant to Uniform Civil Procedure Rules 2005 (Cth) ("UCPR") Pt 28 r 28.2 that the Court make an order for the decision of all issues relating to liability separately and before determining quantum. They rely on the affidavit of their solicitor, Damian Phair, sworn 24 August 2012. In it, amongst others, Mr Phair says that the issues in respect of the cross-claim can be separated out into those involving liability and those involving quantum, that the issues of liability are within a narrow compass involving short evidence and that a decision on liability is likely to determine the proceedings one way or another without the need for significant further evidence in relation to quantum. He says that the issues on quantum are complex and preparation of it will be time consuming and expensive and will be unnecessary if the defendants lose on liability. The first defendant has limited means to support the litigation and it will be an enormous financial strain to fund the steps required to prepare their case on quantum.

12 In exercising the discretionary power under UCPR Pt 28 r 28.2, the Court must give effect to the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings. This is required by ss 56(1) and (2) of the Civil Procedure Act 2005 (NSW).

13 In my opinion, this is not an appropriate case to depart from the general practice that all issues should be tried at the same time; see Tallglen v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141. To so depart would not, in my view, be conducive to achieving that overriding purpose.

14 This is a case where, in my view, the suggested saving in time and expense is more likely to be illusory than real, having regard to the significant respects in which issues of liability and quantum will overlap. There will undoubtedly be issues of remoteness and causation relevant to both; see Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at 55, [168].

15 The evidence of at least the first defendant will be material, if not central, to questions of both liability and quantum and his credit will undoubtedly be in issue. It was he and the second defendant who proposed to operate the businesses.

16 The debt is admitted. In practical terms, the defendants will need to establish damage exceeding the amount of that debt.

17 Leaving aside the potential for appeals in the meantime, the damages claim is undoubtedly complex. In the present case this is a reason for liability and quantum to be tried together. Preparation on damages will reveal both the strengths and weaknesses in the defendants' case. It is in the interests of both parties for these to be revealed sooner rather than later. It will limit the potential for a hearing on liability with the defendants thereafter being unable to establish any or sufficient damage and it will also enable the plaintiff to know whether the defendants have a case on damage which is worth fighting.

18 Finally, the defendants are in breach of directions to put on all their evidence (including as to quantum). Directions were made by consent for them to do so. There is no explanation for their default.

19 It follows that the Motion should be dismissed and that the defendants should pay the plaintiff's costs of it. I so order.

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Decision last updated: 05 September 2012