Currabubula Holdings & Paola Holdings v State Bank of NSW [1999] NSWSC 276

New South Wales Supreme Court CITATION : Currabubula Holdings & Paola Holdings v State Bank of NSW [1999] NSWSC 276 CURRENT JURISDICTION : Equity Division - Commercial List FILE NUMBER(S) : 50268 of 1995 HEARING DATE(S) : 1; 2; 3; 4; 5; 8; 9; 10; 11; 12; 17&20/2/1999 JUDGMENT DATE : 30 March 1999

Currabubula Holdings Pty Limited (First Plaintiff) PARTIES : Paola Holdings Pty Limited (Second Plaintiff) State Bank of New South Wales Limited (Defendant) JUDGMENT OF : Einstein J

COUNSEL : Plaintiffs: D.E.J. Ryan Defendant: R.B.S. Macfarlan QC and C.M. Harris SOLICITORS : Plaintiffs: Gadens Lawyers Defendant: Mallesons Stephen Jaques CATCHWORDS : Banker and Customer - Credit Facility Agreement - Suspicion by Bank of insolvency of company within corporate group of borrower customers - Banks concern to avoid allowing further drawings on current accounts arguably capable of being attacked as preferential payments - Bank without notice, freezing customers current banking accounts and determining that no further drawings would be permitted on current accounts - Whether Banks conduct constitutes breach of facility - Implied term of facility that Bank give reasonable notice in event that it determines to vary its customary mode of providing general banking services, and in particular a finance facility, to customer group - Obligation to give reasonable notice is part of general contract basic to all banker customer transactions - Obligation extends to any variations to accounts to be operated with Bank; to any requirement that overdraft facilities in place in relation to current accounts would no longer be permitted to be drawn upon; to any requirement that customer open new accounts - Obligation to give reasonable notice of variations implicitly embraces correlative obligation to be precise and accurate in communicating what the variations involve and of effect, if any, of variations on the continued operations of the facility - Tampering by Bank with mechanics of customers operations of a facility may vitally affect customers business relationships and other dealings - Special significance of precision in Banks mode of communicating to customer group what a new regime would entail and whether it involved any suggestion of restructuring or varying the facility or of holding the position while the Bank determined in what way to restrict or vary the facility - Special significance of directing such communications to the customer group at a level within the customers hierarchy commensurate with significance of Banks decision.; Banker and Customer - Credit Facility Agreement - Construction - Corporate group of borrowers - Events of default - Default by whom? - Duration of facility.; Banker and Customer - Credit Facility Agreement - Whether act of freezing and not permitting further drawings on customers current accounts amounts to termination or withdrawal of finance facility.; Banker and Customer - Credit Facility Agreement - Customer Group drawn to limit of facility - Alleged wrongful dishonour - Dishonour by Bank of cheques drawn on frozen current accounts continues notwithstanding that borrower group brings itself back within facility limit.; Banker and Customer - Credit Facility Agreement - Breach - Payment of cheques drawn on frozen current accounts and met from new accounts - Whether wrongful dishonour.; Contract - Banker and Customer - Suspicion by Bank of insolvency of company within corporate group of borrower customers - Banks concern to avoid allowing further drawings on current accounts arguably capable of being attacked as preferential payments - Bank without notice, freezing customers current banking accounts and determining that no further drawings would be permitted on current accounts - Whether Banks conduct constitutes breach of facility - Implied term of facility that Bank give reasonable notice in event that it determines to vary its customary mode of providing general banking services and in particular a finance facility to customer group - Obligation to give reasonable notice is part of general contract basic to all banker customer transactions.; Contract - Banker and Customer - Credit Facility Agreement - Construction - Corporate group of borrowers - Events of default - Default by whom? - Duration of facility.; Contract - Banker and Customer - Credit Facility Agreement - Whether act of freezing and not permitting further drawings on customers current accounts amounts to termination or withdrawal of finance facility.; Contract - Banker and Customer - Credit Facility Agreement - Customer Group drawn to limit of facility - Alleged wrongful dishonour - Dishonour by Bank of cheques drawn on frozen current accounts continues notwithstanding that borrower group brings itself back within facility limit.; Contract - Banker and Customer - - Credit Facility Agreement - Breach - Payment of cheques drawn on frozen current accounts and met from new accounts - Whether wrongful dishonour.; Defamation - Bank Statements bearing notation 'in liq' - Imputations that customer insolvent and that liquidator appointed to customer.; Limitation of Actions - Leave to amend to join additional plaintiffs - Representative parties - Courts power to grant leave to amend pursuant to Part 20 Rule 1 Supreme Court Rules - Courts power to add new parties to be exercised within the constraints and subject to the provisions of Part 8 Rule 11(3) Supreme Court Rules.; Locus Standi - First plaintiff member of corporate group of borrowers - All companies in group are parties to Credit Facility Agreement entered into with Bank - Interlocking network of securities to support group borrowings - Plaintiff is a promisee as is each of group borrowers in respect of Banks obligations to observe express and implied terms of facility agreement - Holding that Bank breached obligation imposed upon it by implid term of contract to give reasonable notice in event that it determined to vary its customary mode of providing finance facility carries with it entitlement in first plaintiff to recover in respect of loss or damage suffered by plaintiff by reason of banks breach of contract.; Practice and Procedure - Limitations - Leave to amend to join additional plaintiffs - representative parties - Courts power to grant leave to amend pursuant to Part 20 Rule 1 Supreme Court Rules - Courts power to add new parties to be exercised within the constraints and subject to the provisions of Part 8 Rule 11(3) Supreme Court Rules. Bankruptcy Act 1966 (Com) s 122(2)(a) Cheques and Payments Orders Act 1986 (Com) s 69 ACTS CITED : Defamation Act (1974) NSW s 13 22 Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 Aspro Travel Ltd v Owners Abroad Group plc [1995] 4 All ER 728 Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd (1989) 17 NSWLR 734 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 Burnett v Westminster Bank Ltd [1966] 1 QB 742 Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 Chapell v Mirror Newspapers Ltd (1984) AustTortsR 80-691 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Dixon v Bank of New South Wales (1896) 17 NSWLR 355 Fernance v Nominal Defendant (1989) 17 NSWLR 710 Fosters Brewing Group Ltd v Elliott (Unreported Supreme Court of Victoria 10 August 1995 Beach J) Gould v Vaggelas (1985) 157 CLR 215 George Fischer (Great Britain) Ltd v Multi Construction Ltd [1995] 1 BCLC 260 Hadley v Baxendale (1854) 9 Exch 341 Halesowen Presswork & Assemblies Ltd v Westminster Bank Ltd [1971] 1 QB 1 Industrial Equity Ltd v Blackburn (1977) 137 CLR 567 King & Mergen Holdings Pty Ltd v McKenzie (1991) 24 NSWLR 305 Koufos v C Czarnikow Ltd (the Heran II) [1969] 1 AC 350 Kyra Nominees Pty Ltd (in liq) v National Australia Bank Ltd (1986) 4 ACLC 400 Ley v Hamilton [1935] 153 LT 384 March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 Mirror Newspapers Ltd v World Hosts Pty Ltd (1979) 141 CLR 632 Morgan v John Fairfax & Sons Ltd (No 2) (1991) 23 NSWLR 374 National Westminster Bank Ltd v Halesowen Presswork and Assemblies Ltd [1972] AC 785 CASES CITED : Parras Holdings Pty Ltd v Commonwealth Bank of Australia [Unreported Federal Court of Australia 12 June 1998 Davies J ] Potts v Miller (1940) 64 CLR 282 Prudential Assurance Co Ltd v Newman Industries Ltd [No 2] [1982] Ch 204 Pullman v Walter Hill & Co [1891] 1 QB 524 Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34 Qintex Australia Finance Ltd v Schroders Australia Ltd (1990) 3 ACSR 267 Reardon Smith Line Ltd v Yngvar Hansen - Tangen (trading as HE Hansen Tangen) [1976] 1 WLR 989 Rouse v Bradford Banking Company Ltd [1894] AC 586 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Shepherd v Whittaker (1875) LR 10 CP 502 Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 Re Southard & Co Ltd [1979] 1 WLR 1198 South Hetton Coal Co Ltd v North-Eastern News Association Ltd [1894] 1 QB 133 Theaker v Richardson 1[962] 1 WLR 151 Theophanous v Herald & Weekly Times Ltd (1993-94) 182 CLR 104 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] 165 CLR 107 Walker v Wimborne (1975-76) 137 CLR 1 Wenham v Ella (1972) 127 CLR 454 Wenham v General Credits Ltd (Unreported Supreme Court of New South Wales 16 December 1988 McLelland J) Wimborne v Brien (1997) 23 ACSR 576 Wright v Australian Broadcasting Commission [1977] 1 NSWLR 697 DECISION : Orders will be made following further submissions.