Commonwealth Bank of Australia v Rafidi [2016] NSWSC 381

Supreme Court New South Wales

Medium Neutral Citation: Commonwealth Bank of Australia v Rafidi [2016] NSWSC 381 Hearing dates: 4 April 2016 Decision date: 07 April 2016 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Leave to amend cross-claim refused Catchwords: PRACTICE AND PROCEDURE – proposed amendment to cross-claim – whether proposed claim sustainable - whether critical allegations absent – whether leave should be refused Legislation Cited: Corporations Act 2001 (Cth) Category: Procedural and other rulings Parties: Commonwealth Bank of Australia (Plaintiff/Respondent/Cross-Defendant) Iyad Rafidi (Defendant/Applicant/Second Cross-Claimant) Brick & Block Company Pty Limited (in liquidation) (subject to a deed of Company arrangement) (First Cross-Claimant) Representation: Counsel: A Leopold SC (Plaintiff/Respondent/Cross-Defendant) R E Dubler SC with R White (Defendant/Applicant/First and Second Cross-Claimants)

Solicitors: Gadens Lawyers (Plaintiff/Respondent/Cross-Defendant) Hall Partners (Defendant/Applicant/First and Second Cross-Claimants) File Number(s): SC 2011/251728

Judgment 1. In May 2006, Bank of Western Australia Ltd ("BankWest") agreed to provide Brick & Block Company Pty Ltd ("BBC") various financial facilities. 2. At that time BankWest was owned by HBOS Australia Pty Ltd. 3. By an agreement made on 8 October 2008 (the "Share Sale Agreement") HBOS agreed to sell its shares in BankWest to the plaintiff, Commonwealth Bank of Australia Ltd ("CBA"). 4. In the current iteration of its cross-claim, BBC alleges, amongst other things: 1. it was an implied term of the registered charge granted by it to BankWest that BankWest would exercise its power to appoint a receiver and manager to BBC if an event of default arose; 1. reasonably and in good faith; and 2. not in bad faith for an extraneous or improper purpose or in a capricious or arbitrary manner; 1. in August 2009 BankWest represented to it that it "could resolve its difficulties by restructuring and that it could achieve this through the appointment of an administrator" and that if BankWest approved the restructure, then it was possible that BankWest would allow the appointment of an administrator (described in the cross-claim as "the Administrator Representation"); 2. in reliance on the Administrator Representation, it arranged for chartered accountants, Grant Thornton Australia Ltd, to prepare a restructure proposal for BBC; 3. Grant Thornton prepared a restructure proposal that the directors of BBC resolve pursuant to s 439A of the Corporations Act 2001 (Cth) to appoint administrators and that BBC then enter into a deed of company arrangement (the "Proposed DOCA"); 4. on 28 or 29 October 2009 BankWest represented that it was "comfortable" with the Proposed DOCA"; 5. on 29 October 2009 BankWest represented that if BBC appointed an administrator from a list approved by BankWest, BankWest would not exercise its power under its charge to appoint a receiver and would permit BBC sufficient time to implement the restructure proposal without seeking to sell assets over which BankWest held charges (described in the cross-claim as the "Receiver Representation"); 6. BankWest deliberately failed to warn that it may rely upon the appointment of an administrator as an event of default sufficient to warrant the appointment of receivers to BBC and acted with "an intention to mislead, deceive or to trick BBC into appointing administrators"; 7. in reliance on the Receiver Representation the directors of BBC resolved to appoint administrators; and 8. nonetheless, on 4 November 2009 BankWest appointed receivers to BBC.