FEDERAL COURT OF AUSTRALIA

Perdaman Chemicals and Fertilisers Pty Ltd v ICICI Bank Ltd [2013] FCA 175

THE COURT ORDERS THAT:

1.    The application for intervention is allowed.

2.    The application for service out is refused.

3.    The Applicant for service out pay the costs of the Interveners to be taxed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

REASONS FOR JUDGMENT

INTRODUCTION

1    The applicant (Perdaman) seeks leave to serve an originating application, statement of claim and affidavit on the respondent (the Bank) out of the jurisdiction in accordance with the laws for service of writs in the Republic of Singapore (‘service out’).

2    The application is supported by extensive affidavit material and several sets of submissions together with a statement of claim running to some 95 pages in its initial form. A leaner substituted statement of claim (55 pages in length) was subsequently filed at my direction.

3    The application mirrors in some respects an earlier application granted by Siopis J in Perdaman Chemicals & Fertilisers v Griffin Coal Mining Company Pty Ltd [2011] FCA 1425 (Perdaman No 1). As with the current claim, the claim there made against Lanco Resources International Pty Ltd (Lanco) was an assertion of unconscionable conduct in contravention of the Australian Consumer Law (ACL) in Sch 2 of the Competition and Consumer Act 2010 (Cth) (CCA), alternatively, tortious interference in the contractual relations between Perdaman and the first respondent to that proceeding, the Griffin Coal Mining Company Pty Ltd (Griffin). Lanco is now the holding company of Griffin.

4    The difference with this application is that service out is sought against the Bank which was Lanco’s financier in the acquisition of shares in Griffin.

5    For reasons which follow, while Perdaman might be expected to leave no stone unturned in this large scale dispute, service out against the Bank will not be permitted.

BACKGROUND AND OVERVIEW

6    As revealed in Perdaman No 1, Perdaman entered into a contract with Griffin under which Griffin agreed to supply coal to Perdaman (the CSA). The CSA related to a proposed urea production plant which Perdaman intended to construct and operate. The coal to be supplied by Griffin under the CSA was feedstock for the manufacture of the urea.

7    Perdaman contends that Lanco and other respondents deliberately ensured that performance of the CSA did not occur as it did not suit their interests to proceed with it. Perdaman alleges that by reason of Lanco’s conduct, on which I will elaborate, Griffin did not complete the transfer of securities (known as the CSA Securities), namely, a mortgage over a mining title and a deed of charge to Perdaman by 28 August 2011, being the date of financial closure under the CSA (the CSA Securities breach). Perdaman contended in Perdaman No 1 that Lanco was instrumental in procuring or ensuring that after the financial closure date, Griffin issued a notice of termination of the CSA. Perdaman argued in that proceeding that the conduct of Griffin and Lanco was unlawful and comprised an attempt to take advantage of their own wrongdoing.

8    This application seeks to go further and draw the Bank in as a participant in the alleged unconscionable conduct or tortious interference with respect to the CSA between Perdaman and Griffin. Perdaman says that, as a result of discovery now obtained, it has become aware of relevant conduct of the Bank which it contends constitutes a prima facie case of statutory breach and tortious breach in the manner set out above.

9    The proceeding in which the discovery was supplied is already pending in the Supreme Court of Western Australia. Leave to use the discovered documents for the present application was given by Justice Edelman in that proceeding.

10    It was deemed necessary in this instance, as in Perdaman No 1, to apply in this Court for service out so as to join Lanco before cross-vesting the proceeding back to the Supreme Court. The Supreme Court proceeding embraces in much more detail the contentions summarised above. If service out is permitted, Perdaman wishes to join the Bank and then cross-vest this proceeding back to the Supreme Court so that the trial can include the claim against the Bank as well as the existing defendants, namely, Griffin, Lanco Infratech Ltd (Lanco India), Lanco Resources Australia Pty Ltd (Lanco Australia), Mr Russell Conley, Mr Manoj Agarwal, Mr Lagadapati Madhusudhan Rao, Mr Kandimalla KV Naga Prasad and Lanco Resources International Pte Limited (Lanco Singapore). In the existing Supreme Court proceeding, Perdaman’s allegation of breach of the CSA, unconscionable conduct and tortious interference in respect of the CSA are summarised in reasons for judgment of Beech J delivered in Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2011] WASC 188 (at [159]-[173]) and on appeal in Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd (No 3) [2011] WASCA 203 (at [8] and [12]). In each of those decisions at first instance and on appeal the Court was satisfied that there was an arguable claim for those breaches.

11    The only involvement of this Court would be to determine the application for leave for service out, perhaps to resolve any jurisdictional challenge by the Bank and then to cross-vest the proceeding. There is an apparent inability to exercise the Supreme Court’s long arm jurisdiction with respect to causes of action arising out of Commonwealth legislation, in this case, the ACL: see Kent v Lechmere Financial Corporation [2002] WASC 75.

12    Correctly, in my view, it was not suggested that it was inappropriate to pursue such a course as a matter of principle. The central question, however, is whether the Court has jurisdiction.

RELEVANT CONSIDERATIONS FOR ‘SERVICE OUT’

13    Relevantly, r 10.43 of the Federal Court Rules 2011 (Cth) (FCR) is in these terms:

10.43    Application for leave to serve originating application outside Australia

(1)    Service of an originating application on a person in a foreign country is effective for the purpose of a proceeding only if:

(a)    the Court has given leave under subrule (2) before the application is served; …

(2)    A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

(3)    The application under subrule (2) must be accompanied by an affidavit stating:

(a)    the name of the foreign country where the person to be served is or is likely to be; and

(b)    the proposed method of service; and

(c)    that the proposed method of service is permitted by:

(i)    if a convention applies — the convention; or

(ii)    if the Hague Convention applies — the Hague Convention; or

(iii)    in any other case — the law of the foreign country.

(4)    For subrule (2), the party must satisfy the Court that:

(a)    the Court has jurisdiction in the proceeding; and

(b)    the proceeding is of a kind mentioned in rule 10.42; and

(c)    the party has a prima facie case for all or any of the relief claimed in the proceeding.

14    It is necessary therefore for Perdaman to establish that:

    The Court has jurisdiction in the proceedings;

    The proceedings are of a kind mentioned in r 10.42 FCR; and

    Perdaman has a prima facie case for all or any of the relief claimed in the proceeding.

15    Rule 10.42 FCR relevantly provides:

10.42    When originating application may be served outside Australia

Subject to rule 10.43, an originating application, or an application under Part 7 of these Rules, may be served on a person in a foreign country in a proceeding that consists of, or includes, any one or more of the kinds of proceeding mentioned in the following table.

STATUTORY BASIS FOR THE CLAIM

16    The claim appears to be primarily based on s 20 of the ACL. That section provides:

20    Unconscionable conduct within the meaning of the unwritten law

(1)    A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.

(2)    This section does not apply to conduct that is prohibited by section 21.

17    Sections 21 and s 22 of the ACL concerning unconscionable conduct in connection with goods or services are also engaged by the statement of claim. Suffice it to say for present purposes that I have taken a broad view of unconscionable conduct. However, it is clear that it does not apply in relation to financial services (but equivalent provision for it does appear in s 12CA of the Australian Securities and Investments Commission Act 2001 (Cth)), nor does it apply to conduct that has been prohibited by s 21 or s 22 of the ACL.

18    Generally speaking, it has been considered that the reference to ‘unwritten law’ relates to the equitable doctrine of unconscionable dealing as reflected in cases such as Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 but the courts have been more expansive in their construction of this provision. Amadio involved a bank’s action for possession of property that had been mortgaged by Mr and Mrs Amadio. The mortgage had been given to support a guarantee for their son’s debts. Their son had requested the mortgage to be given and misrepresented its true effect to his parents. The Amadios had a limited understanding of the English language, being Italian migrants of an advanced age, and had some difficulty in understanding the commercial complexities of the terms and effect of the guarantee. Although the representations were made by the son, the bank, despite the shortcomings of the parents being apparent, neglected to explain the effect of the guarantee and mortgage to the parents, particularly in circumstances where the business being guaranteed was in poor financial shape. Gibbs CJ, Mason and Deane JJ discussed the modern notion of equity’s willingness to relieve against a hard bargain where it had been extracted by unfairly taking advantage of a specially disadvantaged or disabled person. The High Court upheld the South Australian Full Court, which had concluded that the conduct of the bank had been unconscionable.

19    The major issue for Gibbs CJ was the bank’s lack of disclosure in the circumstances which his Honour concluded was itself a misrepresentation. However, Mason J considered that all of the notions of equitable fraud, misrepresentation, undue influence, breach of fiduciary duty and unconscionable conduct were species of unconscionable conduct on the part of the party who stands to receive the benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. Mason J placed particular emphasis on the superior positioning or bargaining power of the party deriving the benefit to the detriment of the party suffering from some special disability.

20    Similarly to Mason J, Deane J characterised the intervention of courts of equity in circumstances of unconscionable dealing as the taking advantage of a superior bargaining position in circumstances where a disability was sufficiently evident to the stronger party to make it prima facie unfair or ‘unconscientious’ that he procure or accept the weaker party’s assent to the impugned transaction.

21    Despite s 20 and its predecessor applying by statute in trade and commerce, the transfer of the concepts from equity to the statutory context has been hesitant. The landlord and tenant disputes accompanied the bank and customer dispute but the courts have stood steadfast against substituting notions, idiosyncratic or otherwise, of unfairness for unconscionability. So, for example, imposing ‘irrelevant’ requirements in bargaining (as here pleaded) has fallen well short of being unconscionable conduct. See, for example, Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 where Gleeson CJ noted (at [16]) that:

Parties to commercial negotiations frequently use their bargaining power to “extract” concessions from other parties. That is the stuff of ordinary commercial dealing. What is relevant to a commercial negotiation is whatever one party to the negotiation chooses to make relevant.

22    In Hurley v McDonald’s Australia Ltd (2000) ATPR 41–741, the Full Federal Court (Heerey, Drummond and Emmett JJ) said (at  [22]):

For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated — Cameron v Qantas Airways Ltd (1994) 55 FCR 147 at 179. Whatever ‘unconscionable’ means in s 51AB and s 51AC, the term carries the meaning given by the Shorter Oxford English Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable — Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262. The various synonyms used in relation to the term ‘unconscionable’ import a pejorative moral judgment — Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 283–284 and 298.” (emphasis in original)

23    The Interveners rely on Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 where Spigelman CJ (at [119]) said, concerning a different statutory provision:

Over recent decades legislatures have authorised courts to rearrange the legal rights of persons on the basis of vague general standards which are clearly capable of misuse unless their application is carefully confined. Unconscionability is such a standard.

24    His Honour continued (at [121]):

… Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what is ‘fair’ or ‘just’, it could transform commercial relationships … in a manner which … was not the intention of the legislation … (Interveners’ emphasis)

See also Lopwell Pty Ltd v Clarke [2009] NSWCA 165 (at [38]-[40]) per Macfarlan JA (with whom Ipp and Campbell JJA agreed) and Australian Competition & Consumer Commission v Allphones Retail Pty Ltd (No 2) (2009) 253 ALR 324 per Foster J (at [113]).

25    By way of preface to examination of the claim, it seems to me that Perdaman carries a significant burden in the present application given that the parties are sophisticated international corporations, the dealings are of substantial magnitude (hundreds of millions of dollars) and it is clear on the evidence that the parties had the benefit of a great deal of legal advice. A further significant difficulty in application of s 20 of the ACL to the relevant correspondence pleaded in the statement of claim is that the Bank was not dealing with Perdaman. Perdaman was, for its purposes, a stranger. The Bank was dealing with the Lanco parties.

THE PROPOSED STATEMENT OF CLAIM AGAINST THE BANK – FACTS AND CONTENTIONS

26    With the application, Perdaman filed a statement of claim which reflected many of the matters in the Supreme Court pleading but brought in claims against the Bank. Much of the material provided only contextual background material to any claim against the Bank. But it is necessary, as counsel for Perdaman fairly argued, to consider the whole of the pleading to see how the Bank could be viewed as being at fault for losses sustained by Perdaman.

27    The following facts emerge from the draft pleading on which Perdaman relies:

28    Perdaman was established in 2006 for the sole purpose of developing a world scale ‘leading edge technology’ urea fertiliser plant in the south west of Western Australia using coal as essential feed stock. Griffin, a coal miner, was placed into voluntary administration on 3 January 2010. Between that date and 28 February 2011, it traded in administration by its joint and several voluntary administrators. Lanco Australia acquired all the issued share capital in Griffin and Griffin entered into a deed of company arrangement (DoCA) on 28 February 2011, exiting its administration and selling the shares.

29    Lanco is a leading infrastructure developer in India and elsewhere carrying on business in power generation, construction, property development and in the solar sector. It caused Lanco Singapore to be incorporated on 6 December 2010, holds its shares and also holds the shares in Lanco Australia, incorporated on 13 December 2010. Since the acquisition of shares in Griffin, Lanco has been the ultimate holding company of Griffin.

30    The CSA entered into on 21 December 2010 was for an initial term of 25 years. Perdaman and Griffin were to negotiate in good faith to agree the coal price. The price was agreed and included an escalation component. On administrators being appointed to Griffin from January 2010 onwards, the administrators made it clear that the agreed coal price, including the escalation, was not sustainable for Griffin and accordingly the price was renegotiated.

31    The infrastructure associated with establishing the urea plant was extremely expensive. In order to progress and develop the Project, Perdaman carried out extensive investigations, negotiation and preparatory work. It incurred costs, it says, until May 2011 of approximately $195 million (Perdaman Project costs) including payment for numerous consultants in consequence of which the Project had advanced to the point where it was for a variety of reasons poised to proceed. One of the features of the preparation of the Project was the entry into the Coal Supply Heads of Agreement on 13 October 2008. Following a subsequent presentation of the Perdaman Project to potential financiers, Perdaman pleads that it ‘was on the cusp of achieving Financial Close’ as at May 2011.

32    By cl 25 of the CSA, ‘Financial Close’ meant the date at which Project financing of the funding required for the Perdaman Project had been provided on terms acceptable to Perdaman and all conditions precedent for such funding had been sustained and initial funds had been drawn down by Perdaman. The CSA was conditional (by cl 24) on execution of an inter-creditor deed and other securities known as the ‘CSA Security Documents’ occurring on or before the condition precedent date. That date was relevantly, six months after Griffin exited administration on 28 February 2011, namely, 28 August 2011.

33    Perdaman was to report to Griffin promptly after any event which was material to satisfying the conditions precedent by a condition precedent date and to provide detailed updates every month or at such intervals as may reasonably be required by Griffin. Griffin, in turn, was to cooperate in making reasonable endeavours to assist Perdaman with any due diligence obligations relating to achieving Financial Close. There were other obligations imposed upon Griffin of like nature.

34    Additionally, if Griffin was unable to supply coal in accordance with the terms of the CSA at any time, then Perdaman was to have the right to step-in to Griffin’s operations to the extent and for so long as would be necessary to ensure deliveries from the Griffin mine were restored and maintained in accordance with the terms of the CSA (the ‘step-in’ right). Additionally, while doing so, Perdaman was to ensure that the operations were conducted so as to meet the contractual obligations owed by Griffin to all customers including Perdaman.

35    Perdaman contends in its first statement of claim that Griffin was obliged to execute the CSA Securities when reasonably required by Perdaman to do so. Further, no right to termination conferred by the CSA would be available to Griffin for so long as a breach by it of the CSA caused Perdaman to be unable to satisfy, by the condition precedent date, the conditions referred to in cl 24.1(a).

36    The statement of claim deals with the importance to Perdaman of and benefits of acquisition of coal from Griffin rather than other sources.

37    The statement of claim then sets out how Lanco funded its acquisition of Griffin. On 9 February 2011 Lanco Singapore and Lanco Australia entered into a Facility Agreement with the Bank at its Singapore branch and the Bank of New York Mellon under which Lanco Australia agreed to borrow $800 million from the Bank (the Facility Agreement). By the terms of the Facility Agreement, each of Lanco Singapore and Lanco Australia (the Lanco parties) covenanted to require Griffin (fully owned by Lanco), after the completion of the acquisition of Griffin by Lanco Australia, to enter into a Negative Pledge deed in terms contrary to the CSA and, in particular, contrary to the obligations on the part of Griffin pursuant to cl 24.1(a)(ii), cl 24.2(c) and/or the implied terms to do everything necessary to execute a deed of charge and to execute the CSA Securities. The Negative Pledge would, in broad terms, prevent Lanco from creating any security interest which might relevantly compete with the Bank’s security, or cause it to be deferred.

38    Perdaman contends that by 5 May 2011, the Lanco parties, and after 28 February 2011, Griffin, had determined that it would be commercially advantageous for them to cause the termination through non-fulfilment of the condition precedent of the CSA. This would avoid Griffin’s obligations to hold coal reserves for, and supply coal to, Perdaman as required by the CSA and enable Griffin to direct coal supply elsewhere at a better price. This in turn would cause Perdaman to re-negotiate the coal price. This is the key to the claim against Lanco and Griffin.

39    But the question for present purposes is how the Bank is ‘hooked in’ to that conduct. The Bank comes into the picture, on the statement of claim, between March 2010 and February 2011 when it undertook its own due diligence of Griffin’s mine and operations and the Lanco parties’ operations with a view to funding the Lanco parties’ acquisition of Griffin.

40    The statement of claim then reverts to the subsidiary complaints against the Lanco parties. It contends that from 18 March 2011 to 6 April 2011, arrangements were made for a group of approximately 11 representatives of the joint financiers to attend on a due diligence tour of Griffin. The statement of claim refers to a ‘chain of emails’ in which it sought assistance from Lanco and its directors to achieve ‘Financial Close’ as the date was approaching.

41    On 18 April 2011, Griffin wrote to the Bank sending an executed deed of mortgage and deed of charge in the form of Sch 7 and Sch 8 of the CSA. It requested the Bank to issue a ‘no objection’ letter to send those documents to Perdaman. However, by letter from the Bank (the Singapore branch) to Griffin on 20 April 2011, the Bank informed Griffin that it rejected Griffin’s request that it issue a ‘no objection’ to Griffin sending the documents to Perdaman. In the meantime, on about 4 May 2011, arrangements had been agreed with the Lanco parties and Griffin for the final inspection by financiers to take place on 10 May 2011.

42    Perdaman contends that Griffin and the Lanco parties knew at this stage that Perdaman was ‘on the cusp’ of achieving financial close but notwithstanding this, they interfered with and disrupted the final inspection and financial close. Perdaman relies on letter of 5 May 2011 sent from Griffin to Perdaman pointing out the requirement of reasonable endeavours to achieve execution on or prior to the condition precedent date of the CSA Securities. The letter from Griffin goes on to say that its acquisition was financed by the Bank and, under the financing terms, the Bank had certain rights as regards securities over Griffin. Griffin advised that pursuant to its obligations under the CSA, it had attempted to procure the Bank’s consent to the granting of securities by Griffin for the purposes of the CSA but so far the Bank has refused to grant that consent. The letter assured Perdaman that Griffin would continue to endeavour to procure the Bank’s consent and bring about the execution of the CSA Securities.

43    The same letter continued on a different topic, observing that since completion of the acquisition, Lanco had discovered that the operations may not be financially sustainable in their present form. It wished Perdaman to participate in discussion about future business plans. There were exchanges of correspondence concerning this letter and various meetings and discussions.

44    On some date in the period between 12 and 21 June 2011, without knowledge or consent of Perdaman, Griffin executed the Negative Pledge and in so doing bound itself to obligations to the Bank. Those obligations deprived it of the ability to execute the CSA Securities without the consent of the Bank. Perdaman alleges, as against Lanco and its directors, wrongful assertions as to the Bank’s consent requirements, wrongful entry into the Negative Pledge and refusal and failure to execute the CSA Securities.

Claimed unconscionable conduct by the Bank

45    Those complaints against Lanco and Griffin then link into new complaints against the Bank. The unconscionable conduct by the Bank is identified as being that it was the Bank that procured Griffin’s breach of contract. It asserts that Perdaman was in a ‘weak bargaining position’. (I reiterate however that the Bank was not bargaining with Perdaman and had no dealings or negotiations with Perdaman at all.) The pleaded unconscionability at [162] of the statement claim is in the following terms (this being the key aspect of federal jurisdiction on which leave is sought):

By the conduct referred to in the previous paragraph Lanco India, Lanco Singapore, Lanco Australia, [and various individual respondents] and [the Bank] engaged in conduct that was unconscionable … in that:

162.1    each defendant used unfair tactics and acted in bad faith including by the Lanco Group Interference;

162.2    Perdaman was in a weak bargaining position and each defendant by their conduct exploited that position;

162.3    that conduct was engaged in by the defendants to require Perdaman to comply with conditions which were not reasonably required for Griffin’s protection and [the Bank’s] legitimate interests;

162.4    Perdaman, to the knowledge of the defendants, could not obtain substitute coal supply from an alternative supplier.

46    It will be noted that the Bank is not specifically brought into the unfair tactics and acting in bad faith under [162.1] because that conduct is said to be the conduct of the Lanco parties in the ‘Lanco Group Interference’.

47    As to [162.2], the fact that Perdaman was or was not in a weak bargaining position was irrelevant to the Bank which was not dealing with it.

48    As to [162.3], the conduct of the Bank is raised. The sending of the letters by the Bank declining the consent sought by Lanco or Griffin to enter into the CSA Securities, however, could not possibly be said to be engaged in, in order to require Perdaman to comply with conditions not reasonably required for the Bank’s legitimate interests. The Bank’s legitimate interest was to secure its advances in preference to others and that is what it did.

49    As to [162.4], there is no other material fact pleaded elsewhere to the effect that Perdaman, to the knowledge of the defendants in the Supreme Court proceedings, could not obtain substitute coal supply from an alternative supplier. Even if that was the case and even if the Bank knew that to be the case, it is not clear why it would be unconscionable for the Bank to protect its security in respect of the entity to whom it was advancing funds, namely, the Lanco parties. Putting aside the fact that the two letters were not even in Australia but were dispatched within Asia (from India to Singapore), the question is whether there is a claim for unconscionability within the jurisdiction even at an arguable level.

SHOULD LANCO’S INTERVENTION BE PERMITTED?

50    The Lanco parties, Griffin, Mr Conley, Mr Agarwal, Mr Prasad, Mr Rao and Mr Amarendran have sought leave to intervene in the action. I will refer to those entities and individual company officers collectively as the Interveners. I propose to allow the opposed application to intervene which they have filed and served.

51    Rule 9.12 FCR provides as follows:

9.12    Interveners

(1)    A person may apply to the Court for leave to intervene in a proceeding with such rights, privileges and liabilities (including liabilities for costs) as may be determined by the Court.

(2)    The Court may have regard to:

(a)    whether the intervener’s contribution will be useful and different from the contribution of the parties to the proceeding; and

(b)    whether the intervention might unreasonably interfere with the ability of the parties to conduct the proceeding as the parties wish; and

(c)    any other matter that the Court considers relevant.

(3)    When giving leave, the Court may specify the form of assistance to be given by the intervener and the manner of participation of the intervener, including:

(a)    the matters that the intervener may raise; and

(b)    whether the intervener’s submissions are to be oral, in writing, or both.

52    It is clear from the materials on which Perdaman relies, that the time to be spent in this Court will be limited to the time required to achieve an order for service out (if granted), then the time required to deal with any jurisdictional issue which might be raised by the Bank consequential upon such service out and then with the cross-vesting. But I do not consider that the fact that there is not to be a substantive determination in this Court should limit the right to intervene. Rule 9.12(1) is in wide terms.

53    The Supreme Court proceedings are well underway and I am told the parties hope to have a trial in the Supreme Court this year. In my view the Interveners have a genuine interest in being heard in opposition to Perdaman’s application for service out. The Interveners strongly object to this Court making an order for service out of the jurisdiction and their arguments have been of assistance in refining the case to be articulated by Perdaman against the Bank in order to determine Perdaman’s application.

54    I indicated at the hearing that I was not minded to permit service out of the statement of claim in its present form and that for reasons which will be discussed, significant modification to it was required for leave to be granted. For that reason alone, the involvement of the Interveners has been beneficial and I am satisfied (for the purposes of r 9.12(2)(a)) that the intervention is useful and significantly different from the contribution, at least at this stage, which might have been made by the applicant alone.

55    It is therefore strictly unnecessary to consider the ancillary question of whether or not the close commercial relationship under the Facility Agreement between the Bank and the Interveners is such that it would warrant the granting of leave to intervene, although in the unusual circumstances of this case with parallel litigation proceeding, it seems to me that it may well be a relevant consideration.

56    While I recognise that if served with the originating application the Bank may enter a conditional appearance and challenge the jurisdiction of the Court or the Court’s decision to grant leave to serve outside the jurisdiction, this does not in my view suggest that the Interveners should not be granted leave to intervene at this point.

Leave to intervene will be granted

57    The Interveners have an obvious and legitimate interest in opposing service out where there are allegations against non-parties of this nature. It is unnecessary to descend into detail but it is undoubtedly the position that there are numerous serious allegations against the Interveners which are not connected with the relief presently sought against the Bank. This is because the pleading has, in effect, reproduced (right down to the reference to the Interveners as ‘defendants’) the form of pleading in the Supreme Court. While counsel for Perdaman explains that this is done for the purposes of background, I would not be prepared to permit a pleading of this nature to form part of the materials for service out. The Court should not, in my view, exercise its discretion to allow the service abroad of court process involving serious and multiple allegations against the Interveners in circumstances where Perdaman does not seek relief in this Court against them and where the allegations are freestanding and not material to the case sought to be pleaded against the Bank. As the Interveners have had success on that point, leave to intervene will be granted.

IS THERE A PRIMA FACIE CASE AGAINST THE BANK FOR SERVICE OUT?

58    As to the prima facie case, it has been held that a prima facie case is made out if, on the material before the Court, inferences are open which, if translated into findings of fact, would support the relief claimed (Western Australia v Vetter Trittler Pty Ltd (in liq) (1993) 30 FCR 102 (at 110) per French J). In Ho v Akai Pty Ltd (in liquidation) (2006) 24 ACLC 1,526 the Full Court (Finn, Weinberg and Rares JJ) observed (at [10]):

As has been observed on many occasions, the prima facie case requirement has to be met at the outset, usually on an ex parte basis, and without the advantage of discovery and other procedural aids to the making out of a case: see e.g. Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 at 390. It “should not call for a substantial inquiry”: WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 at 476; see also Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549. For present purposes it is sufficient to say that a prima facie case for relief is made out if, on the material before the court, inferences are open which, if translated into findings of fact, would support the relief claimed: Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 at 110. Or, to put the matter more prosaically as Lee J did in Century Insurance (in provisional liquidation) v New Zealand Guardian Trust [1996] FCA 376:

What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court's processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified.

59    In Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 (at [97]), Carr J said:

The question is whether, on the material before the Court, inferences were open which, if translated into findings of fact, would support the relief claimed. The scrutiny is not that which would occur in a submission of no case to answer following the closure of an applicant’s case at trial. A court can draw inferences more regularly in favour of an applicant, bearing in mind, among other things, that the applicant will not have had the advantage of discovery and other procedural aids. The kind of evidence to be adduced should be in proportion to the nature of such and interlocutory issue by way of a mini rather than a mega trial.

60    The Interveners argue that this case is different because Perdaman has already had the advantage of extensive discovery in the Supreme Court proceeding. In my view the observation made by the Full Court (Justice Carr in particular) in Bray is still apposite. While, of course, there has been discovery in the Supreme Court proceeding of documents in the possession, custody or power of the defendants to that proceeding, Perdaman has not had the benefit of discovery from the Bank which discovery might throw light on the actions and motivations of the Bank. Nevertheless, a ‘fishing’ exercise could not be justified unless the evidence first establishes a prima facie case, giving some weight to the fact that at least some access to private documents between Lanco and the Bank has been achieved through discovery in the Supreme Court proceedings.

61    Perdaman contends the Court has jurisdiction because the conduct of which it complains took place in Australia even though the Bank is a foreign entity. Perdaman relies on communications originating outside Australia directed to a resident or a business located in Australia. This will be sufficient to constitute conduct in Australia for the purposes of the CCA: see Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 where Merkel J said (at [147]):

In the present case the facsimile, e-mail, letter, telephonic, telex, or other communications from overseas parents to officers of the Australian subsidiaries, although they were likely, for the most part, to have been initiated outside of Australia, were directed to and were expected to be, and were, received in Australia. In my view such conduct can, for the purposes of s 45 of the TPA, be regarded as taking place in Australia.

62    I will come back to discuss the central area of debate as to whether or not there is conduct in Australia of the kind which may be sufficient to attract the Court’s jurisdiction.

Perdaman’s jurisdictional argument

63    Perdaman relies upon correspondence directed to Australia which is expected to be received in Australia and is in fact received in Australia as supporting the contention that the sending of that correspondence constitutes conduct in Australia regardless of where the correspondence originated (Rock Solid Surfaces Pty Ltd v Biesse Group (Australia) Pty Ltd [2011] FCA 42 (at [24]) per Gilmour J and Bray (at [147])).

64    For the connection with Australia, Perdaman argues that the following factors demonstrate that this Court has jurisdiction to hear the dispute between Perdaman and the Bank:

    Perdaman’s allegation that the Bank unlawfully inferred or acted unconscionably in respect of the CSA, being an agreement in Australia concerning the supply of coal in Australia;

    The entry of the Negative Pledge by Griffin, Carpenter Mine Management Pty Ltd and the Bank provides that the law governing the document is the law of New South Wales and that courts having jurisdiction in New South Wales have jurisdiction in respect of disputes arising out of or in connection with the document;

    The Bank’s letters to and from Griffin and Lanco Australia, which are both entities registered in Australia and having addresses in Australia, Lanco Singapore and Lanco India between April 2011 and August 2011 concerning the request by Perdaman for Griffin to execute the CSA Securities and the alleged unlawful refusal by the Bank to consent to the execution of the securities. The Bank letters entered the jurisdiction of Australia; and

    The Bank’s letters to and from Lanco Australia being an Australian entity and Lanco Singapore regarding the apparent requirements of Griffin to enter into the Negative Pledge.

No prima facie case as to unconscionability on the original statement of claim

65    Even if one takes an expansive view about there being conduct in Australia, I am unable to detect any arguable prima facie case against the Bank on the first form of the pleading. I can readily accept that there was a prima facie case for breach and/or unconscionable conduct against Griffin and/or the Lanco parties which does not require further elaboration. In contrast, the fact that the Bank wrote some letters, some of which entered Australia, and imposed requirements by declining to grant consent to defer its securities in favour of a stranger cannot possibly found a claim in unconscionable conduct at statute or otherwise, in my respectful view.

66    The statement of claim which, as I assess it, is essentially the Supreme Court statement of claim with some communications and conduct of the Bank added, falls short of the requirements of establishing a prima facie case against the Bank.

67    The primary conduct complained of in the original statement of claim constitutes the sending of two letters from Lanco India to Lanco Singapore. (That does not on its face even attract an Australian conduct element but the letters were apparently copied into Australia.)

68    The conduct in [118] which is central to the pleadings at [160] and [162] was that in accordance with the email request of 21 May 2011 by Lanco India, the Bank sent two letters to Lanco Singapore, both dated 24 May 2011. The text of these letters was as follows:

This is to bring to your attention that the documentation for the creation of Negative Lien is a material condition provided in the Facility Agreement dated February 9, 2011 which you will need to comply with at the earliest as the timeframe for the same is expiring today.

We also advice (sic) you to inform us of the current operational/financial performance of the acquired Griffin mines to enable us to evaluate the same against the base case business plan, at the earliest.

69    The second of the two letters of 24 May 2011 comprised three paragraphs, the first two paragraphs being identical to those set out above. The third paragraph of the second letter reads: ‘In furtherance to your letter dated May 21, 2011, please note that we may consider your request only after the creation of security’.

70    The conduct of the Bank pleaded in [121] adds nothing to that pleaded in [118]. What is pleaded in [121] is that by the letter of 24 May 2011 the Bank advised that the timeframe for Griffin to execute the Negative Pledge ‘expires today’ (being 90 days from the date of entry into the Facility Agreement).

71    The Interveners assert, and I accept, that the dispatch of either of those letters could not possibly on any case constitute unconscionable conduct as the relevant statement appearing in both letters (‘This is to bring to your attention that the documentation for the creation of the Negative Lien is a material condition provided in the Facility Agreement’) is plainly a statement addressed to Lanco Singapore, the addressee of the letter and the party to the Facility Agreement. The statement is entirely accurate. It is entirely innocuous and operational. The third paragraph of the second letter which begins ‘In furtherance to your letter dated May 21, 2011…’ responded to a request in Lanco’s letter which stated:

Please refer to your letter dated April 20, 2011 which was followed by our discussions held with you during a visit to your office on 18-19 May 2011. In our visit will (sic) explain to you that as per clause 24.1 of the [CSA] … it is a condition precedent for Griffin to enter into a mortgage, a deed of charge and inter-creditor deed in favour of Perdaman. The [CSA] shall become effective only pursuant to the execution of these deeds. We hereby request you to reconsider your decision to issue to us a no objection to execute these deeds in order to create charge on assets of [Griffin]. (emphasis added)

72    The statement was consistent with the Bank’s previously stated position.

73    Senior counsel for the Interveners submits, and I accept, that it is plainly to be inferred that the 24 May 2011 letters reflected the outcome of discussions held by the Bank and Lanco in which, as stated in the 21 May 2011 letter, a request for a reconsideration of the ‘no consent’ attitude was made. The Bank would not have issued the letters of 24 May 2011 if what was stated in them did not represent its attitude.

74    In my view, the sending of the two letters from Lanco India to Lanco Singapore, even if copied to entities within Australia, was not conduct capable of constituting a prima facie case of unconscionable conduct in contravention of ss 20, 21 and 22 of the ACL.

75    The other communications to which Perdaman refers, even if within Australia, add nothing to its case against the Bank. Although it is not expressly pleaded in this way, the fact that the Bank was acceding to a request by its customer Lanco (of which Griffin and Lanco Australia are subsidiaries) is a matter that could hardly amount to unconscionable conduct or interference vis-à-vis those companies. There is no explanation in the pleading or otherwise as to why the sending of the 24 May 2011 letters could constitute unconscionable conduct. There was no exploitation by the Bank of Perdaman’s supposed weak bargaining position. The Bank itself was not bargaining with Perdaman at all. The letters were not addressed to Perdaman.

ANALYSIS

76    The Bank was the financier for Lanco in its acquisition of Griffin. It was entitled to protect its own interests and to impose and to adhere to whatever security requirements it could achieve in its dealings with Lanco. The Bank had no obligations to Perdaman nor was it negotiating with or bargaining with Perdaman. The Bank was entitled to and, on one view, obliged to obtain the best possible security it could to protect the interests of the financiers.

77    Viewed conceptually, rather than by reference to the detail of the draft pleading, the contention appears to be, as I understand it, that the Bank was using its (un-pleaded) superior bargaining power vis-à-vis Perdaman - a stranger to its transactions - to impose on its borrower, Lanco, an unnecessary security requirement not to protect the bank’s entitlement but to enable the borrower to escape from a contractual obligation to Perdaman that it knew the borrower, Lanco, had ceased to find commercially attractive.

78    No authority is cited to support the proposition that this could amount to unconscionable conduct by the Bank. But more fundamentally, while there is an extensive amount of documentation and negotiation pleaded as well as apparently very extensive evidence which all goes to the borrower’s position, there is barely anything from the Bank to support the seemingly speculative assertion that simply because it wrote two letters in a form suggested by its borrower, the Bank was participating in some conspiracy or scheme in effect to cause the borrower to commit the CSA Securities breach.

79    The more likely inference is that it was exercising its normal and lawful commercial interests as its shareholders would expect.

80    No motive on the part of the Bank has been exposed. Even if one does speculate that the Bank knew both (a) that adherence to its contracted security requirements would result in the borrower breaching the contract with Perdaman and (b) that the borrower considered it was better off if the contract with Perdaman were terminated, it is difficult to see any arguable unconscionablility. Even with those inferences being drawn in favour of the borrower’s argument, one must ask rhetorically, what part of the law would require the Bank to give up its security entitlement? There is none.

DOES THE RESHAPED CASE SATISFY THE REQUIREMENTS?

81    In light of the difficulties outlined above, I offered Perdaman the opportunity to file an amended statement of claim which removed much of the extraneous allegations against the Lanco parties and specified with greater clarity the alleged unconscionable role of the Bank. That invitation was accepted. In the revised form of the pleading, the alleged unconscionability is reframed in simpler terms which do not involve and do not raise as many complaints against the Lanco parties, Griffin and the directors.

82    Perhaps redrafting the pleading was ambitious as it can be seen that it is very difficult to cure without evidence of a different nature the problems which have been discussed in these reasons. I am not satisfied that the reframed allegation is capable of addressing those shortcomings.

83    In my view, there is no substantive change or improvement in the new proposed pleading because:

(a)    there are no or inadequate particulars of unconscionability;

(b)    there are no particulars of bad faith;

(c)    the interaction between the Bank and Perdaman is still lacking;

(d)    at worst, the Bank drove a hard bargain as it was entitled to do: Astram Financial Services Pty Ltd v Bank of Queensland Ltd [2010] FCA 1010 (at [336]) per Buchanan J; Australian Competition & Consumer Commission v Samton Holdings Pty Ltd (2000) ATPR 41-791 per Carr J (at [99]).

CONCLUSION

84    I accept the Interveners’ submission that the need to establish a prima facie case in the instance of service out is underpinned by the philosophy that it is a serious matter to bring a party with no presence in the jurisdiction and therefore unable to be served within the jurisdiction and not otherwise carrying on business in the jurisdiction before a court in the foreign jurisdiction. The sending of the letters by the Bank, whether in response to a request or not, cannot arguably constitute unconscionable conduct.

85    There can be little doubt on the face of the communications that the Bank was declining to give its consent. It was not required to give its consent and there is nothing unconscionable about refusing consent. (The letter does go on to say that ‘we will reconsider giving consent after the security has been created in accordance with the terms of our financing agreement’.)

86    As the unconscionable conduct claim is unarguable, there was no federal claim to which the tortious interference claim might be attached. The orders will be:

1.    The application for intervention is allowed.

2.    The application for service out is refused.

3.    The Applicant for service out pay the costs of the Interveners to be taxed if not agreed.

Associate:

Dated:    6 March 2013