The parties agreed to consent judgment for possession of the security properties and for the money owing.
The bank then went away and sold the properties but realised a shortfall.
The guarantors brought proceedings alleging the bank breached its duties under section 420A of the Corporations Act when selling and sought to stay the bank’s consent judgment for the shortfall.
The bank responded by seeking to have the borrower’s claim struck out for defective pleading because it gave no allegation as to how the duty was breached. Instead it simply pleaded the market value and sale prices and sought to infer breach of duty.
The court agreed noting that the difference might result from unexpected market forces and not necessarily indicate breach and struck out the pleadings.
The bank then argued that the guarantor ought not be allowed to replead as he had no evidence to support a claim that the bank breached its duty in selling the security. The judge rejected this noting:
The Bank’s is correct: at this stage most of the Shannon parties’ evidence to support a case of breach of section 420A is not admissible, or in only very sketchy form. But this is not a case where the Bank can show by reference to evidence that the guarantor’s claim to damages under s 420A is “so obviously untenable that it cannot possibly succeed” or is “manifested groundless” . There is nothing to say that after issuing subpoenas and notices to produce the evidence will not be found, particularly in circumstances where the differential between actual sale prices and market valuations has been established to the prima facie level. Provided it is properly pleaded, this is an issue in my view, which should go to trial