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R George Investments Pty Ltd v Andagali

 

[2017] QSC 116

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

R George Investments Pty Ltd v Andagali & Ors [2017] QSC 116

PARTIES:

R GEORGE INVESTMENTS PTY LTD

ACN 004 605 583

(first plaintiff/respondent)

TABLEWARE PTY LTD

ACN 004 076 788

(second plaintiff/respondent)

v

ANDERSON LARRY LABE ANDAGALI

(first defendant)

HOWARD LOLE

(second defendant)

TRANSWONDERLAND HOLDINGS PTY LTD

ACN 166 996 523

(third defendant/applicant)

ALEXANDER EDGAR COCK-BURN MERCER

(fourth defendant)

MILLER HARRIS LAWYERS

(first third party)

McLAREN KNIGHT

ACN 101 627 598

(second third party)

FILE NO/S:

BS No 355 of 2016

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

9 June 2017

DELIVERED AT:

Brisbane

HEARING DATE:

31 January 2017

JUDGE:

Douglas J

ORDER:

The application is refused.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – SUMMARY JUDGMENT FOR PLAINTIFF OR APPLICANT – GENERALLY – where applicant defendant submitted that a debt claimed against it by the respondent plaintiffs was extinguished by a Deed of Company Arrangement – where respondent plaintiff argued that the source of the debt was a separate agreement – whether discretion to refuse summary judgment on part of loan where trial proceeding on balance of the loan – where absence of authority on point – whether issue has a real and not fanciful chance of success

Bankruptcy Act 1966 (Cth), s 75

Corporations Act 2001 (Cth), s 588FE, s 588FL

Uniform Civil Procedure Rules 1999, r 292

Bank of Adelaide v Lorden [1970] HCA 59; (1970) 127 CLR 185 considered

Bolton Properties Pty Ltd v JK Investments (Australia) Pty Ltd [2009] 2 Qd R 202, 217; [2009] QCA 135 cited

Gold Ribbon Accountants Pty Ltd v Stoddart [2003] QSC 332 cited

COUNSEL:

M K Stunden for the applicant/third defendant

D J Topp for the respondents/first and second plaintiffs

SOLICITORS:

Dibbs Barker for the applicant/third defendant

Girgenti Lawyers for the respondents/first and second plaintiffs

  1. In this application by the third defendant for summary judgment, it argues that a debt of $480,000 claimed against it has been extinguished by a Deed of Company Arrangement (“DOCA”).  The plaintiffs had intended that the debt be secured but had not registered the proposed security interest pursuant to s 588FL of the Corporations Act 2001 (Cth) by the end of 20 business days after the security agreement came into force or within six months before the entry into voluntary administration of a company called Advance Aviation Group Pty Ltd (“AAG”) which owed the $480,000 to the first plaintiff.  Therefore, the third defendant argues that the plaintiffs have no reasonable prospects of success in respect of this part of their claim. 
  2. The argument for the plaintiffs is that the third defendant bound itself to pay this debt of AAG to the first plaintiff in a separate agreement by which the second plaintiff agreed to lend more money to the third defendant. 

Background

  1. The third defendant was one of three borrowers from the plaintiffs of an amount of $1.43 million under a loan facility agreement entered into on 8 July 2015.  That amount was made up of an alleged existing indebtedness including $480,000 owed by AAG to the first plaintiff pursuant to an earlier loan agreement dated 28 September 2011. 
  2. There were other existing debts also recorded as owing in the loan facility agreement which contributed to the figure of $1.43 million.  The only further advance made pursuant to the 8 July 2015 loan facility agreement was of $650,000 from the second plaintiff to the third defendant.  The origin of the loan facility agreement of 8 July 2015 lay in the third defendant’s need to refinance a loan that was then due and owing by it to an entity known as Urogold Pty Ltd as trustee of a superannuation fund. 
  3. The third defendant, as one of the borrowers, agreed to repay the loan and interest on the repayment date pursuant to cl 6.1 of the loan facility agreement.  It acknowledged it was jointly and severally liable for the obligations of the three entities described as the borrower by cl 6.2.1.
  4. AAG went into administration on 7 April 2013 and entered into the DOCA on 28 August 2013.  The DOCA was terminated by notice that it had been wholly effectuated on 7 August 2015, after the execution of the loan facility agreement on 8 July 2015.  It seems possible that the parties may have understood the $480,000 AAG debt to have been secured because of its purported registration. 

Submissions for the applicant

  1. The applicant/third defendant submits that the plaintiff’s claim has no reasonable prospects of success in respect of the AAG debt because:[1]

“12. First, to establish its claim that RGI was a secured creditor of AAG, RGI needs to adduce evidence that it perfected its security interest by registration within 20 days of it being granted or after six months before AAG entered voluntary administration. RGI alleges its security interest was created with the execution of the Guarantee on 21 October 2012. However it was not registered on the PPSR until 21 February 2013. AAG was put into voluntary administration on 7 April 2013. Critically, this meant that the alleged security interest was registered:

  1.  more than 20 days after the agreement giving rise to the security interest (for the purposes of s 588FL(2)(b)(ii) of the Corporations Act); and
  1.  less than six months before commencement of the administration (being the "critical time" for the purposes of s 588FL(2)(b)(i)).

13.Secondly, because of RGl’s failure to register its security interest in time, the security interest was unenforceable against AAG and vested in AAG pursuant to s 588FL of the Corporations Act immediately before the appointment of the Administrator on 7 April 2013. This is similar to the vesting provisions in 267 of the Personal Property Securities Act where unperfected security interests, or late registration, vest the security interest in the granter extinguishing the security interest. RGI was therefore an unsecured creditor in respect of the AAG indebtedness under the ELA and the HLA.

14.Thirdly, by operation of clauses 3.1 and 3.2 the DOCA dated 28 August 2013 and s 4440(1) and s 444H of the Corporations Act the DOCA bound unsecured creditors and the AAG indebtedness was extinguished.

15.Fourthly, the extinguished AAG indebtedness could not be revived by a subsequent contractual device as a debt owed to both RGI and Tableware by TWH because it was extinguished by operation of the DOCA and the Corporations Act.

16.Accordingly, because the AAG indebtedness under the LFA was extinguished as at the date of the AAG DOCA, namely 28 August 2013, that indebtedness is unenforceable by the Plaintiffs under the LFA and to that extent the Plaintiffs’ claim should be summarily dismissed.”

Submissions for the respondents

  1. Mr Topp, for the respondent plaintiffs, accepted that the registration more than 20 days after the agreement giving rise to the security interest and less than six months before commencement of the administration had the effect that the AAG indebtedness was extinguished as against AAG by the DOCA.  He argued, however, that the acceptance by the third defendant of a joint and several liability for the obligations of the borrowers described in the loan facility agreement, including the third defendant, bound it to repay the $480,000.  It had benefited from the loan facility agreement by the further advance to it of $650,000 and, he argued, part of the consideration for that payment to it was its promise to repay not only that amount, but the amount owing in respect of the AAG debt.  His submission was that the Corporations Act did not bind creditors to give up a claim against a person other than the subject company in a situation like this.
  2. Mr Topp also argued that I could, in my discretion under r 292(2) of the Uniform Civil Procedure Rules 1999, refuse to grant summary judgment on the basis that there will be a trial at any event in respect of the balance of the amount claimed of $950,000 of the loan facility agreement.[2]  He also argued, of course, that the issue raised by him was one that should go to trial on the basis that there was a real, not fanciful, chance of success associated with it.

Discussion

  1. Neither counsel were able to refer me to any authority on the point.  Mr Stunden for the third defendant argued that the argument raised by the plaintiffs cut across the policy of the legislation relating to the discharge of debts effected by entry into a DOCA.  None of the possible issues raised by s 588FE(2B) of the Corporations Act were raised in the submissions before me, however. 
  2. Bank of Adelaide v Lorden,[3] by analogy, is authority for the proposition that a surety may remain liable to a creditor pursuant to an agreement though the debt of the principal debtor has been discharged by other means than payment, as, for example, by a composition with creditors.  See also, for another analogy, s 75(2)(b) of the Bankruptcy Act 1966 (Cth) which provides that the acceptance of a composition or scheme of arrangement does not release any other person from any liability from which he or she would not be released by the discharge of the bankrupt.
  3. Therefore, it seems to me that the matters argued do give rise to an argument that should be dealt with at a trial.  Here the effect of the agreement is that, in return for a loan by the second plaintiff to the third defendant, the third defendant should agree to pay AAG's already discharged debt to the first plaintiff.  That may have been agreed, I gather, because the parties may have believed the debt had not been covered by the DOCA because it was secured.  It does not seem to me to be an issue which, in the absence of clearly binding authority, I should decide summarily and in the absence of possible evidence throwing light on the circumstances in which the agreement to repay AAG’s by then discharged debt arose.

Orders

  1. I shall, therefore, refuse the application for summary judgment.  I shall hear the parties as to costs.

Footnotes

[1]  “RGI” was an abbreviation for the first plaintiff, R George Investments Pty Ltd.  “ELA” and “HLA” are abbreviations for an emergency loan agreement dated 28 September 2011 and a hangar loan agreement dated 28 September 2011 pursuant to which AAG was indebted to RGI for $480,000.  “LFA” is an abbreviation for loan facility agreement.

[2]  See Bolton Properties Pty Ltd v JK Investments (Australia) Pty Ltd [2009] 2 Qd R 202, 217; [2009] QCA 135 at [72]-[73].

[3]  [1970] HCA 59; (1970) 127 CLR 185, 191-192, 200-201.  See also Gold Ribbon Accountants Pty Ltd v Stoddart [2003] QSC 332 at [71].

Close

Editorial Notes

  • Published Case Name:

    R George Investments Pty Ltd & Anor v Andagali & Ors

  • Shortened Case Name:

    R George Investments Pty Ltd v Andagali

  • MNC:

    [2017] QSC 116

  • Court:

    QSC

  • Judge(s):

    Douglas J

  • Date:

    09 Jun 2017

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2017] QSC 116 09 Jun 2017 -

Appeal Status

No Status