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MSD Securities Pty Ltd v MFB Properties (NQ) Pty Ltd (No 3)

 

[2017] QSC 282

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

MSD Securities Pty Ltd & ors v MFB Properties (NQ) Pty Ltd & ors (No 3) [2017] QSC 282

PARTIES:

MSD SECURITIES PTY LTD AS TRUSTEE FOR THE BRUNSWICK STREET TRUST

ACN 160 362 345

(first applicant)

PK’S RESORT PTY LTD

ACN 168 348 730

(second applicant)

MARK LEONARD SEABROOK

(third applicant)

DAVID BRUCESMITH

(fourth applicant)

v

MFB PROPERTIES (NQ) PTY LTD

ACN 101 980 303

(first respondent)

THE JUNGLE VILLAGE PTY LTD

ACN 098 067 077

(second respondent)

ASHLEE JANE PIPER

(third respondent)

MARK FREDERICK DAVID BIANCOTTI

(fourth respondent)

FILE NO/S:

SC No 13256 of 2016

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

28 November 2017

DELIVERED AT:

Brisbane 

HEARING DATE:

22 September 2017

JUDGE:

Bond J

ORDER:

The orders of the Court are:

  1. The parties are directed to bring in minutes of order to reflect these reasons, save in relation to the form of an order appointing a receiver to sell lots 1, 2, 3 and 4 on SP210985, by 4:00 pm on 14 December 2017.
  2. The Court will hear the parties as to the form of the order to appoint a receiver to sell lots 1, 2, 3 and 4 on SP210985 at 10:00am on 15 December 2017.
  3. The parties have liberty to apply.

CATCHWORDS:

REAL PROPERTY – TORRENS TITLE – LEGAL PROCEEDINGS GENERALLY – PROCEEDINGS FOR POSSESSION OR RECOVERY OF LAND – where it was declared in a previous judgment that a contract for the sale of certain land was terminated and that the purchasers were entitled to the return of a $2 million part payment, secured by an equitable lien – where the purchasers remained in possession of the land the subject of the terminated contract – where the vendors applied for recovery of possession of the land – whether the orders sought should be made

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DETENTION, INSPECTION AND PRESERVATION – RECEIVERS – APPOINTMENT OF RECEIVER – where it was declared in a previous judgment that a contract for the sale of certain land was terminated and that the purchasers were entitled to the return of a $2 million part payment, secured by an equitable lien – where the purchasers remained in possession of the land the subject of the terminated contract – where the purchasers cross-applied for a money order requiring payment of the $2 million part payment, an order requiring exchange of possession of the land for payment of that amount, and alternatively, the appointment of a receiver to sell the property to ensure payment – whether the orders sought should be made

Uniform Civil Procedure Rules 1999 (Qld) (UCPR), r 667, r 668

Hewett v Court (1983) 149 CLR 639, cited

MSD Securities Pty Ltd v MFB Properties (NQ) Pty Ltd (No 2) [2017] QSC 168, related

COUNSEL:

K N Wilson QC, with D J Pyle, for the applicants

M A Jonsson QC for the respondents

SOLICITORS:

Dowd & Company for the applicants

Preston Law for the respondents

Introduction

  1. In October 2016, Flanagan J conducted a trial of a dispute between the applicants (the purchasers) and the respondents (the vendors) in relation to a suite of contracts by which, for a consideration of $4 million, the purchasers sought to acquire land and an associated resort business in North Queensland.  The land was more particularly described as lots 1, 2, 3 and 4 on SP219085.  The resort business was conducted on lot 4.
  2. In a judgment published on 28 November 2016, his Honour ordered the contracts to be specifically performed. 
  3. By a subsequent originating application (as amended), the purchasers sought orders pursuant to rr 667(2)(f) and 668 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), the effect of which would be to release them from their obligations to complete the purchase as required by the judgment of Flanagan J.  They also sought consequential orders for repayment of the part payments already made and for associated adjustments and allowances.
  4. On 18 August 2017, I gave judgment effectively in favour of the purchasers: see MSD Securities Pty Ltd v MFB Properties (NQ) Pty Ltd (No 2) [2017] QSC 168.  These reasons are to be read against the background of the facts found in that judgment.  I will use the terms defined in that judgment.

The relevant effect of the orders made on 18 August 2017

  1. The orders I made on 18 August 2017 were:
  1. Orders 2 – 4 of the judgment of Flanagan J dated 28 November 2016 are vacated.
  2. It is declared that:
    1. by its notice to the First Respondent dated 13 December 2016, the First Applicant validly terminated the contract of sale between MFB Properties (NQ) Pty Ltd and MSD Securities Pty Ltd dated 13 March 2014 for Lots 1, 2 and 4 on SP219085 pursuant to s. 73 of the Property Law Act 1974;
    2. the contract of sale of land between Ashlee Jane Piper and MSD Securities Pty Ltd dated 17 March 2014 for Lot 3 on SP219085 was at an end as at 13 December 2016;
    3. the contract of sale of a business between Jungle Village Pty Ltd and PK's Resort Pty Ltd dated 13 March 2014 was at an end as at 13 December 2016;
    4. the Applicants are entitled to be repaid by the Respondents the sum of $2,000,000 paid by the Applicants pursuant to the contracts referred to in sub-paragraphs 1(a) to 1(c) hereof and the transaction deed between MFB Properties (NQ) Pty Ltd, Jungle Village Pty Ltd, Ashlee Jane Piper, Mark Frederick David Biancotti, MSD Securities Pty Ltd as trustee for the Brunswick Street Trust, PK's Resort Pty Ltd, Mark Leonard Seabrook and David Bruce Smith;
    5. the First Applicant has the benefit of an equitable lien over the estate in fee simple in respect of lots 1, 2, 3 and 4 on SP210985 to secure payment of all money referred to in this judgment.
  3. The matter be referred to the Registrar to inquire and determine or assess:
    1. the amount payable by the First Applicant and the Second Applicant as a reasonable occupational rental during the period they were in possession of the land and business the subject of the Contracts; and
    2. the amount paid by the First Applicant and the Second Applicant in respect of the registered mortgage over the Resort Land being Lot 4 on SP219085.
  4. The Registrar determine the amount that is owed by the Respondents, or any of them, to the Applicants, or any of them, or by the Applicants to the Respondents as a result of such inquiry.
  5. The balance so found be paid by the Respondents to the Applicants, or by the Applicants to the Respondents, as the case may be.
  6. There will be liberty to apply.
  1. The effect of the declaration made by order [2](d) was to declare the existence of a $2 million debt owed by the vendors to the purchasers. 
  2. The effect of the orders in [3], [4] and [5] was as follows:
    1. The matter referred to in order [3](a) encompassed the entirety of the period in which the purchasers were in possession, both up to and after judgment.  
    2. The registrar was to conduct an enquiry by which the registrar could determine or assess the two matters mentioned in [3] and work out the amount owed by the purchasers to the vendors or vice versa as a result of that enquiry. 
    3. Order [5] would turn the balance into an order that an amount be paid. 
  3. It formed no part of the process in orders [3], [4] and [5] that the registrar would take into account the $2 million the subject of order [2](d).
  4. That is not to say that there was no relationship between those amounts which explained the making of the orders.  That relationship was explained in my judgment at [101]-[135].  As to that relationship I observe:
    1. The legal analysis was that:
      1. the purchasers had a legal right to the $2 million: see the reasons at [119];
      2. the vendors had a legal right to recover the value of the benefit conferred on the purchasers by letting them into possession rent free: see the reasons at [120] and [121]; and
      3. the purchasers had a legal right to recover the value of the payments made in respect of the mortgage in respect of lot 4: see the reasons at [122].
    2. The legal right to payment of the $2 million was recognised in the declaration in order [2](d) and the other two legal rights were recognized in the orders in [3], [4] and [5]. 
    3. The analysis in equity was:
      1. to recognize the right of recovery in equity of the $2 million: see the reasons at [129]-[133]; and
      2. to acknowledge that the right to recovery of the $2 million had to be conditioned on the purchasers doing equity by giving credit for the value conferred on them by being allowed into possession early.
  5. I should also observe that no attempt was made at the trial to obtain from me an order requiring that the $2 million be paid within any particular time frame.  Indeed, the declaration the subject of order [2](d) said nothing as to the whether the debt was presently due and payable or should be regarded as due and payable as at the date of judgment or at some later time.  

Disputes arise as to the effect of the orders

  1. Since 18 August 2017, the purchasers continued to operate the business the subject of the Contracts.  They justified that course on the basis that the business caters for guests and has licences and they were simply seeking to maintain the value of the business in anticipation of transferring it to Jungle Village.
  2. On 18 August 2017, the solicitors for the vendors suggested that an orderly handover occur.
  3. On 23 August 2017, the solicitors for the vendors made a demand for possession to be given on 25 August 2017.  (I agree with the purchasers’ submission that the proposed timeframe was unreasonable in light of the fact of the business conducted on the land and the steps which would be required for an orderly handover to occur.)
  4. On 25 August 2017, the vendors maintained their demand for possession, but denied a present obligation to pay the $2 million, contending that it would not crystalize until the registrar’s inquiry was completed. (That position was based on an erroneous view of the effect of my orders, as I have explained above.)  On the same day the vendors proposed an exchange after 30 days, and formally demanded payment of the $2 million.
  5. On 1 September 2017, the vendors filed an application which sought recovery of possession of the land and associated injunctive relief in relation to the transfer of the business.  The orders sought by the vendors did not make any provision in relation to the $2 million debt owed to the purchasers.
  6. On 4 September 2017, the vendors filed a notice of appeal with respect to my judgment. The vendors sought orders which would return the status quo to the position which obtained consequent upon the orders made by Flanagan J on 28 November 2016, namely that the contracts be specifically performed.
  7. The result was that by their application the vendors sought to recover possession of the land and the business, without paying the $2 million owed to the purchasers, but at the same time also sought to pursue an appeal whereby they sought orders that would require the purchasers to keep the land and the business and pay the balance of the purchase price. 
  8. For their part, the purchasers wish to leave the property and hand back the business. However, they submitted to me that they are concerned that:
    1. they would not be paid the $2 million that is owed to them without having to take enforcement action;
    2. the business would deteriorate under the management of the vendors; and
    3. if the vendors were successful on their appeal, that would compel the purchasers to re-take possession of the land and the business, and the purchasers would have been put to substantial expense and effort for no good reason.
  9. On 21 September 2017, the purchasers cross-applied for:
    1. a money order requiring payment of the $2 million;
    2. an order requiring exchange of possession of the land and business for payment of the outstanding $2 million; and
    3. alternatively, the appointment of a receiver to sell the property so that the applicants would be paid.
  10. During the course of oral submissions before me, I drew to the attention of senior counsel for the vendors the apparent inconsistency between the two formal steps taken by them.  However, his instructions were to proceed with the attempt to seek recovery of possession of the land and the business. 
  11. At their request after oral argument was complete before me, I gave the parties an opportunity to seek to compromise the issues arising on the two applications, but they were unable to reach agreement.
  12. The result is that I must resolve the present competition between the rights asserted by the parties based on the facts as they currently appear to me.  Whether this has ramifications for the vendors’ appeal is not a matter for me to consider or to resolve. 

Discussion

  1. The purchasers accepted the prima facie right of the vendors to recover possession of their land.  Their position was that the issues raised by the vendors’ application could not be resolved without giving recognition to their rights. 
  2. I agree.
  3. The purchasers proposed two options.
  4. First, that any order allowing the vendors to recover possession be on the terms proposed by the process for exchange identified in the first two orders of their own application (see [19](a) and [19](b) above).  They agreed that the equitable lien they had would not give them the right to withhold possession of land.  But they submitted that I had power to make recovery of possession orders on terms and that the terms should accommodate their proposal. 
  5. Second, that there should be a money order requiring payment of the $2 million and orders should be made permitting the purchasers to enforce their equitable lien by obtaining an order for sale by Court order, and, to that end, the appointment of a receiver to sell the land.
  6. I turn then to consider the nature of the purchasers’ rights.
  7. The purchasers contended I should regard the $2 million as presently due and payable, but were prepared to give the vendors a modest time frame within which to pay.  Given that the orders I made were a reflection of findings which I made as to the existence of legal rights, I do not consider there is any legitimate basis to reject the purchasers’ contention. 
  8. It might have been open to the vendors to seek to establish a right to set off[1] which would reduce or defeat the $2 million debt by putting a value on the legal rights which might be recognized consequent upon the registrar’s enquiry, but they did not do so.  The high point of the evidence before me was the purchasers’ solicitors recording their instructions that the amount paid in respect of the mortgage was $244,473.  I had no evidence at all which put a value on the right referred to at [9](a)(ii) above.  The result is that I do not have any evidence before me which permits me to form the view that the outcome of the registrar’s enquiry is likely to be a balance which favours the vendors.   
  9. This suggests that at this time the purchasers have a right which should be recognized by a money order for the $2 million. 
  10. I turn to consider the significance of the equitable lien.  As to this:
    1. As I have mentioned, the purchasers accepted that the lien did not give them the right to withhold possession of land.
    2. The vendors submitted that it was in the nature of an equitable lien that it was essentially defensive and only operated to prevent disposition of the property without consent of the holder of the lien or the prior discharge of the indebtedness. 
    3. I reject that submission. 
    4. The security given by an equitable lien does not merely operate defensively.  It may be used offensively to enforce the obligation to pay and that is what the purchasers want.  This was recognized in Hewett v Court (1983) 149 CLR 639 per Deane J at 663 (citations omitted and emphasis added):

An equitable lien is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness.  Though called a lien, it is, in truth, a form of equitable charge over the subject property in that it does not depend upon possession and may, in general, be enforced in the same way as any other equitable charge, namely, by sale in pursuance of court order or, where the lien is over a fund, by an order for payment thereout.

  1. On the evidence presently before me, the equitable lien secures the vendors’ obligation to pay the purchasers the sum of $2 million.
  2. The vendors have not proposed anything at all in relation to the payment of any part of the sum owed. 
  3. Accordingly the purchasers have a right to approach the Court for an order for the appointment of a receiver for sale, with a view to getting in funds and paying them out, with the balance being paid to the vendors.
  1. The result of the foregoing analysis is that I recognize the following present rights:
    1. The vendors have a legal right to recover possession of their land from the purchasers.
    2. The purchasers have a legal right that the vendors pay them $2 million.
    3. The purchasers have an equitable lien over the land, which gives them the right to force a sale of the vendors’ land in pursuance of a court order in order to recover payment of the $2 million.
  2. What orders should be made to vindicate those rights, given my conclusion that the vendors’ application may not be resolved without according proper recognition to the purchasers’ rights?
  3. First, whilst I recognize the pragmatic attraction of the first of the two alternatives advanced by the purchasers, I am not satisfied that it is a principled solution to seek to condition the vendors’ right to recovery of possession in the way proposed.  Just as the vendors are prima facie entitled to insist on getting the land and business back, the purchasers are entitled to insist on payment and given that they have not been paid and no proposal has been made as to how they will get paid, they are entitled to force the sale of the property to ensure that they are paid.  Accordingly, I think the second of their alternatives is the appropriate course.
  4. Second, the vendors submitted that there were discretionary considerations against appointing a receiver, but their arguments were premised on the contention that the effect of the orders which I had made was that no amount at all was owed to the purchasers until after the registrar’s enquiry.  I have explained the error in that view.
  5. Third, the appointment of a receiver for sale will require the receiver to take possession of the land and business.  There is no merit in first making orders permitting the vendors to recover possession of the land and business from the purchasers.  That step would be otiose.  The simplest solution is to have the receiver take possession from the purchasers.  The result is that the vendors’ application should be dismissed and there should be an order appointing a receiver to sell lots 1, 2, 3 and 4 on SP210985.   I will hear the parties on the form of an order appointing a receiver to sell lots 1, 2, 3 and 4 on SP210985, including on the question of whether security should be provided and if so in what form and in what amount.
  6. The vendors’ stance was informed by a misconception of the effect of the orders which I made after the trial and on a misapprehension of the rights conferred by the equitable lien.  It seems to me that the orders I have made reflect the purchasers having substantially succeeded.  Accordingly, the vendors should pay the purchasers’ costs of both applications, to be assessed on the standard basis.

Conclusion

  1. The vendors submitted, and I accept, that the appointment of a receiver is a measure which ought not lightly be undertaken. 
  2. In light of –
    1. that fact;
    2. the fact of the extant appeal; and
    3. the fact that in order to perfect the order appointing the receiver I still need to hear further from the parties,

I will formulate the orders I will make in a way which will give the parties further time to resolve their differences in a way which may avoid the need for the appointment of a receiver.  If they can do so, then they may take advantage of my reservation to them of liberty to apply.

  1. I make the following orders:
    1. By 4:00 pm on 14 December 2017, the parties are directed to bring in minutes of order to reflect these reasons, save in relation to the form of an order appointing a receiver to sell lots 1, 2, 3 and 4 on SP210985.
    2. The further hearing on the form of the order to appoint a receiver to sell lots 1, 2, 3 and 4 on SP210985, will be listed before me in the applications list on 15 December 2017.
    3. The parties have liberty to apply.

Footnotes

[1] I express no view on whether any right which the vendors could have established would have operated as either a legal or an equitable set off.

Close

Editorial Notes

  • Published Case Name:

    MSD Securities Pty Ltd & ors v MFB Properties (NQ) Pty Ltd & ors (No 3)

  • Shortened Case Name:

    MSD Securities Pty Ltd v MFB Properties (NQ) Pty Ltd (No 3)

  • MNC:

    [2017] QSC 282

  • Court:

    QSC

  • Judge(s):

    Bond J

  • Date:

    28 Nov 2017

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2016] QSC 261 [2017] 2 Qd R 279 15 Nov 2016 Flanagan J.
Primary Judgment [2017] QSC 168 [2018] 2 Qd R 51 18 Aug 2017 Originating application to release defendants from the obligations ordered by Flanagan J in [2016] QSC 261: Bond J.
Primary Judgment [2017] QSC 282 28 Nov 2017 Amended form of orders from [2017] QSC 168: Bond J.
Primary Judgment [2017] QSC 284 28 Nov 2017 Costs Judgment from [2017] QSC 168: Bond J.
Notice of Appeal Filed File Number: 9085/17 06 Sep 2017 Appeal from [2017] QSC 168.

Appeal Status

{hollow} Appeal Pending