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Trenfield v HAG Import Corporation (Australia) Pty Ltd[2018] QDC 107

Trenfield v HAG Import Corporation (Australia) Pty Ltd[2018] QDC 107

DISTRICT COURT OF QUEENSLAND

CITATION:

Trenfield & Ors v HAG Import Corporation (Australia) Pty Ltd [2018] QDC 107

PARTIES:

KELLY-ANNE TRENFIELD, JOHN PARK AND QUENTIN OLDE AS JOINT AND SEVERAL LIQUIDATORS OF LINEVILLE PTY LTD (IN LIQUIDATION)
(first plaintiffs)

and

LINEVILLE PTY LTD (IN LIQUIDATION)

(second plaintiff)

and

HAG IMPORT CORPORATION (AUSTRALIA) PTY LTD

(defendant)

FILE NO/S:

D4633/2015

DIVISION:

 

PROCEEDING:

Civil Trial

ORIGINATING COURT:

District Court, Brisbane

DELIVERED ON:

15 June 2018

DELIVERED AT:

Brisbane

HEARING DATE:

26, 27 February 2018

JUDGE:

McGill SC, DCJ

ORDER:

Judgment that the defendant pay the first plaintiffs $473,291, together with interest by statute.

CATCHWORDS:

CORPORATIONS LAW – Liquidation – Unfair preferences – whether payments in respect of unsecured debt – whether debt partially secured – value of security – extent of recoverable preference.

CONTRACT – Consideration – whether any consideration given for acknowledgment that certain terms would be incorporated into contracts for the sale of goods.

Re Amerind Pty Ltd [2017] VSC 127, 121 ASCR 206 – distinguished.

Re Amerind Pty Ltd., Commonwealth of Australia v Byrnes [2018] VSCA 41 – distinguished.

BP Australia Ltd v Brown (2003) 58 NSWLR 322 - cited.

Bradnam’s Windows and Doors Pty Ltd v Offermans [2011] 2 Qd R 408 – considered.

Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2015] VSCA 92, 296 FLR 25 – considered.

Re Gelpack Enterprises Pty Ltd [2015] NSWSC 1558 - not followed.

Holdway v Arcuri Lawyers [2009] 2 Qd R 18 – applied.

Hussain v CSR Building Products Ltd [2016] FCA 392 – followed.

IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (2009) 253 ALR 240 – cited.

Manzi v Smith (1975) 132 CLR 671 – applied.

Pioneer Construction Materials Pty Ltd v Schoch [2007] QDC 143 – considered.

Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 - applied.

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 – cited.

Walsh v Natra Pty Ltd (2000) 1 VR 523 – applied.

Williams v Peters [2010] 1 Qd R 475 – considered.

Corporations Act 2001 (Cth) s 588FA.

COUNSEL:

K E Downes QC and M J May for the plaintiffs
S S Cooper QC and A Messina for the defendant

SOLICITORS:

Cooper Grace Ward lawyers for the plaintiffs
Lewis Holdway lawyers for the defendant

  1. [1]
    By this proceeding the plaintiffs seek to recover as preferences pursuant to s 588FA of the Corporations Act 2001 (Cth) a number of payments which the second plaintiff (“the company”) made to the defendant between 21 June and 12 July 2013. The defendant disputes their entitlement to do so, on the basis that the payments were not made in respect of an unsecured debt, as the payments were amounts paid for goods which had been supplied to the company on terms granting to the defendant a security over the goods or the proceeds of sale of those goods, and that the value of the defendant’s security was in excess of the amount paid, or at least, that the plaintiffs had failed to prove to the contrary.
  1. [2]
    There was a good deal which was not in dispute in the proceeding. The parties have produced a statement of agreed facts which became Exhibit 1. Apart from that, at the hearing further concessions were made by the defendant: that the company was insolvent on each date that a payment was made to it, and that the pleaded defence, that the payments had been received by the defendant in good faith and without notice of insolvency, was not pursued.[1]The plaintiffs also did not press certain paragraphs in the reply,[2]as a result of which part of the rejoinder became irrelevant.[3]The defendant also did not contend that, if instead of receiving these payments it had proved for the whole of its debt in the winding up, it would have received any amount by way of a dividend to unsecured creditors. The parties were able to narrow the issues to such an extent that there was oral evidence called from only two witnesses, many of the documents originally included in the bundle of documents which became Exhibit 2 could be omitted, much of the contents of the liquidator’s report and the annexures to it became irrelevant, and the trial was completed in two days instead of taking the five allowed for it. This was commendable efficiency on the part of the lawyers for the parties.

Background

  1. [3]
    The company and the defendant were at all material times duly incorporated. The company operated a chain of kitchenware stores since 2004 in its capacity as trustee for a discretionary trust, retailing goods from various suppliers including the defendant. In early 2004 the defendant agreed to supply goods to the company, though the terms of that agreement are irrelevant and not in evidence. In 2011 the company completed and sent by fax to the defendant a document headed “credit application”, which included a personal guarantee and indemnity signed by the director of the company.[4]It provided a good deal of information about the company, but did not itself identify any particular credit terms. On the second page of the application form, under the heading “acceptance”, it said: “The Applicant applies to [the defendant] for credit. … The Applicant acknowledges receipt of and accepts the present standard Terms and Conditions and acknowledges that the Terms and Conditions may be changed by [the defendant] from time to time.” There was then a reference to the situation where the applicant made the application as trustee, which apparently was the case although those details were not disclosed on the form, and then the director of the company signed under a statement “I warrant that I am authorised to sign this Credit Application on behalf of the Applicant.”
  1. [4]
    That document referred to the defendant’s “present standard terms and conditions”, a copy of which is at Exhibit 2, tab 20. They provided for payment 30 days from the date of invoice, for interest at a rate which could be calculated if payment was not received by the due date, and that the prices charged would be in accordance with the current quotation for the defendant’s standard prices in effect at the date of delivery.
  1. [5]
    By clause 8 of the terms and conditions, “The Customer grants HAG Imports a Security Interest in the goods supplied as Commercial Property, more particularly described as Other Goods… and their Proceeds to secure the obligation of the Customer to pay the purchase price of the goods and any other obligations of the Customer to HAG Imports under this contract (together the ‘Indebtedness’) and, where the goods and/or Proceeds are not readily identifiable and/or traceable or their recoverable value is insufficient to pay the Indebtedness, the security interest shall also extend to all the Customers present and after acquired HAG Imports, of which the goods form part, to the extent required to secure the Indebtedness.” Clause 13 also purported to secure payment for the supply and/or delivery of goods, interest and costs by a charge on all the Customer’s estate or interest in any real property.[5]
  1. [6]
    The company evidently regularly purchased large amounts of the defendant’s product, because inventory records of the company show large values of stock supplied by the defendant on hand at various dates during 2013.[6]As at 13 January 2013, the company had stock on hand supplied by the defendant valued at $462,074, on the basis of the purchase price of the stock from the defendant.[7]The value of the defendant’s stock on hand rose to $809,264 at the end of March 2013, but then declined to $233,232 at the end of June 2013, and continued to decline thereafter until by 15 December the value was only $11,949.
  1. [7]
    On 19 April 2013 someone on behalf the defendant apparently sent an email to the plaintiff attaching new terms and conditions of trade: Exhibit 5. That email may not have been received, because there was a further attempt to provide it by email dated 22 April 2013, where the subject line included the words “second attempt”.[8]The email said that it attached new terms and conditions of trade “effective as of March 2013” but no argument was advanced to support the proposition that the amended terms applied to any goods supplied prior to 19 April 2013, and plainly they did not. These were stated in the email to be the terms of trade “upon which we will now be supplying you with our goods.” The terms and conditions attached are in evidence as Exhibit 2 document 23.
  1. [8]
    These terms provided for a personal property security interest in the same way as the 2011 terms, and an equitable charge on any land, but they also provided in clause 5 a retention of title clause. The clause said:

“Until full payment has been made for all Goods, and any other sums in any way outstanding from the Customer to HAG Imports from time to time … property in the Goods shall not pass to the Customer and the Customer shall hold the Goods as bailee for HAG Imports. … The Customer is only authorised to sell the Goods … to third parties as the fiduciary agent of HAG Imports. … All payments … received from such third parties by the Customer for the Goods … to be held in trust for HAG Imports pursuant to the fiduciary relationship.”

  1. [9]
    There was no evidence that the company ever expressly agreed to these terms and conditions, but the defendant issued invoices to the company on 23 April, 26 April and 2 May 2013, which were presumably issued as soon as an order for goods which the defendant was prepared to accept was placed by the company. The trial proceeded on the basis that the terms and conditions provided in 2013 applied to the goods sold under those invoices. The total price charged by the defendant for those goods was $74,210.38. After 2 May, no further goods were supplied by the defendant to the company.
  1. [10]
    On 3 May 2013, the defendant registered under the Personal Properties Securities Act 2009 (Cth) (“the PPSA”) a financing statement claiming a purchase money security interest in goods supplied and their proceeds, which stated that the registration was transitional. As at 31 May 2013, $778,872.96 was owing by the company to the defendant for goods supplied by it.[9]As a result of a payment made on 14 June 2013, all invoices issued by the defendant before March 2013, and some issued on 1 March 2013, were paid.[10]The company made payments of $100,000 on 21 June 2013 and on 27 June 2013, of $400,000 on 1 July 2013, of $40,765.51 on 5 July 2013 and of $55,533.21 on 12 July 2013. These five payments reduced the company’s debt to the defendant to $328.39.[11]It is these payments which are alleged to be recoverable as preferences.
  1. [11]
    On 16 December 2013 the first plaintiffs were appointed administrators of the company pursuant to the Corporations Act s 436A. On 12 March 2014 the Federal Court made orders for the winding-up of the company and appointed the first plaintiffs joint and several liquidators of it. The relation-back day pursuant to s 588FE of the Corporations Act is 16 December 2013, and each of the payments was a transaction to which the company and the defendant were parties, made by the company during the six months ending on the relation-back day.[12]

Effect of 2011 application and terms and conditions

  1. [12]
    One of the issues which arises in the proceeding is whether the 2013 terms and conditions amounted to a new agreement between the parties, or whether it was an amendment of a previous agreement. When the financing statement was registered in May 2013, it was registered as a transitional security agreement. The PPSA, s 307 defines this as “a security agreement that is in force immediately before the registration commencement time and that continues in force at and after that time.” The registration commencement time was 1 February 2012. The defendant submitted that the 2013 terms and conditions amended the existing contract between the company and the defendant for the supply of goods on credit which had come into existence as a result of the credit application and terms and conditions in 2011. That in turn raises an issue as to the nature of the 2011 document, and indeed as to the true contractual position in the trading relationship between the parties.
  1. [13]
    The credit application is not on its face contractual; it is expressed as a request for credit, an admission by the company that it has been provided with the defendant’s standard terms and conditions, and an acknowledgment that they may be changed at any time. It does not say that either party promises to do, or not to do, anything. When read with the 2011 terms and conditions, it does contemplate that a security interest will arise in the future in favour of the defendant in respect of goods supplied by the defendant to the company on those terms and conditions.
  1. [14]
    That is supported by the wording of clause 1 of the 2011 terms and conditions:

“The whole of the agreement between [the defendant] and the Applicant referred to in the Credit Application (‘Customer’) are those set out in these Terms and Conditions as amended from time to time and those, if any, which are implied and which cannot be excluded by law (‘Terms’). Any other contractual terms of the Customer (whether upon the Customer’s order or elsewhere) which are contrary to or inconsistent with these Terms shall not apply nor shall they constitute a counter-offer. When receiving delivery and/or supply of all or a portion of the goods, materials and/or parts and/or labour and/or services supplied by [the defendant] under these Terms (‘Goods’), the Customer shall be deemed to have accepted these Terms and to have agreed that they shall apply to the exclusion of all others.”

  1. [15]
    It is obvious enough that the expression “referred to in the credit application” governs “the applicant” rather than “the agreement”. The use of the plural “are” for “the agreement” is puzzling but it may be that an earlier draft referred to “the whole terms and conditions of the agreement … .” Overall the clause is drafted on the basis that, if the customer accepts goods from the defendant, the version of the terms and conditions in force at the time applies to the exclusion of all other terms, and in particular any sought to be included by the customer in an order form.[13]
  1. [16]
    The defendant’s submissions were based on proposition that the credit application became the contract between the parties, and that it provided in effect that the defendant’s standard terms and conditions from time to time would apply to the supplies of goods by the defendant to the company. By that contract the defendant could specify different terms and conditions to apply to future supplies of goods. When that happened in 2013, this was not an amendment of the contract, but the continuing operation of the contract with respect to different terms and conditions. There are two difficulties with that analysis. The first is the terms of clause 1 of the terms and conditions, which on its face is inconsistent with the existence of another agreement between the parties. The only way to overcome that would be to read it as providing that it was the only agreement between the parties about the specific goods the subject of that supply or delivery. The second is the difficulty in characterising the credit application as something which amounts to a contract, even if, if it were an offer, it can be said to have been accepted by conduct by the subsequent supply on credit terms by the defendant to the company of goods ordered by the company.
  1. [17]
    The defendant relied on the decision of the Victorian Court of Appeal in Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2015] VSCA 92, 296 FLR 25. This involved a similar situation, where there had been an application on a form for a thirty day credit account with the appellant. The court characterised the application as an offer to acquire goods from the appellant on the terms set out in the application, subject to the appellant’s standard terms and conditions as in force from time to time, in return for the appellant’s agreeing to provide thirty day credit. “The credit application was in substance an application … to become an account customer and it was to cover all future dealings with [the appellant]:”  [31]. There was nothing on the form or by any other document provided by the appellant by which that offer could be said to have been accepted, but the court held there was acceptance by conduct: [33]. The relevant conduct was delivery of equipment which had been ordered and sending an invoice confirming that supply was on 30 day credit. This constituted acceptance of the applicant as an account customer. Sending the invoice was said to be the first communication confirming that credit was being provided.
  1. [18]
    The full terms of the credit application were not set out in the reasons for judgment,[14]but it was characterised in this way by the Court of Appeal, and the court was conscious of the distinction between a contract for a credit account and a situation where there was no formal agreement providing for ongoing supplies, because at [21] the court quoted a passage from the Replacement Explanatory Memorandum for the bill which became the PPSA, at page 125, as follows:

“9.14  A security agreement would be able to expressly provide for ongoing supplies and therefore result in a series of security interests. Provided the security agreement is in force prior to the registration commencement time and allows for future security interests to be granted, each security interest granted under that security agreement, regardless of whether it is granted before or after the registration commencement time, would be a transitional security interest. The secured party to such an ongoing transaction would only need to register one financing statement to cover the ongoing transitional security interests.

9.15  Where there is no formal agreement providing for ongoing supplies, generally each supply would be considered to be a separate contract or security agreement. Supplies made after the registration commencement time in this type of situation would each be made under a new security agreement. Security interests made after the registration commencement time would not benefit from the protection provided in the transitional provisions.”

  1. [19]
    The court also referred to an example set out in the explanatory memorandum, which referred to a supplier and a vendor signing a contract which provided for the ongoing supply of goods by the supplier, on terms that the goods remain the property of the supplier until they were paid for. Under the example each supply represented a new security interest provided for by the security agreement.
  1. [20]
    At first instance the liquidator had been successful, on the basis that the application for credit, assuming it was an agreement between the parties, did not incorporate any agreement for a security interest, and indeed did not incorporate the standard terms and conditions because they were not identifiable by reference in that agreement. In those circumstances, that agreement did not provide for the granting of this interest, so interests subsequently granted in respect of particular sales of goods could not satisfy the definition of transitional security interest in s 308 of the PPSA. The credit application was held not to be a transitional security agreement. Having reached that conclusion, the judge at first instance noted that it was not necessary to decide whether the credit application did operate as an overarching supply agreement, but expressed the view that it did not, and the better characterisation of the contractual arrangement was that each sale was a separate contract: [35]. It was however recognised that in other circumstances a credit agreement could operate in that way, and it was said that an example was Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165.
  1. [21]
    The difficulty I have with Elkerton is that it is not clear where the Court of Appeal derived the proposition that the appellant was “agreeing to provide thirty day credit.” It may be of course that there was something in the credit application which made this clear, but for all I know it was based simply on the fact that the application was for a thirty day account, which implies providing goods on thirty days credit, and the court implied an agreement to provide such a credit account from the fact that the appellant began to supply goods on thirty days credit consistent with a thirty day account having been agreed to. Accordingly there was an agreement between the customer and the appellant for there to be an account extending credit on thirty day terms in respect of all sales of equipment, which sales were to be made otherwise on the basis of the standard terms and condition in force from time to time.
  1. [22]
    Because at the time the agreement was made there was a set of standard terms and conditions then in force which provided for a retention of title clause, the agreement which was entered into in Elkerton in respect of future supplies on thirty days credit was one which “provided for” the grant of a security interest in those supplies of equipment under those standard terms and conditions: [40]. On this analysis, it would not matter if the terms and conditions changed from time to time. There is no difficulty in principle with having an agreement between a customer and a supplier which provides for the terms upon which particular future sales of goods are to take place, with there being a separate contract for sale and purchase on the then current terms for each separate sale of goods. The former agreement will provide for the grant of the security interest by the later separate agreements if it makes provision for the creation of the security interest in the future by those agreements, which it can do by indicating that those agreements will be on terms which when incorporated into the individual agreements for sale and purchase provide for a security interest.
  1. [23]
    The reasoning in that case was based on the existence of an agreement, that is a contract, between the parties, and I have great difficulty in seeing how receipt of the credit application in the present case, complied with the supply of goods on credit, amounted to a contract. The Court of Appeal in Victoria was able to characterise the credit application in that case as an offer which was accepted by conduct by supplying goods on credit. The difficulty I find is in characterising the credit application as an offer, or in identifying any consideration which was provided by the defendant, although after the credit application was delivered to the defendant, the defendant in fact sold and delivered goods to the company.[15]It is very difficult to characterise either the credit agreement or the terms and conditions in themselves as a continuing contract between the parties. Neither is an agreement to do anything specific now, and it is difficult to see how they amount to a promise by either party to do anything, or to accept anything, in particular in the future.
  1. [24]
    In my opinion the credit application in the present case was not an offer, and it was therefore not something capable of being accepted by conduct by the defendant. So far as the applicant was concerned the document was simply what it said it was: a request for credit, an admission that it was familiar with the defendant’s terms and conditions and an acknowledgement that it knew that those were the terms on which the defendant will deal if it chooses to deal with the applicant, unless it changes those terms and conditions, which it can do at any time. It is simply an evidentiary document, an admission that the applicant knows of those terms and knows that those are the only terms on which the defendant will supply goods to the applicant.
  1. [25]
    I have particular difficulty identifying any consideration provided by the defendant. I find it impossible to characterise a mere supply of goods after receipt of this document as amounting to an agreement on the part of the defendant to provide any particular credit to the applicant in the future. I cannot characterise what happened here as even amounting to a promise to continue to extend credit, or to extend credit on any particular occasion, or on any particular terms.[16]Indeed that is made express in clause 2.2 of the 2011 and the 2013 terms and conditions. Clause 1 of the terms and conditions also makes it clear that there is only to be an agreement for the sale and purchase of particular goods if those particular goods are delivered or supplied to the customer, whereupon the incorporation of the terms into that contract is accepted by receiving delivery or supply.
  1. [26]
    Overall it appears to me that the arrangements put in place by the defendant have so carefully excluded any commitment at all by it to a person in the position of the company that I am unable to identify any consideration given for any implied promise in the credit agreement application by the company that goods to be supplied to it will be on the standard terms and conditions in force from time to time. On that basis the situation here was factually distinct from that in Central Cleaning Supplies (supra).[17]
  1. [27]
    The positon here in my opinion is analogous to the second situation contemplated in the passage from the Replacement Exposure Memorandum quoted above, where there is no formal agreement providing for ongoing supplies. Any particular sale and purchase of goods was on the terms and conditions set out in document 20, the 2011 terms, up to 23 April 2013, when the 2013 terms began to apply, and any sale and purchase of goods thereafter was on those terms.[18]I do not consider that the individual contracts for the sale and purchase of goods which had been made on the 2011 terms came to have their terms varied in some way by the defendant’s imposition of the new terms in April 2013. Those terms related to future sale contracts only. The defendant could not unilaterally vary the existing sale contracts, and did not purport to do so.
  1. [28]
    It follows that there was no continuing agreement between the parties to be registered in 2013 as a transitional credit agreement. Each supply was a separate contract providing for its own security interest, and supplies after the registration commencement time did not benefit from the protection provided in the transitional provisions. It follows that none of the supplies the subject of this dispute provided for a security interest which had been perfected by registration.
  1. [29]
    I acknowledge this conclusion is contrary to one of the agreed facts, paragraphs 3, which was that the defendant agreed to supply goods to the company pursuant to the terms and conditions in about, August 2011. The situation here is that there was put before me evidence concerning what happened in August 2011, and in my view it did not constitute in law an agreement, that is a contract, between the parties of the kind found in Central Cleaning Supplies. I raised this issue during the trial, and subsequently received supplementary submissions on the point from the parties, but no party sought to put further evidence before me on the point. My conclusion is based on material which has been put before me by consent, and in that situation, I do not consider myself bound by a fact agreed between the parties for the purposes of the trial, particularly insofar as it involves a conclusion of law.[19]
  1. [30]
    There was no argument advanced on behalf of the defendant that the registration was still valid notwithstanding that the agreement had been incorrectly characterised as transitional. It was not suggested that registration conferred on what was registered a validity otherwise lacking. It follows that the 2013 registration was not valid for the purposes of the PPSA. That in turn means that upon the appointment of the administrators any security interest held by the defendant pursuant to either terms and conditions vested in the company, under the PPSA s 267.
  1. [31]
    Some of the submissions made, particularly on behalf of the plaintiffs, were based on the proposition that the standard terms and conditions which were current in 2011 and which were referred to in the credit application were incorporated into a continuing or overarching agreement for the supply of goods between the parties made in 2011. That is not how I would characterise those terms and conditions. They were simply the terms incorporated into each contract for the supply of goods by the defendant to the company. Even if the credit application, on the reasoning in Central Cleaning Supplies, became a contract on the acceptance of it by the supply of goods on credit, it was held in that case that the standard terms and conditions were to be the terms and conditions of each agreement for the supply of particular goods, not the terms and condition of the overarching contract between the parties. Hence they could be varied, in respect of future sales, without varying either the continuing contract or the terms of any particular contract for the sale of goods.
  1. [32]
    There is a difference between an agreement for the continuing supply of goods on credit where that agreement provides for the credit terms, and an agreement that, if goods are supplied in the future, each such supply will be on certain terms. If the position found in Central Cleaning Supplies had been found to exist also in the present case, the agreement the parties made in 2011 was, like the agreement in Central Cleaning Supplies, an agreement that supplies of goods in the future would be on particular terms, which the supplier could change from time to time. Accordingly the standard terms and conditions notified in 2011 did not in my opinion become part of the overarching credit agreement between the parties, if such an agreement had been made between the parties. What happened in the present case, in my opinion, is that in respect of each supply the standard terms and conditions then current were incorporated into the contract for the supply of those particular goods, and a security arose in respect of those particular goods, though it was not perfected because it was not registered.
  1. [33]
    The plaintiffs submitted that a preferable interpretation of what occurred here was that the terms and conditions represented a continuing agreement, like the one found to exist in Re Amerind Pty Ltd [2017] VSC 127, 121 ASCR 206. That is not how I characterise what happened here. They also rely on the decision on appeal at [2018] VSCA 41, that the time for determining the nature of, and therefore the value of, the secured assets was, in that case, on the appointment of a receiver. This point becomes relevant and is discussed later.
  1. [34]
    Since I do not accept an analysis of what happened here on the basis that there was a contract in 2011 incorporating the 2011 terms and conditions and applying them to all sales of goods until this was replaced (or varied) by the 2013 terms and conditions which applied to all sales thereafter, I do not need to deal further with submissions based on that analysis, but I will comment briefly on one of them.
  1. [35]
    The plaintiffs submitted that the effect of clause 1 in the 2013 terms, which was in identical terms to clause 1 in the 2011 terms, was that thereafter the 2013 terms constituted the only contract between the parties. Hence the effect of the imposition of that document was that all previous contracts for the supply of goods, and any continuing security interest provided by them in respect of those goods, ceased to apply. That however is not the way I would interpret clause 1; rather its function was to determine what the terms and conditions would be if any particular goods were thereafter supplied by the defendant, at least unless and until the defendant specified other terms and conditions. To the extent that there were contracts in relation to goods already supplied which created security agreements in accordance with the 2011 terms, those contracts remained unchanged after April 2013. The new terms and conditions just did not apply to them. Any security interest provided before then was therefore not discharged. I do not accept the plaintiff’s argument to the contrary.

Did the defendant receive payment in respect of an unsecured debt?

  1. [36]
    It may be however that this conclusion is not of any great significance to the outcome of this claim. The PPSA does not make an unregistered security void. Registration has certain consequences in the case of a contest between the holders of competing securities, and it also prevents the security from vesting in a liquidator or administrator if the company goes into external administration.[20]Relevantly in the present case, upon the appointment of the administrators of the company, because the security interest granted by the company in respect of each parcel of goods supplied was unperfected, it “vests in the grantor immediately before the” appointment of the administrators: PPSA s 267. Subject to that however broadly speaking an unperfected security is still effective as between the parties to the security agreement.
  1. [37]
    The defendant’s argument was that in the present case all of the relevant payments were made prior to the appointment of the administrator and therefore prior to the security vesting in the company, and at the time the payments were made, as between the company and the defendant, the debt in respect of each payment was secured. The plaintiff’s answer to this argument was to submit that whether the debt was secured had to be assessed at the date of the winding up, for the purposes of s 588FA, and by that time there was no security because it had vested in the company.
  1. [38]
    The Corporations Act provides in s 588FA:

“(1) A transaction is an unfair preference given by a company to a creditor of the company if, and only if:

  1. (a)
    the company and the creditor are parties to the transaction (even if someone else is also a party); and
  1. (b)
    the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debtif the transaction were set aside and the creditor were to prove for the debt in a winding up of the company;

even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an order of an Australian Court or a direction by an agency.

  1. (2)
    For the purposes of sub-section (1), a secured debt is taken to be unsecured to the extent of so much of it (if any) as is not reflected in the value of the security.”
  1. [39]
    In this matter the crucial issue for the purposes of the identification of a particular payment as an unfair preference was whether it was a payment “in respect of an unsecured debt that the company owes” to the defendant for the purposes of s 588FA(1)(b) of the Corporations Act. Is whether the debt is unsecured to be tested at the time the payment was made or the time when the winding up order was made? The plaintiff submitted that this had to be assessed at the time of the winding up, for three reasons. First, that the structure of the section is that a preference is identified by the difference in outcome between what actually occurred and what would have occurred in a winding up, which is necessarily an assessment to be undertaken at the time of the winding up.
  1. [40]
    It would be an unsatisfactory situation if the Act operated in a way that, if a payment were made to a particular creditor on the basis of an unperfected security, it would be regarded as a payment of a secured debt, but if the payment were not made, the creditor would be regarded as holding an unsecured debt for the purposes of the winding up. That would make it particularly desirable for holders of unperfected securities under the PPSA to secure payment prior to any event which caused the security to vest in the grantor. In effect, it means that the holder of an unperfected security can obtain the benefit of a preferential payment on the basis of the security, even though the security would become worthless once the company went into liquidation.
  1. [41]
    The second argument was that the purpose of the word “unsecured” in s 588FA(1)(b) was to identify a class of creditors that exist at the time of the winding up. This followed from the fact that the unfair preference provisions are aimed at securing equality of distribution among creditors of the same class, which is appropriately determined when assets are distributed in the winding up.[21]
  1. [42]
    The third submission was that an interpretation should be preferred which would give effect to the intention of Parliament.[22]It was submitted that there was no logical reason why Parliament would have intended to benefit a creditor which has a defective security interest which vests in the company on appointment of administrators, to give that creditor preference over other unsecured creditors. Such an approach is inconsistent with the legislative policy of deterring a race to the courthouse and improving the prospect of debtors trading out of their difficulties.[23]
  1. [43]
    The defendant on the other hand submitted that, at the time the payments were made, the security interest held by the defendant in respect of goods supplied remained valid securities as between the company and the defendant, so that those payments at that time were to be characterised as payments in respect of secured debts. The effect of s 267 was that the security could not be enforced against the administrators, but it did not have the effect that the security was treated subsequently as never having been in force.
  1. [44]
    The defendant relied on the decision of the Court of Appeal in Bradnam’s Windows and Doors Pty Ltd v Offermans [2011] 2 Qd R 408. In that matter in a preference action there was an issue about the effect of s 266 of the Corporations Act, which had the effect of rendering a charge which had not been registered under that Act void as a security on the property as against the liquidator. Unfortunately for me, the matter went to the Court of Appeal on the question of whether a plea that this provided a defence to the creditor should be struck out, so that the decision of the Court of Appeal turned on the question of whether such a proposition was arguable, rather than whether it was right. The court held that the defence should not have been struck out, because s 266 did not make an unregistered charge void as a security, but merely void as a security against the liquidator: [9].
  1. [45]
    In the course of deciding that question, the court rejected a submission on behalf of the respondent that s 588FA(1) was to be applied at the date of the impugned transaction on the basis of a hypothetical winding up on that day: [14]. The court held, following Walsh v Natra Pty Ltd,[24]that the relevant comparison was between the amount the creditor had in fact received by the transaction and the amount the creditor would receive if proving for the debt in the winding up that occurred, not some hypothetical winding up at the date of the transaction. On the particular point raised by the plea which had been struck out however, the court simply decided that the proposition was arguable: [12]. In the light of this consideration, I do not regard the decision in Bradnam’s as being conclusive on the point, or even as expressing a particular preference for the contention advanced by the defendant.
  1. [46]
    Muir JA, with whom the other members of the court agreed did however acknowledge at [16]:

“In favour of the respondent’s construction is the fact that, arguably at least, there would be a deficiency in the operation of the Act if an unregistered charge was void as a security against a liquidator under s 266, but valid as a security for the purposes of s 588FA. Also the words “unsecured debt” must be construed in the context of a provision concerned with the setting aside by liquidators (although not exclusively) of unfair preferences. I do not propose to expand further on this question of construction as it was underdeveloped before the primary judge, addressed only in a rudimentary way on appeal, and may not be determinative of the true issues in dispute on a trial of the proceeding.”

  1. [47]
    I accept that there are these difficulties with a conclusion that the defendant was receiving payment of a secured debt even though, had the debt not been then paid, it would have been an unsecured debt in the winding up of the company. The function of a preference action is to ensure that unsecured creditors are all treated alike for the purposes of the winding up, so that payments which can be seen to treat a particular unsecured creditor better than the creditor would do in the event of a winding up are required to be put back into the pool for distribution on the liquidation. That does give rise to an issue about whether treating payments made which were secured at the time they were made but which were subject to a security not enforceable against a liquidator produces a deficiency in the operation of the Act, because in such a situation the creditor if unpaid would be claiming among the general body of unsecured creditors, and would therefore get an advantage from the earlier payment over those other creditors, which is inconsistent with the notion that such payments should be brought back to the pool of funds to be distributed among unsecured creditors.[25] If there were two creditors who had unregistered securities, and one was paid and one not paid, the unpaid one would prove as an unsecured creditor, but on the defendant’s interpretation of s 588FA(1)(b), the payment made to the one that was paid would be treated as a payment in respect of a secured debt.
  1. [48]
    Apart from that, there is a public interest in registrable charges being registered, apart from the significance of registration in the context of a winding up: registering a security gives notice to all the world that the security exists, which is relevant to other potential creditors who may be assessing the credit worthiness of a company.[26] Hence an interpretation of the Act which encourages the registration of charges, rather than one which gives no advantage in the context of preferential payments to persons who do register securities, should be preferred, as being consistent with the scheme of the PPSA as a whole.
  1. [49]
    Nevertheless, the natural reading of s 588FA(1)(b) is that it refers to a debt which was unsecured at the time the creditor received payment in respect of it. Section 588FA(1) makes a comparison between the amount in fact received by the creditor under the relevant transaction and the amount that would be received if the creditor were to prove for the debt in a winding up of the company, on the basis that the transaction was set aside. That is a comparison which involves a consideration of the situation at two different times. That follows particularly from the fact that the section uses the present tense “owes” rather than the past tense “owed”, which would have been appropriate if the provision had been speaking of an analysis of the transaction retrospectively from the time of the winding up. The present tense suggest that the issue of whether the debt is unsecured is to be determined by reference to the situation at the time of the transaction. The comparison which the section requires is between the amount the creditor in fact received, because the transaction did take place, and the amount the creditor would receive in the hypothetical situation where the debt had not been paid and the creditor had to prove for it in the winding up of the company.
  1. [50]
    To the extent that this causes difficulty as a result of the operation of the PPSA, it is because the legislature in the PPSA chose to provide in s 267 for vesting of the security interest in the grantor, rather than to provide that (for example) in the event of a winding up the security was void. In that situation it is easier to conclude that a payment made in respect of a debt which was the subject of a defective security could be treated as an unsecured payment in the event of the company being wound up. That was the situation I assumed applied under s 266 of the Corporations Act where a registrable charge on property of the company had not been registered as required by the provisions of the Act for the registration of charges in Pioneer Construction Materials Pty Ltd v Schoch [2007] QDC 143, which was relied on in the submissions for the plaintiffs.
  1. [51]
    That was a case where a creditor of a company sought to recover from the directors of the company a debt incurred at a time when the company was insolvent, the company having subsequently gone into liquidation. The plaintiff had supplied concrete to the company under general credit terms which arguably included an equitable charge in its favour to secure the unpaid purchase price. Without deciding that point, I concluded that if it did the charge was one which required notice of the charge to be given under s 263, which had not occurred, so that the charge was void against the liquidator, and the plaintiff was in the position of an unsecured creditor: [15]. In that case however the debt had not been paid, and the issue of whether the charge remained valid at some earlier date did not arise.[27]
  1. [52]
    One difficulty with the argument about giving the legislation a purposive construction is that the incongruity identified arises because of the inter-relationship with two different statutes, in particular, because of the wording adopted in the PPSA, which was enacted after the Corporations Act, and when the wording of s 588FA was in its current terms. Overall, notwithstanding the force of the submissions made on behalf of the plaintiffs, and the comments of Muir JA, it seems to me that the wording of the section is sufficiently clear against that interpretation. The High Court has made it clear that the actual wording of a statutory provision is the most important consideration in statutory interpretation. Accordingly in my opinion s 588FA depends on the debt being unsecured at the time a particular payment said to be a preference is received by the creditor from the company.
  1. [53]
    The plaintiffs also relied on the decision on appeal in Re Amerind Pty Ltd, Commonwealth of Australia v Byrnes [2018] VSCA 41, where it was held that, for the purposes of a circulating security where a receiver has been appointed, whether a particular asset was subject to the operation of s 433 of the Corporations Act was to be decided when the receiver was appointed, not when the security was granted. That is a very different provision, with different considerations, and I do not consider that the reasoning is applicable to s 588FA.
  1. [54]
    In the present case each particular contract of supply contained a security, either an equitable charge in the case of the supplies under the 2011 terms, or an equitable charge and a retention of title clause in the case of the supplies made on the 2013 terms and conditions. An equitable charge is a security for the purposes of s 588FA.[28]A retention of title clause gives the supplier a security in the goods supplied for the purposes of the section.[29]The securities although unperfected were valid as between the defendant and the company. They were therefore not unsecured debts at the time of the payments.

Were the payments reflected in the value of the security?

  1. [55]
    The plaintiffs advanced a further submission based on s 588FA(2), quoted earlier, that the payments made were, with one exception, taken to be of unsecured debt because, although the defendant held a security in respect of them, the amount of the indebtedness secured at the time of the payment was greater than the value of the security, and on the authorities the payment is taken to be in discharge first of that part of the debt which was unsecured. In the case of the payment where that did not apply, part of the payment, relating to the excess over the then value of the security, was to be taken as unsecured, and only the balance of the payment was to be treated as payment of a secured debt at the time the payment was made. In order to deal with this submission, it is necessary to make findings about the correct basis on which the security was to be valued, and the value of the security at the relevant time, and to determine whether the security was of a greater value because under the terms and conditions it extended to the proceeds of sale of goods supplied if they were sold before they had been paid for.
  1. [56]
    As to the basis of valuation, there was no expert evidence put before me on this question. The defendant submitted that the goods should be valued at their retail value, on the basis that the decline in the amount of stock held by the company during the relevant period indicated that in fact the goods had generally been sold at retail prices by the company, which therefore realised the retail value of them. I am prepared to infer that the goods were sold retail by the company as the value of stock diminished, but that process was not without cost to the company, namely the cost of providing retail premises within which the goods were sold, and staff to operate those premises and sell the goods to customers. There would have been other costs involved, although there was no evidence about the precise quantification of these costs. The evidence that generally the company operated on the basis of 100 per cent mark up over the wholesale cost,[30]coupled with the fact that ultimately the company went into liquidation, suggests that the costs would be likely to be in the general vicinity of the difference between the wholesale and retail prices. This would be perhaps particularly true in circumstances where the company was keen to realise the value of the stock held in circumstances where it was in financial difficulties.
  1. [57]
    In any event, as a matter of principle I consider that the value of stock sitting in a warehouse would necessarily be the wholesale value rather than the retail value, because such value was only realisable by a sale on a wholesale basis. The value of the security must be the value to the creditor. As the submissions for the plaintiffs pointed out, if the defendant had exercised its security in relation to the goods supplied on the terms and conditions including a retention of title clause, the result would have been that the defendant retook possession of the goods, which would then be available to it to resell, on a wholesale basis.[31]The equitable charge would be enforced by judicial sale, necessarily on a wholesale basis.[32]In circumstances where there was no expert evidence as to the appropriate basis to value the goods, the matter must be resolved as a matter of common sense, and it seems to be that as a matter of common sense the appropriate way to value the stock held by the company is at the wholesale price, that is the price of which the defendant supplied the goods to the company in the first place.
  1. [58]
    The next issue is whether the goods should be valued at the date at which the payment was made, or the date of the winding up. It was submitted for the plaintiffs that the appropriate date was the latter date, on the basis of authorities including Walsh v Natra Pty Ltd and Bradnam’s Windows and Doors.[33]These authorities however are concerned with different questions. One was whether the comparison between the amount received in the payment and the amount that would have been received on a winding up was to be made on the basis of a hypothetical winding up as at the date of the payment, or on the basis of the amount that would be received on the winding up that actually took place. The cases did not directly decide that the value of the security is the value as at the date of the winding up, rather than as that the date of the payment.
  1. [59]
    Indeed, the discussion of how the process is to be undertaken in Walsh v Natra Pty Ltd (supra) seems to me to have proceeded on the basis that the comparison was between the value of the security and the total amount of the debt as at the date of each impugned payment. There was some discussion about the effect of the value of the security fluctuating from time to time depending on the amount secured by a prior mortgage, which included the amount of the bank overdraft of the company. There was an argument advanced that any particular payment did diminish the value of the security because the payment served to increase by that amount the company’s overdraft, which decreased to that extent the value of the creditor’s security which was limited to the balance of the value of the secured property. That argument was rejected, but not on the basis that the security had to be valued at the time of the winding up. If the court had thought that that were the case, it would have been a very easy basis upon which to reject that argument.
  1. [60]
    That aspect of that decision seems to have been adopted in Queensland in Williams v Peters (supra) at [47] – [51]. This point was considered but left open by Edelman J in Hussain (supra) at [176]. Apart from this, the natural reading of s 588FA(2) is that it is concerned with the effect of a payment received by the creditor, and the most obvious time to determine that is the time when the payment was received, so that is the interpretation supported by the actual words of the section. In my opinion therefore the security has to be valued at the date of each particular payment, in order to perform the calculation required by subsection (2).
  1. [61]
    Walsh v Natra Pty Ltd is also authority for the proposition that if the total debt exceeds the value of the security any particular payment made is to be applied first toward the unsecured debt. The analysis by the plaintiffs adopted this principle, and I consider that this decision, endorsed by the Court of Appeal in Williams v Peters (supra), requires me to take the same approach. I should first however deal with the defendant’s argument that the value of the security was, or could have been, actually much greater, because the value extended to the proceeds of sale of the goods, which were also secured under both the 2011 and 2013 terms and conditions.
  1. [62]
    Clause 8.1 of both the 2011 and 2013 terms and conditions provided for a grant of a security interest in both the goods supplied, which must mean the goods supplied under any particular supply or delivery of goods, and their proceeds, as set out in Clause 8.1 of both contracts, quoted earlier. Significantly, the clause provides that the security extended to other goods acquired from the defendant if the proceeds were “not readily identifiable and/or traceable….” In the circumstances I would read the word “readily” as applying to both “identifiable” and “traceable”. Apart from this, there is a statutory extension of the security to “proceeds” in the PPSA s 32, but the definition of “proceeds” in s 31 confines this to “identifiable or traceable” property.
  1. [63]
    The plaintiffs’ evidence was that, although records were kept of the stock obtained from the defendant, when goods were sold no record was kept of what was realized from stock provided by any particular supplier. All that the company could say was that at a particular outlet a particular amount had been taken by way of sales, but there was no practicable way of apportioning that between the proceeds of sale of goods supplied by the defendant and the proceeds of sale of goods supplied by other suppliers.[34]The defendant did not establish any practicable way of identifying or tracing those specific proceeds or otherwise demonstrate that this evidence was incorrect. The position therefore is that, although assumptions may be made about the proceeds of sale of goods supplied by the defendant, the plaintiffs have shown that the proceeds are not readily identifiable or traceable.
  1. [64]
    Even if these amounts could be quantified, the evidence suggests that the company had disregarded any obligations that it had in relation to the proceeds, and simply mixed the proceeds with its general income.[35]The company maintained a number of bank accounts, the major ones being with the National Australia Bank. Most of the NAB accounts were in substantial overdraft at all relevant times.[36]There is no evidence about what happened to any particular proceeds after they were obtained by the company.[37]Presumably proceeds were banked, but the bank statements reveal a regular patters of money being withdrawn almost daily to NAB accounts, leaving only a little balance. For example, Suncorp Business Cheque account 052177420 between 1 June and 30 June 2013 had deposits of almost $113,000 and 16 withdrawals totalling close to $111,000. The balance on 30 June was $2,285.51, but during the month it had been as low as $54.39. This is typical of the non-NAB accounts.
  1. [65]
    If the proceeds were transferred into an overdrawn account, they ceased to be traceable. If they were transferred to an account in which a credit balance were maintained, it is apparent from the statements that they were speedily spent. Even apart from the difficulty caused by the absence of records, on the evidence any proceeds the company in fact obtained were speedily placed beyond the reach of any tracing process, let alone being readily traceable. It appears that during most of this period overall the company’s NAB accounts were in overdraft, generally a substantial overdraft. Even if they were put into an account which was in credit, no doubt the bank had a contractual entitlement to consolidate accounts. In my opinion on the evidence there were at the material times no proceeds of sale of the goods supplied by the defendant that were readily identifiable and/or traceable, and in those circumstances the value of the defendant's security is limited to the wholesale value of all of the goods supplied by the defendant held by the company at the relevant time.[38]I consider that the plaintiffs have discharged the onus of proving the value of the security, for the purposes of subsection (2).
  1. [66]
    The value of the stock was recorded on a fortnightly basis, so that it is only possible to determine the total value (at supply price) of the goods supplied by the defendant to the company on a series of individual dates a fortnight apart.[39]As at 16 June 2013, the value on this basis of the goods supplied by the defendant and held by the company was $316,227.00. The next date shown on the stock list was 30 June, on which day the value of stock supplied by the defendant was $233,232.00. This produces an average daily stock reduction over that period of $5,928.00, and on that basis the stock on 21 June, five days later, can be valued at $286,587.00. [40]At that date the debt owed by the company to the defendant was $703,634.07,[41]of which $417,047.07 was unsecured under subsection (2). Hence, the whole of the payment of $100,000 that day is to be treated as a payment in respect of that unsecured debt.
  1. [67]
    The next payment was made on 27 June 2013, six days later, and the value of the stock on that day, calculated in the same way, was $251,019.[42]At that date the amount of the debt owed to the defendant was $603,634.07, so that again the whole of the payment of $100,000 made that day is to be treated as payment in respect of unsecured debt.
  1. [68]
    The next payment was on 1 July 2013. The previous day, the value of stock was $233,232, while on 14 July the value was $192,784. That meant an average daily stock reduction for that period of $2,889, and on that basis the value of the stock as at 1 July 2013 was $230,343. The value of the debt as at that day was $503,634.07,[43]of which $273,291 was unsecured. The payment made was $400,000, which covered the entire amount of unsecured debt and had the effect of reducing the secured debt by $126,709. Hence, the amount of the payment which was in respect of unsecured debt, which is recoverable as a preference, is $273,291.
  1. [69]
    The next payment was made on 5 July 2013. By that day the value of the stock would have been reduced by a further $11,556, to $218,787, which was more than the total value of the debt of $103,634.07.[44]It follows that all of the fourth payment was made in respect of secured debt. The final payment was made on 12 July 2013, a further seven days later, by which time the value of the stock had reduced a further $20,223 to $198,564. As at this date, the amount owed by the company was only $55,861.60, and it follows that the whole of the payment on that day was in respect of secured debt. Of the various impugned payments, therefore, the amount paid in respect of unsecured debt came to $473,291. The defendant has conceded that it would not have received a sum greater than zero on the winding up of the company, and accordingly there is no deduction to be made from this amount.
  1. [70]
    The defendant however pleaded that it received no net benefit from the payments on the basis the title to the defendant’s goods and any proceeds passed to the company on the date of each of the payments. For the reasons that have been given, in my view, that was only true to the extent to which the payments were in respect of secured debts. Since those amounts are not recoverable anyway, it follows that it is not necessary to consider this point further. I would however point out that, insofar as the defendant’s case was based on the proposition that in the books of the defendant the debt owed by the company was written off on 25 October 2013,[45]in my view that act in itself was of no consequence. The position was simply that at that time those responsible for keeping the accounts of the company considered that it was appropriate no longer to treat that debt as an asset of the company having any real value. It did not have the effect of discharging the debt, at least in the absence of evidence, which was not forthcoming from the defendant, that it had communicated that writing off to the company in terms sufficient to indicate that it had waived any continuing obligation of the company to pay the debt. The plaintiffs referred to, and I apply, the decision in Manzi v Smith (1975) 132 CLR 671 at 674 and 675. Indeed, the defendant recognised this point in 2013, because it still lodged a proof of debt on 16 December 2013 in the amount of $327.87, the amount to which the debt had been reduced by the final payment: Exhibit 3.
  1. [71]
    There will therefore be judgment that the defendant pay the first plaintiffs $473,291. The plaintiffs also claimed interest, which would be payable pursuant to the Civil Proceedings Act 2011, s 58. In circumstances such as the present, in my preliminary view it is appropriate for the defendant to be allowed a reasonable time after demand was made by the liquidators before interest begins to run, in order to give the defendants a reasonable opportunity to investigate the position, and to form a correct conclusion as to the amount properly payable. According to the statement of claim paragraph 16, admitted by the defendant in the defence paragraph 16, the first letter of demand was sent on 7 August 2014, and further letters of demand were sent on 3 December 2014, 18 February, 30 April, 17 July and 28 September 2015. No doubt the matter required careful consideration and investigation, but my preliminary view is that in all the circumstances interest is appropriately payable from 12 month after the first letter of demand, 7 August 2015. I will however invite submissions on the amount of interest payable when these reasons are delivered, along with submissions on the question of costs.

Footnotes

[1]  Transcript p 3. It followed that large parts of the pleadings became irrelevant.

[2]  Paragraphs 3(b), 4(h)(ii)-(iv) and 4(i)(iii)(A) of the second further amended reply to the further amended defence filed 21 February 2018. The plaintiffs also did not press paragraph 4(g)(iii).

[3]  Paragraph 6 of the amended rejoinder filed by leave on the first day of the trial.

[4]  Exhibit 2, document 19. It was common ground that this document replaced what had gone before: Reply paragraph 4(f)(i) and (ii), rejoinder paragraph 2(g).

[5]  This was not relied on, presumably because there was none.

[6]  Exhibit 2 document 135.

[7]  Liquidator’s report, Exhibit 2, document 136, Annexure 50.

[8]  Exhibit 2, document 22. See also Exhibit 6.

[9]  Exhibit 2 document 106 p 471.

[10]  Exhibit 2 documents 111, 112.

[11]  Exhibit 3.

[12]  All this is covered by the Statement of Agreed Facts Exhibit 1.

[13]  This is essentially a clause designed to counter the traditional approach to a contract that, where there is acceptance by conduct, it is the last version of the contract which has been accepted, leading to a “battle of the forms”: Seddon & Ellinghaus “Cheshire and Fifoot’s Law of Contract” (9th Aust Ed, 2008) para 3.28.

[14]  The terms of the document were also not set out in the judgment at first instance: [2014] VSC 61.

[15]  For present purposes I put aside the personal guarantee and indemnity signed by the director, which is a separate contract with a different party, but note that it identifies the consideration for the guarantee as the defendant “supplying goods on credit to the applicant”, rather than agreeing to supply goods on credit to the applicant.

[16]  If a party has an unfettered discretion as to performance, there is no consideration provided, and no contract: Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 361, 370.

[17]  To the extent that the decision in Re Gelpack Enterprises Pty Ltd [2015] NSWSC 1558 is inconsistent with this reasoning, I decline to follow it. That decision did not consider the question of consideration if one party to a “contract” reserves a right unilaterally to vary its terms without limitation.

[18]  Any dispute as to when in April the new terms began to apply is not relevant because there were no invoices issued, and hence presumably no order accepted, between the earliest date if the first email was effective and 23 April 2013: Exhibit 2 document 106.

[19] Holdway v Arcuri Lawyers [2009] 2 Qd R 18.

[20]  Duggan and Brown “Australian Personal Property Securities Law” (2nd Ed 2016) para 5.59, 5.60.

[21] G & M Aldridge Pty Ltd v Walsh (2001) 203 CLR 662 at 675.

[22] Mills v Meeking (1990) 169 CLR 214 at 234.

[23] G & M Aldridge Pty Ltd (supra) at 675.

[24]  (2000) 1 VR 523.

[25] BP Australia Ltd v Brown (2003) 58 NSWLR 322 at [93], [98].

[26]  Duggan and Brown (op cit) para 5.6.

[27]  As pointed out by the Court of Appeal in Bradnam’s Windows and Doors (supra) at [10].

[28] IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (2009) 253 ALR 240 at 253 shows that it is a security in the ordinary sense, and there is no special definition of “security” for s 588FA.

[29] Hussain v CSR Building Products Ltd [2016] FCA 392 at [144].

[30]  Trenfield p 18.

[31]  Strictly speaking the value in the sense of market value would actually have been less than this, because there would have been costs involved in realising the same wholesale price to an alternative purchaser, if only in retaking possession of the goods and redelivering them elsewhere. But the plaintiffs did not contend for a value lower than the supply price.

[32] IMF (Australia) Ltd (supra) at [58].

[33]  The other authorities referred to were BP Australia Ltd v Brown (2003) 58 NSWLR 322 and Williams v Peters [2010] 1 Qd R 475.

[34]  Trenfield p 20.

[35]  More precisely, never separated the proceeds from its general income.

[36]  Money paid into an overdrawn account cannot be traced: Williams v Peters [2010] 1 Qd R 475 at [27].

[37]  This appears from the bank statements on the USB forming part of Exhibit 2, hard copies of which were provided by counsel for the plaintiffs.

[38]  To the extent that there were, in principle, a small amount representing proceeds which had not yet been spent, I consider that it was offset by the realisation costs associated with enforcing the security, which ought to be deducted from the gross supply price. I will not make any adjustment for either.

[39]  These figures are taken from Exhibit 2 document 135.

[40]  $316,227 - $29,640.

[41]  The debt as at 30 June 2013 from Exhibit 2 document 114, plus the two payments of $100,000 made on 21 and 27 June.

[42]  $286,587 - $35,568.

[43]  Exhibit 2 document 114.

[44]  Exhibit 2 document 116.

[45]  Gurman p 42.

Close

Editorial Notes

  • Published Case Name:

    Trenfield & Ors v HAG Import Corporation (Australia) Pty Ltd

  • Shortened Case Name:

    Trenfield v HAG Import Corporation (Australia) Pty Ltd

  • MNC:

    [2018] QDC 107

  • Court:

    QDC

  • Judge(s):

    McGill DCJ

  • Date:

    15 Jun 2018

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Australia Ltd v Brown (2003) 58 NSWLR 322
3 citations
Jump To
Cite 1 - (2003) 58 NSWLR 322
Cite 2 - (2003) 58 NSWLR 322
Cite 3 - (2003) 58 NSWLR 322
Bradnam's Windows and Doors Pty Ltd v Offermans[2011] 2 Qd R 408; [2011] QCA 106
5 citations
Jump To
Cite 1 - [2011] 2 Qd R 408
Cite 2 - [2011] 2 Qd R 408
Cite 3 - [2011] 2 Qd R 408
Cite 4 - [2011] 2 Qd R 408
Cite 5 - [2011] 2 Qd R 408
Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2015] VSCA 92
2 citations
Jump To
Cite 1 - [2015] VSCA 92
Cite 2 - [2015] VSCA 92
Central Cleaning Supplies (Aust) Pty Ltd v Elkerton [2014] VSC 61
1 citation
Jump To
Cite 1 - [2014] VSC 61
Cleaning Supplies (Aust) Pty Ltd v Elkerton (2015) 296 FLR 25
2 citations
Jump To
Cite 1 - (2015) 296 FLR 25
Cite 2 - (2015) 296 FLR 25
Commonwealth of Australia v Byrnes [2018] VSCA 41
3 citations
Jump To
Cite 1 - [2018] VSCA 41
Cite 2 - [2018] VSCA 41
Cite 3 - [2018] VSCA 41
G & M Aldridge Pty Ltd v Walsh (2001) 203 CLR 662
2 citations
Jump To
Cite 1 - (2001) 203 CLR 662
Cite 2 - (2001) 203 CLR 662
Gelpack Enterprises Pty Ltd, Re [2015] NSWSC 1558
2 citations
Jump To
Cite 1 - [2015] NSWSC 1558
Cite 2 - [2015] NSWSC 1558
Holdway v Arcuri Lawyers (A Firm)[2009] 2 Qd R 18; [2008] QCA 218
2 citations
Jump To
Cite 1 - [2009] 2 Qd R 18
Cite 2 - [2009] 2 Qd R 18
Hussain v CSR Building Products Ltd [2016] FCA 392
3 citations
Jump To
Cite 1 - [2016] FCA 392
Cite 2 - [2016] FCA 392
Cite 3 - [2016] FCA 392
IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (2009) 253 ALR 240
3 citations
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Cite 1 - (2009) 253 ALR 240
Cite 2 - (2009) 253 ALR 240
Cite 3 - (2009) 253 ALR 240
Manzi v Smith (1975) 132 CLR 671
2 citations
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Cite 1 - (1975) 132 CLR 671
Cite 2 - (1975) 132 CLR 671
Mills v Meeking (1990) 169 CLR 214
1 citation
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Cite 1 - (1990) 169 CLR 214
Pioneer Construction Materials Pty Ltd v Schoch [2007] QDC 143
3 citations
Jump To
Cite 1 - [2007] QDC 143
Cite 2 - [2007] QDC 143
Cite 3 - [2007] QDC 143
Placer Developments Ltd v The Commonwealth (1969) 121 CLR 353
2 citations
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Cite 1 - (1969) 121 CLR 353
Cite 2 - (1969) 121 CLR 353
Re Amerind Pty Ltd [2017] VSC 127
2 citations
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Cite 1 - [2017] VSC 127
Cite 2 - [2017] VSC 127
Re Amerind Pty Ltd (2017) 121 ASCR 206
2 citations
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Cite 1 - (2017) 121 ASCR 206
Cite 2 - (2017) 121 ASCR 206
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
2 citations
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Cite 1 - (2004) 219 CLR 165
Cite 2 - (2004) 219 CLR 165
Walsh v Natra Pty Ltd (2000) 1 VR 523
2 citations
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Cite 1 - (2000) 1 VR 523
Cite 2 - (2000) 1 VR 523
Williams v Peters[2010] 1 Qd R 475; [2009] QCA 180
4 citations
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Cite 1 - [2010] 1 Qd R 475
Cite 2 - [2010] 1 Qd R 475
Cite 3 - [2010] 1 Qd R 475
Cite 4 - [2010] 1 Qd R 475

Cases Citing

Case NameFull CitationFrequency
Samios Plumbing Pty Ltd v John R Keith (QLD) Pty Ltd [2019] QDC 2373 citations
1

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