Brava Trading Pte Ltd v Leybourne Nominees Pty Ltd
[2012] QSC 328
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- Unreported Judgment
- Brava Trading Pte Ltd v Leybourne Nominees Pty Ltd[2012] QSC 328
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Brava Trading Pte Ltd v Leybourne Nominees Pty Ltd[2012] QSC 328
Brava Trading Pte Ltd v Leybourne Nominees Pty Ltd[2012] QSC 328
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Trial | |
PROCEEDING: | Claim |
ORIGINATING COURT: | |
DELIVERED ON: | 24 October 2012 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 30 August 2012 |
JUDGE: | Philippides J |
ORDER: | It is declared that the amount of $67,321.53 (together with accretions and interest) presently held in the Trust Account of Messrs Hardings Gulhane Solicitors (Bank of Queensland Account No 11588383) are held subject to registered Charge No 025310744 in favour of, and on trust for, the plaintiff herein. It is ordered that the said sum of $67,321.53 (together with accretions and interest) be paid to the plaintiff. |
CATCHWORDS: | CORPORATIONS – CHARGES, DEBENTURES AND OTHER BORROWINGS – GENERALLY – PRIORITIES – where the plaintiff was the holder of a floating charge given by the second defendant – where the first defendant obtained default judgment against the second defendant – where an enforcement warrant was issued in respect of the default judgment – where moneys were ordered to be paid into the first defendant’s solicitors’ trust account – where the enforcement warrant and default judgment were ordered to be set aside upon filing of an affidavit of receipt of the moneys into the solicitors’ trust account – where leave to defend granted to the second defendant – where the first defendant obtained judgment against the second defendant – where the second defendant in liquidation – whether the plaintiff’s floating charge crystallised – whether the plaintiff, by reason of crystallisation of its charge, had priority over the first defendant to the moneys paid into the trust account Bird v Barstow [1892] 1 QB 94 |
COUNSEL: | IA Erskine for the plaintiff |
SOLICITORS: | Irish Bentley Lawyers for the plaintiff |
Philippides J:
[1] The plaintiff, (“Brava Trading”), seeks a declaration as to its security interest in moneys held in the trust account of Hardings Gulhane, the solicitors for the first defendant (“Leybourne”). Its claim to the moneys is based on a registered mortgage debenture provided by the second defendant, (“Brava Marine”), now in liquidation.
[2] Both Brava Trading and Leybourne sought and were granted leaved to proceed.
Factual background
[3] The following facts are not disputed. On 31 March 2007, Brava Trading and Brava Marine entered into a loan facility agreement. On 12 August 2008, pursuant to the loan facility and by way of security for all advances thereunder, Brava Marine granted Brava Trading a fixed and floating charge over the assets and undertakings of Brava Marine (“the Charge”) which was duly registered.[1] (By June 2008, advances totalling $2,253,265.41 had been made, with the total amount advanced by about 20 July 2009 being in the order of $2,967,116.41).
[4] On 14 April 2009, Leybourne commenced District Court proceedings against Brava Marine for claimed outstanding rental moneys and, on 22 June 2009, obtained default judgment in the sum of $66,366.69. Three enforcement warrants were issued in respect of the default judgment obtained by Leybourne. The first two were issued on 23 June 2009 and 1 July 2009. Relevantly, the third was issued on 14 July 2009 directed to the National Australia Bank (NAB). On 20 July 2009, the NAB debited the sum of $67,321.53 from the trading account of Brava Marine, and drew a cheque in favour of Leybourne.
[5] In the meantime, a Creditor’s Statutory Notice of Demand dated 19 May 2009 issued by Harrap Constructions Pty Ltd (“Harrap”) seeking $4,407.10 was served by prepaid post on the registered office of Brava Marine, which it failed to satisfy or comply with. On 20 July 2009, Harrap filed an application for the winding up of Brava Marine.
[6] On 24 July 2009, orders were made by Judge McGill in respect of Brava Marine’s application filed on 17 July 2009 to set aside the default judgment obtained by Leybourne on 22 June 2009. The defendant was given leave to file and serve a Notice of Intention to Defend and Defence. It was ordered that the first two enforcement warrants be stayed. It also ordered that upon payment of $67,321.53 from the NAB being received by Leybourne’s solicitors into their trust account, that sum be retained in the trust account “until further order of the court or as otherwise agreed between the parties”. Additionally, Leybourne’s solicitors were required, within one business day of receipt of the moneys from the NAB, to file and serve an affidavit deposing to their receipt. It was ordered that upon the filing of the affidavit, the default judgment be set aside and the three enforcement warrants also be set aside.
[7] As it turned out, additional steps were taken to give effect to the orders. On 31 July 2009, Leybourne’s director collected the cheque from the NAB in answer to the enforcement warrant, and deposited the cheque into a bank account in the name of Leybourne Nominees Pty Ltd. On 3 August 2009, Leybourne drew a cheque for $67,321.53 against its bank account in favour of Hardings Gulhane’s trust account. On 4 August 2009, the cheque drawn on Leybourne’s account was deposited into Hardings Gulhane’s trust account.
[8] Subsequently, on 27 August 2009 a receiver was appointed over the assets of Brava Marine pursuant to the Charge. On 28 August 2009 Brava Marine was wound up and liquidators appointed.
[9] On 25 November 2011, leave was granted to Leybourne to proceed against Brava Marine in the District Court proceeding. On 10 February 2012, the District Court entered judgment against Brava Marine for the sum of $214,399.71 and costs.
Issues
[10] Brava Trading identified the issue for determination as whether, by reason of the crystallisation of its registered charge, it was entitled to the moneys deposited into Hardings Gulhane’s trust account in priority to Leybourne. That raised the issue of whether there was an event of default (including an insolvency event) within the meaning of those terms as defined in the registered charge which crystallised the Charge and, if so, what effect the crystallised security interest had in terms of Brava Trading’s entitlement to the moneys then in the business trading account of Brava Marine. Brava Trading argued that the enforcement warrant did not create a security interest because at least some of the events of default had occurred and the floating charge had crystallised, prior to the issuing or satisfaction of the enforcement warrant. It also contended that, in any event, at no stage was any security interest reposed in Leybourne because the order of the District Court set aside the enforcement warrant and the underlying default judgment on which it was based. Nor did the order itself create any security interest in the funds or interest that was able to defeat that of Brava Trading.
[11] Leybourne on the other hand submitted that any rights Brava Trading had as chargee over Brava Marine were lost upon the completion of the process of execution against the NAB. Furthermore, the effect of the District Court order was to vest control of the funds with the court, to abide by the result of the proceeding in that court, the moneys no longer being the property of either Brava Marine or Leybourne, but constituting a security created by the court pending finalisation of Leybourne’s claim against Brava Marine.
Crystallisation of the Charge
[12] Brava Trading did not pursue an argument that moneys in the normal business trading account of Brava Marine constituted property within the meaning of cl 5.2(1) and subject to the fixed part of the Charge. Rather it proceeded on the basis that those moneys comprised “Charged Property” not referred to in cl 5.2 within the meaning of cl 5.3 and in respect of which there was a floating charge. It was not disputed that the definition of “Charged Property” was sufficiently wide to encompass such moneys belonging to the chargor – either as “assets” or “rights” of the charger, given that “Charge Property” was defined to mean:
“(a)the undertaking and all the property, assets and rights of the Chargor (whether present or future or situated within or outside Australia) including, without limitation, the goodwill of the Chargor’s business or businesses and the uncalled and called but unpaid capital (including premiums) for the time being on the shares and the Chargor …”
[13] By cl 5.4, immediately upon the occurrence of an “Event of Default”, the floating charge automatically became and was deemed for all purposes to have become fixed and, by cl 17.2, upon the occurrence of an “Event of Default”, the secured money was deemed to be immediately due and payable.
[14] By reason of cl 17.1(d), an “Insolvency Event” was an “Event by Default”. Clause 1.1 defined an “Insolvency Event” to mean the happening of any of the following events:
“(a)if a person, being an individual, dies or becomes incapable of managing that person’s own affairs;
(b)a bankruptcy notice is issued with respect to a person or any application is made or step is taken to bankrupt a person;
(c)a person enters into or proposes to enter into a scheme of arrangement, deed of company arrangement or composition with, or assignment for the benefit of any of its creditors;
(d)a receiver or a receiver and manager is appointed to a person or the whole or part of the assets of the person;
(e)an application is made or a step is taken for the appointment of an administrator, controller, provisional liquidator or liquidator to a person or that person’s assets, or that appointment is actually made;
(f)an application is filed or an order is made or an effective resolution is passed for the winding up of a person; or
(g)anything analogous or having a substantially similar effect to any of the events specified above happens with respect to a person; …”
The events of default
[15] By its amended pleading, Brava Trading relied on the following alleged events of default to trigger the crystallisation of the Charge:
(i)the issuing of the statutory demand on 19 May 2009 or the failure to satisfy or comply with it;
(ii)the failure to stay or satisfy the enforcement warrant issued by Leybourne by 14 July 2009;
(iii)the winding up application filed on 20 July 2009;
(iv)the NAB debit on 20 or 31 July 2009;
(v)the appointment of a receiver on 27 August 2009;
(vi)the appointment of liquidators on 28 August 2009.
[16] Leybourne conceded that there was an event of default, crystallising the Charge upon the filing of an application to wind up Brava Marine on 20 July 2009. However, it disputed that there was a prior event of default by virtue of the issuance of the statutory demand on 19 May 2009. It also disputed that the issue or response to the enforcement warrant directed to the NAB was an event of default because cl 17.1(f) of the Charge required execution to be unsatisfied and it contended that the NAB answered the enforcement warrant in full.
[17] At the hearing Brava Trading’s submissions, reflected in its written submissions, were that the events of default comprised the issuing of the statutory demand on 19 May 2009, the winding up application on 20 July 2009, the NAB debit on 20 or 31 July 2009, the appointment of a receiver on 27 August 2009 and the appointment of liquidators on 28 August 2009. Counsel proceeded on the basis that the only matter in dispute was whether the issuing of the Harrap Statutory Demand was an event of default crystallising the Charge at 19 May 2009.
Was the issuing of the statutory demand an event of default?
[18] Brava Trading contended that the issuing of the Harrap Statutory Demand constituted an “insolvency event” within the meaning of cl 1.1(b) of the Charge, which specifies that such an event occurs when “a bankruptcy notice is issued with respect to a person or any application is made or step is taken to bankrupt a person”. In advancing that argument, Brava Trading relied on the extended definition of the word “person” in cl 1.2(h) which states that “unless the context otherwise requires”, the word “person” includes “an individual, a firm, body corporate, unincorporated association, incorporated association or a public authority”.[2] It was argued that, when the word “person” was substituted by the word “body corporate” in cl 1.1(b), and bearing in mind that a bankruptcy notice can only issue with respect to a natural “person” and not a corporation, it was apparent that the clause contemplated and was intended to cover a situation where a statutory notice of demand was issued with respect to a body corporate.
[19] The alternate ground upon which Brava Trading submitted that the issuing of the statutory demand constituted an insolvency event within the meaning of the Charge rested on subclause (g) or in the reading together of subclauses (g) and (b) of the defined term “insolvency event”. Subclause (g) referred to “anything analogous or having a substantially similar effect to any of the events specified above with respect to a person”. It was argued that, on its proper construction, the meaning of “insolvency event” was intended to cover a situation where a statutory notice of demand had been issued with respect to a body corporate chargor – that being analogous to the situation covered by subclause (b).
[20] In submitting that the issuing of the Harrap Statutory Demand constituted an “insolvency event” within the meaning of cl 1.1(b) or cl 1.1(g) of the Charge, Brava Trading contended that a charge was to be construed in the same manner as any contractual document, namely using an objective approach to ascertain the intention of the parties as they have expressed it.[3] It argued that its construction of cl 1.1 would give effect to the commercial bargain struck between the parties in accordance with the principles referred to in Kendle v Melsom (1998) 193 CLR 46.
[21] Leybourne disputed the notion that the mere issuance of a statutory demand was an insolvency event within the meaning of cl 1.1, arguing it was not a bankruptcy notice under subclause (b) nor an analogous event under subclause (g).
[22] Hayne J stated in Kendle v Melsom (at 68, [58]), in approaching the construction of the charge there under consideration:
“Two considerations must be kept steadily in mind: first, the task is one of construing the particular mortgage and secondly, the construction to be preferred is that which will give effect to the commercial bargain that has been struck between the parties and is recorded in that instrument (Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437 per Barwick CJ; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 348 per Mason J.).”
[23] I am unable to accept the construction urged by Brava Trading of subclauses (b) and (g). A broad range of circumstances is contemplated by cl 1.1, including personal and corporate insolvency. To expand the ambit of subclause (b) in accordance with Brava Trading’s submissions overlooks that the relevant breadth of that term, for the purposes of each subclause, is informed by the textual context of the subclause in question as well as cl 1.1 as a whole. For example, the textual context of cl 1.1(f) (an application or resolution for the winding up of a person) makes it abundantly clear that it is contemplated that in that subclause “person” is not to be construed in the sense of an individual. By contrast, by its terms, subclause (b) is concerned with “person” in the sense of an individual and is not concerned with corporate insolvency, in that it deals with bankruptcy notices. Further, given that events of corporate insolvency are specifically addressed in cl 1.1, I do not consider that the construction urged by Brava Trading in regard to subclause (b) can be accepted.
[24] As regards subclause (g), the fact that events of corporate insolvency specifically addressed include an application or step, inter alia, for the appointment of a liquidator (see subclause (e)) and a winding up application (see subclause (f)), but do not expressly pick up the preceding issuing of or non-compliance with a statutory demand, cuts across the construction favoured by Brava Trading.
[25] Nor do I consider that the approach urged by Brava Trading is suggested as a matter of commercial sense. While one can readily understand the commercial sense of ensuring that the issuing of a bankruptcy notice (that proceeds on the basis of a judgment) is an insolvency event, which, as an event of default, triggers crystallisation, the same reasoning does not apply with equal force to the issuing of a statutory demand. A contra proferentem reading also favours Leybourne’s construction.
[26] It follows that the Charge did not crystallise on 19 May 2009, but did crystallise on 20 July 2009. In the final analysis nothing turns on this in my view, because, as I have concluded below, Leybourne did not acquire any interest in or entitlement to the moneys prior to crystallisation of the Charge on 20 July 2009.
The effect of the process under the enforcement warrant
[27] Leybourne’s submissions proceeded on the premise that the issue of a warrant for redirection of debts is the same as a garnishee order, which operates in the same manner as a writ fieri facias. It relied on the following statements of Kitto J in Hall v Richards (1961) 108 CLR 84 at 91-92, which analysed the effect of a writ fi fa and the analogy with a garnishee order:
“But seizure by the sheriff under the fi fa is different. Though it does not give the execution creditor any property in the goods seized, it places those goods in custodia legis, the sheriff having the special property in them which is necessary for their safe custody and ‘to render the execution of his public duty useful to the judgment‑creditor’, as Tindal CJ put it in Giles v Grover. … The analogy in the case of a garnishee order is obvious. Such an order, though not working an assignment or giving the judgment creditor any proprietary interest in the debt, yet gives him positive rights with respect to it which a creditor having no more than a judgment does not possess; not merely a negative right to prevent the judgment debtor from accepting payment of the debt or disposing of it, but positive rights for the recovery of what is owing on the judgment, namely a right to give a valid receipt and discharge for the money, and a right in case on non-payment to obtain execution against the garnishee: In re Combined Weighing and Advertising Machine Co.” (footnotes omitted)
[28] There is of course ample authority for the proposition that the garnishor does not enjoy a proprietary interest in the relevant debt. As McMurdo J observed in Hansen Yuncken Pty Ltd v Ian James Ericson trading as Flea’s Concreting [2012] QSC 51 at [36]:
“To the statements by Kitto J in Hall v Richards … and Brennan J in Clyne v Deputy Commissioner of Taxation … there may be added on this point the judgments of Santow J in Blacktown Concrete Services Pty Ltd v Ultra Refurbishing & Construction Pty Ltd (in liq) and McPherson SPJ (as he then was) in Relwood Pty Ltd v Manning Homes Pty Ltd (No 2). McPherson SPJ there referred to what he described as the ‘ambiguities of language’ in the terms ‘secured creditor’ and ‘charge’, as they have been interpreted in bankruptcy, referring to the judgment of Griffith CJ, sitting in the Full Court of this Court in Bond v McClay.” (footnotes omitted).
[29] And in Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1992] 2 Qd R 197, McPherson SPJ (with whom Moynihan J agreed), in explaining that a garnishee order absolute effected no assignment either at law or in equity of the debt attached, referred (at 200) to the following remarks of Cotton LJ in Chatterton v Watney (1881) 17 Ch D 259 at 262:
“The effect of a garnishee order is to bind the debt attached and to prevent the creditor from receiving it; and when it is made absolute it gives the judgment creditor a right to recover payment from the garnishee, and by rule 8 it is provided that payment made by the garnishee under the proceeding shall be a valid discharge to him as against the judgment debtor. There is nothing in the terms of the General Order to affect any security for the debt, it only gives the judgment creditor a right to receive it. It has not the effect of transferring the security, nor does it give the person who obtained the garnishee order any right to the security or any claim against the land comprised in it.”
[30] His Honour continued at 201:
“In the same way as the execution debtor cannot sell goods after seizure under fi fa, so neither he nor the garnishee can dispose of the debt after the order is served. That is primarily what is meant by the ‘binding’ effect of the execution process: Bond v McClay [1903] St R Qd 1, 6-7; McQuarrie v Jaques (1954) 92 CLR 262, 272-273, per Dixon CJ. The debt is attached in the hands of the garnishee to be dealt with as the court allows. The judgment creditor can give a valid receipt for the money and, in the event of non-payment, can have execution against the garnishee; but until the money is paid over no proprietary interest in the debt passes. See Hall v Richards (1961) 108 CLR 84, 92, per Kitto J (with whom Dixon CJ agreed); Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1, 27, per Brennan J.”
[31] In Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) the court was called upon to decide the priority between an attachment or redirection order and a crystallised floating charge. The floating charge in that case had crystallised before the garnishee order had been made absolute. McPherson SPJ held (at 200-201) that once the floating charge crystallised the judgment debtor became trustee of each charged asset for the benefit of the holder of the charge. As the garnishee order absolute was made after the floating charge had crystallised, the equitable interest in the debt passed by way of security to the respondent and the garnishee order ought not to have been made absolute.[4] McPherson SPJ observed (at 202) that the result accorded with English decisions approved by Jacobs J in M G Charley Pty Ltd v FH Wells Pty Ltd [1963] NSWR 22 at 28, where it was stated:
“It is established that if prior to the crystallizing of the floating charge a judgment creditor receives judgment from the garnishee, then the mere existence of the floating charge is not sufficient to give the mortgagee a right to the debt. The debt must be an actual security under the charge by its crystallization before payment to the judgment creditor. See Evans v Rival Granite Quarries Limited, [1910] 2 KB 979; and Norton v Yates [1906] 1 KB 112, at pp 118-19. Upon payment by the garnishee to the judgment creditor the proceedings are complete.”
[32] I note that in M G Charley Pty Ltd v F H Wells Pty Ltd at 28 Jacobs J added that a payment into court under s 185 of the Common Law Procedure Act 1899, which was there under consideration, also completed the proceedings in the same way.
[33] None of the authorities referred to concerned the situation where the equivalent to an enforcement warrant was set aside, let alone the underlying judgment.
[34] Leybourne submitted that in this case the enforcement warrant took effect from 14 July 2009 (the date of issue) and that the warrant was “attached” to the debt owed by the NAB in respect of the moneys in Brava Marine’s bank account and thereby was in custodial egis from that date (which it argued was prior to the crystallisation of the Charge over Brava Marine). Citing M G Charley Pty Ltd v FH Wells Pty Ltd at 28, for the proposition that upon payment by the garnishee to the judgment creditor the execution proceeding was completed, Leybourne argued that it was then too late for a chargee to assert any rights in respect of the moneys paid to the judgment creditor. Brava Trading failed to intervene the process of execution, or intercept the payment to Leybourne and, it was contended, once NAB made payment to Leybourne in answer to the enforcement warrant, Leybourne was legally entitled to retain those funds. Leybourne also identified what was said to be a further difficulty facing Brava Trading’s claim being the additional steps taken before the moneys were placed into the trust account (namely, the collection and deposit on 31 July 2009 of the NAB cheque into Leybourne’s bank account and Leybourne then drawing a cheque against its bank account, which on 4 August 2009 was deposited into the trust account). It contended that in those circumstances Brava Trading could have no equitable interest in the moneys deposited into Hardings Gulhane’s trust account.
[35] This was not a case where an asset was “disposed” of after the warrant “attached”, rather, after the warrant was issued, the floating charge over the debt crystallised (on 20 July 2009). At that stage the NAB moneys were held on trust for Brava Trading. Thereafter, by virtue of the District Court order, Leybourne was precluded from itself receiving payment of the moneys under the warrant. The moneys were directed to be paid into its solicitors’ trust account with both the enforcement warrant and underlying default judgment being set aside upon the filing of the relevant affidavit. The Charge thus crystallised prior to payment by the NAB sufficient to discharge its obligations under the warrant. The movement of the funds into Leybourne’s account en route to Hardings Gulhane’s trust account did not alter the matter. They were held on the same trust and did not constitute payment to Leybourne for the purposes of completing the execution proceeding.
[36] Nor is it too late for Brava Trading to assert its rights in respect of the moneys. In M G Charley Pty Ltd v F H Wells Pty Ltd at 28 Jacobs J, having found that the payment into court by the garnishee concluded the garnishee proceedings and was a valid discharge as against the judgment debtor, nevertheless accepted the submission that “the discharge is only against the judgment debtor and not against any third party who may claim the debt”. His Honour referred to authority which recognised in garnishee proceedings the equitable interests of an assignee of a debt[5] and held that an equitable chargee was in the same position. His Honour explained that the ground “for recognizing the beneficial interests of others in a debt which was legally owing to the judgment debtor was that the judgment creditor could not obtain more in execution from the judgment debtor than the judgment debtor himself had”. In so doing, his Honour applied the reasoning of Chitty J in Re General Horticultural Co; Ex Parte Whitehouse (1886) 32 Ch D 512 at 515. That authority is referred to by Brava Trading for the proposition that a judgment creditor cannot by means of attachment, stand in a better position as regards the garnishee than did the judgment debtor; “he could only obtain what the judgment debtor could honestly give him”. In my view, that proposition is correct and applicable to the present case. The payment made in discharge of the NAB’s obligations under the warrant did not affect the entitlement of Brava Trading to assert its claim to the funds. But in any event, the submissions made by Leybourne overlook the fundamental obstacle that not only the enforcement warrant but also the underlying judgment on which it was based were set aside by the District Court order.
The effect of the District Court order
[37] Leybourne submitted that the payment into Hardings Gulhane’s trust account was in respect of the District Court giving Brava Marine leave to defend the proceeding. It argued that the effect of the District Court order requiring moneys to be held on trust by Hardings Gulhane was analogous to moneys paid into court as a condition of leave to defence. Leybourne referred to the discussion in Pilmer v HIH Casualty & General Insurance Ltd (No 2) (2004) 212 ALR 636 (commencing at 645) concerning the relevant principles regarding the effect of the payment of money into court. The court considered a line of authority that, upon payment of moneys into court, the payer ceased to have any legal or equitable interest in the money. Those authorities were confirmed in WASherratt Ltd v John Bromley (Church Stretton) Ltd [1985] 1 QB 1038, where the court accepted that a party making payment into court “parts outright” with its money. Oliver LJ stated (at 1056-7) that the money becomes “subject entirely to whatever order the court may see fit to make”. Leybourne argued that the court “effectively creates a security in favour of the successful party in the proceeding”, referring to the statement of Lord Esher MR in Bird v Barstow [1892] 1 QB 94 at 96, that such money is paid into court and received by the court “in order to secure the plaintiff in obtaining satisfaction of a judgment, if he obtains one, and on terms that, if he does, it shall be paid out to him, so far as it goes, to satisfy that judgment.”
[38] Leybourne submitted that these principles were not limited to cases of payment into court, but extended to where the court controlled the disposition of the funds: Harmer v Federal Commissioner of Taxation (1991) 173 CLR 264 at 272-273. Counsel for Leybourne summarised the findings of the court (at 272-273) in respect of moneys paid into court as being that:
(a) the moneys paid into court, and subsequently paid out of court into the interest-bearing account were in substance trust moneys;
(b) no claimant was beneficially entitled to any part of the moneys; and
(c) the claimant’s interests were contingent on an order of the court being made in their favour in the proceeding.
[39] It should be noted, however, that in Harmer, the court observed that the moneys paid into court were not trust moneys and recognised that, in circumstances where trust moneys are paid into court, the funds “remain subject to any pre-existing trust notwithstanding the payment in”.
[40] Leybourne argued that although the moneys in the present case were not paid into court, but instead into the trust account of its solicitors, that did not alter this result. The moneys were so held pursuant to the order of the District Court and subject to control of the court. Reference was made to Shirlaw (Rodgers) v Malouf (1989) 97 FLR 382, where the effect of a payment to stakeholders pending a resolution of a dispute by arbitration or by agreement was considered. Cohen J (at 389) found that the payment to the stakeholders should be dealt with in the same way as would the amount paid into court under an order of the court. The situation in the present case was said to be stronger than Shirlaw (Rodgers) v Malouf and much closer to the position of a payment into court, since the payment into the Hardings Gulhane’s trust account was made pursuant to the order of Judge McGill, and was required to be held in the trust account “until further order”. Leybourne argued that it had now obtained a judgment against Brava Marine for an amount well in excess of the sum held in the trust account. It was thus argued that in accordance with settled principles, the moneys should be released to Leybourne, the liquidators of Brava Marine having no interest in this proceeding.
[41] In respect of the interest in or security asserted as arising from the order of 24 July 2009, Brava Trading submitted that the notion that a mere payment into court may give rise to an interest in the money paid in is inconsistent with UCPR r 882(1), which requires a person claiming any interest in moneys paid in to seek a stop order. It argued that were the order of Judge McGill to effect (or carry with it) the creation of any security interest vested in the defendant in and to the moneys, it would have to be (and would have been) specified; the nature of the interest identified, and the entity in respect of whom any security interest resulted to be named in the terms of the order: Stapleton v FTS O'Donnell Griffin & Co (1961) 108 CLR 106.
[42] Counsel for Brava Trading also referred to statements of Wilcox J in Commissioner of Taxation v Government Insurance Office of New South Wales (1992) 36 FCR 314, quoted by McMurdo J in Hansen Yuncken Pty Ltd v Ian James Ericson trading as Flea’s Concreting & Anor at [41], dismissing the notion that a payment into court created new interests or derogated from existing interests.
[43] I do not consider that the authorities relied upon by Leybourne advances its claim to the moneys over Brava Trading. When the Charge crystallised, Brava Marine became a trustee of the moneys for Brava Trading. Neither the subsequent payment of the moneys into Leybourne’s account en route to their solicitors’ trust account, nor the payment into the solicitors’ trust account to give effect to the order of Judge McGill on 24 July 2009, derogated from Brava Trading’s then existing entitlement pursuant to the crystallised Charge. After the making of the order on 24 July 2009, the funds paid into the solicitors’ trust account remained subject to any pre-existing beneficial interest of Brava Trading arising from the crystallisation of its Charge which rendered Brava Marine a trustee of the debt: Harmer. The payment of the moneys into the solicitors’ trust account, albeit that it was made pursuant to a court order, did not alter the entitlement that Brava Trading already had to the moneys.
Orders
[44] Brava Trading is entitled to the declaration it seeks. It is declared that the amount of $67,321.53 (together with accretions and interest) presently held in the Trust Account of Messrs Hardings Gulhane Solicitors (Bank of Queensland Account No 11588383) are held subject to registered Charge No 025310744 in favour of, and on trust for, the plaintiff herein. It is ordered that the said sum of $67,321.53 (together with accretions and interest) be paid to the plaintiff.
[45] I shall hear submissions as to any further orders and costs.
Footnotes
[1] There was no dispute that the executed mortgage debenture was duly registered under the Corporations Act 2001 (Cth). Nor was there any issue as to the Charge being void against the liquidator (s 277 of the Act) or otherwise (s 267 of the Act).
[2] It also noted that the dictionary meaning of “body corporate” includes “a person, association or group of persons legally incorporated in a corporation”: The Macquarie Dictionary Online, Macquarie Dictionary Publishers Pty Ltd.
[3] Relying on Ferguson J in Australian Property Custodian Holdings Ltd v Capital Finance Australia Ltd [2012] VSC 124 at [29], citing Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462. See also Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 and Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604.
[4] See also Secure Funding Pty Ltd v Bettini [2011] NSWSC 557 referring inter alia (at para 8) to Blacktown Concrete Services Pty Ltd v Ultra Re Furnishing & Construction Pty Ltd (In Liq) (1998) 43 NSWLR 484 per Santow at 496-502.
[5] Holt v Heatherfield Trust Ltd [1942] 2 KB 1. See also W J Adams & Co Ltd v Blencowe [1929] 46 (NSW) 150.