Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 6)
[2015] QSC 116
To print this judgment please return to the case and click on the PDF icon
next to the
case name. For court use, a full PDF copy is required or preferred.
Exit Distraction Free Reading Mode
Please Note: You are about to print a copy of the onscreen
version of
this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please
return to
the case for PDF printing options.
- Unreported Judgment
- Appeal Determined (QCA)
- Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 6)[2015] QSC 116
- Add to List
Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 6)[2015] QSC 116
Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 6)[2015] QSC 116
SUPREME COURT OF QUEENSLAND
CITATION: | Mio Art Pty Ltd as T’ee of Spencer Family Trust v Mango Boulevard Pty Ltd & Ors (No 6) [2015] QSC 116 |
PARTIES: | MIO ART PTY LTD as trustee of SPENCER FAMILY TRUST v MANGO BOULEVARD PTY LTD ACN 101 544 601 SILVANA PEROVICH ROBERT WILLIAM WHITTON as trustee of the Estate of SILVANA PEROVICH (A BANKRUPT) BMD HOLDINGS PTY LTD ACN 010 093 348 |
FILE NO/S: | SC No 1714 of 2011 |
DIVISION: | Trial Division |
PROCEEDING: | Hearing |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 22 May 2015 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 9 February 2015; Further written submissions heard on the papers 7 May 2015; 11 May 2015 |
JUDGE: | Philip McMurdo J |
ORDER: | It is declared that, subject to any right to set-off any sum as pleaded in paras 29U(c) and (d) of the Sixth Further Amended Defence of the first and fourth defendants, the plaintiff is entitled to payment by the first defendant, pursuant to cl 5.1(a) of the SSA made between them and dated 4 July 2003, of the sum of $602,729. |
CATCHWORDS: | CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – whether the agreement between the plaintiff and a third party constituted a legal assignment, not by way of charge only, of the debt owed to it by the first defendant under a share sale agreement – where the relevant agreement provided that upon the occurrence of an Event of Default, the third party could exercise an option to be paid amounts due to the plaintiff under the share sale agreement – where the better construction of the agreement was that it did not effect an absolute assignment and, until an Event of Default, there was a charge only – not irrelevant that the document referred to the parties as “Chargor” and “Chargee” throughout – where other documents were admissible as an aid to the construction PERSONAL PROPERTY – ALIENATION OF PERSONAL PROPERTY – ASSIGNMENT OF CHOSES IN ACTION GENERALLY – WHAT MAY BE ASSIGNED – where the plaintiff claimed it was entitled to be paid an amount under a clause of a written share sale agreement providing for the purchase price of shares – where the first and fourth defendants argued the debt had been assigned at law by the plaintiff to a third party – where the plaintiff argued there was no legal assignment of the debt, that it was at least the equitable owner of the debt and had standing to sue – where the defendants argued there was an unconditional and absolute assignment by way of mortgage to secure repayment of a loan with the equity of redemption being provided by another clause of the share sale agreement PERSONAL PROPERTY – ALIENATION OF PERSONAL PROPERTY – ASSIGNMENT OF CHOSES IN ACTION GENERALLY – WHAT MAY BE ASSIGNED – CLAIMS TO DAMAGES AND RIGHTS OF ACTION – whether the plaintiff had standing to claim a payment under the share sale agreement – where the plaintiff argued it was at least the equitable owner of the debt and had standing to sue for it PERSONAL PROPERTY – ALIENATION OF PERSONAL PROPERTY – ASSIGNMENT OF CHOSES IN ACTION BY STATUTE – WHAT AMOUNTS TO AN ABSOLUTE ASSIGNMENT – where the plaintiff claimed it was entitled to be paid an amount under a clause of a written share sale agreement providing for the purchase price of shares – where the first and fourth defendants argued the debt had been assigned at law by the plaintiff to a third party under s 199 of the Property Law Act 1974 (Qld) – whether the agreement between the plaintiff and the third party constituted an “absolute assignment”, not by way of charge only, of the debt owed under the share sale agreement – where the relevant agreement provided that upon the occurrence of an Event of Default, the third party “Chargee” could exercise an option to be paid amounts due to the plaintiff “Chargor”, including debt owed under the share sale agreement – where the better construction of the agreement was that until an Event of Default, there was a charge and that it did not effect an absolute assignment – not irrelevant that the document referred to the parties as “Chargor” and “Chargee” throughout – where other documents were admissible as an aid to the construction of the third party agreement PERSONAL PROPERTY – ALIENATION OF PERSONAL PROPERTY – ASSIGNMENT OF CHOSES IN ACTION BY STATUTE – NOTICE – whether notice was given according to s 199(1) of the Property Law Act 1974 (Qld) – defendants argued that notice was given to the debtor by either an email sent by a third party including an attachment of a letter from the purported assignee’s solicitors, by disclosure of the subject agreement during the proceedings, or by a combination of these two events – the email was not sent by or on behalf of either the plaintiff or the purported assignee but was received by the debtor – notice of an assignment must be an express notice – where giving the debtor information indicating that there had been an assignment was not an unambiguous and reliable communication to the debtor that the debt is payable to a third party INTERPRETATION – ADMISSIBILITY OF EXTRINSIC EVIDENCE IN RELATION TO INSTRUMENTS – MATTERS PARTICULARLY RELATING TO CONTRACT – IN GENERAL – OTHER CASES – whether the plaintiff could rely on contemporaneous documents signed by the plaintiff and third party as part of the same transaction to assist in construction of the subject agreement – where the defendant argued contemporaneous documents should not assist in construction because, in order to take them into account, the plaintiff was obliged to adduced evidence of the entirety of the surrounding circumstances – where the documents were admissible as an aid to the construction of the third party agreement – documents are not rendered inadmissible because not every relevant fact or circumstance is also proved Property Law Act 1974 (Qld), s 199 Peter Young, Clyde Croft and Megan Smith, On Equity (Lawbook, 2009) Anning v Anning (1907) 4 CLR 1049, considered Austino Wentworthville Pty Ltd v Metroland Australia Ltd [2013] NSWCA 59; (2013) 93 ACSR 297, considered Burlinson v Hall (1884) 12 QBD 347, cited Clyne v Deputy Commissioner of Taxation (Cth) (1981) 150 CLR 1, considered Cody v JH Nelson Pty Ltd (1947) 74 CLR 629 Comfort v Betts [1891] 1 QB 737, cited Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724, cited Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423, considered Cossill v Strangman [1963] NSWR 1695, cited Deposit Protection Board v Dalia [1994] 2 AC 367, cited Durham Bros v Robertson [1898] 1 QB 765, considered Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, applied Herkules Piling Ltd & Anor v Tilbury Construction Ltd (1992) 61 BLR 111, considered James Talcott Ltd v John Lewis & Co Ltd [1940] 3 All ER 592, considered Mango Boulevard Pty Ltd Mio Art Pty Ltd [2013] QCA 271, cited Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 2) [2012] QSC 348, discussed Ramsey v Hartley [1977] 1 WLR 686, cited Re Carpas; Ex parte White [1931] QWN 43, cited Teal Investments Ltd v Higham Motors (1975) Ltd [1982] 2 NZLR 123, considered Walter & Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584, cited Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81, cited |
COUNSEL: | F M Douglas QC, with D Keane for the plaintiff D Kelly QC, with M Hodge for the first and fourth defendants The second defendant appeared on her own behalf No appearance for the third defendant |
SOLICITORS: | Delta Law for the plaintiff Carter Newell for the first and fourth defendants The second defendant appeared on her own behalf No appearance for the third defendant |
- This is another judgment in the course of the long running litigation between parties to a joint venture for the development of land north of Brisbane. The land is owned by a company in which the shares were originally held by Mr Spencer and Ms Perovich (the second defendant). Mr Spencer says that he held these shares as a trustee. The plaintiff company (which he controls) sues as the current trustee of that trust.
- In 2003, Mr Spencer and Ms Perovich made a written agreement with the first defendant for the sale of 50 per cent of their shares (which I will call the SSA). The first defendant was and is a subsidiary of the fourth defendant which guaranteed the first defendant’s performance of the SSA.
- The SSA provided that the purchase price of the shares was to be calculated as the greater of two amounts, less certain specified deductions. One of those amounts was $5 million. The other was an amount to be calculated by reference to the value of the joint venture land at a subsequent date. Therefore, the price was to be at least $5 million less those agreed deductions.
- It was agreed that the purchase price for the shares would be paid by one or perhaps two payments. By cl 5.1(a), the (minimum) price of $5 million less those deductions was to be paid on a certain date. By cl 5.1(b), it was agreed that the “amount by which the price calculated [by the process of valuation] exceeds $5 million (if any)” was to be paid on another date.
- There was a process of valuation agreed within the SSA, culminating in an arbitration to determine that value. In an earlier judgment, the court held that there was to be a value fixed through a mediation or failing that, by an arbitrator.[1] An arbitration is now in progress. According to the outcome of that arbitration, a payment may have to be made under cl 5.1(b).
- The present questions concern the plaintiff’s claim to be paid an amount under cl 5.1(a). The parties asked the court to determine certain questions in relation to that claim in advance of others, under r 483 of the Uniform Civil Procedure Rules. Those questions concern the standing of the plaintiff to claim a payment under cl 5.1(a).
- The first and fourth defendants (which I will call the defendants) say that this debt has been assigned at law to a third party under a document made in November 2007. The fact of the document and that it then bound the plaintiff is admitted. But the plaintiff denies that it resulted in any legal assignment of the debt and argues that in any case, it is at least the equitable owner of the debt and has sufficient standing to sue for it. The third party to which the defendants say the debt was assigned is a company which is now deregistered.
- The defendants argue that the debt claimed by the plaintiff was assigned at law pursuant to s 199 of the Property Law Act 1974 (Qld) which relevantly provides as follows:
“199Statutory assignments of things in action
(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice -
(a)the legal right to such debt or thing in action; and
(b)all legal and other remedies for the same; and
(c)the power to give a good discharge for the same without the concurrence of the assignor.”
- The defendants say that the assignment was made by an agreement between the plaintiff and a company called Standard Builders Pty Ltd dated 23 November 2007, entitled “Security Over Shares And Rights”. The first question is whether, upon the proper construction of this document, there was, in terms of s 199(1), an “absolute assignment … not purporting to be by way of charge only” of the chose in action under cl 5.1(a) of the SSA. To discuss that question requires a number of provisions of the document to be set out here. But first I should note that there was a mistake in the identification of the parties at the beginning of the document. Under the heading “Parties”, Standard Builders Pty Ltd was described as the “Chargor” and the plaintiff was described as the “Chargee”. It is common ground here that the document should be construed by reading “the Chargor” as the plaintiff and “the Chargee” as the other party.
- The document relevantly contained these provisions:
“A.The Chargor has agreed to mortgage and charge to the Chargee all the Secured Assets to secure financial accommodation now or in the future to be provided to or at the request of the Chargor.
…
2.1Mortgage of Secured Assets
The Chargor transfers, mortgages and assigns by way of security to the Chargee Secured Assets to be held by the Chargee absolutely, but subject to the provisions for redemption contained in clause 2.2.
2.2Redemption
If the Chargor pays or causes to be paid to the Chargee the Secured Money and if the Chargor otherwise performs and observes the covenants, conditions and agreements on its part contained in this document and the Transaction Documents then the Chargee shall at the request and cost of the Chargor execute a release of the Secured Assets from this document and where applicable re-deliver to the Chargor any share or unit certificates and the transfers thereof delivered pursuant to this document or if the Secured Assets have been transferred and registered in the name of the Chargee, the Chargee shall execute and deliver a re-transfer to the Chargor as the Chargor shall direct.
2.3Deposit of Certificates
The Chargor shall deposit with the charge any share of [sic] unit certificates relating to the Secured Assets and the Chargee shall be entitled to retain possession of those certificates until all Secured Money has been paid or repaid.
2.4Dividend/Voting Rights
Until the occurrence of an Event of Default all dividends, distributions and other moneys in respect of the Secured Assets shall be received by the Chargor and the Chargee shall not exercise any voting power in respect of the Secured Assets at any meeting but upon the occurrence of an Event of Default the provisions of this clause shall cease to have further effect and, at the option of the Chargee, all dividends and other moneys payable in respect of the Secured Assets will be receivable by the Chargee and all voting rights associated with the Secured Assets shall be enjoyed and be exercisable by the Chargee alone without any interference by the Chargor.
2.5Charge
Until such time as the assignment referred to in clause 2.1 is perfected the Chargor hereby charges the Secured Assets to the Chargee for payment of the Secured Money. The Chargor does this as beneficial owner except for those Secured Assets which the Chargor owns as trustee of a trust, in which case the Chargor does this as sole trustee of the relevant trust.
…
- CHARGOR’S COVENANTS
During the continuance of this security (and where appropriate from time to time) the Chargor must comply with the following provisions.
(a)Payment of Secured Money
Pay to the Chargee the Secured Money on the date agreed between the parties and failing agreement on demand without set off or counterclaim.
(b)Taxes
Pay on their due date any rates, taxes, charges, outgoings, and assessments in respect of the Secured Assets and produce evidence of payment on demand by the Chargee.
(c)Dealings with Secured Assets
Not sell, assign, let, part with possession, mortgage, charge, encumber, or otherwise dispose of or deal with the Secured Assets despite any power implied by statute or otherwise without the Chargee’s prior written consent. Unless an Event of Default occurs, the Chargor may retain possession of the Secured Assets and may use, operate, maintain, and control the Secured Assets in the ordinary course of its business.
(d)Maintain the Secured Assets
Maintain the Chargor’s rights to and under the Secured Assets. The Chargor must not cause or permit anything to be done by which any part of the Secured Assets may be rendered void, voidable, unenforceable, or of limited or reduced force, effect, or value.
…
(f)Further Assurance
The Chargor shall, if required to do so by the Chargee, at the Chargor’s own cost, execute and do all such assurances, transfers or acts for effectually vesting the Secured Assets in the Chargee and, upon the occurrence of an Event of Default, for enabling the Chargee to receive any sums of money which become due or receivable in respect of the Secured Assets. Without limiting or foregoing the Chargor shall promptly notify the Chargee in writing if the Chargor becomes entitled to any Benefits in relation to the Secured Assets and the Chargee may in its absolute discretion (without being obliged to do so) accept the transfer or allotment of any Benefits and make or pay all calls or other moneys as is payable in respect thereof (which money will immediately form part of the Secured Money) and if required by the Chargee, the Chargor shall cause any such Benefits to be transferred, received, paid or allotted to the Chargee.
…
- RIGHTS ON DEFAULT
8.1Despite any other provision of this document, at any time after an Event of Default occurs how and when the Chargee in its absolute discretion decides, the Chargee may sign anything and do anything the Chargee considers appropriate to recover the Secured Money and deal with the Secured Assets. The Chargee may do this with or without taking possession of the Secured Assets, whether or not in conjunction with other property, despite any omission, neglect, delay, and without liability for loss or need to account as mortgagee or charge [sic] in possession. Without limitation, the Chargee may do any one or more of the following:
…
(b)Exercise any right, power or privilege conferred by law, equity, this document, or any of the Transaction Documents.
…
(g)Appoint in writing any person or any two or more persons jointly and/or severally to be a Receiver or agent of the Chargee of the whole or any part of the Secured Assets whether or not a Receiver has previously been appointed.
…
- DEFINITIONS AND INTERPRETATION
14.1Definitions
…
Debt means all money (and where the context permits or requires any part of that money) which Mango Boulevard at any time and from time to time is or becomes liable to pay to the Chargor under or arising from the Share Sale Agreement;
…
Secured Assets means:
(a)all Marketable Securities owned or held by the Chargor from time to time (whether beneficially or not) in Kinsella Heights Developments Pty Limited ACN [sic] 100 373 368;
(b)all Benefits accruing in respect of any of the above and any Marketable Securities issued in lieu of any of the above and the evidence of title in relation to any of the above;
(c)all present and future rights, title, estate and interest of the Chargor in or arising from all or any of the following:
(i)the Debt;
(ii)the Share Sale Agreement;
(iii)the Put and Call Option;
(iv)the BMD Guarantee;
(v)the Consultancy Services Agreement;
(vi)the Shareholders Deed;
(vii)the Corporate Guarantees; and
(viii)any other document or transaction ancillary or collateral to any of the foregoing or which is contemplated by any of the foregoing.
Share Sale Agreement means the Share Sale Agreement dated 4 July 2003 between Richard William Spencer as Trustee for the Spencer Family Trust (as ‘Spencer’), Silvana Perovich (as ‘Perovich’) and Mango Boulevard (as ‘Mango Boulevard’);”
- The defendants’ argument focuses upon cl 2.1 of the document, which, it says, effected an absolute assignment and not one by way of charge only. But the plaintiff’s argument is that cl 2.1 must be read with other provisions of the document, because it is the effect of the document as a whole which must be determined.
- The meaning of “absolute assignment” in this context was discussed by Barrett JA (with whom Beazley P and Meagher JA agreed) in Austino Wentworthville Pty Ltd v Metroland Australia Ltd.[2] Barrett JA there discussed several judgments, including the observation of Mason J in Clyne v Deputy Commissioner of Taxation (Cth)[3] that an “absolute assignment” in this context “signifies one which is unconditional” embracing “an assignment notwithstanding that the document effecting the assignment provides or implies the need for re-assignment or re-conveyance on the happening of a future event, e.g. the repayment of a loan for which the assignment is being held as a security”. Mason J there noted that in Durham Bros v Robertson,[4] Chitty LJ had said that an unconditional assignment of a debt by way of mortgage to secure repayment of a loan would be an absolute assignment, although it was subject to an equity of redemption.[5]
- Barrett JA summarised the relevant principles emerging from the cases as follows:[6]
“(1)An ‘absolute’ assignment is one that is unconditional and does not attempt to affect part only of the chose in action.
(2)The fact that an assignment otherwise absolute is accompanied by an express proviso for redemption, an implied right of redemption or the creation of a trust in respect of future proceeds does not deprive it of its absolute character.
(3)An assignment by way of charge is one the effect of which is to give a right of payment out of the subject matter assigned without outright transfer of that subject matter. Such an assignment occurs when, for example, there is a transfer of a right to be paid out of a particular fund or of so much of a debt as is sufficient to satisfy a future indebtedness.
(4)The character of the assignment must be ascertained from the terms and effect of the instrument, according to the construction of it as a whole.”
- In several cases it has been said that an assignment of part of a debt cannot be an absolute assignment within the meaning of this provision or its equivalents in other jurisdictions.[7] I will return to the arguments for the plaintiff that only part (if at all) of a chose in action was assigned under this document.
- The defendants argue that this was an absolute assignment although by way of mortgage to secure repayment of a loan, as described by Chitty LJ in Durham. The assignment was according to cl 2.1 and the equity of redemption was provided by cl 2.2. The assignment was unconditional and therefore, they argue, absolute.
- The plaintiff argues that the document as a whole did not provide for an absolute assignment but instead provided for a mere charge over the subject chose in action. To the extent that it provided for an assignment, that was conditional upon the happening of a future event, namely some default by the plaintiff.
- Clause 2.4 distinguished between the position between the parties prior to and after the occurrence of an Event of Default. It provided that until such an event, “all dividends, distributions and other moneys in respect of the Secured Assets shall be received by the Chargor”. Upon the occurrence of an Event of Default, at the option of the Chargee, “all dividends and other moneys payable in respect of the Secured Assets will be receivable by the Chargee …”.
- The Secured Assets were defined to include:
“(c)all present and future rights, title, estate and interest of the Chargor in or arising from all or any of the following:
(i)the Debt;
(ii)the Share Sale Agreement;
…”
The Debt was defined to mean “all money … which Mango Boulevard at any time and from time to time is or becomes liable to pay to the Chargor under or arising from the Share Sale Agreement”.
- At least if read alone, the expression “moneys payable in respect of the Secured Assets” would include a payment of all or part of an amount under cl 5.1(a) of the SSA. If that is how this expression is to be interpreted within cl 2.4, then until an event of default, the plaintiff rather than the Chargee was to be paid an amount under cl 5.1(a) of the SSA and that position would be irreconcilable with an assignment at law of the chose in action constituted by a debt owing under cl 5.1(a). An assignment of part of a debt cannot be an absolute assignment. Where there is a legal assignment, the assignor cannot give a good discharge because that can be given only by the statutory assignee, acquiring as it does the exclusive rights in the debt assigned.[8]
- In Young, Croft and Smith On Equity, it is said that:
“The absolute character of the assignment would not be lost if, when received, the assignee covenants either to pay part of the proceeds of the chose in action to the assignor, or to hold all or part of the proceeds in trust for the assignor”.[9]
But that was not the effect of cl 2.4 of this document. It did not provide for the Chargee to receive moneys in respect of the Secured Assets prior to the occurrence of an Event of Default, but to then hold them or distribute them in a certain way. Rather, it provided that until such an event, the moneys are to be received by the Chargor.
- The defendants argue that the expression “other moneys in respect of the Secured Assets” is confined by the words which precede it, namely “all dividends, distributions and …”. They submit that the general words “other moneys in respect of the Secured Assets” should be interpreted in a way which confines them to things of the same kind as “dividends” and “distributions”.[10] They argue that a payment under cl 5.1(a) would be a payment of moneys of a different kind from dividends or distributions, because it would be a payment “for the acquisition of an asset” and thereby “a capital payment”. But the word “distribution” can apply to a distribution of capital as well as a payment or distribution of something in the nature of income. It is far from clear that there is a kind of payment which is described by the words “dividends” and “distributions” and which would exclude a payment under cl 5.1(a). In addition, having regard to the content of the Secured Assets (as defined), the defendants’ interpretation of the expression “other moneys in respect of the Secured Assets” would seem to give that expression no effective operation.
- Again, the meaning of cl 2.4 must be considered in the context of the document as a whole. But cl 2.1 does not indicate the correctness of the defendants’ interpretation of cl 2.4. To take the example of Secured Assets constituted by the shares in Kinsella Heights Developments Pty Limited, the terms of cl 2.4 are inconsistent with the shareholder being the Chargee, so that the tension between cl 2.1 and cl 2.4 would still exist.
- Clause 2.3 required the Chargor to deposit any share certificate relating to the Secured Assets, rather than to transfer any such share to the Chargee. That is inconsistent with the notion that cl 2.1 effected an assignment of the Secured Assets. Of course, the chose in action under cl 5.1(a) of the SSA is a different thing. But there was no indication within cl 2.1 that some but not all property was to be transferred or assigned absolutely.
- Clause 3(f) also distinguished between the times before and after an Event of Default. Upon the occurrence of such an event, the Chargor, if required to do so by the Chargee, was to “execute and do all such assurances, transfers or acts for effectually vesting the Secured Assets in the Chargee … for enabling the Chargee to receive any sums of money which become due or receivable in respect of the Secured Assets”. This corresponds with the provision in cl 2.4 that until the occurrence of an Event of Default any moneys in respect of the Secured Assets were to be received by the Chargor.
- Clause 2.2 is not inconsistent with the plaintiff’s argument. It did not provide only for a re-transfer of the Secured Assets. Rather, it provided for a “release” of the Secured Assets and, where those assets had been transferred, a re-transfer.
- Clause 2.5 provided that until the assignment referred to in cl 2.1 was perfected, the Secured Assets would be charged to the Chargee. Although this clause is relied upon by the plaintiff, it is more favourable to the defendants’ argument because, of itself, it suggests that there was to be a charge of the Secured Assets only pending the completion of further steps which may be required to legally transfer some of the Secured Assets.
- Clause 3(c) supports the plaintiff’s argument. An agreement by the Chargor not to assign the Secured Assets is inconsistent with the Secured Assets having been assigned by the operation of cl 2.1.
- The strongest argument for the defendants comes from the terms of cl 2.1. It provided for the transfer, mortgage or assignment by way of security of the Secured Assets, rather than using the verb “charges”. As to the verb “mortgages” in cl 2.1, the plaintiff’s argument points out that as Cooke J (as he then was) said in Teal Investments Ltd v Higham Motors (1975) Ltd,[11] “a mortgage of personalty may be carried out in various ways, including a complete transfer of the legal title or a mere charge”. Nevertheless, the plaintiff’s argument has to address the verbs “transfers” and “assigns”.
- Ultimately, there is no clear and rational means for reconciling the terms of cl 2.1 with other provisions of the document to which I have referred, most importantly clauses 2.4 and 3(f). The defendants’ argument as to cl 2.4 would still leave an inconsistency between that clause and cl 2.1, as I have explained.[12] The meaning of “other moneys in respect of the Secured Assets” should not be confined, the defendants argue, because the preceding words do not so clearly define a kind of payment which would exclude a payment under cl 5.1(a) and because that interpretation would give no effective operation to the expression.
- In my conclusion, the better construction of this document is that until an Event of Default, it operated as a charge. It is not irrelevant to that conclusion that the document consistently referred to the parties as Chargor and Chargee.
- In my conclusion, this document, described as Security over Shares and Rights, upon its proper construction did not effect an absolute assignment (and not by way of charge only) of any debt payable to the plaintiff under cl 5.1(a) of the SSA. That would be my conclusion irrespective of the plaintiff’s further submission that such a construction of the document was supported by contemporaneous documents signed by the plaintiff and Standard Builders Pty Ltd as part of the same transaction. One of those other documents was a so-called Deed of Assignment, also dated 23 November 2007, by which the plaintiff as “the Assignor” assigned to Standard Builders Pty Ltd as “the Assignee” the property described as “that part of the Assignor’s right title and interest under the Share Sale Agreement to receive the balance share price payable under cl 5.1(b) thereof which is sufficient and necessary to discharge the Assignor’s obligations under the Loan Agreement”. The other document was the so-called Bill of Sale, of the same date, by which the plaintiff agreed “to assign the right to receive up to $1,000,000 of the share sale price under the Share Sale Agreement plus a premium to be determined upon the calculation of the proceeds due under cl 5.1(b) of the Share Sale Agreement” to Standard Builders Pty Ltd, in order to secure the plaintiff’s obligations as borrower under a loan of $1 million. The plaintiff’s argument is that these other instruments would have been unnecessary if the subject document had effected a legal assignment of any chose in action constituted by a debt payable under the SSA. It submits that if instead the subject document merely created a floating charge, these other documents had an explicable purpose. The construction of a commercial contract requires the court’s consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract, as the plurality said in Electricity Generation Corporation v Woodside Energy Ltd.[13] I would accept that these other documents are admissible as an aid to the construction of the subject document and that they support the plaintiff’s argument.
- The defendants argue that these other documents should not be considered, because if the plaintiff wanted the court to consider evidence of the surrounding circumstances to assist in the construction of the subject document, the plaintiff should have adduced evidence of the entirety of the surrounding circumstances. That submission is unpersuasive. If the surrounding circumstances known or assumed by the parties is relevant, evidence of such circumstance is not rendered inadmissible because every potentially relevant fact or circumstance is not also proved.
- A further question is whether notice of the alleged assignment was given according to s 199(1). The defendants argue that notice was given to the first defendant in one of three ways, the first being an email of 12 February 2009 to which there was attached a letter from Lillas & Loel, a firm of solicitors retained by Standard Builders Pty Ltd. In that letter, the solicitors advised their client that:
“By virtue of the suite of documents signed by [the plaintiff] in November 2007 in your favour … [the plaintiff’s] rights under the Share Sale Agreement … have both been assigned to and mortgaged in favour of you.”
The second way was by the disclosure by the plaintiff of the subject document in this proceeding last September. The third was said to be by a combination of these two events.
- For the plaintiff it was submitted that a notice under s 199(1) must be given by or on behalf of the assignee. For that submission, the plaintiff cited Herkules Piling Ltd & Anor v Tilbury Construction Ltd,[14] a judgment of Hirst J in the Commercial Court of the Queen’s Bench Division. In that case, an argument that the disclosure of a written agreement under which a claimant’s assets had been purchased constituted notice, was rejected. Hirst J said that the apparent argument was that if a debtor “merely learned by any credible means that the money does not or may not belong to the assignor but to the assignee”, the debtor must pay the assignee, an argument which he said was unsupported by authority and which was wrong.[15] He said:[16]
“Did discovery of the APA constitute notice?
Mr Wilmot-Smith submits that it did constitute such notice. I am unable to accept this submission. As was stated by Parker LJ, giving the judgment of the Court of Appeal in Walter & Sullivan v Murphy [1955] 2 QB 584 at page 588, the whole object of the notice to the debtor is to protect the assignee, since after receipt of that notice the debtor pays the assignor at his peril. It follows that, in my judgment, to constitute valid notice, there must be some kind of formal notification by the assignee, or possibly by the assignor on his behalf, to the debtor in order to achieve the object described in the Walter & Sullivan case. This view is also consistent with the decision of the Court of Appeal in Talcott v John Lewis & Co Ltd [1940] 3 All ER 592, where it was held that a notice stamped by a creditor on his invoice stating that the invoice should be transferred and payment made to the assignee, was ineffective, both because it was insufficiently plain in its wording, and because it was not a notice sent by the assignee to the debtor (per MacKinnon LJ at page 595F, with whom Du Parcq LJ agreed). The mere receipt by a debtor of a document on discovery does not meet these criteria.”
However, the judgment of MacKinnon LJ in Talcott,[17] upon which Hirst J relied, may not support the proposition that a notice in this context must be sent by the assignee. The question in Talcott was whether a statement upon a supplier’s invoices that the invoice had been transferred to the appellant company and that payment should be made to it was a sufficiently plain statement to the debtor of an assignment. The invoices with that statement upon them were held to be insufficiently plain to constitute notice of an assignment. It was in construing the invoices that MacKinnon LJ said that it was relevant that the invoices had been sent by the assignor and not by the appellants. He said that:
“If it was sent direct by the [appellants] to the first [respondents], the mere fact that it emanated from them would go some little way to indicate that they were doing so pursuant to a right of theirs.”[18]
It is that statement upon which Hirst J relied in Herkules Piling in the passage which I have set out above. MacKinnon LJ added that the appellant could have given a correct notice or insisted that the assignor “in clear terms give that intimation” instead of the words upon the invoices being “couched in this extremely vague and obscure language”.[19] In the same case, Goddard LJ dissented, holding that the notice was sufficiently plain. But as to the relevance of the notice being given by the assignor in that case, Goddard LJ said:[20]
“Notice may be given by the assignor or by the assignee. For myself, I think that the fact that the notice is given by the assignor may strengthen the position, as far as the debtor is concerned, in this way. I should not draw any inference which is adverse by reason of the fact that it is given by the assignor, because, if the debtor gets a notice from B telling him to pay B the money he owes to A, he will naturally want to know if he is safe in doing so, and he will apply to A, the assignor. If he gets a notice from the assignor, then, of course, he can safely pay, because he will be paying in accordance with the directions of his creditor.”
- In Anning v Anning,[21] Griffith CJ said of the then equivalent of s 199(1) that:
“The section does not say by whom the notice is to be given, but it is, I think, clear that it may be given either by the assignor or the assignee.”
To the same effect was a statement by Walsh J, sitting in the Supreme Court of New South Wales, in Cossill v Strangman.[22] These cases and others are cited for this proposition in Young, Croft, Smith On Equity at [10.150].
- The email attaching the letter from Lillas & Loel was not sent by or on behalf of either the plaintiff or Standard Builders Pty Ltd. It was sent by a third party who, by some means having come into possession of the solicitors’ letter, thought that it would be of interest to the first defendant’s Mr Thomson to whom the email was sent. I would accept that that was relevantly received by the first defendant, Mr Thomson being one of its directors.
- By this communication, Mr Thomson was given information indicating that there had been an assignment. But it is another thing to say that it was an unambiguous and reliable communication to the debtor to the effect that only a payment to Standard Builders would constitute a payment or part payment of the debt. The same question arose in respect of the communication of the subject document by its disclosure in this proceeding.
- The authorities emphasise the requirement that the notice of the assignment be an express notice. In Consolidated Trust Co Ltd v Naylor,[23] Dixon and Evatt JJ said:[24]
“The object of the requirement made by the words ‘of which express notice in writing shall have been given’ is, we think, correctly stated in Warren’s Choses in Action (1899), at pp. 177, 178. ‘The term “express notice” is doubtless employed by way of opposition to notice arising by implication or operation of law, and to what was known in equity as constructive notice. It means a notice which indicates an express intention - a direct and definite statement of a thing, as distinguished from supplying materials from which the existence of such a thing may be inferred.’ The purpose is to make essential actual notice that the debt has been assigned. ‘One of the objects of the giving of notice to the debtor is that he shall “know with certainty” in whom the legal right to sue him is vested’ (McIntosh v Shashoua (1931) 46 CLR 494 at p 515, per Evatt J).”
- Mr Thompson received an email with an attachment. It could hardly be thought that the email itself constituted an effective notice. It was from an unrelated party, a Mr Lancini. His email did nothing but forward to Mr Thompson some other emails. There was an email to Mr Lancini from a Mr Campbell of 11 February 2009, in which Mr Campbell wrote simply that “Mark has asked me to forward this to you he will call you after lunch”. “Mark” is not identified. There was also an email to Mr Campbell from Mr Loel, a solicitor, on the subject “Mio Art” which said simply “See attached letter”.
- The attachment was a letter from Lillas & Loel of 11 February 2009, addressed to Standard Builders Pty Ltd and headed “Strictly Private and Confidential”. The letter advised as to possible interpretations of the SSA. It concluded with the advice which I have set out earlier. On no view was this letter, when written, a notice under s 199. It was a letter of advice to the alleged assignee from its solicitors. The alleged assignee’s solicitor sent it to Mr Campbell but not by way of a notice of assignment. Mr Campbell was unconnected with the defendants. Similarly, Mr Lancini did not receive it as a notice for he was unconnected with the defendants. What Mr Thompson received came from neither of the parties to the alleged assignment. It could not be said that the email to him, containing those other emails and the attachment, served the purpose of the defendants “knowing with certainty” in whom the legal right to sue them was vested. The express notice in writing of an assignment is an essential element in the vesting of title in the assignee: J G Starke, Assignments of Choses in Action in Australia (Butterworths, 1972) at [63] and the cases there cited at N38. It could not be thought that this alleged assignment was effected by information about it reaching the defendants in such an indirect way.
- The disclosure of those emails and the attachment, as part of the plaintiff’s disclosure in the proceedings cannot be characterised as a notice of assignment. It was simply the provision of information indicating the possibility that the chose in action had been assigned. It was not “a direct and definite statement” of the fact of an assignment. It could not have been understood in that way in the context of this proceeding in which the alleged assignor sues for the debt: it could hardly have been understood as intended to serve the purpose of directing the defendants to instead pay the debt to another party. It is even more difficult to characterise this as such a notice in the circumstance that, by this time, Standard Builders Pty Ltd was a deregistered company and thereby had no corporate existence.
- In my conclusion, if there was an absolute assignment effected by the document of 23 November 2007, no notice, as required by s 199(1), has been given so that the title to the debt remains with the plaintiff.
- This makes it unnecessary to consider the other arguments but some comments should be made about them. It was argued for the plaintiff that the subject document could have assigned only part of the debt under cl 5.1(a) of the SSA because Mr Spencer and Ms Perovich had made “partial assignments” of the entitlement under cl 5.1(a) to certain third parties. One of those third parties was a company called Traditional Values Management Ltd. In another proceeding, the present first defendant paid an amount into court in part payment of what was owed under cl 5.1(a) of the SSA. That sum was ordered to be paid out to Traditional Values Management Ltd. It is argued that only part of a debt could have been assigned by the document of 23 November 2007, because another part had been assigned to that company. Three comments about that argument should be made. The first is that the relevant chose in action was the thing to which the plaintiff was entitled as against the first defendant as at 23 November 2007. It was what remained of the cl 5.1(a) debt after an earlier payment or payments. The fact that the debt had been reduced by those earlier payments did not mean that only part of a chose in action remained. Secondly, the payment out of court to Traditional Values Management Ltd does not itself prove any purported assignment of part of the plaintiff’s chose in action. It was equally consistent with the plaintiff retaining the legal ownership of the chose in action and in effect, directing that a part payment of its debt be made to a third party, which is a different thing from an assignment. Thirdly, the argument appears to be based upon a contradiction, which is that although part of a debt cannot be legally assigned, the result of the transactions with these third parties was that part of the chose had been thereby assigned.
- It was also argued that this standing question must be resolved in favour of the plaintiff because the agreements between the plaintiff and Standard Builders, it was said, had been terminated. The plaintiff pleads that it terminated the relevant agreements upon the basis of a repudiation by Standard Builders, constituted by an alleged failure by that company to respond to the plaintiff’s letters of 2008 and 2010 to it. The plaintiff pleads that it accepted that repudiation on 1 March 2011 by its letter to Standard Builders. By that letter, it called upon Standard Builders to return the security documents and to “take all necessary steps to countermand any status that you have ascribed to them either directly or indirectly”. I should note that I am not persuaded to find that the agreements were terminated as the plaintiff alleges. I do accept that the letter, a copy of which appears at pages 6 and 7 and exhibits to an affidavit by Mr Vicca filed 18 December 2014 was sent to Standard Builders. But the basis for such a termination is far from proved.
Conclusion
- The defendants’ challenge to the standing of the plaintiff fails. What should be the final order to give effect to that conclusion? The order made under r 483(1) was for the determination of the question or questions within the plaintiff’s Claim in para 9A of the relief claimed in the Statement of Claim, apart from the questions raised by paras 29U(c), (d) and (e) of the current Defence. Paragraph 9A claims:
“In respect of the first tranche payment due by the First Defendant pursuant to cl 5.1(a) of the SSA, the Plaintiff claims half the short fall sum of $1,205,458, being $602,729.”
- In paras 29U(c), (d) and (e) of the Defence, the defendants plead an entitlement to set-off the amounts of certain costs orders. The last of those subparagraphs pleads a right of set off against any sum to be paid to the second or third defendants. The appropriate relief is to make a declaration but which preserves the set off arguments against the plaintiff.
- It will be declared that, subject to any right to set-off any sum as pleaded in paras 29U(c) and (d) of the Sixth Further Amended Defence of the first and fourth defendants, the plaintiff is entitled to payment by the first defendant, pursuant to cl 5.1(a) of the SSA made between them and dated 4 July 2003, of the sum of $602,729.
- The relief claimed in para 9A does not extend to the fourth defendant, which may be an oversight. I will hear the parties as to whether, consistently with this judgment and the declaration to be made against the first defendant, a like declaration should be made against the fourth defendant.
Footnotes
[1] Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 2) [2012] QSC 348, affd Mango Boulevard Pty Ltd Mio Art Pty Ltd [2013] QCA 271.
[2] [2013] NSWCA 59; (2013) 93 ACSR 297.
[3] (1981) 150 CLR 1, 20.
[4] [1898] 1 QB 765, 772.
[5] Ibid.
[6] [2013] NSWCA 59, 19 [62]; (2013) 93 ACSR 297, 307 [62].
[7] See eg, the cases cited for this proposition in Peter Young, Clyde Croft and Megan Smith, On Equity (Lawbook, 2009) [10.120] being Re Carpas; Ex parte White [1931] QWN 43; Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81; Walter & Sullivan Ltd v J Murphy & Sons Ltd [1955] 2 QB 584 and Deposit Protection Board v Dalia [1994] 2 AC 367.
[8] Deposit Protection Board v Dalia [1994] 2 AC 367, 380-381 (Simon Brown LJ).
[9] Peter Young, Clyde Croft and Megan Smith, On Equity (Lawbook, 2009), citing Burlinson v Hall (1884) 12 QBD 347; Comfort v Betts [1891] 1 QB 737 and Ramsey v Hartley [1977] 1 WLR 686.
[10] Citing Cody v JH Nelson Pty Ltd (1947) 74 CLR 629, 639 and referring to Kim Lewinson and David Hughes, The Interpretation of Contracts in Australia, (Lawbook Co, 2012) [7.12].
[11] [1982] 2 NZLR 123, 126, cited in Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724, 732.
[12] At para [22].
[13] (2014) 251 CLR 640, 656-657 [35].
[14] (1992) 61 BLR 111.
[15] Ibid 119.
[16] Ibid 118-119.
[17] James Talcott Ltd v John Lewis & Co Ltd [1940] 3 All ER 592.
[18] Ibid 595.
[19] Ibid 595-596.
[20] Ibid 597.
[21] (1907) 4 CLR 1049, 1059.
[22] [1963] NSWR 1695, 1698.
[23] (1936) 55 CLR 423.
[24] Ibid 438-439.