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  4. Reel Action Sports Fishing Pty Ltd v Marine Engineering Consultants Pty Ltd (in liq) - [2022] QSC 271

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Reel Action Sports Fishing Pty Ltd v Marine Engineering Consultants Pty Ltd (in liq)[2022] QSC 271

Reported at (2022) 13 QR 297

Reel Action Sports Fishing Pty Ltd v Marine Engineering Consultants Pty Ltd (in liq)[2022] QSC 271

Reported at (2022) 13 QR 297

SUPREME COURT OF QUEENSLAND

CITATION:

Reel Action Sports Fishing Pty Ltd (ACN 092 732 888) v Marine Engineering Consultants Pty Ltd (in Liq) & Anor [2022] QSC 271

PARTIES:

REEL ACTION SPORTS FISHING PTY LTD ACN 092 732 888

(plaintiff)

v

MARINE ENGINEERING CONSULTANTS PTY LTD (In Liquidation)

(first defendant)

CHRISTOPHER JOHN BASKERVILLE

(second defendant)

FILE NO/S:

BS 1377/21

DIVISION:

Trial Division

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

13 December 2022

DELIVERED AT:

Brisbane

HEARING DATE:

11, 12 August 2022 and 5 September 2022.

JUDGES:

Brown J

ORDER:

The Orders of the Court are:

  1. The plaintiff has leave to proceed against the second defendant;
  2. A declaration that the plaintiff was until 15 September 2021 the owner of the Vessel;
  3. A declaration that the plaintiff had until 15 September 2021 the right to immediate possession of the Vessel;
  4. A declaration that no interest in the Vessel or its sales proceeds has vested in the first defendant pursuant to s 267 of the PPSA;
  5. The defendants are liable to pay damages for conversion to the plaintiff in the amount of $20,000 being the difference of the value of the boat of $550,00 at the date of conversion less the price for the sale of the Vessel in September 2021;
  6. The parties are directed to provide orders for the payment of monies maintained in trust accounts of the plaintiff’s solicitors and defendants’ solicitors after the sale of the Vessel, damages for conversion or otherwise to give effect to the declarations made, in accordance with these reasons and as to interest by 2pm on 16 December 2022;
  7. The parties are to provide submissions in relation to orders of costs by email to the Associate for Brown J by 4pm on 20 December 2022.

CATCHWORDS:

CORPORATIONS — INSOLVENCY — WINDING UP — SECURITY INTEREST – where the plaintiff entered into a contract with the first defendant for the construction of a Vessel – where a dispute arose between the parties and the parties subsequently entered into a deed of settlement and guarantee – where the Vessel was incomplete at the time of the first defendant’s winding up – where the Vessel was subsequently sold to a third party – whether the plaintiff or first defendant is entitled to the proceeds of sale – where there are competing security interests – whether the plaintiff has any interest in the Vessel on the proper construction of the deed of settlement and guarantee – whether the plaintiff’s interest in the Vessel is a security interest within the meaning of s 12(1) of the Personal Property Securities Act 2009 (Cth) – whether registration was effective – whether plaintiff’s security interest has priority – whether the plaintiff took the Vessel free of any other security interests pursuant to section 46(1) of the Personal Property Securities Act 2009 (Cth)

CORPORATIONS – WINDING UP – LIQUIDATORS – DUTIES AND LIABILITIES – NEGLIGENCE – where the second defendant was appointed to wind up the first defendant – where the second defendant’s position was that that the plaintiff did not have an effective security interest in the Vessel and detained the Vessel – where the Vessel was moved outside at the direction of the second defendant and damaged as a result of being stored outside – whether the second defendant owed the plaintiff a duty of care in respect of its dealings with the Vessel – whether the second defendant breached any such duty of care

CORPORATIONS – WINDING UP – LIQUIDATORS – CONVERSION – where the second defendant denied the plaintiff’s entitlement to possession – where the Vessel was subsequently sold to a third party – whether the second defendant is liable for conversion

Civil Liability Act 2003 (Qld) s 9

Corporations Act 2001 (Cth) ss 180, 182, 474, 478,479, 545, 530C, 568, 1318

Personal Property Securities Act 2009 (Cth) ss 8, 12, 46, 151, 164, 254, 267

Aardwolf Industries LLC v Riad Tayeh [2020] NSWSC 299, considered

Aardwolf Industries LLC v Tayeh [2020] NSWCA 301, cited

Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd (2017) 324 FLR 378; [2017] NSWSC 1230, considered

Australian Securities and Investments Commission (ASIC) v Vines (2005) 65 NSWLR 281; [2005] NSWSC 1349, cited

Balanced Securities Ltd v Dumayne Property Group Pty Ltd (2017) 53 VR 14; [2017] VSCA 61, considered

Bredenkamp v Gas Sensing Technology Corporation, Re Welldog Pty Ltd (In Liq) (Recs and Mgrs Apptd) [2017] FCA 1065, cited

Brookfield Multiplex Limited and Owners Corporation Strata Plan 61288 & Anor (2014) 254 CLR 185; [2014] HCA 36, cited

Brybay Pty Ltd (in liq) & Ors v Esanda Finance Corp Ltd [2002] WASC 309, considered

Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185; [1966] HCA 38, cited

Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258, considered

Chelliah v NSW Police [2018] NSWSC 55, cited

Concut Pty Ltd v Worrell (2000) 176 ALR 693; [2000] HCA 64, cited

Crouch v Adams [2006] NSWSC 1029, cited

Crowther v Australian Guarantee Corp Ltd (1985) Aust Torts Rep 80-709, cited

Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) (2014) 49 VR 96 [2014] VSCA 326, cited

Federal Commissioner of Taxation v Sara Lee Household & Body Care Australia Pty Ltd (2000) 201 CLR 520; [2000] HCA 35, cited

Flowfill Packaging Machines Pty Ltd v Fytore Pty Ltd (1993) Aust Torts Reports 81-244, cited

Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd (2013) 283 FLR 122; [2013] NSWSC 1741, considered

Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236; [1987] HCA 30, considered

General Motors Acceptance Corp Australia v Southbank Traders Pty Ltd (2007) 227 CLR 305; [2007] HCA 19, cited

Gold Valley Iron Pty Ltd (In Liq) v OPS Screening & Crushing Equipment Pty Ltd [2022] WASCA 134, cited

Hausmann v Smith (2006) 24 ACLC 688; [2006] NSWSC 682, cited

Hillam v Iacullo, (2015) 90 NSWLR 422; [2015] NSWCA196, cited

Hobbs v Petersham Transport Co Pty Ltd; Petersham Transport Co Pty Ltd v ASEA Electric (Australia) Pty Ltd (1971) 124 CLR 220; [1971] HCA 26, considered

Macks v Viscariello (2017) 130 SASR 1; [2017] SASCFC 172, considered

Maelor Jones Investments (Noarlunga) Pty Ltd & Ors v Heywood-Smith (1989) 54 SASR 285, considered

Marsh v Baxter (2015) 49 WAR 1; [2015] WASCA 169, cited

McDermott v Black (1940) 63 CLR 161; [1940] HCA 4, considered

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, cited

National Australia Bank Ltd v Garrett (2016) 340 ALR 532; [2016] FCA 714, considered

Perpetual Nominees Limited v McGoldrick & Anor (No 3) (2017) 317 FLR 227; [2017] VSC 78, considered

Perre v Apand Pty Ltd (1999) 198 CLR 180; [1999] HCA 36, cited

Re Blyth Shipbuilding and Dry Docks Company, Limited [1926] 1 Ch 494, considered

Re Lambert (1994) 20 OR (3d) 108, cited

Re Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd [2013] NSWSC 852, cited

Re OneSteel Manufacturing Pty Ltd (Admin Apptd) [2017] NSWSC 21, cited 

Schreuders v Grandiflora [2016] VSCA 93, cited

Seaman v Silvia [2018] FCA 97, considered

Spittlehouse v Northshore Marine Inc. (1994) 18 O.R. (3d) 60; [1994] OJ No. 809, cited

Sydlow Pty Ltd (in liq) v TG Kotselas Pty Ltd & Ors (1996) 65 FCR 234, considered

Viscariello v Macks (2014) 103 ACSR 542; [2014] SASC 189, cited

Warehouse Sales Pty Ltd (in Liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407; [2014] VSC 644, considered

Williams (as liquidator of Scholz Motor Group Pty Ltd) (in liq) v Scholz [2007] QSC 266, cited

Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; [2004] HCA 16, cited

COUNSEL:

J W Peden QC with B Vass for the plaintiff

P O'Brien for the first and second defendants

SOLICITORS:

Broadley Rees Hogan for the plaintiff

Thynne + Macartney Lawyers for the first and second defendants
  1. [1]
    Reel Action Sports Fishing Pty Ltd (formerly known as Bribie Island Charters Pty Ltd), (the plaintiff), entered into a Vessel Construction Agreement (the VCA) with Marine Engineering Consultants Pty Ltd (the first defendant), which carried on the business of boat building, on 27 September 2017 whereby the first defendant agreed to build a 17-metre catamaran (the Vessel)[1] for the plaintiff.  On 13 March 2019, the plaintiff lodged for registration on the Personal Property Securities Register (PPSR), a document notifying its security interest over the Vessel.  Prior to completion of the Vessel, a dispute arose between the plaintiff and the first defendant which resulted in the parties entering into a Deed of Undertaking, Warranty and Forbearance on or around 13 August 2019 (the Undertaking) and subsequently, a Deed of Settlement and Guarantee dated 31 October 2019 (the Deed of Settlement).  A sale to a third party of the incomplete Vessel which was contemplated by the Deed of Settlement did not occur.  The Vessel remained in the shed known as “Shed H60” at the Gold Coast.  On 27 November 2020, the first defendant was ordered to be wound up and Christopher Baskerville (the second defendant) was appointed by the Court as liquidator.  On 5 February 2021, the plaintiff instituted proceedings in this Court seeking delivery of the possession of the Vessel. Subsequently the matter was ordered to proceed by claim and statement of claim.  By negotiation between the parties, the Vessel was sold on 15 September 2021 and the funds were placed in the trust account of the solicitors for the plaintiff and first defendant.
  2. [2]
    The plaintiff claims it owned the Vessel after making a payment on 5 October 2017 to the first defendant under the VCA, which provided for a transfer of title to the plaintiff of the Vessel.  The defendants contend that any proprietary right of the plaintiff in the Vessel ended when the parties entered into the terms of the Deed of Settlement, and the plaintiff had no interest in the Vessel after 31 October 2019.  In any event, the defendants contend that the provision for the transfer of title together with other terms of the VCA created a security interest which was unperfected when the first defendant was wound up.
  3. [3]
    The present dispute requires the Court to determine which party is entitled to the proceeds of sale.  The Court is further required to determine a claim for damages by the plaintiff as a result of wrongful detention of the Vessel by the defendants in conversion and negligence due to the Vessel being moved outside of Shed H60 at the direction of the second defendant.
  4. [4]
    Subject to a question of leave to amend the relief sought by the plaintiff being granted, the defendants agree the broad issues for determination by the Court have been correctly outlined by the plaintiff’s Counsel in their closing submissions.[2] Given the defendants identify a threshold issue I have added the original issue from the Agreed List of Issues to the issues for determination. The Court must determine:
    1. did the plaintiff have any interest in respect of the Vessel upon entry into the Deed of Settlement;
    2. is the plaintiff’s ownership of the Vessel a security interest within the meaning of s 12(1) of the Personal Property Securities Act 2009 (Cth) (PPSA);
    3. if the plaintiff’s ownership is a security interest:
      1. (i)
        is its registration effective; and
      1. (ii)
        what is the priority of the plaintiff’s security interest;
    4. did the plaintiff take the Vessel free of any other security interests pursuant to section 46(1) of the PPSA; and
    5. are the defendants liable for conversion or negligence, and if so, what damages flow to the plaintiff;[3]
    6. if the plaintiff is not entitled to judgement as to ownership of the Vessel, is the second defendant entitled to a lien;[4]
  5. [5]
    An issue as to whether there was a Vessel which existed and could be sold that was raised by the defendants in the second further amended defence was ultimately not pressed at trial.  The fact that construction of the Vessel had not begun on 5 October 2017 is still a matter of relevance to the passing of title which I will consider.
  6. [6]
    Evidence at the trial was primarily given by way of affidavit. Some additional oral evidence and cross-examination occurred.  There is little dispute in relation to the factual matters relevant to issues 1 to 4, save in respect of whether the registration of the security interest contained a seriously misleading defect.  The factual issues with respect to the claim for damages for conversion and negligence are more contentious. If the Court determines that the plaintiff had ownership of the Vessel, and that it was not a security interest, the issues within [4(c)] above do not fall for determination.  I will outline the background facts which are generally uncontentious and are particularly relevant to the issues in [4(a)-(d)] above.

Background factual matters

  1. [7]
    The National Australia Bank (NAB) registered an all present and after acquired property security interest by two registrations dated 30 January 2012 and 17 August 2012 against the first defendant.
  2. [8]
    The plaintiff and first defendant signed the VCA dated 27 September 2019.
  3. [9]
    The Vessel[5] was a bespoke build which catered to the plaintiff’s particular needs as it intended to use the Vessel in its fishing charter business. 
  4. [10]
    The first stage payment under the VCA was invoiced by the first defendant in the sum of $484,000 including GST on 27 September 2017 and was paid by the plaintiff on 5 October 2017.
  5. [11]
    Between 5 October 2017 and 4 September 2018, the plaintiff paid $1,709,933.50 to the second defendant for the construction of the Vessel.
  6. [12]
    From about October 2017 to on or around 28 March 2019, the first defendant took steps to construct the Vessel.
  7. [13]
    The director of the plaintiff became concerned as to the progress of the construction of the Vessel during an inspection in March 2019.
  8. [14]
    On 13 March 2019, the plaintiff, by its solicitors, lodged for registration on the PPSR two security interests over the Vessel (insofar as it had one), a watercraft registration and an “other goods registration”.  The relevant registration for these proceedings was the “other goods registration”, a general security interest.
  9. [15]
    In or around April 2019, the plaintiff and first defendant fell into dispute regarding the construction of the Vessel, as the plaintiff raised concerns that the construction of the Vessel was not occurring in accordance with the timeframes required by the VCA and that the Vessel was too small, which could not be rectified by a change to the internal layout. As a result, the first defendant was told to stop work. In the course of negotiations regarding the dispute, Mr Murray Owen, director of the first defendant company prior to its liquidation, agreed with the plaintiff that the plaintiff could leave the Vessel in the first defendant’s business premises, being a secure shed at the Gold Coast City Marina, Shed H60, free of charge, pending the resolution of the dispute.
  10. [16]
    It appears that no further work was done on the Vessel.  The Vessel at that time was a shell of the hull with a partial fit out.
  11. [17]
    The dispute resulted in the plaintiff, first defendant and Mr Owen entering into two deeds:
    1. the Undertaking; and
    2. the Deed of Settlement.
  12. [18]
    Contrary to what was contemplated in the Undertaking and Deed of Settlement, the Vessel was not sold to a third party and the first defendant did not perform the terms of the Deed of Settlement.
  13. [19]
    Following the non-performance of the Deed, the Vessel remained in Shed H60, pursuant to a gratuitous bailment between the plaintiff and first defendant.
  14. [20]
    On 6 December 2019, the plaintiff commenced proceedings against the first defendant and Mr Owen for the monies said to be owed to the plaintiff under the Deed of Settlement in the Supreme Court.
  15. [21]
    On 27 November 2020, the first defendant was wound up.
  16. [22]
    There was an exchange of correspondence between the plaintiff’s solicitors and the solicitors acting on behalf of the defendants between December 2020 and March 2021 where the plaintiff asserted primarily that it held title to the Vessel under the terms of the VCA, and in any event held a valid PPSR security interest. The defendants’ solicitors disputed that the plaintiff had an effective security interest, claimed it had vested in the first defendant and claimed a lien over the Vessel.
  17. [23]
    In December 2020 the Vessel was shifted out of Shed H60 into open storage at the discretion of the second defendant. That is said to have resulted in damage to the Vessel, which is supported by the evidence in this Court.
  18. [24]
    On 5 February 2021 the plaintiff instituted the current proceedings by originating application in the Supreme Court. That application was opposed by the defendants and the matters subsequently proceeded by way of claim.
  19. [25]
    The Vessel in its incomplete state was ultimately sold to a company, Lemoncrest Pty Ltd (Lemoncrest), on 15 September 2021 for $530,000, as documented by a Vessel Sale Deed of the same date (the Vessel Sale Deed) by agreement of the plaintiff and defendants. 
  20. [26]
    Under the terms of the Vessel Sale Deed, the sum of $370,000 is held in the plaintiff’s solicitor’s trust account and $160,000 is held in the defendants’ solicitor’s trust account, pending the resolution of this dispute. That remains the case.

Leave

  1. [27]
    The plaintiff obtained leave to proceed against the first defendant but not against the second defendant. The plaintiff filed an application for leave together with an affidavit on the first day of trial. The second defendant opposed leave being given to proceed with a claim against the second defendant and for a damages claim against the first defendant.
  2. [28]
    The plaintiff contends that leave ought to be granted because:
    1. the claim is not spurious or vexatious;
    2. the claim does not wrongfully interfere with the winding up process; and
    3. the claim has sufficient merit to justify the granting of leave.
  3. [29]
    The plaintiff further notes that it made its claim to the Vessel at an early stage of the liquidation and that the second defendant asserted that the Vessel had vested in the first defendant but did not apply for judicial advice. It also contends that the second defendant moved the Vessel outside and took no action to make it watertight, notwithstanding it was on notice from the plaintiff that the Vessel would likely be damaged if exposed to the elements. The second defendant has been a party since the matter proceeded by way of a claim.
  4. [30]
    The Court must be conscious to protect a Court appointed liquidator from spurious or vexatious litigation. In the present case however, while satisfied that the plaintiff has an arguable case in negligence and conversion, I have not found that there is a duty of care owed in this instance. There is a significant overlap of the factual evidence for each cause of action. I have found that the plaintiff has established that the defendants are liable in conversion. In the circumstances I consider it is in the interests of justice that leave be granted for the plaintiff to proceed with its claims against the second defendant.
  5. [31]
    The defendants also contend that the claim for damages for conversion and negligence were added after the originating application and leave is required to proceed against the first defendant.  I am satisfied however that, as pleaded in the Amended Reply, orders made on 26 February 2021 which provided for leave to proceed against the first defendant and that the applicant file and serve its claim and statement of claim was sufficient to provide leave. In the circumstances it was not necessary for the plaintiff to seek leave in relation to the claim for conversion and negligence against the first defendant.

Parties’ contentions – plaintiff’s interest in the Vessel

  1. [32]
    The plaintiff’s contentions include that:
    1. (a)
      the VCA operated to transfer title in the Vessel to the plaintiff on or about 5 October 2017 and it owned the Vessel in whatever state it was constructed, and from that time no security interest was created by the VCA;
    1. (b)
      from 5 October 2017, the remaining obligations under the VCA were for the first defendant to construct a stage of works, certify that stage and issue an invoice. The plaintiff was then to pay the invoice after each stage of work. The performance of the first defendant’s obligations was secured by the stage payments, not the plaintiff’s ownership of the Vessel;
    1. (c)
      if the first defendant failed to perform its obligation to build the Vessel and thereby committed a material breach of the VCA, the plaintiff could give notice under cl 14.1(b) of the VCA and terminate the VCA if the breach was not rectified within 28 days;
    1. (d)
      if the plaintiff did terminate the VCA, then, subject to it having paid for the works that had been undertaken (pursuant to cl 14.3 of the VCA and the first defendant’s workman’s lien), it could retrieve its Vessel (as bailor and owner of the Vessel);
    1. (e)
      if the plaintiff terminated the VCA, it could then sue the first defendant for damages attributed to its failure to keep building the Vessel, or for defective work that claim would be unsecured;
    1. (f)
      if the plaintiff failed to perform its obligations under the VCA, the first defendant could retain possession of the Vessel until it was paid for the work it had performed under a workman’s lien. Thus, the only party that had any form of security under the VCA was the first defendant which was outside the operation of the PPSA;
    1. (g)
      by the time of the first defendant’s liquidation on 27 November 2020, the VCA had been terminated;
    1. (h)
      in the circumstances whereby the plaintiff acquired ownership of the Vessel, the plaintiff’s ownership did not secure the first defendant’s performance of the VCA and the plaintiff did not have a security interest in the Vessel;
    1. (i)
      the plaintiff remained the owner of the Vessel from 5 October 2017 until it was sold to Lemoncrest on or about 15 September 2021;
    1. (j) once title in the Vessel passed in October 2017, the relationship between the plaintiff and the first defendant was in the nature of a bailment.  It arose under the common law on the basis that the plaintiff granted the first defendant an exclusive right to possess the Vessel for the purpose of constructing it, the defendant voluntarily assumed the possession and the obligation to keep the Vessel safe including by cl 13 of the VCA, and the first defendant was obliged to return the Vessel to the plaintiff upon completion of construction pursuant to the VCA or earlier termination of the VCA[6];
  1. (k) section 8(1)(c) of the PPSA applied to the bailment;
  1. (l) the security interest in the Vessel was registered on the PPSR by the plaintiff only out of precaution and to the extent that the plaintiff’s interest was a security interest;
  1. (m) the Deed of Settlement did not supersede or replace all of the terms of the VCA, particularly the plaintiff’s ownership of the Vessel under cl 15.3, or the rights and obligations that ran with bailment;
  1. (n) the first defendant sold the Vessel to the Plaintiff in the ordinary course of its business as a boat builder, in which it sold constructed vessels of that kind;
  1. (o) in the circumstances, the plaintiff took the Vessel free of all security interests, particularly NAB’s security interest, pursuant to section 46 of the PPSA;
  1. (p) the plaintiff took the Vessel free of all other security interests and no security interest vested in the first defendant upon liquidation that would give it the right to own or retain possession of the plaintiff’s Vessel;
  1. (q) the Vessel did not vest in the first defendant on liquidation; and
  1. (r) by 27 November 2020, the plaintiff became entitled to immediate possession of the Vessel by reason of the first defendant’s liquidation, bringing the bailment to an end.
  • [33]
    The defendants’ contentions include that:
    1. the VCA was a contract for supply of labour and services by the first defendant, and not for sale of a Vessel or boat;
    2. if it is found that title to any chattel could pass as at 5 October 2017, then title to the Vessel passed when it was intended to pass according to the VCA on or about 5 October 2017;
    3. the transfer of title was a “transaction” within the meaning of s 12(2) of the PPSA (which contains examples of transactions that may be a security interest);
    4. the transfer of title secured the ongoing performance by the first defendant of its obligations under the VCA;[7]
    5. in the circumstances the transfer of title was a security interest as provided for in s 12(2)(k) of the PPSA;
    6. the registration by the plaintiff of a security interest in the Vessel was ineffective because it was seriously misleading and therefore vested in the first defendant pursuant to s 267 of the PPSA;
    7. regardless of the position under the VCA, the defendants’ primary contention is that the plaintiff had no interest in the Vessel from 31 October 2019 following its entry into the Deed of Settlement, which they contend superseded and replaced the rights of the parties under the VCA;
    8. the Deed of Settlement did not contain any rights in favour of the plaintiff with respect to the Vessel and it ceased to have any ownership or security interest upon entry into the Deed of Settlement;
    9. any default under the Deed of Settlement resulted in a monetary claim against the first defendant and guarantor; and
    10. the Vessel vested in the first defendant and the plaintiff had no interest in the Vessel.

The terms of the VCA

  1. [34]
    Amongst other things, the VCA provided:
    1. by cl 2.1, “[t]he Builder agrees to construct the vessel and the Buyer agrees to buy the vessel, generally described as Aluminium Power Catamaran (Hull No MECY20) (the Vessel), as more specifically described in the Specifications as set out in Schedule 1 together with any drawings and plans in accordance with the Terms of this Agreement”;
    2. by cl 2.2, “[t]he Builder is responsible for the costs and provision of all labour, materials and expertise in the construction of the Vessel”;
    3. by cl 3.1, “[t]he price of the Vessel is the amount set out in Schedule 2 (Contract Price). The Buyer agrees to pay the Contract Price by instalments as set out in Schedule 2 (Stage Payments) and subject to the terms of this Agreement”;
    4. by cl 3.3, “[t]he Builder must certify in writing that the stage has been satisfactorily completed whereupon the relevant Stage Payment will become due and payable 7 days following the receipt by the Buyer of the written certification in accordance with the terms of this Agreement”;
    5. by cl 9, remedies for the Builder (i.e., the first defendant) if the instalments are not paid which include the Builder being entitled to stop construction of the Vessel until payment, the right to charge interest after 14 days from the day payment was due and a right to terminate 28 days after the payment was due and payable;
    6. by cl 10, provision was made for the completion and delivery of the Vessel on conclusion of an acceptance trial and payment of the balance of the purchase price (cll 10.6 and 10.7);
    7. by cl 13, “[t]he Builder must insure the Vessel…in the joint names of the Builder and the Buyer from the date of this Agreement until the acceptance of delivery of the Vessel by the Buyer”;
    8. by cl 14, provision was made for termination of the VCA;
    9. by cl 15.1, “[t]he Builder warrants that title to all materials and equipment in the building of the Vessel, including the Vessel and all subsequently acquired materials whether incorporated in the Vessel or identified to be delivered with the Vessel, passes to the plaintiff upon payment of the First Stage Payment by the Buyer, free from all Security Interests, liens, claims, or encumbrances”; 
    10. by cl 15.3, “[t]he Vessel and/or all materials and equipment purchased or appropriated from time to time by the Builder specifically for its construction (whether in their premises, upon the water or elsewhere) become the property of the Buyer upon the payment of the First Stage Payment”;
    11. by cl 15.4, “[t]he Builder will, insofar as it is reasonably practicable to do so, mark all individual items of equipment and materials which are purchased for or appropriated to the construction of the Vessel so that they are clearly identifiable as the Buyer’s property”;
    12. by cl 17, the parties addressed the PPSA including that:
      1. (i)
        by cl 17.2, clause 17 of the VCA would apply “to the extent that the Buyer’s rights and interests under this Agreement, including for the avoidance of any doubt, the Vessel in whatever state or form of construction as contemplated by this Agreement, all equipment in respect of the Vessel whether supplied by the Buyer or the Builder, and any other arrangement under or contemplated by the Agreement (Collateral) constitutes a security interest”;
      1. (ii)
        by cl 17.3, “[t]he Builder acknowledges and agrees that the Buyer may register its security interest…on the Personal Property Securities Register at any time after this Agreement is signed or accepted by the Builder”;
      1. (iii)
        by cl 17.5, “[t]he Builder must not, without the Buyer’s written consent, assign, mortgage, grant a security interest in or otherwise part with possession of the Collateral”;
      1. (iv)
        by cl 17.9, “if the Builder defaults under this Agreement, the Buyer may (in addition to any other rights it may have under this Agreement):
      1. (A)
        enforce its security interest in the Collateral by exercising all or any of its rights under this Agreement or the PPSA; and
      1. (B)
        exercise right of entry”;
    1. by cl 17.10, “[n]othing in this clause is limited by any other provision of this Agreement or any other agreement between the parties”; and
    2. by cl 17.11, “[n]otwithstanding the provisions this Clause, the risk in the Vessel remains at all times with the Builder until the actual delivery of the Vessel to the Buyer”.

The terms of the Deed of Settlement

  1. [35]
    The terms of the Deed of Settlement included the following[8]:
    1. by recitals A and B, that the first defendant and the plaintiff entered into the VCA, and that the plaintiff had paid the first defendant the sum of $1,709,933.50 pursuant to the VCA (the BIC Amount);
    2. by recital D, that the plaintiff has a registered security interest over the Vessel;
    3. by recital F, that the first defendant had located a third party interested in acquiring the Vessel for a purchase price of $2,722,500 and had entered into a Vessel Construction Agreement with the third party;
    4. by recital H, that the parties had agreed to resolve the dispute on the terms in the Deed of Settlement including the payment of the Settlement Sum by the first defendant to the plaintiff;
    5. a definition of “Settlement Sum” under cl 1.1.12, which “means the sum of $1,755,504.89 including GST, calculated with reference to the BIC Amount ($1,709,933.50) and interest on the finance facility calculated to 11 November 2019 in the sum of $45,571.39;
    6. by cl 2.1, a recognition that the first defendant had entered into a Vessel Construction Agreement for the purchase by a third party of a Vessel for a total of $2,722,500 (inc. GST), with payment by seven instalments, with the first instalment of $1,750,000 on or before 11 November 2019, and six trailing monthly instalments through to May 2020;
    7. by cl 3.1, in consideration of the mutual covenants and releases contained in the Deed of Settlement, the plaintiff and the first defendant agreed on the following terms:
      1. (i)
        the first defendant agreed to pay the Settlement Sum (as defined in the Deed of Settlement as $1,755,504.89) to the plaintiff as follows:
      1. (A)
        $1,550,000.00 by bank cheque or electronic funds transfer from the third-party buyer on or before 11 November 2019 (the Initial Payment);
      1. (B)
        $34,250.82 on or before 11 December 2019;
      1. (C)
        $34,250.82 on or before 11 January 2020;
      1. (D)
        $34,250.82 on or before 11 February 2020
      1. (E)
        $34,250.81 on or before 11 March 2020;
      1. (F)
        $34,250.81 on or before 11 April 2020; and
      1. (G)
        $34,250.81 on or before 11 May 2020;
    1. (h)
      by cl 3.1.2, a payment made by the third-party buyer to the plaintiff, on behalf of or at the direction the first defendant, was to be treated as a payment in reduction of the first defendant’s liability to the plaintiff;
    1. (i)
      by cl 3.1.3, upon clearance of funds paid for the Initial Payment in accordance with clause 3.1.1.1, the plaintiff was to immediately, in the following order:
    1. (i)
      release any and all PPSR security interests in the Vessel pursuant to the VCA; and
    1. (ii)
      transfer the title and ownership in the Vessel to the third-party buyer or as otherwise directed by the first defendant.
    1. (j)
      by cl 3.1.6 if any of the Instalment Payments were not cleared and received by the due date specified in clause 3.1.1, without prejudice to any other rights the plaintiff may have against the first defendant,
    1. (i)
      the first defendant was in default of the Settlement Deed (cl 3.1.6.1);
    1. (ii)
      if the first defendant did not comply with any Notice to Remedy issued by the plaintiff, the plaintiff was able to do, in its absolute discretion, any one or a number of things outlined in 3.1.6.3.1 to 3.1.6.3.4, none of which included any rights of recovery or possession of the Vessel itself;
    1. (k)
      by cl 4.1, subject to the plaintiff receiving the Settlement Sum in cleared funds, the first defendant and plaintiff “release, discharge and forever quit and abandon all claims, causes of action or rights which either have, or may have, against each other in relation to the subject matter of the Dispute or otherwise the subject of this Deed save for a breach of this Deed”;
    1. (l)
      by cl 9, the Settlement Deed was an entire deed and understanding between the parties on everything connected with the subject matter of the Settlement Deed and “supersedes any prior Deed or understanding on anything connected with that subject matter”; and
    1. (m)
      by cl 17, provision for a guarantee by Mr Owens as director, which provides for some 17 events which would result in Mr Owens being liable.

Did the Deed of Settlement supersede and extinguish all rights under the VCA?

  1. [36]
    As set out above, the defendants contend that the Deed of Settlement superseded and replaced the VCA on the basis that it was in respect of the same subject matter as the VCA, in that it concerned the construction and sale of the Vessel.  According to the defendants, in place of the rights and obligations of the plaintiff and the first defendant under the VCA, new rights were acquired by the plaintiff against the first defendant which obliged the first defendant to find a replacement customer and to pay the plaintiff more than the amounts paid by the plaintiff under the VCA with the first defendant’s director, Mr Owens providing a guarantee. The defendants submit that no rights in relation to the Vessel in favour of the plaintiff were provided for in the Deed of Settlement. Alternatively, it is said that the Deed of Settlement varied the VCA so new rights were created as against the first defendant and the director only, and not as against the Vessel or shell. Thus, according to the defendants, the plaintiff had no interest in the Vessel (in its incomplete form) after 31 October 2019 when the Deed of Settlement was executed by the parties.
  2. [37]
    The plaintiff however contends that the application of the Deed of Settlement only effected a change of title of the Vessel upon performance, namely when the plaintiff received the initial payment of the settlement sum in cleared funds, upon which the plaintiff agreed to transfer title in the Vessel to the third party.  The first instalment and Initial Payment provided for under the Deed of Settlement was never made. The plaintiff contends that the consequences of the first defendant’s failure to pay the Settlement Sum included the matters set out in cll 3.1.4 and 3.1.6, which were without prejudice to any other rights that the plaintiff may have against the first defendant and did not affect the continuation of the plaintiff’s right of ownership and right to immediate possession subject to the bailment. Nor to the extent they existed did it release the PPSR security interests.
  3. [38]
    The defendants draw support for their contention by the fact proceedings were instituted by the plaintiff in the Supreme Court against the first defendant and Mr Owen seeking payment of $1,550,000 pursuant to the Deed of Settlement and that those proceedings remain on foot.
  4. [39]
    The Victorian Court of Appeal in Balanced Securities Ltd v Dumayne Property Group Pty Ltd[9] (Balanced Securities) summarised the relevant principles in determining whether a subsequent agreement amends an earlier agreement or brings it to an end and replaces it.  Particularly drawing upon the High Court authorities of Federal Commissioner of Taxation v Sara Lee Household & Body Care Australia Pty Ltd[10] (FCT v Sara Lee) and Concut Pty Ltd v Worrell[11] (Concut v Worrell) and the New South Wales Court of Appeal decision of Hillam v Iacullo[12] and the Victorian Court of Appeal decision of Schreuders v Grandiflora[13], the Court of Appeal summarised the relevant principles as follows[14]:
  1. “(1)
    The relevant issue is whether the subsequent agreement amends the earlier agreement or brings it to an end and replaces it (FCT v Sara Lee).
  1. The earlier agreement may be brought to an end either expressly or by implication (Tallerman and FCT v Sara Lee).
  1. The issue is to be resolved by ascertaining the manifest intention of the parties (FCT v Sara Lee and Concut v Worrell).
  1. The manifest intention of the parties is to be ascertained objectively by the construction of the subsequent agreement, having regard to the relevant context of that agreement where it is permissible to do so in accordance with the ordinary principles of contractual construction (Concut v Worrell, Hillam v Iacullo, Schreuders v Grandiflora).
  1. A potentially critical factor militating in favour of a conclusion that the manifest intention of the parties, objectively ascertained, was to bring the earlier agreement to an end and replace it, is where the terms of the two relevant agreements deal with the same subject matter in different and inconsistent ways (Hillam v Iacullo).”
  1. [40]
    The decision of Balanced Securities involved the question of whether a facility agreement was supplanted by a later second facility agreement provided after the parties had fallen into dispute.
  2. [41]
    There is no express reference to the VCA in the Deed of Settlement, save in the recitals and the calculation of the amount of the settlement sum.
  3. [42]
    For the purposes of this argument assuming that the plaintiff acquired ownership rights of the Vessel, I do not consider those rights were superseded by the Deed of Settlement unless it was relevantly performed.
  4. [43]
    The Deed of Settlement was premised on the plaintiff being the owner of the Vessel and the necessary party to transfer title in the Vessel as well as holding security interests that were required to be released.  That is clear from cl 3.1.3 of the Deed of Settlement, which required the plaintiff to release securities and transfer the title but only upon the Initial Payment being paid (and cleared) to the plaintiff. While it is true that the Deed of Settlement did not provide for the plaintiff to have any specific rights in relation to the Vessel that does not manifest an intention that such rights ceased to exist upon entry into the Deed of Settlement because it the Deed of Settlement preserved those rights until performance.  The Deed of Settlement provided for the rights of ownership of the plaintiff in the Vessel and its registered PPSR security interests to be affected upon performance of cl 3.1.1.1, not upon the signing of the Deed of Settlement. If the Deed of Settlement was not relevantly performed, those rights were not lost. Similarly, pursuant to cl 4 the mutual releases only operated “[s]ubject to [the plaintiff] receiving the Settlement Sum in cleared funds”. 
  5. [44]
    The Deed of Settlement did not provide for accrued rights of ownership to be otherwise affected as is evident from cl 3.1.6.  While providing for rights that the plaintiff would have upon there being default in relation to the instalment payments, including a right to terminate, and/or damages in accordance with contractual principles, it expressly provided that it was “without prejudice to any other rights” the plaintiff may have against the first defendant.  Properly construed that demonstrates that the rights are additional to those under the VCA rather than in derogation of them. The rights in 3.1.6 applied only upon default of the Deed of Settlement and provided for rights in respect of non-compliance with the Deed. That does not suggest that they are new rights which supersede any rights under the VCA, particularly given they are expressly stated not to be to the prejudice of such rights. The rights in relation to the guarantor in cl 17 only arose upon default by the first defendant under the Deed of Settlement. 
  6. [45]
    The above informs the content of the words “In consideration of the mutual covenants and releases contained in this Deed …” in cl 3.1.
  7. [46]
    While the defendants contend that the Deed of Settlement, and particularly cl 3.1.6, provides for the plaintiff to sue for an agreed liquidated sum against the first defendant, cl 3.1.6 in fact refers to one of the rights being to recover damages.[15]
  8. [47]
    While cl 9 provided that the Deed of Settlement was “the entire Deed and understanding between the Parties on everything connected with the subject matter of this Deed” and “supersedes any prior Deed or understanding on anything connected with that subject matter” it is broad in its terms and must be construed in the context of the Deed of Settlement as a whole. Notably, it only makes reference to superseding “any prior Deed”. The Undertaking was in the form of a deed, and is also referred to in cl 3.1.5 of the Deed of Settlement, whereas the VCA is not a deed and not referred to in the Deed of Settlement. The express reference to the Deed and not to a prior agreement is consistent with the “subject matter” of the Deed of Settlement being the dispute between the plaintiff and first defendant in relation to the construction of the Vessel, as identified in recital E, not all the rights and obligations under the VCA, even though the dispute arose out of the performance of the VCA.
  9. [48]
    On its proper construction, cl 9 and the “subject matter of the Deed” does not extend to all rights and obligations under the VCA. Such a construction would be inconsistent with cl 3.1.6 which does not limit the rights of the plaintiff against the first defendant being rights under the Deed of Settlement. It is also inconsistent with the provision of performance of the Deed of Settlement as a precondition to any release of the other party and transfer of title. That supports the fact the Deed of Settlement was only intended to affect rights under the VCA if the Deed of Settlement was actually performed, at least insofar as it had any effect upon the plaintiff’s ownership of the Vessel. 
  10. [49]
    Given the above I do not find that there was a manifest intention by the terms of the Deed to bring the VCA to an end and replace it with the terms of the Deed of Settlement. At best it manifested an intention to vary the accrued rights of the parties under the VCA and discharge future rights and obligations only upon performance of the terms of the Deed of Settlement. For example, obviously upon the sale and transfer of ownership of the Vessel, the obligations to construct the Vessel and pay for stages of construction upon certification would be rendered nugatory.
  11. [50]
    The actions of the plaintiff in suing on the Deed of Settlement in the Supreme Court does not assist in terms of the proper construction of the Deed of Settlement and the manifest intention of the parties in relation to it. The Deed of Settlement on its face provided for remedies upon default.[16]  Whether there is any question of offset arising from the sale of the Vessel is a matter raised in the Defence of the defendants, although denied by the plaintiff.  It is not a matter for determination by this Court.[17] 
  12. [51]
    Given the conditional nature of the Deed of Settlement, which relied upon the performance of at least some of the promises, particularly the payment of the initial payment, there could be no accord and satisfaction which could operate to discharge any rights under the VCA until performance occurred. Relevantly, the present case would be the second type of case discussed by Dixon J in McDermott v Black[18] where his Honour stated that:

“An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or, on the other hand, promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim. If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed.”

  1. [52]
    Given the lack of performance of the Deed of Settlement by the first defendant, the Deed of Settlement did not extinguish or vary the parties’ accrued rights under the VCA.

Is the plaintiff’s ownership of the Vessel a security interest in the Vessel under the VCA?

  1. [53]
    The defendants contend that the plaintiff’s interest in the Vessel arising under the terms of the VCA is properly characterised as a security interest under the PPSA and therefore the plaintiff takes the security interest subject to the provisions of the PPSA. 
  2. [54]
    The plaintiff contends however that its interest in the Vessel is not a security interest within the meaning of s 12(1) of the PPSA.  Rather, it contends it was the legal owner of the Vessel since 5 October 2017 under the terms of the VCA until it was sold to a third party on 15 September 2021 and that no security interest in the Vessel arose in favour of the plaintiff securing performance by the first defendant of its obligations.
  3. [55]
    As noted by the plaintiff by reference to Warehouse Sales Pty Ltd (in liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd[19] (Warehouse Sales), the “PPSA provides for a priority regime, not a title regime. Under s 273 of the PPSA ownership or title to personal property is not determinative…” However, as Mirzai and Harris point out, the PPSA is not a complete code and title is not irrelevant.[20]  Caution must however be exercised in considering cases prior to the introduction of the PPSA.
  4. [56]
    “Security interest” is defined in s 12(1) of the PPSA.  It is an “interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation…”
  5. [57]
    Thus, four elements must be satisfied in order for an interest to constitute a security interest, namely:[21]
    1. there must be an outstanding existing monetary or non-monetary obligation;
    2. there must be an “in substance security” to support the performance of that obligation;
    3. the security interest must amount to an “interest” in personal property; and
    4. the interest must arise out of a transaction.
  6. [58]
    Examples of security interests are given in s 12(2) of the PPSA.  That includes s 12(2)(k), a transfer of title.
  7. [59]
    The central point of contention is the second element, namely whether the Vessel constitutes in substance security to support the performance of the obligations under the VCA, which included the construction of the Vessel after the transfer of ownership in the Vessel.
  8. [60]
    In General Motors Acceptance Corp Australia v Southbank Traders Pty Ltd[22] the Court considered the phrase “security interest” in the context of a registered security interest under the Chattels Securities Act 1987 (Vic).  In the course of that consideration the Court considered the meaning of “securities” in a wider context, noting that the potential width of the term “security” is reflected in the meaning given in Stroud’s Judicial Dictionary[23] as “anything that makes the money more assured in its payment or more readily recoverable”.[24]
  9. [61]
    According to the plaintiff, the transfer of ownership in the Vessel did not make the performance of the obligations under the VCA more assured. The plaintiff contends that the VCA should be construed as providing for the sale of the Vessel, which involved the plaintiff making an upfront payment[25] prior to construction commencing in return for ownership of the Vessel being transferred and thereafter it was in the nature of a contract for the supply of boatbuilding services where payment was made upon the certification that a certain stage of works had been reached, unconnected with the ownership of the Vessel by the plaintiff. According to the plaintiff no security interest was created in either case. In effect, the plaintiff’s interest in the Vessel did not serve as collateral to secure the performance of the defendant’s obligations under the VCA.
  10. [62]
    The plaintiff contends that after the transfer of the Vessel, the first defendant had possession of the Vessel under a gratuitous bailment until the Vessel was completed in accordance with the VCA or was terminated by the plaintiff.
  11. [63]
    The defendants however contend that at the time of the transfer of ownership there was no Vessel in existence that could be sold and the plaintiff had to make an upfront payment and continued to have to make payments in advance of the state of construction of the Vessel where the first defendant had outstanding obligations under the VCA to fulfil and the transfer of ownership under cl 15 provided security for that performance.  In relation to the second and third stage payments, the VCA provided that they would be made at the same time, so the third stage payment was effectively made in advance.  The defendants contend the four requirements set out by the Victorian Court of Appeal in Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd)[26] (Dura (Australia) Constructions) were satisfied that the performance obligations were to continue until the completion of the Vessel and delivery as anticipated by the VCA.  The defendants contend that there was in substance security to support the performance of the obligations by the first defendant, namely that the plaintiff would pay moneys to the first defendant at agreed milestones with the first payment due on the contract date and prior to any equipment or materials being purchased. 
  12. [64]
    In further support of its argument, the defendants point to the fact that the plaintiff was at risk from the outset of the contract while the first defendant was in possession of the Vessel under construction and in respect of all equipment purchased for incorporation into the Vessel after October 2017.  The plaintiff was exposed to increasing financial risk for failure to complete the Vessel as payments progressed, non-compliance with the VCA, and the potential insolvency of the first defendant.  The risk of failure to complete and risk of insolvency existed at the time the VCA was entered into and continued.  The defendants construe the VCA as the plaintiff agreeing to receive a transfer of title as set out in the VCA and thereby obtaining security for its exposure, as construction progressed in the vessel being constructed and in equipment purchased for the purpose of the construction of the Vessel.  The defendants contend that the purpose and substance of cl 15 was to secure the performance of the first defendant and secure the ongoing risk of loss the plaintiff was exposed to under the VCA. 
  13. [65]
    According to the defendants, “transfer of title” was identified as an example of a security interest in s 12(2) of the PPSA, which would usually be sufficient to satisfy the requirement.
  14. [66]
    The plaintiff’s response to the defendants’ contentions is that in reality, notwithstanding the different obligations identified by the defendants, the main obligation relied upon by the first defendant was its obligation to construct the Vessel.  Payment for the performance of the obligations by the first defendant is secured by the fact that the VCA provided for the plaintiff to pay for the work as it is completed and certified by the first defendant. If payments were not made, there were remedies under the VCA.  The first defendant was therefore not under an obligation to do something in respect of which the plaintiff’s ownership will better secure that to be done. 
  15. [67]
    The plaintiff’s characterisation of the VCA, draws some support from the decision of Re Blyth Shipbuilding and Dry Docks Company, Limited[27] (Re Blyth), particularly in submitting the fact that the VCA provided for the sale of the Vessel yet to be constructed was not a legal impediment to there being a sale of the Vessel upon payment of the first instalment.
  16. [68]
    In Re Blyth the Court considered whether a Vessel and materials purchased were incorporated into the whole of the Vessel were owned by the purchaser or the defendant to whom receivers had been appointed.  In particular, Romer J had to consider whether the contract provided the purchases with security or whether the contract provisions manifested an intention of the parties that property in an uncompleted vessel should pass.  Romer J at first instance considered that the contract concerned was “a contract for the sale from time to time of a ship in its various stages of construction or of materials to be used in the construction of a ship, the seller, however, being under an obligation of working up the things sold into a complete ship for the purpose of putting them into a deliverable state.”[28]  As the contract was for a sale of future goods, in determining whether the contract was for the sale from time to time of a ship in its various stages of completion or for the sale of a completed ship, Romer J noted it is a matter of intention of the parties whether it be expressed or inferred.  Romer J concluded that according to the true construction of the contract, the clauses concerned demonstrated an intention that the property in the uncompleted Vessel should pass to the buyer.  Romer J considered that that accorded with the natural meaning of the words used and was particularly supported by the fact that the ship was to be paid for by instalments, and that the purchaser was permitted to inspect the construction. Both of those matters are features in the present case.  Clause 6 of the agreement considered by Romer J was not in dissimilar terms from cl 15.
  17. [69]
    The decision of Romer J was appealed, but only in relation to the question of whether the receiver was entitled to retain the worked material intended for, but not incorporated into the ship, not the finding that the buyer acquired an interest in the Vessel as it was constructed.
  18. [70]
    The defendants contend that the decision of Re Blyth has little relevance in light of the PPSA, which introduced a new regime for the determination of priorities to collateral following an insolvency event and replaced traditional ranking of interests according to who is the true owner and who is the ostensible owner through possession.[29]As Sifris J in the matter of Warehouse Sales however noted, “[i]t is important to appreciate that the PPSA is not a code. Section 254 of the PPSA provides that it is to operate concurrently with the laws of the Commonwealth, State and Territory law and the general law.”[30]  While Re Blyth provides no assistance in terms of the operation of the PPSA, its consideration of the characterisation of the agreement in that case which bears similarities to the present VCA still has relevance and provides assistance.
  19. [71]
    There is nothing controversial about the approach of Romer J in Re Blyth to the construction of contractual provisions and transfer of future property and it supports the characterisation of the VCA by the plaintiff which shares a number of the features discussed by Romer J. Notwithstanding the changes introduced by the PPSA, it does not alter the fact that in determining whether the VCA in substance creates a security interest, the principles of construction of commercial contracts continue to apply. [31]
  20. [72]
    The VCA does not expressly refer to the provision of title in the Vessel was for the purpose of providing a security interest in favour of the plaintiff.  That of course does not preclude the interest being characterised in that way.
  21. [73]
    Under the VCA, the first defendant was to perform a number of obligations.  However, the question is whether the interest in the Vessel provided by the transfer of the Vessel to the plaintiff in substance secured performance of any of those obligations.  That requires the Court to consider the relationship between the obligations and whether any right against personal property generates a security interest.
  22. [74]
    The defendants submit that the plaintiff received a transfer of title from the first defendant to secure ongoing performance of the VCA and thereby obtained a security interest pursuant to s 12(1) of the PPSA, is supported by the fact that one of the examples of the security interest is the transfer of title.[32]  However the example in s 12(2) to the transfer of title requires an analysis of the transaction to determine whether it is a security interest.  While Beech J in National Australia Bank Ltd v Garrett[33] made reference to the instances set out in s 12(2) of the PPSA usually satisfying the requirement of “security interest”, the observation was a fleeting reference made in the absence of any analysis and does not suggest that was always the case.   In that regard, his Honour noted that one considers matters of substance rather than form.[34] 
  23. [75]
    While the question has been the subject of some debate, it remains unresolved. In my view, as is stated in s 12(2) of the PPSA itself, the matters listed only serve as examples and do not in every case constitute a security interest. Everyday sales involve the transfer of title in a product in return for payment, but they could hardly have been intended without more to be characterised as a security interest.
  24. [76]
    In that regard Mirzai and Harris comment that the term “transfer of title”, like the reference to an “assignment”, is somewhat misleading as without additional conditions imposed, a mere transfer can never amount to a security interest.[35]
  25. [77]
    Given the open-ended nature of a transfer of title, that would not, without more, be enough to constitute a security interest.[36]  As was said in Gold Valley Iron Pty Ltd (In Liq) v OPS Screening & Crushing Equipment Pty Ltd [2022] WASCA 134 at [107]:

“Section 12(2) gives colour to the notion of a ‘transaction’ within s 12(1) by specifying examples of relevant transactions.  Section 12(2) states, by way of example, that a security interest includes ‘an interest in personal property’ that is provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation.”

  1. [78]
    In the present case, I consider that there is a disconnect between future obligations under the VCA that were to be performed by the first defendant and that the transfer of title in the Vessel pursuant to cl 15.1 did not secure the future performance of obligations.  The payment under stage 1 is significant, namely $440,000, which was payable to the first defendant upon the signing of the VCA, in return for which the plaintiff received a transfer of ownership in the future property, namely, the Vessel in whatever state of construction, but where the first defendant had possession of the Vessel throughout the period of construction until completion.
  2. [79]
    The defendants submit is that the fact the plaintiff holds title as security is supported by it giving some protection in the face of the first defendant becoming insolvent as the plaintiff pays more money for the construction of the Vessel and carries financial risk particularly with a provision for registration of the interest.  While that is to a certain extent true it is not sufficient in the context of the VCA to characterise it as a security interest.
  3. [80]
    I do not consider that it in substance the VCA provided a security interest, notwithstanding the Vessel was yet to be constructed. On its correct construction the VCA provided for the sale of the future goods, namely the Vessel, and thereafter for the construction of the Vessel. The contention of the defendants that the VCA was a contract for supply of labour and services, is not borne out by the terms of the VCA itself, particularly cl 2 of the VCA. Clause 2.1 provides for the plaintiff to buy the Vessel constructed by the first defendant.  While the defendants plead that it was only a contract for the supply of labour or services, and that no Vessel was ever bought into existence, that is belied by the terms of cl 2.2, which refers to the first defendant being responsible for the “costs and provision of all labour, materials and expertise” in the construction of the Vessel, and the fact that the evidence shows that a Vessel was in fact built by reference to the plans drawn up for the plaintiff’s Vessel. 
  4. [81]
    Future goods can be appropriated to a contract when they are purchased and delivered with the buyer’s assent in advance, even in the absence of markings[37].  The fact that there was such appropriation is supported by the terms of the invoice which reflects the terms of the VCA and that it was a bespoke vessel.[38] That is supported by the provision for the right of inspection by the plaintiff, which Mr Hombsch did on regular occasions. The plans on the Vessel in its incomplete state supported the fact that it was the Vessel appropriated to the plaintiff under the VCA.[39]
  5. [82]
    In Re Blyth, Romer J placed particular weight on the terms of the contract in determining whether the purchaser had a security or whether clauses in that agreement indicated an intention of the parties that the property should pass, Romer J determined that the natural meaning of the words used indicated an intention that the property in the uncompleted vessel should pass.[40]  He found that that natural meaning was supported by other provisions including the fact that the ship was to be paid for by instalments and was constructed under the inspection of the purchasers, as is the case here.[41]  The fact the VCA provided for the transfer of ownership upon the payment of the first instalment is consistent with the fact that one of the commercial objects of the VCA was to provide for construction of a bespoke Vessel intended to meet the plaintiff’s requirements. While clause 3.1 of the VCA is open to be construed as providing for a sale of the completed Vessel, it provides on its terms supported by the context of the VCA as a whole for the obligation of the first defendant to construct a vessel to a particularly design which the plaintiff has agreed to buy. Clause 15 is specifically directed to the passing of title of the Vessel as future property which was appropriated to the VCA constructed in accordance with the agreed design and the material and equipment as they are purchased and or appropriated by the first defendant for the Vessel 
  6. [83]
    While the plaintiff had made the payment of the first instalment upon which it received the transfer of title in the Vessel, it then only made payments as each stage of work was certified, even though stages two and three were close together. Under the VCA, the first defendant was entitled to be paid upon certification that the first defendant had completed a particular stage as provided in Schedule 2, not in advance of the work being completed.[42]  The plaintiff was then obliged to make payment to the first defendant within seven days of the first defendant receiving the staged payment invoice.[43]  In the event payment was not made, the VCA provided that the first defendant could cease work and could subsequently terminate the agreement under cl 9. The obligation to carry out the work by the first defendant was secured by the payment regime, not by the plaintiff’s ownership. 
  7. [84]
    The plaintiff was entitled to inspect the progress of the construction of the Vessel and to take delivery of the Vessel after an acceptance trial.[44]  If the buyer failed to take delivery of the Vessel, the first defendant was entitled to require the plaintiff to pay reasonable berthing and/or storage charges and any other expenses reasonably incurred by the builder.[45]
  8. [85]
    Termination of the agreement was without prejudice to the rights of each party against any other in respect of anything done or omitted under the agreement prior to such termination or any debt obligation or liability which had accrued.[46]  Under cl 16, the first defendant was exposed to being liable for liquidated damages if the Vessel was not delivered to the plaintiff by the date of delivery.
  9. [86]
    While the VCA included a provision for registration of a security interest by the plaintiff under the PPSA, the inclusion of that provision does not advance the case of the defendants very far. As pointed out by the plaintiff, cl 17.2 provides that “[t]his clause applies to the extent that the Buyer’s rights and interests under this Agreement, including for the avoidance of any doubt, the Vessel in whatever state or form of construction as contemplated by this agreement…constitutes a security interest” (emphasis added).  Clause 17.3 provides for the first defendant to acknowledge and agree that the plaintiff “may register its security interest in the collateral…in any manner that the Buyer considers appropriate”.
  10. [87]
    In effect, the VCA provides for the plaintiff to be able to hedge its bets, such that if the VCA was found to create a security interest in the Vessel, provision is made to register that security interest and for that to have been agreed to by the first defendant.  However, the inclusion of the words “to the extent that” demonstrates that its inclusion is not an “admission” that the VCA creates a security interest, but provides a safety net if it was so characterised.  Further, while the defendants rely on the fact that the notice under the PPSA to secure the interest under s 151 of the PPSA requires the person to have reasonable grounds that the person described in the statement as the secured party is or will become a secured party, that does not have any great relevance to the exercise which the Court must carry out in construing the VCA itself. 
  11. [88]
    In the present case, I do not consider that the agreement created a security interest in favour of the plaintiff, as it did not make the performance of the obligations under the VCA more secure.  Rather, as contended by the plaintiff the VCA provided for the Vessel to be appropriated to the VCA even though not fully constructed, as was the case in Re Blyth, as the Vessel was constructed and otherwise made provision for the staged construction of the Vessel. This construction is consistent with the words used in the VCA in the context of the VCA as a whole and the commercial purpose of the VCA for the plaintiff to acquire a bespoke vessel which had to be specially constructed by the first defendant.[47] 
  12. [89]
    I accept the plaintiff’s argument that the VCA was in the nature of a sale agreement where ownership of a chattel passed upon initial payment and thereafter was in the nature of a contract for the supply of boatbuilding services, which were paid for as each stage was completed.  In neither case was there any interest in personal property provided for by a transaction that in substance secured payment or performance of an obligation.  The transfer of title occurred at the same time as the first payment, and nothing was secured by the interest in the Vessel.  Thereafter, the payments for the boatbuilding services did not provide for any interest in personal property because that had already passed to the plaintiff.  As was contended by the plaintiff, if there was a security interest at all, the situation was almost a reverse security interest whereby the first defendant maintained possession of the Vessel in which title had passed to the plaintiff, pending the plaintiff’s payments and taking delivery of the Vessel. In the event that payment was not made the first defendant would have been able to exercise a workers’ lien over the Vessel until payment was made.  That would not be a security interest required to be registered under the PPSA as the PPSA does not apply to such an interest.[48] 
  13. [90]
    I am also satisfied that the proper characterisation of the arrangement between the plaintiff and first defendant whereby the first defendant had possession of the Vessel as it was being constructed was one of bailment, consistent with the principles set out in Hobbs v Petersham Transport Co Pty Ltd; Petersham Transport Co Pty Ltd v ASEA Electric (Australia) Pty Ltd[49] where it was stated:

“A bailment comes into existence upon a delivery of goods of one person, the bailor, into the possession of another person, the bailee, upon a promise, express or implied, that they will be redelivered to the bailor or dealt with in a stipulated way.”

  1. [91]
    The contention by the defendants that there could be no bailment because there was no delivery of possession cannot be accepted.  Constructive delivery is sufficient. As Mason CJ in Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd[50] stated delivery of possession can be effected by constructive or symbolic delivery. In particular, Mason  CJ also relevantly observed that the definition of “possession” did not refer to meaning actual custody, but in its legal or technical sense, and referred to the example of a commodity or chattel incapable of actual physical delivery, except perhaps at great inconvenience and cost such as a yacht, and found that must be capable of constructive or symbolic delivery falling short of actual delivery.[51] 
  2. [92]
    In order to construct the Vessel, the first defendant took possession of it, that right arising under the general law of bailment. While the Vessel was in the first defendant’s possession, the first defendant maintained control over the Vessel with the plaintiff having a mere right of inspection.[52] For the first defendant to meet its obligations under the VCA, the plaintiff granted the first defendant the right to exclusive possession of the Vessel for the purpose of constructing it, and the first defendant as bailee voluntarily assumed possession of the Vessel and assumed obligations to keep it safe.  Consistent with that obligation, cl 17.11 of the VCA provided that the risk in the Vessel remained with the first defendant until the delivery of the Vessel to the plaintiff.  The provision for taking out insurance does not negate such an obligation to keep the Vessel safe. It is supported by the fact that the VCA provided for insurance to be in joint names. Unless the plaintiff failed to make payment, the first defendant would be obliged to deliver the Vessel to the plaintiff upon demand, given the plaintiff maintained ownership of the Vessel.
  3. [93]
    The existence of such a bailment arising under general law is consistent with the fact that the VCA did not explicitly provide for the first defendant having possession of the Vessel until the plaintiff accepted delivery.  Such a gratuitous bailment would not be a security interest to which the PPSA applies. Pursuant to s 8(1)(c) of the PPSA, interests such as those arising out of the operation of bailment under the general law are outside the PPSA.[53]
  4. [94]
    In the circumstances, I do not find that the VCA created a security interest in the plaintiff’s favour that it was required to register on the PPSR.  In my view after title was transferred to the plaintiff on or about 5 October 2017, the relationship between the plaintiff and the first defendant in terms of the Vessel was one of bailment which arose under general law, while the Vessel was constructed in accordance with the VCA.
  5. [95]
    For the reasons set out above, the Deed of Settlement did not supersede or vary the plaintiff’s accrued rights under the VCA. As a result, I do not need to consider the third issue of whether the plaintiff’s registration of a security interest was ineffective although for the sake of completeness I will comment on it briefly below after I consider the fourth issue in relation to s 46 of the PPSA.

Did the plaintiff take the Vessel free of any other security interests pursuant to s 46(1) of the PPSA?

  1. [96]
    The NAB had a registered security interest in 2012 over all present and after acquired property.
  2. [97]
    The defendants denied that the plaintiff would, if found to have owned the Vessel, taken free of the NAB’s security interest because the Vessel was sold in the ordinary course of the first defendant’s business of selling property of that kind such that s 46 of the PPSA applied.  It was not the subject of submission underpinned by evidence from the Defendants. Nor does it appear the NAB contended, otherwise although the meaning of their correspondence was the subject of some disagreement between the parties.
  3. [98]
    Regardless, I am satisfied that the plaintiff presented evidence as to the first defendant’s business which satisfies s 46 of the PPSA,[54] including Mr Hombsch’s evidence of his dealings with the first defendant’s business and how the first defendant portrayed its own business on the website
  4. [99]
    I am satisfied that the Vessel was sold in the ordinary course of the first defendant’s business of selling boats constructed by the first defendant of the kind purchased by the plaintiff and s 46 of the PPSA applies.

Is the plaintiff’s registration ineffective?

  1. [100]
    On 13 March 2019, the plaintiff registered on the PPSR such interest that it might have had that constituted a “security interest” in the Vessel by way of two registrations:
    1. one which contemplated the fully constructed Vessel which is registered in the “watercraft” category.  It is agreed between the parties that this category would only apply if the Vessel had been fully constructed and therefore this does not need to be considered further; and
    2. one which contemplated the partially constructed Vessel in all of its iterations which is registered in the “other goods” category. 
  2. [101]
    The description of the Vessel on the registration in the “other goods” category was as follows:

“Aluminium Power Catamaran (Hull No. MECY20) (the Vessel) in whatever state or form of construction as contemplated by Agreement dated 27.09.17, all equipment in respect of the Vessel whether supplied by the Buyer or the Builder and any other arrangement under or contemplated by the Agreement”

  1. [102]
    The defendants contend the description is seriously misleading within the meaning of s 164 of the PPSA and is therefore ineffective.  Section 164 relevantly of the PPSA provides:

“164 Defects in registration—general rule

(1) A registration with respect to a security interest that describes particular collateral is ineffective because of a defect in the register if, and only if, there exists:

(a) a seriously misleading defect in any data relating to the registration, other than a defect of a kind prescribed by the regulations; or

(b) a defect mentioned in section 165.

(2) In order to establish that a defect is seriously misleading, it is not necessary to prove that any person was actually misled by it.

(3) A registration that describes particular collateral is not ineffective only because the registration is ineffective with respect to other collateral described in the registration.”

  1. [103]
    The defendants contend there were no goods on the site of the first defendant’s premises that fit that description, as there was no vessel which contained the hull number “MECY20”.  The defendants further contends that the “free text words” inserted by the plaintiff described the Vessel as being constructed from September 2017 (more than three years before the second defendant’s appointment as liquidator).
  2. [104]
    According to the defendants, the Vessel as at November 2020 was no more than a shell and it contained plans taped to an inside wall on 27 January 2021 which Mr Lack examined and took photographs of.  The description in the plans was “MEC Robson 525” not MECY20, which is not the description which accords with the description used in the PPSR registration.
  3. [105]
    The PPSA provides for an online system of registration.
  4. [106]
    The purpose of the registration under s 164 was described by Brereton J in Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd[55] (Future Revelation) where his Honour held as follows:

“…The question then is whether it is “seriously misleading”. That term is not defined in the PPSA, nor is there any guidance in respect of its meaning in the explanatory memorandum or the second reading speech. However, as is well-known, the PPSA is modelled on and derived from similar legislation in Canada and New Zealand and, as was observed in Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd [2013] NSWSC 852, the Commonwealth Parliament in enacting legislation that was modelled on the New Zealand and Canadian legislation should be taken to have intended approaches and interpretations applied by the courts of those countries to their legislation to apply in Australia. A similar view has been taken in New Zealand.

Canadian case law suggests that the test for whether a defect is “seriously misleading” is whether it will result in the registration not being disclosed on a search [see Re Lambert (1994) 7 PPSAC (2d); GMAC Leaseco Ltd v Moncton Motor Home & Sales (2003) 227 DLR (4th) 154 at [58]]. That makes sense, as the purpose of registration is to enable the existence of the security interest in the collateral to be searched and ascertained. A person searching in the PPSR is likely to be concerned with the identity of the grantor and/or the collateral. In terms of searching the PPSR, while there is facility to search by reference to the identity of the grantor and the collateral, there is no facility to search by reference to the identity of the secured party.”

  1. [107]
    In Re OneSteel Manufacturing Pty Ltd (Admin Apptd) at [38] the Court stated:[56]

“Alleasing relied on the New Zealand case of Rabobank New Zealand Ltd v Stockco Ltd, in which it was held that a financing statement which included the names of a married couple who operated a farm, rather than the name of their farming partnership, was not seriously misleading, as to the outside world the husband was the farmer. However, in Polymers International Ltd v Toon, Asher J observed that Rabobank had been subject to criticism, and in any event distinguished it on facts much closer to the present: Polymers had registered a financing statement under (NZ) Personal Property Securities Act 1999 (“NZPPSA”) against Interworld as debtor which admittedly failed to comply with the requirements of the NZPPSA, including because it did not include the debtor company’s unique incorporation number. Asher J held that the preferable approach to the question whether an omission was seriously misleading, in the context of a registry which (like the Australian registry and unlike some Canadian registries) only provides returns that exactly match what is entered, was to ask whether the error would prevent a registration being disclosed by a properly formatted search in the relevant searchable field; and consequently that the omission of the company’s number was seriously misleading, as it meant that those who searched the register by company number or through the Companies Office would not discover the relevant financing statement.”

(footnotes omitted)

  1. [108]
    As Brereton further stated in  OneSteel it is not necessary for a defect to be misleading to establish that anyone was in fact misled but rather it is the capacity or potential to mislead that is crucial.[57] While evidence was given by the second defendant and those acting on his behalf being misled by the registered interest, because there was no marking on the hull of the Vessel of MECY20 for the reasons set out below I do not accept that the registration was seriously misleading.
  2. [109]
    In Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd[58] Ward CJ stated it was important to recognise that the PPSA is a “noticed-based” system.[59]  Her Honour also referred to the decision of Brereton J in Re Maiden Civil (P&E) Pty Ltd[60] where the Court referred to the fact that as the PPSA had been modelled on the Canadian legislation and considered the Commonwealth Government would therefore have intended the same approach under the Australian equivalent legislation. Brereton J then referred with approval to the decision of Re Lambert[61] where in the context of the Canadian legislation it was said:

“The purpose of the registration system is to provide enough information to enable a person searching the system to know whom to contact to obtain information regarding a secured transaction. It is for this reason that the registration system is referred to as a notice-filing system.”

  1. [110]
    Her Honour further referred to Brereton J’s judgment in Future Revelation at [6] with approval.  I will therefore apply the objective test applied by Brereton J in Future Revelations.
  2. [111]
    In the present case the defendants’ argument relies on an inspection of the Vessel to establish the description is misleading, rather than the description provided on the register itself and the gap in time from when it was said the Vessel was to be constructed from.
  3. [112]
    The description in the registration correlates with that which is contained in cl 2.1 of the VCA in respect of the Vessel. That description was also used on the invoice of the first defendant for the first instalment.[62]  The register therefore provides a description for the collateral in order to enable it to be identified.  The fact that the description was not on the hull at the time of the appointment of the liquidator does not mean it is not identifiable such that the registration in the Vessel would not be disclosed. The description enables the collateral, namely the Vessel being constructed for the plaintiff to be identified under the agreement dated 27 September 2017, including that the Vessel may only be partially constructed.  The reference to the construction as contemplated by the agreement “dated 27.09.17” is not seriously misleading. It does not state that the Vessel identifies the agreement pursuant to which the Vessel was to be constructed in 2017. The date of that agreement serves as an additional identifying feature of the collateral. 
  4. [113]
    Nor does the fact that there were no markings on the Vessel “MECY20” and a different descriptor was used on the plans that were taped inside the Vessel make the description contained in the registration seriously misleading. The plans do not suggest that description was to be the marking on the hull of the Vessel. The description of the plaintiff together with the fact that the Vessel was being constructed pursuant to an agreement dated 27 September 2017 did not result in the registration not being disclosed and was not seriously misleading. 
  5. [114]
    I am not persuaded the other matters relied upon by the defendants result in the registration being seriously misleading. Given the registration makes clear the Vessel is under construction, even if a registration is seriously misleading can properly arise by subsequent inspection of the Vessel[63], the lack of a marking on the hull bearing the same description would not in the circumstances be seriously misleading. The vessel the subject of the security interest would be ascertainable. Similarly, the fact that the agreement could not be found on the premises does not make the description provided misleading. 
  6. [115]
    Even if I had found that the VCA granted a security interest in the Vessel to the plaintiff, I would not find that the registration was seriously misleading and ineffective by operation of s 164 of the PPSA. As to the question of priority, if the plaintiff did have a security interest, the National Australia Bank’s registered security interests over all of the present and after-acquired property of the first defendant would have priority over the plaintiff’s security interest. While there was some dispute as to the level of the NAB’s indebtedness given my findings it is unnecessary to consider that matter further. 

Issue No. 3 – Is the second defendant liable for damages for conversion and negligent handling of the Vessel?

  1. [116]
    In relation to the claim for conversion, the plaintiff contends after the first defendant’s liquidation on 27 November 2020 the defendants wrongfully withheld possession of the Vessel from the plaintiff and by the actions taken at the direction of the second defendant are liable for conversion. It further contends that the defendants owed a duty of care not to move or store the Vessel in any manner that might allow it to be damaged.

Findings of Fact

  1. [117]
    A number of the facts relevant to the conversion and negligence claim are uncontentious, save for the inspections carried out by the second defendant’s staff members, Mr Ascher and Mr Ghumber and the second defendant’s knowledge of income that may have been available to him in December 2020.
  2. [118]
    On 27 November 2020, the second defendant was appointed as liquidator to wind up the first defendant.
  3. [119]
    After the second defendant’s appointment, the solicitors acting on behalf of the director of the first defendant informed the second defendant that the company was not trading and had no assets of significance.
  4. [120]
    Shortly after the Second Defendant’s appointment, Mr Ascher found from the first defendant’s website that it traded from a unit at the Gold Coast City Marina. Both he and Mr Ghumber agreed that they looked at the website for the first defendant. Mr Ascher stated he read the website to see what the company did, whether it was trading and whether it had assets. Mr Ascher knew that the first defendant allocated descriptions “MEC” with a number to the boats they constructed. He accepted looking at the website in evidence that he now appreciated it showed three boats potentially under construction.  It was also stated to be the first defendant’s principal place of business. The second defendant requested that Mr Ascher and Mr Ghumber attend the premises to obtain books and records, collect assets and identify any employees.
  5. [121]
    On 30 November 2020, Mr Ascher and Mr Ghumber attended the Gold Coast City Marina and were directed to Shed H60 where they were told by people on site that they were employed by the first defendant. They also found evidence that the first defendant was operating from that site. They observed equipment marked “MEC”. They were further told by people who said they were employees that the director had been moving staff and equipment to an alternative work site in Brisbane over the previous year. I accept their evidence in relation to these matters.
  6. [122]
    There were two vessels in the shed. One fibreglass vessel (which was a completed vessel called the “Bossa Nova”) and one shell of a vessel which is referred to in these reasons as “the Vessel”. On 30 November 2020, the first defendant was in possession of the Vessel, and it was stored inside Shed H60.
  7. [123]
    Mr Ascher did not recall being asked by the second defendant to look for a boat referred to as “MECY20”. Nor did he recall asking the director about a boat referred to as “MECY20”. He said the director had told him previously that there were no assets but he did not believe him.
  8. [124]
    Mr Ascher did not see any markings on the outside of the Vessel which I accept, given that is corroborated by other evidence. He gave evidence that he had carried out an inspection inside of the Vessel but did not see any plans on the Vessel. His evidence in this respect was inconsistent and not compelling. He originally said he personally had not inspected the inside of the Vessel but had an agent do it, but then changed when directed to his affidavit where he stated he did a thorough check. When shown the photo of the inside of the Vessel,[64] he could not recall any of the features, including any plans taped inside. While I accept that he had a cursory look inside the Vessel, I find his evidence that he carried out a thorough inspection of the Vessel to be somewhat exaggerated and unreliable. While Mr Ghumber had stated in his affidavit that he had carried out a thorough inspection of the Vessel and could not find any markings on it, he agreed in cross-examination he did not inspect the inside of the Vessel. He was told the vessel was being built for a customer. He agreed the vessel under construction was one of the largest assets at Shed H60 and potentially the most valuable. He also stated it was not until a month after their appointment that he was asked by the second defendant to see if he could locate drawings for “MECY20”, contrary to the second defendant’s evidence. Mr Ghumber gave his evidence in a straightforward and candid way, and I generally accept his evidence in light of the concessions he made.
  9. [125]
    I find that there were plans taped to parts of the inside hull of the vessel which referred to “MEC Robson R552MY” at the time Mr Ascher and Mr Ghumber saw the Vessel in its incomplete state in Shed H60, based on the evidence of Mr Lack who inspected the Vessel on 27 January 2021 and took photographs including of the inside of the Vessel with plans taped to it.[65]  I consider that is the reasonable inference to be drawn given no work was done on the Vessel at least after 27 November 2020 and there is no evidence that the plans were placed after that time nor any reason that they would have been.[66]
  10. [126]
    The second defendant’s evidence was that he did not ask the director about the Vessel even though he agreed that it was the largest of the assets in the shed and potentially the most valuable.
  11. [127]
    Mr Asher spoke to the director by telephone, who agreed to him taking possession of Shed H60 to secure the assets of the first defendant. A solicitor later attended the premises on behalf of the director to raise questions as to the second defendant’s right of possession and he was directed to the second defendant’s solicitor. He subsequently wrote correspondence to the solicitors for the second defendant, requesting that they leave the premises and stating that they were trespassing. The director’s son had also attended and became aggressive when not allowed to go and get tyres which he stated were his property. Subsequently the second defendant hired a security guard and changed the locks to secure the site for seven days. As a result of being told about another site in Brisbane to which assets had been shifted and an uncooperative attitude from the director, the second defendant was concerned about the security of the assets. Solicitors for the owners of Shed H60, being trustees of a trust, which included the director and his wife, sought to take possession of Shed H60 on 1 December 2020.
  12. [128]
    On 1 December 2020, the solicitors for the second defendant wrote to parties with interests registered on the PPSR, including the plaintiff.
  13. [129]
    On 4 December 2020, Broadley Rees Hogan responded stating that:

“…we are instructed to write to you regarding our client’s property, being the incomplete Aluminium Power Catamaran (Hull no MECY20) (Vessel) and all materials and equipment in respect of the Vessel, located at the former premises of the Company at 76-84 Waterway Drive, Coomera.”

  1. [130]
    The second defendant had to deal with a number of competing security interests that had been registered.
  2. [131]
    Various correspondence was exchanged between the second defendant and the representatives of the plaintiff which included the following.
  3. [132]
    On 7 December 2020, the solicitors for the plaintiff wrote to the second defendant enclosing a copy of the VCA, and stating:

“Our client’s ownership of the Vessel and all equipment in respect of the Vessel, supported by our client’s PPSR security interests, is set out in clauses 15 and 17.

Please confirm as soon as possible that the Liquidator does not assert ownership of our client’s Vessel and all equipment in respect of the Vessel on behalf of the [first defendant] and will release the Vessel to our client (or at our client’s direction).”

  1. [133]
    In a letter of 15 December 2020, the solicitors for the plaintiff provided further information requested by the second defendant, including stating that “our client’s PPSR security interests preserve our client’s ownership of the Vessel and all equipment in respect of the Vessel. The security interests do not secure an amount of money”. 
  2. [134]
    On 18 December 2020, the solicitors for the defendants wrote to the plaintiff’s representatives, asserting that the defendants’ position was that the plaintiff “does not have an effective security interest in the Vessel” and that the Vessel had vested in the first defendant under s 267 of the PPSA. I find that no later than 18 December 2020 the second defendant knew that the incomplete Vessel in Shed H60 was the Vessel being constructed for the plaintiff but was acting on the basis title to the Vessel had vested in the First Defendant.
  3. [135]
    On or about 20 or 21 December 2020 the Vessel was shifted outside which came to the attention of Mr Hombsch who informed his solicitor. At about the same time Mr Hombsch had a conversation with Mr Owens where he informed him of the dispute with the second defendant and the second defendant informed him the vessel could be stored at Shed H60 free of charge.
  4. [136]
    On 21 December 2020, the plaintiff’s solicitor wrote to the defendants outlining why it disagreed that the PPSR registrations were ineffective, but stated that the matter was academic since it asserted that the plaintiff was entitled to immediate possession of the Vessel as its legal owner, which it had been since “on or about 3 September 2018”. It contended that once the plaintiff became the legal owner of the Vessel it did not have a security interest in the Vessel and the first defendant was a bailee for the purpose of construction. It contended that the first defendant lost its right to possession of the Vessel for that purpose when the first defendant went into liquidation.  The letter further stated:

“Our client wishes to exercise its right to immediate possession of the Vessel. Any conduct by your client that interferes with this right will be a basis for a claim in conversion.

…

In the meantime, please be advised that we anticipate receiving instructions from our client to take possession of the Vessel in January 2021 and we will provide you with 7 days’ notice prior to any such action being taken. “

  1. [137]
    In an email sent on 22 December 2020, at 12:35pm, the defendants (by their solicitors, Thynne & Macartney) again asserted that under the Deed of Settlement, the retention of title held by the plaintiff in the Vessel until payment of $1,550,000 “operated as “in substance” a security interest because it was, either, a conditional sales agreement…or because it was a consignment”, and that that security interest secured obligations owed to the plaintiff by the first defendant for payment of $1,550,000. The email further stated that “In addition, or alternatively, the agreed sale of the vessel through [the first defendant] was a commercial consignment”. It maintained that the plaintiff’s PPS registration was ineffective, and that the Vessel vested in the first defendant.  It stated that the second defendant agreed not to deal with the Vessel until 18 January 2021.
  2. [138]
    In the 3:29pm email on 22 December 2020 from the plaintiff’s solicitor (Mr Rees of Broadley Rees Hogan), the plaintiff informed the defendants that contrary to the undertaking that they had sought, the Vessel appeared to have been moved out of the shed into the open and exposed to the weather. Concern was expressed that significant water damage may be sustained from water. That was stated to be because the Vessel was partially fitted out and that significant water damage will be sustained by water ingress and that that would compromise the work done to date, including the fit out. The email records that “Mr Owen on behalf of the owners of the previous premises has given my client permission to store the vessel at H60, Gold Coast City Marina free of charge pending further investigations being made. I note your concern about the Vessel being moved without your clients’ consent. Surely, arrangements can be made with the owners of H60, for the secure watertight storage of the Vessel to your client’s satisfaction.” I accept Mr Hombsch’s evidence that Mr Owens had given him such permission orally. I considered him an honest witness and accept the evidence he gave.
  3. [139]
    In response to Mr Rees’ email, at 3:51pm, the solicitors for the defendants stated that the second defendant had moved the vessel because of the refusal of the trustee to allow ongoing occupation and that they wished third parties to have access to the shed. It stated that “without any admission” they would “inform the liquidator of concerns about weather damage”. The letter also stated that “the liquidator asserts exclusive possession”.
  4. [140]
    The second defendant and Mr Ascher took steps to be able to identify the assets of the first defendant and arranged for them to be auctioned given the uncertainty surrounding their ability to access Shed H60.
  5. [141]
    Assets were auctioned off by Global Business Auctioneers & Valuers with a sales campaign between 11 December 2020 and 21 December 2020.
  6. [142]
    On 17 December 2020 the solicitors for the trustees subsequently warned the auctioneers engaged by the second defendant to auction assets that they had no right to be at Shed H60 unless the second defendant negotiated access arrangements. A licence was never agreed between the trustee and the second defendant, but the second defendant negotiated an arrangement where he had access to Shed H60 until 31 December 2020.
  7. [143]
    According to Mr Ascher, the Vessel was one of the last items moved on or about 20 December 2020 out of Shed H60 onto a hardstand outside because it required machinery to move and could not be transported easily.
  8. [144]
    According to the second defendant:
    1. the license to occupy the shed expired on 31 December 2020 and he would lose access to Shed H60 and to the Vessel after that date;
    2. the Vessel was moved to accommodate access to other assets inside Shed H60;
    3. he was concerned about the potential loss of assets of the company given the difficulties in dealing with the trustee’s solicitors and that the director had another boat yard in Brisbane;
    4. he trusted the Gold Coast City Marina to ensure the Vessel was safe on a hardstand and secured;
    5. he had been advised that the Vessel was not saleable in any identifiable market and was not worth much more than the scrap metal value;
    6. he only had 2 options for storage outside Shed H60, one for inside storage at $225 per day and an outside storage option at $137.50 per day; and
    7. he was unsure how long it would need to be stored. If a short time, then the Vessel would not be exposed to the weather for too long, and if for a long period the cheaper storage would mean that limited funds in the liquidation could be preserved to cover other expenses.
  9. [145]
    In cross-examination the second defendant:
    1. stated his understanding was that the Vessel was the last thing to be moved out of Shed H60, refuting the notion it was to give access to other items. That was consistent with Mr Ascher’s evidence, and I find that was the position;
    2. agreed that he could have sought undertakings from the owner to maintain access to Shed H60 or sought an injunction or a warrant under s 530C of the Corporations Act 2001 (Cth) (Corporations Act), although he had not explored or considered any of those options;
    3. he had an agreement to occupy Shed H60 until 31 December 2020 and accepted if there was no document evincing a request being made for further occupation at Shed H60 it would not have been made. He also agreed he was not under great pressure from the director of the first defendant to move the Vessel and it was his decision to do so, although it is clear from the second defendant’s evidence he was concerned about the longevity of the arrangement with the director;
    4. accepted that it would be easier to move the vessel when it was shifted outside of Shed H60 onto the hardstand;
    5. he was aware that rainwater could get inside the boat if it was moved outside and that he had instructed his agent to place the tarpaulin over it in January or February and it was done in late February 2021. He did not take any steps to protect the Vessel from rainwater when it was moved outside or when he was informed of the plaintiff’s concerns when they shifted the boat outside on or about 22 December 2020. He appreciated that there were still openings not covered after the tarpaulin was placed but gave no further instructions to take any action. I find he did not take any such steps until the end of February 2021.
  10. [146]
    While the second defendant was defensive and sometimes evasive in his evidence and on occasion, I found had reconstructed some events in the most favourable way to his case such as saying he directed Mr Ascher to look for markings “MECY20” on the Vessel when he was going to Shed H60, I accept his evidence to the extent I have set out.
  11. [147]
    As to the amount of funds available to the second defendant, that was a source of contention. The evidence showed that:
    1. there was at least $65,000 available from the sale of the Bossa Nova in the CBA account as at 23 December 2020, which had been previously agreed to, so the second defendant knew it was forthcoming;
    2. Global Business Auctioneers & Valuers were selling plant and equipment, with an on-line auction for items at Coomera closing 21 December 2020;
    3. Global Business Auctioneers & Valuers were selling vehicles, with an on-line auction for vehicles at Eagle Farm closing 23 December 2020;
    4. Global Business Auctioneers & Valuers was doing work on credit, such as the (ineffective) covering of the Vessel in February 2021; and
    5. Global Business Auctioneers & Valuers stated on 14 January 2021 that the expected net pay out was $92,008.46.[67]
  12. [148]
    The second defendant therefore had available at least $65,000 plus $92,008.46 once paid, in cash, as at January 2021.
  13. [149]
    While the second defendant stated that on the date when the Vessel was moved, which was sometime after 20 December 2020, the liquidator had no funds, he must have been aware that he would not only have receive the funds from the Bossa Nova but the auction in amounts of approximately $65,000 plus $92,008.46, in cash in a relatively short time afterwards.  The second defendant accepted that he would have been able to inquire on 21 or 22 December 2022 what the results of the auction were and ascertained sufficient funds were coming in to cover the Vessel storage. I find that the second defendant was aware he would have funds from the Bossa Nova Settlement and the auction of assets of the First defendant that would be available to him on or about the time that the Vessel was shifted.
  14. [150]
    While Mr Ascher did the deal with Mr Parkinson in relation to the Bossa Nova, I found him very evasive in his evidence as to how the agreement with Mr Parkinson was recorded, which he stated would have been a settlement deed of some sort. no document was produced. He subsequently stated that he did not recall what the nature of the agreement was and then said in all likelihood he would have made a file note of the arrangement reached. He could not recall why Mr Parkinson paid $65,000 for a release of the boat he owned. His evidence was more reflective of someone who refused to be pinned down without being presented with a document rather than just having a lack of recollection, although I accept his recollection was impaired to some extent by the passing of time. Subsequently a settlement deed was produced.[68]  He accepted the settlement deed was the culmination of the negotiations and thought the agreement would have been reached between 2 December 2020 and when the deed was ultimately signed, which was on 23 December 2020. It is a reasonable inference that the settlement was negotiated at least 2-3 days prior to 23 December 2020 in sufficient time for a settlement deed to be prepared.
  15. [151]
    On 13 January 2021, the plaintiff’s solicitors asked for confirmation that their client could take possession of the Vessel at a mutually agreed time. That was not confirmed, and proceedings were issued in February 2021.

Conversion

  1. [152]
    The plaintiff contends that the defendants have acted in defiance of the plaintiff’s rights by their continued detention of the plaintiff’s Vessel, as perpetuated through their solicitor’s correspondence, particularly the letter dated 18 December 2020 as well as their denial in these proceedings of the plaintiff’s entitlement to possession. The defendants’ defence was based on no ownership in the Vessel having passed or at best having a second ranking security interest for the purpose of the PPSA. The defendants further assert that even if the plaintiff was an owner entitled to immediate possession of the Vessel, the second defendant as liquidator did not convert the asset while there remained multiple claims upon it.
  2. [153]
    I have found above that title in the Vessel passed upon the payment of the first instalment as provided under the VCA.
  3. [154]
    In Brybay Pty Ltd (in liq) & Ors v Esanda Finance Corp Ltd[69] (Brybay) McLure J summarised the relevant principles as follows:[70]

“Conversion involves dealing with goods or chattels in a manner repugnant to the immediate right of possession of the person who has the property or special property in them: Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 at 229; Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87 at par 162.

There must be an intentional dealing with the goods and that dealing must impair the plaintiff's rights to them. However, there is no requirement that the defendant should intend to deny the plaintiff's right to the goods: Rendell v Associated Finance Pty Ltd [1957] VR 604; Fleming J G, "The Law of Torts" 9th ed, LBC Information Services, Sydney, 1998 at 62.”

  1. [155]
    Given I have found that the plaintiff did have a right of ownership in the Vessel, the action of the liquidator of the first defendant in denying the plaintiff’s entitlement to possession after its solicitors had requested arrangements be made for it to obtain possession prima facie constitutes conversion.
  2. [156]
    There is evidence as to there being multiple claims made by creditors who had lodged notice of security interests in relation to the first defendant’s property.[71] I accept that the second defendant needed a reasonable time to review the claim of the plaintiff and during that time the detention of the Vessel did not constitute a dealing with the Vessel in a manner repugnant to the immediate right of possession of the plaintiff. To that end they requested and were provided with documentation including the VCA, the Deed of Settlement and the Supreme Court pleadings.
  3. [157]
    The defendants were clearly put on notice of the plaintiff’s claim to ownership of the Vessel in December 2020. If a party has doubt as to title, they are entitled to seek advice and investigate the competing claim(s), however only a reasonable time to investigate is permissible.[72]  In the present case, the plaintiff set out in detail its arguments as to its entitlement and provided relevant documentation. Upon making investigations the second defendant asserted through his solicitor on 18 December 2020 and further on 22 December 2020 that title had vested in the first defendant and that the second defendant was entitled to deal with the Vessel, but agreed not to do so before 18 January 2021. Having had a reasonable time to investigate the position, the correspondence of 18 December 2020 and 22 December 2020 made clear assertions denying the plaintiff’s title and asserting the right of the second defendant to exercise rights over the Vessel, in the face of the letter from the plaintiff’s solicitor stating the plaintiff wished to exercise its right to immediate possession. That remained the position. I consider that by 18 December 2020 and no later than 22 December 2020, the second defendant as liquidator of the first defendant treated the goods as if they were vested in the first defendant and could be dealt with by the second defendant as part of the liquidation, having denied the plaintiff’s claim for immediate possession and asserted the second defendant’s entitlement to deal with the Vessel, and was liable for conversion.[73]
  4. [158]
    I note that the relief sought by the plaintiff is against both defendants. No specific issue was raised in the defence or in the submissions arising out of the second defendant acting as agent of the first defendant and his individually liability. I note that although factually different, damages were ordered to be paid for conversion by the liquidator and the company in liquidation in Hunter Wholesale Confectioners Pty Ltd (in liq) v Sweeties Confectionery Pty Ltd[74] even though the court noted that the liquidator was acting as agent of the company in acting as he did.  The actions of the asserting title over the Vessel on behalf of the First Defendant and an entitlement to deal with the Vessel as well as the physical act of shifting the Vessel were actions done at the behest of the second defendant. On that basis I will order damages for conversion be paid by both the first and second defendant.
  5. [159]
    I will deal with the quantification of damages below.

Negligence

  1. [160]
    The plaintiff contends that the second defendant owed it a duty of care in respect of its dealings with the Vessel and breached that duty by shifting the Vessel out into the open. 
  2. [161]
    The defendant contends that given a liquidator operates within the context of a statutory regime, in particular where obligations are imposed pursuant to ss 180, 182, 474, 478, and 479(4) of the Corporations Act and that a liquidator has the benefit of s 545, no duty of care was owed to the plaintiff.  According to the defendant, it would create uncertainty and dispute should a liquidator owe a further duty of care as claimed by the plaintiff to each person claiming ownership of the property and also conflict with the duty of identification and gathering in of assets. 
  3. [162]
    It has been recognised that a liquidator owes a duty of care in certain circumstances in the discharge of his or her duties to the company in liquidation outside the statutory duties imposed under the Corporations Act however its scope is an area of the law which remains clouded by uncertainty. Although the plaintiff directed the Court to cases showing the potentially broader scope of duties imposed upon a liquidator at common law, none extended to impose a duty in similar circumstances in the present. As the plaintiff properly conceded the duty sought to be imposed is in a novel category.
  4. [163]
    In Sydlow Pty Ltd (in liq) v TG Kotselas Pty Ltd & Ors[75] (Sydlow), Tamberlin J refused to grant summary judgment in relation to a claim that a liquidator had breached a duty of care in failing to take steps to recover assets transferred to a third party.  Tamberlin J refused the application, noting that liquidators can be liable in an action at common law for failure to exercise due care and skill in the performance of their duties and that there is no force in the submission that there are a range of statutory and equitable remedies available to companies agreed by the actions of a liquidator, such that the company would be no better off having a concurrent or additional right to sue at common law.[76]
  5. [164]
    In Maelor Jones Investments (Noarlunga) Pty Ltd & Ors v Heywood-Smith[77] (Maelor), Olsson J found that a liquidator owed a duty of care in an action brought by the trustee of all contributories of the company in liquidation and parties claiming to be creditors of the company, in appointing a person of limited experience to deal with real estate without any enquiry as to their experience or competence.  In particular, Olsson J in his discussion as to whether a duty of care was owed, stated that it depends upon the circumstances of the case and will more likely be found to exist where a decision is an operational one.[78] The court noted that if the liquidator was faced with a position of conflict in relation to the duties imposed upon him or her, they should revert to the court and take directions.[79] Notably his Honour draw a contrast between operational decisions which the decision to shift the vessel would have been and discretionary decisions require a  liquidator to exercise close judgment.[80]. His Honour observed that a duty of care would be more likely to be found to arise in the former situation rather than the latter.
  6. [165]
    In Pace v Antlers Pty Ltd (in liq)[81] (Pace), Lindgren J held that a liquidator must exhibit care (including diligence) and skill to an extent that is reasonable in all the circumstances.  In that regard he considered all the circumstances “will include the facts that a liquidator is a person practising a profession, that a liquidator holds himself or herself out as having special qualifications, training and experience pertinent to the liquidator’s role and function, and that a liquidator is paid for liquidation work.”[82]  He also considered that there are circumstances that may arise because some decisions and courses of action which a liquidator is called upon to consider will be of a business or commercial character, as to which competent liquidators acting with due care may have differences of opinion.[83] An action was brought by two contributories which in part asserted that the liquidator had breached his duty of care to the company.  In that case, his Honour held that the liquidator owed a duty of care to the company in relation to the payment of income tax when he had sufficient funds payable.
  7. [166]
    In Perpetual Nominees Limited v McGoldrick & Anor (No 3)[84] (McGoldrick) Vickery J considered a claim made by guarantors of a company placed into administration and then liquidation, alleging that the liquidator had breached a duty to obtain the best possible price for property.  Vickery J found that the liquidators owed a duty of care to the guarantors to sell the company’s property acting in good faith and with due care and skill to the extent that was reasonable in all the circumstances.  Given the claim was for economic loss, Vickery J had regard to the requirements set out by McHugh J in Perre v Apand Pty Ltd[85] and Woolcock Street Investments Pty Ltd v CDG Pty Ltd [86] as well as Brookfield Multiplex Limited and Owners Corporation Strata Plan 61288 & Anor[87] and Marsh v Baxter.[88]  Having regard to the indeterminacy of liability, knowledge of the risk and its magnitude, vulnerability, individual autonomy, proximity and inconsistent duties, his Honour concluded that the liquidators owed a duty of care to the guarantors.
  8. [167]
    The decision in McGoldrick has not been accepted as being of broad application. It was subsequently considered by the South Australian Supreme Court in Macks v Viscariello[89] (Macks). Although dealing with the question of whether an administrator owed a fiduciary duty to individual creditors, the Full Court in Macks  noted with approval the observation of Debelle J in Mills v Sheahan[90] (Mills) which was considered by Vickery J in McGoldrick, where his Honour observed that there was no inconsistency in imposing a duty of care on the liquidator as the plaintiffs and company creditors and shareholders shared a common interest in the liquidator obtaining the best price reasonably available for company assets. Consistent with the primary Judge[91], the Full Court agreed that the recognition with the imposition of a duty in favour of individual creditors may be inconsistent with the statutory scheme and the primary Judge’s observations that:[92]

“It is manifestly inconsistent with the statutory regime of the Corporations Act regulating the duties of voluntary administrators to superimpose upon it a common law duty of care owed by the administrator to individual creditors, directors or shareholders to protect them from financial loss by the exercise of reasonable care in discharging his or her statutory powers affecting the form in which the company will continue to operate or, alternatively, whether it will be wound up. That inconsistency is at its greatest when an administrator must form an opinion and frame a recommendation to the creditors, about whether to trade on, enter into a deed of company arrangement, sell the business and/or wind up the company.”

  1. [168]
    In Seaman v Silvia[93] Justice Derrington followed the decision of the Full Court in Macks. The Full Court referred with approval to the decision of Barrett J in Hausmann v Smith[94] where his Honour stated that “duties owed by administrators and liquidators are not duties owed to shareholders or to creditors.”[95] More recently Rees J in Aardwolf Industries LLC v Riad Tayeh[96] (Aardwolf) considered the question of whether liquidators owed duties to third parties. In that case the core allegation was said to be that if the liquidators did not exercise due care and skill in ascertaining what the assets of the companies were when appointed as liquidators of two companies related to the plaintiffs,[97] then the liquidators may purport to sell assets which they thought the companies were entitled to sell, but in fact the companies were not so entitled.[98] It was alleged the liquidators had breached the duty by selling trademarks to which the plaintiff was entitled to use, to their trade rivals.[99]
  2. [169]
    Her Honour did not consider there was any real prospect that the plaintiffs would be able to establish a duty of care as they lacked the vulnerability which they contended formed the basis of that duty,[100] noting that the plaintiffs’ vulnerability was different from that in Mills or McGoldrick and refused leave to sue the liquidator.[101]
  3. [170]
    As recognised by the plaintiff in the present case, they seek to establish a duty of care which is a novel one. Although Counsel for the plaintiff referred to the cases of Sydlow, Maelor and Pace to demonstrate that the Courts have been prepared to go some way towards imposing a duty of care upon a liquidator, the present case extends beyond those cases and is in some respects is more analogous to a duty of care to an individual creditor which to date has not been found to be owed by a liquidator.[102] While that may be accepted, the further authorities to which I have referred to above demonstrate that the decisions do not support the imposition of a duty to individual creditors or third parties such as those considered in Aardwolf.
  4. [171]
    The salient features by which to assess whether a legal duty to take reasonable care to avoid harm or injury exists were helpfully set out by Allsop P in Caltex Refineries (Qld) Pty Ltd v Stavar:[103]

“…If the circumstances fall within an accepted category of duty, little or no difficulty arises. If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by references to the “salient features” or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury.

These salient features include:

  1. the foreseeability of harm;
  1. the nature of the harm alleged;
  1. the degree and nature of control able to be exercised by the defendant to avoid harm;
  1. the degree of vulnerability of the plaintiff to harm from the defendant’s conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself;
  1. the degree of reliance by the plaintiff upon the defendant;
  1. any assumption of responsibility by the defendant;
  1. the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant;
  1. the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff;
  1. the nature of the activity undertaken by the defendant;
  1. the nature or the degree of the hazard or danger liable to be caused by the defendant’s conduct or the activity or substance controlled by the defendant;
  1. (k)
    knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff;
  1. (l)
    any potential indeterminacy of liability;
  1. (m)
    the nature and consequences of any action that can be taken to avoid the harm to the plaintiff;
  1. (n)
    the extent of imposition on the autonomy or freedom of individuals, including the right to pursue one’s own interests;
  1. (o)
    the existence of conflicting duties arising from other principles of law or statute;
  1. (p)
    consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and
  1. (q)
    the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law.”
  1. [172]
    As was emphasised by Allsop P and the other members of the Court, the above features are not exhaustive of the universe of considerations and nor do all have to be present for the Court to conclude a duty of care is owed.[104]
  2. [173]
    In the present case, there are a number of features which favour the imposition of a duty of care, namely:
    1. the imposition of a duty would not give rise to the opening of floodgates. The scope for liability would be reasonably confined to persons who had claims of ownership to property in the possession of the company to which the liquidator was appointed;
    2. the decision whether or not to shift the vessel was not a complex decision although I accept the liquidator had to consider the allocation of resources in making his decision;
    3. the second defendant knew of the risk and its magnitude to the Vessel if it was not stored properly, as he knew the Vessel was half complete, was aware there was timber inside the Vessel and that there were large holes in the Vessel, and had been informed by the plaintiff of the potential damage that could be caused to the Vessel when shifted outside and exposed to the inclement weather, in particular rain;
    4. given the state of the Vessel it was reasonably foreseeable that the Vessel would be damaged internally if exposed to the weather, particularly rain, and could cause the plaintiff loss;
    5. as to proximity, it is not a feature which is generally regarded as providing a test for the imposition of a duty of care although regard may be had to it.  In the present case, given the second defendant had been put on notice as to the claim by the plaintiff of ownership of the Vessel, the second defendant knew that if the Vessel was damaged that could reduce the value of the Vessel;
    6. a liquidator could have disclaimed the Vessel under s 568 of the Corporations Act, which permits a liquidator to disclaim property that is not readily saleable or might give rise to liability to pay or some other onerous obligation or where the costs, charges and expenses that would be incurred in relation to realising the property could exceed the proceeds of realising the property;
    7. as to whether there were inconsistent duties between the statutory duties the second defendant owed to protect and preserve assets, but also not be exposed to the risk of costs where there are not sufficient available assets to meet the expenses, in the latter instance the second defendant would be protected by s 545 of the Corporations Act.
  3. [174]
    However, there are factors which militate against the existence of such a duty of care, namely:
    1. the degree of reliance of the plaintiff upon the second defendant to exercise reasonable care and the assumption of responsibility by the second defendant was limited. While the plaintiff had sought to inform the second defendant’s solicitors of the potential risk and requested undertakings that Vessel would be protected from the weather, the solicitors for the second defendant said that they would pass the concern on but did not give any assurance steps would be taken to protect the Vessel;
    2. the liquidator is given statutory duties and powers under the Corporations Act when discharging his duty as an officer of the Court, including:[105]
      1. (i)
        the liquidator was under a statutory duty to take into custody or control all the property which was, or which appeared to be property of the company, and applied to discharge the company’s liability;[106]
      1. (ii)
        being subject to duties imposed by s 180 to s 182 of the Corporations Act;
      1. (iii)
        not being obliged to incur expenses without sufficient available property under s 545 of the Corporations Act.
      1. (c)
        there were competing claims in relation to the property of the first defendant and even with funds becoming available relatively limited funds;
      1. (d)
        the plaintiff was not in a position of vulnerability as are creditors, shareholders, guarantors or subsequent security holders in relation to the sale of assets of a company in liquidation, which is within the total control of the liquidator. Although control of the Vessel had been taken by the second defendant, the plaintiff could have taken injunctive action to preserve the Vessel pending the litigation or .
  4. [175]
    In the circumstances specific to this case, I do not consider that the second defendant did owe a duty of care to the plaintiff to exercise reasonable care in the storage of the Vessel to avoid damage from inclement weather. Even though I do consider that the second defendant could have anticipated that there would be funds available to pay for the storage and that his decision to shift the Vessel outside with no protection and later to have it covered with a tarpaulin which still left the Vessel open to ingress by water is difficult to comprehend, the competing statutory duties to other creditors and parties asserting an entitlement to be paid from the company property and the fact that the plaintiff could have taken steps to protect themselves from the consequences of any want of due care by the liquidators militate against the existence of such a duty of care.

Breach of duty

  1. [176]
    Notwithstanding that I find there is no duty of care I set out briefly my findings as to whether, assuming there was such a duty of care to exercise reasonable care in moving the Vessel to avoid it being damaged, there was a breach of that duty. The alleged breach of duty is moving the Vessel into the open on or about 20 or 21 December 2020 and exposing it to the elements without any protection.
  2. [177]
    In considering whether there is a breach of duty, s 9 of the Civil Liability Act 2003 (Qld) (CLA) applies.
  3. [178]
    At the time of the breach, the second defendant:
    1. knew the Vessel had openings that would allow rainwater to penetrate the interior;[107]
    2. knew through Mr Ascher, that the interior of the Vessel had a partial plywood fit out;[108]
    3. was put on notice by the plaintiff’s solicitor that the Vessel was “partially fitted out and that if it is not stored in watertight premises, significant damage will be sustained by water ingress which … could compromise certified works to date and the fit out”;
    4. knew the charge for storing the Vessel outside Shed H60 was $137.50 per day, whereas undercover storage was $225 per day, a difference of $87.50 per day;
    5. knew the first defendant would be receiving funds from the auction of various assets of the company by Global Business Auctioneers & Valuers sometime in January 2021 and $65,000 from a settlement with the owner of the Bossa Nova in December 2020;[109]
    6. received the $65,000 on 23 December 2020;
    7. knew that the NAB had a superior security interest to any security interest held by the plaintiff in the Vessel and had reserved its rights in that regard if the Vessel was part of the first defendant’s assets, although the NAB had indicated it had no claim if in fact the plaintiff owned the Vessel; and
    8. knew he had no agreement with the trustee of Shed H60 to store the Vessel in the shed after 31 December 2020, although the director of the first defendant had told the plaintiff’s director it could remain in Shed H60 free of charge until further arrangements could be made.
  4. [179]
    The second defendant was obliged to act in the best interests of the first defendant and creditors in carrying out his duties. If the second defendant paid for storage costs of the Vessel, that would have been recoverable from the assets of the first defendant in liquidation and possibly on the basis of a lien. While I accept that the director of the first defendant indicated the Vessel could remain in Shed H60 pending further arrangements, I find that there was no longevity in any arrangements made with the trustees of Shed H60, making it reasonable for the second defendant to consider the Vessel had to be secured in alternative arrangements to retain possession and control of the Vessel.
  5. [180]
    The second defendant took no steps to prevent water ingress from the boat until late February 2021, which he knew did not fully protect the Vessel from water ingress.[110] However, the difference between the amount of undercover storage and storage on a hardstand outside was $87.50 a day. If the additional cost proved to be unsustainable due to the time the dispute remained unresolved, the liquidator could have taken steps to make alternative arrangements or seek directions from the Court. Further, even if it had been determined that the additional storage costs were not appropriately incurred by him in the circumstances, the second defendant could have taken reasonable steps to ensure the Vessel was properly covered to ensure it was watertight. The cost of obtaining and having the Vessel partially covered with one tarpaulin had been $2,329.28.[111] Even if one doubled that in the context of ensuring protection and minimising costs, that was not a significant amount compared to what the second defendant could reasonably anticipate receiving, even taking account of competing claims. The second defendant’s actions were somewhat cavalier in the face of a claim by the plaintiff asserting full ownership of the Vessel such that if it was upheld it would not form part of the assets of the first defendant.  While he had some advice that the Vessel was worth scrap value it did not appear to be considered advice which could be reasonably relied upon.
  6. [181]
    In the circumstances:
    1. the risk of damage to the Vessel by leaving it exposed to the weather was foreseeable, which was known or in the circumstances set out above should reasonably have been known by the second defendant;
    2. the risk was not insignificant, as the Vessel was not waterproof, and was susceptible to damage, given that there was a partial fit out which included timber;
    3. in the circumstances, a reasonable person in the liquidator’s position would have taken precautions to ensure the Vessel was kept in a waterproof state, whether that was storing it undercover or placing tarpaulins over it that covered all of its exposed areas, such that no rainwater could enter the Vessel and cause damage to it;
    4. the probability and likely seriousness of the harm materialising was moderate given the exposure of the interior fit out; and
    5. the burden of taking precautions was relatively low in comparison to the damage that could have, and did, materialise. Further, the burden would have been mitigated by the second defendant being able to recover the reasonable storage and preservation costs pursuant to a lien.
  7. [182]
    If a duty of care had been owed by the second defendant, I consider it would have been breached by the second defendant in failing to take reasonable care to take precautions against the risk of harm to the Vessel when shifted from Shed H60.
  8. [183]
    Even if the assessment of a breach of duty was made having regard to the subjective assessment of the second defendant’s actions, as the defendants contended, which I do not consider is a correct statement of the law, my decision in the circumstances set out above would not be any different.
  9. [184]
    In final submissions the second defendant claimed the Court should grant him relief under s 1318 of the Corporations Act. That had not been pleaded by the second defendant and the plaintiff opposed it being raised in closings. The plaintiff contended it was prejudiced because one of the matters to be considered by the Court in assessing whether such relief should be given is whether advice was taken and relied upon in the exercise of the Court’s discretion,[112] and that was not the subject of the evidence, notwithstanding the considerable amount of correspondence between the plaintiff’s solicitors and defendants’ solicitors, nor was it the subject of disclosure. Honest action alone is not sufficient to justify relief.[113] In my view the plaintiff’s contention is well founded and I would decline to allow the second defendant to raise the defence in closings absent a proper pleading and disclosure.

Damages

  1. [185]
    The measure of damages for conversion is the value of the Vessel, which is normally the market value of the Vessel, to be assessed at the time of conversion.[114] Consequential loss may in appropriate circumstances be awarded. However, the overriding principle in tort is that the injured party should receive compensation in a sum which, so far as money can do so, will put them in the same position as if the tort had not been committed.[115]
  2. [186]
    The Vessel was sold in its incomplete state for $530,000 on 15 September 2021.
  3. [187]
    Although the pleaded claim is for $570,000 based on a market value of $1,100,000[116] less the sale price of the Vessel, the plaintiff in its submissions contends it is entitled to damages in the sum of $210,207.60 plus GST, which is $231,228.36.[117] That is based on the estimate of costs of repair by Mr Billett to put the boat back into the condition it was before it was damaged. Mr Lack provided a report recording the damage observed to the Vessel by water when he inspected it on 27 January 2021. The plaintiff contends that was supported by Mr Seiffert insofar as he stated there was a $225,000 difference between the damaged Vessel and the undamaged Vessel.
  4. [188]
    The defendants claim the value of the Vessel at the date it was moved out of Shed H60 was at best $550,000 according to what they say is the only evidence on that issue. It was eventually sold for $530,000 so that the maximum claim for damages that could be sought is the shortfall of $20,000. As to the contention that the defendants are liable for the costs of repairs, the defendants further contend that the priming and fairing had to be redone in any event because they were outside the 90 day warranty, and those costs therefore cannot be attributed to the ingress of water, notwithstanding Mr Lack in his report noted that the epoxy primer (which had a 90 day warranty) and fairing had been damaged as a result of being stored outside, requiring that the coat be sanded back and re-done. This was the subject of objection as it was not a matter that had been pleaded.
  5. [189]
    Evidence was called from Mr Lack, Mr Billett and Mr Seiffert.
  6. [190]
    Mr Lack is a Marine Surveyor who inspected the Vessel on 27 January 2021 at the request of the plaintiff. He observed the state of the Vessel, and the areas open to water ingress, took photographs and noted damage by water. In his evidence he stated that he had driven past the Vessel when it was raining and could see rain entering through the side window that was open. In addition to Mr Lack identifying the damage to the epoxy primer and fairing in his survey report of 28 January 2021, he found that as a result of the exposure to rain the internal plywood and timber would all have to be removed. He noted that as a result of adhesive fastening it was likely during removal the timber/plywood fit out would be largely destroyed. Photos taken by him show significant ponding of water in the deck store, saloon and flooding in the engine room.
  7. [191]
    Mr Lack was a straightforward witness and I accept his evidence.
  8. [192]
    Mr Billett estimated rectification costs. He was a professional Marine Captain and then qualified as a Marine Engineer. He inspected the Vessel on 24 February 2021. He prepared an estimate of costs. Based on his review of the report prepared by Mr Lack, he noted he had not included any cost for welding off the keel welds to transport the Vessel by road. He noted the repairs could not be done to the Vessel without it being shifted.  He estimated the costs to restore the Vessel to the condition it was in before it was moved was between $202,046.40 to $210,207.60 plus GST. Mr Billett agreed that he differed from Mr Lack insofar as he considered that fairing had been done to 75 per cent of the Vessel whereas Mr Lack considered it was only 10 per cent.
  9. [193]
    Mr Seiffert, a valuer who holds a certificate in Vessel Valuation from Lloyd’s Maritime Academy, also gave evidence. He was originally instructed by the plaintiff but called by the defendants to give evidence. According to his report, if the Vessel had been sold in the state it was in as at the date of inspection in June 2021 the estimated fair market value would have been $325,000. If it had not been removed from indoor and watertight premises its estimated value would have been $550,000. When told of the price for which the Vessel had sold for in September 2021, namely $530,000, he stated that the market at that time was particularly strong and considered the price to be a premium price. He agreed that the difference in value between the Vessel in its current state and in its undamaged state was $225,000.
  10. [194]
    A condition report of Mr Cummings, a Marine Surveyor, who commented on the condition of the Vessel and the reports of Mr Lack and Mr Billett was admitted into evidence.[118]  Other than confirming water damage when he inspected the Vessel in July 2021 and that the Vessel had openings where rain entered the Vessel, his report provided little assistance.
  11. [195]
    While Mr Seiffert’s fair market value had a difference of $225,000 between the Vessel in its damaged state as opposed to what its value would otherwise have been if it had been kept watertight, I am not satisfied that the fair market value of the Vessel was more than $550,000. Mr Seiffert had a logical and feasible explanation as to why he considered the price the Vessel sold for in September 2021 was a premium price rather than reflecting fair market value. While the plaintiff points to the difference being similar to the estimated value for repairs by Mr Billett, the difficulty with that argument is Mr  Billett’s report values the repairs that he considers had to be done as well as relocation costs to carry out such repairs, but does not equate the cost of repairs to market value, nor on the evidence before me was that established as being a proper measure for the fair market value in the undamaged state.
  12. [196]
    I therefore find that the value of the Vessel at the date of conversion was $550,000. The price the Vessel sold for was $530,000 leaving the amount of damages to be paid to be $20,00.
  13. [197]
    The parties should provide orders to reflect the payment of monies maintained in trust accounts of the plaintiff and defendants’ solicitors after the sale of the Vessel and the difference of $20,000.

Lien

  1. [198]
    The second defendant does not claim a lien arises if the Court finds ownership in the Vessel passed to the plaintiff.[119] This issue only arose for determination in the event that I determined that the plaintiff did own the Vessel and declined the declarations sought in that regard. As the plaintiff has been successful the second defendant is not entitled to a lien. It is unnecessary for the Court to address the question of a lien further.

Conclusion

  1. [199]
    The plaintiff has been generally successfully in establishing the relief sought in its Further Amended Claim.
  2. [200]
    In answer to the issues that have to be determined:
    1. the plaintiff did have an interest in the Vessel notwithstanding the entry into the Deed of Settlement;
    2. the plaintiff’s ownership of the Vessel was not a security interest within the meaning of s 12(1) of the Personal Property Securities Act 2009 (Cth) (PPSA);
    3. if I am wrong as to issue (b) the plaintiff’s ownership is a security interest:
      1. (i)
        its registration was effective; and
      1. (ii)
        the plaintiff’s security interest is subject to the NAB’s registered present and after acquired property security interests ;
    4. the plaintiff take the Vessel free of any other security interests pursuant to section 46(1) of the PPSA; and
    5. the defendants liable in damages for conversion being the amount of $20,000 which is the difference between the value of the Vessel at the date of conversion and the amount received on the sale of the Vessel in September 2021;
    6. the second defendant is not entitled to a lien.
  1. [201]
    Prima facie costs should follow the event, but I will allow the parties to provide submissions as to costs.

Orders that should be made

  1. [202]
    I consider the Court should make the following orders:
    1. The plaintiff has leave to proceed against the second defendant;
    2. A declaration that the plaintiff was until 15 September 2021 the owner of the Vessel;
    3. A declaration that the plaintiff had until 15 September 2021 the right to immediate possession of the Vessel;
    4. A declaration that no interest in the Vessel or its sales proceeds has vested in the first defendant pursuant to s 267 of the PPSA;
    5. The defendants are liable to pay damages for conversion to the plaintiff in the amount of $20,000 being the difference of the value of the boat of $550,00 at the date of conversion less the price for the sale of the Vessel in September 2021;
    6. The parties are directed to provide orders for the payment of monies maintained in trust accounts of the plaintiff’s solicitors and defendants’ solicitors after the sale of the Vessel, damages for conversion or otherwise to give effect to the declarations made, in accordance with these reasons and as to interest by 2pm on 16 December 2022;
    7. The parties are to provide submissions in relation to orders of costs by email to the Associate for Brown J by 4pm on 20 December 2022.

Footnotes

[1]  The reference to ‘Vessel’ in this judgment refers to the catamaran in whatever state of construction.

[2]  Agreed List of Issues.

[3]  This issue subsumes issues 5, 6, 7 and 8 of the Agreed List of Issues handed up at trial.

[4]  Leave was given to the defendants to amend its defence in relation to [24A] of the Second Further Amended Defence on 12 August 2022.

[5]  In referring to the ‘Vessel’ I refer to the vessel the subject of construction under the VCA at its various stages of construction.

[6]  Further Amended Statement of Claim at [11].

[7]  Second Further Amended Defence at [16(b)(iii)(A)]; See cll 2, 3.2, 3.3, 4, 5, 8.2, 8.4, 10, 12, 13, 15.1, 15.2, 15.4, 16, 17.5, 17.6, 18.3 of the VCA.

[8]  Adapting it to be consistent with terminology used above.

[9]  (2017) 53 VR 14; [2017] VSCA 61.

[10]  (2000) 201 CLR 520; [2000] HCA 35.

[11]  (2000) 176 ALR 693; [2000] HCA 64.

[12]  (2015) 90 NSWLR 422; [2015] NSWCA196.

[13]  [2016] VSCA 93.

[14]  At [78].

[15]  Although that does not exclude claiming a right for a debt and there was such a right under the terms of the guarantee.

[16]  Nor is there any question of election.

[17]  The fact possession of the Vessel was not sought by the plaintiff is consistent with such rights not being affected by the terms of the Deed of Settlement rather than an admission that any such right no longer existed.

[18]  (1940) 63 CLR 161 at 184-5.

[19]  (2014) 291 FLR 407; [2014] VSC 644 at [37].

[20]  Nicholas Mirzai and Jason Harris, The Annotated Personal Property Securities Act 2009 (Cth) (Wolters Kluwer, 4th ed, 2020) at [273.5].

[21]  Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) (2014) 49 VR 86; [2014] VSCA 326 at [107].

[22]  (2007) 227 CLR 305; [2007] HCA 19.

[23]  Daniel Greenberg, Alexandra Millbrook (eds), Stroud’s Judicial Dictionary of Words and Phrases (Sweet & Maxwell Ltd, 6th ed, 2000) at p. 2390.

[24]  At [21].

[25]  The first instalment.

[26]  (2014) 49 VR 86; [2014] VSCA 326.

[27]  [1926] 1 Ch 494.

[28]  At 500.

[29] Bredenkamp v Gas Sensing Technology Corporation, Re Welldog Pty Ltd (In Liq) (Recs and Mgrs Apptd) [2017] FCA 1065 at [7] and [10].

[30]  At [35].

[31]  See most recently Gold Valley Iron Pty Ltd (In Liq) v OPS Screening & Crushing Equipment Pty Ltd [2022] WASCA 134 at [114]–[116].

[32]  PPSA s 12(2)(k).

.[33]  (2016) 340 ALR 532; [2016] FCA 714 at [29]

[34]  At [29].

[35]  Nicholas Mirzai and Jason Harris, The Annotated Personal Property Securities Act 2009 (Cth) (Wolters Kluwer, 4th ed, 2020) at [12.5.2.11].

[36] Chelliah v NSW Police [2018] NSWSC 557.

[37] Crouch v Adams [2006] NSWSC 1029 at [36]-[38].

[38]  Exhibit 3, p 684.

[39]  The second defendant in cross-examination conceded the Vessel in its incomplete she which is the subject of these proceedings did exist.  The defendants did not press that there was no Vessel in existence.

[40]  At 507.

[41]  It contained a similar insurance clause to the present, although the present clause provides that the insurance is to be in the name of not only the first defendant but the plaintiff.

[42]  VCA at cll 3.1, 3.3.

[43]  VCA at cl 8.4.

[44]  VCA at cl 10.7.

[45]  VCA at cl 10.8.

[46]  VCA at cll 12–14.

[47] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [47]-[49].

[48]  PPSA s 8(1)(c).

[49]  (1971) 124 CLR 220 at 238.

[50]  (1987) 163 CLR 236 at 263.

[51]  At 244, by reference to s 28(2) of the Sale of Goods Act 1923 (NSW); see also page 247.

[52]  C.f. Bredenkamp v Gas Sensing Technology Corporation, Re Welldog Pty Ltd (In Liq) (Recs and Mgrs Apptd) [2017] FCA 1065 at [64].

[53] Dura (Australia) Constructions at [127].

[54]  There are similarities with the business considered in the Canadian decision in Spittlehouse et al v Northshore Marine Inc 18 O.R. (3d) 60; [1994] OJ No. 809 where title was withheld until full payment for sale of a boat but the contract was in the ordinary course of business.

[55]  (2013) 283 FLR 122; [2013] NSWSC 1741 at [5]-[6].

[56]  [2017] NSWSC 21 at [38].

[57]  [2017] NSWSC 21 at [40]

[58]  (2017) 324 FLR 378; [2017] NSWSC 1230.

[59]  At [64].

[60]  (2013) 277 FLR 337; [2013] NSWSC 852.

[61]  (1994) 20 OR (3d) 108.

[62]  Exhibit 3, p 684.

[63]  Which must be doubted given what occurs subsequently would often be a matter out of control of the registering party.

[64]  Exhibit 6.

[65]  Including Exhibit 5.

[66]  But likely prior to that date when work was directed to cease following the disputes between the parties.

[67]  Exhibit 12.

[68]  Exhibit 14.

[69]  [2002] WASC 309.

[70]  At [14] - [15].

[71]  See for example the affidavit of Mr Baskerville at [62] (Trial Bundle page 1045).

[72]  See the discussion of Young J in Flowfill Packaging Machines Pty Ltd v Fytore Pty Ltd (1993) Aust Torts Reports 81-244, particularly by reference to Crowther v Australian Guarantee Corp Ltd (1985) Aust Torts Rep 80-709.

[73] Flowfill Packaging Machines Pty Ltd v Fytore Pty Ltd (1993) Aust Torts Reports 81-244.

[74]  [2010] NSWSC 1257 at [32]-[33].

[75]  (1996) 65 FCR 234.

[76]  At 243-244.

[77]  (1989) 54 SASR 285.

[78]  At 286-288.

[79]  At 287-288.

[80]  At 1,246

[81]  (1998) 80 FCR 485.

[82]  At 499.

[83]  At 499.

[84]  (2017) 317 FLR 227; [2017] VSC 78.

[85]  (1999) 198 CLR 180; [1999] HCA 36.

[86]  (2004) 216 CLR 515; [2004] HCA 16.

[87]  (2014) 254 CLR 185; [2014] HCA 36.

[88]  (2015) 49 WAR 1; [2015] WASCA 169.

[89]  (2017) 130 SASR 1; [2017] SASCFC 172.

[90]  (2007) 99 SASR 357 at [31]-[32].

[91] Viscariello v Macks [2014] SASC 189 at [95].

[92] Macks at [202], citing Viscariello v Macks [2014] SASC 189 at [95].

[93]  [2018] FCA 97.

[94]  (2006) 24 ACLC 688; [2006] NSWSC 682.

[95] Macks at [207], citing Hausmann v Smith (2006) 24 ACLC 688; [2006] NSWSC 682 at [12].

[96]  [2020] NSWSC 299.

[97]  At [1].

[98]  At [101].

[99]  At [2].

[100]  At [104].

[101]  Upheld in terms of the decision as to the duty of care and not granted leave upon appeal: Aardwolf Industries LLC v Tayeh [2020] NSWCA 301 at [58]-[63].

[102]  Or a director.

[103]  (2009) 75 NSWLR 649; [2009] NSWCA 258 at [102]-[103].

[104]  At [104].

[105]  The defendant also mentioned s 479(4) of the Corporations Act. Section 479 was repealed in 2017.

[106] Corporations Act ss 474, 478.

[107]  T2-37/41, T2-38/19.

[108]  T2-82/27-30; T2-38/4-14.

[109]  T2-45/18-45, T2-45/1-10. I do not accept the second defendant’s evidence that it quite likely “arrived by surprise” insofar as he reasonably knew the funds were coming and a deed had been signed on 23 December 2020, which must have been negotiated beforehand.

[110]   T2-43/19-25, T 2044/11-15.

[111]  Exhibit 11.

[112] Australian Securities and Investments Commission (ASIC) v Vines (2005) 65 NSWLR 281; [2005] NSWSC 1349 at [57].

[113] Williams (as liquidator of Scholz Motor Group Pty Ltd) (in liq) v Scholz [2007] QSC 266 at [72]-[74].

[114] Brybay at [25], [29] and [33].

[115] Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185 at 191-192.

[116]  Which was not the subject of any probative evidence

[117]  In addition to the monies from the sale price for the Vessel.

[118]  Exhibit 10.

[119]  Further Amended Defence at [39(d)]; T1-12/10-15.

Close

Editorial Notes

  • Published Case Name:

    Reel Action Sports Fishing Pty Ltd (ACN 092 732 888) v Marine Engineering Consultants Pty Ltd (in Liq) & Anor

  • Shortened Case Name:

    Reel Action Sports Fishing Pty Ltd v Marine Engineering Consultants Pty Ltd (in liq)

  • Reported Citation:

    (2022) 13 QR 297

  • MNC:

    [2022] QSC 271

  • Court:

    QSC

  • Judge(s):

    Brown J

  • Date:

    13 Dec 2022

  • Selected for Reporting:

    Editor's Note

Appeal Status

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

Cases Cited

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Aardwolf Industries LLC v Riad Tayeh [2020] NSWSC 299
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Aardwolf Industries LLC v Tayeh [2020] NSWCA 301
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Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337
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Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd (2017) 324 FLR 378
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Cite 2 - [2017] NSWSC 1230
Australian Securities and Investments Commission (ASIC) v Vines [2005] NSWSC 1349
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Australian Securities and Investments Commission v Vines (2005) 65 NSWLR 281
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Bredenkamp v Gas Sensing Technology Corporation, Re Welldog Pty Ltd (In Liq) (Recs and Mgrs Apptd) [2017] FCA 1065
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Brookfield Multiplex Ltd v Owners Corporation Strata Plan (2014) 254 CLR 185
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Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36
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Brybay Pty Ltd (in liq) v Esanda Finance Corp Ltd [2002] WASC 309
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Cite 1 - [2002] WASC 309
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Butler v Egg & Egg Pulp Marketing Board [1966] HCA 38
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Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185
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Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258
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Cite 1 - [2009] NSWCA 258
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Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649
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Cite 1 - (2009) 75 NSWLR 649
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Chelliah v NSW Police [2018] NSWSC 55
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Cite 1 - [2018] NSWSC 55
Chelliah v NSW Police [2018] NSWSC 557
1 citation
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Cite 1 - [2018] NSWSC 557
Commissioner of Taxation (Cth) v Sara Lee Household & Bodycare (Australia) Pty Ltd [2000] HCA 35
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Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520
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Concut Pty Ltd v Worrell [2000] HCA 64
2 citations
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Cite 2 - [2000] HCA 64
Concutt Pty Ltd v Worrell (2000) 176 ALR 693
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Crouch v Adams [2006] NSWSC 1029
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Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) (2014) 49 VR 96
1 citation
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Dura (Australia) Constructions Pty Ltd (in liq) (recs and mgrs apptd) v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2014] VSCA 326
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Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 49 VR 86
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Cite 1 - (2014) 49 VR 86
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Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87
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Cite 1 - [2001] WASC 87
Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd (2013) 283 FLR 122
2 citations
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Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741
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Cite 2 - [2013] NSWSC 1741
Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd [1987] HCA 30
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Gamers Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236
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General Motors Acceptance Corp Australia v Southbank Traders Pty Ltd (2007) 227 CLR 305
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General Motors Acceptance Corp Australia v Southbank Traders Pty Ltd [2007] HCA 19
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GMAC Leaseco Ltd v Moncton Motor Home & Sales (2003) 227 DLR (4th) 154
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Gold Valley Iron Pty Ltd (In Liq) v OPS Screening & Crushing Equipment Pty Ltd [2022] WASCA 134
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Hausmann v Smith (2006) 24 ACLC 688
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Hausmann v Smith [2006] NSWSC 682
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Hillam v Iacullo (2015) 90 NSWLR 422
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Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220
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Hobbs v Petersham Transport Co Pty Ltd [1971] HCA 26
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Hunter Wholesale Confectioners Pty Ltd v Sweeties Confectionery Pty Ltd [2010] NSWSC 1257
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Macks v Viscariello (2017) 130 SASR 1
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Maelor Jones Investments (Noarlunga) Pty Ltd & Ors v Heywood-Smith (1989) 54 SASR 285
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Maiden Civil (P&E) Pty Ltd v Queensland Excavation Services Pty Ltd [2013] NSWSC 852
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Marsh v Baxter (2015) 49 WAR 1
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Marsh v Baxter [2015] WASCA 169
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Cite 1 - [2015] WASCA 169
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McDermott v Black (1940) 63 CLR 161
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McDermott v Black [1940] HCA 4
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Mills v Sheahan (2007) 99 SASR 357
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Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37
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Cite 1 - [2015] HCA 37
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Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
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Cite 1 - (2015) 256 CLR 104
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National Australia Bank Ltd v Garrett (2016) 340 ALR 532
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National Australia Bank Ltd v Garrett [2016] FCA 714
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Pace v Antlers Pty Ltd (in liq) (1998) 80 FCR 485
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Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204
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Perpetual Nominees Limited v McGoldrick & Anor (No 3) (2017) 317 FLR 227
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Cite 1 - (2017) 317 FLR 227
Cite 2 - (2017) 317 FLR 227
Perpetual Nominees Limited v McGoldrick & Anor (No 3) [2017] VSC 78
2 citations
Jump To
Cite 1 - [2017] VSC 78
Cite 2 - [2017] VSC 78
Perre v Apand Pty Ltd (1999) 198 CLR 180
2 citations
Jump To
Cite 1 - (1999) 198 CLR 180
Cite 2 - (1999) 198 CLR 180
Perre v Apand Pty Ltd [1999] HCA 36
2 citations
Jump To
Cite 1 - [1999] HCA 36
Cite 2 - [1999] HCA 36
Re Blyth Shipbuilding and Dry Docks Company, Limited [1926] 1 Ch 494
2 citations
Jump To
Cite 1 - [1926] 1 Ch 494
Cite 2 - [1926] 1 Ch 494
Re Lambert (1994) 20 OR (3d) 108
2 citations
Jump To
Cite 1 - (1994) 20 OR (3d) 108
Cite 2 - (1994) 20 OR (3d) 108
Re OneSteel Manufacturing Pty Ltd (Admin Apptd) [2017] NSWSC 21
3 citations
Jump To
Cite 1 - [2017] NSWSC 21
Cite 2 - [2017] NSWSC 21
Cite 3 - [2017] NSWSC 21
Rendell v Associated Finance Pty Ltd [1957] VR 604
1 citation
Jump To
Cite 1 - [1957] VR 604
Schreuders v Grandiflora [2016] VSCA 93
2 citations
Jump To
Cite 1 - [2016] VSCA 93
Cite 2 - [2016] VSCA 93
Seaman v Silvia [2018] FCA 97
2 citations
Jump To
Cite 1 - [2018] FCA 97
Cite 2 - [2018] FCA 97
Sheldon v McBeath (1993) Aust Torts Reports 81
3 citations
Jump To
Cite 1 - (1993) Aust Torts Reports 81
Cite 2 - (1993) Aust Torts Reports 81
Cite 3 - (1993) Aust Torts Reports 81
Spittlehouse v Northshore Marine Inc. (1994) 18 OR (3d) 60
1 citation
Jump To
Cite 1 - (1994) 18 OR (3d) 60
Sydlow Pty Ltd (in liquidation) v TG Kotselas Pty Ltd (1996) 65 FCR 234
2 citations
Jump To
Cite 1 - (1996) 65 FCR 234
Cite 2 - (1996) 65 FCR 234
Trade Credits Ltd v Baillieu Knight Frank (NSW) Pty Ltd (1985) Aust Torts Reports 80
2 citations
Jump To
Cite 1 - (1985) Aust Torts Reports 80
Cite 2 - (1985) Aust Torts Reports 80
Viscariello v Macks (2014) 103 ACSR 542
1 citation
Jump To
Cite 1 - (2014) 103 ACSR 542
Viscariello v Macks [2014] SASC 189
3 citations
Jump To
Cite 1 - [2014] SASC 189
Cite 2 - [2014] SASC 189
Cite 3 - [2014] SASC 189
Warehouse Sales Pty Ltd (in Liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd (2014) 291 FLR 407
2 citations
Jump To
Cite 1 - (2014) 291 FLR 407
Cite 2 - (2014) 291 FLR 407
Warehouse Sales Pty Ltd (in Liq) & Lewis and Templeton v LG Electronics Australia Pty Ltd [2014] VSC 644
2 citations
Jump To
Cite 1 - [2014] VSC 644
Cite 2 - [2014] VSC 644
Williams v Scholz [2007] QSC 266
2 citations
Jump To
Cite 1 - [2007] QSC 266
Cite 2 - [2007] QSC 266
Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16
2 citations
Jump To
Cite 1 - [2004] HCA 16
Cite 2 - [2004] HCA 16
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515
2 citations
Jump To
Cite 1 - (2004) 216 CLR 515
Cite 2 - (2004) 216 CLR 515

Cases Citing

Case NameFull CitationFrequency
Zeno Entertainment Pty Ltd v Kumar [2025] QSC 185 2 citations
1

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