A & J Palms P/L v Bateman - [2012] SASC 33

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
A & J PALMS P/L v BATEMAN
[2012] SASC 33
Judgment of The Honourable Justice Blue
7 March 2012
TORTS - TROVER AND DETINUE - REMEDIES - ACTION FOR CONVERSION - WHO MAY SUE
MAGISTRATES - APPEALS AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT - POWERS AND PRACTICE OF COURT ON HEARING - POINT NOT RAISED IN COURT BELOW
Action in detinue and conversion dismissed by Magistrate - claim by defendant of equitable charge from true owner - finding that appellant failed to prove it was owner or entitled to possession of the equipment.
Appeal against dismissal of the action - whether Magistrate ought to have found that a transfer had been effected by virtue of the intention of the sole director of both transferor and transferee - whether such case available to be run on appeal - whether specific resolutions by transferor and transferee needed to effect transfer - whether Magistrate ought to have found, if no transfer effected, equitable charge defence failed and relief should have been granted to appellant or true owner.
Held: Appeal dismissed - appellant's primary contention not open to be argued on appeal - specific resolutions needed to be made by both transferor and transferee to effect transfer - having found that appellant had no entitlement to possession, Magistrate correct in not granting relief to appellant because respondent's title is good against all except the true owner (jus tertii).
Corporations Act 2001 (Cth) s 601AA, referred to.
Armory v Delamirie (1722) 1 Stra 505; Jeffries v Great Western Railway Co (1856) 5 EI & BI 802; The Winkfield [1902] P 42; Glenwood Lumbar Co Ltd v Phillips [1904] AC 405, considered.

A & J PALMS P/L v BATEMAN
[2012] SASC 33
Magistrates Appeal: Civil

BLUE J: The appellant/plaintiff A & J Palms Pty Ltd (“A & J Palms”) sued the respondent/defendant Mr Bateman in the Magistrates Court in detinue and conversion in respect of a trailer and pressure cleaner (“the equipment”).
Following trial a Magistrate dismissed the action on the basis that A & J Palms had failed to prove that it was the owner or entitled to possession of the equipment.
A & J Palms appeals against the dismissal of the action.
Background facts
Advanced Palms & Trees Pty Ltd (“Advanced Palms”) had been carrying on a palm growing and supply business since 2001. Murray Weiland was the sole director and a 75 per cent shareholder of Advanced Palms.
In October 2002, Advanced Palms entered into a finance lease with Westpac Banking Corporation for the financing and leasing of the pressure cleaner. It appears that Advanced Palms purchased outright the trailer on which it mounted the pressure cleaner. Subsequently, Advanced Palms entered into separate finance leases with Westpac in respect of a computer and a van.
In or before August 2006, Mr Weiland decided to propose to creditors of Advanced Palms a deed of company arrangement and to incorporate a new company (A & J Palms) to commence to carry on part of the business hitherto carried on by Advanced Palms.
On 1 August 2006, Mr Weiland incorporated A & J Palms with his son (Alexander Weiland) as the sole director and shareholder.
As at August 2006, Mr Bateman had been a contractor to Advanced Palms for some years, and was in possession of the equipment with the consent of Advanced Palms. He was owed $8,500 by Advanced Palms.
Mr Bateman gave evidence at trial that on 9 August 2006 he entered into a verbal agreement with Mr Weiland that Mr Bateman be granted a security interest in the equipment (which Mr Bateman claimed gave rise to an equitable charge) as security for payment of the debt of $8,500. Mr Weiland gave evidence denying any such agreement.
On 16 August 2006, Mr Weiland appointed Hugh Martin as administrator of Advanced Palms. As at the date of appointment, Westpac was owed approximately $12,000 under its three finance leases, including approximately $1,000 in respect of the equipment.
On 9 October 2006, Advanced Palms and Mr Martin (together with Mr Weiland and A & J Palms) entered into a deed of company arrangement (“the Deed”). Terms of the Deed included that each of Mr Weiland and A & J Palms would pay $85,000 into a deed fund by 8 January 2007 for distribution amongst the creditors and that on payment of a dividend to creditors Advanced Palms would be released from all claims by creditors.
Mr Weiland gave evidence that on 17 October 2006 he attended a meeting with his son Alexander Weiland (and another son Jason Weiland) at which it was agreed that Advanced Palms would sell to A & J Palms the equipment for $15,000 together with other items (including the computer and van leased from Westpac) for $8,000. Mr Weiland said it was agreed that Advanced Palms would be paid the total sum of $23,000 by a reduction of $23,000 against monies owing by Advanced Palms to Mr Weiland personally. Mr Weiland produced signed minutes of a director’s meeting of Advanced Palms dated 17 October 2006 which recorded a resolution that Advanced Palms enter into that transaction. It was Mr Bateman’s case at trial that there was no such meeting held or agreement made in October 2006, that the purported minutes had been created not earlier than 2009 and backdated, and that the entire transaction was a recent invention.
On 21 August 2007, Mr Weiland became the sole director and shareholder of A & J Palms in lieu of his son Alexander.
On 12 September 2007, the Deed was terminated by reason of having achieved its purpose, and Advanced Palms was thereby released from claims by creditors.
On 9 January 2008, Mr Weiland applied for voluntary deregistration of Advanced Palms. On 11 March 2008, it was dissolved pursuant to s 601AA of the Corporations Act 2001 (Cth). Upon dissolution, any residual assets of Advanced Palms vested in the Australian Securities and Investments Commission (“ASIC”).
On 4 May 2010, solicitors for A & J Palms wrote to Mr Bateman asserting that it was the lawful owner of the equipment and demanding its return.
On 18 November 2010, A & J Palms issued the action against Mr Bateman in the Magistrates Court.
Reasoning of the Magistrate
At trial, Mr Weiland gave evidence of dealings in relation to the equipment and in particular of the agreement which he said was entered into on 17 October 2006. A & J Palms also called Mr Weiland’s accountant, Mr Shepherd, who gave evidence of advice to Mr Weiland concerning the transaction and its documentation.
The Magistrate made an adverse credibility finding in respect of the evidence of Mr Weiland and Mr Shepherd. In particular, he rejected Mr Weiland’s evidence that any meeting occurred or any agreement was entered into in October 2006 for the sale of the equipment.
In making his finding, the Magistrate referred to the fact that there was no objective evidence of any transfer of the equipment by Advanced Palms to A & J Palms prior to 2009 (when A & J Palms applied to register the trailer in its name). The Magistrate also referred to several items of objective evidence which he found indicated that Mr Weiland regarded the equipment as being owned by Advanced Palms (as opposed to A & J Palms) between October 2006 and May 2007. That evidence included:
1.invoices with respect to the equipment rendered by Advanced Palms (which the Magistrate found were issued at the instigation of Mr Weiland) on 23 October 2006 and 2 April 2007 (after the purported transfer);
2.a letter dated 22 May 2007 sent by solicitors for Advanced Palms (which the Magistrate found was sent at the instigation of Mr Weiland) to Mr Bateman demanding the return of the equipment to Advanced Palms;
3.the fact that Westpac was still the owner of the equipment as at 30 November 2006 (after the purported transfer) and had no knowledge of and had not consented to any transfer of that equipment;
4.the fact that Mr Weiland had not informed the administrator of the proposed or actual transfer of the equipment in circumstances in which the Deed had yet to be performed;
5.the minutes of meeting of creditors of Advanced Palms of 8 March 2007 recording Mr Weiland stating that Advanced Palms’ water blaster was still in the possession of Mr Bateman.
Based on the above evidence, the Magistrate found that there had been no transfer of the equipment by Advanced Palms to A & J Palms prior to the dissolution of Advanced Palms on 11 March 2008.
Primary contention on appeal
On appeal, A & J Palms does not challenge the Magistrate’s credit finding, nor his finding that no meeting was held or agreement was made in October 2006 relating to the transfer of the equipment.
Rather, A & J Palms contends on appeal that the Magistrate ought to have found that a transfer of the equipment was effected sometime between 21 August 2007 (when Mr Weiland became the sole director and shareholder of A & J Palms) and 9 January 2008 (when Mr Weiland applied for the deregistration of Advanced Palms). A & J Palms contends that, as the sole director of each company, Mr Weiland was the directing mind and will of both transferor and transferee and it was sufficient for an effective transfer that it had been his intention in 2006 (which intention had not changed as at 21 August 2007 and thereafter) that the equipment be transferred. A & J Palms contends that there is no need for any objective manifestation of that intention, nor any need to characterise the transfer as a sale or a gift or for there to be any terms of the transfer. A & J Palms does not suggest that Mr Weiland formed any new or specific intention to transfer on or after 21 August 2007, but rather his original intention from August 2006 was simply unchanged.
Mr Weiland did not give any direct evidence at trial that he formed an intention to transfer the equipment on or after 21 August 2007. Indeed that would have been inconsistent with his evidence that he had agreed to make and had effected the transfer on 17 October 2006. Nor did he give any direct evidence that he had an intention to transfer which persisted after October 2006. Accordingly, the case on appeal is entirely circumstantial. A & J Palms relies upon two “facts” which it contends give rise to the inference of the existence and persistence of the supposed intention of Mr Weiland in his capacity as the directing mind and will of both companies:
1.the fact that Mr Weiland had intended since not later than October 2006 that the equipment be transferred from Advanced Palms to A & J Palms; and
2.the fact that Mr Weiland in his application for dissolution dated 9 January 2008 must have declared that Advanced Palms did not own any assets the collective value of which exceeded $1,000.[1]
[1] See Corporations Act s 601AA(2)(c) and Corporations Regulations Schedule 2, Form 6010.
Mr Bateman contends that this case was not run at trial, the only case run at trial was of a transfer effected in October 2006, and A & J Palms ought not now be allowed to run such a case for the first time on appeal.
A & J Palms’ pleadings do not disclose a case based on a transfer effected between August 2007 and January 2008 or based on the intention of Mr Weiland as the controlling mind of transferor and transferee. The Magistrate did not address in his reasons any such case. Mr Bateman contends that no such case was run. A & J Palms concedes that any such case run at trial was at best oblique. In the circumstances, I consider that it is not now open to A & J Palms to run such a case on appeal.
In any event, the alternative case sought to be run by A & J Palms relies upon an essential plank, being a finding that Mr Weiland intended in October 2006 to transfer the equipment to A & J Palms (and this intention became effective at law when Mr Weiland became the director and controlling mind of A & J Palms on 21 August 2007, at which point his intention became effective on behalf of both transferor and transferee). However, the factual findings made by the Magistrate are fatal to the contention that Mr Weiland possessed this intention in October 2006. The Magistrate found that Mr Weiland’s own actions at least up to May 2007 were inconsistent with any such transfer and hence inconsistent with his having any such intention. Mr Weiland did not give evidence that he formed any new intention some time between August 2007 and January 2008 and it is not argued on appeal that he did so.
A & J Palms’ contention on appeal also relies upon an essential plank being an inference drawn that Mr Weiland considered the question of ownership of the equipment in January 2008 and formed the positive belief (and intention) that the equipment was now owned by A & J Palms, and hence the assets of Advanced Palms were worth less than $1,000. In the absence of tender of the application to ASIC for dissolution and in the absence of evidence from Mr Weiland that he formed such a belief (and intention), there is no basis to draw that inference. In light of the findings by the Magistrate, the compelling inference is that Mr Weiland simply overlooked the issue of ownership of the equipment until 2009 when he commenced taking steps to backdate a purported transfer to 2006.
Finally, as a matter of law, the fact that Mr Weiland, as sole director of Advanced Palms, formed a generalised intention to transfer property to A & J Palms, is insufficient to effect the transfer. I assume, for the sake of argument, that it does not matter that no minute or other record was made of Mr Weiland’s state of mind (either as sole director of Advanced Palms or as sole director of A & J Palms). At the very least, to effect a transfer, it would have been necessary for Mr Weiland to specifically resolve, as sole director of and on behalf of Advanced Palms, to transfer the equipment on specific terms (ie either a sale for a specific consideration or a gift) and it would have been necessary for Mr Weiland, as sole director of and on behalf of A & J Palms, to specifically resolve to accept the transfer on those terms. There was no evidence from Mr Weiland that he made a resolution on behalf of either Advanced Palms or A & J Palms at any time over the period between 21 August 2007 and 9 January 2008. Insofar as he gave evidence that he made a resolution on behalf of Advanced Palms on 17 October 2006, that evidence was expressly rejected by the Magistrate. Insofar as it is contended on appeal that Mr Weiland intended in a general way to transfer the equipment for no specific consideration, that evidence is inconsistent with Mr Weiland’s conduct in later signing backdated minutes of meeting showing a transfer for a consideration of $15,000. Nor is this a case in which an agreement can be inferred from conduct: on the Magistrate’s findings neither Advanced Palms nor A & J Palms acted on the basis that the equipment had been sold prior to the dissolution of Advanced Palms in March 2008.
In these circumstances, A & J Palms’ primary contention on appeal must fail.
Secondary contention on appeal
A & J Palms puts an alternative contention on the assumption that Advanced Palms remained the owner of the equipment until March 2008 and since then ASIC has been the owner of the equipment. The contention is that Mr Bateman’s defence that he obtained an equitable charge over the equipment in August 2006 must fail (because he provided no consideration for the charge) and relief ought to be granted against him either in favour of ASIC or in favour of A & J Palms.
In view of his finding that A & J Palms had no interest in or entitlement to possession of the equipment, the Magistrate expressly stated that he made no findings concerning the alleged transaction of 9 August 2006 and did not decide whether the transaction alleged by Mr Bateman (if it occurred) gave rise to an equitable charge. In those circumstances, the major premise of A & J Palms’ alternative contention is not established.
In any event, if that premise were established, nevertheless Mr Bateman is in possession of the equipment and his title is good against the world (including A & J Palms) except the true owner (namely ASIC on this hypothesis).[2] It is also clear that a party (such as A & J Palms) cannot seek or obtain relief on behalf of an unrelated party (such as ASIC).
[2] The principle known by the shorthand term “jus tertii”. See Armory v Delamirie (1722) 1 Stra 505; 93 ER 664; Jeffries v Great Western Railway Co (1856) 5 El & Bl 802; 119 ER 680; The Winkfield [1902] P 42; [1900-1903] All ER Rep 346; Glenwood Lumbar Co Ltd v Phillips [1904] AC 405.
In these circumstances, A & J Palms’ secondary contention on appeal must fail.
Conclusion
The appeal must be dismissed.