Allen Ziebell and Irene Ziebell and Ziebell Holdings Pty Ltd -v- Aluminium Marine Consultants and Fabricators and Debis Financial Services (Australia) Pty Ltd

[1999] QSC 351

IN THE SUPREME COURT
OF QUEENSLAND
CAIRNS  No. 36 of 1999
Before the Hon. Justice Jones
[Allen Ziebell and Irene Ziebell and Ziebell Holdings Pty Ltd -v- Aluminium Marine Consultants and Fabricators and Debis Financial Services (Australia) Pty Ltd] [1999] QSC 351

BETWEEN:                  ALLEN ZIEBELL and IRENE ZIEBELL

First Plaintiff

AND:                           ZIEBELL HOLDINGS PTY LTD

Second Plaintiff

AND:  ALUMINIUM MARINE CONSULTANTS AND
  FABRICATORS

First Defendant

AND:  DEBIS FINANCIAL SERVICES (AUSTRALIA) PTY LTD

Second Defendant

JONES J

Judgment delivered 24^th November, 1999

Application for interlocutory injunction dismissed.
The plaintiff to pay the second defendant’s costs of and incidental the application.

Catchwords:   INJUNCTIONS - INTERLOCUTORY - urgent ex parte application - injunction sought to restrain the sale of a vessel - action commenced in the admiralty jurisdiction - defendant finance company asserted right as mortgagee exercising a sale - plaintiff not entitled to grant of injunction sought

Counsel:Mr C Ryall for the Plaintiff

Mr P E Hack for the Defendant

Solicitors:Bottoms English for the Plaintiff

Clayton Utz for the Defendant

Hearing date:    17^th November, 1999

IN THE SUPREME COURT

OF QUEENSLAND

CAIRNS  Writ No. 36 of  1999

BETWEEN:      ALLEN ZIEBELL and IRENE ZIEBELL

First Plaintiff

AND:                           ZIEBELL HOLDINGS PTY LTD

Second Plaintiff

AND:                ALUMINIUM MARINE CONSULTANTS AND
  FABRICATORS

First Defendant

AND:  DEBIS FINANCIAL SERVICES (AUSTRALIA) PTY LTD

Second Defendant

REASONS FOR JUDGMENT

BEFORE THE HONOURABLE JUSTICE JONES

DELIVERED THE  24^TH  DAY OF  NOVEMBER, 1999

1. The first plaintiffs (hereinafter “Ziebell”) are the directors and shareholders of the second plaintiff Ziebell Holdings Pty Ltd (“Holdings”) which was a party to a written contract [1] with Aluminium Marine Consultants and Fabricators (“AMC”) for the construction of a motor vessel to be named Hitchhiker II.  The cost of construction was to be $250,000.00.  Finance for the construction was arranged with debis Financial Services (Australia) Pty Ltd (“debis”).  Ultimately the financial accommodation was provided to a company Vanzack Pty Ltd (“Vanzack”) which had a common directorship and shareholding with Holdings and which was incorporated for the express purposes of taking an assignment from Holdings of its rights and obligations in the construction agreement.  The plaintiffs argue that this assignment was never effected.

   [1]  Ex. “AZ1” to the affidavit of Ziebell 17/11/99

2. Vanzack has not formally been made a party to the action and debis argues that if it is found that the assignment was effected then only Vanzack could argue that it has a beneficial interest in the property and the proceedings as presently framed are incompetent.

3. This action was commenced in the Admiralty jurisdiction coupled with a request for the issue of a writ for the arrest of the vessel.  The Registrar refused to issue the writ, referring the request instead to me.  The plaintiffs’ claim was based upon their having a general maritime claim pursuant to s.4 of the Admiralty Act 1988 (Cwth) both in respect of a proprietary claim and a claim pursuant to s.4(3)(n) for the supply of goods.  Both such claims must of course satisfy the preliminary jurisdictional test of whether the vessel falls within the definition of “ship” as that term is understood for the purposes of the Admiralty Act.  The relevant terms of the definition are as follows:-

   “Ship” – means a vessel of any kind used or constructed for use in navigation by water, however it is propelled or moved, and includes:

(a)a barge, lighter or other floating vessel;

...

but does not include:

(e)a seaplane;

(f)an inland waterways vessel; or

(g)a vessel under construction that has not been launched.”

1. On 12 November 1999 the plaintiffs sought, upon an urgent ex parte application, an interim injunction to restrain the sale of the vessel.  The evidence in the affidavit of Allen Ziebell filed in support of the interim application was that in a conversation with a representative of AMC he was told that “the construction was 100% complete and the fit-out was about 95% complete”.  The plaintiffs argue therefore that this particular vessel did not fall within the exclusion because it was no longer under construction.  I took the view (an opinion which I continue to hold) that the vessel in those circumstances and whilst unlaunched does not fall within the definition of “ship”.  However, because the issue could not properly be resolved on an ex parte application the course was ultimately taken to frame the action in the ordinary jurisdiction of the Court and to seek an injunction to restrain the sale of the vessel.  This course preserved the status quo as effectively as the issue of the writ for the arrest of the vessel, but without the attendant expense and inconvenience associated with an arrest.

2. By the time the interim injunction was granted, debis, asserting a right as mortgagee exercising a sale, purported to accept an offer of purchase from Mr. Mott, representing the firm, Whitsunday All Over Cruises.

3. When the matter came before me on 17 November, 1999 the issues between the plaintiffs and debis were identified as being –

   1.Whether there was an effective assignment to Vanzack by Holdings of its interest in the construction agreement.

   2.Whether debis was entitled to take possession of the property and thereafter to sell it.

   3.Whether the conduct of debis caused the default on the part of Holdings such that it would be unconscionable for debis to rely on that default in asserting its rights.

The assignment issue

1. The need for the assignment from Holdings to Vanzack was a step in a rather protracted and complicated dealing which led to the consummation of an agreement by debis to finance the construction of the vessel.  The affidavits of Allen Ziebell filed on 17 November 1999 and of Craig Rondos, Chief Operations Officer, filed in reply after the hearing of oral submissions, provide the main details of these protracted dealings which do not, for present purposes, need to be set out in full.

2. After two earlier attempts failed to establish an agreed basis for debis to provide the finance, terms were ultimately set out in a commitment letter dated 12 November, 1998 [2]. Following receipt of this commitment letter, Holdings entered into the construction contract with AMC on 18 November, 1998.

   [2]  Exhibit AZ4 to the Affidavit of Ziebell 17/10/99

3. The funding to be provided by debis was $950,000.00 with Holdings to provide a deposit of $300,000.00.  The provision of finance by debis was dependant upon a number of pre-conditions and these relevantly included –

   (i)The sale of the vessel Hitchhiker I at a price sufficient to provide funds in line with the financial projections given in support of the loan application. (Condition 4).

   (ii)Confirmation of the availability of further working capital of $100,000.00 (Condition 5).

   (iii)After the sale of Hitchhiker I, provision of a replacement vessel to enable the continuance of the applicant’s business (Condition 6).

   (iv)     Debis to hold first charge on property (General Condition 3).

   (v)Debis to hold first charge on other property identified in loan documents. (General Condition 6)

4. The sale of the vessel Hitchhiker I was completed on 22 February, 1999 and yielded a net contribution of $180,000.00 to the required deposit.  Other cash amounts paid by Ziebell on behalf of either Holdings or Vanzack totalled $65,000.00.  Holdings also claimed to have satisfied the deposit requirement by its contribution of some equipment valued at $62,919.00 and a further contribution of $4,204.00 being overtime wages paid to AMC staff.  Debis argues that these latter items did not satisfy the requirement and relied upon the failure to provide a deposit as one of the grounds of breach for agreement.

5. It was a term of the construction agreement that in the event of any part of the price failing to be paid within seven days of its becoming due, AMC would be entitled to a charge (lien) until actual payment and without further notice of demand with liberty to sell the vessel.  A routine search of the Australian Maritime Safety Authority as a preliminary to the vessel’s registration revealed that a prior lien of $100,000 in favour of AMC attached to the vessel.

6. As it was a condition for the provision of finance that debis have first charge on the property during construction and on completion, there was a conflict between AMC and debis on this point.  Meeting this requirement of debis for a first charge on assets also necessitated Holdings selling another vessel, the “Tanderra”, to remove a floating charge over its operation held by Capital Finance Pty Ltd.

7. The requirement to have the $100,000.00 working capital could not be satisfied by Holdings.  To overcome this difficulty a varied agreement was entered into by Holdings, AMC and debis, whereby $100,000.00 would be retained from the final payment to AMC for a period of six months after delivery of the vessel.  As consideration for this variation, Holdings agreed to pay to AMC $2.00 per passenger carried during this period.  Effectively this variation meant that AMC was partially financing the construction of the vessel.

8. The problems arising from this complex of unmet requirements led not only to delays in construction but also to a stalemate in discussions between the three parties.  At a meeting between representatives of the parties at the Gold Coast on 22 May, 1999 a way forward was identified which resulted in the preparation of supplementary agreements and a decision by Holdings to assign its interests and obligation in the construction agreement to Vanzack which at that time had no prior commercial vehicles or borrowings.

9. This was the background to the preparation of a number of documents [3] and the signing of them as described by Mr. Ziebell in his affidavit filed on 17 November 1999 in the following terms:-

   “6.On a date in June, I do not recall exactly which date, I recall attending the offices of my then solicitor Sean Walsh of Miller Harris and signing a large number of documents with my wife.  We were informed by Sean that these were “debis contracts”.  Although I do not recall specifically signing it, my current solicitors received a copy of the Deed of Assignment between Ziebell Holdings P/L, Vanzack P/L and the Builder which is exhibit “DGF2” to the affidavit of David Fagan filed herein.

7.The documents we signed did not have any other signatures on them.  We just signed what was put in front of us with “sign here” stickers.  To my recollection no explanation was given as to what documents we were signing or what was in them.  The signing occurred after a long period of negotiations back and forth between our solicitor and debis during a time in which no advances at all had been made by debis to fund the work the second defendant had been doing on the vessel.  We were on a very tight time schedule as we were trying to get the boat finished and have it ready to go to work at the end of August.”

[3]  Exhibited before me were Vessel Finance & Security Agreement – “RLS1”; Retention Agreement – “RLS3”; Deed of Assignment with Charge – “RLS4”; Supplementary Agreement and Certification – “RLS5”.

1. Holdings now asserts that the assignment was not effective because AMC, without Holdings knowledge or consent, deleted one of the terms namely –

   “4.     Release And Indemnity

4.1The shipbuilder hereby releases the assignor from all claims and demands of every description and from its obligations under the shipbuilding contract.”

1. That this term was deleted by AMC is evident from exhibit “DF2” aforesaid. But the question is whether this deletion took place before or after the document was executed by Holdings and Vanzack.

2. On this issue, counsel appearing for debis tendered what appears to be a copy of the Deed of Assignment as it had been executed by AMC.  A comparison of this tendered copy and the exhibited copy of the completed document suggests that they are copies of the one document at different stages of its execution.  This, to my mind, suggests that Holdings and Vanzack were aware of the deletion when the Deed of Assignment was signed by them.  The document on its face was prepared by the then solicitors for the plaintiffs.  One expects it would have been the responsibility of the plaintiffs to forward to debis the executed document or a copy of it together with the new application for finance. Ultimately I presume this document would have been forwarded with the other documents executed on 18 June, 1999 in Cairns.  Despite Mr. Zeibell being in Court when the incomplete document was tendered, no evidence was given about his recollection of this particular document.

3. As a consequence, I have come to the view that the plaintiffs were aware of the alteration before signing and as a consequence the assignment was effective. The result is that the application for an interlocutory injunction could only be brought by Vanzack.

4. After the hearing on 17 November, 1999 I have received further submissions on behalf of Vanzack to the effect that it would join in an undertaking for damages if the injunction is extended and that its joinder as a party in these proceedings would be attended to “in due course”.  In further pursuit of this course, I have been asked to adjourn further consideration of the matter raised until a formal application can be made.

5. The way in which the evidence so far adduced has come before the Court has a number of unsatisfactory features, particularly illustrated by the chronology exhibited to the affidavit of Mr. Ziebell not having particular reference to the documents which arose out of the events there recorded.  Further the affidavit material on hearing was provided only shortly before the hearing. This shortcoming is perhaps explained in part by the urgency with which the matter came before the Court and also by the late change of solicitors acting for the plaintiffs who may not have had access to all of the material. As a consequence, the second defendant has sought leave to file and read 2 further affidavits – one by Brendan Clements and the other by Craig Rondos to which I have already referred.  The affidavit of Brendan Clements goes only to matters of valuation and the mode of sale of the vessel.

6. The granting of an interlocutory injunction in the circumstances of this case has quite serious repercussions.  Not only for the parties and associated entities but now also for a third party.  The applicant’s case, as so far particularised and argued, does not entitle either of them to a grant of the injunction now sought because in my view neither has the standing to seek such relief.

7. Having come to that view I should refrain from making comment on the other issues which can only be considered on an application by the correct party, on pleadings where the issues are properly identified, and after a hearing at which contests on the evidence can be properly assessed.

8. I dismiss the plaintiffs’ application for interlocutory injunction.  I order that the plaintiffs pay the second defendant’s costs of and incidental to that application.