ANZ v Australian Securities and Investments Commission
[2014] VSC 672
•19 December 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
S CI 2014 06487
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ABN 11 005 357 522) | Plaintiff |
| v | |
| AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION | First Defendant |
| and | |
| REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | T FORREST J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 December 2014 |
DATE OF JUDGMENT: | 19 December 2014 |
CASE MAY BE CITED AS: | ANZ v ASIC & Anor |
MEDIUM NEUTRAL CITATION: | [2014] VSC 672, First Revision: 15 July 2015; paragraph [19]; fn 5. |
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SUPREME COURT RULES - Plaintiff sought specific performance by ASIC of a company’s contractual obligations prior to deregistration – Execution of instrument by order of Court under s 22 of the Supreme Court Act 1986 (Vic) – Section 22 not engaged because no existing entitlement to execution of documents by way of judgment or order – Application dismissed.
JUDICIAL REVIEW – Discretion under s 601AF of Corporations Act – Refusal to exercise power an administrative decision by a Commonwealth authority – Cross-vesting – Plaintiff did not seek relief in the nature of prerogative writs or on administrative law grounds – Unnecessary for court to consider jurisdiction to hear judicial review proceedings.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | S. Rubenstein | Kemp Strang Lawyers |
| For the First Defendant | Dr. O. Bigos | ASIC In-house |
| For the Second Defendant | (no appearance) | (no appearance) |
Introduction
From September 2008 until 15 August 2014 the plaintiff, the Australia and New Zealand Banking Group, provided PBS Developments (‘PBS’) financial facilities to assist with property development projects. Mr Peter Schierholter was at that time the sole director and shareholder of PBS.[1]
[1]Affidavit of Ezra May, dated 5 December 2014, Exhibit 1: ‘ASIC Historical Extract for PBS’ (‘the May Affidavit’).
Funds were advanced under the facilities and credited to an Account held by PBS with the plaintiff (‘the Account’). $800,000 is said to have been secured by way of, inter alia, a mortgage over the land at 123 Monkey Gully Road, Mansfield, Victoria, 3722 (‘the Property’). An original executed mortgage document cannot be found and, although it has lodged a caveat against the Property, the plaintiff never registered that mortgage.
The plaintiff now wishes to recover the funds advanced to PBS and intends to conduct a mortgagee sale of the Property. Because, as I will shortly explain, PBS has been deregistered, the plaintiff has requested that the first defendant execute the mortgage document so that the mortgage may be registered. The first defendant has refused.
The plaintiff now seeks orders compelling the first defendant to execute a mortgage over the Property in a form registrable under the Transfer of Land Act 1958. Further orders are sought to compel the second defendant to register such a mortgage.
Background
On or about 29 March 2010, PBS opened the account and by 9 April 2010 had credited to that account approximately $200,000 made available to it by the plaintiff under a commercial bill facility.[2]
[2]The May Affidavit, Exhibit 6: ‘Account Statement for Period 29/03/2010 – 29/09/2014.
In around October 2010, PBS purchased the property. Between December 2010 and January 2012 further funds were advanced to PBS and credited to the account. Ultimately, on or about 14 February 2012, the plaintiff wrote to PBS enclosing a letter of offer for finance and a mortgage over the Property for execution and return.[3] The plaintiff has been unable to locate any document said to have been enclosed with that letter.
[3]The May Affidavit, Exhibit 10: ‘Letter from ANZ dated 14 February 2012.
The original executed mortgage was never registered and is believed by the plaintiff to have been lost. The plaintiff retains and has exhibited a copy of an undated executed mortgage document (‘the Copy Mortgage’).[4] It also retains a copy of the duplicate Certificate of Title for the Property.
[4]The May Affidavit, Exhibit 11.
On or about 16 March 2012, the first Defendant disqualified Mr Schierholter as a company director. Although the plaintiff continued to deal with PBS through Mr Schierholter, it deposes, and I accept, that it did not become aware that he had been disqualified as company director until 11 September 2014. The plaintiff continued to advance funds to PBS and to renew or rollover the commercial bill facility. The plaintiff deposes that it did so on the basis that the facility was secured by, among other things, the unregistered mortgage given by PBS over the Property. It is extraordinary, in my view, that the plaintiff never conducted a search of the first defendant’s company register, which would have disclosed that PBS no longer had any officeholders.
By letter of offer dated 13 February 2013, the plaintiff says it renewed the commercial bill facility in the amount of $800,000.[5] That letter provided that the facility would expire on 15 February 2014 and would be secured by, inter alia, a ‘registered’ mortgage over the Property. The plaintiff deposes that this document was signed by Mr Schierholter.[6] Having perused that document it is not clear to me that it was.
[5]The May Affidavit, Exhibit 15: ‘February 2013 letter of offer’.
[6]The May Affidavit, [22].
On or about 30 December 2013, the plaintiff lodged a caveat on the title to the Property. The interest protected by that caveat was recorded as follows:
Mortgagee under a Mortgage of Land from PBS dated 11 January 2013, being the date on which monies were advanced by ANZ to the borrowers in respect of whom the registered proprietors in their capacity as borrowers pledged the land as security for the repayments.[7]
The plaintiff cannot explain the 11 January 2013 date.
[7]The May Affidavit, Exhibit 16:’
A further letter of offer dated 31 January 2014 renewed the commercial bill facility in the amount of $800,000. Again, under the heading ‘Security’ reference is made to a ‘registered’ mortgage which was said to be held by the plaintiff.
That document was purportedly signed on behalf of PBS by Mr Schierholter.
Direct Background
On 9 August 2014, shortly prior to the expiration of the bill facility, the first defendant deregistered PBS. Upon deregistration, PBS ceased to exist[8] and all non-trust property it owned at deregistration vested in ASIC,[9] who has all the powers of PBS over such vested property. Under s 601AF of the Corporations Act 2001 (‘the Act’), ASIC may ‘do an act on behalf of the company or its liquidator if ASIC is satisfied that the company or liquidator would be bound to do the act if the company still existed.’
[8]Corporations Act 2001, s 601AD(1).
[9]Corporations Act 2001, s 601AD(2).
By 15 August 2014, the bill facility had expired and, on 18 August 2014, $800,000 was debited to the Account. The plaintiff engaged its current solicitors who advised Mr Schierholter by letter of 1 September 2014 that the bill facility had expired, that ANZ required repayment in full and that its client requested a valuation of the Property.
A contemporaneous letter to the first defendant advised it as follows:
(a)ANZ holds a copy of an undated, executed but unregistered mortgage by PBS over the Property and the certificate of title for the Property;
(b)The Copy Mortgage is security for a facility provided to PBS;
(c)The original of the Copy Mortgage has been lost or destroyed and PBS has since been deregistered;
(d)The Memorandum of Common Provisions accompanying the Copy Mortgage contains a clause that provides that PBS will ‘do… whatever ANZ reasonably asks (including signing anything) to better secure the Property’;
(e)If PBS was not deregistered, ANZ would ask PBS to execute a further mortgage over the Property and, if the further mortgage was not provided, ANZ would utilise the power of attorney provisions contained in the Copy Mortgage to obtain the further mortgage.
On that basis, the plaintiff requested that ASIC execute the further mortgage pursuant to s 601AF of the Act.
By letter of 11 September, ASIC declined to exercise its powers under s 601AF. It gave the following reasons:
(a)ASIC’s powers under s 601AF of the Corporations Act are discretionary and ASIC generally only exercises these powers to complete a last, outstanding administrative task on behalf of a deregistered company;
(b)ASIC does not exercise these powers to create new interests in favour of third parties in property vested in ASIC;
(c)ASIC would not be exercising its discretion in these circumstances because:
(i) As Mr Schierholter was disqualified by ASIC from being a director on 16 March 2012, from which time PBS had no officeholders, the execution of any documents purportedly on behalf of PBS after this date may be invalid;
(ii) Were ASIC to execute a mortgage, it would give ANZ a new and greater interest in the Property than ANZ already have; and
(d)ANZ should apply to a Court for a reinstatement of PBS and once reinstated and provided the Court validates the mortgage transaction, request that a liquidator be appointed to PBS execute the mortgage.
This proceeding
By amended summons dated 9 December 2014, the plaintiff seeks orders that:
1.The plaintiff be authorised to commence this proceeding by originating motion in Form 5C of the Supreme Court (General Civil Procedure) Rules 2005.
2.The requirements of Rules 5.03(1) and 8.02 be dispensed with.
3.The plaintiff is entitled to be registered as mortgagee of the Property provided as security for a commercial bill facility provided by the plaintiff to PBS Developments by letter of offer dated 31 January 2014 (‘the Commercial Bill Facility’).
4.The first defendant shall specifically perform the Commercial Bill Facility by executing a mortgage over the Property in a form registrable under the Transfer of Land Act 1958 (Vic) in a form substantially similar to the Copy Mortgage.
5.By 19 December 2014, the plaintiff shall forward by prepaid ordinary post in an envelope addressed to the first defendant:
(a)The Mortgage; and
(b)A sealed copy of this order.
6.The first defendant is directed to execute the Mortgage forwarded to it in accordance with paragraph 5 hereof.
7.By 5 January 2015, the first defendant shall return to the plaintiff by prepaid ordinary post to the plaintiff’s solicitors at Kemp Strang Lawyers, the Mortgage executed in accordance with paragraph 6 hereof.
8.Upon the plaintiff filing an affidavit by its solicitor providing service of the Mortgage and these orders in accordance with paragraph 5 of these orders and that the first defendant has not complied with paragraphs 6 and 7 of these orders, the first defendant shall be taken to have failed or refused to comply with paragraphs 6 and 7 of this order and, pursuant to section 22(1) of the Supreme Court Act 1986 (Vic), the Prothonotary or Deputy Prothonotary of the Supreme Court of Victoria is ordered to execute a mortgage over the Property which is secured by the Commercial Bill Facility.
9.The second defendant shall register the mortgage executed in accordance with paragraphs 4 or 8 of this order on Certificate of Title Volume 9559 Folio 753.
10.Such further order or orders as the Court considers appropriate.
For the reasons to which I will shortly turn, the first defendant submits the proceeding is misconceived.
Conclusion
The plaintiff, in discussion, objected to the characterisation of this proceeding as, essentially, a judicial review proceeding. Instead, the plaintiff argues that the proceeding arises for determination under s 22 of the Supreme Court Act. I set out that provision:
Execution of instruments by order of Court
(1)If a person fails or refuses to comply with a judgment directing that person to execute a document or indorse a negotiable instrument, the Court may, on such terms and conditions as it considers just, order that the document be executed or that the instrument be indorsed by a person nominated by the Court.
(2)A document or instrument executed and indorsed under subsection (1) operates and is for all purposes available as if it had been executed or indorsed by the person originally directed to do so.
Section 22 is, in my view, a mechanistic provision. I accept that where a person is to be compelled to execute a document by judgment or order, an appropriate form of that judgment or order may countenance the failure of that person to comply with the judgment or order. Such ‘cascading’ or self-enforcing orders have, from time to time, been made by this court and guard against unnecessary enforcement proceedings. In order to engage the s 22 mechanism, however, there must first be an entitlement to execution of the document by way of judgment or order.
The plaintiff seeks specific performance of PBS's contractual obligations under either the Memorandum of Common Provisions accompanying the Copy Mortgage or the 31 January 2014 letter of offer.[10] Such specific performance is sought against the first defendant.
[10]Order 4.
Unless I have misread the relevant provisions of the Corporations Act (601ADff), the first defendant does not inherit the personal obligations, such as the contractual obligations, of a deregistered company, even where those obligations concern property that vests in the first defendant under s 601AD(2) and notwithstanding the fact that the first defendant has all the powers of an owner of that property (s 601AD(4)).
Under s 601AF, the first defendant has a specific power to fulfil outstanding obligations of the deregistered company. As I have said, this section provides that, 'ASIC may do an act on behalf of the company […if it is] satisfied that the company […] would be bound to do the act if the company still existed.'
The plaintiff seems to contend that the effect of that section is that the first defendant simply stands in the position of the company in respect of its personal obligations, and that equitable relief (i.e. specific performance) can be granted against the first defendant as if it were the company. Those are not the terms of the discretion. It is unclear, in my view, how the plaintiff could have an entitlement to specific performance of the contract as against the first defendant. It follows that there is no judgment or order that is capable of being enforced by s 22.
Before I consider the issue of costs, I make a number of brief observations about judicial review. The first defendant is a Commonwealth corporate regulator that enjoys wide powers under the Act and the Australian Securities and Investments Commission Act 2001 (Cth). It follows that the first defendant’s refusal to exercise a discretionary power, such as the power under s 601AF, is an administrative decision by a Commonwealth authority. If it is judicially reviewable, this would be under the Administrative Decisions (Judicial Review) Act 1997 (Cth) (‘the ADJR Act’).
A matter arising under the ADJR Act is a ‘special federal matter’ for the purposes of Commonwealth and Victorian cross-vesting legislation. Section 6 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Vic) provides that where a matter for determination in a proceeding pending in the Supreme Court of this State is a ‘special matter’, this Court must ordinarily transfer the proceeding to the Federal Court. Under s 6(3), the Court may otherwise order if there are ‘special reasons’ for not doing so. I am not convinced that any reasons advanced by the plaintiff would extend beyond convenience, which is excluded as a consideration by s 6(3) of the cross-vesting legislation.
Even if this proceeding had been brought in the proper form and this Court were the proper forum,[11] s 601AF is a broad discretionary power. The task of a Court conducting judicial review is to review the subject decision for legality and not to descend into the merits of the decision. The first defendant has advanced six discretionary factors that, it argues, militate in favour of refusing to exercise the power. With one exception, the plaintiff did not impugn those discretionary considerations and, on their face, they provide an ‘evident and intelligible justification’ for the decision.
[11]It is not: Administrative Decisions (Judicial Review) Act, s 9.
The plaintiff has not argued that the decision was unlawful or beyond jurisdiction. Instead, its complaint is essentially that the discretion should have been exercised otherwise. As I have endeavoured to say, unless the discretionary factors advanced by the first defendant are unreasonable in the Wednesbury sense, disclose a failure to consider relevant considerations, or satisfy some other administrative law ground, it is not for a Court to venture into the merits of the decision.
Again, as I have said, the plaintiff objected to the characterisation of this proceeding as a judicial review proceeding. It is not brought in accordance with Order 56 and does not seek relief in the nature of the prerogative writs, or on administrative law grounds. It is therefore, in my view, unnecessary to consider the jurisdiction of this Court to hear and review such proceedings (or the application of the cross-vesting legislation) as there is no matter arising under the AD(JR) Act.
It follows that I dismiss the application and I will hear the parties as to costs.
Due to a mechanical malfunction, there is no audio recording of this judgment before paragraph [11].
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