Bacaral Pty Ltd v Bodnar Pty Ltd
[2000] VSC 523
•8 December 2000
| SUPREME COURT OF VICTORIA | |
| COMMERCIAL & EQUITY DIVISION | Not Restricted |
No. 7268 of 2000
| BACARAL PTY LTD | Plaintiff |
| v | |
| BODNAR PTY LTD & OTHERS | Defendant |
---
JUDGE: | Hansen J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 November 2000 | |
DATE OF JUDGMENT: | 8 December 2000 | |
CASE MAY BE CITED AS: | Bacaral Pty Ltd v Bodnar Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 523 | |
---
Sale of business – vendor terms – whether equitable assignment of proceeds of a future sale of business by the purchaser – whether floating charge or charge on a book debt – whether a vendor's lien – Corporations Law, s. 262.
---
APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr D M Maclean | Moores Legal |
No appearance for the 1st Defendant | ||
For the 2nd Defendant | Mr J B Davis | Deacons |
| For the 3rd Defendant | Mr M T Bevan-John | Russell Kennedy |
HIS HONOUR:
This case concerns the proceeds of sale of a special accommodation house business called Jasmine Lodge conducted at 56 Mount Dandenong Road, Ringwood East. In 1997 the plaintiff Bacaral Pty Ltd sold the business to the second defendant Jasmine Lodge (Vic) Pty Ltd for $725,000 on the basis of a deposit of $25,000 and the residue on extended terms ("the first contract"). The plaintiff calculates that at 1 October 2000 some $946,380 remained owing by the second defendant under the first contract. By a contract of sale dated 27 September 2000 the second defendant sold the business to the first defendant Bodnar Pty Ltd for $575,000 payable as to $3,500 by way of deposit and the residue on 16 October 2000 ("the second contract"). The plaintiff says that on the basis of an equitable assignment[1] or a vendor's lien it is entitled to receive the sum payable upon settlement of the second contract. It seeks a declaration and an order for payment accordingly.
[1]Counsel for the plaintiff did not press a claim of statutory assignment.
1. The first contract
It is alleged in the amended statement of claim that the first contract was made on 17 September 1997 and the second defendant admitted as much. The contract does not bear a date of making, but there are several indications in it that that date was indeed 17 September 1997.
It is stated in the particulars of sale that the residue of $700,000 was to be paid by instalments of principal and interest. Special condition 6 commenced:
" The Vendor shall advance to the Purchaser the sum of $700,000 for a period of ten years on the following terms and conditions:-"
and went on to provide a method for calculating the rate of interest payable on "the said advance" during "the period of the loan" and the amount of monthly instalments of principal and interest. The amount of monthly instalments depended to some extent on occupancy rates. Payments were to be made by "the Purchaser" to "the Vendor", with the final payment of principal and interest on or before 30 September 2007.
The second defendant did not enter into possession of the business on 17 September 1997. Indeed, it had not done so on 27 November when a meeting was held between Kathleen Monica Murphy (a director of the plaintiff), the plaintiff's estate agent, and Keith Avenel Smith (the sole director of the second defendant). Mr Smith requested extra time for the payment of instalments. Mrs Murphy agreed to the request. They also agreed that the second defendant would have possession of the business on 1 December 1997. The agreement was written out and signed. The written document stated that the business would be taken over on 1 December and set out revised terms for payment of instalments or residue, which to that extent varied special condition 6. The amount of monthly instalments was reduced and the effect of occupancy rates was adjusted. It was agreed that the vendor would review "the sale price" on 1 December 1998. Whatever review might have taken place, the sale price was not in fact varied on that date.
There was another matter discussed at the meeting on 27 November 1997. Mrs Murphy asked Mr Smith what would happen if the second defendant sold the business while it still owed money to the plaintiff under the contract. Mr Smith said that if anything was owing, the amount would be paid out of the proceeds of sale. He said that the plaintiff would be paid whatever was owing if the second defendant sold the business. Mrs Murphy said that the proceeds of sale would as a result belong to the plaintiff to the extent required to meet the outstanding balance.[2]
[2]Counsel for the second defendant relied on the parol evidence rule to object to the admissibility of these statements, on the basis that their effect was not embodied in the written documents of 27 or 28 November (see [6] below) and that the oral evidence could not be received to qualify the written documents. Counsel for the plaintiff relied on the exception to the parol evidence rule that permits extrinsic evidence to establish the true nature of an agreement even when that evidence may vary or add to the written instrument: see Guest, Chitty on Contracts: Twenty-Seventh Edition (1994) at 12–098.
Mrs Murphy was not cross-examined and neither Mr Smith nor the plaintiff's estate agent swore an affidavit. There is nothing about Mrs Murphy's evidence which by reason of improbability, contradiction or other circumstance establishes falsity or that for some other reason it is attended with doubt such that it should not be accepted. Indeed counsel for the second defendant did not submit that such was the case. I accept Mrs Murphy's evidence.
Further, in my view that evidence is admissible to relevantly aid in explaining the true nature of the agreement. However, I do not need to refer to it: see [29-30] below.
The plaintiff's estate agent wrote out a note of what was agreed. It states:
"Agreement dated 27/11/1997
At the request of Mrs K. Murphy.
Re Jasmine Lodge
No. 56 Mount Dandenong Road, E Ringwood
Business Lease Hold.
That in the event of the sale of Jasmine Lodge Business by Jasmine Lodge Vic P/L all monies due under the agreement between the Murphys and Keith Smith shall be paid in full on settlement of such sale."
The note was signed by Mrs Murphy and Mr Smith. The agreement was also typed up at the meeting and signed. The typed version is dated 28 November although Mrs Murphy says that it was typed on the day of the meeting. The typed document referred to the corporate entities instead of the individuals. It states:
"Agreement dated 28/11/97
At the request of Bacaral Pty Ltd
Re: Jasmine Lodge S.R.S. (S.A.H.)
Business Leasehold
56, Mt Dandenong Rd, East Ringwood
In the event of any future sale of Jasmine Lodge, Business Leasehold by Jasmine Lodge (Vic) Pty Ltd or any change or transfer of Jasmine Lodge (Vic) Pty Ltd then all monies due under the contract agreement between Backaral [sic] Pty Ltd and Jasmine Lodge Pty Ltd [sic] shall be paid in full on settlement of such sale."
It also added the following, which pertained to matters of adjustments and confirmed the parties agreement to complete the contract:
"Both parties hereby agree to complete all adjustments for all electricity, gas, rates, rent and any resident fees on date of settlement (takeover). The vendor agrees to pay out all staff entitlements, and further agrees to pay out any lease or hire purchase agreements pertaining to the business.
Both parties hereby agree to complete the contractual arrangements previously entered into."
These matters were deposed to by Mrs Murphy in an affidavit. She was not cross-examined. Neither Mr Smith nor the plaintiff's estate agent present at the meeting swore an affidavit.
2. The second contract
As mentioned, the second contract was entered into on 27 September 2000. Having heard that the second defendant was selling the business, and an amount still being owed under the first contract, the plaintiff instructed solicitors who wrote to the second defendant's solicitors on 10 October. The letter referred to the first contract, enclosed a copy of the document dated 28 November 1997 and requested confirmation that the second defendant would, upon settlement of the sale, pay to the plaintiff all monies due to the plaintiff, or that the proceeds of sale would be held in trust pending settlement of the dispute between their clients or an order of the Court. Subsequently, on 15 October 2000 the plaintiff's solicitors wrote to the first defendant's solicitors and gave notice of the assignment under the agreement dated 27 November 1997 and demanded that the sum due on settlement be paid to the plaintiff. There was further correspondence between the parties to which it is not necessary to refer.
3. Appointment of administrators and liquidators of second defendant
On 16 October 2000 the second defendant appointed James Patrick Downey and Robert Molesworth Hobill Cole, chartered accountants and partners in Cole Downey and Co, as administrators of the company. Mr Downey swore an affidavit which was filed in this proceeding. He said that the special accommodation house business was the only substantial asset of the second defendant. His major concern had been to preserve the asset and achieve completion of the sale under the second contract. He gave evidence of other matters including settlement of the sale, costs incurred in the administration and the financial position of the company. If the plaintiff was successful in its claim there would be no funds available for creditors of the second defendant. Mr Downey was not cross-examined.
At the second meeting of creditors held on 13 November, it was resolved that the second defendant be wound up, the administrators were appointed liquidators and their remuneration as administrators (stated by Mr Downey to be approximately $38,000) was approved.
As communications between the parties progressed it became apparent that there was a tension between the claim of the plaintiff that it was entitled to the whole of the settlement sum and advices of Mr Downey as to the costs of the administration, and the claims of two secured creditors and other creditors of the second defendant. The fund arising from the sale could not meet all these claims.
4. The proceeding
On 18 October the plaintiff filed the writ against the first and second defendants. The claim, based on the agreement dated 28 November 1997, was that the second defendant had assigned to the plaintiff the proceeds of any sale of the business to repay monies due under the first contract. The assignment was pleaded, in the alternative, as a legal or equitable assignment. It was alleged (correctly) that notice of the agreement was given to the first defendant by a letter dated 15 October 2000 which also demanded payment of the sum due on settlement. An interim injunction was sought to protect the situation pending trial (to prevent the defendant from completing the sale without paying the sum due to the plaintiff) together with a declaration and an order for payment to the plaintiff of the sum due on settlement.
The first defendant filed an appearance but has not otherwise taken an active part in the proceeding. It has stated it will abide the decision of the court provided no adverse order is sought against it. Hence it did not file a defence.
Beach J heard a contested application for interim injunctive relief on 23 October. Material was placed before him as to the costs of the sale and the administration and other costs associated with the rental of the business premises. He gave his decision on 24 October. On the basis of accepting an undertaking of the second defendant to set aside the sum of $431,250 from the proceeds of the sale and place that sum in a separate bank account pending the hearing and determination of the proceeding or further order, his Honour dismissed the plaintiff's application, gave the plaintiff leave to proceed against the second defendant, made orders for pleadings and affidavits, directed service of the order on National Australia Bank ("the NAB") and Rebecca Atkin (it being alleged they were secured creditors of the second defendant), and referred the proceeding to the Listing Master for an early fixing for trial.
The amount of $431,250 was arrived at after allowing for the balance of agent's commission on the sale, administration costs and costs connected with the lease of the business premises. It did not make allowance for a claim by the NAB of $135,000 or the administrators' past and future legal costs estimated at $45,000.
On 30 October the plaintiff filed an amended statement of claim. This added an alternative claim based upon a vendor's lien implied by law in the first contract. On that basis also the plaintiff claimed payment of the sum due on settlement of the second contract. In the further alternative, on the basis either of the agreement to assign or the vendor's lien, it claimed payment of the sum of $431,250 the subject of the undertaking to Beach J.
The second defendant filed a defence on 1 November.
On 3 November settlement took place under the second contract. The amount received from the purchaser was $512,041.68. A further $20,000 is expected. Pursuant to the undertaking, the administrators placed the amount of $431,250 in an account established for that purpose. The balance of $80,791.68 was placed in an account established in the administration.
The proceeding came on for trial before me on 15 November 2000. When it did, in addition to counsel appearing for the plaintiff and second defendant, counsel appeared for the NAB. He stated that the NAB was the holder of a debenture charge granted by the second defendant and that, were the plaintiff to succeed in establishing an entitlement to the amount due to the second defendant on settlement of the second contract, the NAB would wish to contend that it was entitled to be paid its debt in priority to the plaintiff. He requested that the NAB be added as a defendant to the proceeding and I duly made that order. He supported the submissions to be made by the second defendant in opposition to the plaintiff's claim and requested that if those submissions be unsuccessful I not proceed further and order distribution of the fund to the plaintiff until the NAB had been heard in support of its claim. He said that the NAB had not put its materials on affidavit and that time would be required to do so. He was supported in this approach by counsel for the second defendant who said that he too would wish the opportunity to put in further materials on claims to the fund, if only on the part of the administrators/liquidators, on the matter of priority vis-à-vis the plaintiff. Counsel for the NAB then withdrew from the hearing.
It should be noted that the case was fixed for trial on all issues, including a claim for payment of the settlement sum. It was doubtless for this reason that Beach J ordered that his order be served on the NAB and Ms Atkin. I was informed that this was done. This gave the two claimed secured creditors notice of the proceeding and an opportunity to appear and, if they wished, to assert an entitlement to priority in payment over the plaintiff. Ms Atkin did not appear.
Doubtless the course taken by the second defendant and the NAB was influenced by a desire to save costs, as the case might have settled or been disposed of adversely to the plaintiff. Nevertheless, to the extent practicable, parties should always seek to avoid a multiplicity of hearings in a proceeding and the attendant costs. The decision of the NAB, and of the administrators/liquidators as it would appear from what counsel said, to approach the trial in the way they did involved an element of presumption. For the case had been fixed for trial on all issues, and that included a claim for payment to the plaintiff which, having regard to matters raised at the hearing before Beach J as long ago as 23 October, would involve the resolution of a claim for priority by the alleged secured creditors, if such a claim was pressed.
I refused to agree in advance that the trial be circumscribed in the way sought by counsel for the NAB and counsel for the second defendant. It seemed to me that the trial having been fixed as I have mentioned it should proceed to the greatest extent practicable. In the result, counsel for the NAB having voluntarily withdrawn from the hearing, I heard the submissions of counsel for the plaintiff and second defendant for and against the plaintiff's claim. Having regard to the way in which the NAB and the administrators/liquidators approached the trial, if the plaintiff succeeds I will have no choice but to permit them an opportunity to advance submissions on the matter of priority, if they should be so advised.
As a consequence of the joinder of the NAB I gave leave to the plaintiff to amend the statement of claim to add an allegation that on 6 May 1999 the third defendant had registered a fixed and floating charge over the assets of the second defendant and that on that basis, but wrongly, it has claimed priority in regard to the proceeds of sale as against the plaintiff, and to add a claim for a declaration that the plaintiff was entitled to priority over the NAB. The amended statement of claim was filed on 17 November.
5. Equitable assignment
Counsel for the plaintiff submitted that the true nature of the agreement between the plaintiff and the second defendant was that the amount paid on settlement of the second contract had been assigned to the plaintiff to the extent required to discharge the second defendant's indebtedness to the plaintiff under the first contract. This constituted an equitable assignment on the principle stated by Lord Truro in Rodick v Gandell[3] that:
" an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor … will create a valid equitable charge upon such fund, in other words will operate as an equitable assignment of the debts or fund to which the order refers." [4]
The principle applies to the assignment of so much of a future debt as shall be sufficient to satisfy an uncertain future indebtedness.[5] The security "gives the chargee a right of payment out of the fund of receivables appropriated to the security without transferring the fund", but is not potential in the sense that it depends upon the occurrence of a default; the chargee "has a right of non-possessory control which is co-extensive with the absence of a right in the chargor to dispose of the receivables without his consent".[6]
[3](1852) 1 DeGM&G 763.
[4](1852) 1 DeGM&G 763 at 777, 778. See Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 at 613.
[5]See Starke, Assignments of Choses of Action in Australia (1972) at 15; Jones v Humphreys [1902] 1 KB 10 at 13, 14; Durham Brothers v Robertson [1898] 1 QB 765 at 774. In a case such as the present in which the assignment is of future property, value is required: see McGhee, Snell's Equity: Thirtieth Edition (2000) at 5–18. Counsel for the plaintiff submitted that value had been provided. The assignment occurred in a process of variation of the first contract agreed upon prior to the second defendant taking possession. I did not understand counsel for the second defendant to take issue with that submission.
[6]Oditah, Legal Aspects of Receivables Financing (1991) at 95.
Counsel for the second defendant submitted that, properly understood, the 28 November 1997 document did no more than bring forward the time of payment of the balance due under the first contract, in the event that any balance remained owing when "any future sale" or "any change or transfer of Jasmine Lodge" occurred. The document did not speak of a charge or assignment and did not expressly state that the amount owing to the plaintiff was to be paid out of or from the amount paid on settlement of the future sale.
No particular form of words is required for an equitable assignment. It need not be in writing. "Equity has always looked to the intent rather than the form, and all that is needed is a sufficient expression of intention to assign".[7] In William Brandt's Sons & Co v Dunlop Rubber Co Ltd,[8] Lord Macnaghten said:
' But, says the Lord Chief Justice, "the document does not, on the face of it, purport to be an assignment nor use the language of an assignment." An equitable assignment does not always take that form. It may be addressed to the debtor. It may be couched in the language of command. It may be a courteous request. It may assume the form of mere permission. The language is immaterial if the meaning is plain.' [9]
Thus it is not fatal to the plaintiff's case that the 28 November 1997 document did not speak of charge or assignment and did not expressly state that the amount owing to the plaintiff was to be paid out of the amount paid on settlement of the future sale.
[7]McGhee, Snell's Equity: Thirtieth Edition (2000) at 5–13. See Beecham v Pater (1890) 16 VLR 13 at 15.
[8][1905] AC 454.
[9][1905] AC 454 at 462.
In my view, the intendment of the arrangement between the plaintiff and the second defendant was that in the event of the second defendant selling the business the settlement proceeds were to be applied to discharge any indebtedness which the second defendant then had to the plaintiff under the first contract. I am of that view having regard to the language of the document dated 28 November and the overall context, including the document signed on the previous day.
It is clear that on 27 November Mr Smith sought a revision of the terms as to payment and that possession be given on 1 December in order that the sale might proceed. Mrs Murphy agreed to the revisions. The plaintiff's estate agent, who was the only other person present, was not a lawyer. Counsel for the plaintiff submitted that the document of 28 November was not created by lawyers, and by that he meant the three persons present at the meeting. Counsel for the second defendant did not question that submission. That was relevant in considering the likelihood of legal accuracy and aptness of the language employed to express the parties' agreement. The agreement was made in circumstances in which the purchaser required a reduced level of instalments and extra time for payment in order to undertake the purchase and the value of the business represented an immediate source of payment of any balance of the purchase price should the purchaser on-sell the business. For if the purchaser on-sold but the plaintiff was not paid out of the proceeds of sale, the business would be gone and the sole source of payment would be the second defendant, for whatever it might be worth in the wash-up. The commercial consideration that would have directed a terms vendor in the position of the plaintiff to require that settlement monies from the on-sale be applied in discharge of its debt was obvious and preferable as an option.
In my view, in the circumstances, it matters not that words such as assignment and charge were not used. The document is clearly not the work of a lawyer. It is attempting to express the substance of an agreement. I do not consider that the addition in the document dated 28 November of the words "or any change or transfer of Jasmine Lodge" affects the meaning of the agreement otherwise reflected in the document. Those words, it may be noted, were not in the handwritten document dated 27 November. In my view it is likely that they were added by the plaintiff's estate agent as an afterthought or precaution against the risk of some future transaction which, although not structured as a sale of the Jasmine Lodge business by the second defendant, involved a change in or transfer of control of the second defendant. But however that may be, and I have heard no evidence as to the reason for its inclusion other than the evidence given by Mrs Murphy, there is a clear intention that in the event of a future sale the unpaid monies be paid to the plaintiff. It is asserted by counsel for the second defendant that in the event of a "change or transfer of Jasmine Lodge" there would not be any proceeds of sale. It is not at all clear that that would or must be so in fact. Indeed the contemplation in the use of those words would seem to have been a change in or transfer of control of the company Jasmine Lodge (Vic) Pty Ltd, as distinct from a sale of the business, for which one might expect a consideration in money to be paid and that the situation be equated to a sale. Indeed that is the intention conveyed by the words, in my view; compare the difference in language between a "future sale of Jasmine Lodge … by Jasmine Lodge (Vic) Pty Ltd" and the words "or any change or transfer of Jasmine Lodge (Vic) Pty Ltd". The point that counsel sought to make, based upon his assertion, was that in the case of a "change or transfer" there would be no proceeds of sale but any unpaid balance would have to be paid to the plaintiff in any event. This, counsel submitted, reinforced a construction of the document that it merely provided for an acceleration of the payment of the balance and was not a security. I reject the submission. Not only is it based on a premise as to an absence of payment in the event of a "change or transfer", which is either not established or unlikely in fact, but it is also based on a misunderstanding of the intention of the document in that respect.
Then there is the fact that the document does not state that the payment is to be "from" the proceeds of settlement and distinct from merely being paid "on" settlement. This seems to me to be a narrow and artificial construction in the context of the commercial situation obtaining between the parties on 27 November. To speak of payment "on settlement of such sale" is in context to speak, in my view, of the amount to be paid on settlement being then and there applied to the extent necessary in discharge of the debt to the plaintiff. I am of the view that the intention of the plaintiff and the second defendant was not merely that any indebtedness of the second defendant to the plaintiff be discharged at the time of settlement of a future sale by the second defendant. The intention was that the settlement proceeds of a future sale be assigned to the plaintiff for the purpose of being applied to the extent required to discharge that indebtedness. When regard is had to the written evidence it is clear beyond question that the parties agreed on an assignment to operate as a charge on the proceeds of sale.
The question then is whether the assignment, being a charge, was required to be registered either as a floating charge (s. 262(1)(a) ) or a charge on a book debt (s. 262(1)(f) ) under the Corporations Law. If the Corporations Law requires that it be registered, it will be void as against the administrators/liquidators because it was not registered.
The first point under s. 262(1) is whether the charge is a floating charge within the meaning of para. (a). In support of his submission that it is, counsel for the second defendant referred to the judgement of Gleeson CJ in Fire Nymph Products Ltd v The Heating Centre Pty Ltd (in liq),[10] where his Honour discussed the nature of a floating charge. Counsel also drew attention to the definition of floating charge in s. 9 of the Corporations Law: it includes a charge that conferred a floating security at the time of its creation but has since become a fixed or specific charge. Counsel submitted that if the 28 November 1997 document is a charge, it is a floating charge.
[10](1992) 7 ACSR 365 at 371.
The answer to this submission is found in an understanding of the true nature of a floating charge as distinct from a specific or fixed charge. One of the classic statements of what constitutes a floating charge is that of Lord Macnaghten in Illingworth v Houldsworth[11] that:
" I should have thought there was not much difficulty in defining what a floating charge is in contrast to what is called a specific charge. A specific charge, I think, is one that without more fastens on ascertained and definite property or property capable of being ascertained and defined; a floating charge, on the other hand, is ambulatory and shifting in its nature, hovering over and so to speak floating with the property which it is intended to affect until some event occurs or some act is done which causes it to settle and fasten on the subject of the charge within its reach and grasp." [12]
[11][1904] AC 355.
[12][1904] AC 355 at 358. See Gough, Company Charges: Second Edition (1996) at 85.
The charge in this case is not in the nature of a floating charge. It is a specific charge of future property. It is a present security on a specific future asset which will fix on that particular asset as soon as it is acquired.[13] In relation to the matter of priority, once the asset is acquired the security interest attaches to it with effect "as from the date of the security agreement".[14] The charge was not a floating charge over the assets or a class of assets of the second defendant. As I say, the moment the particular asset came into existence, the charge fixed upon it without more. It was not a floating charge within the meaning of s. 262(1)(a) and was not registrable on that account.
[13]See Ford's Principles of Corporations Law at [19.320].
[14]Goode, Legal Problems of Credit and Security: Second Edition (1988) at 34.
The second point is whether it was a charge on a book debt and thus registrable under s. 262(1)(f): the expression "charge on a book debt" is explained in s. 262(4). Counsel for the second defendant did not refer me to authority on the meaning and operation of the provision. In reply, counsel for the plaintiff submitted that a transaction such as the present, in which a company sold its business as distinct from incurring a debt in the ordinary course of conducting the business, was not a book debt within the meaning of the statute as properly understood. In support he referred to the following statement relating to asset liquidation sales:
" As book debts arise essentially from normal trading activity, debts arising from extraordinary dispositions or realisations of a company's assets should not be considered as book debts." [15]
In my view the concept of a book debt arising in the carrying on of a business is incorporated in s. 262(4). The price payable on the disposal of the second defendant's business is not a book debt within the meaning of that expression in s. 262(1)(f) as it is not an amount that arises in the course of carrying on the business, but, rather, from the realisation of the business. It is a debt arising in the former and not the latter situation that the statute is concerned with. For this reason the charge was not registrable under s. 262(1)(f).
[15]Gough, Company Charges: Second Edition (1996) at 686. See generally Ford's Principles of Corporations Law at [19.353].
It follows that the plaintiff has established that at all relevant times it held a valid equitable assignment by way of charge upon the settlement proceeds payable under the second contract.
6. Vendor's lien
This basis of claim is a true alternative and if upheld would produce exactly the same result as the equitable assignment. In these circumstances, and having regard also to the need for expedition in the case so that the parties know their position in relation to the fund, I will not consider the alternative claim in detail. I merely observe that in my view, and contrary to the submission of the second defendant, the terms of the first contract do not establish that the plaintiff and second defendant intended (the onus being on the second defendant to establish such intention) that the lien, which would otherwise be applicable on the sale of the business in respect of the unpaid purchase price, be precluded or qualified in its application.[16] The inference of intention in that regard must be clear and manifest. Even if on the true construction of the first contract the unpaid residue had the character of a loan and the plaintiff thus had the character of a lender rather than an unpaid vendor, and the plaintiff had sought security in the 28 (or 27) November 1997 document, those matters whether individually or in combination would not establish that intention, in my view.[17]
[16]See Davies v Littlejohn (1924) 34 CLR 174; Hewett v Court (1983) 149 CLR 639; McDowell v Kelic [1998] NSWSC 454.
[17]See Tyler, Fisher and Lightwood's Law of Mortgage: Tenth Edition (1988) at 612; Tyler, Young & Croft, Fisher and Lightwood's Law of Mortgage: Australian Edition (1995) at [35.14] and [35.15]; Mackreth v Symons (1808) 15 Ves 329; 33 ER 778 at 781 and 786; Winter v Lord Anson (1827) 3 Russ 488; 38 ER 658 at 659-660; Barclays Bank PLC v Estates and Commercial Ltd [1997] 1 WLR 415 at 419-421; cf. Wossidlo v Catt (1935) 52 CLR 301; Paul v Speirway Ltd (in liq) [1976] 1 Ch 220; In re Bond Worth [1980] 1 Ch 228 at 251.
Finally I note that s. 262(2)(a) of the Corporations Law expressly exempts a lien over property from the registration requirements of that section. Hence, assuming that the vendor's lien was otherwise registrable as falling within one of the categories in s. 262(1), s. 262(2)(a) exempts the lien from that requirement.
7. Conclusion
The plaintiff seeks a declaration and payment of the amount received at settlement of the second contract or at least the sum of $431,251. I will hear the parties on the terms of the orders and declarations which should be made at this stage. The plaintiff is entitled to a declaration that it is an equitable assignee of the settlement proceeds and that it has a vendor's lien over the proceeds to secure repayment of the unpaid purchase price. A declaration to that effect is sufficient to establish the plaintiff's right. Having regard to the way in which the administrators/liquidators and the NAB approached the trial I will stand over the further hearing of the proceeding for a short time to enable the parties to consider their position, the orders that should be made and the further disposition of the proceeding.
---
0
4
0