Bank of Queensland Limited v Star Trek Pty Ltd

[2019] NSWSC 1712

Supreme Court

New South Wales

Medium Neutral Citation:	Bank of Queensland Limited v Star Trek Pty Ltd [2019] NSWSC 1712
Hearing dates:	3 December 2019
Decision date:	03 December 2019
Jurisdiction:	Common Law
Before:	Adamson J
Decision:	See paragraph [21].
Catchwords:	PERSONAL PROPERTY – property secured by finance agreement – default entitling bank to seize collateral – bank’s rights under s 123 of Personal Properties Securities Act 2009 (Cth) – declaration and associated orders made
Legislation Cited:	Bankruptcy Act 1966 (Cth), s 58 Personal Properties Securities Act 2009 (Cth), ss 123, 206, 207 Supreme Court Act 1970 (NSW), s 23 Uniform Civil Procedure Rules 2005 (NSW), r 42.1
Texts Cited:	Anthony Duggan, David Brown, Australian Personal Property Securities Law (2nd ed, 2016, LexisNexis Butterworths)
Category:	Procedural and other rulings
Parties:	Bank of Queensland Limited (Plaintiff) Star Trek Pty Ltd (First Defendant) Louise Thomson in her capacity as trustee of the Bankrupt Estates of Maria and George Papadeas (Second Defendant)
Representation:	Counsel: J Pokoney (Plaintiff) No appearance by the defendants   Solicitors: Mills Oakley (Plaintiff)
File Number(s):	2019/356468

Judgment

Introduction

1. The Bank of Queensland Limited, the plaintiff (the Bank), commenced proceedings by summons filed on 13 November 2019, seeking declarations and orders designed to authorise and facilitate the enforcement of its security interests over commercial personal property owned by Star Trek Pty Ltd, the first defendant (Star Trek). The property sought is located on land which was owned by Maria and George Papadeas but which has passed to Louise Thomson, the second defendant (the Trustee), upon her appointment as their trustee in bankruptcy: s 58 of the Bankruptcy Act1966 (Cth).

2. Neither defendant filed an appearance in the proceedings. Mr Pokoney, who appeared on behalf of the Bank, established that each of the defendants had been served. Star Trek can be taken to oppose the orders sought although it has not, as referred to above, taken any part in the proceedings. The Trustee does not oppose the orders sought.

The facts

3. By agreement entitled Master Asset Finance Agreement dated 15 March 2016 (the Agreement), the Bank agreed to provide finance to Star Trek for the lease of certain assets for its business which included fixtures, fittings and equipment. Maria and George Papadeas (the Guarantors) guaranteed the performance of Star Trek’s obligations under the Agreement. Mr Papadeas is the sole director and shareholder of Star Trek.

4. Clause 3.1 of the Agreement provided:

“The Grantor [Star Trek] grants a security interest in the Secured Property to BOQ Specialist [the Bank] for the purposes of securing payment of the Secured Money. The security interest created by this security agreement is a charge.”

5. The term “Secured Money” is defined by the Agreement to mean, in substance, all monies advanced by the Bank to Star Trek. The term “Secured Property” is defined to mean all property owned or subsequently acquired by Star Trek.

6. Clause 11.2(c) of the Agreement provides that, on default by Star Trek, the Bank is entitled to “take possession of…the Secured Property and enter any premises where the Secured Property may be located”.

7. On 16 March 2016 the Bank registered a security interest on the Personal Property Securities Register (the PPS Register) maintained under the Personal Properties Securities Act 2009 (Cth) (the Act) in respect of the security interest granted by Star Trek under the Agreement.

8. In June 2018 Star Trek defaulted under the Agreement by failing to make monthly payments. The Bank commenced proceedings in the District Court against Star Trek and the Guarantors. On 26 September 2018 judgment was entered in favour of the Bank against Star Trek and the Guarantors in the sum of $678,139.78, inclusive of costs. The judgment was entered on 11 October 2018. On 4 December 2018, the Bank commenced bankruptcy proceedings against the Guarantors on the basis of the judgment. On 18 June 2019, a sequestration order was made in respect of the Guarantors and the Trustee was appointed. An application for review of the order was dismissed.

9. Star Trek’s registered office is located at a property on xxxxxxxx xxxxx, Matraville (the Matraville Property). The Matraville Property is also the registered office and principal place of business of Dental Surgeon Pty Ltd, of which the Guarantors are the sole shareholders.

10. By letter dated 24 October 2019, the Bank’s solicitors wrote to Cassandra Graves, the director of Star Trek, advising of its intention to seize the collateral which comprised the Secured Property under the Agreement. Ms Graves responded that the “majority of the funds related to the fit out” which “are fixtures and cannot be removed” from the Property. Despite further correspondence, no agreement between Star Trek and the Bank could be reached regarding seizure of the items that comprise the Secured Property.

11. Mr Pokoney has indicated that the Bank has commenced these proceedings in order to ensure that both its entry onto the Matraville Property and its seizure of the Secured Property which is located on the Matraville Property are lawful.

12. On 28 November 2019 the Trustee wrote to the Bank’s solicitors informing them of her intention to sell Star Trek and Dental Surgeon Pty Ltd as going concerns (the shares in both companies having passed to her by reason of the Guarantors’ respective bankruptcies). She foreshadowed making an offer to the Bank to resolve its claim over the Secured Property. As referred to above, the Trustee did not oppose the orders sought by the Bank in these proceedings.

Relevant legislation and jurisdiction

13. The Act relevantly provides, by s 123, that a secured party may seize collateral, by any method permitted by law, if the debtor is in default of the security agreement.

14. Part 6.2 of the Act is entitled “Judicial proceedings generally”. Section 206 defines a “PPS matter” as including a matter arising under the Act or otherwise arising in relation to a security agreement or a security interest. I am satisfied that the present proceeding is a PPS matter as defined in the Act. Section 207 confers jurisdiction on various courts, including this Court, to deal with PPS matters. Jurisdiction on this Court is conferred subject to the following limits of jurisdiction:

“The court’s general jurisdictional limits, including (but not limited to) limits as to locality and subject matter, to the extent that the Constitution permits.”

15. As the Matraville Property and the Secured Property are both located in New South Wales, I am satisfied that this Court has jurisdiction over the matter: s 23 of the Supreme Court Act 1970 (NSW).

Consideration

16. In order to enforce its right under s 123 of the Act to seize the Secured Property, it will be necessary for the Bank to enter onto the Matraville Property, which is owned by the Trustee and, potentially, disturb the operation of Star Trek and the business conducted on the Matraville Property. The Bank has taken the view that it ought obtain authority from this Court for this course so that its methods are unquestionably “permitted by law” within the meaning of s 123. There is support for the Bank’s approach in the following passage from Anthony Duggan, David Brown, Australian Personal Property Securities Law (2nd ed, 2016, LexisNexis Butterworths) at 12.36:

“According to subs 123(1), the secured party may seize the collateral ‘by any method permitted by law’. At general law the main limitations are to be found in the laws governing breach of the peace and trespass. The secured party or its agent may not use unlawful force to seize the collateral. For example, if the grantor is present and resists the seizure, the secured party may not resort to violence. The appropriate response is to back down and obtain a court order for seizure of the collateral.”

17. I am satisfied that the Bank has established that declarations ought be made that it holds a security interest in all present and after-acquired property pursuant to the Agreement as recorded in the PPS Register and that it is entitled to seize the Secured Property. These declarations confirm the Bank’s rights to the Secured Property which are conferred by s 123 of the Act.

18. The Bank also seeks an order that it be granted entry and access to the Matraville Property for the purposes of seizing the Secured Property pursuant to s 123 of the Act and an order that Star Trek be restrained from interfering or otherwise impeding the Bank’s access to the Matraville Property for those purposes. I regard these orders as appropriate ancillary orders to permit the Bank to enforce its security, to require Star Trek to allow this to occur and to require the Trustee to grant entry and access to the Matraville Property for that purpose.

19. Although the Bank has taken a prudent course in approaching the Court for declarations and orders for access, it has not been necessary to consider whether the Bank would have, but for such declarations and orders, been entitled to enter the Matraville Property to seize the Secured Property. It had a contractual right to do so pursuant to s 11.2(c) of the Agreement (to which the Guarantors were also parties), which may have been sufficient to authorise the Bank’s proposed course of action absent these proceedings. Accordingly, I express no view on the subject.

Costs

20. The Bank also seeks its costs of the proceedings from Star Trek. As it is the successful party, it is entitled to its costs in accordance with the usual rule: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. Although Star Trek has not filed an appearance, it has not consented to the Bank’s application which has made it desirable, and potentially necessary, for the Bank to bring these proceedings. In these circumstances, I am persuaded that it is appropriate to order Star Trek to pay the Bank’s costs of the proceedings.

Orders

21. For the reasons given above, I made the following orders at the conclusion of the oral hearing on 3 December 2019:

1. Declare that the plaintiff holds a valid security interest in all present and after-acquired property of the first defendant, pursuant to the terms of the Master Asset Finance Agreement and associated documentation as recorded in the register maintained under the Personal Property Securities Act 2009 (Cth) (Security Interest).

2. Declare that the plaintiff is entitled, pursuant to s 123 of the Personal Property Securities Act 2009 (Cth), to seize the personal property of the first defendant as collateral under the Security Interest, including without limitation the fixtures, fittings and equipment financed by the plaintiff and set out in Annexure A to the Master Asset Finance Agreement dated 15 March 2016.

3. Order that the plaintiff (including by its agents), be granted entry and access to the premises located at xxx xxxxxx xxxx, Matraville NSW, for the purpose of seizing the personal property of the first defendant, pursuant to s 123 of the Personal Property Securities Act 2009 (Cth).

4. Order that the first defendant (including by its officers, employees, agents or assigns) be restrained from interfering or otherwise impeding the plaintiff’s access in order (3) above.

5. Order the first defendant to pay the plaintiff’s costs on the ordinary basis, as agreed or assessed.

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Decision last updated: 03 December 2019