Beton Pumping Group Pty Ltd v Zoomlion Capital (Australia) Pty Ltd
[2017] VSCA 183
•12 July 2017
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2017 0081
| BETON PUMPING GROUP PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) |
| v |
| ZOOMLION CAPITAL (AUSTRALIA) PTY LTD |
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| JUDGES: | WHELAN and SANTAMARIA JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 11 July 2017 |
| DATE OF JUDGMENT: | 12 July 2017 |
| MEDIUM NEUTRAL CITATION: | [2017] VSCA 183 |
| JUDGMENT APPEALED FROM: | Zoomlion Capital (Australia) Pty Ltd v Beton Pumping Group Pty Ltd (subject to a deed of company arrangement) (Unreported, Supreme Court of Victoria, Vickery J, 21 June 2017) |
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PRACTICE AND PROCEDURE – Application for stay of judgment for delivery up of equipment – Where judgment given summarily – Where applicant mortgagor owes money to respondent mortgagee under chattel mortgages – Where mortgagee exercised right of repossession of equipment the subject of security – Where mortgagor seeks to hold mortgagee out of its rights to repossession based on set-off and counterclaim – Where mortgagor required to pay into court amount of outstanding mortgage debt as condition of stay – Where mortgagor unable to pay money into court – Longreach Family Living Pty Ltd v South Eastern Secured Investments Ltd [2009] VSC 499 applied – Application dismissed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr A W Sandbach | Blackstone Waterhouse Zouki Lawyers |
| For the Respondent | Mr J A Castelan | Parkston Lawyers |
WHELAN JA
SANTAMARIA JA:
Introduction
On 7 July 2017, Beton Pumping Group Pty Ltd (subject to a deed of company arrangement) (‘Beton’) applied for leave to appeal an order made in the trial division on 21 June 2017 in proceeding S ECI 2017 000036, in which a judge ordered Beton to deliver up to Zoomlion Capital (Australia) Pty Ltd (‘Zoomlion’) various items of concrete pumping equipment that was listed in a schedule to the order.
In its application for leave to appeal, Beton applied for a stay of the order made on 21 June 2017. This is the disposition of the application for the stay.
The circumstances in which that order was made do not emerge clearly from the materials filed by Beton in support of its application for leave to appeal. However, the Court has been able to consult the electronic files of two separate proceedings in the trial division that explain those circumstances.
The Zoomlion proceeding
Zoomlion is a company that carries on business as a financier in relation to concrete pumping equipment. Beton carries on business as a concrete pumper offering its services in various construction sites around Victoria. The sole current director of Beton is Hasan Genc (‘Genc’). Between 29 December 2014 and 28 January 2016, Zoomlion and Beton entered into some 15 agreements pursuant to which Zoomlion lent Beton the funds necessary to purchase concrete pumping equipment the subject of each agreement. It was a term of each agreement that Beton would grant a security interest, in the form of a chattel mortgage, to Zoomlion in respect of the equipment the subject of each agreement. Each of the agreements also provided that Beton would pay monthly instalments until the respective loans were fully repaid and that, on the occurrence of an event of default, at the option of Zoomlion, the whole of the secured money became due and payable without the need for any demand or notice and that Zoomlion could immediately terminate the agreement and enforce all of its rights under the agreement.
Upon the making of each agreement, Zoomlion registered its security interest in the equipment the subject of the particular agreement on the Personal Properties Securities Register established under the Personal Properties Securities Act 2009 (Cth) (‘PPSA’).
It appears that Beton began to suffer financial difficulties towards the second half of 2016. In the event, it failed to make payments to Zoomlion in respect of the 15 agreements. On 28 October 2016, Zoomlion served Beton with a default notice in respect of each chattel mortgage in which it sought payment by 4.00 pm on 17 November 2016. Each default notice provided that, if the payment was not made by the due date, the loan would become due and payable and that Zoomlion would be entitled to obtain possession of the equipment the subject of that chattel mortgage.
In the event, Beton did not make payment in respect of any of the chattel mortgages.
On 7 November 2016, Beton was placed into voluntary administration pursuant to Part 5.3A of the Corporations Act 2001 (Cth). This was a further event of default under the chattel mortgages.
On 23 December 2016, Beton, Genc and the administrators executed a deed of company arrangement (‘the DOCA’).
On 22 February 2017, Zoomlion brought a proceeding in the trial division
(S ECI 2017 000036) against Beton in which it sought orders for the delivery up to it of the equipment that was the subject of each of the 15 agreements (‘the Zoomlion proceeding’).[1]
[1]The present application for leave to appeal (and the application for a stay) has been brought in the Zoomlion proceeding.
The Beton proceeding
On 2 March 2017, Beton brought a proceeding in the trial division (S ECI 2017 000053) against various defendants (including Zoomlion) (‘the Beton proceeding’).[2] The allegations in the Beton proceeding would eventually form the basis of the defence and counterclaim filed by Beton in the Zoomlion proceeding.
[2]As at the date on which the Beton proceeding commenced, Genc was the sole director of Beton.
It is necessary, first, to identify the various defendants in the Beton proceeding. Prasath Nilantha Hewa Haputhanthirige (‘Prasath’) is the first defendant. He was the chief financial officer of Beton between 2014 and 2016. Dimitrios George Vassiliadis (‘Vassiliadis’) is the second defendant. He was a director of Beton and, through his company, a shareholder in Beton. Nationwide Concrete Pumping (Vic) Pty Ltd (‘Nationwide Concrete’) is the third defendant. It provides concrete pumping services in the construction industry and is a competitor of Beton. Mason David Roberts (‘Roberts’) is the fourth defendant. He is the sole director of Nationwide Concrete and a shareholder in it. Nationwide Plant Hire Pty Ltd (‘Nationwide Plant Hire’) is the fifth defendant. It also provides concrete pumping services in the construction industry and is also a competitor of Beton. Zoomlion is the sixth defendant. Empire Consortium Group Pty Ltd (‘Empire’) is the seventh defendant. It provides concrete pumping services and is also a competitor of Beton.
In its statement of claim, Beton alleges that, on 7 November 2016, it was placed into voluntary administration by a resolution signed by Genc and Vassiliadis. Partners of Grant Thornton, chartered accountants, were appointed as joint and several voluntary administrators. Beton alleges that the decision to pass the administration resolution was based on advice given to Genc and Vassiliadis by Prasath to the effect that Beton was insolvent and unable to pay its debts. The statement of claim then contains allegations that, in November 2016, Genc discovered a variety of documents on the computer database of Beton which suggested that Nationwide Concrete proposed to take over Beton and that, when it had done so, it would employ Prasath as general manager.
The statement of claim then makes a series of allegations in respect of two proposed deeds of company arrangement: one such deed was proposed by Genc, the other by Vassiliadis. It then alleges that, at the second meeting of creditors held on 22 December 2016, a resolution was passed for the execution of a formal deed of company arrangement by Genc, Beton and the administrators and that, on 23 December 2016, they executed the DOCA.
At this point, the statement of claim makes allegations about Beton’s dealings with Zoomlion. It alleges that, between 1 December 2014 and 28 January 2016, Beton granted 15 chattel mortgages in favour of Zoomlion over concrete pumping equipment purchased by Beton from Zoomlion.[3]
[3]The 15 chattel mortgages alleged by Beton in the Beton proceeding are identical to the chattel mortgages the subject of the Zoomlion proceeding.
In its statement of claim, Beton refers to the default notices which were served by Zoomlion in respect of the chattel mortgages on 28 October 2016. The statement of claim refers to a meeting which was held on 7 December 2016 between Genc and representatives of Zoomlion. In the statement of claim, Beton alleges that, at that meeting, it made an agreement with Zoomlion that (a) it would pay Zoomlion the sum of $294,450.21 before 25 December 2016 together with legal costs to remedy Beton’s default under the chattel mortgages; (b) in consideration, Zoomlion would not repossess the equipment; and (c) the parties would re-establish their business relationship on their previous terms (‘the 7 December 2016 agreement’).
Thereafter, Beton alleges that it commenced to perform the 7 December 2016 agreement by (a) making a payment of $64,569.54 on 16 December 2016 and (b) negotiating finance to pay the balance of $229,881 before Christmas 2016. It alleges that Zoomlion breached the 7 December 2016 agreement by informing Genc that it proposed to repossess the equipment the subject of the chattel mortgages notwithstanding the 7 December 2016 agreement. It also alleges that Zoomlion entered into a chattel mortgage agreement with Nationwide Plant Hire in respect of equipment which was already the subject of a chattel mortgage between it and Beton and which was in the possession of Beton. In the event, Beton has alleged that Zoomlion (a) has breached the 7 December 2016 agreement; (b) is estopped from repossessing the equipment; (c) has waived its right to take action to repossess the equipment based on its notices of default; (d) has failed to properly exercise any mortgagee rights of disposal available under the PPSA and, in particular, has failed to honestly exercise its rights pursuant to s 111(1) of the PPSA; and (e) has acted in breach of its general obligations as a financial services licence holder pursuant to s 912A(1) of the Corporations Act 2001 (Cth).
Beton makes allegations against Prasath to the effect that he has breached several duties arising at law, in equity and under the Corporations Act 2001 (Cth) and that, as a result, Beton has suffered loss and damage. It alleges that Nationwide Concrete and Roberts aided and abetted the misconduct of Prasath and that, as a result, Beton has suffered loss and damage.
Finally, Beton alleges that, in the period September 2016 to present, the defendants conspired and agreed together to (a) defraud Beton; (b) injure its business; and (c) enable Nationwide Concrete and/or Roberts to take over Beton and its business. In paragraph 62 of its statement of claim, Beton alleges that the defendants did various overt acts in furtherance of the conspiracy. For present purposes, it is necessary to note the particulars which are said to involve Zoomlion. Beton alleges that the defendants conspired with Zoomlion not to support the deed of company arrangement proposed by Genc and that, in late 2016, Zoomlion, Roberts and/or Nationwide Concrete entered into an agreement to repossess the equipment subject to the chattel mortgages so that it could be used by Nationwide Concrete on building sites operated by clients of Beton.
Beton defence and counterclaim in the Zoomlion proceeding
On 12 April 2017, Beton filed a defence and counterclaim in the Zoomlion proceeding. In its defence and counterclaim, Beton admitted the existence of the 15 agreements on the terms alleged by Zoomlion. It also admitted the allegations of Zoomlion that it had failed to pay amounts payable under the respective agreements. However, in respect of each agreement, it denied that Zoomlion was entitled to possession of the equipment the subject of each agreement. In doing so, it relied upon a defence and counterclaim. That defence and counterclaim referred to the Beton proceeding.
Summary judgment application in the Zoomlion proceeding
On 12 April 2017, Zoomlion applied for an order, pursuant to ss 61 and 63(1) of the Civil Procedure Act 2010 and regs 22.03 and 22.13 of the Supreme Court (General Civil Procedure) Rules 2015 that it obtain summary judgment in the Zoomlion proceeding.[4]
[4]It appears that several interlocutory applications had been made in the Beton proceeding. On 7 March 2017, Vickery J made a search order pursuant to reg 37B.02 of the Supreme Court (General Civil Procedure) Rules 2015 directed at all of the defendants in that proceeding other than Zoomlion. On the same day, Vickery J made a freezing order pursuant to reg 37A.02 against Prasath. On 6 June 2017, on the application of Prasath, a judicial registrar made an order that Beton give security for Prasath’s costs.
It appears that, on 23 May 2017, Vickery J disposed of the ‘alleged agreement of 7 December [2016] as having no real prospect of success’.[5]
[5]Transcript of Proceedings, Zoomlion Capital (Australia) Pty Ltd v Beton Pumping Group Pty Ltd (subject to a deed of company arrangement) (Supreme Court of Victoria, S ECI 2017 000036, Vickery J, 21 June 2017) 1. During the hearing of the present application, the Court was told that this decision was not relevant to the present application.
On 21 June 2017, Vickery J heard Zoomlion’s application for summary judgment for possession of the equipment the subject of the chattel mortgages. Beton resisted that application on the basis of the allegations contained in its set-off and counterclaim.
On 21 June 2017, Vickery J granted Zoomlion’s application for summary judgment and ordered that Beton deliver up possession of the equipment the subject of the chattel mortgages to Zoomlion. It seems that the effect of Vickery J’s reasons is to hold that the set-off and counterclaim – based on conspiracy and s 111 of the
PPSA – should be summarily dismissed.
In his reasons, Vickery J said that Beton relied upon three matters in support of its allegation that Zoomlion was engaged in a conspiracy with the other defendants in the Beton proceeding:
(a) the affidavit of Genc sworn on 2 March 2017 (filed in the Beton proceeding) and, in particular, paragraphs 57, 73–74 and 79–81 thereof;[6]
(b) exhibit GD-2 to the affidavit of Mr Gerald Davis sworn 20 June 2017;[7] and
(c) exhibit HG-15 to the Genc affidavit, which is a circular email dated 12 January 2017 from Zoomlion to customers of Beton advising that Beton is no longer entitled to possession of the equipment the subject of the chattel mortgages and that Nationwide has been appointed as its agent to repossess that equipment.[8]
[6]It appears that the Genc affidavit of 2 March 2017 had been sworn originally in support of the applications for a search order and for a freezing order in the Beton proceeding. The affidavit then became an exhibit to the affidavit of Genc sworn on 6 July 2017, filed in the present application for a stay. In the paragraphs that were relied upon, Genc deposed to a telephone call that he received from Ethan Wang of Zoomlion on 19 December 2016 saying that Zoomlion proposed to repossess all the equipment and that it would proceed with an offer from Nationwide Concrete: [57]. He also deposed to his belief that Zoomlion and Nationwide Concrete ‘appear to have formed an alliance’: [73]. He described the email which had been sent by Zoomlion to clients of Beton on 12 January 2017: [74]. That email is extracted in footnote 8 below. Finally, he deposed to the chattel mortgages which had been entered into between Zoomlion and Nationwide Concrete in respect of equipment which was already the subject of chattel mortgages between Zoomlion and Beton: [79]–[81].
[7]Exhibit GD-2 to the affidavit of Davis sworn on 20 June 2017 was placed before the Court in the present application as exhibit HG-2 to the affidavit of Genc sworn on 6 July 2017. The exhibit comprised an email dated 16 November 2016 from Nicole Cook to various parties including Barry Wight of Cor Cordis, ‘Greg’ of FCM Law, certain representatives of Zoomlion and Roberts of Nationwide Concrete. The subject of the email was ‘VA - BETON’. Its text, in relevant part, was as follows: ‘Thanks for everyone’s time today and thanks Barry for going to the VA meeting tomorrow. We all agreed on Barry’s strategy: We don’t support the VA process and won’t support a DOCA; we wish to gain possession of equipment now (or if not, as soon as the VA ceases or the VA gives back the equipment); given the equipment is vital to the nature of the business, and that it will be returned, it needs to be in good working order; we reserve the right to vote down fees, given the excessive professional costs that will be incurred by continuing to trade with our equipment knowing that the business will ultimately fail. If we can add anything about including the arrears as part of an ongoing agreement and Zoomlion will begin invoicing monthly in advance instead of arrears. Larry/Ethan from Zoomlion will fill out the proxy form and proof of debt form, made available yesterday and send to the group 2pm (asap). Barry will then check and lodge with VA by 4 pm … Barry Wight, Cor Cordis and Larry and Ethan from Zoomlion will meet at Barry’s office tomorrow 10am to confirm plans in meeting … 10.45 sign into meeting. 11 am Rialto VA meeting …’ (emphases in original).
[8]The subject of the email was ‘Notice of Equipment repossession’. Its text, in relevant part, was as follows: ‘Equipment Subject to Seizure by [Zoomlion]. [Zoomlion] provided equipment finance to [Beton] which went into administration on 7th November 2016. Entering into administration was an event of default by Beton as was not paying the monthly payments for the equipment [sic]. As a result of that, Zoomlion served notice on Beton that it was repossessing the equipment which is located on your site and that notice is now effective. We have appointed [Nationwide Concrete] as our agent to secure our property and ask that you give access to your site to [Nationwide Concrete] to take that action on our behalf. Once the goods are secured and a further contract is entered into, we would imagine that [Nationwide Concrete] will be able to provide services to your company but that is a matter between you and Nationwide. In the meantime, we ask that, at a time convenient to you, Nationwide have access to your site to secure our equipment … A representative of Nationwide will contact you directly to schedule a visit.’
Vickery J held that the evidence in the Genc affidavit was mere supposition and conjecture and that it did not go near establishing the alleged conspiracy.[9] He said that the emails were consistent with Zoomlion acting to repossess its equipment and did not evidence any conspiracy, especially given that Beton had fallen into ‘serious default’ under the facilities provided to it and that notices for repossession had expired.[10] Given that the onset of the voluntary administration was itself an event of default, he said that Zoomlion was entitled to seek access to the equipment to repossess it and to appoint an agent to assist it to do so,[11] and to do so in an orderly fashion.[12] In the event, Vickery J found that the Court did not have before it evidence of the ‘unlawful means’ conspiracy that had been alleged.[13] Rather the conduct evidenced Zoomlion taking steps to protect itself and the equipment the subject of its security.[14] Vickery J rejected several arguments of Zoomlion. One seems to have been to the effect that the repossession had caused no loss to Beton; a second was based on the powers conferred under the DOCA. However, he said:
Nevertheless, independently of the DOCA, Zoomlion clearly did have power to deal with the assets being the equipment pursuant to its instruments of chattel mortgage and hire purchase. It was also entitled to exercise self-help which it chose not to do in this case. Rather, it elected to proceed to court to obtain orders for possession of the equipment. It cannot be said therefore, that Zoomlion was not acting in furtherance of any alleged conspiracy, if such conspiracy did in fact exist, by reason that, in claiming possession of the property it was the administrator that was dealing with the property and not Zoomlion.
I find that it was in fact Zoomlion that had at all material times the power to deal with the equipment and claim repossession of it, which it in fact exercised. Zoomlion cannot purport to sit behind the administrator and claim that the administrator was in fact exercising the repossession powers under the DOCA in claiming possession of the property.[15]
[9]Transcript of Proceedings, Zoomlion Capital (Australia) Pty Ltd v Beton Pumping Group Pty Ltd (subject to a deed of company arrangement) (Supreme Court of Victoria, S ECI 2017 000036, Vickery J, 21 June 2017) 92.
[10]Ibid 94.
[11]Ibid 96.
[12]Ibid 98.
[13]Ibid 99–100.
[14]Ibid 100.
[15]Ibid 101–2.
Vickery J rejected an argument that he should exercise the discretion under s 64 of the Civil Procedure Act 2010.[16] He also held that Beton’s claim based on s 111 of the PPSA had ‘no real prospect of success’.[17] Finally, he rejected an argument based on s 130 of the PPSA. It had been contended that the notices required to be served on Beton pursuant to s 130 of the PPSA had not been served. He held that the absence of such notices, ‘assuming they were not given’, does not provide a defence to a claim for repossession of goods to which Zoomlion was entitled.[18]
[16]Section 64 of the Civil Procedure Act 2010 provides: ‘Court may allow a matter to proceed to trial. Despite anything to the contrary in [Part 4.4] or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because— (a) it is not in the interests of justice to do so; or (b) the dispute is of such a nature that only a full hearing on the merits is appropriate.
[17]Transcript of Proceedings, Zoomlion Capital (Australia) Pty Ltd v Beton Pumping Group Pty Ltd (subject to a deed of company arrangement) (Supreme Court of Victoria, S ECI 2017 000036, Vickery J, 21 June 2017) 105. Section 111 of the PPSA provides: ‘Rights and duties to be exercised honestly and in a commercially reasonable manner. (1) All rights, duties and obligations that arise under this Chapter must be exercised or discharged: (a) honestly; and (b) in a commercially reasonable manner. (2) A person does not act dishonestly merely because the person acts with actual knowledge of the interest of some other person.’ Before Vickery J, Beton said that the same facts which were relied upon in relation to the conspiracy claim were relied upon in respect of the statutory defence under s 111.
[18]Transcript of Proceedings, Zoomlion Capital (Australia) Pty Ltd v Beton Pumping Group Pty Ltd (subject to a deed of company arrangement) (Supreme Court of Victoria, S ECI 2017 000036, Vickery J, 21 June 2017) 105–6.
Vickery J made an order in the Zoomlion proceeding that Beton deliver up possession of the equipment the subject of the chattel mortgages to Zoomlion.
Application for leave to appeal
In its application for leave to appeal, Beton has raised the following proposed grounds of appeal:
1.The learned judge erred in concluding that the application for summary judgment ought be determined by considering whether [Beton] had demonstrated an unlawful means conspiracy on the material then before the Court (T100).
2.The learned judge erred in rejecting, on the grounds that [Beton] had not sought a further adjournment of the summons, [Beton’s] submission that there was a real case to be investigated and that further investigation of the facts through discovery and other interlocutory processes was warranted (T104-105).
3.The learned judge erred in failing to find that the email of 16th November 2016 established a basis for a possible finding at trial, with the benefit of discovery, subpoenas, other interlocutory processes and cross-examination, that [Zoomlion] had fanned a deliberate plan in conjunction with the Nationwide parties to place the Nationwide parties in possession of [Beton’s] equipment in the full knowledge that Nationwide intended thereby to destroy [Beton’s] business and that such would be the likely consequence of their mutual plan.
4.The learned judge erred in failing to hold that the email of I 6th November 2016 and the letter of 12th January 2017 showed that the dispute concerning the alleged conspiracy to injure [Beton] is of such a nature that only a full hearing on the merits is appropriate.
5.The learned judge erred in finding (T105) that because the material relied on to support the claim based on the tort of conspiracy did not establish it that such material was incapable of supporting a finding at trial that [Zoomlion] did not act reasonably as required under s 111 of the Personal Property Securities Act 2009 (Cth).
6.The learned judge erred in failing to give any or any sufficient weight to [Beton’s] offer to pay the sum of $380,656.76 into Court as a condition of a grant of leave to defend.
Application for stay pending determination of application for leave to appeal
When he made the order for possession, Vickery J imposed a short stay on the execution of the judgment. On 6 July 2017, Hargrave J made the following orders, in relevant part:
1.The stay on execution of the orders made by the Honourable Justice Vickery on 21 June 2017 (‘the orders’) is extended to 5.00 pm on 11 July 2017.
2.Until 5.00 pm on 11 July 2017 or further order, [Beton] shall not, by itself, its directors, employees, agents, or howsoever otherwise, dispose of, lease, or otherwise encumber the equipment listed in Schedule A to the orders.
At the completion of the hearing of the present application, this Court made the following orders:
1.The stay of execution of the orders made by the Honourable Justice Vickery on 21 June 2017 (‘the orders’) is extended to 5.00 pm on 12 July 2017.
2.Until 5.00 pm on 12 July 2017 or further order, [Beton] shall not, by itself, its directors, employees, agents, or howsoever otherwise, dispose of, lease, or otherwise encumber, damage or destroy the equipment listed in Schedule A to the orders.
3.[Beton’s] application for a stay of execution of the orders pending the hearing of [Beton’s] application for leave to appeal is adjourned to 4.15 pm on 12 July 2017.
Contentions of Beton in support of stay
In its written submissions dated 7 July 2017, Beton said that Zoomlion ‘has taken vigorous self-help steps to secure possession of the equipment although it had notice that [Beton] is appealing the order’. It said that, unless a stay is granted, its business will be destroyed. Beton said that, where there was a real risk that its appeal would be rendered nugatory, a stay should be granted. It said that it was not appropriate to consider the prospects of success of its appeal. Beton contended:
The Court will not generally speculate upon an Applicant’s prospects of success in the context of an application for a stay. Nonetheless it is strongly arguable that the learned primary judge acted on a wrong principle in determining the application on the material then before him, as if the application were the trial itself, rather than weighing the extent to which further investigation of the facts was shown to be warranted. The conclusion reached by the learned primary judge that the omission of the Applicant to seek a further adjournment of the summons supports a conclusion that the s64 discretion ought not be exercised (T105) is arguably misconceived.
The conclusions that ought properly be drawn from the terms of the 16 November 2017 e-mail and the letter of 12 January 2017, the application of the facts to the test established by s111 of the [PPSA], and the weight properly accorded to the offer of payment into Court all give rise to arguable grounds of appeal.
In its oral submissions, Beton said that the primary judge should not have proceeded to give summary judgment on its defence and counterclaim. While it was true that it had had the benefit of a search order and had been able to inspect documents produced as a result of that order, it should have been permitted to conduct the customary forensic investigation that results from discovery and the issue of subpoenas. There were special circumstances justifying the grant of a stay; if the equipment was removed, its business would be destroyed and its rights of appeal rendered effectively nugatory. While Beton agreed that, by reason of the expiry of the default notice, Zoomlion was entitled to exercise its rights to possession, it could only do so in a way that was reasonable. Otherwise, s 111 of the PPSA affected its rights to possession. Beton said that several matters meant that it was possible, or even likely, that Zoomlion had exercised its rights in an unreasonable way within the meaning of s 111 of the PPSA. First, although it was entitled to appoint an agent to recover possession of the equipment, the appointment of Nationwide Concrete as its agent was improper given that it was a competitor of Beton. Second, Zoomlion and Nationwide Concrete had been provided with information by Prasath, a former employee of Beton. Third, Nationwide Concrete had contacted the customers of Beton and had demanded that they transfer their custom to Nationwide Concrete. Fourth, all these things had been done in the knowledge that they would destroy the business of Beton. Finally, Zoomlion had frustrated any opportunity that Beton might have to trade out of its financial difficulties under the protection of the DOCA.
During argument, there was discussion as to the amount payable at present by Beton under the various chattel mortgages. For its part, Zoomlion said that, as at 30 June 2017, $713,893.34 was owing.[19] For its part, Beton said that it owed $380,656. It explained the discrepancy as follows. It seems that, in the Christmas/New Year period over 2016/2017, Zoomlion entered into an agreement with Nationwide Concrete and, in January 2017, Nationwide Concrete made payments to Zoomlion of $120,000 and $174,000. This agreement was not in evidence. However, the Court was told that the effect of the agreement was to appoint Nationwide Concrete as the agent of Zoomlion and, when the equipment the subject of the chattel mortgages was recovered, to enter into chattel mortgages in respect of that agreement that corresponded to the existing chattel mortgages. It appears that it was a further term of the agreement that Nationwide Concrete would make payments to Zoomlion that corresponded to the payments that Beton had failed to make under its chattel mortgages. During argument, counsel for Beton said that the effect of the agreement and the making of the payments was to discharge pro tanto the payment obligations of Beton under its chattel mortgages.
[19]In doing so, Zoomlion relied upon exhibit 5 to the affidavit of Roberts sworn on 10 July 2017. In his affidavit, Roberts referred to information provided to him by Ethan Wang, the sales manager of Zoomlion. Roberts exhibited a document entitled ‘Updated figures of agreements between the applicant and the respondent’. In that document, sums payable under 15 chattel mortgages were identified, including (a) the monthly payment and (b) the amount overdue as at 30 June 2017. The document took into account the fact that, in respect of two chattel mortgages, no ongoing monthly payments were payable as the equipment the subject of those mortgages had been repossessed in July 2017.
At various points, the Court pressed Beton to give an indication of what amount it was prepared to pay into court as a condition of a stay being granted. Before Vickery J, Beton had offered to pay $200,000 by 30 June 2017 and the balance of $180,656.76 by 21 July 2017.[20] Initially, before us, counsel for Beton said that $380,000 could be paid into court in 60 days. When given the opportunity to reconsider that, and after taking instructions, counsel said that Beton would (1) pay $100,000 in 30 days and (2) pay $281,000 in 60 days. All the above payments also involved the making of the regular monthly payments of $61,722.09 to Zoomlion.
[20]Transcript of Proceedings, Zoomlion Capital (Australia) Pty Ltd v Beton Pumping Group Pty Ltd (subject to a deed of company arrangement) (Supreme Court of Victoria, S ECI 2017 000036, Vickery J, 21 June 2017) 82.
Contentions of Zoomlion
On 10 July 2017, Zoomlion gave notice that it opposed the application for a stay. In its written submission filed in opposition to the application for the stay, Zoomlion said that (a) a refusal of a stay of execution would not necessarily render an appeal nugatory and (b) Beton’s prospects on appeal were weak. It said that this Court should not exercise its discretion to grant a stay. In particular, it pointed out that, in its defence and counterclaim, Beton had admitted the existence of all the chattel mortgage agreements and that it had received default notices dated 28 October 2016 in respect of those agreements. Further, it was not only in default of its payment obligations, but also the fact of its voluntary administration was a further event of default. As a result, it had a right to repossess the equipment. It pointed out that, even if the agreements had remained on foot, Beton would have to pay all amounts outstanding since the service of the default notices, together with $61,722.09 per month. In effect, it said that Beton still owes $713,893.34 in respect of the equipment. The Court should not grant any stay without imposing a condition that Beton pay into court the amount outstanding together with a requirement that it continue to pay monthly instalments. Otherwise, it will have the benefit and use of the equipment for nothing.
In its oral submissions, Zoomlion said that, if the Court were to grant a stay, Beton Capital would have to pay immediately into court the amount of $713,893.34. Otherwise, Beton would continue to have the benefit and use of the equipment for nothing. It also said that a refusal to grant a stay would not necessarily render any appeal brought by Beton nugatory; if the stay were refused and the appeal allowed, Beton could maintain its claims in the Beton proceeding. In the event, there are no special or exceptional circumstances justifying the grant of a stay. Moreover, it said that, even on a preliminary assessment, there are no arguable grounds in Beton’s application for leave to appeal. Only two pieces of correspondence – in the form of emails – supported the conspiracy argument advanced by the applicant. According to Zoomlion, nothing in those emails suggested anything that could amount to a conspiracy; Zoomlion was simply trying to recoup a debt that was owed to it by Beton Holdings while managing the risks posed by Beton’s financial woes. Using the language of s 111 of the PPSA, there was nothing dishonest or commercially unreasonable in what Zoomlion had done. Finally, Zoomlion said that, in all of the circumstances, the Court ought not exercise its discretion in favour of Beton by granting a stay. It pointed to (a) the lack of evidence that Beton could pay immediately into court the amount outstanding together with monthly instalments; (b) a statement made by Genc in an affidavit sworn on 2 March 2017 that ‘[w]ithin the next two months most of [Beton’s] 30 employee workers will be transferred’ to a related entity of Beton, which suggested that Beton’s workforce would not be impacted if a stay were refused; and (c) there being damage to the equipment that has been repossessed by Zoomlion.
Analysis
During the hearing of the application for a stay, Beton accepted that, consequent upon Beton’s defaults, Zoomlion had been entitled to possession of the equipment the subject of the chattel mortgages. It contended that, by reason of the way in which Zoomlion went about seeking possession and, in particular, its collaboration with Prasath and with competitors of Beton, Zoomlion had lost its entitlement to possession. It relied upon a set-off and counterclaim which, if successful, would work to extinguish any liability that it had to Zoomlion. Further, it contended that its outstanding liability to Zoomlion had been reduced by reason of the payments made by Nationwide Concrete to Zoomlion in respect of chattel mortgages made between those parties in respect of equipment which had been the subject of Beton’s chattel mortgages. The effect of those payments had been to reduce its liability from approximately $715,893.34 to approximately $380,000.
On the application for a stay, it is unnecessary for us to determine whether the primary judge erred in summarily dismissing Beton’s defences based on (a) conspiracy and (b) s 111 of the PPSA.
In Loftus v Australia and New Zealand Banking Group Limited,[21] Whelan and Kaye JJA said:
The principles relating to such an application are well established and not in dispute. Prima facie, a successful party is entitled to the benefit of the judgment obtained below. Accordingly, an applicant for a stay is required to demonstrate special or exceptional circumstances to remove the case from the general rule that an appeal, and an application for leave to appeal, do not operate, of themselves, as a stay. In particular, special circumstances may be found to exist where the applicant is able to demonstrate that there is a real risk that it will not be possible to restore the applicant substantially to his or her former position if the judgment against the applicant is executed before the conclusion of the appeal.[22]
[21][2016] VSCA 114.
[22]Ibid [7], citing Cross Country Realty Victoria Pty Ltdv Ubertas 350 William Street Pty Ltd [2015] VSCA 347 [90] (Kyrou and McLeish JJA); Neate v Thoroughbred International Marketing Pty Ltd; (2012) 34 VR 318, 321 [8] (Mandie JA and Cavanough AJA); Bresam Investments Pty Ltd v Shmee Pty Ltd [2008] VSCA 251 (Dodds-Streeton JA).
However, where a mortgagee is seeking possession of equipment the subject of its security on the basis of default, the mortgagor is usually required to bring into court the outstanding debt. In Longreach Family Living Pty Ltd v South Eastern Secured Investments Ltd,[23] Kaye J said:
It would seem that, at its highest point, the plaintiffs’ claim at this interlocutory stage would be, if it were made out, one for loss and damage by way of cross-claim or set-off. In my view, it has not established there is a serious issue to be tried in relation to any such set-off or cross-claim for the reasons I have already stated. But even if that were so, the plaintiffs would face the problem which is posed by the line of authority that ordinarily where it is sought to hold a mortgagee out of its rights, a mortgagor must bring into court the amount of the mortgage debt which is outstanding. That principle is stated in the locus classicus Inglis & Anor v Commonwealth Trading Bank of Australia.
It is true that that principle has, to some extent, been modified in other authorities in which it has been considered. In particular, the authorities, it would seem to me, now provide that if the issue raised by the mortgagor goes only to the amount due, then ordinarily the mortgagor will need to bring into court the amount of the mortgage debt, in order to be able to hold the mortgagee out of its rights to its securities. However, if the issue which is raised, goes to the enforceability of the mortgage itself, then the court, in the exercise of its discretion, may decide not to require the mortgagor to bring the debt into court. See, for example, Harvey v McWatters; Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd; MCP Muswellbrook Pty Ltd & Ors v Deutsche Bank Asia AG & Ors.
In the context of cross-claims for damages under s 52 of the Trade Practices Act, the courts have also, in some cases, moulded the relief by way of injunction so as to require payment of outstanding interest only as a condition of the injunctive relief sought. However, in each of those cases, the court had concluded that the mortgagor did have an arguable case either to recast the loan agreement, or alternatively to have the security set aside at trial. See Glandore Receivers & Managers Appointed v Elders Finance & Investment Co Limited; Graham v Commonwealth Bank of Australia.[24]
[23][2009] VSC 499.
[24]Ibid [24]–[26] (citations omitted).
We think that this principle has present application. In our opinion, a stay should not be granted unless Beton is prepared to pay into court the amount outstanding under the chattel mortgages. We are not concerned here to decide whether the payments made by Nationwide Concrete have reduced the liability of Beton to Zoomlion. Beton itself accepts that it owes approximately $380,000 under the chattel mortgages. It has frankly conceded that it is not in a position to pay that money into court. In its most recent proposal (made during the hearing of the present application), Beton said that it could pay into court approximately $100,000 within 30 days and approximately $281,000 within 60 days in addition to the monthly payments that fall due under the chattel mortgages. In the circumstances, this proposal is not acceptable.
For these reasons, the application for a stay of execution pending the hearing and determination of the application for leave to appeal should be dismissed.
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