Billinudgel Pastoral Company Pty Ltd v Westpac Banking Corporation

[1993] FCA 137

7         1993

JUQGi,.lEiJi No. ,.> ....... Deo ,...: . 3 ~ ~ ~ o o o ~ ~ ~ o

IN THE FEDERAL COURT OF AUSTRALIA

DUEENSLANDDISTRICT REGISTRY

GENERAL DIVISION . . No. G28 of 1993

BILLINUDGEL PASTORAL COMPANY PTY. LTD.

First Applicant

AUSTRALIAN TEA TREE ESTATES PTY. LTD.

Second Applicant

COPPERFIELD PASTORAL CO. PTY. LTD.

Third Applicant

COLIN UEBERGANG, COLIN ROBERT UEBERGANG AND CHRISTOPHER LEWIN UEBERGANG TRADING AS C. UEBERGANG & SONS !A FIRML

Fourth Applicant

COLIN UEBERGANG AND CHRISTOPHER LEWIN

UEBERGANG

Fifth Ap~licant

COLIN UEBERGANG

Sixth Applicant

WESTPAC BANKING CORPORATION

First Respondent

LIONEL HENRY STEMP

Second Respondent

KENNETH STRAHLEY

Sixth Respondent

Third Respondent

LINDSAY RICHARD DICKSON AND

ALAN RAPHAEL TUTTLE

Fourth Respondent

PHILIP ARTHUR HENNESSY AND JMlES

WARWICK ARMSTRONG

Fifth Respondent

MARWICK (A FIRM)

JUDGE MAKING ORDER:	cooper J.
WHEW MADE:	Brisbane
DATE OF ORDER:	16 March, 1993

MINUTES OF ORDER

THE COURT ORDERS:

1.        That the application for interlocutory relief in tens of the notice of motion filed on 10 March,

1993 is dismissed.

2.        The applicants pay the costs of the respondents of and incidental to the notice of motion.

m:  Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

-	g
GENERAL DIVISION No. G28 of 1993

BILLINUDGEL PASTORAL COMPANY PTY. LTD.

First ADDlicant

AUSTRALIAN TEA TREE ESTATES PTY. LTD.

Second ADDlicant

COPPERFIELD PASTORAL CO. PTY. LTD.

Third A~olicant

COLIN UEBERGANG, COLIN ROBERT UEBERGANG AND CHRISTOPHER LEWIN UEBERGANG TRADING AS C. UEBERGANG & SONS (A FIRM1

Fourth ADDlicant

COLIN UEBERGANG AND CHRISTOPHER LEWIN

UEBERGANG

Fifth ADDlicant

COLIN UEBERGANG

Sixth ADDlicant

WESTPAC BANKING CORPORATION

First Res~ondent

LIONEL HENRY STEMP

Second Res~ondent

KENNETH STRAHLEY

Third Res~ondent

LINDSAY RICHARD DICKSON AND

ALAN RAPHAEL TUTTLE

Fourth Res~ondent

PHILIP ARTHUR HENNESSY AND JAMES

WARWICK ARMSTRONG

Fifth Res~ondent

KPMG PEAT MARWICK (A FIRML

Sixth Res~ondent

c o w :	Cooper J.
PLACE :	Brisbane
m:	16 March, 1993

REASONS FOR JUDGMENT

The applicants by notice of motion seek interlocutory relief against the respondents seeking injunctions restraining the exercise of the first respondent of any rights which it may have under security documents granted by the various applicants to secure monies advanced by the first respondent as banker. The applicants also seek injunctive relief to restrain actions by the fourth and fifth respondents as receivers and managers appointed by the first respondent under the security documents of various property of the applicants or some of them. Additionally, it is sought to have appointed a receiver and manager ad litem of the assets and undertakings of each of the first to fourth applicants.

There is some urgency in the application as it is

proposed to auction a property at Goondiwindi owned by the

third applicant at 11.00 a.m. on Thursday, 18 March, 1993.

Accordingly, these reasons are less detailed than I

would otherwise have preferred to have given.

The first applicant is the owner of land at Mullumbimby in Northern New South Wales.

The second applicant conducted a business of tea- tree farming on the land at Mullumbimby owned by the first applicant and was itself the owner of certain agricultural and farming equipment used to conduct the business on that land.	I
The third applicant was the owner of freehold land at Goondiwindi ("the Mount Carmel land").
The fourth applicant is a partnership which conducted a wheat growing business on the Mount Carmel land.
The fifth and sixth applicants, either through the fifth applicant or together, developed certain intellectual property and had certain confidential information relating to a methodology for growing wheat by organic farming methods, and for producing tea-tree oil free from herbicides. The fifth applicant imparted to the second and third respondents the confidential information and methodology during a period when the second and third respondents were employed by, respectively the second and third applicants.
On 23 June, 1987 the first respondent wrote to the sixth applicant at care of the second applicant offering a finance facility to the extent of $3,000,000.00. The borrower under the facility was the fourth applicant, the partnership of C. Uebergang & Sons. The security to be provided for the advance to the partnership was a bill of mortgage by the third applicant over the Mount Carmel land, a mortgage by the first applicant over land at Brunswick Heads and Mullumbimby, and, a mortgage by the sixth applicant over a unit at Walker Street, North Sydney.

The letter of offer also included an offer to the first applicant as borrower of a commercial bill acceptance loan of $2,800,000.00. The security required to support the advance to the first applicant was a second bill of mortgage by the third applicant over the Mount Carmel property, a first

bill of mortgage by the first applicant over its properties at Brunswick Heads and Mullumbimby, and, interlocking unlimited guarantees by the first, second and third applicants.

The offer was accepted by the fourth applicant and the first applicant on 25 June, 1987.

On 20 July, 1987 the first applicant executed two bills of mortgage over the Mullumbimby land. The first bill of mortgage was to secure the indebtedness of the first applicant to the bank. The second bill of mortgage was to secure the indebtedness of the partnership to the bank.

On the same date the third applicant executed a first bill of mortgage over the Mount Carmel land to secure the indebtedness of the partnership. It also executed a second bill of mortgage to secure the indebtedness of the first applicant to the bank.

On 25 October, 1990 the first applicant executed a

bill 01 sale whereby it assigned and transferred to the bank all the chattel, effects and property described in the bill of sale, being property of the first applicant at and associated with the farm business being conducted at Mullumbimby. On the same date the second applicant executed a bill of sale whereby it assigned and transferred to the bank all the chattel, effects and property described in the schedule to the bill of sale, being property of the second applicant at and associated with the farm business being conducted at Mullumbimby.

On 25 October, 1990 the fourth applicant executed a bill of sale in favour of the bank over the chattels described in the first schedule of the bill of sale. The chattels were said to then be on the Mount Camel land, which land was occupied according to the bill of sale by the partnership as lessee from the third applicant. On the same date the partnership executed a further bill of sale in relation to chattels of the partnership then said to be on the land at Mullumbimby.

On 4 December, 1991 notice of default was sent to the first applicant making demand for payment in the sum of $3,783,144.52, for monies due and owing by the first applicant to the bank. On the same day a notice of default was served against the second named applicant demanding payment of $3,783,144.52, being monies due by the first applicant to the

bank and subject to the registered bill of sale granted by the second applicant to support the advance to the first applicant.

On 4 December, 1991 notice of default was served on the third applicant demanding payment of $3,600,406.39, being monies owing by the partnership and secured by the registered bill of mortgage over the Mount Carmel land and a registered crop lien number 2413/91 and (NSW) 52103. On the same day the third applicant was served with a notice of default claiming payment of the sum of $3,783,144.52, being the monies due by the first applicant to the bank and secured by bill of mortgage registered number J288070H (the second mortgage over the Mount Carmel land).

On the same day demands were made against the various other applicants under the securities which they had given to the bank to support the indebtedness of the partnership and the first applicant to the bank in terms of the letter of offer made in 1987.

By 9 December, 1991 the defaults had not been remedied and in consequence on 10 December, 1991 the first

respondent appointed the fourth respondents receiver and

manager of the Mullumbimby land under each of the first and second mortgages over that land. On the same day, the bank appointed the fourth respondents the receivers and managers over the mortgaged property under the registered bills of sale, that property being the chattel property on the Mullumbimby land. On the same day, the fourth respondents

were appointed by the bank as receivers and managers of the mortgaged property under the bill of sale granted by the second applicant over the chattels on the Mullumbimby land.

On 10 December, 1992 the fourth respondents were appointed receivers and managers of the mortgaged property, being the land and income earned from it secured by the registered bills of mortgage granted over the Mount Camel land. On the same day, the fourth respondents were appointed receivers and managers of the mortgaged property under the bill of sale granted by the partnership in respect of the chattels situated on the Mullumbimby land, and likewise under the bill of sale in respect of the chattels of the partnership situate on the Mount Camel land.

The receivers and managers, on or about 10 December, 1991, entered into possession of the property, the subject of various appointments.

It is contended in the material filed by the possession of the property, the subject of the securities, respondents that the receivers were appointed and entered into

with the consent of the applicants. The applicants deny this.

In March, 1992 the applicants granted further securities to the bank as follows :-

(a)	The first applicant granted a fixed and floating charge on 10 March, 1992;
(")	The second applicant granted a fixed and floating charge on 4 March, 1992;
(C)	The third applicant granted a fixed and floating charge on 10 March, 1992;
(d)	The fourth applicant granted a bill of sale over specific items of plant and machinery at Mount Carmel on 4 March, 1992;
(e)	The fourth applicant granted a bill of sale over specific items of plant and equipment at Mullumbimby on 4 March, 1992;
( £ 1	The fourth applicant granted a bill of sale over specific items of plant and equipment at Mullumbimby on 4 March, 1992;
(9)	The third and fourth applicants jointly granted a crop lien over the wheat crop then growing, or, to be grown in the twelve months thereafter, on the Mount Carmel land, on 10 March, 1992.

On 24 April, 1992 the fourth respondents were
appointed receivers of the property secured under the new

contends that the appointment of receivers was consented to by securities granted in March, 1992. The first respondent

the applicants on 10 March, 1992. This is disputed by the
applicants.

Consequent upon the granting of the securities,
further funds were advanced by the bank to enable the farming
operations to be carried on on the Mullumbimby land and the

Mount Carmel property. A 1992 crop was planted at the Mount Carmel property and was harvested, and the proceeds of sale of that crop have been or will be received by the receivers and managers.

AS appears from the affidavit of Lindsay Richard Dickson, one of the receivers and managers, on 23 December, 1992 he was advised by the bank that they would not provide funds to continue the operations at Mount Carmel, and in particular would not provide funds for the growing of a 1993 wheat crop. He deposes that he advised the sixth named applicant of the bank's decision late on 23 December, 1992. The receivers have advertised the Mount Carmel land for sale by public auction, such advertisements commencing on 6 February, 1993 and continuing thereafter.

On 10 March, 1993 the applicants filed the application herein together with a supporting statement of claim. The notice of motion together with one affidavit in support was filed on the same day.

By the statement of claim the applicants allege that

the receivers and managers when they were appointed on 10 December, 1991 under the then existing securities, were directed by the bank to take control of all of the business, interests, undertakings, and, assets and property of the respective companies and partnership, and to exclude the officers of each company and the members of the partnership from the control and management of the affairs of the companies and partnership. It is further alleged that the receivers and managers complied with the direction of the bank and in fact took control of all the undertaking and property of the companies and partnerships and thereafter managed and controlled the business to the exclusion of the respective officers and partners, as if the whole of the assets and undertakings of each of the companies, and the partnership, were secured under the relevant security documents.

The applicants contend that the assumption of control of the assets and undertakings went beyond the powers of the receivers and managers to take control and possession of those assets specifically secured under the then existing securities. The conduct of the receivers and managers and the bank is pleaded as variously being unlawful interference in the business of the companies, and the business of the partnership. Where there was publication that the companies were in receivership and managership, that publication is alleged to have constituted a malicious falsehood. The

companies and the partnership seek damages for the conduct

insofar as it touches on the circumstances of each of the

first, second, third and fourth applicants.

The assumption of the control of the businesses and undertakings of the companies and the partnership is alleged to constitute on the part of the bank and the fourth respondents :-

(a)	Representations that the bank held securities authorising such conduct;
(b)	Representations that the receivers and managers in fact held the powers to take control of the assets and undertaking in the manner which they did:
(C)	Representations that the receivers and managers had power to exclude the officers of the companies and the members of the partnership from the management and control of the respective companies and partnership;
(d)	Represented that the applicants were contractually bound to the bank to allow the receivers and managers to assume control.

The representations are alleged to be fraudulent, misleading and deceptive, and/or negligent, and intended to induce the officers of the companies and the members of the partnership to yield management and control of the business, and assets and undertakings of the companies and the partnership to the receivers and managers. It is further

alleged that in consequence of the representations, the officers of the companies and the members of the partnership

did in fact yield up management and control of the businesses, the assets and undertakings to the receivers and managers, and have thereby incurred loss and damage.

In consequence of this conduct the applicants seek
declarations that the actions of the receivers and managers

were unlawful and that they were not lawfully appointed. They further seek an account of dealings between the companies, the

partnership, the receivers and managers, and the bank, and
damages.

Insofar as the further securities were given in March, 1992, it is alleged by the applicants that those securities were procured by fraudulent misrepresentation, misleading and deceptive conduct, unconscionable conduct and economic duress.

The representations which it is alleged are fraudulent and/or which found the conduct complained of on the part of the receivers and the bank in January and February, 1992, leading up to the granting of securities in March, 1992, are :-

(a)	That the receivers and managers had the power to exercise, manage and control the business, undertaking, assets and affairs of the companies and the partnership to the exclusion of the officers of
representations previously alleged were maintained the companies and the partners (that is, the false

by the first and fourth respondents in circumstances when they knew that the representations were untrue).

(b)	That further funds were required for the continued operation of some or all of the businesses and that the bank would not provide further funds without additional securities.
(C)	That wages would be stopped and long service leave not paid unless further security was provided by the applicants.

To the extent that the representations were fraudulent or misleading and deceptive, it is alleged that they were made by the bank and the fourth respondents for the purpose of inducing the applicants to sign further security documents to cover all of the assets and undertakings of the companies and the partnership so as to legitimise the previous unlawful conduct of the first and fourth respondents. The applicants allege that they were induced by that conduct to sign the documentation and that at the time the documentation was signed, the applicants were in a position of unequal bargaining power with the bank, and thus the execution of the documents was unconscionable. Further it is alleged that the documents were signed because of economic duress placed upon the applicants by the conduct alleged.

The consequence of the conduct alleged in relation to the creation of the securities in favour of the bank in March, 1992 is, it is pleaded, that the securities are void or voidable and ought, in all the circumstances, be set aside.

It is further alleged that the receivers and managers have discharged their duties and functions not in the interests of the companies and the partnership, but in the interests of themselves, the bank and the sixth respondent. Accordingly, damages are sought in respect of loss and damage sustained by the applicants in consequence of the fourth respondent's breach of duty.

It is further alleged in the pleadings that in or about the first half of 1992, the sixth named applicant developed a proposal to offer the ownership of the Mullumbimby land, the business of growing tea-tree and producing tea-tree oil, and the intellectual property residing in the methodology and cultivation of tea-tree so as to produce tea-tree oil free from herbicides to the public by way of an offer of shares in a limited partnership. In order for the proposal to proceed, it is alleged that it was necessary for the bank to agree to the release of the securities given by the first applicant by way of fixed and floating charge, by the second applicant by way of fixed and floating charge in March, 1992 and a further security by way of fixed and floating charge given by the second applicant in favour of the bank on 18 May, 1992.

It was further alleged that the agreement of the bank to a plan of subdivision was necessary and for the bank to cause the issue of new title deeds in consequence of the subdivision. It was further alleged that the bank agreed to the public offering, to release the securities, and to cause the new title deeds to issue in sufficient time to enable the public offering to proceed to finality.

BY virtue of the agreement it is pleaded that the bank impliedly represented that the bank was able to obtain title deeds by 30 June, 1992 and that the bank would do all things necessary and co-operate to ensure that the title deeds would issue by that date. It is alleged that although

$1,700,000.00 worth of subscriptions were obtained from the

public, those subscriptions had to be returned because the bank failed to obtain the title deeds by 30 June, 1992 and did not do all that was necessary and co-operate to ensure that the title deeds issued by that date.

In consequence it is alleged that the sixth respondent was denied access to funds which would have allowed the securities in part to be discharged and to provide a payment which would correct the situation of default under the securities granted by the third applicant. The conduct of the bank and its officers concerning the public offering of the tea-tree oil business is alleged to have been negligent and in breach of the duty owed by the bank to the applicants as its customers and was misleading and deceptive conduct under the

Trade Practices Act. In consequence, the applicants seek	damages.
I am clearly of the view that in December, 1991 there was a default in terms of the securities then granted by the various applicants to the bank which entitled the bank to appoint receivers and managers of the specific property charged by the securities. This the bank did on 10 December,
1991. I am satisfied that the receivers and managers entered into possession of the secured property. The applicants, however, allege that the receivers and managers went further.
There is some evidence contained in a memorandum from the receivers and managers to the bank which indicates that there was some concern that the continued business operations at Mullumbimby and at Mount Camel involved the use of chattels and equipment which were not subject to the securities then held. The memorandum does not suggest that there was any doubt on the part of the receivers and managers that they were entitled to conduct a business on the Mount Camel land because the mortgage documents specifically so provided. There was, however, some doubt expressed as to the ability to continue with the New South Wales farming operations because there was no specific power to engage in business on the lands contained in the relevant New South Wales' mortgages.
It is impossible on the state of the affidavits come to any firm conclusion as to whether or not the receivers filed by both sides, which were not cross-examined upon, to
and managers exceeded their powers.
The bank and the receivers contend that the receivers went into possession with the consent of the applicants for the purpose of attempting to ensure that the businesses continued, and for that purpose the bank advanced further funds. It is further contended by the bank and the receivers that they advanced money to pay the wages of the employees of the farming operations at Mullumbimby in New South Wales and Mount Carmel in Queensland, and that Colin Uebergang and his son Christopher were employed to run the day-to-day operations of the farms at each location and were paid for doing so. If, it is submitted by the respondents, plant and equipment the property of the applicants (and not subject to the securities) was used, then it is submitted on behalf of the bank and receivers and managers that property was used because of the conduct of Colin Uebergang and his son, and not because of any conduct on behalf of the bank or the receivers and managers. Without the provision of further ongoing funds from the bank and the use of the land and plant and equipment which was properly in the possession of the receivers and managers, the respondents submit that the businesses carried on by the partnership and the second applicant could not have continued, particularly where it was the default of the partnership and the second applicant which led to the appointment of the receivers and managers.
The applicants, on the other hand, contend that the receivers and managers did what is alleged against them in the statement of claim and that the applicants, for the reasons pleaded, did not then know that the receivers and managers were not entitled to do so.
Insofar as the circumstances leading to the grant of the later securities is concerned, the material establishes to my satisfaction, that the receiver formed the view that the businesses could not be continued without the injection of further funds on the part of the bank, because the receiver did not have sufficient funds from the operation of the businesses to meet the ongoing costs. The receiver says that he advised Mr. Colin Uebergang that he could not continue the businesses or pay the wages or pay the long service leave without the bank providing further funds, and to do this the bank required further security.
The material establishes to my satisfaction that the applicants wished the businesses to be continued and a 1992 wheat crop planted at Mount Carmel. If the funds were not provided, then the logical consequence would have been that the businesses would have ceased and the properties, the subject of the securities, sold. There is no suggestion that the applicants had or had access to funds to discharge the indebtedness of the applicants to the bank.

More importantly, there was held on 11 February,

1992 a meeting in the boardroom of the sixth respondent

between Mr. Colin Uebergang, Mr. Christopher Uebergang, Miss Gloria Ryan, their solicitor, Mr. P. Poolman and Mr. I. Britton of Poolmans Agricultural Consultants as advisers to Messrs. Uebergang, and a Mr. Mulkerns of Moores Chartered Accountants, acting as accountants to the Uebergang interests. At the same meeting were Mr. Searle and Mr. Vaughan on behalf of the bank, Mr. Walker from Feez Ruthning solicitors on behalf of the bank, and Mr. Dickson, one of the receivers and managers. At that meeting the receivership was discussed and the possibility of the applicants raising money by public subscription for investment in the tea-tree cultivation carried on at Mullumbimby was also discussed.

On 17 February, 1992 Mr. Mulkerns, the accountant for the Uebergang interests, sent a facsimile transmission to the receiver and manager referring to the meeting of 11 February, and stating that the Uebergangs had indicated their preparedness to sign the certain documentation. The documentation set out includes a fixed and floating charge by the third applicant, a fixed and floating charge by the first applicant, a bill of sale by the partnership over motor vehicles at Mullumbimby, and a crop lien to be granted by the third and fourth applicants in relation to the 1992 wheat crop planting at Mount Carmel. The facsimile also raises matters relevant to a public float. The facsimile also states that the additional securities will be provided upon certain

bank that no action will be taken to sell the Mount Carmel	conditions, which include an undertaking on the part of the
property before 30 January, 1993, that is after the then current 1992 wheat harvest. There are then some proposals put forward as to the "misunderstanding between both parties" in relation to the management and relationship between the receiver and the Uebergangs due to "the receivers requirement for security documentation and the Uebergang's concern as to their future".
The proposals relate to the retention of staff and the payment of remuneration, the intended capital raising and a proposal that the costs of Colin Uebergang in attending at the meetings to facilitate such a capital raising be funded by the receiver. Additionally there is a request for an undertaking that the tea-tree plantation will not be sold during the period of the accountants continuing to act for Colin Uebergang, and not before the expected compLetion of the capital raising, namely 30 June, 1992.
The memorandum concludes :-

" I t	i s	the	Uebergang	f a m i l y ' s	i n t e n t i o n
where	p o s s i b l e	a f t e r	the	c a p i t a l	r a i s i n g
f o r	the	t e a - t r e e	p r o j e c t ,	t o c o n t i n u e	the
o p e r a t i o n s	a t	Mount	C a m e l	by	C o p p e r f i e l d

Pas to ra l Co. under a m o n i t o r i n g

a c c o u n t a n t ' s role w i t h the bank w i t h a n agreed level o f capped d e b t and the cross- c o l l a t e r a l i s a t i o n between the two p r o j e c t s

w i l l be	n e c e s s a r i l y abandoned.
W h i l s t i t i s a	l i t t l e e a r l y t o s p e c i f y i n

a n y d e t a i l the t e rms o f the f i n a l

under s tand ings , the p a r t i e s a r e working t o

comp le t e	i n	the	f u t u r e ,	it	i s impor tan t
t h a t	a l l	p a r t i e s	unders tand	the	d i r e c t i o n

which they a r e each t a k i n g and acknowledge

a s b e i n g the mos t f avourab l e f o r b o t h t h e

Uebergangs ,	s e c u r e d	and	unsecured
c r e d i t o r s " .

It is clear that in February, 1992 the applicants were receiving independent financial, legal and business advice from professional persons acting in their interests. It is further clear that the applicants were putting forward

specific proposals which necessarily involved the continuation of the businesses, funding from the bank and a continued role for the receivers and managers. Whatever misunderstanding the applicants may have had as to the basis upon which the businesses had in the past been continued and funded, I am satisfied that in the negotiations on 11 February, 1992, and thereafter the applicants did not negotiate from a position of disadvantage in consequence of any previous conduct on the part of the bank or the receivers and managers. Any disadvantage that the applicants then laboured under was in consequence of their inability to discharge the indebtedness to the bank from their own funds, their wish that the bank not sell under the securities and their desire to maintain a cash flow from the businesses which required the injection of funds by the bank. Likewise, I do not accept that the applicants executed the additional securities in consequence of any duress, economic or otherwise, imposed upon them by the bank.

I do not accept that if the applicants had known that the receivers and managers had exceeded their powers, if

security documents in March, 1992. At a bare minimum, W .	that be the fact, the applicants would not have executed the
Colin Uebergang could not have advanced his plan to seek a public offering of the tea-tree business without the Mullumbimby property not being sold by the bank. Without the injection of funds from a successful public offering, the Uebergang family had no prospect on the material before me of saving the Mount Camel property. There is nothing in the material, and it was not suggested in argument, that the bank
has taken advantage of the position of the applicants in relation to their financial affairs to impose terms in the security documents or to charge a rate of interest other than in accordance with the then usual terms and interest rates for persona similarly placed to the applicants. The only reasonable inference open on the material is that the applicants signed the security documents in March, 1992, after independent advice because the only commercial option open to them to achieve what they wished to accomplish involved the bank providing further funds which provided the giving by the applicants of additional security.
The true position in relation to the proposal to market to the public the tea-tree oil business is far from clear. For the proposal to work, it required the acquisition of additional land and the carrying out of a plan of subdivision leading ultimately to the issue of separate title in relation to an aggregation of land sufficient to carry on the business in accordance with what was contained in the
prospectus issued to the public. There may have been an additional requirement that boundaries as between particular
parcels of the first applicant's land be adjusted as part of the subdivision.
In an affidavit filed on behalf of the respondents, Lionel Henry Stemp deposes that he was instructed by Mr. Colin Uebergang in about April, 1992 to ascertain the availability of a parcel of land to the south of the existing holding of the Mullumbimby property. That land was owned by the Graham family and executors of the estate of a deceased member of the family. Mr. Stemp deposes that he was advised by Mr. Uebergang that the land was necessary for the purpose of a public raising by offering shares in a limited partnership in the tea-tree oil business. He further deposes that he conducted negotiations with the Graham family and the executors with a view to acquiring the land. The negotiations continued until about 29 June, 1992 without any agreement being reached as to the acquisition of the land or as to the leasing of it. He further deposes that on 29 June, 1992 he was told by Mr. Uebergang that the public offer would not be going ahead.
An integral part of the public float was that the agreement of the bank to release the securities over the land and to the subdivisional proposals, be obtained.
All parties are agreed that the first firm proposal of the bank was contained in a letter of 4 June, 1992, Exhibit "D" to the affidavit of Mr. Searle filed on behalf of the
first applicant. On 10 June, 1992 a company, Commercial Investments Australia Limited, which was the general partner of Australian Tea-Tree Estates (a limited partnership), wrote to the bank indicating that it wished to purchase certain of the assets detailed in the bank's facsimile to Mr. Uebergang of 4 June, 1992. The letter does not deal with the other conditions contained in the letter of the bank relating to other securities held by the bank over property of Mr. Uebergang. On 25 June, 1992, Moores Chartered Accountants, on behalf of Mr. Uebergang, wrote as to the other conditions contained in the letter of the bank of 4 June, 1992. The response of 25 June sought to accept the offer but impose additional terms which were unacceptable to the bank. The letters in my view do not show that there was any concluded agreement between the bank and Mr. Uebergang on 25 June, 1992.
Mr. Searle deposes to a conversation on 29 June, 1992 wherein Mr. Uebergang blamed the bank or the receivers for the failure of the property raising because Mr. Uebergang believed it was the receiver's responsibility to ensure that the title deeds were available. Mr. Searle deposes that he told Mr. Uebergang that Mr. Uebergang was acting as the vendor of the property and it was the responsibility of his solicitors to have the subdivision effected in time. He deposes to the fact that the plan of subdivision had only been received by the bank two weeks prior to 29 June, 1992 and had
been sent to Sydney for registration when received.
Mr. Colin Uebergang, in an affidavit filed by leave on the hearing, exhibits correspondence between Messrs. Hungerford Lehmann & Andrews, solicitors of Mullumbimby, New South Wales and the bank, which suggests that the solicitors forwarded to the bank the plan of subdivision for execution and the endorsement of the bank's consent in late May, 1992
and that the solicitors were advised on 23 June, 1992 that the title deeds would be lodged for registration by the bank.
By letter of 29 June, 1992 from the solicitors to the bank, the bank was advised that the solicitors had been advised in turn by the purchaser's solicitors that they wished to settle the matter before the end of July, subject to registration of the plan, and asked that the bank prepare the necessary discharge of mortgages in relation to the identified properties, and further asked that the bank forward the documentation for settlement on 24 July, 1992. The letters indicate that the titles and plan of subdivision were lodged for registration on or about 6 July, 1992. The correspondence tends to support the bank's contention that the necessary surveys were to be obtained by others and to be presented to the bank for endorsement and lodgement with the existing certificates of title. There is nothing to suggest that the bank, as mortgagee, agreed to itself engage surveyors and have the plan of subdivision drawn up and to procure the issue of new title deeds by 30 June, 1992. At best, the material indicates that the bank would do all that was necessary of it as mortgagee to facilitate the issue of new title deeds and
although the bank may have been aware that the new deeds were required by 30 June, 1992 as alleged, the material does not support a conclusion that the bank warranted it would happen and in the circumstances it is unlikely that the bank would have done so.
Mr. Colin Uebergang does not challenge the evidence of Mr. Stemp that Mr. Stemp was instructed to take steps aimed at the acquisition of the Graham land. However, he says that he desisted in attempting to obtain the land or other suitable land on 25 June, 1992 when he was advised by an officer of the bank that titles would not issue by 30 June. I am not persuaded that as at 25 June, 1992 Mr. Uebergang realistically had any prospect of obtaining the additional land which he required by 30 June, 1992.
The applicants submit that the bank and the receivers are not in a position to exercise any rights or powers under the original securities because they merged in the later securities. I do not accept this proposition. Firstly, the original securities provide in terms that the grant of any subsequent securities will not constitute a merger, nor will it be to the prejudice of the rights of the bank under the original securities. Secondly, the additional securities granted were not superior securities, in that the security relied upon in relation to the Mount Carmel land is a
the bank a legal estate or interest as mortgagee in the said registered real property mortgage of Torrens Title land giving
land. The granting by deed of charge of fixed and floating charges over the assets of the companies does not create an instrument capable of registration sufficient to create the legal estate or interest as mortgagee. The powers, which the fourth respondent as receiver and manager of the Mount Carmel land, seeks to exercise, are those flowing from the original
mortgage granted by the third applicant over the Mount Carmel land. That mortgage and the appointment of the receiver and manager under it are not tainted by any of the conduct alleged against the bank and the receivers and managers alleged in the statement of claim. That conduct does not give rise to any relief whereby the security or the security interest obtained by the bank under the original securities would be set aside in these proceedings.
Further, I am not persuaded that the material discloses a serious question to be tried that the securities granted in March, 1992 are liable to be declared void or set aside.
Assuming, as I am preapred to do having regard to the state of the evidence, that in the conduct of the receivers and managers between their appointment and the issue of the additional securities in March, 1992, and in the conduct of the bank in relation to the provision of title to enable a public offering of the tea-tree business to be
satisfied that the balance of convenience is against granting achieved, there is a serious question to be tried, then I am
the relief sought.
The present indebtedness of the applicants to the bank in total exceeds $7,000,000.00. I am advised that
interest is accruing at the rate of approximately $60,000.00 per month.

The business of growing wheat for the 1993 season at Mount Carmel cannot proceed without somebody providing the necessary working capital. Likewise, in relation to the continued operation of the tea-tree oil business. The bank is not prepared to provide additional funds and the receiver and manager deposes that realisation of the both properties will not clear the present indebtedness of the applicants to the bank. The applicants place no material before the court to indicate that they have the funds to carry on the businesses.

If the Mount Carmel property is not sold in sufficient time to enable wheat to be planted for a 1993

harvest, there is evidence to suggest that the value of the land will be depreciated by $150,000.00 to $200,000.00. The profit projections of Mr. Uebergang as to the likely receipt from a 1993 wheat crop at Mount Camel are seriously challenged by the receiver who states that the yields contended for are historically beyond anything achieved from the property and would involve a working of the property in such a way as to lose its accreditation as an organic wheat

farm.

The applicants do not offer to pay into Court the monies outstanding under the securities. At best they offer to provide by the day of the auction a bank guarantee in the sum of $200,000.00 to cover interest payments. The receiver has incurred time and expense amounting to thousands of dollars since 6 February, 1992 in marketing the Mount Carmel property. If the auction does not proceed, then that money will be thrown away. There has been no explanation of the delay on the part of the applicants in commencing proceedings in this Court raising the allegations which they now bring against the bank and the receivers and in seeking the interlocutory orders sought.

It was submitted that there was an equitable set-off in relation to the loss or damage arising out of the conduct of the bank in relation to the capital raising from the public in 1992. Putting aside the questions of law involved, as pleaded in the statement of claim and as sworn to in the affidavits, if the capital raising had gone ahead, the position at best would have been a realisation of approximately $2.15 million to $2.5 million from the sale of the Mullumbimby land and business, and, the generation of sufficient funds to get the partnership's business operations on the Mount Carmel land out of a default situation. There is no suggestion that if the scheme had proceeded there would have been sufficient funds to wholly discharge the

sell the Mount Carmel property after harvesting of the 1992	indebtedness, or that the bank had or would have agreed not to
wheat crop. There is no material before the Court which would satisfy me that the applicants, or any of them, have a claim for damages which equals or exceeds the debt due to the bank and such claims as they assert have not been quantified in any meaningful way.
~t was submitted that the property at Mount Carmel is a unique property because it has an accreditation as an organic farm property and that it would take another three years to bring any other property to an accreditable state. ~t was further submitted that the skill, expertise and intellectual property of the partnership and Mr. Uebergang is the methodology of organic farming of wheat would be lost. As to the last matter, irrespective of whether or not the property is sold, the partnership and Mr. Uebergang retain the benefit of that confidential information and can apply it in other farming ventures. To the extent that the accreditation adds to the value of the property, that ought to be reflected in the market price at auction. To the extent that the applicants, and in particular the partnership and Mr. Uebergang, should succeed in their action, then such loss and damage as is properly compensable will be subject to an award of damages. There has been no suggestion that if the applicants proceed and succeed in their action, any award of damages against the bank or the receivers would not be able to be satisfied.
Insofar as the Mullumbimby land is concerned, the bank and the receivers have given an undertaking to the Court that they will not take any step to realise the land by sale without giving 28 days notice to the applicants and the first applicant has reciprocally undertaken that it will withdraw a caveat which it has lodged against the land at the Titles Office in Sydney.
There is in the material nothing to suggest that the receivers or the second and third respondents are doing anything or propose to do anything in contravention of the rights of the fifth and sixth applicants in their intellectual property or confidential information.
There is nothing in the material before me which would satisfy me that I ought to restrain the receivers and managers from exercising their powers under their appointments in respect of the original or subsequent securities. Likewise, I am not persuaded that a case has been made out for the appointment of receivers ad litem for the property of the first, second, third and fourth applicants.
THE COURT ORDERS:
1. That the application for interlocutory relief in terms of the notice of motion filed on 10 March,

1993 is dismissed.

2.        The applicants pay the costs of the respondents of and incidental to the notice of motion.

thirty (30) pages are a true copy of the I certify that this and the preceding

reasons for judgment herein of his Honour
Mr. Justice Cooper.

Date: 16 March, 1993

Associate

Counsel for the Applicants:	Mr. J.S. Douglas Q.C. and Miss D. Spence
Solicitors for the Applicants:	Lynch and Company
Counsel for the Respondents:	Mr. R. Chesterman Q.C. and
Mr. R. Derrington
Solicitors for the Respondents:	Feez Ruthning
Date of Hearings	15 March, 1993
Place of Hearing:	Brisbane