BMW AUSTRALIA FINANCE LIMITED v CHEIHK
[2011] FMCA 720
•26 August 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BMW AUSTRALIA FINANCE LIMITED v CHEIHK | [2011] FMCA 720 |
| BANKRUPTCY – Application to declare for or against trustees title – claim for declarations against the bankrupt, her trustees and another in respect of the ownership and right to possession of a chattel – no dispute – no proper claim under the Bankruptcy Act 1966 – no proper claim under the Court’s associated jurisdiction. |
| Bankruptcy Act 1966, ss.27(1), 31(1), 31(1)(f), 58 Federal Magistrates Act 1999, s.18 |
| Scott v Bagshaw (2000) 99 FCR 573 |
| Applicant: | BMW AUSTRALIA FINANCE LIMITED |
| First respondent: | GEORGE ANTHONY CHEIHK (ALSO KNOWN AS GEORGE ANTHONY CHEIHK) |
| Second respondent: | ZOE CHEIHK (ALSO KNOWN AS ZOE CHEIHK) (A BANKRUPT) |
| Third respondents: | JOHN RICHARD PARK AND KELLY-ANNE TRENFIELD (AS TRUSTEES OF THE BANKRUPT ESTATE OF ZOE CHEIHK) |
| File Number: | BRG 10 of 2011 |
| Judgment of: | Jarrett FM |
| Hearing date: | 21 March 2011 |
| Date of Last Submission: | 21 March 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 26 August 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr Stunden |
| Solicitors for the Applicant: | Mills Oakley |
| Counsel for the first respondent: | Mr Sayer |
| Solicitors for the first respondent: | Qld Law Group |
| Solicitors for the second respondent: | No appearance |
| Solicitors for the third respondent: | No appearance |
ORDERS
All outstanding applications are dismissed.
This matter be adjourned to 9.30am on 31 August 2011 in the Federal Magistrates Court of Australia at Brisbane for the hearing of any costs application.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 10 of 2011
| BMW AUSTRALIA FINANCE LIMITED |
Applicant
And
| GEORGE ANTHONY CHEIHK (ALSO KNOWN AS GEORGE ANTHONY CHEIHK) |
First respondent
ZOE CHEIHK (ALSO KNOWN AS ZOE CHEIHK) (A BANKRUPT)
Second respondent
JOHN RICHARD PARK & KELLY-ANNE TRENFIELD (AS TRUSTEES OF THE BANKRUPT ESTATE OF ZOE CHEIHK)
Third respondents
REASONS FOR JUDGMENT
(Revised from the transcript)
Initially, this application was commenced by the applicant against the first and second respondents only. However, by an application in a case filed on 21 March, 2011 the applicant sought the joinder of the third respondents to the proceedings. The joinder was unopposed, and for what appeared to be good reason, I made that order as sought by the applicant. The balance of the relief sought by the applicant was the subject of dispute.
Two general issues were argued, and after hearing argument I reserved my decision on those issues. These are my reasons and orders on those outstanding issues.
In these proceedings, and with the consent of the third respondents, the applicant seeks a declaration that it holds a legal and beneficial interest in a certain Ferrari motor vehicle. It also seeks an order for the recovery, possession, and delivery up of it, and authority to enter premises where the vehicle might be located. Additionally, the applicant seeks against the first and second respondents an order that they make, file, and serve an affidavit setting out to the best of their knowledge and belief certain information that might assist in locating the vehicle. The applicant seeks costs as against the first and second respondents. On the hearing of this application, the applicant also handed up draft final orders which differ in some respects from the relief sought in the application. The departures between the two are immaterial to the result of this application.
The first respondent contends that the court has no jurisdiction to entertain the proceedings. Despite that, the first respondent has purported to file and serve an affidavit setting out to the best of his knowledge and belief all of the information in his knowledge that might assist in locating the vehicle; it is fair to say that his knowledge is rather vague. The applicant seeks to cross-examine him on his affidavit.
The second and third respondents have not appeared, although both have been served. The third respondents consent to the declaratory relief sought by the applicant.
The background to this application is as follows. Pursuant to a written agreement dated 19 October, 2005 the applicant permitted the first and second respondents to take possession of a certain luxury motor vehicle on the terms and conditions set out in the agreement. The exact nature of the agreement is in dispute, and I will refer to it in more detail later in these reasons. For present purposes, it is sufficient to record that the agreement obliged the first and second respondents to make certain regular payments to the applicant; it might be described as a hire purchase agreement.
The first and second respondents fell into default under the agreement. They ceased making the payments required of them by the terms of the agreement and the applicant has purported to terminate the agreement. The applicant has tried unsuccessfully to locate the vehicle and repossess it.
The third respondents were appointed as joint and several trustees of the estate of the second respondent by virtue of a sequestration order made by the Federal Magistrates Court of Australia on 14 April, 2010.
The applicant argues that the relief sought in this application is within the jurisdiction of this court as conferred upon it by the Bankruptcy Act 1966. The first respondent argues that the application is not within the jurisdiction conferred on the court by the Bankruptcy Act 1966. I think that the first respondent’s argument is correct and that this court is without jurisdiction.
The applicant argues that by s.58 of the Bankruptcy Act 1966 the property of the bankrupt second respondent vested in her trustees, the third respondents. Thus, it is argued that any right, entitlement and interest the second respondent may have had to ownership and/or possession of the Ferrari has been vested in her trustees. It is further argued that as the declaratory relief sought by the applicant involves a declaration adverse to the third respondents’ title to the Ferrari, the third respondents ought to properly be parties to the application, and this court’s jurisdiction under the Bankruptcy Act 1966 is properly engaged. It was argued for the applicant that the joinder of the trustees would facilitate the proper determination of the justiciable controversy already before the court.
Moreover, the issue of ownership and possession of the Ferrari was said to be a common question as between the applicant, the second respondent, and the third respondents, and thus, sufficient to engage the associated jurisdiction of this court in respect of any non-Federal claim pressed against the first respondent.
However, a proper understanding of the nature of the agreement between the applicant and the first and second respondents reveals that upon the second respondent’s bankruptcy, there was no interest arising under that agreement that vested in the third respondent.
The agreement is described as a “Prestige Purchase Agreement”, and it appears to comprise at least two separate documents. The first is headed “BMW Group Financial Services”, and bears the notation, “Contract number 148069”. The applicant is described as the “owner” of the vehicle, and the first and second respondents as “hirers”.
The document takes the form of an offer to hire the vehicle (as described in the schedule to the offer document) from the applicant “on the provisions set out below, and contained in the Prestige Purchase Agreement – Standard Terms and Conditions”.
The second document is entitled “Alphera Financial Services”, and “Prestige Purchase Agreement – Standard Terms and Conditions”.
The two documents just described do not sit comfortably together.
The second refers not to the first as an offer to hire, but rather as an offer to purchase. It contains definitions of the terms Purchase and Purchaser, but no definitions of Hire or Hirer. It refers to a schedule, but the references do not make very much sense. For example, the definition of Instalments in clause 1 of the “Prestige Purchase Agreement – Standard Terms and Conditions” refers to the “instalment payments specified in section 1 or section 2 of item 5 of the schedule”. If it is the schedule which is part of the first document headed “BMW Group Financial Services” that is referred to, item 5 does not deal with instalments but merely contains “State: QLD”. Item 4 appears to deal with instalments.
Nonetheless, neither party suggested that the “Prestige Purchase Agreement – Standard Terms and Conditions” document in evidence did not govern the relationship between the applicant and the first and second respondents.
There are a number of clauses of the “Prestige Purchase Agreement – Standard Terms and Conditions” document that are significant.
The first, and perhaps the most important, is clause 18 which provides for an option to purchase the vehicle in certain circumstances.
In summary, clause 18 of the agreement provides that in the event that the purchaser has made all of the payments that he or she has been obliged to make up to any particular point in time, and provided the other provisions of the agreement have been observed, then the purchaser may opt to terminate the hire purchase agreement and purchase the vehicle.
Subclause (2) of clause 18 sets out the mechanics of how the purchase price might be calculated.
Subclause 18(3) is important, it says this:
Until the purchaser exercises this option, the purchaser shall have no property in the goods and shall only be a bailee thereof.
The agreement provides for the termination of it, both by the first and second respondents and by the applicant in certain circumstances.
The circumstances in which the purchasers – I will use that term, for that is the term used in the agreement – might terminate the agreement are many.
Clause 12 of the agreement deals with when the applicant (the owner of the vehicle) might terminate the agreement; it is headed “Events of Termination”, and contains a number of subclauses which cover various contingencies. One of the contingencies, is that the instalments of hire, or purchase price, whatever they might be under the agreement, set out in item 4 of the schedule, are not paid. In that event:
Subject to complying with the requirements of any Act, Alphera Financial Services may forthwith repossess the goods.
There is nothing in the material that suggests to me a connection between Alphera Financial Services and BMW Australia Finance Limited, the applicant in these proceedings, but no point was taken, and I am prepared to assume that they are either the same entity, or are in some way related, such that the difference in names is of little moment.
Alphera Financial Services has certain rights in the event that the instalments set out in the schedule are not paid, and those rights include repossession of the goods. Clause 12(2) provides that:
Upon such repossession, this agreement shall terminate, but the purchaser shall pay to Alphera Financial Services as liquidated damages the amount by which moneys paid and value provided by the purchaser, or on the purchaser’s behalf, by way of deposit and instalments, together with the value of the goods at the time Alphera Financial Services takes possession, is less than the net amount payable.
Relevantly then, the agreement seems to work this way: if there is a default in payment by the purchasers the owner might repossess the goods, and upon repossession the agreement is terminated.
As the evidence reveals in this case, although there have been attempts to repossess the goods, the goods have not been repossessed, and it seems to me that, although not the subject of argument before me, there may be a question as to whether the agreement has, in fact, been terminated by the applicant.
Notwithstanding that uncertainty, it is the applicant’s position as revealed in the correspondence sent by its solicitors to the trustees of the second respondent, that the agreement was terminated as long ago as March, 2008 well before the second respondent became a bankrupt. It is clear, having regard to clause 18 of the agreement, that as long ago as March, 2008 the first and second respondents were in default under the agreement; there does not seem to be a contention to the contrary. What that means is that in terms of clause 18, the option to purchase set out in clause 18 evaporated; it was no longer available to be exercised by the first and/or second respondents. Clause 18 provides that the purchasers (the first and second respondents) have no property in the motor vehicle, and are only bailees.
It was not suggested in argument that the first and second respondents’ entitlements to the vehicle, in March 2008 or at any other point in time were anything other than as set out in the agreement. That is to say, I was not taken to any statute which might have provided to the first and second respondents any greater interest in the vehicle, either in possession or in terms of legal or equitable ownership, than that set out in the agreement.
The position, therefore, is that as at the date of the second respondent’s bankruptcy, the second respondent had no ownership interest in the vehicle, nor any entitlement to possession of it, the applicant having resolved to re-take possession pursuant to clause 12 of the agreement. In those circumstances, the second respondent being devoid of any entitlement to either ownership or possession of the vehicle, there was nothing to vest in her trustees pursuant to s.58 of the Bankruptcy Act 1966.
It is argued that these proceedings are brought pursuant to the Court’s jurisdiction in bankruptcy as set out in s.27(1) of the Bankruptcy Act 1966, and that s.31(1)(f) of the Act provides a guidepost as to that jurisdiction. Section 31(1) of the Bankruptcy Act 1966 is a procedural section which directs the court to determine certain types of applications in open court. It has been used as a guidepost to exposing the breadth of the court’s jurisdiction under s.27 of the Bankruptcy Act 1966, as explained in cases like Scott v Bagshaw (2000) 99 FCR 573. It was said that these proceedings engage s.31(1)(f) of the Bankruptcy Act 1966, because in truth they are proceedings to declare for or against the title of the third respondent trustees in the motor vehicle.
In my view, they are not, because the trustee:
a)has never had any title in the motor vehicle according to the agreement, and
b)has never purported to suggest that they had any such title.
The correspondence attached to the affidavits of Mr Smouha – and there are three of them – contain no evidence whatsoever that the trustees at any time have suggested that they have any entitlement, either in the nature of an ownership interest, or in the nature of an interest which entitles them to possession of the relevant motor vehicle.
In those circumstances, these proceedings, although they might be seen as proceedings to declare for or against the title of the trustee, cannot affect the title of the trustee in the relevant goods. In those circumstances, these proceedings are not within the court’s jurisdiction under s.27(1) of the Bankruptcy Act 1966 and they must be dismissed.
The proceedings against the first and second respondents are said to be justified by reference to the court’s associated jurisdiction, set out in s.18 of the Federal Magistrates Act 1999, but as the authorities dealing with associated jurisdiction demonstrate, there must be before the court a justiciable federal matter before the associated jurisdiction can be engaged.
There is no legitimate application under the Bankruptcy Act 1966 before me, and there is, in my view, no proper engagement of s.18 of the Federal Magistrates Act 1999. For those reasons, all outstanding applications shall be dismissed.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Jarrett FM
Associate:
Date: 16 September 2011
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