Centurian Constructions(In Liq) v Beca Dev (In Liq)

[2000] HCATrans 411

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S4 of 2000

B e t w e e n -

CENTURIAN CONSTRUCTIONS PTY LTD (IN LIQUIDATION)

Applicant

and

BECA DEVELOPMENTS PTY LTD (IN LIQUIDATION)

Respondent

Application for special leave to appeal

McHUGH J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 12 SEPTEMBER 2000, AT 2.50 PM

Copyright in the High Court of Australia

MR M.J. WEBECK:   Your Honours, I appear for the respondent liquidator.  (of Michell Sillar)

MR G. PSELLETES appeared in person for Centurian Constructions. 

McHUGH J:   You are seeking leave to appear, Mr Pselletes?

MR PSELLETES:   Yes, your Honour.

McHUGH J:   Leave is granted, Mr Pselletes.  You proceed, Mr Pselletes.

MR PSELLETES:   Thank you, your Honours.  Your Honours, I will start with a very very brief history.  I understand we are under time constraints.

McHUGH J:   I think we are very familiar with the case.  I can tell you that, for a moment last night, I thought that you may have had a point and the point was that perhaps the debt had never been extinguished because it was payable on demand or reasonable notice, and no demand or reasonable notice had been made and, therefore, the limitation period.  But having looked at some cases on it, I think the law is that time started to run from the moment the debt came into existence.  In many ways, the position you find yourself in, or the company finds itself, is very unfair and any judge would seek to see if there is any basis for it.  But I have to tell you that we have looked at it very closely and we will hear what you want to say, but at the moment I just cannot see any case for granting special leave.  But you carry on.  We are very familiar with the facts of the case and there may be something you can bring to our attention that will swing the balance in your favour.

CALLINAN J:   Is there anything that you can point to to show that there was an agreement that there had to be a demand for the debt?

MR PSELLETES:   Yes, I can, your Honour, I think.

CALLINAN J:   Perhaps you should concentrate on that.

MR PSELLETES:   I think what I would like to do is just take you up the ladder until we reach that point.  Proceeding 1600 of 1996, 21 August 1997, judgment was handed down by Justice Young.  In his judgment, he established that the plaintiff in those proceedings was the development company and the defendant ‑ ‑ ‑

McHUGH J:   We are familiar with – try and get to the essentials.  Do not waste your precious time.  We know it backwards.

MR PSELLETES:   Right.  The reason I have to start there is because there were mutual credits and mutual debts and mutual dealings from both companies ‑ ‑ ‑

McHUGH J:   Yes, we are familiar with it and the findings in your favour in the Court of Appeal.

MR PSELLETES:   The liquidator undertook a claim against both parties for $1.2 million and of that $1.2 million we now are down to $134,000.  That has been established.

McHUGH J:   Yes.

MR PSELLETES:   Now, between both companies there were two sets of books, one for Centurian and one for Beca.  There were common directors in both companies.  The relationship between those two companies was one of support in terms of loan advances, Centurian to Beca, right throughout the history of that 20 year operation.  Now, Young J found that there was not enough evidence – or there was no evidence – to support a loan of $282,390 had been paid from Centurian to Beca in the proceedings 1600 of 1996, appealed those proceedings.  In the Court of Appeal his Honour Justice Priestley, on page 27 said that:

This deposit is shown in Beca’s bank statement and is recorded in Beca’s journal under the heading “Duke Pacific”…..To my mind, the inference to be drawn is that Centurian agreed to make this amount owing to it available by way of loan to Beca.

So, in the first instance, Young J ‑ ‑ ‑

McHUGH J:   Yes, but do not worry about it.  You have that finding of fact in your favour.  So you do not have to worry about it.  The real question is when was the debt repayable – sorry, when was the money repayable?  Now, ordinarily the law would say it is repayable on demand.  If it is, the Limitation Act will defeat your claim.  But can you point to something which suggests that money was repayable only at some later stage.  Is there some evidence, not on demand?

MR PSELLETES:   The important point is here that we had established that the debt was, in fact, owing to Centurian.  We established that only through the Court of Appeal.  We had not established that in the lower court.  Having established that, their Honours ruled on the limitation point.

McHUGH J:   Yes.

MR PSELLETES:   That limitation point was not argued.  It was not in the written submissions of the respondent in the Court of Appeal.  It was mentioned in the lower court by his Honour Justice Young who also allowed equal age transactions, from both sides of the fence, to be heard and adjudicated and given in our favour.  His Honour said that, in respect of the limitation point:

I do not consider in the present case that in view of the tentative way the limitation point is put forward I should let it stand in the way
of any set-off.

That was on page 29.  So he had ruled on the limitation point in the lower court. 

Now, the Court of Appeal heard the case in respect of the indebtedness of Centurian to Beca and ruled that, in fact, the evidence was there supporting that loan of Centurian to Beca, therefore the limitation point should never have been raised.  It was not in the respondent’s written submission.  But to carry that one step further ‑ ‑ ‑

McHUGH J:   Did they have a notice of contention?  Do you know what a notice of contention is?  Did they say the judgment can be supported on the ‑ ‑ ‑

MR PSELLETES:   Not to my knowledge, your Honour.  Now, to go that further step, as you rightly put, if you take the limitation point as being rightly upheld in the Court of Appeal, then I would rely on Brooker v Pridham in Brooker (Australia) Limited  (In Liquidation).  Now, in that case, in the lower court his Honour Justice Millhouse said that inclusions in the annual financial statements of a company were not a sufficient acknowledgment or a promise to pay.  Now, that case was then appealed and his Honour King CJ said – well, it is an old section of the old Act but it roughly is the same. 

Section 35 of the Limitation of Actions Act provides that an action founded upon any simple contract shall be commenced “within six years next after the cause of action accrued and not after”.

He then says:

It is trite to say that where there is a simple loan of money, the debt is due and payable immediately and from day to day from the time of the making of the loan, and that the cause of action therefore arises immediately upon the loan of the money.

Further down the page, on the same side of the page, in that particular case he says:

There was no agreement in writing between the parties…..but to a large extent the agreement or agreements must be inferred from the conduct of the parties and their relationship.

Your Honours, I can take you five, six, seven, through the whole pages of that judgment, but really what it boils down to is the conduct, the relationship between the two parties.  Now, the conduct and relationship between Beca and Centurian has already been adjudicated upon in that his Honour Justice Young found $600,000 in the same way as he would have found the last $300,000 if he had the evidence – or if he had noticed the evidence that was there in an affidavit of 11 April.

CALLINAN J:   Is there any entry in the books in respect of interest?

MR PSELLETES:   Yes, your Honour.

CALLINAN J:   No, in respect of interest.

MR PSELLETES:   In respect of interest, yes, your Honour, there would be.  It starts with a cash book, of course, a cash book entry.

CALLINAN J:   Were the books in evidence?

MR PSELLETES:   Yes, the books were in evidence, your Honour.

CALLINAN J:   And did the books show that the debtor company was actually entering a debit for interest due and owing to the creditor company?

MR PSELLETES:   You would find, your Honour, that there was – the way the transaction was handled, it did not have a full description of how the moneys came from Centurian to Beca and that was the reason why ‑ ‑ ‑

CALLINAN J:   No, but the judge made findings about that.  He accepted that it was a loan to enable them to buy the equipment which they then leased ‑ ‑ ‑

MR PSELLETES:   To answer your question, your Honour, I would say yes, on the basis that if you look at the balance sheets you will find that the amount under the heading “Duke Pacific” is less than the amount $282,390, so by deduction, there were payments made, the exact amount I do not know.

CALLINAN J:   Did the books actually – all of the books go into evidence?  We do not have the books.

MR PSELLETES:   All of the books went into evidence, your Honour.

HAYNE J:   Can I just go back a stage, Mr Pselletes, just to make sure I understand something.  When we go to Justice Young’s judgment we find his Honour saying that the limitation point was put forward in a “tentative way”.  What happened in the Court of Appeal?  Did the liquidator rely on the limitation point?

MR PSELLETES:   As I say, your Honour, the written submissions make no mention of the limitation point at all.

CALLINAN J:   We do not have the pleadings, you see.  Was the Limitation Act actually pleaded by the liquidator?  It could have been pleaded in the alternative, a denial of the debt but, in the alternative ‑ ‑ ‑

MR PSELLETES:   If my memory serves me correctly, I think that is exactly what happened.

CALLINAN J:   They did plead it then?

MR PSELLETES:   They did not plead it.

CALLINAN J:   We are really speculating then, we do not have the pleadings.

MR PSELLETES:   It was not a point that was of great issue.

CALLINAN J:   The rule, you would understand, is that generally speaking, limitation sections have to be strictly pleaded before somebody can rely upon them.

MR PSELLETES:   Yes, well I would have thought it would be in the written submissions if it was a point to be relied on.  Now, in the lower court, your Honour, his Honour Justice Young made the ruling it was put tentatively, and the reason the liquidator put it tentatively is because he had debts that he was relying on to claim of equal age.  It would have been an unfair balance to take debts that were 10 and 12 and 15 years old and claim those from Centurian and from the directors personally and not have a cross-demand for the same amount of money of equal age.

CALLINAN J:   Was there any evidence why the liquidator took so long to bring the proceedings against Centurian?

MR PSELLETES:   Your Honour, I have personally thought about that ‑ ‑ ‑

CALLINAN J:   No, but was there any evidence?

MR PSELLETES:   I think they were waiting for the elapse of time.  There is no evidence.  The company was wound up in 1992, the debt was only four years old in 1992.  There was no major issues at hand.  All the issues were handled in the first few months of the liquidation.  Three years after that they decided to go on a fishing expedition and six years later we are here before you, your Honour.

McHUGH J:   One problem is whether or not the failure, if you are right, of the liquidator to rely on the Limitation Act is itself a matter for special leave to appeal.  As you would appreciate, ordinarily this Court only grants special leave to appeal in matters of general public importance.  What do you say about that?  We do not sit here as an appellate court or we do not grant leave, even if we think the judgment below is wrong.  Ordinarily there has to be some special point about the case or there has to be some very clear miscarriage of justice.  See, we are not an appeal court as the Court of Appeal is.

MR PSELLETES:   Your Honour, six years ago there was a claim of $1.2 or $1.3 million and it is now, as I say, down to $100,000-odd and that simply is not owed.  So the clear injustice is, of course ‑ ‑ ‑

McHUGH J:   I know, you see it is an injustice and, if you are right, then it is an injustice in the sense that you have been ordered to pay money that you should not have been, but this Court can only hear 70 or 80 cases a year.  There are hundreds of thousands of cases decided in Australia and we have to pick the really important ones that count for the future in respect of other like cases, but there does not seem to be any point of general importance in your case.  It is certainly important from your point of view, but how does it affect the public generally?

MR PSELLETES:   In the first instance, I think that when you have directors that are involved in more than one company and there are dealings between each of those companies, I think it is important that the conduct becomes part of a defence, if there is a dispute.  I think, secondly, the Court of Appeal has not considered that conduct or that relationship.

McHUGH J:   But it is not really relevant.  The only issue outstanding at the moment is whether or not the Limitation Act barred this debt.  If you had got rid of that, you would have succeeded on this issue, because you won on everything else in the Court of Appeal.

MR PSELLETES:   Yes.

HAYNE J:   And the consequence of winning on that issue would have been that Centurian was not wound up.

MR PSELLETES:   That is right, your Honour.

HAYNE J:   Are we too late to unscramble the omelette?  An order for winding up is made against Centurian.  Do we know from the papers what would happen if we took the case, we decided the Court of Appeal was wrong about what it did in its treatments of the debts; presumably therefore the winding up of Centurian was not well based; but is the omelette so scrambled now that we will have written a nice theoretical essay to no practical purpose for these parties?

MR PSELLETES:   To assist you there, your Honour, the omelette is fairly plain.  Firstly, there are no outstanding debts that Centurian has besides the debt of the creditor.  But most importantly ‑ ‑ ‑

HAYNE J:   What really are we fighting about, whether the company shell, Centurian, should survive or die?  If that is all we are fighting about, Mr Pselletes, it does not seem to be a matter of great importance to these immediate parties, leave aside the theoretical question about set off that might arise.  Do you see the sort of difficulty I have?

MR PSELLETES:   Yes, I do, your Honour.  If you are asking about how scrambled the egg is, it is very simple.  The liquidator is quite happy, I suppose – he has been happy enough to let us take this matter to your Honours.  We have paid his fees.  We have no – I do not think there is any problem bringing Centurian out of liquidation at all – in fact I know there is not ‑ if the Court was so minded

CALLINAN J:   Do you owe any money to Centurian, you or your wife?

MR PSELLETES:   I beg your pardon, your Honour?

CALLINAN J:   Do you owe any moneys to Centurian, on the accounts between you personally and your wife and Centurian?

MR PSELLETES:   I cannot recall, your Honour.  I do not think so.

CALLINAN J:   You are not a debtor?

MR PSELLETES:   No, your Honour.

HAYNE J:   You have not got a liquidator round your neck demanding money?

McHUGH J:   He is there and they failed.

MR PSELLETES:   That is exactly right, your Honour.  They did try, and they failed.

CALLINAN J:   There is no further demand?

MR PSELLETES:   The other thing is the actual petitioning creditor, the liquidator, is in fact deregistered.  So it is unscrambled to its – if you can say, most unscrambleable.  It is quite a simple case, your Honour. 

I believe the Court of Appeal made the correct judgment in finding in favour of the loan.  I think the limitation point was correct inasmuch as it went to a point, but I think the case of Brooker v Pridham, on the last page of page 384 ‑ ‑ ‑

McHUGH J:   I know, you have pointed out, and you rely on that, and certainly that is in your favour, but the problem at the moment is that it would appear that this is recorded only in the journal entries – that is all that is before us.  One assumes, if it is in the journal entries, it must have got into the ledger and no doubt into the balance sheet, but were the balance sheets of the company in evidence?

MR PSELLETES:   They were, your Honour.  I do have a copy of the 1991 balance sheet.  I do not know whether it is appropriate to hand it up, but I do have a copy.

McHUGH J:   We might have a look at it.

MR PSELLETES:   It is under the heading “Duke Pacific”, your Honours.

McHUGH J:   There does not seem to be any charge for interest.  The current liabilities at 30 June 1991 acknowledge the debt of $122,000 to Duke Pacific Finance, but there does not seem to be any acknowledgment of any debt to Centurian, is there?

MR PSELLETES:   Yes, your Honour, that is what the Court of Appeal established, that it was the debt of Centurian.

McHUGH J:   I know it was, but I am asking about an acknowledgment.  See, if there was an acknowledgment by the company, then the Limitation Act would not run until that last acknowledgment – run again until that acknowledgment, but there is no – I cannot see any acknowledgment.  I

know you have a finding in your favour, but I do not see any acknowledgment.

MR PSELLETES:   Yes, your Honour.  The acknowledgment is the fact that Duke Pacific was really the abbreviated code for Centurian, if you like, put in there by the accountant to explain where the money came from.  He did not follow through by putting the word “Centurian”, but that has been well established.  The deposit book shows that the amount of ‑ ‑ ‑

McHUGH J:   I know, and the journal entries, I know.  I see that your time is up, Mr Pselletes.  If you would take a seat for a moment.

MR PSELLETES:   Thank you, your Honour.

McHUGH J:   Yes, Mr Webeck.

MR WEBECK:   Thank you, your Honours.

CALLINAN J:   Can I just ask you a question?  Was the Limitation Act pleaded?

MR WEBECK:   It was not pleaded in a strict sense because it was a summons by my client, the liquidator, to wind up Centurian and the amount claimed in that summons for winding‑up purposes was admitted.  It then became a matter by direction of putting on cross‑claims against that amount for what the set offs were in relation to the primary debt.  So there was no statement of claim or pleading in that sense.  There was evidence put forward relying upon the Limitation Act.

McHUGH J:   Mr Webeck, was the point taken in the written submissions to the Court of Appeal?

MR WEBECK:   I believe they were.  I cannot prove that now but I can certainly say that I was present when Mr Chippindall, the counsel representing the liquidator, where the limitation point occupied a great deal of the appeal time before the court.

McHUGH J:   The limitation point?

MR WEBECK:   Correct.

McHUGH J:   Yes, we do not want to hear any more.  Yes, is there anything you would like to say in reply to that, Mr Pselletes?

MR PSELLETES:   No, your Honour.  If it would be of any assistance, I have those written submissions.

McHUGH J:   You have them, do you?

MR PSELLETES:   Yes, I have.

McHUGH J:   You might hand them up.  They do not seem to have been mentioned.  Nevertheless, Mr Webeck says that the Limitation Act took up quite a bit of argument during the Court of Appeal and the Court of Appeal itself says that the point was relied on.  What do you say about that?  It says, for instance, at page 29 of the appeal book, line 29, the Court of Appeal judgment says:

the liquidator seeks to invoke the Limitation Act 1969 in respect of the alleged set‑off.

Perhaps that is just a reference to what Justice Young said.

MR PSELLETES:   Yes, your Honour, with respect, that is the reference.  He was going off the transcript that was part of the application book, your Honour.

McHUGH J:   Thank you, Mr Pselletes.  The application for special leave to appeal must be refused in this case.  The Court is not convinced that there is a point of law of sufficient general importance to warrant the grant of special leave to appeal.  Nor is there any other aspect of the case which seems to us to require the grant of special leave to appeal.  The result must be that the application is dismissed.

Adjourn the Court.

AT 3.20 PM THE MATTER WAS CONCLUDED