Devere Holdings Pty Ltd v Lopez
[2008] FCA 1091
•24 July 2008
FEDERAL COURT OF AUSTRALIA
Devere Holdings Pty Ltd v Lopez [2008] FCA 1091
PRACTICE AND PROCEDURE – application for leave to appeal – orders to provide further and better particulars of defence – related application for stay – particulars related to positive pleading in defence – evidentiary burden – decision below not attended with sufficient doubt – no substantial injustice would result if leave not granted, supposing the decision to be wrong – application dismissed.
Federal Court of Australia Act 1976 (Cth) s 24(1A)
Bankruptcy Act 1966 (Cth) s 120(1)Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 cited
Custom Credit Holdings Ltd v Creighton Investments Pty Ltd (Unreported NSWSC, 7 March 1985, BC8500943) cited
Dare v Pulham (1982) 148 CLR 658 cited
Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 cited
Hornsby Shire Council v Yifta Pty Ltd (Unreported, NSWSC, 17 March 1993, BC9301992) cited
Verge v Devere Holdings Pty Ltd [2008] FMCA 591 citedDEVERE HOLDINGS PTY LTD (ACN 009 220 615) AND PACKHAM PTY LTD (ACN 056 326 884) v GEORGE AUBREY LOPEZ AND EVAN ROBERT VERGE
WAD 112 OF 2008
GILMOUR J
24 JULY 2008
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAD 112 OF 2008
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:
DEVERE HOLDINGS PTY LTD (ACN 009 220 615)
First ApplicantPACKHAM PTY LTD (ACN 056 326 884)
Second ApplicantAND:
GEORGE AUBREY LOPEZ AND EVAN ROBERT VERGE
Respondents
JUDGE:
GILMOUR J
DATE OF ORDER:
24 JULY 2008
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.The applications for leave to appeal and for a stay be dismissed.
2.The applicants pay the respondents costs of the application.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAD 112 OF 2008
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:
DEVERE HOLDINGS PTY LTD (ACN 009 220 615)
First ApplicantPACKHAM PTY LTD (ACN 056 326 884)
Second ApplicantAND:
GEORGE AUBREY LOPEZ AND EVAN ROBERT VERGE
Respondents
JUDGE:
GILMOUR J
DATE:
24 JULY 2008
PLACE:
PERTH
REASONS FOR JUDGMENT
BACKGROUND
Devere Holdings Pty Ltd (“Devere”) and Packham Pty Ltd (“Packham”) apply for leave under s 24(1A) of the Federal Court of Australia Act 1976 (Cth) to appeal from, and to stay, the orders of Federal Magistrate Lucev made on 9 May 2008 requiring them to provide further and better particulars of paras 5, 10.6 and 10.7 of their Proposed Amended Defence (“defence”). It is accepted by counsel for the applicants that the stay application arises for consideration only in the event of leave to appeal being granted.
The application is supported by an affidavit sworn 30 May 2008 by Giacomino Fazio, who is a director of each of the applicants.
The substantive proceeding was commenced by the respondents (“the Trustees”), as trustees in bankruptcy of the bankrupt estates of Arthur John Andony and Joan Elizabeth Andony (“the Andonys”). Devere and Packham are the first and second respondents to those proceedings. The third respondent, Castleworld Pty Ltd, is not a party to this application.
The Trustees seek orders voiding certain transactions between Devere, Packham and the Andonys and vesting certain property, held by Packham and Castleworld, in the Trustees. The property comprises an undivided one-third interest in land in Dongara (the “Land”) and 1,111,113 shares in Devere.
The Trustees allege that the transfer by the Andonys of their interest in the Land to Devere and the transfer by them of 1,111,113 shares in Devere to Packham, are each void by virtue of s 120(1) of the Bankruptcy Act 1966 (Cth) (“the Act”). The Trustees also allege, in respect of some transfers of the Andonys’ shares in Devere, that these were not authorised by one or both of the Andonys.
LEAVE TO APPEAL
The general approach to such an application is to consider whether the decision is attended with sufficient doubt to warrant its reconsideration and whether substantial injustice would result if leave were not granted, supposing that the decision was wrong: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-9.
The proposed appeal concerns a point of practice and procedure. There is an important distinction between the exercise of the discretion to grant leave to appeal in such a case and one which involves determining a substantive right: Décor Corporation at 400. In so finding, the Court was reflecting the warning reaffirmed by the High Court in Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 at 177 that a tight rein should be kept on such appeals. That warning has been echoed many times by this Court.
THE APPLICATION FOR LEAVE
The particulars under challenge concern paragraphs 5, 10.6 and 10.7 of the defence.
It is trite that particulars constitute the details of a statement of a party's case sufficiently clear to allow the opponent a fair opportunity to meet it: Dare v Pulham (1982) 148 CLR 658 at 664.
Defence: paragraph 5
Paragraph 18 of the statement of claim alleges that the consideration which Devere gave for the transfer of the Andonys’ undivided one-third share of the Land was at most $45,000. Paragraph 5 of the defence denies this allegation but then pleads that the consideration comprised the benefits accruing to the Andonys under and pursuant to what are described as the First Agreement or alternatively the November 2000 Agreement.
The particulars of para 5 of the defence which were ordered are as follows:
Particulars of all of the benefits alleged to have accrued to each of Mr Andony and Mrs Andony under and pursuant to
(a)the First Agreement;
(b)the November 2000 Agreement;
by identifying in respect of each and every benefit:
(c)the nature of the benefit;
(d)the monetary value of the benefit;
(e)when and how the benefit was accrued to each of Mr Andony and Mrs Andony;
(f)by whom the benefit was provided.
The applicants submit that the error below was the finding that, in para 5 of their defence, they had put the “consideration” for the sale, the “benefits” comprising the consideration, and the “benefits accruing” under both the “First Agreement”, alternatively the “November 2000 Agreement” in issue and, accordingly, must provide the detailed particulars demanded by the Trustees: Verge v Devere Holdings Pty Ltd [2008] FMCA 591 at [23] and [24].
The applicant submits that it is the Trustees who bear the onus of proving each of the elements of s 120(1) of the Act which renders void, relevantly, a transfer of property where “the transferee gave consideration of less value than the market value of the property”. In particular they submit that the Trustees must plead and prove:
(a)the consideration that Devere gave to the Andonys;
(b)the value of that consideration; and
(c)the market value of the Andonys’ undivided one third interest in the Land.
The applicants contend that whilst paragraph 5 denies the allegation that the consideration was $45,000 and pleads what the consideration actually was, it does not answer an allegation by the Trustees that the identified consideration pleaded in para 18 of the statement of claim had a particular value and then assert that it had a different value. It merely puts in issue, the applicants say, the threshold element to the Trustees’ claim by asserting, in effect, that the transaction was wider than is alleged by the Trustees in para 18 of the statement of claim. In summary, the applicants’ defence is that there was additional consideration, not that there was additional consideration of some particular value.
The applicants were prepared to provide the following particulars of the additional consideration:
The benefits that accrued to Mr and Mrs Andony were:
(a) under the First Agreement:(i)the sum of $45,000;
(ii)1,111,111 shares in Devere;
(iii)the provision of a loan in the sum of $180,000,
(iv)the release from liability to Packham in respect of moneys expended by Packham for their benefit;
(v)the release from any liability or obligations under the November 2000 Agreement; and
(vi)the entry into of the shareholders agreement undated but stamped 10 June 2004 and the loan agreements undated but stamped 10 June 2004
(b) under the November 2000 Agreement:
(i) 801,111 shares in Devere.
Accordingly their complaint, properly understood, is directed at the order that they particularise the monetary value of each “benefit”.
The applicants submit that the monetary value of each of the items of the consideration, and the other particulars ordered, properly understood, are not particulars of the applicants’ case, because they are not particulars of the material facts that are pleaded in para 5. They also submit that it is open to the Trustees to amend their statement of claim to plead, in the alternative, that the consideration for the transfer of the Andonys’ interest in the Land comprised the consideration pleaded in para 5 of the defence but which still had less value then the market value of the Andonys’ interest. If the Trustees do not do this, and proceed at trial on the sole basis that the consideration was $45,000, the applicants submit that they will fail if the Court finds that additional consideration was provided irrespective of the value of that additional consideration.
They submit that the primary Court erred by reversing the onus of proof in respect of the elements of s 120(1). They say that trustees in bankruptcy cannot simply select part of the consideration provided for a transfer of property and then shift the onus to the transferee to prove that additional consideration was provided and that the total consideration was equal to or greater than market value; or conduct a free standing and wide ranging inquiry in relation to matters of interest to the Trustees but which are not pleaded by the applicants.
In my opinion, the applicants have adopted an unduly narrow view of the relevant pleadings. Paragraph [18] of the statement of claim requires to be considered in the context of the discrete claim pleaded in paragraphs [17]-[20] of the statement of claim. The effective allegation found within those paragraphs as a whole is that the consideration given was at most at a value of not more than $45,000 which was less than the market value and therefore void against the Trustees in the applicants bankruptcy by reason of s 120 of the Act. The concepts of “consideration”, “value” and “market value” are essential to the statutory provision. The Trustees case is that the relevant undervalue was the difference between at least $236,606, being the minimum market value of the Andonys’ undivided one-third share of the Land and $45,000 being the value of the consideration agreed to be paid. The applicants themselves plead the matter of “market value” in the context of the two alternative agreements in para 4 of the defence in answer to para 17 of the statement of claim.
The applicants, by para 5 of the defence, positively plead that the consideration was not merely $45,000 but also comprised the benefits accruing to the Andonys under either the First Agreement or the November 2000 Agreement. The effect of that plea, in context, is to allege that the value of the consideration was not merely $45,000 but was more than that and “comprised the benefits accruing to them under and pursuant to the First Agreement alternatively the November 2000 Agreement”. In my opinion, that is the only sensible way of understanding the pleadings concerned and the issues raised by them.
Where, as here, the applicants have pleaded a positive case then they have an evidentiary onus in that respect. In my opinion, the positive pleading constitutes material allegations and the Court below was correct to order that particulars, in terms of those requested, be given. This includes, relevantly, particulars as to the monetary value of the benefits pleaded. This adopts a common sense approach and ensures that the core issues directed to s 120 of the Act are fully ventilated.
Defence: paragraphs 10.6 and 10.7
Paragraphs 10.6 and 10.7 of the defence form part of the applicants’ response to para 45 of the statement of claim. That paragraph is the culmination of preceding paras 41-44 which concern a Deed dated 1 April 2003 which the Trustees allege constitutes an invalid transfer to Packham of Mrs Andony’s interest in the shares in Devere held jointly with her husband.
Paragraph 10.6 of the defence is as follows:
10.6say further or alternatively that by reason that Mrs Andony obtained the benefit of the performance of the obligations of the second respondent pursuant to the deed dated 1 April 2003, including the discharge of Mrs Andony's liability to the second respondent with respect to loan funds borrowed by Mrs Andony jointly with Mr Andony from the second respondent, Mrs Andony thereby ratified the conduct of Mr Andony if and to the extent (if any, which is denied) that such conduct was beyond the authority of Mr Andony. (Emphasis added)
The particulars ordered in respect to para 10.6 were as follows:
(a)Each and every obligation under the deed dated 1 April 2003 that were allegedly performed by or on behalf of the second respondent;
(b)When, where and how each such obligation was allegedly performed;
(c)The nature and monetary value of each benefit conferred upon Mrs Andony by the performance of those obligations;
(d) The amount of the loan funds borrowed jointly by Mr Andony and Mrs Andony from the second respondent;
(e)When those loan funds were borrowed;
(f)The amount of the liability Mrs Andony allegedly had to the second respondent in respect of those loan funds at the date the second respondent became the registered holder of the joint shares;
(g)When and how that liability was allegedly discharged;
(h)The conduct of Mr Andony that Mrs Andony is alleged to have ratified;
(i)The acts of Mrs Andony relied upon by the first and second respondents to support the allegation that Mrs Andony ratified the conduct of Mr Andony. (Emphasis added)
Paragraph 10.7 of the defence is as follows:
10.7 says further or alternatively that:
10.7.1the matters pleaded in paragraphs 10.5 and 10.6 above caused the second respondent to assume that Mr Andony acted on Mrs Andony’s behalf and with her authority with respect to all matters pleaded in paragraphs 41-43 SOC; and
10.7.2by reason of the performance of obligations pleaded in paragraph 10.6 and the benefit thereby conferred on Mrs Andony and the corresponding detriment that will be suffered by the second respondent if Mrs Andony resiles from the assumption that Mr Andony acted on her behalf and with her authority with respect to all matters pleaded in paragraphs 41-43 of SOC Mrs Andon is estopped from denying that Mr Andony acted on her behalf and with her authority with respect to all matters pleaded in paragraphs 41-43 of SOC. (Emphasis added)
The particulars ordered in respect of para 10.7 were as follows:
(a)Each and every obligation under the deed dated 1 April 2003 that was allegedly performed by or on behalf of the second respondent;
(b)When, where and how each such obligation was allegedly performed;
(c)The nature and monetary value of each benefit conferred upon Mrs Andony by the performance of those obligations;
(d)The facts relied upon to support the essential elements of the plea that Mrs Andony is estopped vis a vis the first and second respondents from denying that Mr Andony acted as her agent and with her authority as alleged. (Emphasis added)
Accordingly the challenge proposed is not to the entirety of the particulars ordered but rather to that part of the orders which require particulars of the monetary value of each “benefit conferred upon Mrs Andony by the performance of those obligations” although in respect to the estoppel pleading the applicants say that this, in effect, requires a value to be placed on the detriment pleaded under paragraph 10.7.2 of the defence. In any event, in my view, the Court below was correct in ordering the entirety of the particulars.
The applicants submit that the value of a benefit is not relevant when determining if conduct was ratified, and that what is important is the adoption or acceptance of the validity of an act done: Custom Credit Holdings Ltd v Creighton Investments Pty Ltd (Unreported NSWSC, 7 March 1985, BC8500943) at 25 per Clarke J. They also submit that a detriment that gives rise to an estoppel does not need to be valued: Hornsby Shire Council v Yifta Pty Ltd (Unreported, NSWSC, 17 March 1993, BC9301992) at 24 per Young J.
There can be no doubt, in my view, that the Court below was correct in ordering particulars as to what were the benefits alleged. Indeed the applicants have no difficulty with this aspect of the orders. They submit, however, that it is not, as a matter of law, necessary that the benefits be valued, or at least, not by them, as part of their case. However, ordering particulars of those values was, in effect, a way of ordering particulars of whether the alleged benefits were actually benefits. The benefits specified under para [15] above, apart from the sum of $45,000 are not self-evidently “benefits”. The issue of detriment is not strictly relevant to the question of the particulars. It arises under para 10.7.2 of the defence but is said to be the same as the benefits pleaded in that paragraph. These in turn are the same benefits pleaded under paragraph 10.6 of the defence.
For these reasons I am of the opinion that the decision of the Court below to order the particulars which it did is not attended by sufficient doubt to warrant the grant of leave to appeal. The provision of the particulars will ensure that the case which the Trustees have to meet in respect to the applicants’ defence is fully articulated.
Substantial Injustice
It is my opinion, in any event, that no substantial injustice would result from the refusal to grant leave supposing the decision below to be wrong.
The applicants’ submissions, in this respect, reiterate their arguments as to why leave should have been granted. They say that they will have to prove the value of the consideration for the transfer of the Andonys’ interest in the Land to Devere at possibly significant cost in obtaining expert valuation evidence. I do not consider this to be a substantial injustice. It is a matter which, should the applicants succeed in their defence on that issue, will likely be the subject of an award of costs. This would wholly indemnify them in respect to that cost. There is no suggestion that the Trustees could not meet such a costs order.
APPLICATION FOR STAY
As I foreshadowed earlier, given the conclusion to which I have come in relation to the leave application it is not necessary to consider the stay application.
CONCLUSION
For these reasons the applications for leave to appeal and for a stay will be dismissed with costs.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour . Associate:
Dated: 24 July 2008
Counsel for the Applicants: Mr D H Solomon Solicitor for the Applicants: Solomon Brothers Counsel for the Respondent: Ms P Cahill Solicitor for the Respondent: Jackson McDonald
Date of Hearing: 15 July 2008 Date of Judgment: 24 July 2008
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