Dodrill & Anor v Bank of Queensland Limited & Ors

[2012] HCATrans 22

[2012] HCATrans 022

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B38 of 2011

B e t w e e n -

JOSEPH MICHAEL DODRILL

First Applicant

JOHN ANTHONY DODRILL

Second Applicant

and

BANK OF QUEENSLAND LIMITED (ACN 32 009 656 740)

First Respondent

JOHN RICHARD PARK AND KELLY-ANNE LAVINA TRENFIELD

Second Respondents

MULHERN CONSTRUCTIONS PTY LTD (ACN 060 410 102)

Third Respondent

Application for special leave to appeal

FRENCH CJ
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO BRISBANE

ON FRIDAY, 10 FEBRUARY 2012, AT 11.05 AM

Copyright in the High Court of Australia

__________________

MR R.A. PERRY, SC:   May it please the Court, I appear on behalf of the applicants.  (instructed by Lynch Morgan Lawyers)

MR A.B. CROWE, SC:   May it please the Court, I appear with MR B.T. PORTER on behalf of the respondents.  (instructed by Dibbs Barker)

FRENCH CJ:   Yes, Mr Perry.

MR PERRY:   Your Honours, I accept of course at the outset that the application and in the appeal is, in essence, concerned with the construction of the charge in this particular instance.  As to that, however, there are both matters of general principle and impact upon third parties which give this appeal a particular characterisation of general importance warranting the grant of special leave.  In terms of a brief sequence of events, can I take your Honours to page 21 of the application book.  You will see in paragraph ‑ ‑ ‑

FRENCH CJ:   The key question is whether the banks release affected proceeds of future sale of the land.

MR PERRY:   Yes.

FRENCH CJ:   That is the core of it, is it not?

MR PERRY:   It is indeed, and the sequence of events, just briefly, your Honour.  At the bottom of page 21, paragraphs [13] and [14], the release was, in essence, directed towards a refinancing arrangement which involved Bankwest as distinct from this bank.  The terms of the charge are then set out on pages 22 onto 23 of the application book.  At first instance before the Chief Justice, as the Court of Appeal recognised, in essence, the argument was whether or not a floating charge had crystallised.  Before the Court of Appeal it came down to whether, in fact, the proceeds of sale were caught by the fixed charge itself rather than any crystallisation of the floating charge.

Your Honours, the consequences of the construction found by the Court of Appeal are emphasised by two aspects or two parts of the judgment itself.  Can I take you to page 27 of the application book to paragraph [36], which is right at the bottom, and the substance of it goes over the page.  The point of general principle or theory, which might be the better description of this instance, is that set out in that passage from Goode.  That that is no dry theoretical exercise is revealed not only because of the consequences inter partes in this instance, but also by the passage at paragraph [29], which appears at page 26 of the application book.

What Justice Muir there refers to is the principle in Sogelease and finds, certainly arguably correctly in paragraph [30], that what that principle concerned was not necessarily rights between the bank and the applicants here, but between the bank and Bankwest.  But the point to be made on the application is that it is apparent that by reason of the construction found by the Court of Appeal, what can happen in circumstances such as these is not confined to simply interests arising between the applicant and the respondent here but between the respondent and other parties who have engaged in a refinancing transaction.

Certainly the inference one would draw from the refinancing transaction is that upon the release of the charges Bankwest considered that the security that they gained, which was referred to in the chronology I took you to earlier, had some degree of priority over that of the bank, the bank having released the charges.  But the court found by reason of the construction that it favoured that that was not so.

FRENCH CJ:   That is a matter which might agitate the minds of advisers to future providers of refinancing.

MR PERRY:   It might sound for an awful lot of third parties or others ‑ ‑ ‑

FRENCH CJ:   Does it raise the question of principle?

MR PERRY:   Your Honour, the highest one can put it is that by reason of the potential impact, not only inter partes but because of the impact upon the securities process generally evidenced by what happened to Bankwest in this case, it does raise the requisite matter of general principle.  Now, to take up your Honour the Chief Justice’s observation, this consequence might agitate the minds precisely of those engaged in or advising those engaged in refinancing operations just such as this.  It is because of that real potential and the potential has been realised, as is set out in this case at paragraph [29], the matter is of sufficient importance to warrant the grant of special leave.  The reason why there is ‑ ‑ ‑

FRENCH CJ:   If you were in the Bankwest position, for example, and you were concerned, what would you do?  Would you seek the release of the land and future proceeds of sale thereof?

MR PERRY:   No.  If the judgment of the Court of Appeal is right, and, in my respectful submission, of course it is attended by sufficient error to warrant an application, the answer to your Honour’s question is yes, one would not have to.  The problem would be, in any one instance, whether the release of the real property necessarily now carries with it the red flag that that does not mean what it says because of the construction favoured by the Court of Appeal here.  Now, the submission advanced before the Court of Appeal by the applicants was that that issue can be very simply determined by giving the charge and, more importantly, the release of the charge the construction which it ought properly carry with it.  Can I emphasise that this way. 

As against the applicant, it was said by the Court of Appeal that the expansive definition of “property” in the charge itself, that is, relating to current or future assets – and that is referred to, your Honour, at paragraph [28] on page 26 of the application book – in that paragraph there is reference back to the expansive definition contained in the charge as to what is constituted by property and it is said that that expansive definition was sufficient, absent firstly any question of construing the release, to mean that the property in question included not just the real property but the proceeds of any sale of it no matter when that occurred.  Now, if that expansive approach is to be taken to the terms of the charge, it should also be taken, in my submission, to the terms of the release because the release is set out, in particular, at paragraph [31] a little further down that page. 

What the Court will see is that the way in which the release is framed is a “discharge or release of property from a charge” and the “discharge extent” is “the property the subject of the release”, then the property is described.  It would appear that the way in which the Court of Appeal approached it is that the mere description of the property in the terms set out there was sufficient to confine it to the real property itself and not the proceeds of sale where, in the applicant’s submission, the way in which the discharge as a whole is framed by reference to property generally in the context of the expansive definition of “property” which in other parts of the judgment is used against the applicant necessarily has the conclusion that the release should similarly be treated expansively to include any future proceeds from sale.  One approach, one way.

KIEFEL J:   In essence, the approach of the Court of Appeal was to have regard to the express terms of the release of property set out at paragraph [31], that is, it took a perfectly literal approach, and the question is, why should that, if one were to consider this as an application for special

leave having regard to errors as distinct from principle, why that approach is erroneous?

MR PERRY:   Because the literal interpretation that the Court of Appeal seems to have adopted is confined simply to the description box rather than the totality of the release which refers to, in the general terms, the release of property.  The description box may, as it is necessarily to do, of course, describe the property.  The point here is whether the release comprehends ‑ ‑ ‑

KIEFEL J:   But in the process it identifies real property and real property alone.

MR PERRY:   Yes, it does.  The highest I can put it is that if an expansive definition of “property” is to be utilised against the applicant in the sense in which it was done by the Court of Appeal, similarly it should operate this way.  As against that, one thing that was apparent, I think, from both the arguments at first instance and before the Court of Appeal is the dearth of authority on point, as one sees from the Court of Appeal judgment.  Most of the authorities that the court considered related to issues of book debts, and I accept that there is a material distinction ‑ ‑ ‑

KIEFEL J:   That may be because in most of these cases it turns upon the terms of the release and the terms of the charge.

MR PERRY:   Yes, your Honour, that may be the case, of course.  Equally, it may be that simply the issue has never been addressed in detail because a release of real property has heretofore been considered as including a release of the subsequent proceeds of sale along the lines of the passage from Goode that I took the court to earlier.  As I said at the outset, your Honours, I accept it is a question of construction.  The point of it here is that it impacts not only inter partes but more broadly than that, and that there is at the very least a strong argument that the approach taken by the Court of Appeal, not only by reason of its consequences but by reason of the terms of the judgment, is sufficiently attended by error to warrant the grant of special leave.  They are the submissions I have, your Honours.

FRENCH CJ:   Thank you, Mr Perry.  We will not need to trouble you, Mr Crowe.

This application for special leave depends upon the construction of fixed charges granted to the first respondent and of partial releases which the first respondent gave.  On that question and on the question of vesting of the proceeds of sale also agitated by the applicants, there is no question of general principle, in our opinion, which would warrant the grant of special leave.  Special leave will be refused with costs.

AT 11.18 AM THE MATTER WAS CONCLUDED