Emerald Properties P/L v Chan, Y.K
[1993] FCA 987
•15 DECEMBER 1993
EMERALD PROPERTIES PTY LIMITED v. Y. K. CHAN, SHEE CHOW WEE and SAY LEE GAN
No. VG3298 of 1993
FED No. 987/93
Number of pages - 13
Corporations - Costs
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
HEEREY J
CATCHWORDS
Corporations - provisional liquidation - right and obligation of provisional liquidator to recover possession of company's property - costs against persons resisting possession.
Costs - provisional liquidation of company - provisional liquidator seeking possession of company's chattels on land not owned by company - court order by consent granting access - whether costs order against land owner.
Corporations Law (Cth) ss. 474(1), 477(2)(a)-(k), 478(1)(c), 568A(1).
HEARING
MELBOURNE, 15 December 1993
#DATE 15:12:1993
Counsel for the Applicant: Mr P D Santamaria
Solicitors for for Applicant: Abbott Tout Russell Kennedy
Counsel for the Respondents: Mr T J P Walker
Solicitors for the Respondents: Stamfords
ORDER
Minutes of Orders
That Shee Chow Wee and Say Lee Gan be added as respondents to this proceeding.
That the costs of and incidental to the notice of motion dated 22 October 1993, including reserved costs, be paid by the respondents.
That the notice of motion is otherwise dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
HEEREY J On 22 October 1993 Sweeney J made an order by consent that Mr Y.K. Chan, who was then the only respondent to the applicant's notice of motion filed that day, permit the applicant, who was the provisional liquidator of Emerald Properties Pty Ltd (the company), to remove certain chattels from the Emerald Golf and Country Resort at 48 Lakeside Drive, Emerald. His Honour adjourned the notice of motion for mention on 28 October. On that day Ryan J further adjourned the matter until today and gave directions as to the filing of affidavits. I have to decide what order should be made as to the costs of the notice of motion of 22 October.
The company had conducted the business of a country club at the Emerald property. The premises included a golf course, bar, restaurant and accommodation. The company ceased trading on 23 April 1993. The first mortgagee of the property was the ANZ Bank. The bank sold the property to Mr Shee Chow Wee and his wife, Say Lee Gan, who are residents of Malaysia. The contract of sale was dated 13 August 1993.
Clause 1.7 of the special conditions of the contract provided as follows:
"Any chattels on the property are not the property of the vendor and are not included in the sale and the purchaser shall not require the vendor to remove the items from the property prior to settlement."
The sale was completed on 21 September and the purchasers took possession. Chattels which had been used in connection with the business remained on the property. They are listed in an inventory dated 19 February 1993 prepared by Purdy Kirkham Valuations Pty Limited. The items included bar and restaurant equipment, furniture and plant and equipment such as tractors and mowers used for the maintenance of the golf course. Purdy Kirkham valued the chattels on an auction realisation basis at $63,876.
Lockvale Group Pty Ltd (Receiver and Manager appointed) was owed $70,000 by the company for money lent. On 12 October 1993 Lockvale obtained an order of this court appointing Mr Tim Arthur Jonas provisional liquidator of the company. The order conferred on the provisional liquidator power to carry on the business of the company and all those powers specified in s.477(2)(a) to (k) inclusive of the Corporations Law, with the exception of sub-paragraph (c). That meant the provisional liquidator could not sell property of the company without leave of the court.
The basis for the appointment of a provisional liquidator was the concern of Lockvale's receiver for the protection of the chattels on the property. These chattels were not claimed by the bank and did not pass on the mortgagee sale to the purchasers.
The issue I have to decide requires an analysis of what happened between the appointment of the provisional liquidator on 12 October and the making of the order of 22 October. The applicant says that his application to the court on 22 October was necessary for the performance of his obligations as provisional liquidator to recover the goods of the company both under ss.474(1) and 478(1)(c) of the Corporations Law and as required by par.4 of the order of 12 October which provided:
"The provisional liquidator take possession of and secure all goods and chattels owned by the company."
He seeks an order for the costs of the application of 22 October.
Mr Chan and Mr and Mrs Wee (who were joined as respondents today by consent) resist any order for costs. They contend that the provisional liquidator acted precipitately and unreasonably and in the absence of any urgency that would justify the application to the court.
On Tuesday 12 October Mr Bob Tolliday, an employee of the provisional liquidator, spoke by telephone to Mr Chan. Mr Chan is a relative of the owners and an engineer by profession. He had been also working in a part time capacity as the temporary manager and caretaker of the property after it had been purchased.
Mr Tolliday told Mr Chan of the appointment of a provisional liquidator and that it was the provisional liquidator's belief that Mr Chan was in the possession of assets belonging to the company and that he was using those assets. Mr Chan told him that certain assets were being used. Mr Tolliday asked if he could meet Mr Chan at the property for the purpose of identifying the company's assets. Mr Chan told him that he did not have authority to do this and that he was only acting for the owner, who was in Malaysia. Mr Chan said that he would have to contact the owner; at that stage he would not agree to Mr Tolliday meeting him at the property and that if Mr Tolliday did go there he would be trespassing on private property and he (Mr Chan) would have to call the police. Mr Tolliday told Mr Chan that all he wanted to do was to sight the assets to ensure that they were there and were secure and, if necessary, he would have to take action to secure the assets. He asked that Mr Chan contact the owner in Malaysia with the utmost urgency and confirm that representatives of the provisional liquidator could visit the property. He also asked Mr Chan to inquire of the owner as to whether he had any interest in purchasing the assets of the company. Mr Tolliday's version and, indeed, the applicant's evidence as to all the conversations that passed between the parties, is not significantly disputed.
On the next day, Wednesday 13 October, Mr Tolliday again telephoned Mr Chan. On this occasion, Mr Chan said that he had spoken to the owners in Malaysia and that they required evidence of ownership of the assets and the appointment of a provisional liquidator. Mr Tolliday told Mr Chan he would forward a copy of the order appointing the provisional liquidator and details of the assets as listed in the relevant valuation. Mr Chan told him that he would not be at the property that afternoon and did not expect to be there the next day. Mr Tolliday told Mr Chan that it was the provisional liquidator's duty to secure the assets of the company and accordingly the provisional liquidator needed access as a matter of urgency. He also told Mr Chan that the vendor had told him that the sale to the purchaser did not include the chattels but only the golf course and the club house. He asked Mr Chan if he had received confirmation of this fact by the purchaser but Mr Chan said he did not know; he was only acting as a part time caretaker of the purchaser and knew nothing about the contract. Mr Chan said the purchaser would be coming out to Australia at the end of the month and that the provisional liquidator would be able to talk to him them. Mr Tolliday told him that this was unacceptable as the provisional liquidator had to have access to the company's property within the next two days or the provisional liquidator would take the necessary action through the courts to take possession of the assets. Mr Tolliday stated that it would be in the best interests of Mr Wee to cooperate with the provisional liquidator in view of the fact that they were apparently using assets and may be interested in purchasing them. Mr Tolliday confirmed he would be sending evidence of the appointment and documentation as to the assets to Mr Chan.
On Thursday 14 October Mr Jonas sent by fax to the owners a letter in these terms:
"I advise that I was appointed provisional liquidator of the abovenamed company on 12 October 1993 by order of the Federal Court of Australia. I attach a copy of the order for your information.
I advise that pursuant to the order and my duties as a court officer it is my duty to secure and safeguard the assets of the company. I attach a list of assets belonging to the abovenamed company as detailed in valuation No V1833 (this was the Purdy Kirkham valuation). I believe your company, the Emerald Golf and Country Resort, is currently in possession and use of the assets and I hereby advise that pursuant to my duties I require immediate access to the property of the company. I therefore advise that unless I receive your agreement within 24 hours for your Mr Chan to meet with Mr Bob Tolliday, of my staff, at the Emerald Golf and Country Resort for the purpose of Mr Tolliday to identify the assets of the abovenamed company, I shall have no alternative but to take appropriate action to secure the same assets.
I hope to receive your co-operation in regard to this matter and should you have any queries please contact Mr Bob Tolliday on Australia (03) 2899777."
The significance of this letter is that two days after the appointment of the provisional liquidator the owners, who (subject to a minor qualification which I shall later mention) never made any claim to the goods in question, were given a copy of the court order. On the same day Mr Jonas wrote to Mr Chan in similar terms. Mr Tolliday, also on the same day, contacted Mr Wee in Malaysia and confirmed the appointment of the provisional liquidator and the fact that the provisional liquidator believed that assets of the company were under the control of the purchaser.
Mr Jonas also wrote to a Melbourne solicitor, Mr Quinlan of Ryan Mackey and McLelland, who had acted for Mr and Mrs Wee in the purchase of the property. That letter also enclosed copies of the order and the Purdy Kirkham inventory.
On Friday 15 October Mr Tolliday spoke to Mr Quinlan. Mr Quinlan stated that the new owner was not due in Australia for another two or three weeks. Shortly afterwards Mr Quinlan said that he had just been informed the owner would arrive in a week. Mr Tolliday told him that the provisional liquidator would not be able to wait that long and may have to obtain a court order. Mr Quinlan said he had no comment to this and advised him to speak to Mr Chan.
On the same day Mr Tolliday spoke to Mr Chan by telephone. Mr Chan told him that the owners had new solicitors, Messrs Stamfords, and that the person handling the matter was Mr Teng Goh. Mr Tolliday then sent a fax to Mr Goh attaching a copy of the order and stating:
"As you are aware, our request of your client is currently that we require access to their property to sight assets of the abovenamed company. This is not an unreasonable request and should it be denied we shall have no alternative then to take the necessary action to secure those assets. Your response to our request is respectfully asked to be treated as a matter of utmost urgency."
Also on the Friday Mr Tolliday received a fax from Mr Goh. This was the first written response on behalf of the owners. The fax asked Mr Tolliday to forward a copy of the court order - which of course had already been done. The letter continued:
"We are seeking our client's instructions regarding your request to have access to the property for the sole purpose of sighting the assets which you allege belong to Emerald Properties Pty Limited. We will contact you when we receive the instructions and until our client's instructions are to hand you do not have their consent for access to the Emerald Golf and Country Resort and any entry by you or your agent will be viewed as illegal trespass. Any trespass will be reported to the police.
Mr Y K Chan has requested that you forward all further notice of correspondence directly to this office."
It might be noted that this was the second occasion on which it had been stated on behalf of the owners that any entry on to the property by the provisional liquidator or persons on his behalf would be a trespass and would result in the owners' representatives calling the police. In a case where there has been criticism of the provisional liquidator for being precipitate and unreasonable, or at the very least discourteous, one cannot help but observe that threats to call police seem to involve an unnecessary heightening of tension where there was never any suggestion on behalf of the provisional liquidator that he would act otherwise than with the consent of the owners or with an order of the court.
On Monday 18 October Mr Tolliday telephoned Mr Goh and enquired as to whether he had received instructions from his client in regard to organising a meeting at the property for the purpose of identifying the assets. Mr Goh said he was still waiting for his client's instructions. Mr Tolliday told him that the provisional liquidator would need to know by 5 pm that day or he would have to obtain a court order. Mr Goh said he would try and contact his client to obtain the instructions.
Nothing happened until Wednesday 20 October when Mr Jonas wrote to Mr Goh in the following terms:
"I refer to your letter dated 15 October 1993 and to a facsimile transmission forwarded to you on that day by Mr Bob Tolliday of this office.
Despite repeated requests for access to the property known as the Emerald Golf and Country Resort, I have to date been denied access by your client. Pursuant to the provisions of section 474(1) of the Corporations Law, when a company is placed into liquidation the Provisional Liquidator "...shall take into his or her custody or under his or her control all property to which the company is or appears to be entitled..." As a Court Liquidator, I am also an officer of the Court. I understand that your client the proprietor of the Emerald Golf and Country Resort purchased the land, together with any improvements, known as Emerald Golf and Country Club situated at 48 Lakeside Drive, Emerald pursuant to a contract of sale dated 13 August 1993. Special condition 7 of the sale of contract states:
"Any chattels on the property are not the property of the vendor and are not included in the sale and purchaser shall not require the vendor to remove the items from the property prior to settlement."
In an Affidavit prepared by Mr John Menzies Sparks the Receiver and Manager of the Lockvale Group Pty Limited dated 8 October 1993 which was filed with the Supreme Court (sic) in support of the winding up application for Emerald Properties, Mr Sparks states:
"...the only other assets of the company are goods situated on the property and which were used as part of the golf course. The goods can be identified from a valuation and report of Purdy Kirkham Valuations Pty Limited dated 19 February 1993... The bank has no security interest in the goods and accordingly the goods have not been sold to the purchaser of the property". A copy of the valuation report was provided to your client in my letter dated 14 October 1993.
Furthermore, members of my staff have spoken to the former directors of Emerald Properties, and Mr Rocco Loccisano who confirms the existence of the goods and that the company is the owner of the goods.
The refusal of your client to allow me to carry out my duties as per the Court order under which I was appointed is unlawful and intolerable.
Unless I receive your client's consent to me entering into possession of the property today I will forthwith report the actions of your client and their advisers to the Court as well as seek appropriate orders from the court to give me possession of the property of the company. I will seek to have the costs of these actions awarded against your client. Further I shall be seeking directions as to whether your client has in preventing me from conducting my duties as a Court Officer been in contempt of court.
Finally I hold your client responsible for securing the property that has now passed to my control."
This of course was the first occasion on which the provisional liquidator sought the owners' consent to him taking possession of the chattels, as distinct from just sighting them. Nevertheless, for the reasons mentioned in his letter, the clear legal obligation on the provisional liquidator was to obtain possession.
On Thursday 21 October the provisional liquidator received a letter from Mr Goh in these terms:
"We act for Mr and Mrs Alex Wee, the registered proprietors of the Emerald Golf and Country Resort.
We have received instructions from our client and are instructed to reply as follows:
(1) Your Mr Bob Tolliday had previously made numerous demands on Mr Wee and Mr W K Chan for immediate access to your client's property. Mr Wee and Mr Chan are offended by your unreasonable demands. Mr Tolliday had threatened both Mr Wee and Mr Chan that if access to the property is not granted within 24 hours, he will take whatever action necessary to secure the assets. These "assets" are claimed by Mr Tolliday to belong to Emerald Properties Pty Limited.
Mr and Mrs Wee's purchase of the property was settled on 21 September 1993. Your notice demanding access within 24 hours was received by our clients on 15 October 1993. The delay in your taking any action until 15 October 1993 and then demanding access within 24 hours is most unreasonable."
I interpolate the comment that the provisional liquidator could, of course, only take steps after he was appointed on 12 October. The letter also omits reference to the express term of the contract which made it clear that the chattels did not pass to the purchaser. The letter continues:
"(2) Our clients require proof of ownership to each item of the assets which you allege to have a right to possess. To date, you have not proven nor indicated that legal title in the assets vested in Emerald Properties Pty Limited. Until the said legal title is established, Emerald Properties Pty Limited is not entitled nor appears to be entitled to the assets. Our clients appreciate that you are a Court appointed liquidator and our clients are not obstructing you from conducting your duties. However, our clients are not in a position to surrender the chattels claimed by you until you are able to establish that you are legally entitled to take possession of same. Our clients would make this reasonable request of any person seeking to take possession of the chattels.
(3) Our clients will be seeking monetary compensation from the legal owner of the chattels or from the persons claiming possession of the same. The basis for compensation are (a) storage fees for chattels, (b) the chattels are obstructing our clients' renovation of the property which has caused unnecessary delays and additional expenses. Our clients will exercise a lien over the chattels until satisfactory monetary compensation is made.
(4) Our clients do not warrant nor will our clients be responsible or liable for the safe custody or the condition of the chattels claimed by you. The chattels were apparently abandoned on our clients' property and our clients have no notice of the legal owner of the chattels.
(5) Mr Wee who is presently in Kuala Lumpur, Malaysia will be travelling to Melbourne around 27 October 1993. The main purpose of his travel to Melbourne is to attend to this matter. Mr Wee requests that an appointment be made with you after he has arrived in Melbourne to enable you to have access to his property for the sole purposes of sighting the chattels which you allege you are entitled to possess.
(6) Our clients stress that they are not hindering nor obstructing the performance of your duties as a Court appointed liquidator. Our clients seek to have the above matters clarified and to put you on notice of same."
The significance of this letter is that while it is inconsistent with any claim for ownership of the chattels it expressly states that the chattels, in respect of which the owners are asserting a right to exclude the provisional liquidator from possession, are to be at his risk. The letter suggests the possibility of a sighting of the chattels, but no more than that, and in any event not until a week or more has passed.
At about 3.45 in the afternoon the same day Mr Ross Hodgens of Abbott Tout Russell Kennedy, the solicitors for the provisional liquidator, telephoned Mr Goh and told him that the provisional liquidator had a duty to take into his possession the chattels at the property and that for the purpose of inspection preliminary to taking the chattels into his possession the representatives of the provisional liquidator would attend at the property at 9 am the next day. Mr Goh told him that he would obtain instructions whether or not permission to enter the premises would be granted. Mr Hodgens told Mr Goh that the provisional liquidator was under no duty to prove to anyone that the company and the provisional liquidator was the actual owner of the goods so long as they appeared to the provisional liquidator to be the property of that company. He told Mr Goh this was particularly so when the person or persons in possession of the goods were not owners.
At approximately 4.00 pm on the same day Mr Goh telephoned Mr Hodgens and told him that inspection of the chattels was available at 10.00 am on Monday, 25 October. Mr Hodgens said that this was not satisfactory and Mr Goh replied that he could not change his instructions. Mr Hodgens told Mr Goh that his client left him no alternative but to seek an order for possession of the goods. At 5.45 pm he telephoned Mr Goh and informed him that the provisional liquidator would be in court on the matter in the following morning (Friday 22 October) to seek orders, including an order for possession of the chattels, and that he would telephone Mr Goh on that morning to give him an opportunity to appear before the court. Mr Goh said to Mr Hodgens that he should send him an order when he obtained it.
Later that day Mr Goh sent a fax to Mr Hodgens saying that he was instructed that his clients would consent to the provisional liquidator's request for access to the property:
"... for the sole purpose of sighting the chattels which your client alleges belong to Emerald Properties Pty Ltd at 10.00 am on Monday 25 October 1993."
The notice of motion, issued on the morning of Friday 22 October and returnable at 2.15 pm, sought an order that Mr Chan (who was then the only respondent named) deliver up to the provisional liquidator such of the goods referred to in the Purdy Kirkham inventory as were in his possession.
The motion came on for hearing before Sweeney J in the afternoon. The hearing commenced as an ex parte application but soon afterwards a solicitor appeared from Mr Goh's office and later Mr Goh himself arrived. The matter was stood down by his Honour and ultimately the parties announced a consent order in these terms:
"Upon the applicant giving the following undertakings to the Court, Shee Chow Wee and Mrs Say Lee Gan, the proprietors of the golf club:
(a) to be responsible for any damage which may be caused to the real or personal property situated at the Emerald Golf County Club, 48 Lakeside Drive, Emerald ("the Golf Club") by reason of the applicant's inspection of and/or removal of the goods and chattels described in this order.
(b) to give reasonable notice to the respondent's solicitors of:
(i) any application by the provisional liquidator to sell the goods and chattels described in this order or any of them;
(ii) The date, time and place appointed for the sale of the said goods and chattels or any of them.
Upon the respondent undertaking to the Court and to the applicant that he, his employees or agents will not remove from the golf club or interfere with any of the goods and chattels described in paragraph 1 of this order which he claims are fixtures.
The court orders that:
1. By 5.30 pm today the respondent, his employees and agents, allow the applicant, his employees or agents, access to the golf club for the purpose of inspecting and recording such of the goods and chattels listed in the inventory of Purdy Kirkham Valuations Pty Limited dated 19 February 1993 which is attached as a schedule to this order as are in the possession of the respondent, his employees or agents.
2. That the applicant be authorised by the Court to take possession of the said goods and chattels (save and except the Ford motor vehicle registered No EQU-917, the Husquvarna petrol chainsaw and any items which the respondent claims are fixtures to the property) on Saturday 23 October 1993 at or about 10 am and thereafter.
3. General liberty to apply is reserved on notice.
4. Adjourn the Notice of Motion for mention to Thursday, 28 October 1993.
5. All times necessary to enable this order to be made are abridged.
6. The costs of this day are reserved."
In the course of discussion prior to the making of the consent order some question arose as to some items which might be thought to be fixtures. The essence of the agreement recorded in the order was that any items so claimed would be left on the property upon the respondent undertaking not to remove them until that question was resolved. It was also agreed that the Ford motor vehicle and the chainsaw were not the property of the company and had already been purchased by the respondents.
The chattels were removed the following day. This was a substantial operation, taking from about 10.00 am to 5.00 pm and requiring five furniture vans, three low loaders and twelve men.
To my mind what passed between the parties between 12 October and the application to the court on 22 October shows a reasonable and, indeed, quite restrained course of conduct by the provisional liquidator. In any case, it was not, as was urged upon me by counsel for the respondents, a matter for the provisional liquidator to make out some case of urgency before he approached the court. The provisional liquidator was obliged by the Corporations Law and by the specific terms of his appointment to take possession of goods and chattels belonging to the company; no ifs, no buts, no maybes. Further, there was no question of any assertion of a right of ownership by the respondents to those goods and chattels. Obstructing the provisional liquidator in his attempts to perform this clear duty amounted to a serious interference with the discharge of his obligations.
In any event, it is plain that it was most unsatisfactory for this large collection of chattels worth, it would seem, some $60,000, to be left in the possession of somebody who did not own them, who was expressly disclaiming any obligation to take care of them but who was nevertheless using them. I do not see the fact that the owners of the property lived overseas as any mitigating factor. That certainly does not diminish the right and obligation on the provisional liquidator to carry out his duty.
Persons who resist the claim of a liquidator or provisional liquidator to property of the company in liquidation are entitled to have that dispute, like any other dispute, decided by the courts. It is to be hoped that such questions would in the vast majority of cases be resolved in a courteous and commonsense way by the negotiation of mutually satisfactory arrangements for taking possession. Nevertheless those who resist such a claim and require the liquidator or provisional liquidator to enlist the aid of the courts have to realise that, if the claim is upheld, the usual result will be that costs follow the event. In the final analysis, it is the right and duty of a liquidator or provisional liquidator to take into his or her possession the property of the company forthwith - not at such time as may be convenient to the person in possession or at a time when that persons is satisfied as to the claim.
In the present case the respondents never asserted any right to the chattels - nor could they, having regard to the terms of the contract of sale. Nor did they suggest that some third person had or might have a claim. The obvious likely owner was the company, since it had, to the respondents' knowledge, been using the chattels for the business which had been carried on at the property. The provisional liquidator had to go to court to vindicate his right to immediate possession of the chattels. He is entitled to the costs of that application.
There was mention in argument of some items, mainly connected with the kitchen, which the provisional liquidator did not remove. These were subsequently the subject of a notice of disclaimer of onerous property under s.568A(1) of the Corporations Law given on 7 December. There was mention of a possible claim by the owners to recover alleged loss caused by the delay of their development of the property as a result of these items not being collected by the provisional liquidator.
The basis of such a claim was not at all clear to me. It was suggested that it could be founded on the undertaking given by the applicant. Even if that be so, any proceedings alleging a breach of the undertaking (which of course would be a contempt of court) is a serious matter and would need to be raised by way of notice of motion on proper notice and on proper material.
It was also said that Mr Chan was improperly joined because he was known to be the agent of the owners and that he was joined as a device to avoid the difficulties of obtaining service out of the jurisdiction. There is no substance in this point. Mr Chan was the person apparently in possession of the chattels and was the one the provisional liquidator dealt with. He was properly made a party.
I will make orders that Shee Chow Wee and Say Lee Gan be added as respondents to this proceeding. I order that the costs of an incidental to the notice of motion filed 22 October 1993, including reserved costs, be paid by the respondents. I order that the notice of motion filed 22 October 1993 is otherwise dismissed.
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