Errichetti Nominees Pty Ltd v Esanda Finance Corporation Ltd
[2006] WASC 37
ERRICHETTI NOMINEES PTY LTD -v- ESANDA FINANCE CORPORATION LTD [2006] WASC 37
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 37 | |
| Case No: | COR:274/2005 | 10 FEBRUARY 2006 | |
| Coram: | MASTER SANDERSON | 9/03/06 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | ERRICHETTI NOMINEES PTY LTD ESANDA FINANCE CORPORATION LTD (ACN 004 346 043) |
Catchwords: | Corporations Act 2001 (Cth) Application to set aside statutory demand Turns on own facts |
Legislation: | Chattel Securities Act 1987 (WA) Corporations Act 2001 (Cth), s 459G, s 459H Trade Practices Act 1974 (Cth), s 51A |
Case References: | Credit Lyonnais Australia Ltd v Darling (1991) 5 ACSR 703 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACLC 669 GE Finance Australasia Pty Ltd v Tony B Holdings Pty Ltd & Anor [2005] WASC 247 Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362 TSB Bank plc v Camfield & Anor [1995] 1 All ER 951 Bank of New South Wales v Rogers (1941) 65 CLR 42 Challenge Bank Ltd v Pandya (1993) 60 SASR 330 Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) v Registrar of Titles [2001] WASC 201 Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454 Felkro Nominees Pty Ltd v Deputy Commissioner of Taxation (1996) 21 ACSR 391 Hudson Investment Group Ltd v Mower Specialists Association of Australia Ltd [2005] NSWSC 459 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 Moutere Pty Ltd v Deputy Commissioner for Taxation (2000) 34 ACSR 533 Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 15 ACLC 1001 Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ESANDA FINANCE CORPORATION LTD (ACN 004 346 043)
Defendant
Catchwords:
Corporations Act 2001 (Cth) - Application to set aside statutory demand - Turns on own facts
Legislation:
Chattel Securities Act 1987 (WA)
Corporations Act 2001 (Cth), s 459G, s 459H
Trade Practices Act 1974 (Cth), s 51A
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr C P Stokes
Defendant : Mr C F McLeod
Solicitors:
Plaintiff : Chris Stokes & Associates
Defendant : Deacons
Case(s) referred to in judgment(s):
Credit Lyonnais Australia Ltd v Darling (1991) 5 ACSR 703
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACLC 669
GE Finance Australasia Pty Ltd v Tony B Holdings Pty Ltd & Anor [2005] WASC 247
Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362
TSB Bank plc v Camfield & Anor [1995] 1 All ER 951
Case(s) also cited:
Bank of New South Wales v Rogers (1941) 65 CLR 42
Challenge Bank Ltd v Pandya (1993) 60 SASR 330
Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) v Registrar of Titles [2001] WASC 201
Eumina Investments Pty Ltd v Westpac Banking Corporation (1998) 84 FCR 454
Felkro Nominees Pty Ltd v Deputy Commissioner of Taxation (1996) 21 ACSR 391
Hudson Investment Group Ltd v Mower Specialists Association of Australia Ltd [2005] NSWSC 459
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563
Moutere Pty Ltd v Deputy Commissioner for Taxation (2000) 34 ACSR 533
(Page 3)
Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 15 ACLC 1001
Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102
(Page 4)
1 MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The application is brought under s 459G of the Corporations Act 2001 (Cth) ("the Act") and falls to be determined under s 459H of the Act. It is the plaintiff's position that there is a genuine dispute between the parties as to whether the plaintiff is indebted to the defendant.
2 The statutory demand is dated 25 October 2005. The amount claimed in the demand was $91,331.27. A copy of the statutory demand appears as annexure "GD4" to the affidavit of George Dropulich ("Dropulich") sworn 5 December 2005. There was no dispute between the parties either about the form of the statutory demand or whether or not the application to set it aside was brought within time. Nor are the background facts which give rise to the alleged debt are not seriously in dispute. They are set out in the affidavit of Peter Rocky Errichetti ("Errichetti") sworn 15 November 2005.
3 In February 2002 Errichetti and one Craig Hughes ("Hughes") entered into a contract to purchase a motor launch ("the Vessel") for the sum of $210,000. The purchase was made through one John Piscaneri ("Piscaneri") of Freedom Marine. During the course of arranging the purchase of the Vessel, Errichetti and Hughes indicated to Piscaneri that they would require finance. Errichetti says that Piscaneri subsequently advised him that finance had been arranged with the defendant in the sum of $206,032.90. Errichetti then goes on (par 6 of his affidavit) and says:
"Shortly after this Craig Hughes and myself were presented with a loan agreement and chattel mortgage to sign. The documentation also required that personal guarantees be given by Craig Hughes and myself and that a corporate guarantee be given by the Company. I asked the broker Jeff Doig, before signing my personal guarantee and arranging for the execution of the guarantee by the Company, if the chattel mortgage agreement would be registered as a charge against the company. I was told by him that it would be registered and that this was a standard requirement by all finance companies including Esanda."
4 At the time Errichetti and Hughes entered into the loan agreement with Esanda, the plaintiff executed a guarantee of the obligations of the two individuals. A copy of the plaintiff's guarantee appears on pages 11 and 12 of Errichetti's affidavit, these pages being part of annexure
(Page 5)
- "PRE1". There is no dispute between the parties that the guarantee was properly executed.
5 In or about July 2004 Hughes and Errichetti agreed to sell the Vessel. Errichetti says that the sale was negotiated by Hughes and the Vessel was sold through Freedom Marine for an amount of $245,000. It would appear that for reasons which are unexplained (and are in any event irrelevant), the defendant had never registered a chattel mortgage over the Vessel. Errichetti says that at the time of the sale of the Vessel, he was not aware that the chattel mortgage had not been registered. He directed Hughes, he says, to use the proceeds of the sale of the Vessel to discharge the chattel mortgage and to use the remaining funds to be deposited into the bank account of Timemaster Pty Ltd (a company controlled by Errichetti).
6 Errichetti says that in or about May 2005 he became concerned about the activities of Hughes in relation to another business in which Errichetti had an interest. Errichetti says that an audit indicated a number of financial irregularities. He also says that he ascertained that the defendant was still being paid the sum of $3800 per month in relation to the Vessel, although it had been sold in September 2004. The payments were stopped forthwith. As a consequence of the payments ceasing, a letter of demand was received from the defendant and eventually the statutory demand was issued.
7 In the affidavit of Dropulich sworn 5 December 2005 and filed in opposition to this application, the deponent traces the path of the proceeds of the sale of the Vessel. The proceeds less commission were paid by way of cheque drawn by Freedom Marine to Errichetti. A copy of that cheque dated 31 August 2004 appears as annexure "GD3" to Dropulich's affidavit. Into which account the funds were paid is unclear. Errichetti in his affidavit says (at par 12) he understood the chattel mortgage was discharged and the remaining funds were paid into an account held by Timemaster Pty Ltd. However, given that the cheque was drawn in favour of Errichetti, if payment was made - and there is no suggestion that it has not been made - then the funds must at some stage have passed through an account in the name of Errichetti or have been paid with Errichetti's authority.
8 It is the plaintiff's submission that there is a genuine dispute as to whether the plaintiff's guarantee given at the time of the purchase of the Vessel is enforceable. The plaintiff says that Jeff Doig ("Doig") of Pacific Finance Australia Pty Ltd was, in the context of the financing of the
(Page 6)
- Vessel, the agent of the defendant. It is said that the defendant, through its agent Doig, represented that a chattel mortgage would be registered under the Chattel Securities Act 1987 (WA) with respect to the Vessel. Errichetti says he relied on this representation in agreeing to execute the guarantee.
9 It is common ground between the parties that the chattel mortgage was not so registered. That meant sale of the Vessel could be effected without the liability to the defendant being discharged. On the plaintiff's case, there was then a misrepresentation of fact which would entitle the guarantor to rescind the contract: see O'Donovan and Phillips: The Modern Contract of Guarantee (3rd ed) 136 fn 130.
10 In my view, the plaintiff's argument is unsustainable. Assuming for present purposes that Doig was the agent of the defendant (a matter disputed by the defendant and about which I will have something to say below), it is necessary to consider the representation of fact allegedly made to the plaintiff. The representation was that the chattel mortgage would be registered. That was a representation as to a future matter. As Errichetti says, he understood that registration of a chattel mortgage was undertaken as a matter of course. There is nothing to suggest that Doig did not share that view. The fact that the chattel mortgage was not registered does not render what was said by Doig at the time a misrepresentation. The position can be contrasted with the facts in a case mentioned by O'Donovan and Phillips, TSB Bank plc v Camfield & Anor [1995] 1 All ER 951. The facts in that case taken from the headnote were as follows:
"The defendant wife's husband was a partner in a motor vehicle leasing business. The partners requested the plaintiff bank to provide the business with an overdraft facility of £30,000. The bank agreed, provided the partners executed a charge over their houses. The bank stipulated that the wives should receive independent legal advice before entering into the charge and wrote to the solicitors acting for it in the transaction requesting that the wives be given independent legal advice by a separate person within the firm. The person handling the matter in the solicitors' firm replied confirming that the wives would be so advised, but in fact the wives were not advised separately from their husbands when they attended the solicitors' office. The defendant wife duly executed the charge but did so under the impression, as the result of an innocent misrepresentation by the husband, that the maximum liability under the charge would be
(Page 7)
- £15,000. That misapprehension was not corrected by the person advising her, even though the effect of the legal charge was to charge her beneficial interest in the house with an unlimited liability to meet the debts of the partnership, in which she had no financial interest, if and to the extent that the debts were not met by the partners themselves. The bank lent £30,000 to the partnership and subsequently made further advances. The business failed and six months later the bank made a written demand on the partners, who were unable to pay. The bank then commenced proceedings in the county court against the husband, who admitted the claim, and the wife, who contested it. The judge gave judgment against the husband for the full amount claimed, but held that the relationship between the husband and the wife was such as to put the bank on inquiry, that the bank had failed to take reasonable steps to ensure that the wife understood the charge, with the result that it had constructive notice of the husband's misrepresentation, and that although the wife was prepared to risk her interest in the house to the extent of £15,000, if a higher figure had been contemplated she would not have signed. The judge accordingly entered judgment against the wife for £15,000 and made an order for possession subject to payment in full within six months. The wife appealed against the order."
11 The Court of Appeal set aside the order against the wife. The Court held that once it was accepted that the wife would not have entered into the charge if she had known its true nature, she should not be liable even to the extent of the £15,000. It is important to note that the innocent misrepresentation made by the husband was that the guarantee was limited to £15,000. That was a representation of present fact. The Camfield case was quite different to this case.
12 The plaintiff is also not in a position to rely upon the provisions of the Trade Practices Act 1974 (Cth). Section 51A of the Trade Practices Act deals with representations as to future matters. Where a corporation makes a representation as to a future matter and the events do not come to pass, then it is for the corporation to show that the representation was reasonably made. There can be no doubt that in this case the representation that the chattel mortgage would be registered was reasonably made. Errichetti in his affidavit says as much - registration of chattel mortgages by finance companies were seen as standard practice. There is nothing in the evidence to suggest that there was an actionable misrepresentation on the part of the defendant.
(Page 8)
13 There are a number of other difficulties which the plaintiff faces and which, in my view, are insurmountable. The provisions of cl 2 of the Terms and Conditions of the Guarantee and Indemnity (see page 7 of annexure "GD2" to the Dropulich affidavit) expressly preserve the liability of the guarantor in circumstances where any security taken by the defendant is released or is void or ineffective. Master Newnes considered a similar position in GE Finance Australasia Pty Ltd v Tony B Holdings Pty Ltd & Anor [2005] WASC 247. The learned Master said (at par 36):
"It is also clear that where, under the terms of the guarantee, the principal may release securities, or where the guarantor has agreed that his or her liability will not be affected by anything that would otherwise have affected or discharged it, that will normally be effective to preserve the guarantor's liability notwithstanding acts or omissions of the principal that have caused the securities held for the guaranteed debt to be lost or diminished: Hancock v Williams (1942) 42 SR (NSW) 252 at 256, 259; Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654."
14 Further, in Credit Lyonnais Australia Ltd v Darling (1991) 5 ACSR 703, the Court held that the liability of the guarantor was preserved where the creditor had failed to register a mortgage debenture from the principal debtor. That case is on all fours with this case. In my view, it puts paid to the plaintiff's argument.
15 There is one further matter which I should mention for the sake of completeness. It was the plaintiff's case that Doig could be regarded as the agent of the defendant. The plaintiff provided no evidence at all to support that proposition. Errichetti says that he mentioned to Piscaneri that he and Hughes required finance to purchase the Vessel. Piscaneri appears to have arranged for Doig to provide the finance. How, from those facts, it could be said that Doig was the defendant's agent is unclear. But as I have said, in my view, even accepting the plaintiff's argument on this point, there is no serious question to be tried.
16 In the course of these reasons I have not canvassed the test to be applied in determining whether or not a statutory demand is to be set aside on the grounds that there is a genuine dispute. There was no contest between the parties as to the principles to be applied. Reference was made by counsel to the standard authorities of Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362 and Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACLC 669. Applying these standard
(Page 9)
- principles, I am satisfied that there is no serious question to be tried in this case and that the application ought be dismissed. I will hear the parties as to the precise form of orders and as to costs.
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