Esperance Market Garden (WA) Pty Ltd v Cribb
[2003] WASC 165
ESPERANCE MARKET GARDEN (WA) PTY LTD & ORS -v- CRIBB & ORS [2003] WASC 165
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASC 165 | |
| Case No: | COR:185/2003 | 18 AUGUST 2003 | |
| Coram: | PULLIN J | 27/08/03 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiffs' claim on preliminary issue that receivers invalidly appointed dismissed | ||
| B | |||
| PDF Version |
| Parties: | ESPERANCE MARKET GARDEN (WA) PTY LTD (ACN 073 312 722) WESTERN AUSTRALIAN CERTIFIED SEED POTATOE COMPANY PTY LTD (ACN 077 625 186) GARY NORMAN BRITZA KATHLEEN MARY BRITZA NEIL RAYMOND CRIBB MARK ANTHONY CONLAN HIGHLAND PTY LTD (ACN 009 246 397) G P AYRES AND SONS PTY LTD (ACN 055 215 579) WILLIAM ROBERT GUEST ANGELIKA MARIA GUEST |
Catchwords: | Mortgages and charges Remedies of the mortgagee Receivers Whether service of 30-day notice of demand precluded mortgagee relying on other events of default to appoint receivers within 30-day period Election Waiver |
Legislation: | Transfer of Land Act 1893, s 107, s 108 |
Case References: | China & South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536 Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Lyford v Media Portfolio Ltd (1989) 7 ACLC 271 Pan Foods Co Importers & Distributors Pty Ltd v Australia & New Zealand Banking Group Ltd (2000) 170 ALR 579 Re McCann [1985] 2 Qd R 381 Refuge Assurance Co Ltd v Pearlberg [1938] Ch 687 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Smythe & Co v Bailey & Co [1940] 3 All ER 60 State of Victoria v Sutton (1998) 195 CLR 291 Butler Pollnow Pty Ltd v Garden Mews-St Leonards Pty Ltd (1988) 15 ACLR 24 Coffey v DFC Financial Services Ltd (1991) 5 NZCLC 67,403 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
and
WESTERN AUSTRALIAN CERTIFIED SEED POTATOE COMPANY PTY LTD (Receiver Appointed) ACN 077 625 186
- First Plaintiff
WESTERN AUSTRALIAN CERTIFIED SEED POTATOE COMPANY PTY LTD (ACN 077 625 186)
Second Plaintiff
GARY NORMAN BRITZA
KATHLEEN MARY BRITZA
Third Plaintiffs
(Page 2)
- AND
NEIL RAYMOND CRIBB
MARK ANTHONY CONLAN
First Defendants
HIGHLAND PTY LTD (ACN 009 246 397)
Second Defendant
G P AYRES AND SONS PTY LTD (ACN 055 215 579)
Third Defendant
WILLIAM ROBERT GUEST
ANGELIKA MARIA GUEST
Fourth Defendants
Catchwords:
Mortgages and charges - Remedies of the mortgagee - Receivers - Whether service of 30-day notice of demand precluded mortgagee relying on other events of default to appoint receivers within 30-day period - Election - Waiver
Legislation:
Transfer of Land Act 1893, s 107, s 108
Result:
Plaintiffs' claim on preliminary issue that receivers invalidly appointed dismissed
(Page 3)
Category: B
Representation:
Counsel:
First Plaintiff : Mr M H Zilko SC & Mr B S Morton
Second Plaintiff : Mr M H Zilko SC & Mr B S Morton
Third Plaintiffs : Mr M H Zilko SC & Mr B S Morton
First Defendants : Mr L D Ayres
Second Defendant : Mr R H B Pringle QC
Third Defendant : Mr S M Davies
Fourth Defendants : Mr K Yin
Solicitors:
First Plaintiff : Eley Palmer
Second Plaintiff : Eley Palmer
Third Plaintiffs : Eley Palmer
First Defendants : Minter Ellison
Second Defendant : MacKinlays
Third Defendant : Haynes Robinson
Fourth Defendants : G Chopra
Case(s) referred to in judgment(s):
China & South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536
Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Lyford v Media Portfolio Ltd (1989) 7 ACLC 271
Pan Foods Co Importers & Distributors Pty Ltd v Australia & New Zealand Banking Group Ltd (2000) 170 ALR 579
Re McCann [1985] 2 Qd R 381
Refuge Assurance Co Ltd v Pearlberg [1938] Ch 687
Sargent v ASL Developments Ltd (1974) 131 CLR 634
Smythe & Co v Bailey & Co [1940] 3 All ER 60
State of Victoria v Sutton (1998) 195 CLR 291
(Page 4)
Case(s) also cited:
Butler Pollnow Pty Ltd v Garden Mews-St Leonards Pty Ltd (1988) 15 ACLR 24
Coffey v DFC Financial Services Ltd (1991) 5 NZCLC 67,403
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500
Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26
(Page 5)
1 PULLIN J: The second defendant ("Highland") lent money to the third plaintiffs ("the Britzas"), and the Britzas' companies, the first plaintiff ("EMG") and the second plaintiff ("WACSPC"), guaranteed performance of the obligations and repayment.
2 There was an event of default as defined in the agreements relating to the loan, and in consequence Highland appointed the first defendants as receivers of the property of EMG and WACSPC.
3 The plaintiffs challenge the validity of the appointment of the receivers. This issue is being tried as a preliminary issue. The preliminary issue arises from the pleadings in this way. In the statement of claim, the plaintiffs plead that they were served with a notice of default dated 7 March 2003 which contained a demand for payment within one month, that there were no "events of default" at that time, and that before the 30-day notice period had expired, Highland appointed the receivers. The plaintiffs seek a declaration that, in consequence, the receivers were invalidly appointed. Highland pleads that there were, before the date of appointment of the receivers, events of default, including the failure to pay interest on demand as required under the documents relating to the loan. In reply to this issue, namely whether there was an event of default, the plaintiffs plead in par 9 of the reply, that by Highland's conduct in serving the notice of default and executing the deeds of appointment of the receiver:
"(a) Highland has waived any such event of default;
(b) further or alternatively, Highland has elected to exercise its rights under the provisions of the EMG Charge and the WACSPC Charge that provide for the giving of notice demanding payment within 30 days rather than to exercise any rights it may have had to appoint a Receiver without giving such notice; and
(c) further and alternatively, Highland is obliged to give notice before appointing a receiver as pleaded in paragraph 2 herein and has purported to appoint a receiver prior to expiry of the notice given by Highland."
4 After the pleadings closed, the plaintiffs conceded that there had occurred by 12 February 2003, an event of default, namely a failure on the part of the Britzas to pay interest on demand as required under the loan documents. As a result, the preliminary issues to be tried are those raised in par 9 of the reply.
(Page 6)
Facts not in dispute
5 As mentioned above, the Britzas borrowed money from Highland. On 16 June 1998, Highland, the Britzas, EMG and another company, executed a deed recording the terms on which the financial accommodation made available to the Britzas should continue.
6 Clause 2.1 read:
"[Highland] and [the Britzas] agree the Loan shall be repaid upon demand or upon an Event of Default as set out in clause 2.7 of this Deed …"
7 Clause 2.2 provided that:
"[The Britzas] shall pay [Highland] the Rate of Interest set out in Item 3 of the Schedule in the manner set out in Item 4 of the Schedule."
8 The schedule stated the rate of interest and provided that interest was to be paid upon demand, provided that such demand should not be made more than monthly.
9 Clause 2.7 contained a list of events, each of which were defined elsewhere to be an "Event of Default". Clause 2.7 read:
"The parties hereby agree that time shall be the essence of this Deed and on the default of any one or more of the following events, [the Britzas] shall be deemed to be in default under this Deed:
(a) if default is made in the due payment of any of the Moneys Owing in accordance with this Deed or the performance or observation of any term or condition set out in this Deed or any Transaction Document;
…
(g) if there is committed a breach of any covenant or agreement contained in the Transaction Documents …"
10 "Transaction Documents" was defined elsewhere to mean the deed of 16 June 1998.
11 Clause 3 read:
(Page 7)
- "Immediately upon the happening of any Event of Default the Moneys Owing shall immediately become due and payable without it being necessary to make any demand thereof."
12 Clause 9 contained the guarantee by EMG, and cl 9.6 provided that all property rights and assets of the guarantors, whether real or personal, were charged and that Highland may register its interest as mortgagee on any real or personal property of the guarantors upon the failure of the Britzas to comply with the terms of the deed.
13 By way of security, EMG granted a mortgage over Neridup Location 125, being the whole of the land in Certificate of Title Vol 1682 Folio 297, to Highland, and on 3 August 1998, Highland registered the mortgage. Clause 8.1 of the mortgage was relevant to the potential statutory power of sale conferred on Highland, as mortgagee, by s 108 of the Transfer of Land Act 1893 and which provided that the period of 30 days was fixed as a period of time for which default mentioned in s 108 of the Transfer of Land Act 1893 must continue after service of the notice of demand for payment mentioned in s 107 of the Act before the power of sale given in s 108 could be exercised.
14 EMG and WACSPC also executed deeds of charge. The charge executed by EMG was stamped on 17 June 1998, and that executed by WACSPC was dated 6 September 1999. The terms of these two documents were identical, so the reference to the clauses below are references to the clauses in both. Clause 3.1 reads:
"The Secured Moneys shall be repayable Thirty (30) days from demand having been given by [Highland] to [EMG] unless there is an agreement in any Transaction Document to the contrary in which case [EMG] shall pay the Secured Moneys to [Highland] at such time or times and in such manner as … agreed or as may from time to time be agreed in any Transaction Document."
15 It was agreed by counsel for the plaintiffs that the 16 June 1998 deed is one of the transaction documents. Thus, in my opinion, as a matter of construction, the secured moneys were repayable upon an event of default occurring, or if there were no event of default as defined in the 16 June 1998 Deed, then repayable 30 days from demand. A failure to pay interest on demand was an event of default. Clause 7.1 of the deed of charge contained a list of events of default, defined elsewhere as an "Event of Default". Clause 7.1 read:
"An Event of Default occurs if:
(Page 8)
- 7.1.1 The Mortgagor … does not pay any Secured Moneys on time and in accordance with any agreement (including without limitation any Transaction Document) which imposes the obligation to pay;
7.1.2 The Secured Moneys become prematurely payable or can be rendered prematurely payable by the giving of notice, lapse of time or fulfilment or non-fulfilment of any condition;
7.1.3 The Mortgagor … defaults in the due performance or observance of any of the Secured Obligations …"
16 Clause 7.2 read:
"Immediately upon the happening of any Event of Default under this Clause 7 the Secured Moneys or other moneys hereby secured or any of them or any part thereof respectively shall immediately become due and payable without it being necessary to make any demand thereof and the remaining provisions of this deed shall apply."
17 Clause 11.1 read:
"Any time after an Event of Default has occurred [Highland] may appoint one or more persons as a receiver or receiver and manager of the Charged Property and this power may be exercised whether or not a Receiver has previously been appointed."
18 Clause 2.1 read:
"In consideration of the premises [EMG] … hereby charges as security for payment of the Secured Moneys and performance of the Secured Obligations:
2.1.1 All its undertaking and all its property rights and assets whatsoever, whether real or personal …"
19 Clause 3.1 read:
"The Secured Moneys shall be repayable Thirty (30) days from demand having been given by [Highland] to [EMG] unless there is an agreement in any Transaction Document to the contrary in which case [EMG] shall pay the Secured Moneys to [Highland]
(Page 9)
- at such time or times and in such manner as … agreed or as may from time to time be agreed in any Transaction Document."
20 Clause 12 of the deed of charge set out the receiver's powers and authorised the receiver to sell the charged property and to enter into, and take possession of, the charged property.
21 There were some other documents, but for present purposes it is not necessary to refer to them.
Events occurring in 2003
22 I make the following findings. By 12 February 2003, as conceded by the plaintiffs, an "Event of Default" had occurred in that interest payable on demand had not been paid by the Britzas.
23 On 12 February 2003, and after the event of default, MacKinlays, solicitors for Highland, wrote a letter to the Britzas, making demand for payment of moneys. This letter was never served, and so can be ignored.
24 On 7 March 2003, Highland's solicitors sent a notice of default to the Britzas, EMG and WACSPC, which recited the existence of the loan agreement of 16 June 1998 and the charges granted by EMG and WACSPC referred to above, and referred to the mortgage granted by EMG referred to above. The document then continued:
"TAKE NOTICE THAT:
1. The Borrowers have defaulted in:
(i) payment of the debt was due on 19 February 2003 and the Borrowers have failed to repay the debt;
(ii) the Borrowers have failed to pay monthly interest on demand;
(iii) events have occurred whereby the Borrowers are deemed to be unable to pay their debts as and when they have fallen due;
(iv) the Borrowers have committed an act of bankruptcy;
(Page 10)
- (v) the Borrowers have failed to pay their trade debts within 14 days after the expiry of the usual trade credit for payment of that debt;
(vi) in the reasonable opinion of the Lender there has been a material change in the financial position, standing or credit worthiness of the Borrowers which have adversely affected their ability to make payment of the moneys owing; and
(vii) the Borrowers have failed to provide monthly figures to the Lender by the 21st day of each subsequent month.
- 2. The Mortgagee hereby demands payment of the Principal Sum of $279,234.57 plus interest of $144,788.30 owing within 1 month from the date hereof.
3. If the default is not remedied the Mortgagee may exercise the Mortgagee's power to sell pursuant to the Transfer of Land Act 1893."
25 The plaintiffs' counsel informed me agree that under the provisions of the documents, this notice would have been deemed to have been served on 12 March 2003. Without waiting for the expiry of 30 days from the date of the notice of default, Highland, by deeds dated 27 March 2003, appointed the first defendants as receivers of the charged property of EMG and WACSPC. The first defendants took possession of the charged property of both companies and have entered into contracts to sell the Neridup property to the fourth defendants and to sell the crop of potatoes on the Neridup land to the third defendant.
26 On 19 June 2003, the plaintiffs applied for an injunction to restrain the first defendants from settling the sale of the Neridup property or completing the sale of the potatoes. Undertakings were given by the receiver that it would not complete or settle those contracts until further order.
Election
27 This is the issue raised by par 9(b) of the reply.
28 Election, in the sense used here, is an expression used at common law and is concerned with "the sterilisation of a legal right otherwise than
(Page 11)
- by contract": Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 421. In Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655, Mason J said:
"A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, ie when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach – in each instance the alternative right to insist on performance creates a right of election."
"The doctrine of election as between two inconsistent legal rights is well established but certain of its features are not without their obscurities. The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence."
30 In State of Victoria v Sutton (1998) 195 CLR 291 at 306, Gaudron, Gummow and Hayne JJ said:
"The true nature of 'election' is the confrontation of the person electing with two mutually exclusive courses of action between which a choice must be made, for example, to terminate or keep a contract on foot."
31 Repeating what is set out in the cases referred to above, election will only occur when a party has available to it, alternative remedies and that neither may be enjoyed without the extinction of one of those remedies.
32 The plaintiffs concede that as at 12 February 2003, an event of default had occurred. The plaintiffs do not dispute that cl 11 of the charges authorised Highland to exercise the right to appoint a receiver. The plaintiffs submit however, that once Highland's solicitors served the notice of default, that service amounted to an election not to appoint a
(Page 12)
- receiver forthwith in reliance upon the event of default which existed at 12 February 2003 but to appoint a receiver only after 30 days' notice expired. From this it is argued that the appointment of the receiver on 27 March 2003, ie before the notice period expired, was an invalid appointment.
33 I do not accept the plaintiffs' submission.
34 I do not consider that there were alternative remedies open. In my opinion, there was only one right open to Highland under cl 11, and that was to appoint a receiver if an event of default had occurred. There was an event of default on 12 February 2003, and so on 27 March 2003, Highland was entitled to make the appointment of the receivers. I do not accept the plaintiffs' contention that there were two rights, namely the right to appoint receivers immediately based on the existing event of default and alternatively, an inconsistent right to appoint only after notice expired once demand was made. In my opinion, the right to appoint receivers arose at the time of the earliest event of default. In practical terms, a lender will often have different levels of confidence about proving a number of events of default which might exist. For example, in this case, the charges provide that an event of default occurred if a representation made by the mortgagor were found to be incorrect; another occurred if the charged property were purchased by any persons; and another occurred if the land charged were prejudicially affected by a proposal prepared by a government agency. The lender might contend that all of these things had occurred. The lender may be confident about proving some events of default, and not so confident about proving others. The lender may fail to prove that all had occurred. However, as long as the lender proved that at least one event of default had occurred, then cl 11 empowered the lender to exercise its single right, namely the right to appoint receivers. If more than one event of default were proved, both would support the appointment of receivers.
35 The second defendant referred to authorities which make it clear that a mortgagee may exercise all of its remedies concurrently: see Re McCann [1985] 2 Qd R 381. As Gleeson CJ, McHugh and Hayne JJ in Pan Foods Co Importers & Distributors Pty Ltd v Australia & New Zealand Banking Group Ltd (2000) 170 ALR 579 said at [8]: "Lenders may wear both belt and braces", or as the Privy Council said in China & South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536 in respect of the availability to a creditor of different remedies for enforcement, the creditor may exercise them, "simultaneously or contemporaneously or successively or not at all". The authorities referred to by the second
(Page 13)
- defendant would be relevant if, for example, Highland wished to exercise the mortgagee's power of sale of the land under the Transfer of Land Act and at the same time have the receivers sell the potato crop. However, they have no relevance to present circumstances because the right to appoint receivers does not involve different rights. If there were any validity in the plaintiffs' submissions, then these authorities would have application.
36 Finally, the notice of default did not contain any representation as the plaintiffs' counsel submitted, namely that having issued the notice of default it would only rely on non-compliance with the demand for payment within 30 days, rather than upon any other event of default. On the contrary, the notice states that the Britzas had defaulted in failing to pay interest on demand. The notice does not imply that such event of default is not to be treated as an event of default, and does not represent that receivers will not be appointed based on that event of default. Clause 2 of the notice of default contains a demand for payment within one month, but this is followed by cl 3, which states that the mortgagee may exercise the powers of sale under the Transfer of Land Act. This was necessary if the power of sale under s 108 of the Transfer of Land Act was to be exercised. The notice of default therefore added a further potential weapon in Highland's armoury. This was the right of Highland, as mortgagee, to exercise the power of sale of mortgaged land conferred on it by s 108 of the Transfer of Land Act after 30 days expired.
37 There was therefore no election of any kind made by Highland in serving the notice of default.
Waiver
38 Paragraph 9(a) of the reply pleads that Highland waived the event of default, namely non-payment of interest on demand.
39 The word "waiver" is a vague term used in many senses: Smythe & Co v Bailey & Co [1940] 3 All ER 60 at 70 and Verwayen's case at 467. Toohey J, in the latter case, said that the term was apt to signify in one respect: "the legal grounds on which a person is precluded from asserting one legal right when he is entitled to alternative rights inconsistent with each other" and in another respect the legal grounds on which a person is precluded from raising a particular defence to a claim against him. The first meaning of the word suggests that the word is a reference to election, and understood in that way, the word "waiver" is better categorised as "election": see Toohey J in Verwayen's case at 467.
(Page 14)
40 The plea in par 9(a) of the reply is that there was a waiver of "the event of default". That particular plea smacks more of a part of a plea that Highland is estopped from making an appointment based on the admitted event of default (non-payment of interest on demand). I say "part" of a plea, because an estoppel plea can only succeed if there is pleaded and proved, some detriment suffered by the plaintiff. There is no such plea. Insofar as this part of par 9 raises the same arguments as are raised in par 9(b), I need say no more. I have found that those arguments did not succeed.
Construction
41 Paragraph 9(c) of the reply pleads that as a matter of construction, Highland was obliged to give notice before appointing a receiver. In my opinion, that argument is unsustainable. The provisions of cl 11 are clear and unambiguous. A receiver may be appointed if there is an event of default. Reference was made by counsel for Highland to Refuge Assurance Co Ltd v Pearlberg[1938] Ch 687 and to Lyford v Media Portfolio Ltd (1989) 7 ACLC 271. Not much assistance can be drawn from these cases because each turned on its own facts, but, to employ the language used in the Refuge Assurance Co Ltd case, I consider that, as a matter of pure construction, the words in which the power to appoint a receiver is expressed, are perfectly clear words which are not to be limited in the way that the plaintiffs contend.
42 Finally, the plaintiffs submitted that the notice of default was the provision of, or an agreement to provide, "financial accommodation" and that it was therefore a transaction document because the quoted words are found in par (e) of the definition of "Transaction Documents" in the two charges. It is not necessary to consider where that submission might lead. Highland did not by the notice of default provide "financial accommodation". The notice of default was a demand for repayment of moneys previously advanced by way of financial accommodation.
43 As a result, the matters raised by the plaintiffs in par 9 of the reply must all fail. In consequence, in relation to the issues raised on this trial of preliminary issues, I dismiss the plaintiffs' claim that the receivers were invalidly appointed.
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