Exotic Retirement Living v Construct By Design Commercial

[2018] NSWSC 860

Supreme Court

New South Wales

Medium Neutral Citation:	Exotic Retirement Living v Construct By Design Commercial [2018] NSWSC 860
Hearing dates:	06/06/2018
Date of orders:	06 June 2018
Decision date:	06 June 2018
Jurisdiction:	Equity - Commercial List
Before:	McDougall J
Decision:	Dismiss amended summons. Reserve costs.
Catchwords:	CONTRACT – assignment – deed purported to assign rights, title and interest in a car stacker to the plaintiff – at date of execution of deed, the defendant had no right, title or interest in the car stacker – deed of assignment expressed in present tense and not as an assignment of future property – assignment of car stacker ineffective.   EQUITY – assignment of future interest – only enforceable in equity if consideration paid or executed – no such consideration paid or executed in full – no assignment in equity.
Legislation Cited:	Evidence Act 1995 (NSW)
Cases Cited:	Holroyd v Marshall (1862) 10 HLC 191 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 Tailby v Official Receiver (1888) 13 App Cas 523
Texts Cited:	J Heydon, M Leeming & P Turner, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (5th edition, 2015)
Category:	Principal judgment
Parties:	Exotic Retirement Living Pty Limited (in Liquidation) (Plaintiff) Construct by Design Commercial Pty Limited (Defendant)
Representation:	Counsel: D S Weinberger (Plaintiff) N Mirzai (Defendant)   Solicitors: Galilee Solicitors (Plaintiffs) Chedid Storey Legal (Defendant)
File Number(s):	2018/148654

Judgment   (EX TEMPORE – REVISED 6 JUNE 2018)

1. HIS HONOUR: The plaintiff (ERL) claims a declaration that it is entitled, as between it and the defendant (CBD), to possession of a car stacker and an order for delivery up of the car stacker. The car stacker was the subject of a separate contract between CBD and a company known as Car Stackers International Pty Ltd (CSI). The car stacker was required, and was to be delivered and installed, for the purposes of a contract made between ERL as principal and CBD as contractor for the construction of residential apartments on the Northern Beaches of Sydney.

2. It is apparent that CSI itself was not to manufacture the car stacker. The car stacker was apparently to be manufactured abroad, to CBD's specifications as relayed through CSI, and imported by CSI, whereupon, upon payment, it would be delivered, installed and commissioned.

3. The factual background is somewhat complicated, but one thing that can be noted is that the construction contract between ERL and CBD came to an end, on any view of the facts, no later than 24 January 2018. That date is of some significance, because it is an agreed fact that the car stacker was not delivered by CSI to CBD until 1 February 2018.

4. The contract between CBD and CSI provided for a purchase price of $343,200 together with GST. It provided for payment by instalments: 10% by way of deposit on order, 45% prior to the commencement of manufacturing, 30% on landing in Australia and 15% on satisfaction of the somewhat obscure term or condition "progress claim".

5. It is another agreed fact that ERL has paid, or caused to be paid, amounts equivalent to the first three tranches of the purchase price, and that the final tranche - the 15% payable on "progress claim" - is unpaid.

6. The contract between CBD and CSI contains a reservation of title clause. Under that clause, all goods supplied will remain the property of CSI until full settlement of all outstanding claims deriving from the business relation between the supplier and CSI. That somewhat unclear wording would appear to give CSI a form of security over the car stacker, in effect equivalent to a lien, until not only the purchase price but also any other claims that it might have against CBD have been paid.

7. One of the mysteries of this case is that CSI has not been joined as a party. There was an attempt made very late in the day to regularise the position. ERL sought to obtain from CSI some indication that CSI had no claim to the equipment. I rejected the evidence of that on the basis that the documents seeking to prove this was inadmissible to prove the truth of the asserted facts. I said, further, that if it had been admissible, I would have rejected it in the exercise of the discretion given by s 135 of the Evidence Act 1995 (NSW), because of the extremely late notice given to CBD and its consequent inability to investigate the truth of the asserted facts.

8. Mr Weinberger of counsel, who appeared for ERL, suggested that CSI's position was irrelevant because the declaration sought went no further than a declaration as to possessory rights between ERL on the one hand, and CBD on the other. That may mean that CSI is not a necessary party, in the sense explained in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [1] at [131]. The technical correctness of that point, however, does not take into account the expressed desire of ERL (more accurately, of its liquidator, Mr Peter Hillig) to sell the car stacker once possession is delivered up. It seems to me to be reasonably clear, in circumstances where there is a retention of title clause and where on any view an amount is owing by someone to CSI in respect of the car stacker, that the proposed course of action could have a serious impact on CSI's rights.

   1. (2010) 241 CLR 1.

9. This is all very unfortunate, because if (as ERL says), the attitude of CSI is that it has disclaimed all interests in the property and does not mind what happens to it as between ERL and CBD, that could have been dealt with very simply. CSI could have been joined as a party, so that it could be bound by the orders, and could have submitted. Perhaps, even in the absence of that formal step, some affidavit could have been obtained from CSI, on sufficient notice to CBD, to satisfy the Court that indeed CSI did not assert any ongoing proprietary or other claims in relation to the car stacker. Neither of those steps was taken.

10. I turn to the substance of the dispute. ERL founds its claim on something called an Assignment and Benefit Deed made between it, CBD and people who I understand to be the directors or shareholders of CBD, as "Guarantors". The deed is very helpfully not dated (and I might add that the entire documentary evidence in this case has been presented in a way that seems intended to maximise its incomprehensibility) but there is some internal evidence that it may have been executed and delivered around 16 August 2017.

11. The deed refers to the car stacker as the "Equipment": namely, in full, “the car stacking lift equipment to be manufactured by [CSI] and imported into Australia for the purpose of being installed into the Property, as part of the Works". The Supplier is of course CSI.

12. The deed recognises that CSI had provided or would provide a bank guarantee in favour of CBD, to give CBD some security in respect of the substantial amounts required to be paid before the stacker even made its appearance in this country, and before it was ready for delivery, installation and commissioning.

13. Against that background, cl 2 of the deed relevantly provided as follows:

2.1   Acknowledgement, Consent and Benefit

(a)   The parties acknowledge and agree that:

(i)   ERL is responsible for the payment of the invoices issued by the Supplier associated with the Equipment;

(ii)   as CBDC is responsible for the installation of the Equipment, CBDC has contracted directly with the Supplier;

(iii)   the Supplier will only agree to the Bank Guarantee being issued in favour of CBDC, as it is corresponding party to the Purchase Agreement; and

(iv)    ERL is the beneficial owner of the Bank Guarantee.

(b)   In consideration of the covenants by ERL, CBDC and the Guarantors contained in this deed, the parties agree and consent to the assignment by CBDC of all of CBD’s rights, title and interest in the Bank Guarantee to ERL.

2.2   Assignment    

For valuable consideration, CBDC assigns all its rights, title and interest in the Equipment (if any) and the Bank Guarantee to ERL who will from the date of this deed be solely entitled to the rights and benefit of the Equipment and the Bank Guarantee.

…

2.4   Warranties by CBDC

CBDC covenants with ERL as follows:

(a)   CBDC has the authority to assign its rights, title and interest in the Bank Guarantee and the Equipment to ERL;

(b)   There are no disputes in relation to any matter contained in the Purchase Agreement;

(c)   This Agreement is made free of all encumbrances; and

(d)   The Assignor will do all acts and things, and provide all necessary documents to give effect to this Assignment.

…

2.6   Undertakings by ERL

ERL undertakes to:

(a)   As soon as possible after this deed has been signed, attend to payments to the Supplier of the Bank Guarantee Fee and the Deposit; and

(b)   Upon confirmation from the Supplier that:

(i)   the Bank Guarantee Fee and the Deposit have been received; and

(ii)   the Bank Guarantee will be issued,

ERL will attend to the additional payment of 45% of the total Equipment cost (being $154,440 plus GST) to the Supplier.

(c)   Upon receipt of the original Bank Guarantee, ERL will arrange for the additional payments (being $102,960) + GST and $51,480 + GST) as required by the Purchase Agreement.

14. Before I turn to the arguments based upon that document, I should note that at one stage it might have been thought that ERL relied on cl 37.3 of the construction contract. That clause provided as follows:

37.3   Unfixed plant and materials

The Principal shall not be liable to pay for unfixed plant and materials unless they are listed in Item 34 and the Contractor:

(a)   provides the additional security in Item 14(e); and

(b)   satisfies the Superintendent that the subject plant and materials have been paid for, properly stored and protected, and labelled the properly of the Principal.

Upon payment to the Contractor and the release of any additional security in

paragraph (a), the subject plant and materials shall be the unencumbered

property of the Principal.

15. It is unnecessary to show why cl 37.3 has nothing to do with the case, because in submissions in reply, Mr Weinberger made it clear that his client did not rely on that clause. I may be being a little unkind in referring to this point having been made in "submissions in reply", but it was at that point that it first became clear, at least to me.

16. I return to the deed. Clause 2.2 recites "valuable consideration". Mr Weinberger submitted that this was the consideration set out in, among other places, cl 2.1(a)(i) and in cl 2.6. I think that there is force in that submission. Mr Weinberger sought to argue that, in cl 2.1(a)(i), the only "invoices issued by the Supplier" that were relevant were the invoices for the manufacture and delivery of the car stacker. I do not agree. The words "associated with" indicate that all that is needed is that there be some real connection between the invoices and the equipment. That is of some significance in this case, because CBD's evidence satisfies me that it has paid at least two amounts, totalling of the order of $10,000, in answer to invoices raised by CSI on CBD for storage and transport of the car stacker. CBD's evidence also suggests that it has paid other costs, but it is by no means clear that these costs were the subject of invoices raised by CSI on CBD.

17. The real difficulty with ERL's position seems to me to be that what is assigned by cl 2.2 of the deed is CBD's right, title and interest in the “Equipment” and the “Bank Guarantee”. The assignment of right, title and interest in the “Equipment” is qualified by the immediately following words "(if any)". They appear to acknowledge that CBD may not have any right, title or interest in the Equipment as the deed was made.

18. What the deed does not purport to do is assign to ERL CBD's right, title and interest in its contract with CSI. It is of course correct to say, as Mr Weinberger submitted, that cl 2.2 concludes by stating the sole entitlement of ERL "to the rights and benefit of the equipment". Again, however, that acknowledgment (if this is the correct way to regard it) seems to me to focus on the Equipment as an item of property, not on the contract pursuant to which or by reason of which that Equipment was to come into the possession and, it may be, become the property, of CBD.

19. The reason that this is a problem is that, as at 16 August 2017, CBD had no right, title or interest in the Equipment. The Equipment was presumably in the course of construction somewhere outside this country. It had not been delivered into Australia. The third and substantial instalment of the purchase price had not been paid. The Equipment had not been delivered either to CBD nor to the property at Narrabeen where it was to be installed. That seems to me to apply equally to the acknowledgment that, from the date of the deed, it is ERL that is solely entitled to the rights and benefit of the Equipment.

20. In those circumstances, it seems to me that the assignment was not effective at the date it was made to transfer whatever right, title and interest in the equipment CBD had to ERL; nor was there then any right or benefit to which, by virtue of the concluding words of that cl 2.2, ERL would be entitled.

21. Mr Weinberger submitted that cl 2.2 should be construed as an agreement for future assignment: that is to say, as an agreement to assign not only whatever present right, title or interest CBD had in the Equipment but also whatever right, title or interest it might acquire in the future. I do not agree. The clause is expressed in the present tense. It is very easy to draft a clause which is to operate as a future assignment (or as an assignment of after- acquired property). It is very easy to draft a clause which effects both present and future assignments. The drafting of cl 2.2 does not do those things. It is firmly rooted in the state of affairs existing at the time the deed was made.

22. In any event, as Mr Mirzai of Counsel (who appeared for CBD) submitted, if the assignment were construed as one of future property, it would only be enforceable in equity if the consideration were paid or executed. Mr Mirzai referred to Meagher, Gummow and Lehane's Equity: Doctrines and Remedies [2] at [6-245] to [6-265]. The authors consider some of the leading cases, including Holroyd v Marshall [3] and Tailby v Official Receiver [4] . They conclude at [6-265] that an agreement for valuable consideration to assign future property might be effective if the consideration were paid or executed. That follows from the antecedent discussion, which makes it clear that the effect of such an assignment is, in effect, coterminous with the ability to procure specific performance of it. In my respectful view, the authors' summary of the principles at [6-265] is accurate, and indeed uncontroversial.

    2. J Heydon, M Leeming & P Turner (5th edition, 2015)

    3. (1862) 10 HLC 191.

    4. (1888) 13 App Cas 523.

23. In the present case, the consideration has not been paid or executed in full, because invoices issued by CSI associated with the Equipment, and (if it matters) paid by CBD have not been paid by ERL pursuant to its assumption of responsibility in cl 2.1(a)(i) of the deed.

24. The effect of that lengthy recital of principle is that even if, contrary to my view, cl 2.2 could be construed as effecting an assignment of future property, the assignment would not be specifically enforceable and thus it does not, at present, confer any interest or benefit upon ERL. For those reasons, however the claim is put, it fails. The amended summons must be dismissed.

25. I reserve costs.

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Endnotes

Decision last updated: 08 June 2018