Fowler Superannuation Nominees Pty Ltd v Stellas

[2013] VCC 1341

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

Revised
(Not) Restricted

COMMERCIAL LIST
GENERAL DIVISION

Case No. CI-13-02911

FOWLER SUPERANNUATION NOMINEES PTY LTD	Plaintiff
v.
PETER STELLAS AND GREG GIANNAKOPOULOS	Defendants

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	15 October 2013
DATE OF JUDGMENT:	15 October 2013
CASE MAY BE CITED AS:	Fowler Superannuation Nominees Pty Ltd v. Stellas & Anor
MEDIUM NEUTRAL CITATION:	[2013] VCC 1341

REASONS FOR JUDGMENT

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Catchwords:              Practice and procedure – Application for summary judgment by plaintiff - Plaintiff suing upon a debt purported assigned to it – Assignment not in writing – Whether equitable assignment considered and whether debt should be recoverable – Proposed defences not “fanciful”.    

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J.A.F Twigg	Vadarlis & Associates
For the Defendants	Mr J.P Foster	Rockwell Oliver Solicitors

HIS HONOUR:

1The plaintiff seeks summary judgment against the two defendants. The plaintiff sues upon a written agreement dated 1 April 2011 in which the plaintiff purported to advance the sum of $150,000 by way of loan to four borrowers, including the defendants. Repayments of principal together with interest were to be made monthly in accordance with an attachment to the agreement.

2There is no dispute about certain matters:

a.the two defendants executed the agreement;

b.the principal sum of $150,000 was made up of $39,723.08 advanced by the plaintiff to Kovacs Plumbing Pty Ltd and $110,276.92 to Mr Gregory Fowler;

c.the first three repayments totalling $42,924.66 were made by Kovacs Plumbing Pty Ltd to the plainitff.

3The defendants have filed a defence and an amended defence. Upon the present application, the plaintiff has filed five affidavits including four affidavits sworn by Mr Gregory Fowler. The defendants have filed two affidavits sworn by the first defendant Mr Peter Stellas. Some matters of defence were raised in the pleadings and further matters of defence in the defendant’s affidavit material. These matters are:

a.only $39,723.08 was advanced by the plaintiff;

b.the remaining $110,276.92, making up the $150,000, was a pre-existing debt owed by Kovacs Plumbing Pty Ltd to Mr Fowler;

c.the total sum of $65,426.64 had been repaid to the plaintiff pursuant to the loan agreement;

d.the default interest rate is a penalty and unenforceable;

e.the plaintiff purportedly sues as an assignee of the rights of Mr Fowler to recover debts due to him from Kovacs Plumbing Pty Ltd. However:

i.there is no written assignment as required by s.134 of the Property Law Act 1958;

ii.no equitable assignment can be established by the plaintiff;

iii.no clear and manifest intention to create an equitable assignment;

iv.the subsequent actions of Mr Fowler are inconsistent with an intention by him to assign his debt to the plaintiff;

v.equity should not assist the plaintiff to recover from the defendants;

f.the purported assignment was arguably intended to defeat the interests of Mr Fowler’s creditors in his bankruptcy by divesting himself of assets that otherwise might have been available for distribution to his creditors;

g.Mr Fowler was apparently acting in breach of an ASIC Notice of Disqualification by assisting “in the management of the Trust” on behalf of the plaintiff, including the initiation of the present proceeding.

4The plaintiff is the trustee of a superannuation fund. In his third affidavit, Mr Fowler refers to it as “my super fund”. Mr Fowler is not, however, a director of the plaintiff. That role has been filled in recent years by various members of his family. Mr Fowler was a bankrupt from February 2009 until he was discharged on 13 February 2012. On 30 September 2010, he was disqualified from managing corporations pursuant to a notice issued by ASIC.

5On an unspecified date prior to 31 March 2011, Mr Fowler said that he had “spoken with my brother, Grant Fowler who was managing the plaintiff at the time about…me transferring whatever was owing to me by the Business [Kovacs Plumbing Pty Ltd] to the plaintiff’s super fund”. Mr Fowler said that on 31 March 2011, he informed the defendants “that I would assign whatever was owed to me by Kovacs Plumbing to my super fund”.

6The assignment was to be a condition for the plaintiff entering into the loan agreement with the borrowers for $150,000 which included the debt of $110,276.92 owing by Kovacs Plumbing Pty Ltd to Mr Fowler and the further advance $39,723.08. Mr Grant Fowler confirmed in an affidavit that, “The monies that were assigned by Greg to the plaintiff were part of the loan to the defendants and the subject of the Loan Agreement”.

7It seems that the plaintiff paid the sum of $110,276.92 to Mr Fowler at this time. The defendants said that this sum included an “outstanding debt owed by Kovacs to Gregory Fowler as at 29 March 2011” of $56,454.55, being the balance of $73,293 debits and $16,838.45 credits. It also included $53,822.37 “being the outstanding balance of Gregory Fowler’s salary entitlements from Kovacs for the period 1 July 2008 to 28 March 2011“ which comprised gross salary entitlements of $224,276 less withdrawals of $141,676 and wages paid of $28,777.63.

8In these circumstances:

a.it is difficult to see what consideration was provided by the defendants in respect of the payment by the plaintiff to Mr Fowler of $110,276.92;

b.Mr Fowler asserts that, together with the defendants and Mr Mike Brady, they were partners in the plumbing business conducted by Kovacs Plumbing Pty Ltd. That fact is specifically denied by the defendants who say that they were employees of the company and only subsequently took over the assets, but not the liabilities of Kovacs Plumbing Pty Ltd when they formed a new company;

c.the connection between the debt to Mr Fowler from Kovacs Plumbing Pty Ltd and the defendants is arguably tenuous;

d.the assignment of the debt owing by Kovacs Plumbing Pty Ltd and the defendants was not reduced to writing;

e.in order for there to have been an effective equitable assignment, there would have needed to have been a gift of the debt by Mr Fowler to the plaintiff as no consideration apparently passed;

f.equity will not, however, “perfect an imperfect gift”, as in the present case, where the transaction was not reduced to writing (see Olsson v Dyson (1969) 120 CLR 365 at 386 per Windeyer J);

g.following the assignment, Mr Fowler purported to act inconsistently with having expressed a clear and manifest intention to divest himself of the amount owing to him by Kovacs Plumbing Pty Ltd. On 11 April 2011, Mr Fowler asked Mr Stellas to transfer $1,100 to an account for the benefit of Mr Fowler’s son and “to take it off my loan account” with Kovacs Plumbing Pty Ltd. It is unlikely that Mr Fowler had a loan account with the company apart from the one purportedly assigned to the plaintiff on 1 April 2011;

h.the plaintiff apparently paid $110,276.92 to Mr Fowler on about 1 April 2011. If this sum included income in excess of amounts Mr Fowler, as an undischarged bankrupt, was entitled to receive himself and not account to his trustee in bankruptcy, it is arguable that the transaction is tainted with illegality and may not be enforceable;

i.these matters may constitute circumstances which would make it inappropriate for the plaintiff to recover from the defendants.

9Accordingly, I consider that the defendants have demonstrated that they have a defence to the plaintiff’s claim which “has a ‘real’ as opposed to a ‘fanciful’ chance of success”.

10Further, the circumstances of the assignment and payment of monies by the plaintiff, as trustee of a superannuation fund, to Mr Fowler, and the source of those monies make it appropriate for the matter to proceed to trial rather than being disposed of summarily. I also consider that the plaintiff’s trustee in bankruptcy be informed of the proceeding and the court file, including the exhibits to the affidavits relied upon in this application, be available for inspection by the trustee.

11I considered the possibility of requiring the defendants to pay money into Court as a condition of being granted leave to defend. The plaintiff’s position is, however, protected by caveats lodged over properties owned by the defendants. Further, security in these circumstances would not be appropriate.

12       I propose to make the following orders:

a.leave to the defendants to defend the proceeding;

b.by 4pm on 29 October 2013, the defendants must file and serve any further amended defence;

c.by 4pm on 22 October 2013, the defendants’ solicitors must send to the trustee in bankruptcy of Mr Gregory Fowler a copy of the orders made today and the reasons for decision of His Honour Judge Anderson. The original exhibits to all affidavits filed in relation to the plaintiff’s summary judgment application shall remain on the Court file and the whole of the Court file will be made available to Mr Fowler’s trustee in bankruptcy for inspection upon application. The defendants’ solicitors must forthwith notify the Associate to His Honour Judge Anderson in writing after this order has been complied with;

d.the plaintiff’s summons filed 3 September 2013 is otherwise dismissed.

13Orders will be made setting the proceeding down for trial and for the standard interlocutory directions.    

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Certificate

I certify that these 5 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 15 October 2013

Dated:       15 October 2013

Philippa Gilkes

Associate to His Honour Judge Anderson