G E Commercial Corporation (Australia) Pty Ltd v Trustee of the Property of Terry Stephen White & Penelope Eva White, as bankrupts

[2001] NSWCA 444

Reported Decision: 53 NSWLR 513

New South Wales

Court of Appeal

CITATION:	G E Commercial Corporation (Australia) Pty Ltd v Trustee of the Property of Terry Stephen White & Penelope Eva White, as bankrupts [2001] NSWCA 444
FILE NUMBER(S):	CA 40279/01
HEARING DATE(S):	31/10/01
JUDGMENT DATE:	31 October 2001
PARTIES :	G E Commercial Corporation (Australia) Pty Ltd (Appellant) Trustee of the Property of Terry Stephen White and Penelope Eva White, as bankrupts (Respondent)
JUDGMENT OF:	Stein JA at 1, 25, 27; Young CJ in Eq at 2-24; Mathews AJA at 26

LOWER COURT JURISDICTION :	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S) :	4688/00
LOWER COURT JUDICIAL OFFICER :	Windeyer J

COUNSEL:	M Ashhurst (A) J T Johnson (R)
SOLICITORS:	Dibbs Barker Gosling (A) Donovan Oates Hannaford (R)
CATCHWORDS:	MORTGAGE- Bill of Sale- Statutory requirement that consideration be stated- What "consideration" is covered- Whether document stated consideration for the bill- Held "No"- Bill invalid. (D)
LEGISLATION CITED:	Bills of Sale Act 1898, s 5C(2)
CASES CITED:	Burns v McFarlane (1940) 64 CLR 108 Charlesworth v Mills [1892] AC 231 Clements v Colley [1936] VLR 200 Danby v The Australian Financial Agency & Guarantee Co (1872) 18 VLR 303 Hughes v Little (1886) 18 QBD 32 Monsell v Team Link Management Pty Ltd (1997) 8 BPR 15401 O'Connor v Quinn (1911) 12 CLR 239 Tobias v QDL Ltd [1999] NSWCA 343
DECISION:	Leave to appeal granted. Appeal dismissed with costs.

CA 40279 of 2001
STEIN JA
YOUNG CJ in EQ
MATHEWS AJA


Wednesday 31 October 2001

GE COMMERCIAL CORPORATION (AUSTRALIA) PTY LTD v TRUSTEE OF THE PROPERTY OF TERRY STEPHEN WHITE & PENELOPE EVA WHITE, as bankrupts

Judgment

1 STEIN JA: I will ask Young CJ in Eq to give the first judgment of the Court.

2 YOUNG CJ In EQ: This is an application for leave to appeal heard on the basis that, if leave is granted, the appeal would be heard forthwith. The decision below was made by Windeyer J in proceedings brought by a financier against the trustee of the bankrupt estate of two individuals who appear to have been running a caravan business on the mid north coast.

3 We have not really spent much time considering whether leave to appeal should be given, as the whole appeal could be argued in an hour. I think formally we should grant leave to appeal and then proceed to deal with the appeal on its merits.

4 The statement of claim pleaded that on 17 June 1999, the plaintiff provided a bailment facility to the bankrupts. Paragraph 5 said:

“In consideration of the plaintiff providing the bailment facility to the Whites (that is the bankrupts) the Whites provided, inter alia, a Trader’s Bill of Sale as security to the plaintiff in respect of the obligations owing to the plaintiff under the bailment facility.”

5 The statement of claim sought a declaration that the trader’s bill of sale was valid and enforceable according to its tenor, a declaration that the plaintiff was entitled to possession of the property set forth in the schedule to the statement of claim and appropriate executive orders.

6 The trial took place before Windeyer J and it would appear that on the second day leave was sought by the defendant and was granted to add a new clause 3A to the defence, which read:

“In answer to the entire claim of the Plaintiff grounded upon the Traders Bill of Sale, the Defendant says that the Traders Bill of Sale does not comply with the requirements of Section 5C(2)(a)(iv) of the Bills of Sale Act, 1898 and that the Traders Bill of Sale has no validity at law or in equity.”

7 His Honour dealt with that submission and upheld that defence in a five page judgment.

8 Section 5C(2) provides essentially that no trader’s bill of sale shall have any validity at law or in equity unless the same sets forth various matters. The fourth of those matters says:

“ … the consideration for the trader’s bill of sale, specifying the amount of past debt (if any), the advance (if any) made at the time of making or giving the trader’s bill of sale, and (if such is the case) that future advances are secured by the trader’s bill of sale; … ”

9 The bill of sale is in evidence. It is a printed eight page document which is printed both sides and which has inserted between the third and fourth sheet two pieces of paper which are said to be annexure A. There is no actual reference to annexure A in the bill of sale itself but that probably is of little moment. The so-called annexure A contains clause 26 headed “Other Securities” and the following page is a mere execution page of the document.

10 The printed form has crossed out on the first page the reference to a loan or advance and has these words:

“ NOW IT IS HEREBY AGREED AND DECLARED by and between the said parties that in pursuance of the said agreement and in consideration of the * principal sum now paid by the Mortgagee to the Mortgagor (the receipt of which is hereby acknowledged) THAT -
*these presents”

11 Clause 26 is headed “Other Securities” and commences:

“The Mortgagor must punctually and duly observe and perform or must procure the punctual and due observance and performance of all of the terms, covenants and conditions contained in or implied by:
(a) Bailment Agreement dated 17 June 1999 between the Mortgagor and the Mortgagee;
(b) Secured Guarantee dated 17 June 1999 between the Mortgagor and the Mortgagee;
(the `Other Security’). Default under the Other Security will constitute a default under this Bill. The money secured by this Bill may be recovered by the Mortgagee exercising its rights under this Bill or Other Security separately or concurrently...”.

12 The bill of sale bore date 19 July 1999.

13 It can be seen that there is no explicit statement of a consideration for the trader’s bill of sale in the document. Windeyer J in paragraph 10 of his judgment refers to clause 26 and says:

“What that clause does is to create an obligation by covenant to comply with the terms of other agreements. On its simple wording, I do not think it could be said in any way to state the consideration for the bill of sale. It may be that the consideration was the agreement of the plaintiff to enter into the bailment agreement, which was the basis for any other documentation. It would have been possible to say that, and I accept that the law is that one should not be unduly restrictive if determining whether or not the requirements to set out the consideration have been met. Nevertheless, it cannot be doubted that there is a requirement to set out the consideration in some reasonably comprehensible way, and it is perfectly clear that there has been no attempt to do so in this document. The words "these presents” do no more than to state that the parties have entered into the document that cannot possibly amount to a proper statement of consideration. It follows from this that the plaintiff’s claim must be dismissed.”

14 On the appeal, Mr Ashhurst for the financier put forward the only two arguments that possibly could be advanced against that decision. First, that the word “consideration” in paragraph (iv) of the Act was confined to monetary consideration and secondly that the way in which this sort of clause has to be approached as laid down by the authorities, most recently the decision of this Court in Tobias v QDL Limited [1999] NSWCA 343, meant that on the proper construction of the document it did set forth the consideration. When asked what the consideration was that we should infer, Mr Ashhurst said that it was the bailment agreement.

15 The first argument was not advanced before Windeyer J. There is some doubt as to whether we should entertain it but, as in my view it fails, it is probably simpler to entertain and discard it rather than worry about technicality.

16 There is some basis in the argument from cases such as Danby v The Australian Financial Agency and Guarantee Company (1892) 18 VLR 303 at 309 and Clements v Colley [1936] VLR 200, both of which tend to say that what the Victorian equivalent of the legislation requires is the monetary consideration, as is made clear by the fact that one has to specify in the schedule the past, present and future consideration, so that one does not have to include collateral arrangements or consideration other than in cash.

17 Although there is a considerable difference in form between the Victorian Act and the New South Wales Act, there is also a great deal of similarity. For instance, our paragraph (iv) requires, not in the schedule, but somewhere in the bill, a statement of the past, present and future advances in cash to be made. The reason for this appears to be the problems that there were under the English legislation from which both the Victorian and the New South Wales Acts have derived, where there were repayments of old loans out of the making of fresh loans and how the consideration should be stated. The line of cases dealing with those problems is reviewed by the High Court in Burns v McFarlane (1940) 64 CLR 108.

18 There are in the authorities very few cases where the consideration has been otherwise than for cash. Hughes v Little (1886) 18 QBD 32 at 35 appears to be one of the exceptions and the English Court of Appeal seems to have thought there was no real problem in requiring a statement of the consideration for the bill of sale where the bill was given as security for a guarantee provided by a guarantor.

19 The matter was also briefly considered by Santow J in Monsell v Team Link Management Pty Ltd (1997) 8 BPR 15401 where his Honour suggested that all the authorities said was that whilst one had to set out the real and actual consideration, one did not have to give details of any collateral bargains.

20 The purpose of the legislation is apparent from what has been said by leading courts such as the House of Lords in Charlesworth v Mills [1892] AC 231, 235 as applied by the High Court in O’Connor v Quinn (1911) 12 CLR 239 246.

21 There is a twofold purpose, first that the people dealing with the trader will know that even though the goods are in the trader’s actual possession they are not the trader’s property, but they are charged to the extent of the consideration set forth in the bill. Accordingly, it is an important matter for people searching the register to know the upper limit of the charge as well as things such as the trading name of the trader, as is specified in paragraph (i) of the Act.

22 The second, an ancillary purpose, is to make sure the debtor knows that he or she is entering into a solemn mortgage and so a relatively solemn format is required, though not an actual solemn form. Although as Santow J said in the Monsell case, in modern commercial eyes these requirements are rather quaint and archaic, they are still in the law and they still must be observed. Accordingly, in my view the word “consideration” requires a statement of what it is for which the trader’s bill of sale is granted in respect of whether that be consideration in money or money’s worth, or some other consideration.

23 The second point is that the bill does in fact set forth the consideration. The argument is that when one looks at cases such as O’Connor’s case and Tobias’ case, one can see that the law, even though the Act uses the words “set forth”, expects merely that there will appear somewhere in the document or in its annexures the information that is required in a form which can be readily understood by the average person of commerce. It does not require one to formally state “the consideration for this bill of sale is...”. That we fully understand and that is a matter which Windeyer J also appears to have fully appreciated. His Honour however applied that test and could not find how this bill did state the consideration. With great respect to the argument put against it, I can really see no way at all in which his Honour was in error. Indeed, questioning of Mr Ashhurst as to what was the consideration that should be implied seemed to reinforce the statement that his Honour made.

24 Accordingly, in my view I cannot improve on paragraph 10 of his Honour’s judgment. We should grant leave to appeal, the appeal should be dismissed with costs.

25 STEIN JA: I agree with Young CJ in Eq.

26 MATHEWS AJA: I also agree.

Accordingly, the order of the Court is that leave to appeal is granted. The appeal is dismissed with costs.

oOo