Industrial Progress Corporation Pty Ltd v Wilson
[2013] WASC 225
•6 JUNE 2013
INDUSTRIAL PROGRESS CORPORATION PTY LTD -v- WILSON [2013] WASC 225
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 225 | |
| Case No: | CIV:1715/2013 | 21 MAY 2013 | |
| Coram: | BEECH J | 6/06/13 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Operation of caveat extended | ||
| B | |||
| PDF Version |
| Parties: | INDUSTRIAL PROGRESS CORPORATION PTY LTD ROBERT TERENCE WILSON ELIZABETH WILSON REGISTRAR OF TITLES |
Catchwords: | Real property Caveats Application for extension of operation of caveat Whether interest claimed has or may have substance Turns on own facts |
Legislation: | Transfer of Land Act 1893 (WA), s 138C Personal Property Securities Act 2009 (Cth) |
Case References: | Allen's Asphalt Pty Ltd v SPM Group Pty Ltd [2009] QCA 134 Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 Bashford v Bashford [2008] WASC 138 Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654 ING Bank (Australia) Ltd v Leagrove Pty Ltd [2011] QCA 131; [2012] 1 Qd R 140 Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95 Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 Porter v McDonald [1984] WAR 271 Williams v Frayne (1937) 58 CLR 710 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ROBERT TERENCE WILSON
ELIZABETH WILSON
First Defendants
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Real property - Caveats - Application for extension of operation of caveat - Whether interest claimed has or may have substance - Turns on own facts
Legislation:
Transfer of Land Act 1893 (WA), s 138C
Personal Property Securities Act 2009 (Cth)
(Page 2)
Result:
Operation of caveat extended
Category: B
Representation:
Counsel:
Plaintiff : Mr M Curwood
First Defendants : Mr D H Solomon
Second Defendant : No appearance
Solicitors:
Plaintiff : Murfett Legal
First Defendants : Solomon Brothers
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Allen's Asphalt Pty Ltd v SPM Group Pty Ltd [2009] QCA 134
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549
Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Bashford v Bashford [2008] WASC 138
Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654
ING Bank (Australia) Ltd v Leagrove Pty Ltd [2011] QCA 131; [2012] 1 Qd R 140
Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95
Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171
Porter v McDonald [1984] WAR 271
Williams v Frayne (1937) 58 CLR 710
(Page 3)
- BEECH J:
Introduction
1 The plaintiff applies for an order extending the operation of caveats it lodged over two parcels of land owned by the first defendants. For the reasons that follow, I would extend the operation of the caveats.
The facts
2 For present purposes, the facts are not in dispute. The plaintiff has filed two affidavits. The first defendants have not adduced any evidence.
3 In October 1998, the plaintiff signed a credit account application with Lowrie Constructions (WA) Pty Ltd (the Customer), and the first defendants signed a guarantee in favour of the plaintiff.
4 By cl 1 of the guarantee, the defendants agreed to pay to the plaintiff 'on demand, without deduction or set-off, all moneys then owing or from time to time remaining unpaid by the Customer'.
5 Clause 2 provided as follows:
This Guarantee shall be a continuing Guarantee to the Company for the whole of the Customer's indebtedness or liability to the Company from time to time howsoever and whenever arising and it will not be affected by:
(a) the Company granting any time or other indulgence, compounding or compromising with or releasing the Customer or any Guarantor or co-surety;
(b) the Company taking or failing to take or enforcing or failing to enforce or holding any other security for the Customer's indebtedness or varying or surrendering any such security;
(c) any change in the identity or proprietorship of the Customer and shall not be wholly or partially discharged by any payment until payment in full of all monies due by the Customer;
(d) any failure to notify the Guarantors of any dealings between the Company and the Customer, including any variation in the amount of credit allowed to the Customer or any failure to pay by the Customer;
(e) the Company obtaining judgment against the Customer.
6 Clause 3 provided for an indemnity for loss suffered by reason of the Customer going into liquidation.
(Page 4)
7 Clause 7 provided that the first defendants thereby charged in favour of the plaintiff as security for their obligations to the plaintiff all right, title and interest in any land then held by them alone or jointly with anyone, or acquired by the first defendants at any time thereafter. Clause 7 also provided that if the guarantors defaulted in payment of any amount owed to the plaintiff, the first defendants specifically authorised the plaintiff to lodge a caveat against any dealings with such property and appointed the plaintiff as their attorney for that purpose.
8 The credit account application was a standard form document evidently prepared by the plaintiff. It set out details of the Customer and contained several provisions, including the following:
(a) the Customer acknowledges receipt of the standard terms and conditions of sale of the plaintiff specified on pages 3 and 4; and
(b) the Customer agrees that notwithstanding any other document, terms and conditions, and/or anything else except a written agreement signed by all parties, any sale and delivery by the plaintiff of goods and services to it shall be upon these standard terms and conditions of sale.
9 Condition 4 of the standard terms and conditions attached to the credit account application provided that property and goods supplied remained the property of the plaintiff until the full purchase price was received by it, and provided for a right of repossession in the event of default in payment of the purchase price.
10 Mr Lilley says, in his affidavit, that he is instructed by Mr Iyyunny, the former accounts manager of the plaintiff, that between July and October 2012, Lowrie Constructions requested goods from the plaintiff on credit, the goods were supplied to Lowrie and the plaintiff issued invoices to Lowrie for those goods.
11 In response to the first defendants' contention in their written submissions that the plaintiff's evidence is insufficient to establish supply of the goods or the date of supply, the plaintiff filed a further affidavit of Mr Roger Fernandez. Mr Fernandez is the acting credit account manager of the plaintiff. The invoices totalling $34,861.34 are attached to his affidavit. Based on the contents of the invoices, and Mr Fernandez's evidence in pars 7 - 10, the plaintiff has adduced evidence to establish a strongly arguable case that the products referred to in each invoice were delivered on or about the date of delivery shown on each invoice.
(Page 5)
12 The invoices remain unpaid.
13 On 15 October 2012, Lowrie Constructions was placed under external administration.
14 On 3 December 2012, the plaintiff lodged the two caveats the subject of this application. The caveats are lodged over land owned by the first defendants. The caveats claim an estate or interest as chargee that is said to arise by virtue of the agreement dated 5 October 1998 between the plaintiff and the first defendants. The caveats are 'subject to claim' caveats.
15 On 12 December 2012, the plaintiff's solicitors demanded payment of the debt from the first defendants.
16 In December 2012 and January and February 2013, there was correspondence between the parties' solicitors.
17 On 18 April 2013, the plaintiff received notices issued by the Registrar of Titles advising that the first defendants had lodged applications under s 138B of the Transfer of Land Act 1893 (WA).
18 I turn to the legal principles, which are also not in dispute.
Caveats: legal principles
19 The court can extend the operation of a caveat under s 138C(2) if it is satisfied that the interest claimed in the caveat has or may have substance. That has been interpreted in the cases as requiring the applicant to demonstrate a serious question to be tried. That, in turn, requires the plaintiff to show a sufficient likelihood of success to justify the preservation of the status quo pending trial by extending the operation of the caveat: Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [65]; Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 [42] - [44].
20 Otherwise, I refer to the outline of principles in Bashford v Bashford [2008] WASC 138 [42] - [56]. What is said there about the balance of convenience should be understood in the light of the decision of the Court of Appeal in Navarac Pty Ltd v Moondancer Holdings Pty Ltd [2009] WASCA 95 [22].
21 The first defendants contend that the plaintiff has failed to discharge its onus of demonstrating that its claim has or may have substance. I turn to that question.
(Page 6)
A claim that has or may have substance?
22 The first defendants have not adduced any evidence. In particular, they have not adduced any evidence in relation to the balance of convenience. Thus, there is no evidence as to any adverse consequences, for the first defendants, of the maintenance of the caveat. That is relevant to the necessary strength of the plaintiff's case to establish a serious question to be tried sufficient to sustain the maintenance of the caveat.
23 The plaintiff's submission on why it has a claim that has or may have substance is simple. By cl 7 of the guarantee, the first defendants charged land that they owned in favour of the plaintiff as security for the first defendants' obligations under the guarantee to the plaintiff. That gives rise to a caveatable interest: Porter v McDonald [1984] WAR 271; Allen's Asphalt Pty Ltd v SPM Group Pty Ltd [2009] QCA 134. The plaintiff supplied the Customer with goods for which the Customer has not paid. The plaintiff's charge secures the first defendants' liability in respect of the outstanding monies.
24 Those submissions satisfy me that the plaintiff's claim to the interest claimed in the caveats has or may have substance.
25 The first defendants put a number of contentions in support of the conclusion they invite. I will deal with them in turn.
Failure to perfect the securities?
26 In oral submissions, counsel for the first defendants emphasised their contentions based on the Personal Property Securities Act 2009 (Cth) (PPSA). The first defendants' argument involves the following steps:
(1) the plaintiff's right to seize goods under condition 4 of the standard terms and conditions is a security interest as defined in s 12 of the PPSA;
(2) that interest has not been registered;
(3) because that interest has not been registered, the right of the plaintiff to seize goods is not enforceable against the liquidator, by reason of s 267 and s 267A of the PPSA;
(4) in failing to register its interest, the plaintiff failed to perfect its security interest: s 21 PPSA;
(Page 7)
- (5) the plaintiff's failure to perfect its security interest involved a breach of its duty to perfect securities, as to which see O'Donovan J and Phillips JC, The Modern Contract of Guarantee (3rd ed, 1996), pages 397 - 400;
(6) the first defendants as guarantors are entitled to be credited, in reduction of their liability, to the extent that that breach diminishes the value of the security: Williams v Frayne (1937) 58 CLR 710, 738; and
(7) clause 2(b) of the guarantee does not exclude failure to perfect a security, particularly when the guarantee is construed, as it must be, in accordance with the principles stated in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, 561.
27 It is not necessary to deal with all aspects of the first defendants' contentions. For at least two reasons, I am satisfied that there is a serious question to be tried notwithstanding the first defendants' contentions based on the PPSA. First, it is at least seriously arguable that the rights of the plaintiff under condition 4 are temporarily perfected for 24 months by operation of the transitional provisions of the PPSA. That means there is no breach. Secondly, in the alternative, assuming, as the first defendants assert, breaches on the part of the plaintiff of the equitable duty to perfect its security, it is by no means clear that such breach would reduce the amount of the debt owed by the first defendants under the guarantee to nil. In this respect, the first defendants as guarantors bear the onus of proof. I proceed to explain those conclusions.
28 Under s 322(1) of the PPSA, a transitional security interest is, in effect, temporarily perfected for 24 months after the registration commencement time. The registration commencement time is 1 February 2012.
29 Counsel for the first defendants very properly conceded that, if each sale the subject of an invoice is a transitional security interest, then the first defendants' argument would fail (ts 21). However, counsel argued that each sale is not a transitional security interest.
30 By s 308, a transitional security interest means a security interest provided for by a transitional security agreement, if, relevantly, the transitional security agreement as in force immediately before the registration commencement time provides for the granting of the security interest, and the Act applies in relation to the security interest.
(Page 8)
31 By s 307, a transitional security agreement means a security agreement that is in force immediately before the registration commencement time and that continues in force at and after that time.
32 By s 10, security agreement is defined to mean an agreement by which a security interest is created, arises or is provided for. By s 10, a security agreement 'provides' for a security interest if the interest arises under the agreement.
33 The foundation of the first defendants' contention is their submission that the transaction constituted by the credit account application is not itself an agreement. Rather, the first defendants submit, it is a platform that sets out the terms and conditions on which future agreements will be entered when and if products are supplied. Thus, no security interest arises under the credit account application, and so it is not an agreement that provides for a security interest.
34 Whether the documents signed in October 1998 gave rise to or were an element of a contract at that time depends, in part, on facts and circumstances not the subject of direct evidence on this application. On that account, I would be hesitant to decide, adversely to the plaintiff, that the first defendants' contention based on the PPSA means the plaintiff has no arguable claim. In any event, in my view, it is arguable that the provision of these documents by the plaintiff to the Customer and to the first defendants was an offer accepted by the return of the signed documents, giving rise to a contract. The terms of the contract were, in substance, that the plaintiff would supply to the Customer goods on credit when requested to do so, on the standard terms and conditions that formed part of the credit account application.
35 In my view, the plaintiff has demonstrated a seriously arguable case in relation to the following propositions:
(1) the October 1998 dealings gave rise to an agreement that would govern future deliveries;
(2) a right to repossess arises under that agreement in respect of each delivery;
(3) accordingly, the October 1998 agreement is a security agreement as defined in the PPSA;
(Page 9)
- (4) because the agreement was in force, and continuing, as at 1 February 2012, the October 1998 agreement is a transitional security agreement; and
(5) the October 1998 agreement provides for the granting of the security interest, and the PPSA applies in relation to that security interest, so the security interest provided for is a transitional security interest within the definition in s 308.
36 The consequence is that there is a seriously arguable case that the plaintiff has not breached its equitable duty to perfect the securities.
37 Alternatively, assuming, favourably to the first defendants, that the failure to register under the PPSA was a breach of the equitable duty, for the reasons that follow, that does not mean that the first defendants have no liability under the guarantee.
38 Counsel for the first defendants made clear that their case did not claim a breach of any implied condition of the guarantee (as to which see ING Bank (Australia) Ltd v Leagrove Pty Ltd [2011] QCA 131; [2012] 1 Qd R 140 [24] - [31]); rather, it relied on a breach of the equitable duty to perfect securities. Further, counsel accepted, correctly, that that meant the guarantors are released only to the extent that the security has been diminished in value: Williams v Frayne (738).
39 The first defendants submit that when the plaintiff exercises its right to repossess, the price of the goods ceases to be payable. That may be accepted. However, in my view, that does not mean that the value of the security is necessarily equal to or in excess of the value of the guaranteed debt. The security enables the security holder to take back the goods. If, at the time when a right to repossession could have been exercised, the goods are not worth as much as the price, then the loss of the security would not give rise to a loss equal to the value of the guaranteed debt. This is more than a theoretical possibility. The nature of the products supplied by the plaintiff makes it inherently likely that some at least of the product supplied would, soon after delivery, be affixed to a building under construction. If that occurred, there would be difficulties in the exercise of a right to repossession and, on the face of it, it would seem most unlikely that the net proceeds of the exercise of a right of repossession would be equal to the price paid for the product.
40 A guarantor who complains that the creditor has, by breach of duty, caused security to be lost or diminished bears the onus of establishing any
(Page 10)
- deficiency caused by the breach of duty: Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654, 676.
41 The first defendants have not established that any breach of duty by the plaintiff in failing to register its right to repossession under the PPSA has caused a loss equal to the whole of the outstanding price of the goods delivered pursuant to the unpaid invoices. Consequently, I am not satisfied that, on this account, the first defendants have no liability to the plaintiff under cl 7 of the guarantee.
The first defendants' other contentions
42 The first defendants submit that under cl 1 of the guarantee, the plaintiff is entitled to demand moneys only if they are 'then owing', meaning owing at the date of the demand. Because the Customer had been in administration since October 2012, and the demand was made in December 2012, the first defendants contend that, at the time of the demand, there was no money then owing. That is because rights to recovered debts were suspended on the commencement of the administration. See s 440D and s 440F of the Corporations Act 2001 (Cth).
43 I do not accept that contention. In my view, it overlooks the second limb of cl 1. Clause 1 provides that the defendants must pay 'on demand … all moneys then owing or from time to time remaining unpaid by the Customer'. The moneys demanded by the plaintiff on 12 December 2012 remained unpaid by the customer within the meaning of cl 1. That is the ordinary meaning of the phrase moneys remaining unpaid, and there is no warrant for departing from that ordinary meaning. The operation of s 440D and s 440F does not detract from that. I do not accept the first defendants' submission that the debts owed by the Customer are 'no longer unpaid once it is in administration [or] liquidation' (ts 26).
44 Given that conclusion, there is no need to deal with the first defendants' submissions about cl 3 of the guarantee.
45 The first defendants also point to the terms of cl 7 of the guarantee. That authorises lodgment of a caveat 'if the guarantors default in payment of any amount owing to the company'. The first defendants point out, correctly, that the caveats were lodged on 3 December 2012, prior to demand being made. Thus, they contend, at the time of lodgment of the caveat, the guarantors were not in default. That may be accepted. There may be a question as to whether the express words in the second part of
(Page 11)
- cl 7 should be taken as limiting the right that would otherwise appear to arise to lodge a caveat to support the interest created by the first part of cl 7. In any event, the guarantors have been in default since after receipt of the letter of demand of 12 December 2012. Both at the time when this application was filed, and now, the plaintiff has a caveatable interest that has or may have substance.
46 For these reasons, I am satisfied that the plaintiff has demonstrated a sufficient probability of success in establishing its claim the subject of the caveat to sustain the conclusion that its claim has or may have substance.
Balance of convenience
47 The first defendants have not adduced any evidence. Nevertheless, counsel for the first defendants submitted that there is no evidence of a risk of non-recovery by the plaintiff of the outstanding amount of about $34,000, so that the balance of convenience is against the plaintiff.
48 I do not accept that submission. There is no evidence as to the financial position of the first defendants. It was open to them to adduce such evidence. Moreover, the first defendants have not proposed any alternative arrangement that would have secured the debt alleged by the plaintiff to be owed to it by the first defendants as guarantors.
49 In those circumstances, I consider that the balance of convenience favours the extension of the operation of the caveat, in order to avoid the defeat of the security interest claimed by the plaintiff.
Conclusion
50 For these reasons, I would extend the operation of the caveats.
51 The plaintiff accepts the first defendants' contention that it should be a condition of the extension that the plaintiff commence proceedings to sustain its underlying claim, within 21 days.
52 I will hear from the parties as to the appropriate form of orders that should be made in light of these reasons.
53 Given the relatively small amount in issue, there would seem to be much to be said for attempt by the parties to resolve the matter commercially, to avoid litigating the numerous issues that have been raised (and not finally determined) in this proceeding.
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