Jayfield Pty Ltd v Cussen

[2020] VSC 380

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S ECI 2019 04190

JAYFIELD PTY LTD (ACN 007 114 249)	Plaintiff
v
NEIL ROBERT CUSSEN AND ROBERT WOODS in their capacity as joint liquidators of MELDED FABRICS AUSTRALIA PTY LTD) (IN LIQUIDATION) (ACN 147 555 726)	First Defendant
and
AUSTRALIAN COMFORT GROUP PTY LTD (ACN 098 742 584)	Second Defendant

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JUDGE:	GARDE J
WHERE HELD:	Melbourne
DATES OF HEARING:	1-2 June 2020
DATE OF JUDGMENT:	30 June 2020
CASE MAY BE CITED AS:	Jayfield Pty Ltd v Cussen & Ors
MEDIUM NEUTRAL CITATION:	[2020] VSC 380

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PERSONAL PROPERTY – Disposal of uncollected goods – Whether pt 4.2 of the Australian Consumer and Fair Trading Act 2012 (Vic) applies – Jurisdiction of courts – Relevant charge – Statutory charge – Equitable lien – Liquidation of provider of goods - Whether Personal Property Securities Act 2009 (Cth) applies – Position of liquidators – Australian Consumer Law and Fair Trading Act 2012 (Vic) ss 3, 54, 56, 58, 62, 66, 68, 69, 70, 71, 72 and 73; Personal Property Securities Act 2009 (Cth) ss 8, 10, 12, 21 and 267.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr I Hone Hone Legal & Conveyancing
For the First Defendant	Mr M McKillop	Gadens Lawyers
For the Second Defendant	Mr D McAloon	Cottell & Co

HIS HONOUR:

The claims

1. This judgment concerns the following two proceedings:

(a) an application made by Australian Comfort Group Pty Ltd (ACN 098 742 584) (‘ACG’) for an order under s 70 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (‘ACLFTA’) that it is authorised to sell by public auction or otherwise dispose of the goods stored by it (‘stored goods’) at premises formerly occupied by Melded Fabrics Australia Pty Ltd (in liquidation) (ACN 147 555 726) (‘MFA’) at 34-36 Commercial Drive, Dandenong South (‘premises’); and

(b)  a claim made by Jayfield Pty Ltd (ACN 007 114 249) (‘Jayfield’) against ACG for failing to release the stored goods to Jayfield.

1. The first defendants  (‘liquidators’) are the joint liquidators and former administrators of MFA. They were appointed administrators of MFA on 17 June 2019 and liquidators on 22 July 2019. At this time, Greg Taylor was the sole director of MFA. 

1. Prior to 12 April 2019, MFA subleased the premises from ACG (‘sublease’) and used the stored goods in its business. The premises formed part of a larger property (‘property’) which was leased by ACG (‘head lease’).

1. The evidence in this proceeding is largely undisputed.  Most is documentary or found in unchallenged witness statements. 

1. ACG relies on the witness statement of Grant Paine, the general manager of its ‘Dunlop Foams’ business.  Mr Paine gave oral evidence supplementing his witness statement.  He was cross-examined as to some aspects of his oral evidence and witness statement.  He was the only witness cross-examined.

1. The liquidators rely on the witness statement of Neil Cussen, one of the liquidators of MFA. 

1. Jayfield relies on the witness statements of:

(a)        Stephen Robert Carkeek, a director of Jayfield. Mr Carkeek was a director of MFA from 16 June 2016 to 17 July 2018;

(b)       John McLennan, the managing director of two companies that expressed interest in investing in MFA; and

(c)        Ronald Griffiths, Jayfield’s accountant. 

The assets

1. The Signature Assets were acquired by Jayfield as trustee of a trust in about 2004.  They include machinery and equipment used for textile printing and carpet tile manufacturing. The Melded Assets are heavy textile manufacturing plant and equipment. They were acquired by Jayfield as trustee of another trust in about 2009.

1. The stored goods include many but not all of the Signature Assets and the Melded Assets. They were transported to the premises in March 2016, and remain there after MFA ceased business and vacated the premises on 12 April 2019.

1. As at 31 January 2020, the stored goods included:

(a)eleven 40-foot shipping containers and their contents;

(b)plant, machinery and parts including carpet tile manufacturing line and accessories, nitrile rubber pressing, textile printing, cutting and IP assets, heavy textile manufacturing plant and equipment, textile looms, air compressors, forklifts and racking;

(c)stock and materials, including fabrics, dyes, tiles and flooring;

(d)office furniture, including desks, chairs, filing cabinets and electronic equipment; and

(e)an unregistered 2001 Ford Falcon motor vehicle.

Service and asset sale agreements

1. On 21 December 2015, Jayfield and MFA entered into a service agreement (‘service agreement’). Jayfield leased the Signature Assets to MFA for use in business for a monthly service fee of $1,500 per week plus GST. The service agreement was expressed to terminate if MFA was placed in administration or ceased to operate.

1. On 1 July 2016, Jayfield sold the Melded Assets to MFA (‘asset sale agreement’) in exchange for the issue of 80% of the issued shares in MFA to Jayfield. Ownership of the Melded Assets was to pass to MFA on the completion date of the asset sale agreement. MFA accepted responsibility for all costs associated with the Melded Assets, including the costs of transporting about 19 containers of the Melded Assets from Vietnam to the premises in around May to June 2016.

The sublease

1. The head lease was for a term of eight years commencing on 1 October 2013. The sublease was for a term of five years and five months, commencing on 1 May 2016. The premises include a warehouse together with an office block and ‘conversion building’.

1. Clause 3.1 of the sublease provided that the sublease contained the same clauses as the head lease (with appropriate modifications) to the extent that they were applicable to the premises.

1. Clause 6.8 of the head lease (‘cl 6.8’) applied to the sublease and provided:

(a)The Lessee prior to the expiration of the term of this Lease must remove the Lessee’s property and make good any damage to the Premises the Building or the Land caused by such removal;

(b)If the Lessee does not comply with clause 6.8(a) the Lessor may remove and store at the cost and risk of the Lessee and subject to the power or sale for non-payment of storage charges such of the Lessee’s Property as the Lessee fails to remove and the Lessee must pay to the Lessor on demand all costs and expenses incurred by the Lessor in so doing.

1. Clause 9.9 of the head lease (‘cl 9.9’) also applied to the sublease and provided:

Lessee’s Property remaining on the Premises following a determination of the Lease is subject to clauses 6.8(a) and 6.8(b).

1. Clause 1.1 of the head lease defined ‘Lessee’s property’ as:

all chattels, partitions, fixtures or fittings in the [property] belonging to or under the control of the Lessee including but not limited to signage.

MFA’s financial difficulties and subsequent events

1. MFA defaulted in payment of rent and outgoings under the sublease in 2016 and 2017.  On 22 February 2017, ACG and MFA entered into a deed of reinstatement of lease providing for the payment of arrears of rent and outgoings.

1. According to the administrators’ report to creditors dated 15 July 2019, MFA started to have financial difficulties following the shipment of equipment to Vietnam for a proposed joint venture with a Vietnamese company, where it incurred costs of around $1.6 million. As a result, MFA could not meet its financial commitments and ceased to pay rent.

1. The events that followed were:

(a)on 11 January 2019, ACG served notices on MFA under s 146 of the Property Law Act 1958 (Vic) relating to arrears of rental and outgoings payable under the sublease;

(b)on 14 April 2019, ACG served a notice of termination of the sublease and re-entered the premises (‘re-entry notice’);

(c)on 15 April 2019, Jayfield served a notice of default on MFA in relation to the asset sale agreement;

(d)on 24 April 2019, ACG exercised its rights in relation to a security deposit held under the sublease;

(e)on 10 May 2019, Jayfield issued a notice of termination of the service agreement;

(f)on 21 May 2019, Jayfield issued a rescission notice in relation to the asset sale agreement;

(g)on 24 May 2019, ACG served three statutory demands for payment of rent and outgoings on MFA;

(h)on 17 June 2019, voluntary administrators were appointed to MFA;

(i)on 4 July 2019, ACG served a notice of intention to dispose of uncollected goods under the ACLFTA (‘disposal notice’) on MFA and Jayfield;

(j)on 9 July 2019, ACG claimed a possessory lien over the stored goods; and

(k)on 22 July 2019, the liquidators were appointed to MFA.

Disputed ownership of the stored goods

1. In the re-entry notice, ACG stated:

Please note the following contact details of [ACG] for [MFA] to arrange for a suitable time to remove its property from the [premises].

[Contact details for Mr Paine were provided]

[ACG] reserves all of its rights.

1. Mr Paine personally served the re-entry notice on Mr Carkeek. Mr Paine asked Mr Carkeek to vacate personal items by Monday 15 April 2019. MFA accepted the notice and ceased to occupy the premises from 12 April 2019.  However, no action was taken by Jayfield or MFA to remove the stored goods.

1. On 28 April 2019, Mr Carkeek told Greg Taylor, the sole director of MFA, that he could no longer support MFA. On 10 May 2019, he resigned as general manager of MFA, stating in his letter of resignation:

By an act of insolvency, [the sublease] was inextricably terminated 12 April 2019, [MFA] has been unable to remedy its defaults, it has ceased operations.

1. On 14 May 2019, Mr Carkeek, as managing director of Jayfield, wrote to ACG. He said that Jayfield was the owner of the Signature Assets and the Melded Assets and requested that:

[ACG] keep safe and store the [stored goods] until terms for a new sublease are complete.

1. On 17 May 2019, general counsel for ACG responded to Mr Carkeek by email.  She advised:

1.Your letter asserts that [Jayfield]… is the owner of the ‘Signature Assets’ and… the ‘Melded Fabric Assets’.

2.You are aware that [MFA] has claimed ownership or rights to lawful possession of all the [stored goods].

3.[ACG] is not in a position to assess or form any view on the correctness of either party’s assertion or of which asset is in which category.  Accordingly, we are not in a position to admit and do not admit that Jayfield is the owner of any of the assets which Jayfield now claims it owns; or that any of these assets claimed by Jayfield are currently located at the premises.

4.We note in passing that no [Personal Property Securities Register] registrations appear to have been made by Jayfield against [MFA], as might be expected for an equipment hiring arrangement of the type now referred to by Jayfield.

5.ACG is an unwilling possessor of the [stored goods] following termination of the sublease due to [MFA’s] default.  ACG does not accept any risk or responsibility to anyone for any of the [stored goods] except as required by law.  To be clear, ACG does not consent to any of [the stored goods] remaining on the premises, rather ACG wishes for all of the [stored goods] to be removed immediately and the premises made good.

6.Unfortunately, the ownership dispute leaves ACG in the difficult position that it may be exposed to a claim from [MFA] if ACG was to allow Jayfield to collect the [stored goods] or otherwise to allow those assets to be dealt with by or in accordance with Jayfield’s instructions (or vice versa).  Therefore, given the competing claims to some or all of the [stored goods], ACG is cannot [sic] release the [stored goods] to Jayfield or otherwise store or deal with them as Jayfield directs unless Jayfield either: (1) provide us with confirmation from [MFA] that it consents to Jayfield removing or dealing with the [the stored goods]; or (2) Jayfield obtains and produces to ACG a court order confirming Jayfield’s ownership.[1]

[1]Emphasis added.

…

Uncollected Goods and temporary storage request

1.…ACG is intending to pursue our legal rights to seek removal of the [stored] goods including by notice in relation to uncollected goods under the [ACLFTA].

2.However you have suggested that ACG should store the [Signature Assets and Melded Assets], seemingly free of charge, until such time as the lease you refer to can be put in place....

3.Taking that you are asserting ownership of the [stored goods] (but without ACG accepting that to be the case) and you wish to continue to use our premises to store the [stored goods] then that can only be agreed on an interim basis if Jayfield enters into a short term licence agreement for the premises with [ACG]. This may assist Jayfield whilst it is endeavouring to resolve any disputes it has with [MFA] or any other person as to ownership of the [stored goods] as at least Jayfield and the third parties will know that the [stored goods] are being stored by Jayfield in their current location.

…

8.In any event, we put you on notice that, if Jayfield is in fact the rightful owner of the [stored goods], we will be pursing Jayfield for reasonable storage fees for the period since termination of the sublease on 14 April 2019.  These fees will continue to accrue until such time as the [stored goods] are removed or disposed of.….[2]

[2]Emphasis added.

1. On 20 May 2019, Mr Carkeek advised that Jayfield was interested in entering into a short term licence storage agreement for its assets with ACG, and requested further details for consideration.

1. On 23 May 2019, general counsel for ACG responded that ACG considered that a licence was too risky due to the disputed ownership of the stored goods. 

1. The disposal notice said in part:

(c)the [stored] goods may be collected from [the premises] by contacting [Mr Paine];

(d)the relevant charge payable to ACG for the [stored] goods as at the date of this notice is $219,561.84.  A more detailed statement of the relevant charge is set out in Schedule 3 of this notice. The relevant charge will increase at the rate of $1,446.58 per day. Therefore, by way of illustration, ACG estimates that, as at the date that is 28 days after the date of this notice, the further charges that will accrue will be $40,504.24;

(e)on or after the date that is 28 days after the giving of this notice, the [stored] goods will be disposed of unless they are collected and the relevant charge paid; and

(f)ACG will retain from the proceeds of sale of the [stored] goods an amount not exceeding the sum of the relevant charge and the disposal costs.

1. In a letter dated 9 July 2019, ACG’s solicitors advised Jayfield and MFA:

1.[ACG] claims a possessory security interest (lien) in [the stored goods];

2.no unauthorised access to the [premises] is permitted without [ACG’s] prior written consent;

3.lawyers representing the [administrators of MFA] have asserted that [ACG] is not permitted to dispose of the [stored] goods during the administration in the absence of court orders.  [ACG] does not accept that, but has nonetheless undertaken to the [administrators] not to sell or dispose of the [stored] goods without giving at least 3 business days prior notice to the [administrators]; and

4.[ACG] does not accept that the [administrators’] written consent is required in order… to allow persons to collect [the stored goods] from the [premises].  However, in the current circumstances, unless and until [ACG] notifies otherwise, any person wishing to collect [the stored goods] from the [premises] will need to provide [ACG] with either written consent from the [administrators], an appropriate court order or otherwise demonstrate to [ACG] that the person is entitled to collect the [stored] goods notwithstanding that [MFA] is in administration.  Payment will also need to be made to [ACG] of the applicable storage charges before collecting any goods.

1. In a letter dated 10 July 2019 to Mr Cussen, Jayfield sought agreement that the stored goods were the property of Jayfield.

1. The administrators’ solicitors responded in a letter of 12 July 2019 and said:

the [administrators] consider that Jayfield’s interest in [the Signature Assets] is a deemed security interest in the form of a PPS Lease pursuant to s 113 of the Personal Property Securities Act 2009 (Cth) (‘PPSA’).

As a consequence:

·any unperfected security interest vested in [MFA] immediately prior to the appointment of the [administrators] under s 267 of the PPSA. The PPS Registrations related to all property of [MFA] and not specifically the assets the subject of the Service Agreement, which raises the question whether the PPS Registrations were effective to perfect Jayfield’s security interest; and

·to the extent that the PPS Registrations made by Jayfield were effective (which is not accepted), they were made years after the Service Agreement was entered into, and less than 6 months prior to the appointment of the [administrators]. In the circumstances, the [administrators’] position is that the [Signature Assets] the subject of the Service Agreement vested in [MFA] pursuant to section 588FL of the Corporations Act 2001 (as it applies to late registered security interests).

…The Deed of Charge was signed by Jayfield and contains recitals which indicate that the [asset sale agreement] was amended and that [MFA] had title to the [Melded Assets] the subject of the [asset sale agreement]. In the circumstances, and on the face of it, the [administrators] are not in a position to accept that Jayfield owns the [Melded Assets] the subject of the [asset sale agreement].

Even if title to the [Melded Assets] did not pass to [MFA] under the [asset sale agreement] (or otherwise), the [administrators] query the basis on which [MFA] was in possession of the [Melded Assets] and whether the arrangement was a security interest in favour of Jayfield (which may also have vested in [MFA] as set out above).

1. The result was that ACG found itself in possession of the stored goods but caught in a dispute between Jayfield and the liquidators as to their ownership.

Offers to buy the stored goods

1. Mr McLennan was the managing director of Waste and Energy Innovations Pty Ltd (ACN 617 529 156) (‘W&E’) and Textile Innovations Pty Ltd (ACN 635 999 825) (‘TIA’). On 2 August 2019, Mr Carkeek emailed Mr Cussen and put a proposal that W&E buy MFA’s assets and business for $300,000. Mr Cussen responded the following day advising that he had appointed Hymans Valuers and Auctioneers Pty Ltd (ACN 164 281 350) (‘Hymans’) to manage the sale, and that all offers should be sent to them.  Mr Carkeek repeated the proposal to Hymans on 5 August 2019. 

1. On 6 August 2019, the liquidators’ solicitors confirmed that ownership of the stored goods had passed to MFA. They advised Jayfield that the liquidators intended to sell the stored goods by way of public auction with Hymans as the selling agents. The liquidators would consider any offers to purchase the stored goods prior to the auction.

1. On the same day, Hymans advised Mr Carkeek that they were prepared to recommend that the liquidators consider a price of $675,000 (excluding GST) for the stored goods on conditions that included payment of rent under the sublease following the exchange of contracts.

1. On 9 August 2019, Mr McLennan acting for TIA made an offer of $300,000 to acquire the stored goods.  Hymans rejected the offer. Their price and the conditions stood.  As these were unacceptable to TIA, the negotiations ended.

Proposed auction of the stored goods

1. On 12 August 2019, Jayfield’s solicitor wrote to the liquidators and Hymans demanding that the proposed auction not proceed and contending that MFA had no right, title or interest in the stored goods. Jayfield’s solicitor advised that he held instructions to issue proceedings for injunctive relief. Further correspondence ensued between respective solicitors but the position did not alter.

1. By 22 August 2019, Hymans had prepared a comprehensive inventory of the stored goods. They intended to conduct an on-site and on-line public auction on 31 October 2019. ACG was content for the auction to go ahead, provided that the proceeds of the sale were preserved until the competing claims were determined, and all of the stored goods were removed.

Dispute as to ownership and control of the stored goods

1. On 4 September 2019, Jayfield issued the writ in this proceeding claiming ownership of the stored goods and damages. On 11 October 2019, Jayfield issued a summons seeking an interlocutory injunction against the liquidators and ACG to restrain them from selling, unpacking or dealing with the stored goods.

1. On 23 October 2019, Connock J restrained the liquidators from selling, transferring or disposing of the stored goods until the trial of the proceeding or further order. No restraining order was made against ACG. On 20 March 2020, Connock J gave ACG leave to proceed against MFA under s 500(2) of the Corporations Act 2001 (Cth).

1. On 4 December 2019, ACG’s solicitors advised that ACG intended to exercise its rights to dispose of the stored goods by public auction. Jayfield could collect any of the stored goods that it may own or have an interest in by paying the relevant charge.

1. On 19 December 2019, ACG applied to the Court under s 68 of the ACLFTA for an order to dispose of the stored goods.

1. On 9 April 2020, upon the liquidators’ application, I ordered Jayfield to provide security for the liquidators’ costs from the date of the order up to and including the trial of the proceeding in the amount of $38,500 including GST by 4.00pm on 11 May 2020.

1. Jayfield did not provide security for costs.  The consequence was that Jayfield’s claim against the liquidators was dismissed, and the interlocutory injunction granted on 23 October 2019 was discharged. On 15 May 2020, I ordered that Jayfield pay the liquidators’ costs of the proceeding.

Failure to remove the stored goods

1. Mr Paine said that:

(a)following the re-entry notice, MFA did not collect the stored goods, or make arrangements for their collection or removal;

(b)ACG remained in possession of the stored goods except for some items belonging to third parties that were removed with ACG’s consent;

(c)Jayfield did not contact ACG or its solicitors to collect any of the stored goods;

(d)Jayfield did not pay the relevant charge in respect of the stored goods, or indicate any concern with the proposed disposal by ACG;

(e)ACG was unable to use or let the premises while the stored goods remained;

(f)the stored goods were large, bulky and difficult to move; and

(g)potential new sublessees of the premises wished to occupy with vacant possession.  This could not be given until the stored goods had been removed.

1. Mr Paine said that ACG’s occupation of the premises under the head lease will end on 30 September 2021.  ACG did not intend to renew the head lease.  The presence of the stored goods made it very difficult for ACG to secure a lessee willing to sublet the premises for the limited remaining period.  Lessees were unwilling to pay full value to secure only short term tenure for industrial premises. Significant prejudice had been suffered by ACG as a result of the stored goods remaining on the premises.

1. Mr Paine said that extensive clean-up and make good work would be required after the stored goods were removed.  This could take up to two months. 

Sublease of the premises

1. Mr Paine said that Jayfield had not made a subleasing proposal to ACG apart from brief communications in May 2019 about the possible grant of a licence.  ACG had no meaningful leasing discussions with TIA, with the last communication between ACG and TIA occurring in October 2019.  No person introduced by Mr Carkeek had made offers or proposals to ACG capable of acceptance.

1. Mr Paine spoke of an approach by Mr McLennan of W&E to occupy a portion of the warehouse and use the stored goods.  He indicated to Mr McLennan that ACG could not agree to a sublease or licence until the question of ownership of the stored goods was resolved.  ACG made an offer to Mr McLennan setting out the terms of a possible sublease, but this was not accepted.  ACG said that it was unable to authorise the use of the stored goods which were owned by others and subject to litigation. Mr McLennan obtained his own legal advice and in a telephone conversation told Mr Paine that it was all too hard.  Nothing eventuated.

1. In November 2019, an approach to lease the premises was received from Luke Van Vliet of Vy-Fab Pty Ltd (ACN 007 083 347) (‘Vy-Fab’).  Mr Paine met with Mr Van Vliet on 15 November 2019 and showed him the premises with Mr Carkeek, who explained the stored goods. Nothing further was heard from Mr Van Vliet and no proposals were ever put by him or Vy-Fab.

ACG’s application

1. ACG seeks an order under s 70 of the ACLFTA authorising it to sell or dispose of the stored goods by public auction unless the relevant charge is paid prior to the sale or disposal. It also seeks orders as to the amount of the relevant charge, and the application of the proceeds of sale.

1. The liquidators contend that ACG is not entitled to a disposal order under pt 4.2 of the ACLFTA (‘pt 4.2’) for the following reasons:

(a)cl 6.8(b) confers a contractual lien that entitles ACG to remove and store the stored goods;

(b)the lien entitles ACG to detain the stored goods as against MFA until its unpaid storage charges are paid, and to sell the stored goods for non-payment of storage charges;

(c)the lien amounts to a security interest in the stored goods within the meaning of s 12(1) of the Personal Property Securities Act 2009 (Cth) (‘PPSA’);

(d)ACG has not perfected its security interest by registration of the lien on the Personal Property Securities Register;

(e)the security interest vested in MFA under s 267 of the PPSA on the appointment of administrators on 17 June 2019;

(f)ACG has no lien to require payment of its storage charges because the lien had vested in MFA;

(g)there is no relevant charge within the meaning of s 55(1) of the ACLFTA; and

(h)ACG has not mitigated its loss.

1. ACG contests the liquidators’ contentions. It says that:

(a)   cl 6.8(b) does not apply as it did not remove and store the stored goods;

(b) it has a statutory right under pt 4.2 to seek an order to dispose of the stored goods;

(c)   it has an equitable lien over the stored goods;

(d) the PPSA does not apply;

(e) if the PPSA does apply, its interest is vested by possession under s 21(2) of the PPSA; and

(f)    it has mitigated its loss.

Relevant statutory provisions

1. Section 3 of the ACLFTA contains definitions relevant to the construction of pt 4.2:

(1)       In this Act-

…

bailment includes bailment for reward, bailment in the course of business, gratuitous bailment, voluntary bailment and any sub-bailment.

…

provider, …means the person who gives possession of goods under bailment (whether or not the person is the owner of the goods);

…

receiver, … means the person who takes possession of goods under a bailment;

…

relevant charge has the meaning given by section 55;

…

uncollected goods has the meaning given by section 54.

1. Part 4.2 contains the provisions relating to the disposal of goods. Relevant provisions are:

54       Uncollected Goods

(1)       Goods under bailment are uncollected goods if:

(a)the goods are ready for delivery to the provider in accordance with the terms of the bailment, but the provider has not taken delivery of the goods and has not given directions as to their delivery; or

…

(d)the provider has not paid the relevant charge payable to the receiver in relation to the goods within a reasonable time after being informed by the receiver that the goods are ready for delivery.

…

55       Relevant charge

…

(2)Unless determined otherwise by a court order, the amount payable to the receiver is the sum of the following –

(a)for any carriage or storage of the goods or for any repairs, cleaning, treatment or other work done in connection with the goods –

(i)the amount agreed to by the provider and receiver as the charge payable to the receiver; and

(ii)in the absence of any agreement, an amount that is reasonable;

…

56       Application

…

(4)       This Part applies to the disposal of uncollected goods –

(a)if there is no agreement between the provider and the receiver about their disposal; or

(b)if there is an agreement about their disposal, only in respect of matters not dealt with by the agreement.

…

(6)For the avoidance of doubt, this Part does not affect the right of a provider and receiver to make an agreement about the disposal of uncollected goods.

…

58       Receiver may dispose of uncollected goods

(1)Subject to subsection (2), a receiver may dispose of uncollected goods under this Division.

(2)       A receiver must not dispose of uncollected goods if—

(a)a dispute exists between the provider and receiver regarding the relevant charge, including such a dispute about the condition of the goods or the nature or quality of any repairs or other work done in connection with the goods; and

(b) an application has been made to the court under section 69.

(3)Subsection (2) does not prevent the receiver from giving notice under this Division of the receiver’s intention to dispose of the uncollected goods.

(4)A receiver who disposes of uncollected goods in accordance with this Division is not liable in relation to the goods by reason of the disposal.

59       Payment of relevant charge

The provider, the owner of the uncollected goods or any other person with an interest in the goods is entitled, on payment of the relevant charge, to delivery of the goods at any time before their disposal.

…

62       High value uncollected goods

(1)       A receiver may dispose of high value uncollected goods if—

(a)the receiver has given written notice of the receiver's intention to dispose of the goods to the following—

(i)        the provider; and

(ii)in a case where the provider and the owner are different people and the receiver is aware of that fact, the owner of the goods; and

(iii)any person who has a publicly registered interest in the goods; and

(iv)any other person having or claiming an interest in the goods of which the receiver is aware; and

(b)28 days have elapsed since giving the notice and neither of the following persons have taken delivery of the goods or given directions as to their delivery—

(i)        the provider; or

(ii)       the owner of the goods.

….

(3)       Goods must not be disposed of under this section otherwise than—

(a)       by way of public auction that is either—

(i)        advertised at least 7 days in advance; or

(ii)       held over a period of at least 7 days; or

(b)       subject to subsection (4), by way of private sale.

(4)       Goods may only be disposed of under subsection (3)(b) if—

(a)       notice has been given in accordance with subsection (1); and

(b)the receiver has a reasonable belief that the best price could only be achieved by private sale; and

(c)the receiver takes reasonable care to ensure that the goods are sold for the best price that can reasonably be obtained, having regard to the circumstances at the time the goods are sold.

…

66       Form of notice under this Division

A notice of the receiver's intention to dispose of uncollected goods under this Division must specify—

(a)       the receiver's name;

(b)       a description of the goods;

(c)       an address at which the goods may be collected;

(d)a statement of the relevant charge payable to the receiver for the goods and, if the relevant charge is likely to increase, a statement of the current relevant charge and an estimate of further charges that will accrue;

(e)a statement to the effect that on or after a specified date the goods will be disposed of unless they are collected and the relevant charge paid;

(f)if applicable, a statement to the effect that the receiver will retain from the proceeds of sale of the goods an amount not exceeding the sum of the relevant charge and the disposal costs.

…

68       Application to court for disposal order

(1)A receiver may apply to a court for an order to dispose of uncollected goods.

(2)       The application must—

(a)       state fully the grounds on which it is made;

(b) include the information in section 66(a) to (d);

(c)in the case of the disposal of a motor vehicle, include the written search result required under section 63 and any certificate obtained under section 64.

(3)       The receiver must give a copy of the application to—

(a)the provider, if the provider can be located after reasonable enquiries have been made;

(b)the owner of the goods, if the owner can be located after reasonable enquiries have been made;

(c)       any person with a publicly registered interest in the goods;

(d)any other person known by the receiver to have or to be claiming an interest in the goods.

69       Other applications to court

If a dispute exists between the provider and the receiver regarding the relevant charge for uncollected goods, either party may apply to a court for an order determining the amount of the relevant charge payable to the receiver.

70       Court orders

(1)On an application under section 68 or 69, the court may make any of the following orders—

(a)an order authorising the disposal of specified goods under bailment;

(b)an order determining the relevant charge payable to the receiver;

(c)any other orders that it considers necessary to give effect to an order made under paragraph (a) or (b).

(2)       An order under subsection (1)(a) must specify the following—

(a)       the authorised means of disposal of the goods;

(b)       the date by which the goods may be disposed of;

(c)the amount of the relevant charge payable to the receiver for the goods.

71       Payment of relevant charge

If a court order has been made for the disposal of uncollected goods, the provider, the owner of the uncollected goods or any other person with an interest in the goods is entitled, on payment to the receiver of the relevant charge, to delivery of the goods at any time before their disposal.

72       Effect of other proceeding

(1)If, at any time before the disposal of uncollected goods under Division 2, a person (other than the provider) starts a proceeding for the recovery of the goods, an order made under section 70 is suspended until the proceeding is decided.

(2)If an order is made for the recovery of the goods, the order made under section 70 ceases to have effect.

…

73       Proceeds of sale

(1)If uncollected goods are sold under Division 2, the receiver is entitled to retain the relevant charge payable to the receiver for the goods and the disposal costs.

(2)The balance (if any) of the proceeds of sale are to be dealt with as if the receiver were a business and the money were unclaimed money for the purposes of the Unclaimed Money Act 2008 [(Vic)].

(3)If the proceeds of the sale are insufficient to pay the relevant charge and disposal costs, the receiver may recover the deficiency from the provider as a debt in court.

1. Relevant provisions of the PPSA are:

8           Interests to which this Act does not apply

(1)This Act does not apply to any of the following interests…:

…

(b)a lien, charge, or any other interest in personal property, that is created, arises or is provided for under a law of the Commonwealth (other than this Act), a State or a Territory, unless the person who owns the property in which the interest is granted agrees to the interest;

(c)a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law;

…

(k)a particular right, licence or authority (the statutory right) granted by or under a law of the Commonwealth, a State or a Territory, if, at the time when the statutory right is granted, or at any time afterwards, a provision of that law declares that kind of statutory right not to be personal property for the purposes of this Act (no matter whether the provision remains in force);

…

10        The Dictionary

In this Act:

general law means the principles and rules of the common law and equity.

…

‘interest’ in personal property includes a right in the personal property

…

personal property means property (including a licence) other than:

(a)        land; or

(b)       a right, entitlement or authority that is:

(i)granted by or under a law of the Commonwealth, a State or a Territory; and

(ii)declared by that law not to be personal property for the purposes of this Act.

…

12        Meaning of security interest

(1)A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).

(2)For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation:

…

(d)a conditional sale agreement (including an agreement to sell subject to retention of title);

…

(i)        a lease of goods (whether or not a PPS lease);

(j)         an assignment;

(k)       a transfer of title;

…

21        Perfection—main rule

(1)       A security interest in particular collateral is perfected if:…

…

(b)       all of the following apply:

(i)       the security interest is attached to the collaterals;

(ii)      the security interest is enforceable against a third party;

(iii)      subsection (2) applies.

(2)       This subsection applies if:

(a)for any collateral, a registration is effective with respect to the collateral; or

(b)for any collateral, the secured party has possession of the collateral (other than possession as a result of seizure or repossession); or

…

267Vesting of unperfected security interests in the grantor upon the grantor’s winding up or bankruptcy etc.

Scope

(1)       This section applies if:

(a)       any of the following events occurs:

…

(ii)an administrator of a company or a body corporate is appointed…;

…

(b)a security interest granted by the body corporate, company or bankrupt is unperfected at whichever of the following times applies:

(i)in the case of a company or body corporate that is being wound up—when, on a day, the event occurs by virtue of which the winding up is taken to have begun or commenced on that day…;

…

(2)The security interest held by the secured party vests in the grantor immediately before the event mentioned in paragraph (1)(a) occurs.

…

The scheme of pt 4.2

1. Part 4.2 provides a process by which the receiver of uncollected goods may exercise a statutory power of disposal or obtain a disposal order from a court. It does not require the receiver to have a lien over the uncollected goods, and does not refer to a lien in its text.

1. For goods to be ‘uncollected goods’, the goods must be goods under bailment, and fall within at least one of s 54(1)(a) to (d). Exclusions are found in s 56(2), but do not apply here.

1. The receiver of the uncollected goods must serve a notice of intention to dispose in accordance with the requirements of s 66. This involves providing a statement of the relevant charge payable to the receiver for the uncollected goods determined in accordance with s 55. A person with an interest in the uncollected goods is entitled on payment of the relevant charge to delivery of the goods at any time before their disposal.[3]

   [3]ACLFTA s 59.

1. After the expiration of a further period (normally 28 days), and if the relevant charge has not been paid, the receiver may exercise a statutory right to dispose of the uncollected goods. There are various qualifications and restrictions that apply in specific circumstances, and the power of disposal must be exercised in the manner directed for low, medium and high value goods.

1. Application can be made to a court for a disposal order, or if there is a dispute as to the amount of the relevant charge. Section 73 provides for the receiver to retain the relevant charge and disposal costs from the proceeds of sale of the uncollected goods with the additional right to recover any deficiency from the provider as a debt in court. The balance of the proceeds (if any) is dealt with as unclaimed money.[4]

   [4]See Unclaimed Money Act 2008 (Vic).

1. Section 75 provides for a purchaser of goods sold under div 2 to acquire good title to the goods free from any interest that existed in the goods in favour of another person before the goods were sold, provided that the purchaser buys the goods without notice of any failure of the receiver to comply with pt 4.2 and without notice of any defect or want of title of the provider.

1. Part 4.2 confers important rights on the receiver of uncollected goods provided that the statutory requirements of div 2 to 4 are met. The receiver of uncollected goods has disposal rights under ss 58, 60, 61, 62 and 65. Disposal rights can also be conferred by court order under s 70.

The issues

1. The issues that arise in relation to ACG’s claim for an order under s 70 of the ACLFTA are:

(1)Does cl 6.8(b) apply?

(2)What is the extent of the Court’s jurisdiction under pt 4.2?

(3)Are the stored goods uncollected goods under s 54 of the ACLFTA?

(4)What is the relevant charge for the stored goods?

(5)Has ACG complied with the requirements of pt 4.2?

(6)Is ACG entitled to an equitable lien over the stored goods?

(7)Does the PPSA apply?

(8)Has ACG mitigated its loss?

Issue 1 – does cl 6.8(b) apply?

1. Under cl 6.8(a), MFA was required to remove its property from the premises on the termination of the sublease and make good any damage to the premises caused by the removal.  MFA did not remove the stored goods from the premises. ACG was entitled under cl 6.8(b) to remove and store the stored goods.  If the storage charges were not paid by MFA, cl 6.8(b) gave ACG the right to sell the stored goods.

1. Clause 6.8(b) confers a power similar to that contained in the former s 42B of the Landlord and Tenant Act 1958 (Vic) (‘LT Act’).[5]

   [5]Section 42B provided:

   (1)Where a landlord recovers possession of any premises because of the end or other determination of the tenancy and goods remain on the premises which the tenant fails or refuses to remove, the landlord may at his own expense remove and store the goods.

   (2)Where the tenant or any person who has resided in or occupied the premises with the permission of the tenant claims any of the goods after they have been removed by the landlord pursuant to subsection (1) that tenant or person shall not be entitled to restoration of the goods until he has reimbursed the landlord for the cost of removal and storage of and any other costs which the landlord has incurred in respect of the goods claimed by him.

   For similar covenants see GM & MY Campbell & Co Pty Ltd v IS Cotton & Anor [1992] ANZ ConvR 610 (Williams, Derrington and Ambrose JJ); Sharon-Lee Holdings Pty Ltd v Asian Pacific Building Corporation Pty Ltd (Retail Tenancies) [2012] VCAT 546 (Riegler SM).

1. The purpose of cl 6.8(b) and like provisions is self-evident.  It is to authorise the lessor to physically remove and store goods left behind by a lessee at the end of a lease, and to sell them if the lessee fails to pay the costs of removal and storage. The lessor is empowered to remove unwanted goods left behind by the departing lessee, make the premises ready for reletting, and give vacant possession to an incoming lessee. It would be intolerable and unworkable if the lessor could not remove goods left behind by a former lessee for fear of committing trespass to goods or conversion. Having removed the goods from the premises, the lessor is given a power of disposal if the former lessee does not collect the removed goods, or fails to pay the costs of removal and storage.

1. A plurality of the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd summarised the principles of construction of commercial contracts in these terms:

The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. It may be necessary in determining the proper construction where there is a constructional choice.

…

Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating.

Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption ‘that the parties… intended to produce a commercial result’. Put another way, a commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.[6]

[6](2015) 256 CLR 104, 116–7 [46]–[51] (citations omitted) (French CJ, Nettle and Gordon JJ).

1. These principles have been consistently applied in Victoria.[7]

   [7]See Perpetual Ltd v Myer Pty Ltd [2019] VSCA 98, [75] (Whelan, Niall and Hargrave JJA); PCCEF Pty Ltd v Geelong Football Club Ltd [2019] VSCA 144, [27] (Whelan, McLeish and Emerton JJA); Knights Quest Pty Ltd v Daiwa Can Company (2018) 366 ALR 557, 579 [88] (Beach, Kyrou and Hargrave JJA).

1. ACG submitted that the power of sale in cl 6.8(b) did not arise until the stored goods had been removed and stored, and the lessee had failed to pay the costs of doing so.  In the present case, the power of sale in cl 6.8(b) had not arisen.

1. The liquidators submitted that cl 6.8(b):

(a)        allows the lessor a permissive right to remove and store the goods at the cost and risk of the lessee; and

(b)       does not require the lessor to remove the goods from the premises before the costs associated with the storage of the goods can be claimed.

1. In my view, cl 6.8(b) should be given a businesslike construction in keeping with its purpose.  For the power of sale to arise, the following elements must be present:

(a)the lessee must fail to remove the goods from the premises prior to the expiration of the term;

(b)the lessor must remove and store the goods that the lessee has failed to remove;

(c)the lessor must incur storage costs and expenses by reason of the removal of goods from the premises;

(d)the lessor must demand payment from the lessee of the costs and expenses of removal and storage; and

(e)the lessee must fail to pay the costs and expenses demanded by the lessor.

1. I reject the construction of cl 6.8(b) submitted by the liquidators as:

(a)cl 6.8(b) is intended to give the lessor the power to remove the lessee’s goods from the premises if the lessee fails to do so prior to the expiration of the term;

(b)cl 6.8(b) provides for the payment by the former lessee of the storage charges incurred by the lessor and the costs and expenses of the lessor of removing and storing the goods;

(c)if the goods are left on the premises, the lessor may be deprived of rental from a new lessee but will not ordinarily incur storage charges in relation to the goods;

(d)cl 6.8(b) is intended to provide the lessor with the capacity to obtain vacant possession of the premises; and

(e)cl 6.8(b) gives the lessor power to dispose of the lessee’s property, and should not be construed more widely than the language of the clause permits.

1. The undisputed evidence is that ACG found itself unwillingly in possession of unwanted goods left by MFA when it ceased business and vacated the premises.  ACG did not remove the stored goods from the premises, and no party sought to do so whilst the dispute was pending. ACG did not exercise its powers under cl 6.8(b).

Why were the stored goods left at the premises?

1. ACG had to decide what to do in circumstances where there was an ongoing dispute between Jayfield and the liquidators as to the ownership of the stored goods.  

1. Mr Paine stated that ACG had little choice but to leave the stored goods at the premises. The stored goods included 11 large shipping containers, plant and machinery, much of which was attached to the building. There was also a huge quantity of waste fabric material. The stored goods would need to be dismantled, disconnected and packaged before they could be removed from the premises, which was an onerous and expensive undertaking.

1. Mr Paine said that ACG had no spare space at the premises or at any other site in Victoria for the stored goods to be relocated. Third party storage providers were either unwilling to accept the stored goods or interested in doing so only at storage rates considerably in excess of the rental and outgoings incurred by virtue of the stored goods remaining on the premises. If the stored goods were removed, ACG would have to pay the third party provider’s fees and charges. In addition, the liquidators advised ACG that they intended to conduct an on-site auction. 

1. Mr Paine’s reasons for leaving the stored goods at the premises are persuasive and were not disputed by the liquidators.  I accept Mr Paine’s evidence generally.

Issue 2 – what is the extent of the Court’s jurisdiction?

1. In Tasman Logistics Services Pty Ltd v Seaco Global Australia Pty Ltd, I considered the jurisdiction of courts under pt 4.2. I held that ss 56(4) and (6) of the ACLFTA uphold the private rights of providers and receivers to agree about the disposal of uncollected goods. Where parties have made an agreement concerning the disposal of uncollected goods, the agreement has primacy and takes effect according to its tenor. Part 4.2 may not apply at all, or may apply only in respect of matters not dealt with by the parties in their agreement.[8]

   [8][2020] VSC 100, [26]–[27] (‘Tasman Logistics’).

1. In the present case, the legal relationship between ACG and MFA was governed by the sublease.  The only provision of the sublease that dealt with uncollected goods was cl 6.8(b).  There is a complete lack of detail in cl 6.8(b) as to the manner of disposal, whether a sale is to be conducted by public auction or private sale, what notice is to be given, how the price is to be determined, and how storage and disposal costs are to be borne.

1. Consequently, I hold that the sublease provides no impediment to the jurisdiction of the Court under pt 4.2.

Issue 3 - are the stored goods uncollected goods under s 54 of the ACLFTA?

Parties submissions

1. The liquidators submitted that:

(a)the stored goods are not uncollected goods under s 54(1)(a) to (d) of the ACLFTA;

(b)the stored goods are only within s 54(1)(d) if MFA has not paid the relevant charge within a reasonable time after being informed by ACG that the goods are ready for delivery;

(c)the stored goods are the subject of a relevant charge if ACG has a right to refuse to provide delivery of the stored goods until an amount is paid; and

(d)there is no relevant charge since the rights given by cls 6.8 and 9.9 have vested in MFA and ACG has no other contractual right.

1. ACG submitted that:

(a)pt 4.2 contains no requirement that the receiver of uncollected goods has a lien over those goods;

(b)pt 4.2 replaced pt IV of the LT Act. Relief under the LT Act was not conditional on the existence of a lien;

(c)to be uncollected goods, only one of the circumstances in s 54(1)(a) to (d) need apply to the goods under bailment;

(d)both s 54(1)(a) and (d) are satisfied;

(e)there is no basis for adopting a restrictive approach to the application of pt 4.2, particularly where the amount payable as the relevant charge will either have been the subject of agreement between the provider and receiver or, alternatively, must be reasonable;[9] and

(f)in the present case, where the amount of the relevant charge was not agreed, the amount payable is a reasonable amount.

Does s 54(1)(a) apply?

[9]See Scandi International Pty Ltd v Larkfield Industrial Estate Pty Ltd [2019] VSCA 109, [92] (Whelan and Beach JJA and Sifris AJA) (‘Scandi (No 2)’), where the Court of Appeal adopted a broad approach to the construction of s 55(1) and (2) of the ACLFTA.

1. The term ‘bailment’ is given an extended meaning by s 3 of the ACLFTA. The parties agreed that after the termination of the lease, ACG held the stored goods on an involuntary bailment for the purposes of s 54(1). As the bailment was involuntary, it is unexceptional that no relevant charge was agreed.

1. Section 54(1)(a) provides that goods under bailment are uncollected goods if the goods are ready for delivery to the provider in accordance with the terms of the bailment, but the provider has not taken delivery of the goods and has not given directions as to their delivery.

1. I find that the stored goods are uncollected goods under s 54(1)(a) for the following reasons:

(a)in the re-entry notice, ACG requested MFA to arrange for suitable time to remove its property from the premises, and provided Mr Paine’s contact details.  MFA did not take delivery of the stored goods and did not give directions about their delivery;

(b)a month later, Mr Carkeek claimed that Jayfield was the owner of the stored goods and requested ACG to ‘keep safe and store the [stored goods] until terms for a new sublease are complete’.  Mr Carkeek was a director of Jayfield and had been the general manager of MFA until 10 May 2019.  Mr Carkeek did not ask to take delivery of the stored goods or give directions for their delivery;

(c)in response, general counsel for ACG described ACG as ‘an unwilling possessor’ of the stored goods, which did not consent to the assets remaining on the premises. By this time, ACG requested reasonable storage fees to be paid for the period since termination of the sublease;

(d)the disposal notice again stated that the stored goods could be collected and provided contact details. Neither Jayfield nor MFA did so. Storage costs were accruing at the rate of $1,446.58 per day; and

(f)the stored goods were ready for collection or delivery on 14 April 2019 and after the disposal notice was served on 4 July 2019. Jayfield and MFA did not take delivery of the stored goods or give directions about their delivery.  No amount was paid or offered to ACG for its storage costs and expenses.

Does s 54(1)(d) apply?

1. Section 54(1)(d) applies if the provider has not paid the relevant charge payable to the receiver in relation to the goods within a reasonable time after being informed by the receiver that the goods are ready for delivery.

1. ACG submitted that it was entitled to require MFA to pay the relevant charge in relation to the stored goods within a reasonable time after being informed by the receiver that the goods were ready for delivery.

1. In Scandi International Pty Ltd v Larkfield Industrial Estate Pty Ltd,[10] Judge Anderson considered the operation of s 59 of the ACLFTA in circumstances where furniture had been stored in a storage facility conducted for reward. The facility operator declined to release the furniture until outstanding rental and other charges were paid. Both parties agreed that the receiver held the furniture on an involuntary bailment at least from the time the receiver took possession of the goods and transferred the goods to another shed at the premises.[11]

   [10][2018] VCC 584 (‘Scandi (No 1)’).

   [11]Ibid [224]–[225].

1. His Honour held that the receiver had an equitable lien over the furniture because it would be unjust and unconscionable for the providers to take the benefit of the storage without first paying an appropriate charge for this service. Section 59 exhaustively covered the circumstances in which uncollected goods could be recovered by the provider. It required the provider to pay the relevant charge before there could be an entitlement to recover the goods.[12]

   [12]Ibid [207].

1. The Court of Appeal held that the trial judge did not err when he concluded that the furniture constituted uncollected goods under s 54(1)(d). The provision was engaged because the provider did not pay the charges that accrued after the date of termination by the receiver of the storage agreement. The storage agreement gave the provider the right to store furniture at the premises.[13]

   [13]Scandi (No 2) (n 9) [87].

1. I find that s 54(1)(d) does apply for the following reasons:

(a)ACG found itself in possession of the stored goods on 14 April 2019 when MFA vacated.  Despite requests, no party sought to remove the stored goods at that time or after the disposal notice was served on 4 July 2019. It is easy to understand why this was so, given that their removal and storage in another location would be difficult and expensive.

(b)Jayfield requested and acquiesced in ACG’s continuing possession of the stored goods after 14 April 2019.  MFA acquiesced in ACG’s continuing possession of the stored goods both before and after the administrators were appointed. The administrators required that ACG not dispose of the stored goods without court order or their consent.  The liquidators acquiesced in ACG’s continuing possession of the stored goods, appointing auctioneers to sell the stored goods in location by online auction on 31 October 2019. ACG had little choice but to continue in possession of the stored goods.

(c)After the disposal notice was given, no one paid the relevant charge. There was no tender or payment by Jayfield or MFA to ACG in reduction of the relevant charge after being informed that the stored goods were ready for collection. Indeed, there appears to have been no thought of payment of the relevant charge.

(d)The result was that from about 2 August 2019, ACG was empowered to dispose of the stored goods as high value uncollected goods under s 62 of the ACLFTA.

(e)ACG did not act or rely on cl 6.8(b). There is no reference to it in the evidence. It relied on its rights under the ACLFTA.

1. In Re Mossgreen Pty Ltd (in liq), goods delivered to an auction house were left in a leased warehouse.[14] The administrators of the auction house gave up occupation of the warehouse and possession of the goods in the warehouse. The lessor had no prior relationship with the owner of some of the goods.  Robson J held that the owner was liable for the cost of storing the goods for the period in which the administrators had no longer been in possession of the goods.  The amount payable by the owner was the amount that is reasonable for the storage of the goods or other work done in connection with the goods.  The Court’s reasoning did not depend on the existence of a lien over the goods.[15]

   [14][2018] VSC 230.

   [15]Ibid [16], [20].

Issue 4 - what is the relevant charge for the stored goods?

1. Under s 55(2) of the ACLFTA, unless determined otherwise by a court, the relevant charge is the sum of:

(a)the amount for any carriage or storage of the goods or for any repairs, cleaning, treatment or other work done in connection with the goods agreed by the provider and receiver as the charge payable to the receiver, or in the absence of an agreement, a reasonable amount; and

(b)the amount of costs for any storage, maintenance or insurance of the goods incurred by the receiver from the giving of the receiver’s intention to dispose of the goods or the making of an application for a court order under div 3 until the disposal of the goods.

1. The disposal notice set out the basis on which ACG calculated the relevant charge.  For the period from 1 October 2018 until termination of the sublease on 14 April 2019, storage charges totalling $100,942.66 (inclusive of GST) were outstanding for unpaid monthly rental and outgoings, and would continue to accrue at the rate of $1,446.58 per day from 14 April 2019 until the stored goods were removed.  The validity and efficacy of the disposal notice and its contents are not disputed.

1. Mr Paine gave evidence as to how these amounts were calculated. The premises were not fit for use by ACG or by any third party while the stored goods remained.  The rent for the premises payable by ACG under the head lease and the outgoings accrued by ACG in relation to the property were apportioned to the premises at a reduced rate.  He explained that ACG incurred rent for the premises of about $75/m², but was seeking to recover storage charges of $69/m² for the premises.

1. I accept Mr Paine’s evidence and find that an amount of $1,446.58 per day as claimed by ACG is fair and reasonable, and less than the actual rent incurred by ACG to the head lessor.  The stored goods became uncollected goods on 14 April 2019, which is the appropriate date for the relevant rate of $1,446.58 per day to commence.  Prior to this date, there was unpaid rent and outgoings owed by MFA to ACG. In relation to these amounts, ACG stands as a creditor in the winding up of MFA. After 14 April 2019, ACG was denied the opportunity of obtaining a new sublessee by the existence of the stored goods and the need to safeguard them.

Issue 5 - has ACG complied with the requirements of pt 4.2?

1. The position is that:

(a)the stored goods are uncollected goods under s 54(1)(a) and (d);

(b)ACG became the involuntary possessor of the stored goods on 14 April 2019;

(c)ACG remains in possession of the stored goods;

(d)ACG gave the disposal notice to all interested parties and satisfied the notice requirements;

(e)the relevant charge has not been paid;

(f)the amount determined as the relevant charge is a reasonable amount; and

(g)ACG became entitled to dispose of the stored goods as high value uncollected goods on or about 2 August 2019.

1. I find that ACG has complied with all relevant provisions of pt 4.2. Unless its position is affected by the provisions of the PPSA to which I will shortly turn, it is entitled to an order under s 70 of the ACLFTA.

1. While an order under s 70 is in the discretion of the Court, there is no reason why an order should be refused. ACG has been the custodian of the stored goods since April 2019 at very considerable expense to itself. It did not seek to be the bailee of the stored goods but became an involuntary bailee when MFA did not remove them on the termination of the sublease. During their dispute as to the ownership of the stored goods, Jayfield and MFA have received a continuing and substantial benefit from the storage services provided by ACG.

Issue 6 – is ACG entitled to an equitable lien over the stored goods?

1. An equitable lien is a right against property implied by law to secure the discharge of an actual or potential indebtedness.  It arises by operation of equity as part of a general adjustment of mutual rights and obligations. It is in truth an equitable charge on the subject property, and is not dependent on the existence of a contract or upon possession.[16]

   [16]Hewett v Court (1983) 149 CLR 639, 645 (Gibbs CJ), 663 (Deane J) (‘Hewett’).

1. In a well-known passage in Hewett, Deane J described the circumstances giving rise to the implication of an equitable lien between parties in a contractual relationship:

They are: (i) that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it…; (ii) that that property… be specifically identified and appropriated to the performance of the contract…; and (iii) that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property… to a stranger without the consent of the other party or without the actual or potential liability having been discharged.[17]

[17]Ibid 668 (citations omitted). See also McDonald’s Australia Ltd v Bendigo and Adelaide Bank Ltd [2014] VSCA 209, [102]–[104] (Hansen JA).

1. In Stewart v Atco Controls Pty Ltd (in liq), the High Court referred to this passage in discussing the circumstances that must exist for an equitable lien to arise.[18]

   [18]Stewart v Atco Controls Pty Ltd (in liq) (2014) 252 CLR 307, 317–8 [13], 320 [23], 322 [30] (Crennan, Kiefel, Bell, Gageler and Keane JJ) (‘Stewart’).

1. In Scandi (No 1), Judge Anderson reviewed classes of qualifying circumstances for cases of unjust enrichment, and noted the following:

(a)work performed at the request of a party;

(b)acquiescence in the provision of services knowing that the services were not being rendered gratuitously;

(c)a party did not take a reasonable opportunity to reject the performance of services; and

(d)a contract that failed to materialise.[19]

[19]Scandi (No 1) (n 10) [190].

1. In the present case:

(a)the goods were stored and secured at Mr Carkeek’s request;

(b)Jayfield and MFA acquiesced in the provision of storage services by ACG knowing that ACG was incurring considerable expense and was not rendering the services gratuitously;

(c)neither Jayfield nor MFA rejected the performance of storage services; and

(d)subsequent to 14 April 2019, no sublease or licence materialised.

1. In Scandi (No 2), the Court of Appeal was unpersuaded that the judge erred in finding that the receiver acquired an equitable lien over the stored furniture.[20]

   [20]Scandi (No 2) (n 9) [97].

1. I am satisfied that ACG acquired an equitable lien over the stored goods for the following reasons:

(a)ACG became the unwilling possessor of the stored goods on 14 April 2019;

(b)ACG secured and safeguarded the stored goods on the premises without payment or reward;

(c)the cost to ACG of storing the stored goods is substantial and at least $1,446.58 per day;

(d)ACG was in jeopardy of legal proceedings whatever it did with the stored goods;

(e)Jayfield and MFA acquiesced in ACG’s possession and had the benefit of its custody and safekeeping of the stored goods;

(f)Jayfield and MFA have been content for ACG to incur continuing rental and outgoings in securing the stored goods without making any financial contribution;

(g)Jayfield and MFA did not propose any alternative arrangements for the storage and safekeeping of the stored goods;  

(h)the stored goods are specifically identified and can be appropriated; and

(i)it would be unconscionable and unfair for ACG to be left with considerable expense without affording it the opportunity to recover some of the expenses through the recognition of an equitable lien over the stored goods.

1. An equitable lien over the stored goods is consistent with cl 6.8(b). Clause 6.8(b) provides a contractual lien where goods are removed by the lessor and stored on the termination of the lease and affords a power of sale if the costs and expenses of removal and storage are left unpaid by the departing lessee. An equitable lien would achieve a similar purpose where goods are left behind by a departing lessee of such size and magnitude as to render the premises unusable until they can be removed.

Issue 7 - does the PPSA apply?

Relevant PPSA provisions

1. ACG has established that it is entitled to an order under s 70 of the ACLFTA for the disposal of the stored goods and to an equitable lien. The issue that then arises is whether its position is affected by the PPSA.

1. Section 8(1)(b) and (c) provide that the PPSA does not apply to a lien, charge or other interest in personal property that is created, arises or is provided for:

(a)        under a law of a State unless the person who owns the property in which the interest is granted agrees to the interest; or

(b)       by operation of the general law.

1. The expression ‘interest in personal property’ is widely defined in s 10 of the PPSA and extends to statutory rights as well as to contractual, possessory and equitable rights in personal property.

1. Section 8(1)(k) provides that the PPSA does not apply to a particular right, licence or authority granted by or under a law of a State if, at the time when the statutory right is granted or at any time afterwards, a provision of that law declares that kind of statutory right not to be personal property for the purposes of the PPSA.

1. While there is no provision in the ACLFTA declaring the rights created under that statute not to be personal property for the purposes of the PPSA, s 8(1)(b) excludes liens, charges and other interests in personal property created, arising or provided for under a law of a State from the operation of the PPSA unless the owner of the property in which the interest is granted agrees to the interest. The rights provided by pt 4.2 arise by operation of law and not by the agreement of the provider or property owner.

Australian decisions

1. In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd, the Court of Appeal held that an equitable charge held by a judgment creditor over monies in a joint account was not a security interest under s 12(1) of the PPSA and did not vest in the judgment creditor under s 267(2) of the PPSA.[21]

   [21](2014) 49 VR 86 (Maxwell P, Whelan and Santamaria JJA) (‘Dura’).

1. The Court of Appeal considered the meaning of the expression ‘interest in personal property’:

The PPSA does not define the phrase ‘interest in personal property’ in s 12(1), save that s 10 provides that ‘interest, in personal property, includes a right in the personal property’. In the absence of some legislative stipulation to the contrary, the phrase, and the words that constitute it must be given their natural and ordinary meaning.

It was not in contention that the funds in the joint account were ‘personal property’ for the purposes of the PPSA. It will be noticed that an equitable charge, such as that acquired by Hue over the moneys paid into the joint account, naturally falls under the description of ‘a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law’ found in s 8(1)(c) of the PPSA. Such interests are not covered by the PPSA.[22]

[22]Ibid 123 [108]–[109].

1. The Court of Appeal also considered the meaning of the word ‘transaction’ in s 12:

Section 12 uses the word ‘transaction’. The PPSA does not itself proffer a definition of this central concept. It does not qualify the use of the word ‘transaction’ in the phrase ‘provided for by a transaction’ with any epithet. The word itself is one of considerable generality; it covers a broad range of activities. The Shorter Oxford English Dictionary provides several meanings of transaction including ‘3. The action of transacting or fact of being transacted … 4. That which is or has been transacted, esp. a piece of business; a deal. A physical operation, action, or process.’ The word is apt to describe conduct giving rise to rights, where the creation of those rights may be said to be consensual as between parties, as well as conduct as a result of which rights arise by operation of law, notwithstanding the absence of any consent inter partes. It is itself apt to describe a payment into a joint account such as occurred in the present case: the payment (like all payments) involved an action in which something passed from one person to another.[23]

[23]Ibid 123 [110].

1. In Central Cleaning Supplies (Aust) Pty Ltd v Elkerton, the Court of Appeal described a security interest in these terms:

A ‘security interest’ is thus an interest ‘provided for by’ a transaction of a particular kind. It must be a transaction which ‘in substance, secures payment or performance of an obligation’. Under s 12(2), the legislature has given a non-exhaustive list of types of transactions which may give rise to a security interest, provided always that the transaction is of the relevant character, that is, it ‘secures payment or performance of an obligation’.[24]

[24][2015] VSCA 92, [15] (Maxwell P, Tate and Beach JJA)

1. In Australian Personal Property Securities Law, Professors Duggan and Brown discuss security interests that arise by operation of law in the following passage:

PPSA s 12 limits the application of the statute to a security interest provided for by a transaction. In other words, subject to the limited exceptions discussed below, the PPSA only applies to consensual security interests. To reinforce this point, PPSA, paragraphs 8(1)(b) and (c) provide that the statute does not apply to a security interest or other interest in personal property arising by operation of law. Paragraph (b) applies to statutory liens, while paragraph (c) applies to common law liens. Statutory liens include both government liens and liens in favour of private creditors. …Examples of private liens created or regulated by statute include the warehouse operator’s lien and the unpaid vendor’s lien. Examples of common law liens include the repairer’s lien; the innkeeper’s lien; and the solicitor’s lien over documents.[25] 

[25]A J Duggan and David Brown, Australian Personal Property Securities Law (LexisNexis Butterworths, 2016) 3.24.

Overseas decisions

1. The New Zealand equivalent of the PPSA was considered in Fisk & McCloy v Attorney-General on behalf of the Comptroller of Customs. Brown J held that a customs charge under s 97(1) of the Customs and Excise Act 1996 (NZ) was a charge created by statute and was beyond the application of the PPSA.[26]

   [26][2016] NZHC 479, [23].

1. In McKay v Toll Logistics (NZ) Ltd, Rodney Hansen J observed that a contractual lien may qualify as a security interest but a lien created by statute or operation of law could not because the New Zealand equivalent of the PPSA had deliberately distinguished between different categories of lien.[27] 

   [27][2010] NZHC 978, [38].

1. In Canadian Imperial Bank of Commerce v 64576 Manitoba Ltd, Jewers J held that the Canadian equivalent of the PPSA did not apply to a statutory right of distress because the right was a lien given by statute and not by a consensual transaction.[28] The right was not a security interest, and the requirement of registering or perfecting such transactions was not consistent with the legislative intention.[29] In the ordinary course, a lender could check the register for prior secured interests before making an advance. They could perfect their security and have control over the situation. In non-consensual transactions, the security interest acquired may not arise until a later point in time, which may not be in the interest holder’s control.[30]

   [28][1990] 5 WWR 419, 429.

   [29]Ibid 430.

   [30]Ibid 430–431.

1. In Dube v Bank of Montreal, the Saskatchewan Court of Appeal was of a similar view. The Canadian equivalent of the PPSA did not apply to determine the priorities in relation to a statutory right of distress because it was a type of statutory interest.[31]

   [31](1986) 27 DLR (4^th) 718, [6].

1. While there are some differences in statutory language, the reasoning of the Canadian courts is equally applicable to the PPSA in Australia. It makes no sense for a lessor to be required to register a possible future right arising by operation of law under pt 4.2. Such a right will only arise if the operative legislative provisions apply, and in the event of a dispute, a court is minded to exercise its discretion in favour of the lessor. Likewise in present circumstances, an equitable lien can only arise if its existence is declared by a court. The registration regime of the PPSA can have no application in such circumstances.

The PPSA does not apply

1. A power to dispose of uncollected goods under pt 4.2 is an interest in personal property that is provided for by a State law. It is not a security interest as defined in s 12(1) of the PPSA because it is not consensual and is not provided for by a transaction that secures payment or performance of an obligation.

1. An equitable lien is an interest created by application of the rules of equity. Under s 8(1)(c), it is not an interest to which the PPSA applies. It is not an interest in personal property that is provided for in a transaction that secures payment or performance of an obligation under s 12(1).

1. These conclusions are consistent with the Court of Appeal decision in Dura:

In my opinion, because the interest of Hue in the moneys paid into Court did not arise out of a consensual transaction between it and Dura, its interest in the funds was not a ‘security interest’ within s 12 of the PPSA…

Further, in so far as Hue acquired an equitable charge over the moneys paid into Court, the PPSA did not apply as that charge answered the description of ‘a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law’, within the meaning of s 8(1)(c) of the PPSA. Its interest arose as a result of Dura complying with the condition imposed by the Court of Appeal. There was no contractual or any other transaction or arrangement between the parties…

For those reasons, any interest of Hue in the moneys was not capable of being ‘perfected’ under s 21 of the PPSA. Section 267 of the PPSA operates with respect to security interests granted by a body corporate that are unperfected at the time of its insolvency. As a result, s 267(2) of the PPSA has no operation…[32]

[32]Dura (n 21) 128–129 [126]–[128].

1. In Tasman Logistics, I considered a storage agreement where there was a lien on goods that empowered Tasman to sell the goods by public auction or private treaty in the event that storage charges were unpaid.[33] In that case, s 73 of the PPSA applied to the interest in the goods created by the storage agreement because it was listed in the table in s 8(2) of interests to which the PPSA applied. Section 267 is not listed in that table.

   [33]Tasman Logistics (n 8).

1. The result is that the PPSA does not apply to the statutory powers of disposal in pt 4.2. It does not apply to an equitable lien arising in circumstances where the owner of the goods would be acting unconscionably or unfairly if it were to dispose of the property without that liability being discharged.[34]

   [34]See Stewart (n 18) 322 [30].

1. Moreover, even if the lien created by cl 6.8(b) vests in MFA under s 267 of the PPSA (which it is not necessary to decide), this makes no difference as ACG relies on pt 4.2 and on an equitable lien which are not subject to the PPSA for the reasons previously given.

The liquidators’ submissions

1. The liquidators’ submission that any security interest held by ACG was not perfected by registration or possession with the result that ACG’s interest in the stored goods was vested in the liquidators must fail. The PPSA does not apply for the reasons given by the Court of Appeal in Dura.[35]

   [35]Dura (n 21) 128–129 [126]–[128].

1. The liquidators relied on Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (in liq), where Markovic J considered in detail the meaning of the expression ‘as a result of seizure or repossession’ found in s 21(2)(b) of the PPSA.[36] Unlike the present case, there was an agreement that secured the indebtedness of a purchaser of plasterboard products over its assets, with the result that there was a security interest in personal property under s 12(1) of the PPSA. Markovic J’s decision therefore does not assist the liquidators.

   [36](2017) 254 FCR 559.

Conclusion

1. ACG’s statutory right to dispose of the stored goods under pt 4.2 is not subject to the PPSA as it is excepted from its operation by s 8(1)(b). Likewise, an equitable lien is excepted from the operation of the PPSA by s 8(1)(c). Section 267(2) of the PPSA has no application.

Issue 8 - has ACG mitigated its loss?

1. The contention that ACG failed to mitigate its loss was only faintly pressed at the trial.  I find that ACG acted at all times in a reasonable manner to minimise its costs and expenses. It negotiated with prospective incoming sublessees but no acceptable proposal was forthcoming. The existence of the stored goods was a major drawback to the reletting of the premises. As Mr Paine said, the course adopted by ACG was the best it could do in the circumstances. I agree and find that at all times ACG mitigated its loss.

Jayfield’s claim against ACG

1. Jayfield claims to be the owner of the stored goods and claims that ACG failed to release them on 17 May 2019.  This was the occasion when general counsel for ACG advised that because of the dispute between Jayfield and MFA, ACG could not release the goods to Jayfield without MFA’s consent or a court order confirming Jayfield’s ownership.[37] 

   [37]See [25].

1. Jayfield’s claim is misconceived, as on 14 May 2019 it wrote to ACG consenting to ACG’s possession and requesting that ACG ‘keep safe and store the [stored goods] until terms for a new sublease are complete’.[38]  Consistently with its request to ACG, Jayfield made no complaint about the general counsel’s advice. It did not countermand or alter its request to ACG to keep and store the stored goods.  Negotiations for a sublease or for the purchase of the stored goods continued until August 2019, ultimately without success. I make no criticism of ACG for the failure of negotiations as it received no meaningful commercial offer to sublease the premises.

   [38]See [24].

1. Jayfield’s security interests in the Signature Assets and the Melded Assets under s 12(1) of the PPSA were not registered until 17 May 2019 following ACG’s letter and one month before the appointment of the administrators. The liquidators contended that the registration was misleading and too late, with the result that MFA was the owner of the stored goods. Jayfield’s claim against the liquidators was dismissed for failure to provide security for costs. It has failed to establish that MFA is not the true owner of the stored goods.

1. ACG has established its right to dispose of the stored goods under pt 4.2, and to an equitable lien over the stored goods. Jayfield is not entitled to the return of the stored goods.

1. Jayfield’s claim against ACG fails.

Orders to be made

1. The Court will make orders under s 70(1) of the ACLFTA authorising ACG to dispose of the stored goods, and fixing the amount of the relevant charge payable to it. The order will specify the authorised means of disposal, the date by which the stored goods must be disposed of and the amount of the relevant charge. Jayfield’s claim against ACG will be dismissed.