Leader Computers P/L v Johnson & Ors and Synnex Australia P/L v Johnson & Ors (No 2) - [2014] SADC 23

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
LEADER COMPUTERS P/L v JOHNSON & ORS AND SYNNEX AUSTRALIA P/L v JOHNSON & ORS (No 2)
[2014] SADC 23
Judgment of Her Honour Judge Davey
14 February 2014
INTEREST - AGREEMENTS TO PAY INTEREST
PROCEDURE - COSTS - AGREEMENTS AS TO COSTS
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - ORDER FOR COSTS ON INDEMNITY BASIS
REAL PROPERTY - TORRENS TITLE - OFFENCES AND OTHER MATTERS
The plaintiffs had separate claims against Mr Johnson pursuant to different agreements guaranteeing monies owed for the supply of goods to Arcom Computers Pty Ltd (trading as A & R Computers). The agreements included charges upon Mr Johnson's property. Mr Johnson was the sole director of Arcom Computers. The plaintiffs each sued Mr and Mrs Johnson for declarations that a transfer of Mr Johnson's interest in property to Mrs Johnson was void. The declaration was made. An appeal against that declaration was dismissed. This part of the proceedings concerned claims for costs and interest pursuant to those agreements. There was a claim for costs against Mrs Johnson on an indemnity basis relating to the conduct of the proceedings. The plaintiffs also sought orders for the sale of the property charged by the guarantees.
Law of Property Act 1936 (SA) ss 43, 44, 69, 70 and 86; District Court Act 1991 ; Corporations Act 2001 s 563B; Bankruptcy Act 1966 s 82(3B); Property Law Act 1958 (Vic) , referred to.
Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602; South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 384; Sheahan v Cooper & Ors [1998] FCA 1531; Toll (FGCT) v Alphapharm Pty Ltd (2004) 219 CLR 165; Horsell Nominees Pty Ltd & Ors v NAJB Pty Ltd [2010] SASC 321; Goodchap v Roberts (1880) 14 Ch Div 49; Hungerfords v Walker (1989) 171 CLR 125; O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359; Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1915] AC 79; Esanda Finance Corporation Ltd v Plessnig (1989) 166 CLR 131; AMEV - UDSC Finance Limited v Austin (1986) 162 CLR 170; Ryan v Rouen [2000] NSWSC 468; Edelman v Badower & Ors [2010] VSC 427; Tennant v Trenchard (1869) IV Ch App 537; Avco Financial Services Ltd v White [1977] VR 561; Midland Bank plc v Pike and another [1988] 2 All ER 434; McMahon v A F Wade Pty Ltd [1983] WAR 152; McDonald and Anor v Dennys Lascelles Limited (1933) 48 CLR 457; C J Belmore Pty Ltd v A.G.C. (General Finance) Ltd [1976] 1 NSWLR 507; Johnson v Leader Computers Pty Ltd; Johnson v Synnex Australia Pty Ltd [2014] SASCFC 14; R v Scott [2006] FCA 718; Leader Computers P/L v Johnson & Ors and Synnex Australia P/L v Johnson & Ors [2013] SADC 72, considered.

LEADER COMPUTERS P/L v JOHNSON & ORS AND SYNNEX AUSTRALIA P/L v JOHNSON & ORS (No 2)
[2014] SADC 23
Introduction

On 24 May 2013 I declared the transfer of 20 October 2010 in respect of the property at 45 Wattle Avenue Hove[1] (the Hove property) void. The appeal against the declaration was dismissed by the Full Court on 5 February 2014.[2] This part of the proceedings concerns other orders sought by the plaintiffs Leader Computers Pty Ltd (Leader) and Synnex Australia Pty Ltd (Synnex) related to that declaration.
[1] Certificate of Title Register Book Volume 5256 Folio 194.
[2] See Johnson v Leader Computers Pty Ltd; Johnson v Synnex Australia Pty Ltd [2014] SASCFC 14.
The plaintiffs in each action were creditors of Arcom Computer Pty Ltd (Arcom) which traded as A&R Computers. The first defendant, Robert William Johnson (Mr Johnson) was sole director of Arcom and gave personal guarantees to each of the plaintiffs in respect of the debts owed by Arcom to the plaintiffs. The second defendant, Fay Johnson (Mrs Johnson), is his wife. The Hove property is jointly owned by the first and second defendants. The plaintiffs commenced separate proceedings. Because of the similarities with respect to the claims and arguments as to the application of s86 of the Law of Property Act 1936 (SA) (LPA), the parties agreed that the trial of the claims should be heard together. Orders were made in respect of the joint hearing of the matters with the consent of all parties.[3]
[3] 25 July 2012; T25.
Mr Johnson was declared bankrupt on 15 November 2011; after commencement of both of the proceedings.
On 3 July 2012 Besanko J in the Federal Court made orders permitting the continuation of both of the proceedings notwithstanding Mr Johnson’s bankruptcy.
At the outset of the proceedings before this court Mr Burnett, counsel for the Trustee in Mr Johnson’s bankruptcy (the fourth defendant) appeared and said that his client would abide the event and withdrew.[4]
[4] 23 July 2012 T1 - T5.
The general factual circumstances of the matter are set out in my judgment of 24 May 2013.[5]
[5] [2013] SADC 72 at [6] – [17].
The relief sought by both plaintiffs included a declaration that the Hove property was charged to the extent of the sums owed to the plaintiffs. There was no dispute as to the principal sums owed but there are disputes as to the quantum of interest and costs, the scope of the charges and whether I could and should order the sale of the Hove property.
This further hearing and trial of the matter concerned orders as to the extent of the charges, interest, costs and orders sought with respect to the sale of the property. The arguments in respect of costs and interest did not only concern the usual discretionary costs and court interest; each plaintiff also claimed that the contractual arrangements between their respective clients and Mr Johnson gave rise to agreements about interest and costs. In respect of each of the plaintiffs, the claims for interest and costs are different; the terms of the relevant agreements are different and the arguments and the merits of the claims are different.
Most of the further consideration of the outstanding claims for interest and costs involved legal argument and submissions based on the evidence already before me. I also heard lengthy submissions as to the orders sought in relation to the sale of the Hove property. The first and second defendants argued that I did not have power to make the orders sought by both plaintiffs.
During the submissions the fourth defendant became actively involved.[6] This caused some disruption to the proceedings and to the progress of the submissions. The fourth defendant objected to the orders sought by Leader as to the legal costs to be included in the charge on the Hove property and argued that was not agreed between Mr Johnson and Leader. No other submissions were put by the fourth defendant as to the orders sought by the plaintiffs.
[6] T280 - T320.
The submissions as to the orders proposed by each plaintiff took a number of days and, regrettably, did not proceed in an orderly fashion. That observation is not a criticism of either plaintiff. I have separated the arguments into topics and provided reference to the relevant pages of the transcript. There were differences as to some of the orders sought by the plaintiffs; a joint position was put as to the orders for the sale of the Hove property and related orders.
Should both plaintiffs recover costs of the proceedings?[7]
[7] Argument at T125 - T145; T172 – T180; T345; T360 – T362.
The first and second defendants submit that insofar as costs orders are made in favour of the plaintiffs, they are not both entitled to full costs on a party/party basis for the trial regarding the transfer of the Hove property. They rely on the general proposition that where there are two or more parties in a proceeding it is a matter of discretion whether there is to be more than one set of costs. It was submitted that there was only one issue in the trial; the validity of the transfer of Mr Johnson’s share in the Hove property. It was argued that the cases of both plaintiffs were ‘on all fours’ with each other except in regard to peripheral matters. As to the particular debts owed to each plaintiff, it was submitted that there was no contest. It was argued that there was doubling up between the plaintiffs; whilst counsel for Leader was examining, cross examining or making submissions, counsel for Synnex was also present in the court room.
The plaintiffs issued separate proceedings. During an interlocutory hearing the solicitor for the first and second defendants (Mr Esau) told the learned Master that he did not want the matters to proceed separately.[8] At that stage, the solicitor for Synnex (Mr Agar) pointed out that there were no costs savings to Synnex in the event of a joint hearing.[9] Master Blumberg opined that a just outcome was to have both actions tried together and that separate trials were not an efficient use of resources.[10] The matters then continued to be listed together although no formal orders were made for a joint trial until 25 July 2012. Those orders were prepared by Synnex and made by consent. At that stage the issue of costs was not raised by the first and second defendants.[11]
[8] Master Blumberg, 3 November 2011, T35.
[9] Ibid T36.
[10] Ibid T38.
[11] Judge Davey, 25 July 2012, T25, T26.
This trial concerned claims by two separate plaintiffs. Whilst Synnex was the party who made the formal application that the two matters be heard together, it is clear that the first and second defendants urged that course. The first time that the issue of costs in respect of both matters was raised by the defendants was by correspondence during the trial (14 January 2013)[12] and after a good deal of evidence had been led. The nature of that correspondence was to inform the parties that the defendants would take issue with their separate representation.
[12] Exhibit D46.
Not only did each of the plaintiffs conduct their cases in a different fashion (and without overlap), their clients had different interests which arose out of the differing amounts of money claimed and also the differing contractual arrangements. Attempts were made by the parties to settle the claims throughout the trial. In my view, no solicitor could have acted for both plaintiffs, nor could counsel. It was suggested by the defendants that one counsel could have waited away from the court whilst cross-examination or submissions by the other occurred. The implication is that that counsel and solicitor would have no claim for costs during that time. The nature of the evidence and the proper use of court time meant that that was impracticable and I would not have agreed to such a proposal.
In my view there were not only conflicting interests between the plaintiffs but there were quite different attitudes by the plaintiffs with respect to settlement. Each of the plaintiffs were separate computer supply businesses who presumably had different financial and other interests in the outcome of proceedings. In practical terms, there were limits as to the funds available to meet the claims of each of the plaintiffs. There was not only potential but actual conflict of interest.[13]
[13] See South Sydney District Rugby League Football Club Limited v News Limited [2001] FCA 384; Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [93]-[103].
The first and second defendants point to the duration of the evidence and cross-examination of the various witnesses who gave oral evidence. I do not think there is any merit in this submission. There was no unnecessary time wasting or duplication by either of the plaintiffs.
The discretion in relation to costs is unfettered but it must be exercised judicially having regard to all of the circumstances.
I note that counsel for the first and second defendants acknowledged that it was in their interests to have both matters heard together[14] and that it was not until 14 January 2013 that the first and second defendants’ solicitors raised the costs issue with the plaintiffs;[15] by that time much of the evidence had been heard.
[14] T138.
[15] Exhibit D46.
Counsel for the first and second defendants tendered an extract from the Appeal Book in respect of this matter[16] which showed the schedule of witnesses and transcript pages to demonstrate his point about counsel being unnecessarily in attendance. I note that the evidence that was particular to only one or other of the plaintiffs was of short duration.
[16] Exhibit D47.
I accept that in this case there must have been some duplication in terms of time spent by counsel but this was the most practical way for the matters to proceed. Nonetheless, I am impressed by the economy of the presentation of the plaintiffs’ cases and their efforts to avoid duplication throughout the hearings before me.
Having regard to the clear benefit to the defendants in running the two matters at the same time, their knowledge that both plaintiffs were represented by separate solicitors and counsel, and all of the circumstances, I am of the view that it is appropriate that each of the plaintiffs have their costs. The precise nature of those orders is another issue.
Leader’s claim for interest pursuant to the Terms and Conditions of Sale[17]
[17] Argument at T19 – T41; T340 – T350; T365 – T367; T372 – T373; T390 – T414.
In addition to the sum owed of $225,136.46 Leader seeks interest on that sum to the date of judgment of $96,856.61 and, further, seeks interest accruing on that total sum of $321,933.07, from the date of judgment. Leader argued that interest continues to accrue pursuant to the terms of the Guarantee and Indemnity[18] and became part of the charge created pursuant to the Guarantee and Indemnity.
[18] Exhibit P1-3.
Leader relies on clause 4 of the Terms and Conditions of Sale,[19] and in particular, clause 4.2:
4.2Should the Customer fail to pay Leader the net invoiced purchased price within stipulated from the date of invoice of the Goods, then Leader is entitled to interest at a rate equal to two percent (2%) per annum above the overdraft rate for the time being charged by Leader’s banker for the relevant period on unsecured overdrafts of more than one hundred thousand Australian dollars, and which interest shall be compounded monthly and calculated from the due date for payment to the date upon which payment is actually made.
[19] Exhibt P1-43.
Exhibit P1-48 sets out the Westpac rate for unsecured overdrafts over $100,000 and the relevant calculations. The exhibit commences with the original debt of $225,136.46. Although there was some earlier dispute as to admissibility,[20] ultimately there was no dispute as to the Westpac rate and the rate changes.[21] Exhibit P1-48 includes the relevant interest rate plus 2% and a calculation of the interest claimed.
[20] T19 – T41.
[21] T340.
The evidence at trial was that the terms of trading were monthly and that Leader invoiced Arcom Computers on a monthly basis. Leader relied on the evidence from Mr Scrymgour, financial controller of Leader and Ms Gauci, credit controller of Leader as to the credit arrangements between the two companies.[22]
[22] Trial transcript T66 – T78; T84 – T93.
Clause 4.1 of the Terms and Conditions of Sale provides:
4.1Payment for the supply of Goods shall be made within stipulated from the date of invoice subject to Leader’s rights to require other terms of payment for any particular order.
The evidence was that Arcom was required to pay within 30 days.[23]
[23] Trial transcript T68.
The Guarantee and Indemnity provides that Mr Johnson guaranteed and indemnified in respect of monies owed by Arcom to Leader. Clause 1 provides:
1. (a)To guarantee the due and punctual payment by Purchaser of all and every

sum or sums of money and other liability which Purchaser is now or may hereafter be indebted to Supplier on any account or in any manner whatsoever:
(b)To Indemnify and forever hold harmless Supplier in respect of any failure by Purchaser to pay such sums or discharge such liabilities howsoever rising. [24]
[24] Exhibit P1-3.
Leader relied upon Toll (FGCT) v Alphapharm Pty Ltd[25] in support of the contention that notwithstanding that Mr Johnson may not have read the documents containing the terms and conditions, he signed them and that was a binding contract with contractual force. There was no dispute as to this matter.
[25] (2004) 219 CLR 165.
There was no dispute that if interest was payable pursuant to the agreements, it was secured by the charge.[26]
[26] T350, lines 1-11.
Leader referred to Horsell Nominees Pty Ltd & Ors v NAJB Pty Ltd[27] which concerned a contractual provision for interest. That case was relied upon as an example of the discretion to order the rate of interest above the usual court ordered rate.
[27] [2010] SASC 321.
Mr Manetta, for the first and second defendants, opposed the order sought and submitted that the questions to be asked are whether interest is recoverable under clause 4.2 of the Terms and Conditions of Sale[28] and whether that interest stipulated properly represents a genuine pre-estimate of damages. He said that the test is whether or not the loss was such that the parties may have reasonably expected or contemplated as flowing from the failure to pay the money. He referred to Goodchap v Roberts.[29]In that case the interest claimed was double the usual rate of interest. I do not find that case to be of assistance; the High Court authorities[30] referred to by Leader describe the current law.
[28] Exhibit P1-43; T390.
[29] (1880) 14 Chancery Div 49.
[30] See infra.
It was submitted that the interest claimed by Leader was double the usual court rate. It was submitted that the interest sought was a penalty and the amount sought is extravagant; not only is the interest rate claimed 2% above the highest rate that a bank would charge for unsecured amounts over $100,000, but it compounds monthly. The first and second defendants point to the absence of evidence from Leader as to actual loss arising from the lost opportunity to invest money in such a way that it would earn compound interest.
It was argued that clause 4.2 of the Terms and Conditions of Sale[31] was a penalty and accordingly was void; therefore no interest is payable pursuant to the agreement. However, the first and second defendants recognise that pre-judgment interest is payable under the District Court Act 1991. It was submitted that such interest would not be secured by the charge because it was not interest pursuant to the contract.
[31] Exhibit P1-43.
The first and second defendants submitted that the appropriate time frame for interest payable to Leader is from 20 October until 15 November 2011 (ie the date of Mr Johnson’s bankruptcy) at a rate of 6.5%. It was submitted that post-judgment interest should only be ordered against the first defendant and should not be part of the charge.
In reply to these submissions, Mr Stathopoulos for Leader relied upon the principles discussed in Halsbury’s Laws of Australia.[32]
[32] Halsbury’s Laws of Australia, LexisNexis, (at 24 August 2009) 135 Damages, ‘(B) Interest on Award of Damages (1) At Common Law’ [135-205]; (at 20 May 2010) 295 Mortgages and Securities, ‘(B) Interest’ [295-6790]; (at 15 May 2013) 185 Equity, ‘(F) Relief Against Penalties and Forfeiture in Equity (1) Penalties’ [185-991], [185-992], [185-1005].
Leader submitted that the first and second defendants bore the onus of establishing that the interest referred to in clause 4.2 of the Terms and Conditions of Sale was a penalty rate of interest. Mr Stathopoulos acknowledged he had no authority for that proposition; however he also acknowledged that as he was claiming the interest, that his client bore the onus that Leader was entitled to that rate of interest.

It was submitted by Leader that the Terms and Conditions of Sale must be seen as a transaction in a commercial context and that by extending credit, Leader was effectively in the role of a banker or credit provider for Arcom. Mr Stathopoulos submitted that the ‘uplift’ of 2% above the unsecured overdraft rate for $100,000 was not exorbitant or contrary to public policy when one had regard to the lack of information provided about the financial position of Arcom and the risks occasioned by Leader. It was submitted that it was entirely appropriate, in a commercial context, that Leader would adopt an increase of 2% to take account of those risks and that it was a genuine pre-estimate of the appropriate cost in the event of breach of the terms.
There is no evidence before me as to the level of margin which would be appropriate in light of such risks.
I was referred to Hungerfords v Walker[33] to the effect that in the modern context a compound rate of interest may be appropriate, particularly in contract cases or in assessing damages for loss of use of money. It was submitted that in this case the contractual arrangements were to agree to the compound rate of interest and there was no impediment at law to compound interest.
[33] (1989) 171 CLR 125 at [37] – [42]. See also: C J Belmore Pty Ltd v A.G.C. (General Finance) Ltd [1976] 1 NSWLR 507.
Whether such interest claimed is a penalty or not is a question of construction of the original agreement. In O’Dea v Allstates Leasing System (WA) Pty Ltd,[34] the High Court followed Lord Dunedin in Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited:
The question whether a sum stipulated is a penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged as at the time of the making of the contract, not as at the time of the breach. [35]
[34] (1983) 152 CLR 359 per Gibbs CJ at [7], [11] – [12], [14]; Wilson J at [5]; Deane J at [9] and see generally for discussions as to penalty.
[35] [1915] AC 79 at 186, 187.
In Esanda Finance Corporation Limited v Plessnig[36] the High Court considered decisions including O’Dea’s case and AMEV - UDSC Finance Limited v Austin.[37] I have had regard to those cases.
[36] (1989) 166 CLR 131, Wilson and Toohey JJ at [9], [13], Brennan J at [1] - [5]; Deane J at [3] - [6].
[37] (1986) 162 CLR 170.
The question of whether a term of a contract is penal in character requires a consideration of events at the time when the agreement was made, not at the time of subsequent breach. In this case the agreement is for payment of an interest rate at 2% higher than the overdraft rate and whereby interest is compounded. The question is whether the extent of the loss that may be suffered by Leader bears a relation to the amount of the interest agreed. If that agreed is a fair method of estimating in advance the likely damages caused to Leader of non-compliance with the contract, then the clause could not be a penalty. I think that the likely consequence to Leader was not only the loss of the amount owed but the potential for loss of opportunity to use those funds for other productive purposes with a necessity that Leader may also have to borrow sums and potentially pay a higher than usual interest rate.
In my view, clause 4.2 of the Terms and Conditions of Sale is neither penal nor productive of a windfall profit to the owner.[38] The first and second defendants point to the court interest rate of 6.5% and submit that the agreement is unconscionable. In my view, the defendants must show that the term is unconscionable.[39]
[38] See Esanda Finance Corporation v Plessnig, Brennan J at [5].
[39] Ryan v Rouen [2000] NSWSC 468 at [98].
The court rate of interest does not necessarily reflect the commercial rate of interest. Exhibit P1-48 demonstrates Westpac’s commercial interest rate at the relevant time. The claim for interest arises on a contractual basis and the court must look at the formation of the contract and ask whether the agreement was a fair method of estimating in advance Leader’s likely damages including loss of opportunity to use the funds for other purposes. I do not think that consideration of the court interest rate is relevant to this issue.
At the time when the contract was entered into, Leader was asked to, and agreed to, extend credit to Arcom of up to $200,000 for a short term. The contractual arrangements were that Arcom was to pay outstanding sums within 30 days and it was a reasonable estimation of damages for failure to pay to refer to the overdraft rate for unsecured loans plus a margin of 2%. At the time when the agreement was reached there was no security for the debt owed because the Hove property was, at that time, encumbered. Leader was providing credit on a short term basis for a significant sum without registered security and, on the face of the material before me, in light of the obvious risks, it could not be said that the clause was a penalty. The agreement to pay interest is specifically referable to the breach, being non-payment. With respect to the argument about compound interest, Arcom was effectively being provided with a short term overdraft facility and the interest agreed was as if it was a running account, just like an overdraft. Agreement to pay compound interest is not prohibited. In my view the term in respect of interest is not penal. I accept the arguments put by Leader as to this issue. In my view the interest claimed by Leader was agreed by the first defendant and is properly the subject of the charge.
Leader’s claim for costs against the first defendant (Mr Johnson)[40]
[40] T350 – T389; T414 – T417.
Leader seeks the following order relevant to costs to be included in the charge over the Hove property:
3.The interest of the first defendant in the land comprised in Certificate of Title Register Book Volume 5256 Folio 194 is charged by way of equitable charge in favour of the plaintiff with payment of …
(a)…
(b)…
(c) all costs, fees, charges and expenses including legal costs on a solicitor and own client basis incurred by the plaintiff in relation to this action and in respect to the lodgement of the caveat ad incidental thereto and the costs of the action in the Federal Court of Australia No. SAD 140 of 2012 in seeking leave to proceed with this action.
Clause 4.3 of the Terms and Conditions of Sale[41] between Leader and its customers provides:
4.3Should payment for supply of Goods be outside of or beyond Leader’s payment terms the Customer shall be liable for all costs including legal costs (on a full indemnity basis) and all other fees incurred by Leader in recovering the amount outstanding.
Clause 2.7 also provides that:
2.7The Customer shall indemnify Leader against and pay to Leader immediately upon demand all and any loss, damage, cost, charge, expense or other liability (including but not limited to consequential loss, loss of profits and legal costs) whatsoever and howsoever incurred or sustained by Leader as a result of or in relation to the exercise by Leader of any of its rights under this Clause 2 on a full indemnity basis.
[41] Exhibit P1-43.
The Terms and Conditions of Sale are an agreement between Leader and the customer, namely Arcom. Mr Johnson is not the customer.
Leader seeks a charge against the first defendant’s interest in the Hove property to include costs on a solicitor and own client basis and they rely on the contractual arrangements between Leader and Arcom and the Guarantee and Indemnity[42] provided by Mr Johnson. This matter concerns construction of the agreement under the Guarantee and Indemnity and Terms and Conditions of Sale.
[42] Exhibit P1-3.
In respect of this matter, the fourth defendant, represented by Mr Burnett of counsel, became actively involved in the argument. Synnex also joined in that argument and submissions, opposing the orders sought by Leader.
Mr Burnett for the fourth defendant referred to the Guarantee and Indemnity[43] document between Leader and Mr Johnson; particularly Clause 6 which provides:
6.So as to better secure the liability if the Guarantors and each of them HEREBY CHARGE with the payment of the monies pursuant to Clause 1 hereof, all their freehold and leasehold in land …
[43] Exhibit P1-3.
The charge is therefore referable to the payment of monies pursuant to the Guarantee and Indemnity; Clause 1 provides:
1(a) to guarantee the due and punctual payment by Purchaser of all and every sum or sums of money and other liability which Purchaser is now or may hereafter be indebted to Supplier on any account or in any manner whatsoever;
(b)to Indemnify and forever hold harmless Supplier in respect of any failure by Purchaser to pay such sums or discharge such liabilities howsoever arising.
As Mr Burnett pointed out, there is no reference in the Guarantee and Indemnity document to or charging (directly or indirectly) the costs of enforcing the guarantee. Moreover, clause 4 of the Terms and Conditions of Sale refers to the liability of the customer (Arcom) and is not referable to the Guarantee and Indemnity signed by Mr Johnson.
The fourth defendant submits that all legal costs including the lodgement of the caveat, Federal Court proceedings and the trial of this matter relate to a claim against Mr Johnson; they do not relate to recovering an amount outstanding pursuant to clause 4.3 of the Terms and Conditions of Sale and are therefore not covered by the Guarantee and Indemnity.
Synnex joined in the fourth defendant’s opposition to the claim for costs by Leader. Synnex argued that they had a right to be heard on the matter as both Synnex and Leader claim enforcement of equitable charges over the same piece of land and the quantum of the judgment which Leader is entitled to enforce by way of equitable charge may have direct impact upon Synnex. It was submitted that if the relief sought by Leader was wrongful then Synnex’s legal rights may be directly adversely affected. Synnex also argued that these proceedings concerned a proprietary interest and that this court is not entitled to make orders which will have an adverse effect on others who hold a proprietary interest in the same property without others being joined as a party or being given an opportunity to make submissions.[44]
[44] T379 – T380.
Leader objected to Synnex being heard on the issue and said they had no standing to be heard. It was argued that there had been no joinder on the pleadings. For practical reasons, I heard Synnex’s arguments on this point and I reserved my decision as to their standing.
I am of the view that I can and should hear Synnex on this argument. I agree that in the circumstances, the orders sought by Leader have a direct effect on Synnex.
Synnex supported the submissions made by the fourth defendant in respect of Leader’s claim for costs. Mr Edmonds-Wilson pointed out the distinction between the agreement in respect of Leader and the agreement in respect of Synnex. It is submitted that all that was charged pursuant to the Guarantee and Indemnity re Leader[45] was the money which Mr Johnson was obliged to pay pursuant to Clause 1 of the Guarantee and Indemnity. It was submitted that nowhere in that Guarantee and Indemnity does it say that the costs incurred by Leader in bringing proceedings against Mr Johnson are costs which are secured against property.
[45] Exhibit P1-3.
Mr Edmonds-Wilson referred to clause 4.3 of Leader’s Terms and Conditions of Sale.[46] He submitted that those words must refer to liability for money outstanding from the customer Arcom; and it could not refer to recovering an amount outstanding for someone else. He submitted that the Guarantee is not linked to those Terms and Conditions of Sale and that clause 4.3 also takes its colour from clause 6 of the Terms and Conditions which speak of the events upon default ‘by the Customer’. It was submitted that a reading of clause 6 reinforces that clause 4.3 is only directed to the situation where Leader is recovering the amount outstanding from the Customer and that customer is Arcom.
[46] Exhibit P1-43.
The first and second defendants joined in the submissions made by the fourth defendant and Synnex as to the Terms and Conditions of Sale in respect of Leader. Mr Manetta drew my attention to clause 2.7 and submitted that was an example of indemnity costs being charged to the Customer for legal costs associated with enforcement and he acknowledged that Arcom would be liable for those costs. He submitted that legal costs referred to in clause 4.3 must be the legal costs incurred by action against Arcom and that these proceedings are not against Arcom.
Mr Manetta conceded that the costs of the Federal Court proceedings are costs incidental to enforcing the Guarantee. However, he submitted that the largest part of the proceedings were in relation to setting aside the transfer which was not part of the enforcement of the guarantee but rather a separate action.
I agree with Synnex, the first, second and fourth defendants that the costs order sought by Leader against the first defendant should not be made. I find that a proper construction of the agreements do not include agreement that Mr Johnson would pay Leader’s costs on the basis sought. I also find that Mr Johnson did not agree to charge his property in respect of such a liability for costs. I decline to make the order sought by Leader in this regard.
Synnex’s claim for interest[47]
[47] Argument at T46 – T55; T57 – T76; T101 – T114.
In addition to the sum owed ($89,082.73) which is not disputed, Synnex seeks interest from 20 October 2010. That claim is disputed. The rate of interest is not in dispute (6.5% per annum).[48] Synnex relies on the agreement between Synnex and Arcom and the guarantee provided by Mr Johnson. Synnex does not seek to enforce the agreed rate of interest[49] but says that the contract provided for interest on the unpaid debt. Synnex relies on the terms and conditions of the Authorised Dealer Application Form, clause 26, which provides:
26.We request that Synnex supply us with goods and/or services for which we undertake to pay Synnex that agreed price(s) within the terms agreed, or if no such terms have been agreed, it will be cleared funds before delivery. Upon approval of this credit application form, Synnex will accept a company cheque at time of delivery. Synnex reserves the right to grant a credit account. A credit account will only be provided to customers who have traded with Synnex for a certain period of time with a satisfactory history. Details of the credit will be notified separately. All overdue amounts are subject to a penalty interest rate of 3% per annum above the prevailing prime lending rate, calculated on an overdue balance on a daily basis.[50]
[48] T47 – T48.
[49] T47; the agreed rate included a penalty of 3% but Synnex does not seek to enforce clause 26 of Exhibit P2-1.
[50] Exhibit P2-1 Authorised Dealer Application Form at p6.
Synnex also relies upon the Guarantee whereby Mr Johnson agreed:
… do hereby (jointly and severally in the case of more than one Guarantor) guarantee the due and punctual payment of all monies which may now or in future be or become due and payable to the Company by the Customer on any account whatsoever …[51]
and
… that this Guarantee shall be a continuing guarantee and shall remain in full force and effect and the Guarantor shall remain liable hereunder notwithstanding the granting by the Company of time, credit or any other indulgence or concession to the Customer or the Guarantor or the waiver by the Company of any breach by the Customer of its obligations to the Customer or the liquidation of the Customer or the bankruptcy or death of the Guarantor or the liability of the Customer ceasing or becoming extinguished for any reason …[52]
[51] Ibid at p7.
[52] Exhibit P2-1 Authorised Dealer Application Form at p7.
Synnex submits that Mr Johnson guaranteed the liability of Arcom to Synnex and guaranteed due and punctual payment of all monies payable at the time or in the future. Synnex says that the liability continues notwithstanding the liquidation of Arcom. Synnex relies on McDonald v Dennys Lascelles Ltd[53] per Rich J:
In cases in which the bankruptcy law, or the law relating to the winding up of companies, or the law authorizing compromises and schemes of arrangement among shareholders and creditors of companies, absolves the principal debtor from liability, the object is not to disentitle the creditor from the benefit which the principal obligation was intended to secure, but merely to change the nature of his right, in the interests as well of himself as of all others who have claims of like degree against the debtor.[54]
[53] (1933) 48 CLR 457.
[54] Ibid at 467; see also Starke J at 471.
The point made is that Arcom’s liquidation does not discharge the obligation to pay interest at the contractually agreed rate. Synnex relies on the agreement as a guarantee and indemnity. Synnex submits that the charge extends to interest.
Synnex argues that Mr Johnson’s subsequent bankruptcy is irrelevant because Synnex does not prove in bankruptcy but rather is a secured creditor who holds a charge over the Hove property. In short, Synnex argues that a proper construction of the guarantee provides for interest payable by Mr Johnson.
Synnex noted that s 82(3B) of the Bankruptcy Act 1966 provides:
82(3B) a debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy.
Synnex argued that notwithstanding bankruptcy there can be situations where interest may be recovered in respect of interest accruing after the date of bankruptcy.[55] It was argued that the restrictions on proof of interest upon debts in bankruptcy is irrelevant to the contractual liability of Mr Johnson on the guarantee.
[55] For example if there is a surplus; see R v Scott [2006] FCA 718.
Mr Johnson submits that there is no enforceable agreement as to interest and that interest ordered pursuant to the District Court Act 1991 should not commence until a demand for payment was made. It was submitted that the clause in the guarantee relied upon by Synnex is void for uncertainty.[56] The relevant part of the guarantee says:
… if any of the obligations hereby guaranteed shall not be enforceable against the Customer purported to be primarily liable this Guarantee shall be construed as an indemnity and the Guarantor hereby indemnifies the Company in respect of any failure by the Customer to make payment or perform or observe any covenant, obligations, term or condition of this Guarantee …[57]
[56] T71 – T73.
[57] Exhibit P2-1 at p 7.
It was also submitted that the first time a demand was made was when proceedings were commenced, being 10 March 2011, and that interest was only payable from that date until the date of Mr Johnson’s bankruptcy, 15 November 2011. It was submitted that once bankrupt, Mr Johnson was not able to pay the debt and that the ‘clock stops’ on any interest accruing on his personal obligations.[58]
[58] T74.
Mr Johnson also pointed to Arcom’s obligation to pay the debt and the effect of s563B of the Corporations Act 2001 which is to the effect that upon liquidation, creditors prove the debt and interest until that time. It was submitted that because of the way in which payments are to be made upon liquidation, Arcom’s obligation to pay interest had been postponed and the obligation to indemnify for Arcom’s debt had not been triggered.[59]
[59] T102 – T103.
I do not accept the submissions made on behalf of Mr Johnson. I agree that Mr Johnson remains contractually liable to Synnex for interest on the debt at the agreed rate from 20 October 2010. I find that the agreement as to liability for interest is unaffected by the liquidation of Arcom and the bankruptcy of Mr Johnson. I do not accept that the guarantee is void for uncertainty.
Synnex’s claims for costs

Synnex seeks orders that the first defendant’s interest in the Hove property be charged with not only the debt and interest but also for costs related to these proceedings. The orders sought are:
3.     The interest of the first defendant in the land … is charged … with payment of
(a)     …
(b)     …
(c)all costs, fees, charges and expenses including legal costs on a solicitor and own client basis incurred by the plaintiff in relation to this action, the caveat lodged by the plaintiff in relation to the said land, and action no. SAD 140 of 2012 in the Federal Court of Australia.
For brevity I will refer to this as the legal costs claim by Synnex against the first defendant.
Synnex also seeks an order that the second defendant pay costs on a solicitor and own client basis:
4.The plaintiff recover from the second defendant the costs of the action to be adjudicated or agreed on a solicitor and own client basis.
Synnex’s claim for costs against the first defendant[60]
[60] Argument at T77 – T82; T87 – T96; T114.
Synnex’s claim includes a declaration that Mr Johnson’s interest in the Hove property be charged not only with the principal debt owed by Arcom together with interest but also for the costs including legal costs incurred.
Synnex relies upon the agreement set out in the Authorised Dealer Application Form.[61] That document includes the directors guarantee and says:
… that the Guarantor shall pay all costs, fees, charges and expenses including legal costs on a solicitor and own client basis incurred by the Company of and incidental to this Guarantee or any matter arising out of or incidental to this Guarantee or the performance or failure to perform by the Guarantor of the covenants herein contained …
AND the Guarantors hereby charge in favour of the Company as security for his/her/their obligations to the Company all right, title and interest in any land held now by the Guarantors alone or jointly with anyone …
[61] Exhibit P2-1.
It was submitted that the proceedings before this court were of dual character; Synnex sought to recover the debt owed by Mr Johnson (which they were entitled to do notwithstanding his bankruptcy given the leave of the Federal Court) and the other aspect of the proceedings was to set aside the transfer of the Hove property. It was submitted that as a matter of construction the legal costs in respect of setting aside the transfer arose out of or were incidental to the guarantee.
Synnex submits that they have wholly succeeded with respect to their claims and therefore are entitled to the costs as agreed with Mr Johnson. In these circumstances Synnex says that I should declare that the charge extends to the costs on the basis sought.
It was submitted for the first defendant that the charge should not include costs ordered against Mr Johnson either on a party/party basis or at all. The first defendant argued that there was a distinction between the guarantee and the charge. The guarantee[62] gave rise to an obligation to pay money owed by Arcom. Mr Manetta pointed to the difference between that and a charge being a security over real property supporting a guarantee. It was submitted that whilst Synnex was entitled to include their costs of enforcing the guarantee, that does not include the cost of enforcing security such as security over real estate that is associated with the guarantee.
[62] Exhibit P2-1.
Mr Manetta said the question is whether the guarantor is liable for costs incurred by the creditor as a result of enforcing the principal transaction or the guarantee.[63] He acknowledged that the answer is dependent upon the wording of the guarantee and the principal transaction. It was submitted that the trial of the matter was not about enforcing the guarantee but rather about ‘unravelling a transfer between Mr and Mrs Johnson’.[64]
[63] He referred to O’Donovan’s Modern Contract of Guarantee, Westlaw AU, [5.420].
[64] T89.
Whilst it was true that the bulk of the evidence of the trial concerned the question of the validity of the transfer between Mr and Mrs Johnson, the claim by Synnex was for money owed and enforcing the guarantee. The defendants argued that the enforcement of the guarantee ‘really occupied virtually no court time because Mr Johnson offered no contest in his defence, did not adduce any evidence to suggest that he didn’t owe money under the guarantees, and there was no contest in the evidence’.[65] It was submitted that the costs incurred related to the setting aside of a transfer of land between Mr and Mrs Johnson and that that was not properly characterised as enforcing the guarantee. Thus, on a contractual basis, there was no entitlement to solicitor and own client costs and party/party costs.
[65] T90.
In my view the Guarantee and Indemnity[66] in respect of Synnex not only charges the land held by the guarantor (Mr Johnson) but provides that if Mr Johnson defaults then the guarantor was specifically authorised to lodge a caveat against any dealings with the property. The Guarantee and Indemnity provides for legal costs on a solicitor and own client basis of and incidental to the guarantee ‘or any matter arising out of or incidental to this Guarantee or the performance or failure to perform by the guarantor of the covenants herein contained’. The first and second defendants argued that the necessity to bring these proceedings and, particularly, the argument in respect of the transfer of Mr Johnson’s interest in the Hove property was brought about by the dilatoriness of the plaintiffs in failing to place a caveat upon the property prior to Arcom being placed in liquidation. I do not accept the defendant’s arguments. In my view Mr Johnson’s agreement with Synnex includes the costs claimed on a solicitor and own client basis and includes the costs in relation to setting aside the transfer of the Hove property. I make the order in the terms sought by Synnex.
Synnex’s claim for costs against the second defendant (Mrs Johnson)[67]
[66] Exhibit P2-1.
[67] T82 – T86; T115 – T145; T169 – T172.
Synnex seeks a special order for costs as between Synnex and the second defendant (Mrs Johnson) on a solicitor and own client basis. This argument is not in relation to an agreement; Synnex relies on the conduct of the proceedings by Mrs Johnson and the failure to accept offers made by Synnex. Synnex submits that it was unreasonable for the second defendant not to have accepted the offers made. The second defendant resists the claim for costs on a solicitor and own client basis and submitted that in the circumstances, the second defendant was reasonable in refusing the offers made by Synnex.
Synnex relies on the affidavit of the solicitor for Synnex, Mr Agar, [68] which sets out the offers made in correspondence between Synnex and Mrs Johnson with a view to resolving the matter. Offers were made before and during the trial. The offers were to settle on a lesser basis than that achieved. Synnex argues that it was unreasonable for each of those offers to have been rejected by Mrs Johnson and, in light of my judgment and orders, Synnex is entitled to costs on a solicitor and own client basis.
[68] Sixth affidavit of Michael Agar sworn 29 July 2013 – FDN33. The second defendant does not take issue with the contents of that affidavit – see T124.
The first and second defendants say that the proper order for costs is that the plaintiff’s costs be payable on a party/party basis but that only one set of costs be payable for issues which were within the common interests of both plaintiffs.[69]
[69] T117, T118.
The second defendant resists the order sought by Synnex. It is submitted that Mrs Johnson had no pecuniary obligation to either of the plaintiffs. She was not indebted to them. It is submitted that she did not owe money to Synnex and an offer could only be determined as reasonable if it had some benefit to her. It was also submitted that the offers made by Synnex could not be accepted of themselves because that did not resolve the challenge to the validity of the transfer of Mr Johnson’s interest in the Hove property because Leader maintained their claim. It was submitted that Synnex was offering Mrs Johnson in effect ‘nothing’ and that there was ‘no way’ to settle the matters without settling with both plaintiffs at the same time. It was submitted that as Leader would not resolve the matter (in a manner satisfactory to the defendants) then the matter could not settle between the second defendant and Synnex. It was argued that Mrs Johnson ‘remained exposed to the worst outcome for her of the litigation so there was no point in accepting Synnex’s offers’.[70] No authority or principle was argued in support of this contention.
[70] T120.
I reject the second defendant’s argument as to this issue. The fact that the two proceedings were heard together was something suggested by the defendants and was in their interests. Had the proceedings proceeded separately and the Synnex matter heard first, it would be no answer to proper offers of settlement to say that there was another case to follow. In my view the outcome of proceedings and the significant offers of settlement made on behalf of Synnex were unreasonably rejected by the second defendant. I order that Synnex’s costs against the second defendant be adjudicated or agreed on a solicitor and own client basis.
Orders sought for the sale of the Hove property[71]
[71] Argument at T198 – T277; T321 – T338. Note at T269, line 9 of the transcript reads:
‘I am certain that your client would find partition to be more favourable.’ The transcript is not correct. I cannot now recall the words used but my intention was to remark that ‘I am certain that your client would find sale rather than partition to be more favourable’.
Both plaintiffs sought orders for sale of the Hove property with orders as to the conditions and circumstances of sale. The orders were sought pursuant to Part 8 of the Law of Property Act 1936 (LPA). Both plaintiffs seek an order that the property be sold and the net proceeds of the sale of the land and improvements be paid into court to the credit of the plaintiffs’ actions and thereto abide the further orders of the court to give effect to the judgment herein.[72]
[72] The Statement of Claim made by Synnex sought orders (Statement of Claim, p16, para 7) for enforcement of the equitable charge of the interest of the first defendant in the Hove property. During argument (T200 - T202) that was changed (without objection from the defendants) to an order for sale of the whole of the property.
The orders sought by both plaintiffs are:
5.The land comprised in Certificate of Title Register Book Volume 5256 Folio 194 and the improvements on it be sold and that the sale be conducted in such manner and upon such terms and conditions and by such licensed land agent or agents as may be agreed upon between the parties and by the plaintiff Leader Computers Pty Ltd (ACN 093 139 354) in action no. 2267 of 2010 in this Court.
6.In default of agreement by the parties and by Leader Computers (ACN 093 139 354) the land and improvements be sold by public auction in accordance with the conditions of sale for auctions approved by The Real Estate Institute of South Australia Inc by such auctioneer and at such reserve price as may be agreed upon between the parties and Leader Computers Pty Ltd (ACN 093 139 354) or in default of agreement as may be determined by a Master on the application of any of them.
7.The costs of advertising the sale by auction be limited to the sum of $5,000.00.
8.If the land and improvements are not sold at the auction or within such further time after the auction as the auctioneer shall have the sole right to sell to the parties and Leader Computers Pty Ltd (ACN 093 139 354) may nominate one land agent for the purpose of arranging such sale by private treaty at the price and upon such terms and conditions as may be agreed upon between them or in default of agreement as may be determined by a Master on the application of any of them.
9.The net proceeds of the sale of the land and improvements in any manner specified above after the deduction of all proper expenses be paid into Court to the credit of this action and of action no. 2267 of 2010 in an account to be entitled “No. 2267 of 2010 Leader Computers Pty Ltd v Johnson & Ors and No. 534 of 2011 Synnex Australia Pty Ltd v Johnson & Ors – Proceeds of Sale of Land” there to abide the further orders of the Court to give effect to the judgment herein.
10.A sealed copy of this order be served upon the selling agent before or immediately after the sale or upon such other person who may be holding the proceeds of sale and upon that person paying the net proceeds into Court, such person be discharged from any further liability account to the parties for the proceeds of sale.
11.The parties may apply for further orders and directions in relation to the sale of the land.
The first and second defendants oppose the making of those orders.
In respect of the orders sought for the sale of the Hove property, I note that Synnex specifically sought that remedy.[73] Leader did not specifically seek such an order although paragraph 12 of Part II of the Statement of Claim seeks ‘any other order that this Honourable court thinks fair.’. No objection was made to the orders sought by Leader on this basis.
[73] Synnex Australia’s Statement of Claim, p16, para 7.
The plaintiffs submit that Mr Johnson’s interest in the Hove property is charged by way of equitable charge in favour of each of the plaintiffs with respect to the sums claimed plus interest and costs. There are disputes about interest and costs (and quantum of same) but there is no dispute as to the principal sum claimed in respect of each of the plaintiffs. The plaintiffs say that I have the power to order the sale of the Hove property pursuant to either s69 or s70 LPA:
Part 8—Partition
69—Power to order partition or sale instead of partition
(1)On any application for partition the court may order a partition of the said land or other property, and may give all necessary or proper consequential directions.
(2)On any such application if it appears to the court that, by reason of the nature of the property, or of the number of the parties interested or presumptively interested therein, or of the absence or disability of some of those parties, or of any other circumstance, a sale of the property and a distribution of the proceeds would be more beneficial for the parties interested than a division of the property between or among them, the court may, if it thinks fit, on the request of any of the parties interested, and notwithstanding the absence, dissent or disability of any others of them, direct a sale of the property accordingly, and may give all necessary or proper consequential directions.
70—Sale on application of certain proportion of parties interested
On any application for partition, if the party or parties interested individually or collectively, to the extent of one moiety or upwards in the property, request the court to direct a sale of the property and a distribution of the proceeds, instead of a division of the property between or among the parties interested, the court shall, unless it sees good reason to the contrary, direct a sale of the property accordingly, and shall give all necessary or proper consequential directions.
The first and second defendants agreed that there is a charge against Mr Johnson’s interest in the Hove property by each of the plaintiffs (they dispute the extent of those claims) but they argue that such charge only extends to the first defendant’s interest in the property and that I do not have power to order the sale of the whole of the Hove property. They submit that I can only order the sale of the first defendant’s interest therein. Mr Johnson is a joint tenant in the Hove property with his wife. He has a right to use the property in equal share to Mrs Johnson. The property is largely comprised of a domestic dwelling. Obviously there would be difficulty in selling a half interest in a residential property.
The second defendant argued that she was not a party to the guarantee which gave rise to Mr Johnson’s liability to Arcom’s creditors and, having regard to her interest, I should not make an order for sale of the Hove property. It was submitted that she is a ‘stranger’ to the agreement[74] and that a proper construction of ss69 and 70 LPA does not permit orders to be made for sale in such circumstances.
[74] T260.
The first and second defendants submitted that the unencumbered share of a co-owner cannot be brought into a sale by a mortgagee who only has an encumbrance over one share of the jointly held property. They also submit that none of the authorities support a construction of the legislation favouring the orders sought. They argue that the English position and authorities differ as that legislation is in different terms from the LPA.
The first and second defendants also argue that s70 LPA cannot assist as the parties’ interest is not ‘to the extent of one moiety or upwards’. They submitted that the words in s70 LPA refer to a beneficial interest in the property and that it would be incorrect to find that because the plaintiffs have a charge over Mr Johnson’s interest they therefore have a moiety in the property.
I was referred to Edelman v Badower[75] where the writ claimed an order for sale of the land and the court considered the relevant provisions in the Victorian Property Law Act, 1958. Those provisions contained terms similar to s70 LPA including ‘collectively to the extent of one moiety or upwards’. Mukhtar AJ said:
A moiety is a dainty word meaning one half. Under section 223 an owner of one moiety can request the court to direct a sale of the property and the court shall … direct a sale of the property accordingly.
[75] [2010] VSC 427.
Mukhtar AJ also pointed out that that threshold amount was significant because other provisions for orders of sale of land in the Victorian legislation left greater discretion to the court in light of the competing interests of parties. I note that the Victorian provision includes the term ‘owner’ of a moiety; that word does not appear in s70 LPA. In Edelman v Badower the respective claims were by owners. In my view that case does not assist the argument that s70 LPA requires ‘ownership’ of one moiety or upwards to invoke its operation.
It was argued by the first and second defendants that the varying interests should be calculated to see if that threshold of one half was reached and in this case, it was not. They submitted that Mr Johnson has an equity in the property; an ‘equity and redemption’ which, it was argued, is less than a moiety but which, combined with the plaintiffs’ interest, must together make up a moiety. It was argued that having regard to Mr Johnson’s nominal interest (by virtue of his equity and redemption) in the property, the plaintiffs’ share is less than a moiety.[76]
[76] T266.
The first and second defendants also argued that computation of each of the plaintiffs’ interests is confined to the value of the debt owed and that does not include interest and costs. It was submitted that those sums do not contribute to the total amount giving rise to the extent of one moiety or upwards. It was argued that the evidence at trial was of a valuation of the Hove property at about $1 million[77] and that the combined value of the claims of the plaintiffs was less than $500,000. The defendants say that I cannot have regard to the costs and interest in arriving at that sum.
[77] Trial transcript T67.
The first and second defendants submitted that the court would have residual powers for sale if no one was prepared to buy Mr Johnson’s half share in the Hove property. The defendants referred to Tennant v Trenchard[78] in support of the contention that if Mrs Johnson does not wish to buy Mr Johnson’s half share and there is no other purchaser on the open market, then the court can give leave to either or both of the plaintiffs to purchase Mr Johnson’s half share at which point they will become beneficial owners of a moiety and can activate s70 LPA to bring about sale of the property. The defendants submit that at this time I should only order the sale of Mr Johnson’s half interest in the Hove property.
[78] (1869) IV Ch App 537.

Mr Edmonds-Wilson, counsel for Synnex, presented most of the submissions as to this issue. Mr Stathopoulos, counsel for Leader, joined in those submissions and added to them.
Mr Edmonds-Wilson submitted that each plaintiff had an equitable charge in their favour over Mr Johnson’s interest in the Hove property. It was submitted that an equitable charge is a mortgage for the purposes of the LPA[79] and pursuant to ss43 and 44 LPA that the court has power to order the sale of the property in like manner as if the mortgage had been made by way of legal mortgage. It was argued that in light of that power, the proper construction of s69 LPA must allow for sale ordered at the request of an equitable chargee.
[79] As to equitable charge see Fisher and Lightwood’s Law of Mortgage (2^nd Australian Edition), 2005 at 2.2 – 2.8.
The plaintiffs rely on Avco Financial Services v White[80] in support of their contention that this court has power to order the sale of the property. In that case Gillard J said:
An equitable charge for debt is a security whereby only a right to payment of the debt out of the property is conferred by the owner of the property to the holder of the security. The remedy of the holder of the security on default in payment of the debt was to apply to a court of equity to have the property sold and the proceeds paid into court. [81]
[80] [1977] VR 561.
[81] Ibid at 563.
The plaintiffs submitted that I have power to order the sale pursuant to s70 LPA because Mr Johnson had a moiety interest in the property, a joint interest with his wife.
The plaintiffs submitted that in any event, I have power to order the sale of the whole property pursuant to s69 LPA. It was submitted that the plaintiffs were parties interested in the property as they each held a charge over a co-owner’s interest in the property. Section 69 LPA concerns the powers of a court to order partition or sale. In this case there is no request to partition the property and there is no suggestion that that would be appropriate.
Section 69 of the LPA does not describe who may make the application although there is reference in the section to parties interested. The first and second defendants argue that the interested parties must have an interest over the whole of the property. The section does not refer to an interest in the whole of the property and, as was argued by Mr Edmonds-Wilson, there is no reason to think that a derivative interest should be treated any differently to the interest of the registered proprietor or person who has an interest in the whole of the property. It was pointed out that there is no authority for the interpretation urged by the first and second defendants.
It was submitted by Mr Edmonds-Wilson that joint tenants and tenants in common have a risk that one or other of them might want to alter the situation by way of partition or sale of the land. It was submitted that the potential for sale of the whole property ‘goes with the territory’ in a joint tenancy arrangement and that the construction urged is rational, fair and sensible. It was pointed out that were there no charge, in the event of Mr Johnson’s bankruptcy, his share in the property would have been assigned to the trustee in bankruptcy and that there is no doubt that a sale could take place in those circumstances.
The plaintiffs submit that, for the purposes of s69 LPA, a person who holds an encumbrance over land is a person interested for the purposes of the section and they rely on Midland Bank plc v Pike & another.[82] That case is to the effect that a person having an equitable charge over a co-owner’s interest in a property was entitled to invoke or rely upon the UK provision which is similar to s69 LPA. There the court had to decide whether the holder of the equitable charge was a person interested in the property such as to enable the court to order the sale of the whole of the property. The court held that the holder of the equitable charge was a person interested.[83] Mr Nugee QC said:
As to principle, an equitable charge, he submits, has all the characteristics of a proprietary interest. It endures through changes of ownership of the property charged, the rights of the charge prevail over those of the trustee in bankruptcy of the charger or any successor in title of the charger, and the benefit of the charge is transmissible. An equitable charge operates as an assignment pro tanto of the property charged. I accept this submission. If authority is required to support it, it may be found in Swiss Bank Corp v Lloyds Bank Ltd [1979] 2 All ER 853, [1979] Ch 548; affd [1981] 2 All ER 449, [1982] AC 584 (see especially the statement of principles by Browne-Wilkinson J ([1979] 2 All ER 853 at 865-866, [1979] Ch 548 at 565-566), which was approved by Lord Wilberforce ([1981] 2 All ER 449 at 453, [1982] AC 548 at 613)) and the references by Browne-Wilkinson J to ‘a property interest (by way of charge or trust)’ ([1979] 2 All ER 853 at 868, [1979] Ch 548 at 568) and by Lord Wilberforce to ‘any charge or other proprietary interest’ ([1981] 2 All ER 449 at 453, [1982] AC 548 at 613).[84]
[82] [1988] 2 All ER 434.
[83] Ibid at 438, 435, 436.
[84] Ibid at 436.
It was submitted that the term ‘parties interested’ in s69 (and s70) LPA should be given a similar construction to the Midland Bank case. The plaintiffs also rely upon McMahon v Wade[85] in support of the argument.
[85] [1983] WAR 152 at 155.
The plaintiffs conceded that there was no South Australian authority as to the meaning of the term ‘parties interested’ to the effect that it includes someone who derives their interest from a co-registered proprietor. It was argued that having regard to the general principles of property law and equity that an equitable charge has all the characteristics of a proprietary interest and would suffice for the purposes of s69 LPA.
Section 69 LPA is discretionary. When making an order I must have regard to the nature of the property, the number of parties interested or presumptively interested therein, the nature of the interest and whether a sale of the property and distribution of the proceeds would be more beneficial for the parties interested than the division of the property.
In my view the plaintiffs are parties interested and in all the circumstances a sale of the whole of the Hove property and distribution of the proceeds would be more beneficial to all of the parties. I note the common sense submission that a half share with another co-owner would effectively destroy the value of the property as compared with the property as a whole.
Mr Stathopoulos, for Leader, added to the submissions. He relied upon the Federal Court decision in Sheahan v Cooper & Ors.[86] In that case Mansfield J considered ss69 and 70 LPA and said that pursuant to s70 LPA an application by a part owner or part owners together holding one half or more of the interest in the property, the court is to make the order for sale sought unless there is good reason to the contrary. Mansfield J observed that if the applicant had less than one half interest in the property in issue the court has a general discretion as to whether to direct sale of the property in all the circumstances. That court made a finding that one of the properties would be more valuable if sold as a single entity rather than sold as individual sections or titles and it appears that there was evidence to that effect. In this case there is no specific evidence on this topic but I do not think evidence is necessary. It is a matter of common sense that a residential suburban property will achieve a greater value when sold as a whole as opposed to two half interests.
[86] [1998] FCA 1531.
In Sheahan v Cooper & Ors, Mansfield J indicated that a desire by one of the parties to purchase the property is not a reason to decline the order. I have no submissions before me to as to Mrs Johnson’s attitude in that regard but note that it is my intention that Mrs Johnson be given an opportunity to undertake to purchase what is described as Mr Johnson’s share.
In my view the orders sought by the plaintiffs as to the sale of the Hove property should be made. I do not need to decide whether the plaintiffs’ interest amounts to a moiety within the meaning of s70 LPA. Having regard to all of the circumstances and the criteria set out in s69 LPA, I am satisfied that the order for sale should be made. I will give the second defendant an opportunity to be heard as to whether she wishes to purchase the first defendant’s interest in the property.
Conclusion
I have made rulings upon various orders sought which were disputed between the parties. It is necessary for the parties to consider the form of orders in light of those rulings and I will hear the parties in due course. I will also hear the parties as to orders for costs of the lengthy arguments as to these issues.