Morenita Pty Ltd v AGC Advances Ltd

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I

IN THE FEDERAL COURT OF AUSTRALIA

)

NEW SOUTH WALES DISTRICT REGISTRY

)	NO. G170 Of 1986

DIVISION

GENERAL

)

BETWEEN :

MORENITA PTY. LIMITED

Applicant

AND :

AGC (ADVANCES) LIMITED

First Dospondent

AND :

PETER WALKER

Second Respondent

MINUTES OF ORDER.

Judge making order: Jackson

Date

order

made:

July

1986

Sydney

made:

Where

t	THE COURT ORDERS	THAT:
i .
?
n

Upon the applicant giving the usual undertaking

as to

damages

and upon the applicant undertaking

to the Court not to

dispose

of any of its assets except in the ordinary course

its ordinary business.

,	.
I
l

2. j

IT IS ORDERED:	!
I

1.	That until further order the applicant keep records of	i -
:

recelpts and payments received	or made by the applicant
such records to include:-
Cash Receipts book

Cash Payments

book

Bar takings book

Bistro takings

book

Bookings Register

Deposit Receipts book

Cheque butts from

1 July 1985

Bank deposit books from

1 July 1985

' Bank statements from

1 July 1985

Stock sheets from

1 July 1985

Wages book from

1 July 1985

Liquor Purchases Register

Creditor's Invoices

That an officer

of-the first respondent

and an

accountant of the first respondent's choice have leave

to inspect (and make copies) at the Aspen Chalet

on each

of 8 July 1986, 22 July 1986, 5 August 1986, and every

second Tuesday thereafter until judgment is delivered

(or otherwise on a date every two weeks agreed to by the

parties) the accounting records

of the applicant

3 .

including those re€erred

to in 1. above.

That until

4.00

p.m.

on 23rd July 1986 or further

earlier order:-

(a) the first respondent be restrained from

appointing a receiver of the assets

of the

applicant pursuant to the powers conferred

on the

first respondent by the securities given by the

I .

applicant in favour of the first respondent on

27th September 1985;

(b)

the second respondent be restrained from

-- -

exercising any powers

as such a receiver.

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That if the applicant

on or before 4.00

p.m.

on 23rd

July 1986 pay

to the first respondent the sum

$70r000.00 on account of interest

on the moneys advanced

to it by the first respondent and secured by such securities, the injunctions referred to in paragraph 3 are to continue until the final hearing of the

proceedings or further order.

That it

a term of the grant of the injunctions to

which I have referred that the applicant, in respect of

the periods after 27th June 1986r shall pay to the first

respondent the instalments of interest due under the

Deed of Loan and Guarantee dated 27th September 1985 and

being Anncxure "A" to the affidavit

of Noel Henry Heath

sworn 5th May 1986 and filed herein.

That the parties shall have general liberty

to apply on

48 hours notice in writing

to each other, and in

particular that the respondents shall have liberty to

apply on such notice to dissolve the injunctions which I

have granted if on any occasion a payment of interest

referred to in paragraph 5 is not made

at the time and

in the manner required	by such Deed of Loan and
Guarantee.

7.	That the injunction granted by Beaumont	J. on 8th May
1986 is dissolved.

I DIRECT the parties to approach the Registry forthwith to obtain

a date for a final hearing of the matter.

I ORDER that the respondents' costs of the application be part of

their costs in the proceedings.

Note:

Settlement

and

entry of orders is dealt with

by Order 36

of the Federal

Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

No. G170 of 1986

)

DIVISION

GENERAL

)

BETWEEN :

MORENITA PTY. LIMITED

Applicant

AND:

AGC

(ADVANCES)

LIMITED

First Respondent

AND :

PETER WALKER

Second Respondent	I
!

I .

CORAM:	JACKSON J.
-	DATE :	2 July 1986
PLACE:	Sydney

REASONS FOR JUDGMENT

In these proceedings the first respondent seeks

have varied the terms

on which Beaumont J. on 0th May 1986

granted an interlocutory injunction restraining the first

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respondent from appointing a receiver of the assets of the

applicant. (I should mention in passing that I was informed

by the parties that at the time when the injunction was

granted it was the fact (though it was not drawn

to His

Honour's attention) that the first respondent already had appointed the second respondent as receiver but the receiver had not exercised any powers under that appointment and that

the parties, sensibly,

had treated His Honour's order as

applying to restrain the exercise

by the second respondent of

his powers.

I shall In any event alter the form

of the

injunction to reflect the true situation.)

The applicant's case relates

to the items of property

which were to be the subject of securities given

on 27th

September 1985 to secure a loan of

$4,250,000.00

the /

made

by -'

the first respondent to the applicant. The securities given

were a registered first mortgage over a hotel/motel, the

"Aspen Chalet" at Jindabyne, registered mortgages over some

real esizate'in Sydney and a bill

of sale and charge over the

licence, goodwill, fixtures, fittings

and stock of the Aspen

--I

Chalet. The essential question in the proceedings is whether

after 27th September

19.85 the applicant was entitled

to have

the plant and equipment fittings and fixtures

of the Aspen

Chalet released from the security

to which I have referred.

The applicant's contention that it was

so entitled i s put on

several legal bases in the amended Points of Claim, the	l '
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jurisdlction of the Court being attracted

by the fact that one

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of those bases

is s.52(1)-of the Trade Practices Act

1974, but

the underlying factual contentlon is that the first respondent

had intimated, or agreed, prior to the entry of the parties

into the transactions, that

it was prepared to release these

items from the securities in order to permit the applicant

obtain finance either

by sale of them and lease back (as

alleged in the amended Points of Claim) or by way of a bill of

sale over them

(as was mentioned in argument). On the

evidence the figure which might have been obtained from

financing in either of these ways was some $350,000.00.

I might say that if there

had been a release of the

plant, equipment, fixtures

and fittings from the securities,

the amount of the loan

by the

first respondent to the

applicant would be unchanged,	as would the rates of interest
appllcable.

When the matter came

before Beaumont J., a

considerable amount

of interest on the $4,250,000.00 was then

due and unpaid.

In particular the interest payable in 1986 on

27th January, 27th February, 27th March and 27th April had not

been paid in full. All that had been paid

on account of

interest for those periods wasabum of

$40,000.00 paid in April

1986. The estimates of the.interest due and unpaid provided

by the parties vary depending on the rate of interest to be applied but it is sufficient for present purposes to take the

figures used by the applicant in Exhibit

1 which (although

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using as the date on which interest became payable

the 1st of

the month following the date on which it actually became due) shows that at the time of the grant of the interlocutory injunction the total of interest then due was $222,219.18,

taking into accoulnt the $40,000.00 which had been paid.

! '

His Honmr was conscious of the fact that the

applicant was then apparently in serious financial difficulties and he was invited to make the payment of

interest a condition	of relief. He declined to do so,
saying:-

"I turn to the balance of convenience.

On behalf of the applicant, the obvious prejudice of

appointment of a receiver was advanced as a reason for

the grant of interim relief. On the other hand, the

respondents point to the applicant's apparently serious

financial difficulties and submit that,

at the least, the

payment of arrears of interest should be

made a condition

of relief (cf. Glandore Pty. Ltd. v. Elders Finance

Investmeat Co.

(1984) 57 A . L . R .

186).

However, it would

seem tha6 ehe applicant would be .unable

to comply with

such a condition,

at least before

the commencement of the

ski seaspn.

b	In my opinion, the balance of convenience would be

best achieved by restraining the appointment of a

receiver but ordering an early final hearing of the

application. In order to secure the position of the

first respondent to some extent in the interim, the

applicant profeered an undertaking

to the Court not

dispose of its assets except in the ordinary course of

its ordimry business. I propose alsdto order that the

applicant keep proper accounts in the interim

and make

them available

to the first respondent upon request."

The orders which

he made, leaving aside directions, were

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as follows:-

"1.

Note that the appllcant gives the usual undertaking

as to damages.

2. Note that, until further order, the applicant undertakes to the Court not to dispose of any of its assets except in the ordinary course of its ordinary business.

3. Order that untll further order, the applicant keep accounts of the payments and receipts made or received by the applicant and that such accounts be

made available for inspection

by the first

respondent and its solicitors upon the giving of

three days' notice

to the applicant's solici,,rs.

4 . Order, until further order, that the first

respondent be restrained from appointing a receiver

of the assets of the applicant.

Fix 28, 29 and 30 May 1986 for the final hearing of

I .

the application before Burchett

J."

The trial could not proceed

on 28th-30th May because

Heath, a director

of, and the person in fact controlling, the

. -

applicant was injured in

a motor accident. It was suggested that

the proceedings might be heard on 1st-3rd July 1986 but those

dates were unsuitable to the first respondent

. As matters stand

the matter will be

set down for hearing

on a date in the near

future.

Several matters are urged in support

of-this contention

that I should impose,

as a condition of

the continuance of the

injunction, a

reqluirement that the applicant pay both

the arrears

of interest, and also the interest falling due under the

securities in the future.

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First reference was made to the fact that, for the

reasons to which

I have referred, the trial will occur

at a later

date than had been expected at the time of the hearing before

Beaumont J..

Secondly there is evidence that the height of the

ski season is July and August, with some tapering off in

September. There is also evidence that on 17th April

1986 Mr

Heath gave to Mr McDiarmid, the first respondent's State Manager,

estimates showing projected operating surpluses, before interest,

of $310,000, $450,000 and $170,000 for those months. Thirdly it

is said, by reference to Mr Howard's affidavit, which puts in

issue matters in Mr Heath's earller affidavits, that

I should

regard the applicant's case with some suspicion and be less

inclined to find that there is a serious question

to be tried.

Finally, it is said that the now discovered documents show,

contrary to the evidence given by Mr Heath before Beaumont

that the $350,000.00,

if obtained from a

sale of the plant and

equipment, fixtures and fittings, would not have been used for

the purpose of providing funds

to pay the interest to the first

respondent as it fell

due-but would have been used

for a quite

different purpose, namely

as the source of funds which Mr Heath,

in one way

or another, might use

to buy out his aunt's

shareholding in the alp.plicant.

. .

In relation

to the third of these matters,

I should say

that it is not a matter which

I have taken into account. If I

had, I would yet have arrived at the conclusions

to which I shall

I .

refer.

I also do not regard the fourth

matter as being one which

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I

would affect the views I have taken.

The present case is unusual in

that, as I have said

earlier, it is clear that the interest in question

- at the rate

applicable if -Interest

were paid timeously and if there were no

other default under the securities

- was due whether the

applicant's contentions are correct or not. What is said is that

the applicant would have had

a further

$350,000 available to it

which it night have used to pay the interest falling

due to the

first respondent,

. I

The parties are agreed that the present case

is one

i:	where, to use the words of Morling	3. in Glandore Pty Ltd v.
L.

Elders Finance IQvestment

Co. Ltd. (1984) 4 F.C.R.

130 at 135,

adopt

ing the observation of Sugerman

J. in Harvey v. McWatters

(1948

) 4 9 S.R.

(N.S.W.) 173:-

"the proper approach

is to mould an order

so as to ensure

adequatme protection to the mortgagee and

to otherwise do

justice between the parties during the period pending

the final hearing

.'l

Having tcaken into account the matters

to which I have

referred, I am not satisfied that

I should make any variation of

the-order made by Beamont J. in respect of arrears

of interest

in respect of the period

up to the making of his

order. Nor do I

think that I should require payment of the interest due on 27th

May 1986.

It seems to ne that His Honour must have been

cognizant of the fact that it was unlikely that that would be

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paid before trial.

I see no reason, however, why with the lapse

b	of time which has occurred some provision should not now be made
:.
c	for payment of interest.
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'It is clear on any view that even if the

$350,000.00 had

been obtained it would not have been sufficient

to pay all the

interest due in the period

to the present time. See for example

Exhibit 2. In

my view an appropriate exercise

of my discretion

in the events which have occurred is

to make it a condition of

the continuance of the injunction that interest falling due in

the future

be paid and that

a sum roughly equivalent to the

L '

amount of interest which would have become payable as interest on

27th June 1986, namely a sum of $70,000.00 be paid on account of	I
interest within 21 days from today's date. The interest falling	I
due on that day could not have been paid in full if the
$350,000.00 had been obtained, and I see no reason why I should
in effect give credit to the applicant for the whole of the

$350,000 (after ma.king the notional adjustments referred	to in
Exhibit 2).

[1986] FCA 263

7 Feb 1986