Offermans v Bradnams Windows and Doors Pty Ltd

[2012] QDC 8

DISTRICT COURT OF QUEENSLAND

CITATION:

Offermans v Bradnams Windows and Doors Pty Ltd (ACN 010 409 819)  [2012] QDC 8

PARTIES:

Dennis John OFFERMANS

(Plaintiff/Applicant)

and

BRADNAMS WINDOWS AND DOORS PTY LTD

(ACN 010 409 819)

(Defendant/Respondent)

FILE NO/S:

D 1 of 2010

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court, Townsville

DELIVERED ON:

2 February 2012

DELIVERED AT:

Townsville

HEARING DATE:

25 January 2012

JUDGE:

Baulch SC DCJ

ORDER:

Application dismissed.

CATCHWORDS:

CORPORATIONS - CHARGES, DEBENTURES AND OTHER BORROWINGS - CHARGES - VALIDITY – OTHER CASES - where the Court of Appeal overturned the primary judge's interlocutory order striking out the subject pleadings - whether additional evidence now relied upon makes it appropriate to strike out the allegations - whether the pleadings disclose a cause of action or valid defence - whether the payment was an unfair preference

LEGISLATION

Corporations Act 2001 (Cth) s 262, s 266, s 280, s 281, s 588FA

COUNSEL:

A Moon for the Applicant

M Stunden for the Respondent

SOLICITORS:

Connolly Suthers for the Applicant

Forbes Dowling for the Respondent

1. In this action the liquidator of Eckerbuilt Pty Ltd seeks to recover what he says are unfair preferences or payments which were uncommercial transactions from a creditor of the company which received the payments during the relation back period created by the Corporations Act 2001 (Cth) (‘the Act’). Unfair preferences can only be recovered if paid in respect of "unsecured debt(s)".[1]

   [1] See s 588FA of the Corporations Act 2001 (Cth).

1. This application is the liquidator's second attempt to strike out that part of the defence which alleges that the payments in question were not made in respect of "unsecured debt(s)" and so cannot be recovered as unfair preferences.

1. On the liquidator's first attempt to strike out the allegations he was successful but the relevant order was overturned in the Court of Appeal.

1. The liquidator says that additional evidence now relied upon makes it appropriate to now strike out the relevant allegations.

1. The creditor alleges that a charge was created by the credit agreement which it entered into with Eckerbuilt.[2]

   [2] See the judgment of the Court of Appeal for the relevant terms of the agreement - Bradnams Windows & Doors Pty Ltd v Offermans [2011] QCA 106 at [3].

1. Two matters principally occupied counsel who argued the matter before me.  First the creditor argues that the bare reference to land in the instrument creating the charge means that it need not be registered even though

(a)       it charges things other than land; and/or

(b)       the company has no land and never did have any.

1. As counsel for the liquidator says that would lead to an unattractive, artificial outcome where the obligation to register (and thereby inform interested persons of the existence of the charge) would be avoided, interested persons left uninformed while the creditor retains the status of secured creditor.

1. I am inclined to think that such an interpretation is so patently against the scheme and purpose of the Act that it could be discounted not just at trial but on an application like this.

1. The second question is more difficult and involves the meaning of "unsecured debt" in s 588FA. Counsel tell me that there is no direct authority dealing with the question whether the fact that the charge was unregistered means it was void in the circumstances here existing or whether it would only be void in a winding up.

1. The short question is whether the fact that the charge is "void against the liquidator" because it has not been registered as required by s 262 the conclusion must follow that the debt was unsecured and that the payments made were accordingly made in respect of an "unsecured debt".

1. Such a result would treat the payments in the same way as debts were treated by McGill DCJ in Pioneer Construction Materials Pty Ltd v Schoch and Ors[3].  It is worthy of note that the facts in that case differed in that the payments were outstanding at the date of winding up.[4]

   [3] [2007] QDC 143.

   [4] See Bradnams Windows & Doors Pty Ltd v Offermans (supra) at [10].

1. The following matters emerge from consideration of the legislation.

1. First, the effect of s 266 of the Act is to make the charge void as against the liquidator, not the company.[5]

   [5] See 266(1) and Bradnams Windows & Doors Pty Ltd v Offermans (supra) at [9].

1. Second, s 280 and s 281 of the Act acknowledge that an unregistered charge, while void against a liquidator still has some legal status. That seems consistent with s 262(11) of the Act.

1. In this case the relevant payments were made before the commencement of the winding up and while the security existed between the respondent and the company.

1. Can the fact that the winding up commenced later change the character of those debts which were secured when incurred and when paid? While the commencement of the winding up allows the liquidator to ignore the charge where it is relevant to him it seems to me to be arguable that the charge was in existence at the time that the debt was incurred and paid and thus governed the relationship between the creditor and the company. That being arguable it must also be arguable that the debts are not "unsecured debts" within the meaning of s 588FA.

1. As the Court of Appeal pointed out at [16] there may be a deficiency in the legislation if an unregistered charge while void against a liquidator is regarded as valid for the purposes of s 588FA.[6]

   [6]Bradnams Windows & Doors Pty Ltd v Offermans (supra) at [16].

1. That may be so but in my opinion that is a matter appropriately resolved at trial rather than on an application where the General Steel[7] test must be applied.

   [7]General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125.

1. The application is therefore dismissed.

1. I will hear submissions as to costs.

1. I invite the parties to submit a timetable which will progress the matter to trial without delay.