Rolfe, James Geoffrey v Transworld Marine Agency Co NV
[1998] FCA 532
•19 MAY 1998
FEDERAL COURT OF AUSTRALIA
ADMIRALTY - sale of vessel arrested by Court - successful claim against the proceeds of sale - whether commission is payable to applicant - whether agreement exists as to amount of commission.
CONTRACT - whether any binding contract made - examination of correspondence - whether an equitable charge or lien over proceeds of sale arises in respect of commission - agreement to pay from proceeds of sale - whether any equitable assignment.
BANKRUPTCY - Letter of Request from Belgian Court - whether any moneys held in Australia should be assigned to Belgian trustees to be administered as part of a world-wide administration of assets and liabilities - external administration in Corporations Law and Bankruptcy Act - Belgium not a prescribed country - relevant considerations - avoidance of duplication - security - delay - uniform administration of bankruptcy - mutual co-operation - comity.
Corporations Law ss 350(14)(b), 580 and 581
Bankruptcy Act 1966 (Cth), s 29
Morlines Marine Agency Ltd & Ors v The Proceeds of Sale of the Ship “Skulptor Vuchetich” (1997) (unreported, Sheppard J, 15 May 1997), cited
Australian Broadcasting Corporation v XIVTH Commonwealth Games (1988) 18 NSWLR 540, cited
Hewett v Court (1982) 149 CLR 639, followed
Re Universal Distributing Co Ltd (In liq) (1933) 48 CLR 171, cited
Sympson v Prothero [1857] 26 LJ Ch 671, cited
Worrell v Power & Power (1993) 118 ALR 237, cited
Shirlaw v Taylor (1991) 31 FCR 222, distinguished
Palmer v Carey [1926] AC 703, distinguished
Commercial Banking Company of Sydney Limited v Colony Financiers of Australia Pty Ltd (1972) 20 FLR 220, distinguished
Hilton v Guyot, 159 US 113 (1895), cited
Turners & Growers Exporters Ltd v The ship “Cornelis Verolme” [1997] 2 NZLR 110, cited
John LavingtonBonython v The Commonwealth of Australia [1951] AC 201, followed
Bank of Credit and Commerce International No (10) SA 1997 Ch 213, cited
Re Ayres; Ex parte Evans (1981) 34 ALR 582, followed
Smith v Australian Securities Commission (1995) 13 ACLC 511, cited
Nygh, Conflict of Laws in Australia, 6th edn
Sykes and Pryles Australian Private International Law, 2nd edn
JAMES GEOFFREY ROLFE v
TRANSWORLD MARINE AGENCY COMPANY NV
NG 764 OF 1997
TAMBERLIN J
SYDNEY
19 MAY 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
IN ADMIRALTY
NG 764 of 1997
BETWEEN:
JAMES GEOFFREY ROLFE
APPLICANTAND:
TRANSWORLD MARINE AGENCY COMPANY NV
RESPONDENT
JUDGE:
TAMBERLIN J
DATE:
19 MAY 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Mr Rolfe, the applicant, is a shipping agent who carries on business in Melbourne. He was retained by the respondent, Transworld Marine Agency Company NV (“Transworld”), a Belgian company, to recover moneys on its behalf from the proceeds of sale of two Russian ships, which had been arrested by this Court. The two ships are the MS “Skulptor Konenkov” and MS “Skulptor Vuchetich” (“the vessels”), which were formerly owned by the Baltic Shipping Company (“BSC”).
In return for his work in recovering these moneys he claims to be entitled to be paid a commission of 20% of the proceeds of sale of the vessel payable to Transworld, together with disbursements, costs, and expenses incurred by him in such recovery. He, therefore, submits that he is a secured creditor because he has a charge over the proceeds of sale for the commission owing to him.
Transworld succeeded in its claim against the proceeds of sale of the “Skulptor Vuchetich” and was awarded an amount of 96,661,901 Belgian francs, less agency commission of 15,169,797 Belgian francs. Of that sum, an amount in excess of USD1.04 million is held in Australia in a trust account pursuant to an undertaking to the Court given by Transworld pending the outcome of this proceeding. It is against this fund that the present claim is brought.
Although Transworld was incorporated in Belgium, it appears that its directors are Russian nationals and that it is a subsidiary of Sovfracht International, a corporation carrying on business in Odessa. Another subsidiary company of Sovfracht is Seachart Corporation (“Seachart”), which carries on a similar business.
The Transworld debts, in respect of which Rolfe claims to have been retained for debt recovery, are said to arise from services provided by Transworld to a number of vessels owned by BSC, which is now in receivership.
The proceeds of sale of the two Russian vessels were held in trust pending the outcome of claims against the funds. Transworld claimed to have a maritime claim against those proceeds and succeeded in this contention before Sheppard J.
The proceedings in relation to the claims against the vessels were heard on 17 to 19 June 1996 and judgment was delivered on 15 May 1997. See Morlines Marine Agency Ltd & Ors v The Proceeds of Sale of the Ship “Skulptor Vuchetich” (1997) (unreported, Sheppard J, 15 May 1997).
On 26 March 1997, Transworld was adjudged bankrupt and three Trustees in Bankruptcy were appointed to Transworld by the Commercial Court of Antwerp. The Trustees were Belgian Attorneys at Law and included Mr Berneman, who has given evidence in this proceeding. The presiding Magistrate of the Commercial Court of Antwerp has by order made on 23 September 1997 requested the Federal Court to:
· acknowledge that the funds held by the solicitors are vested in the Belgian Trustees;
· stay these proceedings;
· declare that the funds are to be assigned to the Trustees;
· take measures to ensure that the funds are placed under the control of the Trustees.
On 1 July 1997, I ordered that an interim payment of USD813,030 be paid from the proceeds of sale of the vessel “Skulptor Vuchetich.” These funds were received by the solicitors for Transworld and were used to pay disbursements. The balance was then immediately remitted to Belgium without any notice to Mr Rolfe.
On 29 August 1997, I ordered that the trustees of Transworld be paid a further sum of USD1,028,964.40. This amount is presently held in Australia in the trust account of the solicitors for the trustees, pursuant to an undertaking to the Court pending the outcome of this proceeding.
Causes of Action
The Amended Statement of Claim alleges that an oral agreement was made on 5 October 1995, to the effect that, in consideration of Rolfe acting to recover moneys claimed by Transworld from the proceeds of sale of the Russian vessels, Transworld would pay to Mr Rolfe a 20% commission out of and calculated by reference to the proceeds of sale payable to the respondents together with costs and expenses.
The claim also alleges that a further agreement was made in Cyprus in February 1996, to the effect that, in consideration of Mr Rolfe continuing to take steps to recover the debt from the proceeds of sale of the vessels, 30% of all funds owed by Baltic to Transworld would be held in a trust account in Australia until such time as to any dispute as to the applicant’s entitlement to commission was resolved.
A third, alternative contractual claim is based on correspondence passing between the parties from 10-13 November 1995 to the effect that the applicant would continue to act to recover the BSC debt from the proceeds of sale and would receive 20% of the funds recovered for Transworld together with costs.
A fourth contract is alleged by Mr Rolfe, which has a similar effect to the one set out above. It is said to have been made between the parties in early April 1996.
In the alternative, Rolfe alleges that there were representations made by Transworld to the above effect. Further claims are made based on estoppel, implied contract, quantum merit, equitable lien, equitable charge and equitable assignment.
Factual context
At all relevant times, Mr Rolfe carried on a transport and container business. In September 1995, he carried out investigations in Australia for Sovfracht and Seachart in relation to the Russian vessels, which were then under arrest. On 25 September 1995, he reported the current position to Sovfracht, which, as noted earlier, is the holding company of Transworld, and its sister company Seachart.
On 5 October 1995, Mr Rolfe had a telephone conversation with Mr Kalenik, the General Manager of Transworld. This is set out in Mr Rolfe’s affidavit. There was no contradictory version suggested by Transworld and I accept Mr Rolfe’s evidence as to what was said on this occasion. After Mr Kalenik informed Mr Rolfe that he had been given his number by Mr Vinogradov from Sovfracht the following discussion ensued:
“Kalenik:Mr Vinogradov would have told you of our (TMA)problems with Baltic.
RolfeThat is correct.
Kalenik:Would you be prepared to help us collect this debt?
Rolfe:Yes I would, but before I could give you a firm answer on this I would need to know what the debt is all about.
Kalenik:It’s normal (shipping) agency debts and we have a letter from Baltic acknowledging the debt.
Rolfe:I would want all the documents you have quickly so I can give them to my solicitor before I could advise you as to whether I thought the claim would be successful.
Kalenik:Vinogradov told me that you were doing something similar for Seachart and they were paying you 20 per cent of the claim plus costs and expenses.
Rolfe:I would want the same arrangement with TMA.
Kalenik:It seems a bit high, could we settle on 15 per cent?
Rolfe: The arrangement would be 20 per cent plus costs and expenses.
Kalenik:I’ll send you the documents immediately and we agree on that commission.”
Mr Rolfe was informed by Mr Kalenik on that occasions that Transworld wanted USD500,000 urgently. According to Mr Rolfe, the parties then proceeded to discuss a loan in that sum. Mr Rolfe indicated a willingness to provide such a loan on the basis of security from the parent company, Sovfracht. This conversation is said to evidence the first contract on which Mr Rolfe bases the present claim.
The following day Mr Rolfe faxed a letter to Mr Kalenik, who worked in the Antwerp office of Transworld. In that letter he made no reference to any agreement with Transworld having been reached the previous day with respect to recovery on 20% commission plus costs and expenses
On 9 October 1995, Mr Rolfe wrote to Mr Kalenik saying that he had received advice regarding the Transworld debt owed by Baltic and the possibility of the debt being “factored”, by which he claimed he meant that the debt might be sold to another party and collected in Australia. He then went on to say:
“In order that my company can properly consider any proposal to factor this debt, I would require the following documentation ....
Obviously, if you do not factor the debt, Transworld will have to wait a considerable length of time to recover the debt. I have not been advised if this is either possible or practicable.”
This facsimile is tentative in terms and it is based on a different arrangement to the 20% collection fee in that it contemplates a factoring arrangement. There is no reference or any agreement to pay commission for proceeds recovered.
On 16 October 1995, Mr Rolfe withdrew his offer to factor the Transworld debt. He also proposed that Sovfracht should “consider some form of remuneration” if it desired him to pursue the Transworld debt. This proposal is not consistent with a legally binding agreement having been reached as to remuneration on 5 October 1995. The facsimile of 16 October 1995 was sent to Mr Kotov of Sovfracht in Vienna. Copies were sent to Mr Vinogradov in Moscow.
On 1 November 1995, Mr Rolfe wrote to Mr Kalenik in relation to the contemplated loan, in which he stated he was prepared to provide the USD loan in instalment of 100,000 dollars on a number of conditions, one of which included a fee of 20% of all moneys collected on behalf of Transworld and Seachart. This fee was to be paid in return for funding the actions, briefing legal counsel, and being responsible for all legal and other costs, collection of debts and defending Transworld and Seachart’s legal positions. It was to be success fee only. In other words, if there was no recovery then there would be no payments.
As a result of “some concern and confusion” expressed on the part of Mr Vinogradov in a telephone conversation of 2 November 1995, Mr Rolfe wrote to him on 3 November 1995 stating that he was not prepared to enter into a “stand alone” commercial arrangement with Transworld unless satisfactory arrangements were finalised addressing “other issues”, which were conditional upon each other. This letter makes it clear that he had in mind a series of arrangements which were interdependent. The risks associated with the collection of the Transworld debt were considered so great as to require the provision of some security to cover the “funding” by Mr Rolfe.
Mr Kotov responded on 7 November 1995, and in his response he referred to a loan facility to be secured in Australia of the vessels.
In his letter of 8 November 1995 , Mr Rolfe proposed in relation to Transworld that:
“In return for advancing TWM a loan facility of USD500,000 a factoring fee of 20% will be paid on all monies collected. Terms and conditions of the loan will be arranged between Mr Kalenik of TWM and myself or Mr James. A satisfactory Power of Attorney will be provided so that we have sufficient power to act on behalf of TWM in this matter, both in Australia and anywhere else in the world that will be necessary.”
Mr James, at all relevant times, was the representative of Sovfracht in Australia.
Messrs Kotov and Vinogradov replied to Mr Rolfe on the same day referring to the contingency that:
“...the amounts collected are not sufficient to cover the loan facility and interests and your 20% factoring fee on the amounts collected less US$500,000 - lended(sic) earlier.”
On 10 November 1997, Mr Rolfe relied by fax. This fax referred to a proposal whereby he would receive an agreed factoring fee of 20% of any moneys collected; repayment of a loan of $500,000 together with collection costs. Mr Vinogradov then faxed Mr Rolfe a response, accepting Mr Rolfe’s terms in principle, subject to one exception, which is not presently before the Court. In fact, the loan was never made.
It is apparent from the above correspondence that the parties intended a “package deal”, which did not consist of a number of discrete independent agreements but rather envisaged an overall inter-dependent series of agreements. Moreover, it is evident that Mr Rolfe understood the arrangement as a “a package deal” because in a letter of 13 November 1995 he says:
“...I agree that the implementation of our package deal should progress immediately.” (Emphasis added)
This interdependence is emphasised in further correspondence passing between the parties between mid and late November 1995.
Cyprus Protocol
A meeting took place in Cyprus on 17 and 18 February 1996. Those present were Mr Rolfe, Mr Kotov, Mr Vinogradov and Mr Craig James, the Australian representative of Sovfracht.
The meeting was suggested by Mr Vinogradov because he considered that the arrangements as to the collection of the Transworld and Seachart debts in Australia required clarification.
As a result of further discussions, a document was drawn up which was described as “Protocol - Meeting in Cyprus”. With minor amendments this document was signed by Mr Rolfe on 23 May 1996.
The debt due to Seachart from the proceeds of sale was also discussed at that meeting. It was agreed that the Seachart debt was collectable in Australia. All moneys were to be forwarded to Seachart on collection, less a collection fee of 20% together with verified costs and expenses.
In relation to the Transworld debt, after some discussion, it was noted that Mr Rolfe rejected the proposal as put by Messrs Kotov and Vinogradov, that Mr Rolfe should be paid all reasonable costs incurred to date and that there was to be a reasonable collection fee negotiated in respect of any amount collected by Rolfe in Australia for Transworld to be between five and seven per cent of collections. The Protocol records that it was Mr Rolfe’s view that he would collect Transworld amounts in Australia and be paid a commission/collection fee of some 20%.
The document records that, after lengthy discussion as to the intention of the parties in respect of the collection of the Transworld debts from BSC, it was agreed that the following approach would be adopted:
-Rolfe would pursue the collection of Transworld amounts due from available Baltic Australian assets;
- Sovfracht and Sovfracht companies around the world would continue to seek the repayment of the like moneys owed to Transworld in other ports around the world;
- The parties would agree to keep each other informed as to the progress of the collection process via Mr Vinogradov.
- The question of the collection fee would be deferred as between the parties. Rolfe maintains the right to receive a collection fee of 20% of collections made. Messrs Kotov & Vinogradov maintained that there is no Agreement in place as a loan in the amount of USD500,000 was not put in place;
- Any further moneys collected in Australia on behalf of the Transworld debt owed by Baltic would be remitted immediately to Transworld less 30% - to be held in the Trust Account pending the determination of the costs to be paid in Australia in respect of collections, out of pockets, and legal fees paid.
The subsequent correspondence records show that the parties did not substantially move from their positions as to the terms of the commission arrangement.
On his return from Cyprus on 26 February 1996, Mr Rolfe wrote to Mr Vinogradov to confirm the agreements reached in Cyprus:
“It was further agreed that 70% of all funds collected in Australia as a result of these actions will be remitted to TWM immediately upon collection, and an accounting for legal expenses etc. will be provided to TWM as soon as possible after that time. It is further understood that Rolfe maintains his right to 20% of all monies collected in Australia, but agrees to postpone these rights until the money has been collected.”
This correspondence records that Transworld was concerned to collect the proceeds of sale as soon as possible because of its urgent need for cash. In a letter of 28 February 1996, Mr Backx wrote to Mr Vinogradov:
“Ref: Rolfe
Received following copy of fax from Mr Crosiers. It already explains quite a lot. Nevertheless USD65,000 is quite a lot, suppose there is no juridical problem to add these costs to a maritime claim in Australia. Also suppose in this case Rolfe will not deduct this amount from sum collected for TWM, even if we only receive a % of total claim. Meaning Rolfe will wait till total sum is collected before deducting costs.”
On 18 March 1996 Mr Vinogradov sent to Mr Rolfe a fax, which in part reads:
“Since TWM needs badly cash money, we have come to a decision to expressly confirm the TWM’s committment (sic) to pay you the commission of 20% out of the amounts collected in Australia. The payment will be effected without any prejudice but subject to a loan of USD500,000 at least and before 26 March as latest. The securities of the TWM’s payment back of the loan are the money to be collected in Australia.” (Emphasis added)
Transworld’s position as to the linkage of the USD loan with payment of the 20% commission is reflected in Mr Vinogradov’s letter to Mr Rolfe of 18 March 1996 as follows:
“Referring to my today’s telephone call, I would like to formally raise once again the question of granting Transworld, Antwerp a USD500,000 loan as soon as practicable.
Last week I met Mr P. Backx of TWM at Antwerp for deliberating on our controversial issue as regards a 20% commission.
Since TWM badly needs cash money, we have come to a decision to expressly confirm the TWM’s commitment to pay you the commission of 20% out of the amounts collected in Australia. The payment will be effected without any prejudice but subject to a loan of USD500,000 at least and before 26 March as latest. The securities of the TWM’s payment back of the loan are the money to be collected in Australia.
Looking forward to your prompt reply.” (Emphasis added)
Further correspondence up to 29 March indicates that the parties did not substantially move from their positions as to the terms of the commission arrangement. In short, Mr Rolfe considered that the 20% commission plus costs recovery agreement stood alone whilst Transworld proceeded on the basis that it was part of the overall package deal.
On 18 March 1996, Mr Vinogradov received a report from his Australian agent, Mr Craig James, who said in relation to the collection of moneys for Transworld:
“I have received the reports sent to you by Mr Rolfe in respect of our Cyprus discussions, thank you.
On the face of the Report, it would appear that Rolfe will pursue the Australian arrests and defer any claim for collection until all moneys are to hand. As the monies will at first instance be with the Court, I would advise you to maintain the status quo, that is to let the money flow in and then argue the point, if any when any issues as to collection arise.
.....
I would suggest to you that given that any money that flows to the Court in respect of Transworld will be advised to me. At that point, Transworld and Sovfracht should consider their options prior to me issuing any final protocol of the meeting that occurred in Cyprus. Will you please let me have your urgent comment by return, in order that I may proceed accordingly.”
By fax on 19 March 1996, Mr Rolfe responded that he was not in a financial position to provide a US$500,000 loan by 26 March 1996. The maximum which he could provide was US$175,000. He said that it was unlikely that further funds could be provided before the end of May.
However, on and shortly after 29 March 1996, the correspondence indicates a different arrangement. On that date Mr Rolfe wrote to Mr Vinogradov stating:
“You know my stand as far as the 20% commission is concerned. I have asked for the Directors of TWM to officially state their position. I will not enter into further discussion or negotiation on this subject.”
On 2 April 1996, only two and half months before the hearing of the claims before Sheppard J was due to commence, Mr Rolfe wrote to Mr Vinogradov stating :
“We are now in a position whereby we ready to instigate actions to gain a preference for both Seachart and TWM over the Baltic assets in Australia. This includes the proceeds of the sale of the two vessels in Australia.
I therefore require your response to my facsimile dated 29 March, 1996 by return. I am not prepared to commit to the funding for these actions until such time that we have agreement on the payment of the 20% commission by TWM” (Emphasis added)
Also on 2 April 1996, Mr Backx wrote to Mr Vinogradov regarding Mr Rolfe:
“1. 20% commission
For us it has always been clear that the 20% was linked to the loan of 500,000USD. I still feel Mr Rolfe is playing a game with us and we will never see any money from Australia. More important for me is that we fully concentrate on one issue in Australia and if it turns wrong we will never see any money.
Most important for TWM is to collect cash, if it means we have to give 20% why not? If Rolfe can really collect 1.5 million dollars or more, it is to be taken. But Mr Rolfe only talks about comm., but never when money will be there. In the end he will blame us that he could not collect anything because we didn’t agree on 20%. I feel Mr Rolfe should now concentrate on collecting the debts.” (Emphasis added)
Mr Vinogradov replied to Mr Rolfe on the same day:
“We are well aware about the Courts (sic) procedure in Australia. Kindly ask you to speed up the recovering the money due to TWM/Seachart. Looking forward to your report on last developments in that respect.”
On 3 April 1996 Mr Rolfe replied:
“It is clear from your response that you acknowledge the agreement between myself and TWM, as confirmed at our meeting in Cyprus and reconfirmed in my letter dated 26 February, 1996, and it is firmly understood that I am to do everything possible to speed up the recovery of funds to TWM, and of course Seachart.”
There was no response from Mr Vinogradov to this communication.
On the following day Mr Vinogradov wrote to Mr James and requested him to sign the Cyprus Protocol and arrange signing by Mr Rolfe. He also asked Mr James the following questions:
“1. Could JR block remittance from the lawyers bank account of the moneys assigned to TWM under pretext of non-payment of 20% collection fee?
2. Is it unavoidable for both Seachart and TWM to keep JR as the sole collector of the monies in Australia because of his funding of the actions of regaining the monies?
It was understood that at the present stage of the procedure anybody else, perhaps you, could positively be helpful in accelerating the recovery of funds to Seachart and TWM.
3. If all above mentioned could be avoided in order to not spend money on the collection fee of 20%, it would be justified to make fresh arrangements in our process of regaining the funds for Seachart and TWM subject to a certain confidence that such arrangements would not inflict any negative consequences to both Seachart and TWM.”
This letter reflects that an arrangement had been made to pay a 20% commission but that Mr Vinogradov was keen to avoid having to pay the collection fee.
On 21 April 1996 Mr James replied and recommended:
“My recommendation to you is that, given the lengthy time that these proceedings have taken, together with the approaching finality, that we maintain the current position - namely that I maintain a watching brief; and that we utilise Rolfe funding to complete the court battle(s). Any money that is payable by the Courts will be on notification to Sovfracht.” (Emphasis added)
In other words, the advice was to let Mr Rolfe continue to expend his funds and recover the money leaving any dispute as to payment until later. It clearly suited the interests of Transworld to continue to use the funding and services provided by Mr Rolfe in view of work done up to that time by him.
This approach was never communicated to Mr Rolfe, who continued to pursue the appropriate recovery steps.
The proceedings were heard by Sheppard J on 17 and 19 June 1996 and judgment was delivered on 15 May 1997. After further hearing, orders were made to pay funds to Transworld as described earlier.
In the interim period, while the judgment was reserved, Mr Backx wrote to Mr Rolfe on 3 July 1996 agreeing to pay legal fees but wanting some information as to how much the fees would be and for which actions to enable the total amount to be evaluated.
On 4 July 1996, Mr Vinogradov wrote to Mr Rolfe stating:
“... I confirm our understanding that a 30% reserve out of the amount due to be collected very soon to be held in a Trust Account as agreed in the meeting on Cyprus for payment of your collection fee, out of pocket money and legal fees. Thus, it means that no other deduction to be done out of the monies collected.” (Emphasis added)
In a handwritten recorded on 4 July 1996, Mr Vinogradov noted:
“Mr James Rolfe confirmed today over the phone that 30% of the money collected should cover ‘... collection (out of pockets & legal fees paid)( THE
PROTOCOL).”
The existence of a contract
Where it is said that a binding contract has arisen from a series of on-going communications and negotiations, it is necessary to construe these communications having regard to the subject matter of the negotiations, and the surrounding circumstances, and in the light of later communications. The question which needs to be addressed in this situation is whether there is objective evidence of an intention to make a concluded bargain: Australian Broadcasting Corporation v XIVTH Commonwealth Games (1988) 18 NSWLR 540 at 541.
The applicant’s contractual claims are advanced on several bases.
The first is that an oral agreement was made on 5 October 1995 as the result of a telephone conversation between Mr Kalenik and Mr Rolfe.
I accept that the conversations took place in substantially the terms expressed in Mr Rolfe’s affidavit, which are referred to earlier. No evidence was adduced from Mr Kalenik to contradict the version given by Mr Rolfe. Nor was Mr Rolfe shown in cross-examination to have inaccurately recounted the terms of the conversation. However, I do not accept the submission that the conversation as recounted gave rise to any concluded oral agreement.
The circumstances and considerations which lead me to this view are as follows.
In the course of the discussion, as recounted by Mr Rolfe, it is evident that he wanted to obtain further information before making any contractual commitment. He wanted to know the likelihood that the action would be successful. For this reason he requested to see the relevant documents. It is clear that he considered that there was a need to talk about the costs involved. In addition, it is also significant that, in the same discussion, Mr Kalenik sought a loan of USD500,000 for the Sovfracht group, who were in need of money urgently.
Mr Rolfe’s position is that a discussion concerning the loan was independent of the discussion concerning the collection of the debt and the payment of commission. It is by no means apparent from the terms of the conversation that the loan was unrelated to the engagement to pay a 20% commission for recovery. Moreover, having regard to the cross-examination and the subsequent correspondence I cannot accept that the two matters, namely the collection and the loan, were separate.
The correspondence, written by Mr Rolfe on the following day, makes no mention of any agreement regarding collection fees or costs. Furthermore, Mr Rolfe’s letter of 9 October 1995 indicates that he contemplated a proposal to “factor” the debt. This is quite a different arrangement from that allegedly made on 5 October 1995. A few days later he withdrew this proposal. On 16 October 1995, he indicated that he would be happy to recover the debt on the basis of a success fee only. This correspondence discloses a fluidity in the proposed arrangements between the parties and is, therefore, inconsistent with any firm agreement having been reached on 5 October as to recovery and commission as alleged by Mr Rolfe.
Although some of the correspondence refers to a fee of 20% of all moneys collected on behalf of Transworld, the reference to the percentage occurs in the context of a USD500,000 loan. The correspondence supports the view that the payment of the collection fee and expenses were linked to, and depended upon, such a loan being agreed to. Having regard to these considerations the conversation of 5 October 1995 did not give rise to the contract alleged or indeed to any contract. However, the conversation and correspondence surrounding it form part of the background against which to consider subsequent discussions and communications between the parties, in order to ascertain whether any binding agreement was reached.
The second event to which the applicant points is the making of the Cyprus Protocol. This Protocol records discussions held on 17 and 18 February 1996 in Cyprus between the parties. That document shows that the parties were unable to agree that a 20% commission would be payable to Mr Rolfe for recovery of Australian moneys. Baltic’s position was that, although such an arrangement had been discussed, it was dependent on the making of the loan and, therefore, because there had been no loan then there was no agreement as to commission.
In view of this position, the parties agreed on an approach which would be taken to collect the Baltic debts in Australia. This included the deferral of the question of collection fees. It was, however, agreed that 30% of any moneys collected in Australia in respect of the Transworld debt were to be held in a trust account pending resolution of the amounts to be paid in Australia in respect of the collection/out of pockets and legal fees incurred. It is important to note that this agreement as to retention envisages payment out of moneys collected because it lends to the contention discussed later, that the obligation to pay a collection fee gave rise to a charge. This is apparent from the reference to payment in “Australia”.
The Cyprus Protocol was not signed immediately but was later signed by Mr Rolfe on 13 May 1993 with minor alterations, as a correct record what had been discussed in Cyprus in February.
I do not think that the Cyprus Protocol can be read as evidence of a final or binding agreement whereby Transworld was obliged to pay a 20% commission to Mr Rolfe but, in my view, it did evidence a binding agreement in relation to the retention of 30% of moneys collected and the payment of commission and expenses from those retained moneys.
Alternatively, it is submitted for Mr Rolfe that a contract arose from an exchange of facsimiles passing between Transworld and Mr Rolfe from 10 to 13 November 1995. In that correspondence, Mr Vinogradov refers to the acceptance of Mr Rolfe’s terms “in principle”. Reliance is placed on this to indicate that a contract had been reached. However, this correspondence must be read in the context of Mr Rolfe’s proposal of 10 November 1995, which included as a component of the “agreement” the making of the USD500,000 loan. This correspondence cannot support the contract alleged by Mr Rolfe.
As a further alternative, Mr Rolfe submits that a binding contract was reached from correspondence in late March-April 1996 between the parties when examined against the background of the previous negotiations and communications between the parties.
The salient parts of this correspondence are set earlier in these reasons.
The timing of this correspondence is important. The correspondence occurred two and a half months before the hearing of the Transworld claims by Sheppard J in this Court. On 29 March 1996, Mr Rolfe by fax, requested that the directors of Transworld state their position as regards the 20% commission. In the same letter he also offered a loan of USD175,000, which was to expire on 29 March 1996. Mr Vinogradov sent a copy of this fax to Messrs Kotov and Backx for their comments. On 2 April 1996, Mr Rolfe wrote to Mr Vinogradov stating that he was ready to instigate action to gain a preference over the Baltic assets in Australia. He said that he was not prepared to fund the actions until such time as he had agreement on payment of the 20% commission
He required a response to his fax of 29 March 1996 by return. On the same day, in response to Mr Vinogradov’s request for comment, Mr Backx wrote concerning Mr Rolfe’s letter. After stating that the position of Transworld had always been that the payment of 20% collection fee was linked to the loan, he stated:
“Ref: J Rolfe
1) 20% commission
For us it has always been clear that the 20% was linked to the loan of 500,000 US$. I still feel Mr Rolfe is playing a game with us ad we will never see any money for Australia. Most important for me is that we fully concentrate on one issue in Australia and if it turns wrong we will never see any money.
Most important for TWM is to collect cash, if it means we have to give 20% why not? If Rolfe can really collect 1,5 million dollars or more, it is to be taken. But Mr Rolfe only talks about comm., but never when money will be there. In the end he will blame us that he could not collect anything because we didn’t agree on 20%. I feel Mr Rolfe should now concentrate on collecting the debts.2) Loan of 175,000 USD
Since conditions were 20% comm. on total and a letter of attorney which we don’t intent(sic) to give, I feel we better reject the offer of this loan.” (Emphasis added)
The reference in the fax to rejection of the offer of USD175,000 is important because it indicates that Mr Backx was opposed to paying the 20% commission even without a loan. There is no indication that Messrs Vinogradov or Kotov took any different view. The strong probability is that they agreed with Mr Backx.
On 2 April 1996, Mr Vinogradov replied to Mr Rolfe and after acknowledging receipt of his facsimile of 2 April, stating that Mr Rolfe was not prepared to proceed until such time as he had agreement on payment of the 20% commission, Mr Vinogradov instructed Mr Rolfe to go ahead. He stated:
“We are well aware about the Court’s procedure in Australia.
Kindly ask you to speed up recovery of the money due to TWM/Seachart.”
The following day, 13 April 1996, Mr Rolfe responded to Mr Vinogradov:
“It is clear from your response that you acknowledge between myself and TWM, as confirmed at our meeting in Cyprus and reconfirmed in my letter dated 26 February 1996, and it is firmly understood that I am to do everything possible to speed up the recovery of funds to TWM, and of course Seachart.
The recent appointment of a receiver to the Baltic assets in Australia will undoubtedly accelerate the recovery of these funds. It will also increase the percentage payout to TWM. As at today’s date, all my advice is that we will achieve a 100% return for both TWM and Seachart. I am well aware of the desperate cash position that TWM is in and you can be assured that the return of funds to TWM is the priority.
I will keep you informed of all the progress.” (Emphasis added)
No response was made to that letter by Mr Vinogradov. Thereafter, with the full knowledge and indeed at the express request of Mr Vinogradov, Mr Rolfe continued to pursue recovery of the debt. In my view, the correspondence between late March and early April, when read against the previous exchanges between the parties, is strongly indicative of a concluded contract. The contract is one whereby Mr Vinogradov, on behalf of Transworld, agreed to pay 20% commission together with costs and expenses from the trust fund in which proceeds collected were to be held. At that time Transworld was desperately in need of cash and Mr Rolfe had threatened to discontinue fund recovery of the debt at a time when a hearing was to take place within ten weeks. Mr Rolfe had carried out a considerable amount of work in getting the recovery process to this stage. He made his position quite clear to Transworld and it was only after communication between directors of Transworld that Mr Rolfe was urged to speed up the recovery. This request by Transworld , in my view, amounts to an acceptance of Mr Rolfe’s offer It is also consistent with the pragmatic course suggested by Mr Backx, namely that :
“... if it means we have to give 20% why not? If Rolfe can really collect 1.5 million dollars or more, it is to be taken...”
When read in the context of the correspondence outlined previously, having regard to the discussions and dealings between the parties, it is evident that both the commission and the costs were to be paid from the particular fund consisting of moneys collected from Baltic and that the balance was to be remitted to Transworld. In particular, this emerges from the Cyprus Protocol but it also appears in the other correspondence.
A subsequent letter confirms this view. On 4 July 1996, Mr Vinogradov wrote to Mr Craig seeking advice as to whether Mr Rolfe could block transfer of funds recovered under pretext of non-payment of 20% collection fees. He also sought advice as to whether Transworld could avoid paying the 20% collection fee to Mr Rolfe by making “fresh arrangements” to regain the funds.
Having regard to the above communications and the context in which they occurred, I am satisfied that a binding contract was made between Transworld and Mr Rolfe; that in return for funding and continuing to proceed with the collection of the debt, Mr Rolfe would receive a 20% commission to be paid from the moneys recovered, together with reimbursement for legal fees and other expenses incurred.
The next question which arises is whether the obligation of the commission was in the nature of a charge on the proceeds.
Equitable charge
The applicant claims not only to be a creditor but also to be a secured creditor. The security alleged is created because of equitable lien or charge. The applicant says that the proper lien in this case is one analogous to an equitable lien which a solicitor has for his fees and disbursements. The submission of the applicant is that where a party has, by his or her efforts, brought into Court a fund in the administration of which various parties are interested, the costs and expenses of that party should be a first claim against the fund. The principle so stated was applied in Shirlaw v Taylor (1991) 31 FCR 222 as the foundation for an equitable lien by a provisional liquidator with respect to expenses and remuneration over assets under his administration. The Court (at 228-231) referred to examples of equitable liens, such as the lien of an unpaid vendor for the purchase moneys; that of a trustee over trust assets; the lien of a co-owner to recoup expenditure on joint property, and a lien of a court appointed Receiver against proceeds recovered.
Among the authorities cited by the applicant was the High Court decision in Hewett v Court (1982) 149 CLR 639, where the Court decided that a purchaser had an equitable lien over a house for the amount of purchase money paid. The Court also held that an equitable lien can arise over moneys paid under a contract, even where the contract was not capable of specific performance.
Gibbs J at 645 points out that:
“Equitable lien does not depend either upon contract or upon possession. It arises by operation of law, under a doctrine of equity ‘as part of a scheme of equitable adjustment of mutual rights and obligations’; those words of Isaacs J were used .... in relation to the doctrine of vendor’s lien, but they have a general application. It would be difficult, if not impossible, to state a general principle which would cover the diversity of cases in which an equitable lien has been held to be created.”
After referring to vendor and purchaser liens, his Honour said:
“At all events, the rule has been said to be founded on ‘solid and substantial justice...’ In each of these cases the vendor or the purchaser, as the case may be, is treated as a secured creditor ... - the lien is the security for the money which is justly due. In other circumstances an equitable lien may arise because of the relationship that exists between the parties (e.g., that of partnership, or trustee and beneficiary or solicitor and client) or by reason of subrogation or estoppel. ... Indeed, as Professor Sykes suggests ... the list may not be a closed one.”
Deane J at 663 considered the nature of an equitable lien. He described it as follows:
“An equitable lien is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness ... Though called a lien, it is, in truth, a form of equitable charge over the subject property ... in that it does not depend upon possession and may, in general, be enforced in the same way as any other equitable charge, namely, by sale in pursuance of court order or, where the lien is over a fund, by an order for payment thereout ... Equitable lien differs from traditional mortgage in that it does not transfer any title to the property and therefore cannot be enforced by foreclosure. While it arises by implication of some equitable doctrine applicable to the circumstances, its implication can be precluded or qualified by express or implied agreement of the parties.”
At 668, his Honour identified circumstances which he considered sufficient, but not essential, for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship. He said:
‘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. It may be that the above circumstances or tests, particularly (i), would be unduly restrictive if propounded as a statement of exclusion. ... however, they are formulated as a statement of what is sufficient rather than what is essential.”
In further support of his position, the applicant referred to a number of other authorities to support the existence of an equitable charge in the present case. These include Re Universal Distributing Co Ltd (In liq) (1933) 48 CLR 171 at 174 (liquidators’ lien); Sympson v Prothero [1857] 26 LJ Ch 671 at 672 (solicitors’ lien) and Worrell v Power & Power (1993) 118 ALR 237 at 244.
In Prothero’s case the principle is expressed in this way at 672:
“The principle upon which ... the court should proceed ... is to consider how the fund has been obtained; and if you find that it has been recovered by the exertions of the party claiming the lien, it is but right that he should have his rewards out of the fruit of his exertion.”
As the Court pointed put in Worrrell’s case, referring to Re Born (1900) 2 Ch. 455 a solicitors lien will survive the intervening winding up of a corporate client.
In Re Born, Farwell, referring to the claim of a solicitors lien, went so far as to say:
“... it is plain that they have a common law lien on the company’s share of the fund in court for the amount of their costs. It would be monstrous if this were not so, as the company would never have recovered the money without their exertions. It resembles the case of debenture holders who have to allow liquidator’s costs when they take the benefit of his exertions, and it is clear that justice calls for such a lien.”
In submitting that there is no equitable lien or charge, the respondent points out that although the above authorities refer to broad principles, they arise out of particular legal relationships such as vendor-purchaser; solicitor-client; trustee-beneficiary; liquidator or receiver. It is submitted that the principle should not extend to cover Mr Rolfe’s position, as, in effect, a debt collection agent.
It is clear from the authorities that the classes of equitable liens and charges are not closed. I am satisfied that the general principles expressed in the above decisions are sufficiently broad to encompass the position of Mr Rolfe in the present circumstances. It can properly be said that by his exertions and funds, moneys have been recovered for Transworld. Counsel could cite no example of an equitable lien having been found to exist in a case such as the present, which is outside the types of relationships referred to in the authorities. However, I can see no reason why these principles should not apply to the claim of Mr Rolfe.
In the present circumstances, however, it is not necessary to rely on the implication of an equitable lien, because, in my opinion, not only is there a binding contract that Transworld will pay Mr Rolfe’s commission and expenses but it has also been expressly agreed that the commission and expenses are to be satisfied from a specific identified trust fund comprised of the proceeds recovered from Baltic on behalf of Transworld.
Accordingly, in my view, Transworld has agreed to make those specific trust moneys available for payment of Mr Rolfe’s 20% commission, costs and expenses. The arrangement to pay Mr Rolfe from the proceeds is specifically provided for in the Cyprus agreement and is reiterated in the correspondence. The repeated references to the payments being collected from or being made out of the proceeds recovered, provides the necessary foundation for an equitable charge in the present case, particularly when considered in conjunction with the specific direction of Transworld requiring Mr Rolfe to continue with the speedy recovery of the debt after he had clearly stated his position in respect of commission during March and April 1996. The nomination of the fund from which the commission and expenses are to be paid and the amount to come from the fund is sufficiently specific to give rise to an equitable charge on the fruits of Mr Rolfe’s work for Transworld. The nomination of the proceeds as the source of payment is more than an expression of an expectation. It is an agreement that these proceeds come from the fund.
Having regard to the above considerations, I find that the moneys recovered have been sufficiently appropriated to the obligation to pay 20% commission plus expenses in such a way as to create an express equitable lien or charge in favour of Mr Rolfe.
Equitable assignment
As an alternative, it is suggested that there was an equitable assignment of that part of the fund that represented the applicant’s commission, costs and expenses, so as to give rise to a secured interest.
The applicant relies, for this proposition, on Palmer v Carey [1926] AC 703 at 706 where the Judicial Committee advised:
“An agreement for valuable consideration that a fund shall be applied in a particular way may found an injunction to restrain its application in another way. But if there is nothing more, such a stipulation will not amount to an equitable assignment. It is necessary to find, further, that an obligation has been imposed in favour of the creditor to pay the debt out of the fund. This is but an instance of a familiar doctrine of equity that a contract for valuable consideration to transfer or charge a subject matter passes a beneficial interest by way of property in that subject matter if the contract is one of which a Court of Equity will decree specific performance.”
This short answer to the submission that there has been equitable assignment is that the principle does not apply in the present case because the agreement, being one for personal services, is not one in respect of which the Court would decree specific performance.
Money paid into Court
The applicant further submits that because transmission of the proceeds to Belgium has been restrained by the Court, the debt is therefore secured. Reliance is placed on Commercial Banking Company of Sydney Limited v Colony Financiers of Australia Pty Ltd (1972) 20 FLR 220.
In that case, the company paid money into Court pursuant to conditional leave to defend a creditors’ petition against the company. The Court held that the payment into Court gave rise to a “charge” within the extended meaning of that expression in s 122(1) of the Bankruptcy Act 1966, which relates to the avoidance of preferences. That decision in respect of s 122 was followed and extended by Cohen J in Shirlaw v Malouf (1989) 15 ALR 641, and now applies in circumstances where money was paid to a shareholder pending an arbitration.
Neither of these cases support the submission advanced by the applicant. A payment to a stakeholder or into Court by a party, in the course of an arbitration or court hearing, is not analogous to the restraint imposed in the present case, which simply prevents the transmission of funds in the control of a solicitor.
Other matters
The applicant did not press at the hearing a claim based on a quantum meruit, although the expression is used in the pleadings. No evidence was led to establish that a 20% commission represented a reasonable charge, although a general reference was made to the existence of risks and uncertainty inherent in the recovery process in this case. This could possibly support a claim for a higher level of remuneration than might otherwise be appropriate.
However, there is no necessity to justify the quantum of remuneration as if the claim was based on quantum meruit, because I found above that the entitlement of the 20% commission arose from a binding agreement.
The respondents also submitted that the applicant had not proved that he had paid the legal costs and incurred the expenses claimed in the recovery process.
The evidence indicates that the solicitors’ bills were directed to Mr Rolfe. I accept, on the balance of probability, that payment made by Mr Rolfe were recorded in a trust ledger of Mr Rolfe :(see Exhibit B). I also accept his evidence that disbursements and fees have been paid. No application has been made to tax those fees and, on their face, they are not shown to have been unreasonable. I accept that they were reasonable and were properly incurred.
It was submitted by the respondents that part of the moneys claimed by Mr Rolfe were paid from moneys which he had been overpaid by Seachart and that, therefore, they could not be recovered by him in the present proceeding. This was said to result because the remuneration claimed by Mr Rolfe, in relation to the collection of the Seachart debt, was an overcharge and was grossly excessive and unreasonable. No proper evidentiary foundation was laid for this submission and I do not accept it.
The evidence - general observations
One aspect of this proceeding is that the respondent did not attempt to adduce evidence from any of the directors of Transworld, nor from Mr James, its representative in Australia. No reason was advanced for this course. I have taken this circumstance into account when drawing inferences from the documentary and oral evidence before me. In particular, in relation to the conversation of 5 October 1995, I have taken into account the absence of any evidence from Mr Kalenik. In the absence of any contradictory evidence, I accept Mr Rolfe’s statements as to what in fact was said on that day. The absence of Messrs Vinogradov and Backx is also important, given their central role in their discussions and communications with Mr Rolfe and Mr James.
On the other hand, I did not find Mr Rolfe a satisfactory witness in a number of respects which arose out of the cross-examination. I accept the evidence given by him that he paid the costs claimed and also his version of the conversation which he had with Mr Kalenik. I do not, however, agree with the conclusions which he drew from the latter conversation. In particular, his evidence as to the nature of the arrangements made between 5 October 1995 and the Cyprus Protocol are in clear conflict with the correspondence. On occasions, he made attempts to justify the position that were clearly untenable as to the existence of a firm concluded and independent agreement as to the basis of an agreement having been reached prior to the end of March 1996.
In view of the unsatisfactory nature of much of the oral evidence, I preferred to primarily rely on the documentary material and consider the oral testimony against that background.
Letter of Request
On 26 March 1997, Transworld was adjudged bankrupt by the Commercial Court for the District of Antwerp.
New trustees, including Mr Sidney Berneman and Mr Heirbaut, a Judge in Commercial matter, were appointed to supervise the bankruptcy and to assist the three trustees.
The trustees, on 19 September 1997, petitioned the Antwerp Commercial Court for a court order that the moneys held in Australia should be assigned to them and that the present proceedings instituted by Mr Rolfe before me should be stayed.
On 23 September 1997, the Presiding Magistrate, H Hellenbosch, of the Antwerp Commercial Court accepted the petition and made requests to this Court in the following terms:
“A) that it may please the Federal Court of Australia to acknowledge that the funds frozen in the hands of Messrs. Holmes & Bevan, sollicitors, (sic) and subject of a notice of default filed by Mr Rolfe, are vested in Mr Sidney Berneman, attorney-at-law, qualitate qua, and in the other trustees in the bankruptcy of the firm of N.V. Transworld Marine Agency Cy, entrusted with the possession and the administration of the property of the bankrupt company pursuant to the adjudication judgment of March 28, 1997;
B) that the Federal Court of Australia may order a stay of the proceedings instituted by Mr. Rolfe against the firm of N.V. Transworld Marine Agency Cy in accordance with the provisions of Belgian law or, failing that, in accordance with the provisions of Australian law;
C) that the Federal Court of Australia may also say that the funds, subject of the warrant issued by Justice Tamberlin on September 5, 1997, are to be assigned to the trustees in the bankruptcy of the firm of N.V. Transworld Marine Agency Cy, in accordance with:
- the provisions of Belgian law or, alternatively,
- the provisions of Australian law;D) if none of the above is deemed liable, at the very least, to take appropriator measures to ensure that the funds are frozen and blocked in the hands of Messrs. Holmes & Bevan, sollicitors, (sic) and subject of a notice of default filed by Mr Rolfe, be dealt with in a manner consistent with the legal principle and the fact that all property, assets and claims in possession of or accruing to the firm of N.V. Transworld Marine Agency Cy at the time of the adjudication of bankruptcy are placed or taken in the custody and under the administration of the trustees in the bankruptcy of the firm of N.V. Transworld Marine Agency Cy.”
The respondents submit that this request should be granted: the proceedings should be stayed and the funds held should be assigned to the Belgian trustees to be administered as part of a world-wide administration of the assets and liabilities of Transworld.
The respondent referred me to ss 580 and 581 of the Corporations Law. Those section appear in Division 9 of Chapter 5, which is entitled “Co-operation Between Australia and Foreign Courts in External Administration Matters”.
Section 580(1) defines “external administration” to mean a matter relating to a winding up outside Australia of a body corporate.
Section 581 (2) of the Corporations Law provides that:
“(2) In all external administration matters, the Court:
(a)shall act in aid of, and be auxiliary to, the courts of the excluded Territories, and of prescribed countries, that have jurisdiction in external administration matters; and
(b)may act in aid of, and be auxiliary to, the courts of other countries that have jurisdiction in external administration matters.
(3) Where a letter of request from a court ... of a country other than Australia, requesting aid in an external administration matter is filed in the Court, the Court may exercise such powers with respect to the matter as it could exercise if the matter had arisen within its own jurisdiction.” (Emphasis added)
Section 29 of the Bankruptcy Act 1966 (Cth) is to a similar effect.
It is common ground that Belgium is not a prescribed country. This means that the Court has a discretion, but not a duty, to act in aid of the Belgian Court. The respondent says that the discretion should be exercise in accordance with accepted principles of comity and the request granted. They refer to the United States decision in Hilton v Guyot, 159 US 113 (1895) where comity was described as:
“... the recognition which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws ... comity will be granted to the decision or judgment of a foreign court if it is shown that the foreign court is a court of competent jurisdiction, and that the laws and public policy of the foreign states in the rights of its residents will not be violated.”
The application of this principle in an Admiralty context was recently considered by Williams J of the New Zealand High Court in Turners & Growers Exporters Ltd v The ship “Cornelis Verolme” [1997] 2 NZLR 110.
Proper law
In my opinion, the proper law governing the proceeding in relation to the present claim is the law of Australia, which of course includes the private international law of Australia. This is so because the funds were recovered in Australia; the collection work was carried out in Australia; and the claim on the proceeds was decided according to Australian law. Furthermore, Mr Rolfe was a resident in Australia; the vessel in question was arrested and sold in Australia and the proceeds were administered in Australia. There are no substantial countervailing connections with Belgium apart from the evidence of its incorporation and bankruptcy. Australian law in a practical sense is the law which the transactions had its closest and most real connection: John LavingtonBonython v The Commonwealth of Australia [1951] AC 201 per Lord Simonds at 219; Nygh, Conflict of Laws in Australia, 6th edn at 291 ff; Sykes and Pryles Australian Private International Law, 2nd edn, 551 ff.
The applicant agrees that, in accordance with authority, this Court will recognise the standing of the Belgian Trustees but that the Belgian bankruptcy has no other effect. However, he points out that this is not a case where an ancillary winding up has been sought in Australia. The applicant submits that s 350(14)(b) of the Corporations Law supports the view that until a winding up order is made in Australia, a foreign winding up does not affect the rights of parties dealing with the corporation in Australia. That section provides:
“350(14) Where a registered foreign company commences to be wound up, or is dissolved, in its place of origin:
(a) ...
(b)the Court shall, on application by the person who is the liquidator for the foreign company’s place of origin,.... appoint a liquidator of the foreign company.”
The duty of the liquidator so appointed is to recover and realise the property of the foreign company in Australia and to pay the net amount so recovered to the liquidator of the foreign company or its place of origin.
The applicant further submits that a foreign winding up does not operate to vest the companies and overseas trustees appointed to administer the bankruptcy or winding up. Australian courts do not readily enforce the authority of a foreign liquidator in their own jurisdiction. The applicant says that the Court should go no further than to allow a local insolvency proceeding to be ancillary to a foreign winding up.
It is also submitted for the applicant that the English authorities should be followed in so far as they take a more restrictive approach to comity in international insolvency than the United States Courts for example. Counsel says that United States courts operate under legalisation, which requires them to pursue principles of comity. In any event, it is said, comity should only be given limited weight and greater weight should be given to the rights of local creditors and the operation of local laws to protect those creditors. The Court, it is said, should prefer and apply the English authorities, such as the Bank of Credit and Commerce International No (10) SA 1997 Ch 213 at 242. These authorities favour local creditors as opposed to the more liberal or global approach adopted in the United States, which tender to favour remittal of the assets to overseas administrators charged with implementation of the bankruptcy.
Discussion
There is little authority on the application of s 581(2) of the Corporations Law, although there is some authority on s 29 of the Bankruptcy Act, which is in substantially similar terms. In Re Ayres; Ex parte Evans (1981) 34 ALR 582, Lockhart J considered Letters of Request issued by the High Court of New Zealand. The New Zealand bankrupt had not been made bankrupt in Australia but the request was sought to do so by the New Zealand Official assigned control of the bankruptcy proceedings in Australia. Because New Zealand was “ a prescribed country,” the first limb of s 29 was enlivened with the consequence that the court was bound to lend its assistance. His Honour was satisfied that the request should be granted. In his judgment, his Honour said at 592 in relation to s 29(b):
“... I have considered s 29 in relation to the requirements that Australian courts shall act in aid of the court’s [sic] of ‘prescribed countries (s 29(2)(a)). It is not necessary to consider definitively if the section has any different meaning or operation in relation to the courts of ‘other countries’.... where the word ‘may’ is used. All I will say is that, on my present view, it means that the power conferred by s 29 is merely enabling and discretionary; there is no initial assumption that, once the Australian court is satisfied that the case falls within the scope of s 29, it is bound to give all the assistance it can. As the ‘other countries’ are not ‘prescribed countries’ their bankruptcy laws may not be similar to ours.
In the result, I am satisfied that the court should lend its aid to the High Court of New Zealand.”
That decision was affirmed on appeal: (1981) 39 ALR 129.
It should be noted that, in framing his preliminary orders, Lockhart J required that any matter in controversy between the New Zealand Official Assignee and any person resident in Australia should be determined by the Australian Court. He required the Official Assignee should submit to the jurisdiction of the Australian Court and that solicitors should be nominated to accept service of any proceedings in Australia. The Court was, therefore, protective of the interests of Australian creditors by retaining control of controversies involving Australian residents.
His Honour also expressed the view that in some cases the Court might refuse aid if it could be established that the anterior proceedings were hopelessly bad under their proper law or that they offended some outstanding principle of English policy.
In Smith v Australian Securities Commission (1995) 13 ACLC 511, Hayne J considered a Letter of Request from a liquidator appointed by the English High Court. As a result of the fact that England is a country nominated in s 581(2)(a), which is in mandatory terms, his Honour held that it was appropriate to act on the request and reinstate an Australian company in order to transfer property to the liquidator. The judgment does not address the present issue but it provides an example of the type of assistance which Australian Courts may be called upon to provide.
Under s 581(2)(b) the Court, in considering a letter of request, has a discretion, not only as to the nature and extent or terms of the aid which should be provided, but also as to whether the request should be acceded to at all.
In the present case I do not consider that the proceeding before this Court should be stayed and the proceeds transferred to the Belgian trustees for administration in accordance with Belgian law. In reaching this conclusion I have taken into account the following matters:
· Proper law
The proper law is that of Australia for the reasons given earlier.
· Avoidance of duplication
The substance of the claim of Mr Rolfe has now been fully canvassed in Australia over a five day hearing. From the commencement of the hearing the parties have properly taken the position that it would not be practicable to determine whether the proceeding should be stayed without hearing the substantive claim itself.
· Security
In view of my conclusion that the claim of Mr Rolfe is secured by way of equitable charge under Australian law it is inappropriate to allow the moneys held in the trust fund to be remitted to the trustees for administration in the bankruptcy proceedings until that charge has been satisfied in full.
· Delay
If the proceeding is stayed and the proceeds are remitted overseas, Mr Rolfe will have to pursue his claim in Belgium in circumstances where there is no indication as to when the assets of Transworld might be realised on a world-wide basis.
As against these considerations there is to be weighed:
· Uniform administration
The interests of the Belgian trustees in ensuring a uniform administration of the Transworld bankruptcy on a world-wide basis.
· Mutual co-operation
The desirability that national courts should, where appropriate, act in aid of each other in a time of ever increasing international interdependence, especially in relation to enforcement of insolvency laws.
In my opinion, in the particular circumstances of this proceeding discussed earlier, the balance is in favour of proceeding to judgment in Australia and I therefore exercise my discretion against imposing a stay of the proceeding and ordering remittal of the funds to the Belgium trustees.
Belgian Law
Evidence was led for the trustees as to the nature, operation and effect of Belgian bankruptcy law.
However, in view of the conclusions which I have reached in relation to the existence of an equitable charge, it is not necessary for me to make any decision on the meaning and affect of the Belgian law. Suffice it to say that, on the evidence presented to me as to the Belgian law it is by no means clear that the Belgian bankruptcy law recognises the concept of an equitable charge and accordingly, if the matter were to be remitted, there is at least a real possibility that the rights of Mr Rolfe under Australian law would not be recognised.
Notice of Motion
After the matter had been reserved for judgment the respondents made an application, dated 18 March 1998, for remittal to Belgium of any surplus moneys held after payment of a sufficient amount to meet the applicant’s claim in fees and costs. In principle, I consider that this is an appropriate course. However, taking into account the possibilities of further litigation and costs I consider that the moneys held in trust should be retained in Australia until these matters have been clarified and it is possible to make a more accurate estimate of the amounts involved. The Notice of Motion should therefore be dismissed with costs.
Costs
My prima facie view is that costs should follow the outcome and therefore that the costs incurred by Mr Rolfe in the present proceedings were necessary and appropriate to enable recovery of his collection fee and expenses. Accordingly, I consider it appropriate that the costs and disbursements awarded to Mr Rolfe, should be paid out of the funds in Australia before any balance is remitted to Belgium.
However, I will hear argument from the parties as to costs and the appropriate orders to give effect to these reasons.
Orders
I direct the parties to bring in Short Minutes within seven days to give effect to the above reasons for decision.
I certify that this and the preceding thirty-four (34) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin
Associate:
Dated: 19 May 1998
Counsel for the Applicant: Mr M R Aldridge Dr S C Churches
Solicitor for the Applicant: Goldsmiths Counsel for the Respondent: Mr D E Grieve QC Mr J S Wheelhouse
Solicitor for the Respondent: Holmes & Bevan Date of Hearing: 23-27 April 1998 Date of Judgment: 19 May 1998
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