Rothuan Pty Ltd v Acumen Finance Pty Ltd
[2023] FCA 401
•24 April 2023
FEDERAL COURT OF AUSTRALIA
Rothuan Pty Ltd v Acumen Finance Pty Ltd [2023] FCA 401
File number(s): NSD 94 of 2023 Judgment of: JACKMAN J Date of judgment: 24 April 2023 Catchwords: CONTRACTS – application for removal of registration of purported security interests in personal and real property – proceedings ex parte – where purported security interests arise pursuant to various contracts – contracts with a deregistered entity void – where a party denies ever signing a contract – alternatively, where agreement made to remove the security interests Legislation: Corporations Act 2001 (Cth) s 601AD
Federal Court of Australia Act 1976 (Cth) s 51A
Personal Property Securities Act 2009 (Cth) s 182
Federal Court Rules 2011 (Cth) rr 4.01, 41.09
Real Property Act 1900 (NSW) ss 74M, 74MA, 74O
Cases cited: Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 29 Date of hearing: 24 April 2023 Counsel for the Applicants: Mr L Teoh Solicitor for the Applicants: Minas & Associates Counsel for the Fourth Respondent: Mr B May Solicitor for the Fourth Respondent: Australian Government Solicitor ORDERS
NSD 94 of 2023 BETWEEN: ROTHUAN PTY LTD
First Applicant
ESPLANADE CONSULTANCY PTY LTD
Second Applicant
MR RODNEY CHARLES CARTER
Third Applicant
AND: ACUMEN FINANCE PTY LTD
First Respondent
ADVANCED COLLECTION SERVICES LTD
Second Respondent
NATHAN DALY (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
JACKMAN J
DATE OF ORDER:
24 APRIL 2023
THE COURT ORDERS THAT:
1.Pursuant to section 182(4)(a) of the Personal Property Securities Act 2009 (Cth) (the PPSA), the Registrar of the Personal Property Securities Register (the Registrar) register a financing change statement removing the registration of the purported security interest with registration number 202212150082503 from the Personal Property Securities Register (the PPSR) within seven days from the date of this order.
2.Pursuant to section 182(4)(a) of the PPSA, the Registrar register a financing change statement removing the registration of the purported security interest with registration number 202212290041272 from the PPSR within seven days from the date of this order.
3.The first, second and third respondents be restrained from registering or causing to be registered on the PPSR any further financing statement in respect of any security interest or purported security interest in the personal property of the applicants.
4.Upon notification by the applicants of a registration with the PPSR in breach of order 3, the Registrar is to remove such registration forthwith.
5.Judgment for the applicants against the first, second and third respondents in the amount of $84,500, together with interest pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth).
6.Pursuant to sections 74M and 74MA of the Real Property Act 1900 (NSW), the first respondent withdraw caveat AS875688 over 1/366438, 4/328834 and 232/872597 forthwith.
7.If order 6 is not complied with by 26 April 2023, then a registrar of the Federal Court of Australia is authorised pursuant to rule 41.09 of the Federal Court Rules 2011 (Cth) to sign a form of withdrawal of the caveat referred to in order 6 in registrable form and provide that signed form of withdrawal to the applicants for lodgement.
8.The first, second and third respondents are restrained pursuant to section 74O of the Real Property Act 1900 (NSW) from registering further caveats claiming the same interest as caveat AS875688 over any real estate assets of which the applicants are the registered proprietors.
9.The first to third respondents pay the applicants’ costs of proceedings NSD 94 of 2023 and of proceedings NSD 19 of 2023.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)JACKMAN J
These proceedings were commenced on an urgent basis during the court vacation in January 2023. The proceedings came before me for a case management hearing on 7 March 2023, in which I made orders to have the matter prepared for hearing, commencing today, with an estimate of three days. Those directions included orders for the filing and service of pleadings, including a cross-claim by the respondents, and orders for the filing and service of any affidavits on which the respondents would seek to rely, by 6 April 2023. As matters have turned out, the respondents have not filed or served any affidavits in the proceedings.
An email that was sent to my associate this morning indicated that the respondents had terminated the services of the lawyers who were, until then, representing them, and also requesting an adjournment of today’s proceedings. My associate responded by indicating that any application would be heard at 10.15 am this morning, when the matter was called on for hearing. There has been no appearance by any lawyer for the first to third respondents, neither has there been any appearance in person or any application for anyone to have leave to represent the first and second respondents. The first and second respondents are companies, and under r 4.01(2) of the Federal Court Rules 2011 (Cth), they must be represented by a lawyer. I have indicated that I would be prepared to grant leave to Mr Daly to represent the first and second respondents and to dispense with r 4.01(2), Mr Daly being the third respondent and a cross-claimant. Accordingly, he is entitled to represent himself, and in that capacity, he could be expected to put arguments which would be available to the first and second respondents. My associate has also sent an email to Mr Daly this morning, indicating that the Court would be prepared to make an audio-visual link available for the purpose of an appearance by him at today's hearing, and that offer was declined by Mr Daly.
The matter is urgent, as it appears that the applicants are currently in default under a loan with Central Real Capital Pty Ltd, or one of its related entities, and are paying interest at a higher rate by reason of that default, and are also liable to enforcement of the loan agreement. In those circumstances, Mr Teoh, who appears for the applicants, has proceeded on an ex parte basis at today's hearing. The salient facts are as follows.
On 17 August 2022, the first applicant (Rothuan) entered into a contract to purchase properties at 102, 122 and 133 Lake Road, Elermore Vale, New South Wales 2287 (the Property) for $30 million.
On or about 9 December 2022, Mr Carter, a director of Rothuan, was put in touch with Mr Daly by a finance broker. Discussions took place that day concerning the possibility of Mr Daly procuring finance to assist with the purchase of the Property. Mr Daly sent by email an engagement agreement naming the party to provide the relevant services as Advanced Fintech Pty Ltd. A company search of that company reveals that it was deregistered on 19 September 2022. Accordingly, pursuant to s 601AD(1) of the Corporations Act 2001 (Cth), that company ceased to exist on 19 September 2022. Mr Carter executed the engagement agreement without obtaining any legal advice in respect of it.
On 13 December 2022, Mr Carter paid a sum of $45,000 to a bank account nominated by Mr Daly, being an account held in the name of the second respondent (ACSL).
On 14 December 2022, Mr Daly paid a further amount of $59,500 to the same account. It appears that the amount of $45,000 was eventually repaid by Mr Daly or ACSL, but I would infer that that repayment did not occur until relatively recently, and at any rate, some time after 31 December 2022.
On 13 December 2022, Mr Daly received under a letterhead of Acumen Finance Pty Ltd (Acumen), the first respondent, a loan offer. Two days later, that offer was withdrawn.
On 15 December 2022, a charge was registered on the Personal Property Securities Register (PPSR) as against Rothuan and the second applicant (Esplanade) by Acumen (Acumen charge). The applicants did not have notice of the Acumen charge until 21 December 2022.
On 16 December 2022, Mr Carter sent an email to Mr Daly terminating the engagement agreement purportedly made with Advanced Fintech Pty Ltd. At the time of entering into the agreement, Mr Carter had not realised that the company was deregistered. On around 16 December 2022, Mr Carter said to Mr Daly that he was sorry that the proposal has not worked out, and he may get Mr Daly to help him with a refinance when needed. Mr Daly said that he would send a new engagement agreement to clear up some administrative issues.
On 18 December 2022, Mr Daly sent another engagement agreement in the same form as the original engagement agreement purportedly with Advanced Fintech Pty Ltd, except that it purports to be with Acumen. Mr Carter says in his principal affidavit that he did not read the document, and he thought it was for a future purpose, being a refinance in the future. Mr Carter says that at no time did he execute the new engagement agreement purportedly with Acumen, either physically or by way of “DocuSign”. Mr Carter says that at no time did he return that document to Mr Daly.
The defence of the first to third respondents makes reference to some emails on 18 December 2022 between Mr Carter and Mr Daly, referring to Mr Carter executing the new engagement agreement by DocuSign. Mr Teoh has told me that neither he nor those instructing him have any such email correspondence of 18 December 2022, and accordingly, there would not be any tender of any such emails, acknowledging the obligations which fall on those proceeding ex parte at a hearing such as this. I accept what I am told by Mr Teoh, and I have no reason to doubt the evidence given on affirmation by Mr Carter to the effect that he never executed the engagement agreement referring to Acumen and never returned such a document to Mr Daly.
The engagement deed referring to Acumen purports to have signatures by Mr Carter on behalf of the first and second respondents as well as for himself as guarantor, but, as I indicate, I accept Mr Carter’s evidence that he never signed those documents, whether physically or electronically. The engagement agreement purportedly with Acumen bears a date 12 December 2022, which is the date of the first purported engagement agreement with the deregistered company, Advanced Fintech Pty Ltd. The agreement with Acumen could not have been entered into on that date, given that it was not provided by Mr Daly to Mr Carter until 18 December 2022.
The terms of the agreement purportedly with Acumen include the following salient terms:
(a)the “Broking Fee” is defined relevantly as an amount of 3% of the higher of various amounts, the last being relevantly: “the total value of the Project Assets as at the time that the Broking Fee becomes payable”;
(b)the “Engagement Fee” is defined as an amount of $59,500;
(c)the “Project Assets” are defined as, firstly, 102, 122 and 136 Lake Road, Elermore Vale, New South Wales, and then three other pieces of real property in Mount Pleasant are referred to;
(d)“Secured Moneys” are defined as meaning all fees, costs, debts and monetary liabilities of each obligor to Acumen, including under or in relation to the transaction documents including, without limitation, the Engagement Fee and Broking Fee;
(e)clause 3 provides relevantly that the borrower must pay to Acumen, ACSL and Mr Daly the Engagement Fee on or prior to the date of the deed or shortly thereafter and must pay the Broking Fee on the date determined under clause 3(e), that date including the date on which a loan offer is submitted to the borrower, whether or not it is satisfactory to or accepted by the borrower, and also the date on which any obligor notifies Acumen and others of its intention not to proceed with the transaction;
(f)clause 11 provides a general indemnity;
(g)clause 13.1 provides that each obligor grants a security interest in its present and after required property and specifies that the security interest is a charge;
(h)clause 13.2 provides that each obligor mortgages all of its real property to Acumen, ACSL and Mr Daly as security for the due and punctual payment of the Secured Money; and
(i)clause 20.9 provides that a certificate signed by any authorised representative of Acumen, ACSL and Mr Daly, stating the amount of the secured moneys due and payable, is sufficient evidence of that amount unless it is manifestly incorrect, or the contrary is proved.
A notice to complete had been issued by the vendor of the properties at Elermore Vale, and that notice had made 19 December 2022 an essential term of the contract for completion. The contract was not completed that day, and the vendor terminated the contract on 20 December 2022. However, efforts continued between the vendor and Rothuan to revive the transaction and to complete the purchase.
On 21 December 2022, Mr Carter instructed his then solicitors to send an email to the respondents, pointing out that Acumen had no right or entitlement to lodge the charge which Acumen had lodged against Rothuan and Esplanade. Mr Daly responded by attaching the purported engagement deed with Acumen and an invoice for payment of the Broking Fee of $1,425,000 plus GST. Complaint was made by Mr Carter’s solicitors about those documents promptly on 22 December 2022. Mr Daly responded on 29 December 2022, asserting that Mr Carter had signed the engagement deed freely, and consideration had been given, and vehemently denied many of the propositions advanced by Mr Carter’s solicitors.
On 22 December 2022, Mr Daly sent Mr Carter another loan offer, this time from ACSL. Mr Carter says, and I accept, that he ignored that offer as it had no relevance to him or Rothuan and Esplanade. He was focused on finding a way to complete the purchase of the Property, and did not sign or in any way accept the loan offer from ACSL. Mr Carter refers to a charge which was registered in the PPSR in favour of ACSL on about 30 December 2022 (the ACSL charge), which he assumes arose from the ACSL offer. Mr Carter says, and I accept, that at no time has he entered into any contractual relationship with ACSL and has never given ACSL a right to enter a charge as against Rothuan, Esplanade or any other entity in which he is involved.
On 23 December 2022, there was a chain of emails between Mr Daly and Mr Carter in relation to the removal of charges from the PPSR register so as to enable the settlement of the Property to proceed. Mr Carter sent an email at 7.17 am that day, proposing that the Acumen charge be removed by 1 o'clock that day, that he would not seek to recover funds already paid, and he would pay to Mr Daly or his interests an amount of $50,000 once the PPSR registration was lifted, and proposed that the payments be made in two tranches: $25,000 that day and $25,000 on 2 January. Mr Daly responded at 9.08 am, agreeing to the conditional withdrawal to allow the property settlement on the basis that proof of funds was shown and direction for payment and PEXA invitation was sent to his solicitor for $25,000, and the balance in 10 days. By a further email at 9.22 am, Mr Daly wrote that once the payment was shown in clear funds, he would remove the Acumen charge to allow settlement. Then omitting some email communications in which litigation was threatened, some time later that morning Mr Carter wrote an email saying that he was happy to deposit the $25,000 on the basis of the agreement to withdraw. Mr Daly responded, saying that his solicitor had the token to release PPSR registration the moment cleared funds were in the trust account. Mr Daly sent a further email at 12.57 pm that day, saying that the payment had to be made by telegraphic transfer or RTGS so the funds were cleared immediately, and his solicitor would confirm when he could see the funds at his end. The email also said that the solicitor holds the release token, subject to cleared funds.
An amount of $25,000 was duly paid by Mr Carter to Mr Daly’s solicitor later that day, 23 December 2022. There is no evidence that a second amount of $25,000 was paid subsequently by Mr Carter.
On 30 December 2022, in order to enable the completion of the Property to occur, Mr Carter gave an undertaking as follows:
1)I will do everything reasonably within my control to ensure that PPSR registration number 202212150082503 by Acumen Finance Pty Ltd is removed from the register within 14 days of 30 December 2022 and provide evidence to the lender confirming same; and
2)should registration number 202212150082503 by Acumen Finance Proprietary Limited not be released within 14 days of 30 December 2022, the borrower acknowledges and agrees that an event of default under the facility has occurred and that interest may be charged at the higher rate until the PPSR charge has been removed from the register, at the lender’s sole discretion.
The purchase of the Property completed on the afternoon of 30 December 2022, Mr Carter having given his undertaking. In order to complete the purchase, Rothuan obtained funds by way of loan from Central Real Capital Pty Ltd, together with cash provided by Esplanade and a loan provided by the vendor to Rothuan.
On the basis of the facts as summarised above, my conclusions are as follows.
First, the engagement deed purportedly with Advanced Fintech Pty Ltd is void, being a contract purportedly with a company which had ceased to exist by 12 December 2022. The second engagement deed, purportedly entered into with Acumen, is not operative, because it was never executed by Rothuan, Esplanade, GS Lithium Holdings Pty Ltd or Mr Carter. The document purports to bear a signature of Mr Carter as director and secretary of those companies, and on his own behalf. However, I have accepted Mr Carter’s evidence that he never signed those documents.
In those circumstances, the first to third respondents have no entitlement to any debts as referred to in either of those documents, and no entitlement to lodge any security interests in relation to those debts. Accordingly, the security interests registered on the PPSR are invalid and should be removed, and the caveat which was lodged over certain real property should be removed. In the latter regard, a notice of lapsing of caveat was served on 12 April 2023, and the caveat would lapse after 21 days, pursuant to that notice. However, given the urgency of the matter, it is appropriate to order that the caveat be removed or withdrawn forthwith.
The applicants have paid amounts of $59,500, $45,000 and $25,000 in compliance with Mr Daly’s demands pursuant to the purported engagement agreements and the agreement of 23 December 2022. As I have found that those engagement agreements are not valid, the reason for making the payments has failed to subsist, and those amounts would be liable to be repaid as money had and received on a total failure of consideration. As I have mentioned, the amount of $45,000 has been repaid, and therefore the first to third respondents are liable to repay the applicants the total amount of $84,500.
Even if I had regarded the engagement agreement with Acumen as valid, on the basis that the document had actually been signed by Mr Carter, I would have found that the effect of the agreement reached on 23 December 2022 was that the security interests should be removed both in relation to the personal property under the PPSR and also the real property over which a caveat has been lodged. While the negotiations for that agreement began with reference to a total amount of $50,000, there was a shift in the language used in the emails with the effect that Mr Daly promised to release the PPSR registrations upon payment in cleared funds of the first amount of $25,000. Even if that had not been the case, and $50,000 was the required sum to obtain the release of the PPSR charges, Mr Daly had already been overpaid $45,000 by Mr Carter, and was duty-bound to bring that to account on the question of whether the total amount of $50,000 had been paid.
A further issue of construction in relation to the agreement of 23 December 2022 is whether it extends to removal of the caveat over the real property. The caveat was not lodged until 22 February 2023, which explains why the negotiations referred expressly to the PPSR registrations. However, it is clear that the commercial purpose of that agreement was to allow the property settlement to proceed, as Mr Daly’s email of 9.08 am acknowledged. Commercial contracts must, of course, be construed by reference to the perspective of a reasonable business person: see Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at [16]. A reasonable business person would regard the agreement as obliging Mr Daly and his interests to remove any security interest which would impede property settlement, whether by way of PPSR registration or by way of caveat over real property. In my opinion, the reasonable business-like construction of the agreement would also oblige Mr Daly not to lodge any such security interest in relation to the same matters in the future.
Accordingly, had I been of the view that the second engagement agreement, the agreement with Acumen, was valid, then the security interests would have to be removed in any event. That would have left a question about the amounts of debts as between the parties. The $25,000 on that assumption would still have been payable. There would then have been a question as to what amount, if any, was owed by the applicants to the first to third respondents by way of Broking Fee. The cross-claim seeks the payment of a Broking Fee in the amount of $1,711,050. I have referred above to the method of calculation, having regard to the value of the Project Assets at the time. The only evidence of value of the Project Assets is the arm’s length contract of purchase and sale of the property at Elermore Vale for $30 million. There is no evidence of the value of the other pieces of real property referred to in the definition of Project Assets. Based upon a value of project assets of $30 million, the Broking Fee would have been $900,000. The cross-claim does not seek any alternative remedy in relation to that amount, and accordingly, I would have dismissed the claim for monetary judgment in the cross-claim if I had not found, as I have, that the Acumen engagement deed was invalid in any event.
The orders which I make are as follows:
1.Pursuant to section 182(4)(a) of the Personal Property Securities Act 2009 (Cth) (the PPSA), the Registrar of the Personal Property Securities Register (the Registrar) register a financing change statement removing the registration of the purported security interest with registration number 202212150082503 from the Personal Property Securities Register (the PPSR) within seven days from the date of this order.
2.Pursuant to section 182(4)(a) of the PPSA, the Registrar register a financing change statement removing the registration of the purported security interest with registration number 202212290041272 from the PPSR within seven days from the date of this order.
3.The first, second and third respondents be restrained from registering or causing to be registered on the PPSR any further financing statement in respect of any security interest or purported security interest in the personal property of the applicants.
4.Upon notification by the applicants of a registration with the PPSR in breach of order 3, the Registrar is to remove such registration forthwith.
5.Judgment for the applicants against the first, second and third respondents in the amount of $84,500, together with interest pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth).
6.Pursuant to sections 74M and 74MA of the Real Property Act 1900 (NSW), the first respondent withdraw caveat AS875688 over 1/366438, 4/328834 and 232/872597 forthwith.
7.If order 6 is not complied with by 26 April 2023, then a registrar of the Federal Court of Australia is authorised pursuant to rule 41.09 of the Federal Court Rules 2011 (Cth) to sign a form of withdrawal of the caveat referred to in order 6 in registrable form and provide that signed form of withdrawal to the applicants for lodgement.
8.The first, second and third respondents are restrained pursuant to section 74O of the Real Property Act 1900 (NSW) from registering further caveats claiming the same interest as caveat AS875688 over any real estate assets of which the applicants are the registered proprietors.
9.The first to third respondents pay the applicants’ costs of proceedings NSD 94 of 2023 and of proceedings NSD 19 of 2023.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman. Associate:
Dated: 1 May 2023
SCHEDULE OF PARTIES
NSD 94 of 2023 Respondents
Fourth Respondent:
REGISTRAR OF PERSONAL SECURITIES
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