Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd
[2014] VSC 217
•14 May 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
S CI 2014 00592
IN THE MATTER OF
AN APPLICATION UNDER
THE PERSONAL PROPERTY SECURITIES ACT 2009
BETWEEN:
| SANDHURST GOLF ESTATES PTY LTD (ACN 089 884 766) and DOMAIN NO 1 PTY LTD (ACN 103 760 685) and ALBANY NO 1 PTY LTD (ACN 103 760 658) and KENNETH JAMES ROCHE | First Plaintiff Second Plaintiff Third Plaintiff Fourth Plaintiff |
| v | |
| COPPERSMITH PTY LTD (ACN 068 505 206) and PHILLIP ANTHONY POPPLESTONE and WILLIAM HURRELL POPPLESTONE and THE REGISTRAR OF THE PERSONAL PROPERTY SECURITIES REGISTER | First Defendant Second Defendant Third Defendant Fourth Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 31 March and 1 April 2014 | |
DATE OF JUDGMENT: | 14 May 2014 | |
CASE MAY BE CITED AS: | Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 217 | |
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SECURITIES – Application to enjoin registration of a financing statement under the Personal Property Securities Act 2009 (Cth) – Meaning of ‘security interest’ – Jurisdiction to restrain threatened registration – Amendment demand granted by Registrar – Consideration of New Zealand and Canadian authorities - Personal Property Securities Act 2009 (Cth) ss 12, 150, 180, 181 and 182.
PRACTICE AND PROCEDURE – Discovery – Documents not relevant to facts in issue.
PRACTICE AND PROCEDURE – Jurisdiction to restrain threatened conduct of defendants that may not be in breach of the Personal Property Securities Act 2009 (Cth).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr M McKillop | Minter Ellison |
| For the First Defendant | No appearance | |
| For the Second Defendant | In person | |
| For the Third Defendant | In person | |
| For the Fourth Defendant | No appearance |
Cases referred to:
Auto Moto Corporation Pty Ltd v SMP Solutions Pty Ltd [2013] NSWSC 1403.
Gangemi v Gangemi [2009] WASC 268.
Halaga Developments Pty Ltd v Grime (1986) 5 NSWLR 740.
i Trade Finance Inc v Bank of Montreal [2011] 2 SCR 360.
Milne Feeds Pty Ltd v Bride (Unreported, Supreme Court of Western Australia, Murray J, 7 May 1996).
NCO Finance Australia Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd [2013] FCCA 2274.
Stiassny v North Shore Council [2009] 1 NZLR 342.
White v Spiers Earthworks Pty Ltd [2014] WASC 139.
TABLE OF CONTENTS
Introduction............................................................................................................................... 2
Background to the proceedings................................................................................................... 4
Early history of the SGE joint venture....................................................................................... 7
Unilateral Deed......................................................................................................................... 11
Previous claims by William Popplestone.................................................................................. 11
Changes in the initial shareholdings in SGE............................................................................ 14
Transfer of 529,000 shares to Coad-87..................................................................................... 15
Claims by the Popplestones....................................................................................................... 16
The interest of Albany and Domain.......................................................................................... 18
Discussion................................................................................................................................ 19
The nature of a security interest............................................................................................... 20
Does the Court have jurisdiction to make the orders sought?................................................... 26
Did the plaintiffs give adequate discovery?............................................................................... 29
Should the Popplestones be restrained?.................................................................................... 29
HIS HONOUR:
Introduction
Sandhurst Golf Estates Pty Ltd (SGE), Domain No 1 Pty Ltd (Domain) and Albany No 1 Pty Ltd (Albany) (the plaintiffs)[1] seek a final order that the first to third defendants be enjoined from entering or causing to be entered on, or seeking to have removed from the Personal Property Securities Register (PPSR) any financing statement claiming an interest in the property of the plaintiffs, or any of them, without further order of the Court. The PPSR is maintained under the Personal Property Securities Act 2009 (Cth) (the Act). Orders are also sought against the Registrar of the PPSR, the fourth defendant. The Registrar does not appear and will abide by the orders of the Court.
[1]Throughout these reasons I refer to the first three named plaintiffs as “the plaintiffs”. Unless stated otherwise, “the plaintiffs” does not refer to the fourth named plaintiff.
The application by the plaintiffs, by an originating motion dated 12 February 2014, is made pursuant to s 182 of the Act and pursuant to the jurisdiction of the Court to protect property rights and to issue injunctions under the Supreme Court Act1986 (Vic).
Mr William Popplestone, the third defendant, is an accountant and a CPA. He is bankrupt. Coppersmith Pty Ltd (Coppersmith), the first defendant, is a company of which Mr William Popplestone’s wife is the sole director. Mr Phillip Popplestone, the second defendant, is the son of Mr William Popplestone. Mr Phillip Popplestone is a shareholder in Coppersmith. The first to third defendants have threatened to lodge new financing statements for registration if the existing registrations are removed.
There are four issues before the Court. First, do the first, second and third defendants (whom I shall call the Popplestones) have any interest in the plaintiffs’ personal property that would entitle them to register on the PPSR a financing statement? For the reasons given below, I find that the Popplestones and each of them are not entitled to register a financing statement as they do not have, nor do they claim to have, any interest in the plaintiffs’ personal property. Such an interest usually arises from a transaction that, in substance, secures payment or performance of an obligation. Further, Mr Phillip Popplestone has not been involved in any transactions or dealings with the plaintiffs. There is no basis for him seeking to register any interest on the PPSR in respect of the plaintiffs’ property.
At best, the first and third named defendants assert a claim to a proprietary interest in the personal property of the plaintiffs by way of equitable relief. For the reasons given below, I find that even if the claims of the first and third defendants to such equitable relief were made out (about which I make no findings), the interests they might have or obtain are by their nature not security interests within the meaning of the Act.
Second, the issue arises whether the Court has jurisdiction to make the orders sought. For the reasons given below, I find that the Court does have the jurisdiction to restrain the Popplestones from engaging in the threatened conduct even though that conduct may not be in breach of the Act.
Third, the issue arises whether the plaintiffs made adequate discovery in the proceeding. Prior to the hearing, at a directions hearing, the Popplestones sought an order for discovery. I directed the Popplestones to write to the plaintiffs indicating the documents of which they sought discovery. The Popplestones did so but the plaintiffs refused to discover any documents relating to the involvement of Mr Kenneth James Roche, the fourth named plaintiff, and his associates in the Sandhurst Golf Estate project or the exclusion by them of Mr William Popplestone. When the matter of discovery was raised at the subsequent directions hearing by the Popplestones, I directed that if I ascertained at the trial that inadequate discovery had been given by the plaintiffs then the proceedings would be adjourned. For the reasons given below, I find that the documents sought by the Popplestones are irrelevant to the issues that I have to decide and that the plaintiffs were not required to give discovery of them.
Fourth, whether the Court should exercise its discretion to restrain the first to third defendants as sought by the plaintiffs. There was no appearance for Coppersmith. Mr William Popplestone and Mr Phillip Popplestone appeared personally. Although William Popplestone’s estate is under administration, the trustee of his estate informed the Court that he would not be appearing and he had no objection to William Popplestone appearing for himself as the relief sought against him was in personam and did not touch on his estate.
Both William Popplestone and Phillip Popplestone indicated that they would not seek to file a financing statement with respect to the personal property of the plaintiffs, if they were provided with the documents that they seek from the plaintiffs. For the reasons given below, I am satisfied that there is an unacceptable risk that they may file a financing statement with respect to the personal property of the plaintiffs. Accordingly, in my discretion, I have resolved to grant the injunctions sought.
Background to the proceedings
On 1 and 5 November 2013, Coppersmith, William Popplestone and/or Phillip Popplestone caused financing statements to be registered on the PPSR, claiming a security interest in respect of the property of SGE, Albany and Domain.
The plaintiffs received two sets of notifications from the PPSR dated 1 November 2013 and 5 November 2013. The notifications attached verification statements (financing statements), which in substance contained details of the security interest registered by Coppersmith in respect of the property of the plaintiffs.
The statements provided notice of the following information, amongst other things:
(a)Coppersmith had registered a security interest in respect of each of the plaintiffs;
(b)in respect of SGE, the registration was PPSR registration number 201311010083392, registered from 1 November 2013, and in respect of Domain and Albany, the registration was registration number 201311050000475, registered from 5 November 2013; and
(c)in respect of all three companies, Coppersmith claimed to hold a security interest in respect of the following collateral:
(i)Collateral Type: Commercial property
(ii)Collateral Class: Financial property – Investment instrument
(iii)Proceeds: Yes – all present and after acquired property.
The secured party group details lodged by Coppersmith on the PPSR website were those of Phillip Popplestone and William Popplestone.
The plaintiffs determined to send ‘amendment demands’ to Coppersmith to end the registrations on the PPSR referred to in the statements, pursuant to s 178 of the Act. On 8 November 2013, the plaintiffs’ solicitors, Minter Ellison, sent letters to Mileva Popplestone, as director of Coppersmith, William Popplestone and Phillip Popplestone as email points of contact, making a demand that Coppersmith end the registrations by registering financing change statements on the PPSR. Despite the amendment demands, the registrations were not removed. Extensive emails passed between Minter Ellison and Phillip and William Popplestone relating to the issue. It is unnecessary to set these out at this stage.
Under the Act, there are two means by which amendment demands may be pursued: an administrative process (ss 179–181) and a judicial process (s 182). Following the failure of Coppersmith to end the registrations in accordance with the amendment demands, the plaintiffs determined to invoke the administrative process set out in ss 179-181 of the Act.
That process required the fourth defendant, as Registrar of the PPSR, to give, in effect, a show cause notice, called an ‘amendment notice’ under s 180 of the PPSA. Amendment notices require the holder of the registration to show why, in the face of a financing change statement in an amendment demand, the registration ought to remain on the PPSR. If no response is given within five business days (or such longer time that the Registrar has approved), the Registrar is then required to register the financing change statement served in the amendment demand.
On 19 November 2013, Ms Salveson of Minter Ellison sent letters enclosing copies of the amendment demands and the responses from the Popplestones to the Registrar in relation to the registrations, pursuant to s 180(3) of the Act.
On 20 November 2013, Ms Salveson received two emails at approximately 9.22am and 11.50am from Phillip Popplestone in which he threatened to lodge new financing statements for registration if the existing registrations were removed.
On or about 9 December 2013, the plaintiffs received copies of amendment notices sent by the Registrar to Coppersmith in accordance with s 180 of the Act. The notices invited Coppersmith to respond before 23 December 2013. Coppersmith responded. The response, however, was not copied to the plaintiffs. Nevertheless, the response was referred to in the Registrar’s notice of decision, discussed below.
On 31 January 2014, Ms Salveson received an email from Phillip Popplestone in which he demanded the removal of ‘PPSR register 201206270078384’.
On 5 February 2014, Ms Salveson received an email from Phillip Popplestone in which he purported to serve an amendment demand (the new amendment demand) under s 178 of the Act in respect of registration number 201206270078384. This registration was in respect of a security interest held by Mr Kenneth Roche over property of SGE.
On 7 February 2014, the Registrar sent Minter Ellison a notice that following the amendment notice procedure, a decision had been made pursuant to s 180(1) of the Act to register a financing change statement. The effect of the decision was in substance to terminate the registrations of Coppersmith’s claimed interests on the PPSR.
On 12 February 2014, the plaintiffs issued an originating motion and summons seeking the injunctions referred to below. On 17 February 2014, the plaintiffs applied for orders for substituted service which were granted.
On 21 February 2014, the Registrar filed a notice that he did not intend to appear and informed the Court that he would submit to any order of the Court in this proceeding save where costs were sought against the Registrar.
On 25 February 2014, the plaintiffs obtained orders, among others, from Cavanough J, that:
(a)pursuant to s 182(4)(b)(i) of the Act, until the hearing and determination of this proceeding or further order, the Registrar be restrained from registering a financing change statement under s 181 of the Act in respect of the amendment demand lodged by Phillip Popplestone in respect of registration number 201206270078384;
(b)pursuant to s 182(4)(b)(iii) of the Act, until the hearing and determination of this proceeding or further order, the Registrar be restrained from giving amendment notices under s 180 of the Act to the plaintiffs in response to any amendment demand given by the first to third defendants, whether in respect of registration number 201206270078384, or at all; and
(c)pursuant to s 182(4)(b)(i) and (c) of the Act, until the hearing and determination of the proceeding or further order, each of the first to third defendants be restrained from registering any financing statement or making any amendment demand within the meaning of s 177 of the Act, in respect of any personal property of the plaintiffs or any security interest held by the plaintiffs.
Cavanough J also made orders for the hearing of the proceeding in the Commercial Court and thus on 7 March 2014, the first directions hearing came on before me.
Early history of the SGE joint venture
Before setting out the history, I should say that the facts set out below are derived from two affidavits sworn by Mr Kenneth Roche, the exhibits thereto, and inferences that are open to be drawn from the exhibits; the affidavits of Phillip Popplestone of 5 March 2014 and William Popplestone of 6 March 2014; and further elaboration from Phillip and William Popplestone from the bar table. Mr Roche, Phillip Popplestone and William Popplestone were not cross examined.
I do not propose to make any findings of fact on any disputed or contentious issues as between the Popplestones, or any of them, on the one part and Mr Roche or the plaintiffs, or any of them, on the other. The history merely seeks to set out undisputed facts and further facts that the Popplestones may be able to establish, with a view to assessing whether or not it would be open to the Popplestones, or any of them, to lodge a financing statement with respect to the personal property of the plaintiffs.
William Popplestone was an accountant. He and Mr Peter Hamilton entered into a joint venture to purchase and develop a golf course and an associated residential development at Carrum Downs known as Sandhurst Golf Estate. To that end, William Popplestone and Mr Hamilton formed a company Novafield Pty Ltd (Novafield). Mr Bill Coady acted as solicitor for the joint venture. William Popplestone contends that in 2000, he agreed to vary his interest in the joint venture by taking 10 per cent of the shares in Coad-87 Pty Ltd (Coad-87) (a company controlled by Mr Hamilton) that held an interest in SGE. SGE was thereafter to undertake the joint venture that had previously been conducted by Novafield.
As elaborated on below, William Popplestone claims that he has not received the shares in SGE that had been promised to him by Mr Hamilton. The joint venture project is now being undertaken by SGE and Links-Sandhurst Pty Ltd (Links). As explained below, William Popplestone complains that he has been wrongly excluded from the joint venture and that his interest in the venture has not been properly recognised.
Mr Roche has been a director of SGE since his appointment on 26 April 2000 and by affidavit he gave evidence on behalf of SGE. Mr Roche has been a director of Domain since his appointment on 17 April 2003. His brother, Denis Arthur Roche, is a director of SGE and Albany.
The sole director of Coppersmith is Mileva Popplestone. William and Phillip Popplestone are not directors of Coppersmith.
Mr Roche deposes that he made all due and proper inquiries and, based on those inquiries, his own knowledge, the instructions of his brother Denis and other directors of SGE, he believes that none of the plaintiffs has granted any interest in their property to Coppersmith. Mr Roche swears that Coppersmith has not entered into any agreement at all with any of the plaintiffs, including any that would give rise to a security interest.
Further, Mr Roche deposes that whilst Phillip and William Popplestone have been in communication with the plaintiffs or their solicitors in relation to the claimed security interests, no details of any interest in the property of the plaintiffs which is capable of registration have been provided by any of the Popplestones to the plaintiffs.
During 1999, Denis Roche informed Mr Kenneth Roche that Albert Mantello, with whom he had been holidaying, had suggested that Denis Roche might like to consider investing in a proposed golf course development at Carrum Downs.
The vehicle that was eventually used to progress the project was a joint venture between a newly incorporated company, SGE, and Links. Since approximately early 2000, Mr Kenneth Roche has, through companies he controls, been an investor in SGE and has been one of its directors.
In or around 2000, after SGE entered into agreements with a view to acquiring the properties for the project, Mr Roche was informed by Mr Hamilton that an associated company of Mr Hamilton had previously held options over all of the relevant properties. Mr Roche understands that the company must have been Novafield. Mr Roche deposes that he cannot recall whether, at that time, he knew the relevant company’s name was Novafield.
Mr Roche deposes that he was informed by one or both of Mr Coady and Mr Hamilton that the options had expired, or were about to expire, and options or contracts of sale would need to be negotiated with each of the vendors of the land proposed for the development. Mr Roche deposes that the current books of SGE do not contain copies of any option contracts that Novafield may have had with any one of the vendors.
In or around December 1999, SGE entered into several options or conditional contracts of sale to acquire certain pieces of land that were eventually acquired for the purposes of the Sandhurst Golf Estate project. The initial option fees were funded by Mantello Holdings Pty Ltd, but Roche Holdings Pty Ltd (Roche Holdings) was asked by Jeremy Mantello to meet 50 per cent of the expenses despite the absence of a formal equity participation agreement in relation to the project.
Mr Roche attended a meeting in Portsea during January or February 2000, at a property owned by the Mantellos. The meeting was attended by Mr Coady, Brian Blair, Mr Hamilton and Denis Roche. They discussed the basis on which Denis and Kenneth Roche would be prepared to participate in the project. At that time, Mr Blair was the finance director of Roche Holdings.
As at November 2000, the final equity structure of SGE was still undergoing changes to reflect an acknowledgment of the substantial equity required to progress a proposed golf course development. To the best of Mr Roche’s current recollection, the earliest agreement of ongoing significance he executed in relation to SGE was a deed of agreement dated 21 November 2000. The minutes of a meeting of directors of SGE in December 2000 reflect the fact that the original land assets were acquired directly from land vendors, rather than a transfer of options from Novafield, Coad-87 or anyone else.
Land sale and purchase agreements were subsequently executed with each of six vendors. Mr Roche deposes that his office has not, to date, been able to locate copies of the land sale contracts or any prior options. He says his investigations into whether the relevant files are still held by the joint venture’s solicitors at the time, Maddocks, are still continuing. At that time, Coadys Barristers & Solicitors represented SGE. Mr Roche deposes that they may have held copies of each of the contracts and options, however Coadys Barristers & Solicitors no longer exists.
Mr Roche deposes that he has never signed or sighted any contract between SGE and Novafield, or between SGE and Coppersmith. He deposes that he has reviewed the minutes of meetings of directors of SGE and there is no reference to such a document. The historic title searches for the relevant properties acquired from the vendors do not disclose any prior registered or caveated interest in favour of Novafield, Coppersmith or William Popplestone.
Unilateral Deed
Mr Roche deposes that the books of SGE do contain a copy of a deed of release (referred to as a Unilateral Deed) dated 28 March 2001 (but expressed to be backdated to 22 December 2000) signed under seal on behalf of Novafield. SGE is not a party to that document. The document purports to have been signed by directors, and the company seal is affixed. Mr Roche deposes that he does not recall this document ever being reviewed at a board meeting of SGE.
Mr Roche deposes that he has located a memo dated 25 March 2001 from Mr Coady, copied to Mr Blair. In that memo, the unilateral deed was described as needing ‘to be picked up from Bill Popplestone’, and as needing to be provided to SGE’s proposed financier, the NAB, as part of the documentation to support SGE’s application for finance. Mr Roche deposes that he does not recall having read that memo previously.
Previous claims by William Popplestone
In March 2006, William Popplestone commenced a proceeding against Coad-87 and its former director, Mr Hamilton, in the Supreme Court of Victoria; proceeding number 5233 of 2006. William Popplestone claimed among other things, an order that Mr Hamilton held 10 per cent of the shares in Coad-87 on trust for William Popplestone. This trust claim was abandoned by William Popplestone in an amended statement of claim in 2008. The proceeding was defended by Coad-87 and Mr Hamilton, and subsequent orders were made on 23 August 2011 staying proceedings due to William Popplestone’s bankruptcy.
A second related proceeding in the Supreme Court of Victoria, proceeding number 6145 of 2007, was brought by William Popplestone as plaintiff against Novafield as defendant, relating to the disposal of Novafield’s assets. William Popplestone and Mr Hamilton had previously been directors of Novafield.
By orders made 31 October 2007, the proceedings were dismissed and a notice of discontinuance in that proceeding was filed on 26 February 2008. Coad-87 is now in liquidation.
Neither of the two proceedings made any claim that William Popplestone had any legal or equitable interest in SGE or SGE’s property. Further, the liquidators of Coad-87 have also not claimed any legal or equitable interest in SGE or its property. William Popplestone’s trustee in bankruptcy has also not made any such claims against SGE, or any of the other plaintiffs.
On this basis, the plaintiffs say that there is and was no proper basis for the lodgement of financing statements on the PPSR against the plaintiffs by Coppersmith. As indicated above, these registrations have now been removed by administrative decision of the Registrar.
However, the plaintiffs say that threats have been made by Phillip Popplestone to place further unfounded registrations on the PPSR. By this proceeding, the plaintiffs seek orders to restrain Coppersmith and its officers and agents, Phillip Popplestone, and William Popplestone from making any further registrations on the PPSR, or seeking to remove financing statements registered by other persons in respect of any of the plaintiffs.
Mr Roche deposes that there is, in his opinion, no proper basis upon which Phillip Popplestone can make a demand that Mr Roche remove this security interest. He says that in the circumstances, Phillip Popplestone’s threats are an abuse and represent a continuing unjustified harassment of Mr Roche and SGE.
In addition to the matters concerning the Act, Mr Roche is seeking a final intervention order against Phillip Popplestone under the Personal Safety Intervention Orders Act2010 (Vic) in the Melbourne Magistrates’ Court. A final hearing was scheduled for 27 and 28 February 2014, but interim orders have been made against Phillip Popplestone.
In the intervention proceeding, Phillip Popplestone issued a number of subpoenas seeking the production of documents about alleged interests of his father in SGE, which are substantially the same as those he has asserted in the financing statements registered on the PPSR against SGE and the other plaintiffs.
The plaintiffs contend that the registration of the security interest by Coppersmith and the new amendment demand by Phillip Popplestone are causing the plaintiffs loss and damage as it has been necessary for SGE to engage lawyers to make applications to remove the purported security interests and respond to queries from SGE’s bank, Westpac.
On 20 December 2013, Mr Nick Anson of Minter Ellison provided a written explanation to Westpac’s lawyer, Mr Peter Grotjans of Gadens Lawyers, of the circumstances surrounding the lodging of the financing statements by Coppersmith. SGE was also required to confirm in writing that no security agreement had been entered into between SGE and Coppersmith (which would have been a breach of SGE’s banking covenants) and that steps had been taken to have the registration lodged on behalf of Coppersmith removed from the PPSR.
Mr Roche deposes that in light of the conduct that he has referred to and particularly the emails that he has referred to, the plaintiffs are concerned that the first to third defendants, or their related entities, will seek to register new security interests or pursue amendment demands without foundation. Mr Roche deposes that this may cause the plaintiffs to incur significant legal costs to remove them and explain them to financiers. He also says that should it be necessary to borrow additional funds to further develop the Sandhurst Golf Estate project, the existence of new unfounded registrations may affect their ability to borrow funds.
Changes in the initial shareholdings in SGE
Together with the Mantellos, Denis and Kenneth Roche recognised that Mr Hamilton had spent significant time trying to progress a golf course development at Carrum Downs before SGE was incorporated. Mr Hamilton had not been able to progress the development without the support that Denis Roche, Kenneth Roche and the Mantello family were able to contribute. While Mr Hamilton originally believed that the development could proceed without material equity, significant equity was in fact required in order to obtain bank support. Mr Roche deposes that, to the best of his recollection, they arranged for Coad-87 to receive funds in the order of $1 million in consideration for the introduction of the project to the Roches and Mantellos. Mr Roche deposes that the initial agreement to do this was reflected in a directors’ shareholding resolution dated 27 March 2001.
The 27 March 2001 resolution envisaged that Coad-87 would be entitled to an allotment of two million shares in SGE, subject to payment of an allotment price of $2 million. Any subscription needed to occur by 30 April 2001. Mr Roche deposes that he recalls being advised by Mr Hamilton that he was endeavouring to raise funds so that Coad-87 could acquire equity of up to $2 million. Ultimately, Coad-87 was not able to take up the offer to subscribe for any shares prior to the cut-off date, being 30 April 2001, and as a result, Ropar Pty Ltd (Ropar) took up the allotment on 9 May 2001, as explained below. Coad-87 did subsequently secure an agreement to fund from a third party, Mr Delios. However, by that time the relevant shares had already been allotted to Ropar.
In addition, Links was only able to fund the acquisition of $4 million worth of shares from their allotment of $5 million, leaving a shortfall of $3 million.[2] Ropar ultimately underwrote the shortfall in the funding to enable the project to proceed. If Ropar had not underwritten the equity shortfall, SGE and Links would not have been able to draw down on the bank facilities and would not have been able to complete the relevant land sale contracts.
[2]I infer that this sum is made up of the $1million allocated to Links and the $2million initially allocated to Coad-87.
Mant-01 Pty Ltd, another entity controlled by the Mantello family, wanted to increase its shareholding in SGE by taking up an additional approximately $500,000 worth of shares.
The shortfall in the subscriptions resulted in the additional following share allotments by SGE:
(a)two million shares being allotted to Ropar on 9 May 2001 (being all of the entitlement offered to but not accepted by Coad-87); and
(b)of the portion of shares available to be taken up by Links, this was split two thirds to one third, that is, 468,066 shares allotted to Ropar and 234,033 shares allotted to Mant-01 Pty Ltd.
As the Mantello family (through Mant-01 Pty Ltd) wanted to have a total of $1,500,000 worth of equity in SGE, Ropar agreed at the same time as the allotments referred to, to transfer 161,702 shares in SGE to Mant-01 Pty Ltd with effect from 11 June 2001.
Transfer of 529,000 shares to Coad-87
Mr Hamilton (through Coadys) subsequently advised in a letter dated 28 June 2001, that he had raised funds and still wished to acquire two million shares in SGE. However, the directors of SGE were not prepared to permit additional shares to be issued to Coad-87 because that would dilute the existing shareholdings.
At the time, Denis Roche and Kenneth Roche thought it was unfair for Mr Hamilton not to have any equity (other than the initial ten shares Mr Hamilton had initially been allocated in SGE) in the project, given his personal effort and passion in promoting the project.
Ropar subsequently agreed to transfer 529,000 of Ropar’s ordinary shares in SGE to Coad-87 for a consideration of $264,500, being 50 cents per share, that is a discount of 50 per cent to allotment value. This occurred on or around 30 November 2001. The consideration of $264,500 was loaned by Ropar to Coad-87 to be repaid out of future dividends. No upfront payment was required.
Claims by the Popplestones
Mr Roche subsequently became aware that William Popplestone claimed that Mr Hamilton promised him a 10 per cent interest in Coad-87. This has been the subject of court proceedings earlier referred to. Mr Roche deposes that to his knowledge Coad-87 never allotted shares to William Popplestone or any nominee. Mr Roche deposes that prior to the lodging of the relevant financing statements the subject of this proceeding, William Popplestone, Novafield and Coppersmith had never claimed to have been granted a security interest in the personal property of SGE, or Albany or Domain for that matter.
Mr Roche has located a letter from Anderson Rice on behalf of William Popplestone addressed to Mr Hamilton care of Roche Brothers Pty Ltd (Roche Brothers) dated 19 October 2001, attaching an earlier letter dated 21 September 2001 addressed to Coadys. Mr Roche deposes that Mr Hamilton never worked with Roche Brothers and never had a desk at the St Kilda Road premises. Mr Roche assumes that the letter was sent to them in the hope it would get to Mr Hamilton. The 19 October 2001 letter concerns shareholdings in Coad-87. The 21 September 2001 letter seeks confirmation, among other things, that Mr Hamilton would transfer to William Popplestone a 10 per cent shareholding in Coad-87 and request ‘a final transfer of that interest into Sandhurst Golf Estate Pty Ltd’.
Mr Roche deposes that a 10 per cent interest in Coad-87’s equity in SGE would have equated to approximately 0.5 per cent of the Sandhurst Golf Estate project.
Mr Roche deposes that he has no recollection of a letter being received or any discussions of it in the period thereafter with Mr Hamilton or Mr Blair of his office. Mr Roche deposes that it appears from a notation on a copy of the letter that Mr Roche must have queried the significance of it with Mr Blair.
Mr Roche deposes that the files of Roche Holdings contain a fax from Mantello Holdings dated 23 October 2001 marked to the attention of Mr Blair enclosing a company search in respect of Novafield. Mr Roche deposes he does not recall having ever looked at or discussed the fax with Mr Blair.
Mr Roche deposes that the files of Roche Holdings also contain a request from Mr Blair to Mr Hamilton asking for an explanation of the matters raised in respect of Novafield and its relationship with Coad-87. Mr Roche deposes that no response is held on the file and that he does not recall any response being given by Mr Hamilton or any discussion concerning any response.
Mr Roche deposes that since about 2005, he has been repeatedly assured by Mr Hamilton that the claim by William Popplestone for a 10 per cent stake in Coad-87 was Mr Hamilton’s problem, had nothing to do with SGE, and that Mr Hamilton was dealing with it. Mr Roche understood Mr Hamilton to mean that William Popplestone claimed that he was entitled to an interest in Coad-87. Mr Roche deposes that Mr Hamilton never suggested to him that Mr Hamilton had ever purported to agree on behalf of SGE to grant a security interest over SGE’s personal property to Coppersmith, Novafield or William Popplestone.
Mr Roche deposes that he recalls a brief meeting with William Popplestone at his office in about 2005 in which William Popplestone advised of his dispute with Mr Hamilton in relation to Coad-87 and asked for his assistance. Mr Roche deposes that while he does not recall the details of the conversation, he recalls that he told Mr Popplestone that it was an issue between Mr Popplestone and Mr Hamilton and did not involve Mr Roche.
Mr Roche deposes that in or around 2008/2009, Mr Hamilton’s solicitors approached SGE to ascertain whether, if a commercial settlement with William Popplestone could otherwise be reached, SGE would permit Coad-87 to transfer a portion of its holding in SGE to William Popplestone or a nominee. Mr Roche recalls that SGE indicated it would not agree to such a proposal as it did not want to deal with any additional minority stakeholders. Mr Roche deposes that to the best of his recollection, SGE had no objection to equity in Coad-87 being offered to William Popplestone or a nominee.
The interest of Albany and Domain
As mentioned above, Albany and Domain are companies controlled by Denis and Kenneth Roche. The plaintiffs did not file any affidavit material explaining the role of Albany and Domain in the Sandhurst Golf Estate project or any of the associated transactions.
As mentioned above, Mr Roche does depose that neither company had entered into any transaction with Coppersmith, including any that would give rise to a security interest. Further, Mr Roche deposes that whilst Phillip and William Popplestone have been in communication with the plaintiffs or their solicitors in relation to the claimed security interests, no details of any interest in the property of the plaintiffs which is capable of registration have been provided by any of the Popplestones to the plaintiffs.
I was informed by counsel for the plaintiffs that neither Albany nor Domain is involved in the Sandhurst Golf Estate project and that they were merely lenders to Mr Hamilton and at one point, but they took security from Coad-87.[3]
[3]Transcript, 1 April 2014, 150.
Mr Phillip Popplestone interrupted counsel for the plaintiffs at this point to say that he did not know if that was true. When asked what Mr William Popplestone’s claim was over the personal property of Albany and Domain, Mr Phillip Popplestone was unable to explain the claim (if any) although in his submissions he did mention two companies, KJSRA Pty Ltd and DARS1 Pty Ltd.
In response to these submissions of Mr Popplestone, counsel for the plaintiffs informed me as follows. Coad-87 charged shares it held in SGE as security for a loan of $500,000 to Coad-87 from Mr Kenneth Roche. The loan was also secured by a guarantee given by Mr Hamilton. The charge was in favour of Mr Kenneth Roche personally. Coad-87 defaulted on the loan when Mr Hamilton went bankrupt. The security, being Coad-87’s shares in SGE, was then transferred at Mr Roche’s direction to two companies, KJSRA Pty Ltd and DARS1 Pty Ltd. These companies are the trustees of the family trusts of Denis and Kenneth Roche.
Counsel for the plaintiffs did not explain to me the relevance of these facts to Albany and Domain. Although pressed by me, counsel for the plaintiffs did not explain what Albany and Domain did, save to repeat the evidence of Mr Roche that they have entered into no transactions with the Popplestones. There the matter rested.
As it is the Popplestones have not placed any evidence before the Court suggesting that any transaction has occurred between Albany and Domain and the Popplestones, or that the Popplestones hold any security over any personal assets of Albany and Domain.
Discussion
The Sandhurst Golf Estate project is a property development in Carrum Downs that involved the construction of a golf course and development of surrounding land for housing.
I have no doubt that William Popplestone genuinely feels that he has been wrongly deprived of his interest in the Sandhurst Golf Estate project. Initially he held a 30 per cent interest in Novafield which was the vehicle through which he and his partner Mr Hamilton sought to develop the project. Mr Popplestone and Mr Hamilton had identified the land and the vendors, obtained options to buy and procured the relevant town planning permits to enable the project to proceed. They had reached the stage where further partners were required to finance the project.
As indicated above, in 1999 new parties were introduced to the project and for reasons that Mr Popplestone does not fully understand, the project proceeded without his interest being recognised or compensated for. Since that time he and his son have sought to procure what they believe is their rightful share in the project.
As indicated, the project is currently undertaken by a joint venture between SGE and Links. SGE contends that even if William Popplestone or his company Coppersmith hold some sort of proprietary interest in the project that does not give rise to any security interest. The Popplestones’ claim is a proprietary claim and not a claim to a security interest. Further, the plaintiffs contend that any interest that the Popplestones may hold in the plaintiffs’ personal property did not arise by way of a consensual transaction as required under the Act.
The nature of a security interest
Section 150 of the Act provides:
150 Registration—on application
(1) A person may apply to the Registrar to register a financing statement with respect to:
(a) a security interest; or
(b)personal property prescribed by regulations made for the purposes of paragraph 148(c).
(2) A person may apply to the Registrar to register a financing change statement to amend a registered financing statement.
(3) The Registrar must register the financing statement or financing change statement in accordance with the application, but only if:
(a) the application is in the approved form; and
(b)the fee (if any) determined under section 190 has been paid; and
(c) the Registrar is not satisfied that the application is:
(i) frivolous, vexatious or offensive, or contrary to the public interest; or
(ii) made in contravention of section 151 (belief about security interest); and
(d) the registration would not be prohibited by the regulations.
A security interest is defined in s 12 as follows:
12 Meaning of security interest
(1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).
Note: For the application of this Act to interests, see section 8.
(2) For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation:
(a) a fixed charge;
(b) a floating charge;
(c) a chattel mortgage;
(d)a conditional sale agreement (including an agreement to sell subject to retention of title);
(e) a hire purchase agreement;
(f) a pledge;
(g) a trust receipt;
(h) a consignment (whether or not a commercial consignment);
(i) a lease of goods (whether or not a PPS lease);
(j) an assignment;
(k) a transfer of title;
(l) a flawed asset arrangement.
(3) A security interest also includes the following interests, whether or not the transaction concerned, in substance, secures payment or performance of an obligation:
(a) the interest of a transferee under a transfer of an account or chattel paper;
(b) the interest of a consignor who delivers goods to a consignee under a commercial consignment;
(c) the interest of a lessor or bailor of goods under a PPS lease.
(3A) A person who owes payment or performance of an obligation to another person may take a security interest in the other person’s right to require the payment or the performance of the obligation.
(4) Without limiting subsection (3A):
(a) an account debtor, in relation to an account or chattel paper, may take a security interest in the account or chattel paper; and
(b) an ADI may take a security interest in an ADI account that is kept with the ADI.
(5) A security interest does not include:
(a) a licence; or
(b)an interest of a kind prescribed by the regulations for the purposes of this section.
(6) A security interest is not created only by an agreement or undertaking to do either of the following:
(a) to postpone or subordinate a person’s right to payment or performance of all or any part of a debtor’s obligation to another person’s right to payment or performance of all or any part of another of the debtor’s obligations;
(b) to postpone or subordinate all or any part of a secured party’s rights under a security agreement to all or any part of another secured party’s rights under another security agreement with the same grantor.
Section 10 defines financing statement to mean data registered (or that is to be registered) pursuant to an application for registration under subsection 150(1).
The central plank of the plaintiffs’ submissions is that a security interest must be an interest in personal property provided for by a transaction. The plaintiffs submit that the transaction must be a consensual transaction. The plaintiffs submit that the transaction does not include dealings between the parties that may give rise to an equitable interest by way of a remedy. As authority for this proposition, the plaintiffs rely on i Trade Finance Inc v Bank of Montreal,[4] a decision of the Supreme Court of Canada on an appeal from the Court of Appeal of Ontario. Deschamps J delivered the judgment of the Court of Binnie, LeBel, Deschamps, Fish, Charron, Rothstein and Cromwell JJ.
[4][2011] 2 SCR 360.
The relevant facts may conveniently be taken from the head note. The appellant, i Trade Finance Inc (i Trade), advanced funds to a corporation, W, controlled by a fraudster, A, on the basis of non-existent contracts. A and his spouse pledged securities acquired with the same funds and held in an investment account to the respondent, Bank of Montreal (BMO), which had no knowledge of the fraud.
The pledge was made by A and his spouse in exchange for valuable consideration (increased credit card limit). On discovery of the fraud, i Trade obtained a judgment declaring that the assets acquired with the funds were held under a constructive trust for i Trade’s benefit, and allowing the tracing of those funds into the hands of persons other than bona fide purchasers for value without notice.
Both i Trade and BMO claimed entitlement to the proceeds of sale of the securities. i Trade claimed a right to the proceeds from the sale of the securities on the basis of the judgment it obtained, principles related to recovery of payments under a mistake of fact, and on the basis that the funds were impressed with a constructive trust and were subject to an equitable lien.
i Trade also contended that the pledge to BMO did not create an enforceable security interest under Ontario’s Personal Property Security Act 1990 (PPSA) because the pledgors, A and his spouse, could not convey to BMO any interest in the shares. BMO asserted that while the resolution of the dispute between the parties was not governed by the PPSA priority rules, it had a valid and enforceable PPSA security interest, and the pledge agreement established it is a bona fide purchaser for value without notice, which shielded it from i Trade’s claim to the disputed funds.
The Canadian Supreme Court said that where a party claims a security interest in personal property to satisfy payment or performance of an obligation, the Court must ask whether the PPSA applies. The Court did so and held that the PPSA did not apply to the interest claimed by i Trust in the proceeds from the sale of the securities. Rather, the Supreme Court held that i Trade’s claim to the disputed funds arose from the judgment giving it an equitable proprietary interest by way of a constructive trust or equitable lien; an interest not covered by the PPSA.
The Court ultimately held that BMO was a bona fide purchaser for value without notice and was entitled to the funds.
Under the PPSA a “security interest” is defined as “an interest in personal property that secures payment or performance of an obligation.” Similar to the Act, the PPSA applies to “every transaction without regard to its form and without regard to the person who has title to the collateral that in substance creates a security interest.”
The Supreme Court held that the PPSA did not apply to i Trade because i Trade acquired its interest as a result of a court decision and not from a “transaction…that in substance creates a security interest.” In addition, the Supreme Court held that the “creation of the rights was not consensual.” The Court held that i Trade’s interest in the disputed funds was not subject to the PPSA as it only arose in equity. The Court held that the interest flowed from the equitable remedies and was not governed by the PPSA.[5]
[5]Ibid at [29]-[32].
In my opinion, the construction that the Supreme Court of Canada applied to the meaning of “security interest” in the PPSA also applies to the definition of “security interest” in the Act. The transaction that gives rise to the security interest must be consensual. The transaction itself must give rise to the security interest.
It follows that if the Popplestones’ claim over the personal property of the plaintiffs is based on obtaining equitable relief from a court, then the claim is not able to be registered under the Act. The claim does not arise under any consensual transaction between the Popplestones, or any of them, and the plaintiffs. At best, the claim arises under disputed dealings.
Secondly, the plaintiffs also contend that the transaction must be one that, in substance, secures payment or performance of an obligation. The plaintiffs say that this is borne out by the examples of security interest given in s 12(2) such as a fixed or floating charge.
The plaintiffs also rely on the decision of Stiassny v North Shore Council,[6] a decision of the New Zealand Court of Appeal of William Young P, Glazebrook and O’Reagan JJ.
[6][2009] 1 NZLR 342.
Section 17(1) of the Personal Property Securities Act 1999 (NZ) relevantly gave the meaning of ‘security interest’ as:
(1) In this Act, unless the context otherwise requires, the term security interest –
(a) Means an interest in personal property created or provided for by a transaction that in substance secures payment or performance of an obligation, without regard to –
(i) The form of the transaction; and
(ii) The identity of the person who has title to the collateral; and
….
The Court held that “where an individual has only the proprietary interest of a beneficiary under a trust, that alone necessarily cannot amount to a security interest” as a “security interest under s 17(1) must “in substance [secure] payment or performance of an obligation””.[7] The Court said that “[t]he interest held by a beneficiary does not secure any obligation independent of those arising pursuant to the trust.”[8]
[7]Ibid [29].
[8]Ibid. The Court’s decision was delivered by William Young P.
The plaintiffs submitted there was no Australian authority directly relating to these issues. There are some Australian authorities considering the meaning of “security interest” under the PPSA. In Auto Moto Corporation Pty Ltd v SMP Solutions Pty Ltd,[9] the Court considered an argument that the equitable interest claimed to be the security interest had converted into an interest in the proceeds of the property, rather than the property itself. In White v Spiers Earthworks Pty Ltd,[10] Le Miere J of the Supreme Court of Western Australia observed that “[t]he PPSA deems three types of interest in personal property to be security interests, whether or not the transaction in substance secures payment or performance of an obligation.”[11] These are set out in s 12(3) of the PPSA. None of these interests are claimed by the Popplestones. In NCO Finance Australia Pty Ltd v Australian Pacific Airports (Melbourne) Pty Ltd,[12] the Federal Circuit Court of Australia considered whether a repairer’s lien constituted a security interest.
[9][2013] NSWSC 1403.
[10][2014] WASC 139.
[11]Ibid, [16].
[12][2013] FCCA 2274.
In my opinion, the Popplestones’ claims are not registrable under s 150 of the Act as they do not arise out of a consensual transaction between the plaintiffs and the Popplestones and any claim the Popplestones may have does not give rise to a security interest. Rather, the interest, if any, may arise under the principles of equity if so held by a court. The rights of the Popplestones (if so held by a court to exist) do not secure payment of any sum or the performance of any obligation. Nor does the interest claimed by the Popplestones fall within s 12(3) of the PPSA.
In my opinion, any claims that the Popplestones may have are not registrable under the Act.
Does the Court have jurisdiction to make the orders sought?
Under s 151 of the Act a person must not apply to register a financing statement that describes collateral unless the person believes, on reasonable grounds, that the person described in the financing statement as the secured party is, or will become, a secured party in relation to the collateral. A breach of the provision exposes the person to a civil penalty. In my opinion, it is unnecessary for me to consider whether or not the Popplestones are in breach of this provision. In my opinion, the Court has jurisdiction to enjoin them from seeking to register a financing statement even where the Popplestones’ conduct may otherwise be lawful.
There is a line of authority relating to the lodging of caveats in which the Court has enjoined a party from lodging a caveat where such restraint is necessary to protect the rights of another party, despite the caveator’s conduct otherwise being lawful: Halaga Developments Pty Ltd v Grime;[13] Milne Feeds Pty Ltd v Bride;[14] and Gangemi v Gangemi.[15]
[13](1986) 5 NSWLR 740 (Halaga).
[14](Unreported, Supreme Court of Western Australia, Murray J, 7 May 1996) (Milne Feeds).
[15][2009] WASC 268 (Gangemi).
In Halaga, the defendant had lodged a caveat over the plaintiff’s land. The Real Property Act1900 (NSW) provided that such a caveat would lapse after the expiration of three months unless certain steps were taken. The steps were not taken. The defendant lodged a further caveat one day before the date on which the first caveat lapsed. The defendant lodged a third and then a fourth caveat claiming the same interest similarly just before the prior caveat lapsed. The plaintiff applied for an order that the defendant be restrained from lodging further caveats.
Waddell CJ in Equity said that it was an abuse of the caveat provisions of the Real Property Act to lodge a series of identical caveats which would indefinitely prevent consideration of the initial objection raised by the first caveat.
His Honour held that by virtue of the ordinary consideration of the Court to protect rights of property and s 23 of the Supreme Court Act1970 (NSW) which provided: “The Court shall have all jurisdiction which may be necessary for the administration of justice in New South Wales”, the Court had jurisdiction to grant an injunction to restrain a party where such restraint was necessary to protect the rights of another party, even though the restrained conduct was lawful.
Also, in Gangemi Murphy J of the Supreme Court of Western Australia enjoined the defendant from lodging further caveats over certain properties owned by the plaintiff where the defendant had previously lodged caveats and it had been found that he had no caveatable interest over the properties.
Murphy J cited the decision of Murray J in Milne Feeds as authority for the Court making such a restraining order. Murray J said:
It is clear that it lies within the jurisdiction of the court effectively to grant an injunction restraining a party from conduct which is lawful, such as the lodgement of the caveat, upon the ground that such restraint is necessary in the interests of justice to protect a particular litigant from a multiplicity of actions and to order the business of the court.
In my opinion, the statutory procedure that enables a person to register a financing statement claiming a security interest over personal property under the PPSR is for relevant purposes not dissimilar to the statutory procedure for lodging caveats over Torrens land.
Under s 37(1) of the Supreme Court Act1986 (Vic) the Court may by order, whether interlocutory of final, grant an injunction or appoint a receiver if it is just and convenient to do so.
In my opinion, the same considerations that led the court in Helga and Gangemi to issue an injunction, lead me to conclude that the Court does have jurisdiction to restrain the Popplestones from seeking to register a financing statement claiming a security interest in the plaintiffs’ personal property in circumstances where the Popplestones have been found to have no such interest but nevertheless threaten to seek to register a security interest that would inconvenience and damage the plaintiffs.
The process of removing a financing statement is time consuming and costly. In my opinion, the Court should exercise its jurisdiction to protect the plaintiffs from this unnecessary and unwarranted trouble and expense.
The plaintiffs also rely on s 182 of the Act, which makes provision for the Court to make certain orders in relation to an amendment demand. In the circumstances, I consider it is unnecessary to consider this ground.
Did the plaintiffs give adequate discovery?
The Popplestones frankly conceded that one of the motivating factors for lodging the financing statements in respect of the plaintiffs’ personal property was to obtain access to all documents relating to the involvement of Mr Roche and his associates in the Sandhurst Golf Estate project and the exclusion by them of William Popplestone. The Popplestones even indicated to the Court that they would undertake not to lodge any further financing statements if they were provided with the documents they seek. As discussed above, if those documents did disclose that the Popplestones had some sort of equitable right over the assets of the joint venture and the plaintiffs arising from the Popplestones being excluded from the Sandhurst Golf Estate project, such a right would not entitle them to register financing statements under the Act.
For the reasons canvassed above, the production of those documents would not have been relevant to the issues raised in this case. In my opinion, the plaintiffs were not obliged to discover the documents sought by the Popplestones.
Should the Popplestones be restrained?
The Popplestones were asked whether they would undertake not to seek to register any further financing statements based on their claims against SGE. The Popplestones failed to unconditionally do so. They implied that they would continue to do so until they obtained the documents they were seeking that related to SGE taking over the project.
In those circumstances, I find that that the plaintiffs should be granted the relief that they seek. Accordingly, I propose to order as follows:
1Pursuant to section 182(4)(b)(i) and (c) of the Personal Property Securities Act 2009 (Cth) (the Act), each of the first to third defendants (whether by themselves, by their agents, or on behalf of any other person) are restrained from registering or causing to be registered on the Personal Property Securities Register (PPSR) any financing statement claiming an interest in the property of the Plaintiffs, or any of them, or seeking to amend or have removed any financing statement entered on the PPSR claiming an interest in the property of the Plaintiffs, or any of them, whether by making an amendment demand within the meaning of s 177 of the Act or otherwise, without further order of the Court.
2If a registration is made on the PPSR in breach of Order 1, the Fourth Defendant is required to remove it forthwith.
3The Fourth Defendant is restrained from taking any step in respect of any amendment demand made by the first to third defendants in breach of Order 1.
4The first to third defendants in this proceeding pay the plaintiffs’ costs of and incidental to the proceeding, including reserved costs.
5 There be no order as to costs against the fourth defendant.
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CERTIFICATE
I certify that this and the 29 preceding pages are a true copy of the reasons for Judgment of Robson J of the Supreme Court of Victoria delivered on 14 May 2014.
DATED this fourteenth day of May 2014.
Associate
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