Sands Print Group Limited v Jackson
[2000] VSC 346
•25 August 2000
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | Not Restricted |
No. 6437 of 2000
No. 6548 of 2000
| SANDS PRINT GROUP LIMITED | Plaintiff |
| v. | |
| STEPHEN PAUL JACKSON | Defendant |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 24 AUGUST 2000 | |
DATE OF JUDGMENT: | 25 AUGUST 2000 | |
CASE MAY BE CITED AS: | SANDS PRINT GROUP v. JACKSON | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 346 | |
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CATCHWORDS: Corporations Law - Appointment of receivers to companies in voluntary administration – Claim by companies that mortgagee estopped from appointing receivers – Corporations Law, ss.440B, 440D and 441A.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr. D. Denton with Mr. C. Shaw | Freehills |
| For the Defendant | Mr. G. Ritter QC with Mr. R. Cook | FLA Partners |
HIS HONOUR:
This matter has a high degree of urgency about it. My reasons for judgment, therefore, will be brief.
Sands Print Group Ltd, (Sands) carries on business as a printer at Breakwater near Geelong. It has about 120 employees. Tynworth Pty Ltd, (Tynworth) is an associated entity. It does not trade. Its function appears to be that of trustee of the Jackson Family Trust and it holds properties on behalf of the trust.
By a mortgage debenture dated 28 May 1998 Sands granted a charge over its assets to the Australian and New Zealand Banking Group Ltd (ANZ) to secure the repayment of moneys advanced to it by ANZ. Tynworth granted a similar charge over its assets by a deed of mortgage debenture dated 3 September 1998. The mortgages provide that on demand Sands and Tynworth shall duly pay to ANZ the moneys secured by the mortgages.
Clause 8.1(e) of each mortgage provides
"8.1.The Secured Moneys shall (notwithstanding anything else contained in this Mortgage Debenture) immediately become due and payable and the security hereby created shall immediately become enforceable without the necessity for any further demand or notice (and notwithstanding any delay or previous waiver of the provisions of this clause by the bank):
(e)if the Mortgagor is placed under official management or voluntary administration or a meeting is summoned or other step taken for the purpose of placing the Mortgagor under official management or voluntary administration and on appointing an official manager or administrator thereof."
Clause 9.1((a) of each mortgage reads -
"9.1.At any time after the security has become enforceable the Bank may by instrument in writing signed by an officer of the bank:
(a)appoint any qualified person or any two or more qualified persons jointly or jointly and severally to be a receiver or a receiver and manager of the Mortgaged Property or any part thereof."
On 8 August 2000 Gregory John Shilton was appointed administrator of Sands pursuant to s.436A of the Corporations Law, and Leigh William Dudman was appointed administrator of Tynworth.
On 9 August 2000 Simon Alexander Wallace-Smith and Peter George Yates were appointed joint and several receivers and managers of Sands and Tynworth by ANZ.
On Saturday 12 August I heard an urgent ex parte application on behalf of ANZ for orders (inter alia) that the three directors of Sands and Tynworth, namely Stephen Paul Jackson, Peter Domney Jackson and John McDonald deliver up to the receivers all books and records of Sands and Tynworth and for orders restraining those directors from taking possession of any of the premises or assets of Sands and Tynworth and from selling or otherwise dealing with those assets. Having regard to the content of the affidavit of Peter George Yates sworn 12 August 2000 and the exhibits to the affidavit, I granted the orders sought.
I now have an application by the plaintiffs to continue my orders to the trial of the proceeding. I also have applications by the receivers in relation to a number of other companies in the Sands group. The latter applications will be referred to the Corporations List.
On 22 August the defendants filed a cross-summons in the proceeding whereby they seek an order setting aside my orders of 12 August and on 22 August Sands and the defendant, Stephen Paul Jackson, filed a writ in the court whereby they seek orders restraining ANZ from appointing receivers during the voluntary administration and restraining the receivers from so acting.
Sands' application to continue the injunctive relief granted by me on 12 August is resisted by the defendants on three grounds. In the first place, it is contended by the defendants that prior to the appointment of the receivers, it had been agreed by ANZ, Sands and Tynworth that in the event that the directors of Sands and Tynworth placed Sands and Tynworth in voluntary administration, ANZ would permit those companies to continue trading and would not appoint receivers and managers of them, that Sands and Tynworth acted upon the representation to their detriment and appointed administrators and that in that situation, ANZ was estopped from appointing receivers and managers; in the second place it is contended that in appointing the receivers, ANZ failed to comply with the provisions of s.440B of the Corporations Law and their appointment therefore is invalid, and in the third place it is contended that in instituting the present proceeding, ANZ failed to comply with the provisions of s.440D of the law.
The representation relied upon by the defendants is said to have been made at a meeting on 3 August 2000 attended by ANZ solicitor, David Harold Reichenberg, three ANZ Bank officers named Richard William Emery, Douglas John Atcheson and Robert William Seychel, Peter George Yates, who is a chartered accountant, the first and second named defendants' solicitor, Peter Lewis Finkelstein, and the first defendant, Stephen Paul Jackson. According to Mr Finkelstein, Mr Reichenberg said at the meeting, "We will be prepared to allow to you keep trading on these conditions, that you get the injunction and go into administration and we won't put anyone in, but on the basis that the overdraft account would be frozen with no further advances."
The injunction referred to was an injunction to restrain the Australian Taxation Office from pursuing two garnishee orders in respect of some $8 million which it alleges is owing by Sands in respect of unpaid group tax. The defendant Stephen Jackson's account is a little briefer. He has sworn that Mr Reichenberg said, "If you do this and appoint a VA, we won't put anyone in."
The other persons present at the meeting, namely Mr Reichenberg, Mr Emery, Mr Atcheson, Mr Seychel and Mr Yates have all sworn affidavits to the effect that at no time did Mr Reichenberg or anyone else present at the meeting on 3 August make a statement to the effect that if administrators were appointed to Sands and Tynworth, ANZ would not have recourse to its security.
In the normal course of events I would have referred the determination of that dispute to the Causes List or Corporations List on the basis that its determination would require the calling and cross-examination of the deponents to the various affidavits, but because of the urgency of the matter I chose to deal with it in the Practice Court, despite the fact that it ultimately involved a two and a half day hearing.
Having heard evidence from the persons who were present at the meeting on 3 August, the conclusion I have come to is that at no time did Mr Reichenberg make the representation attributed to him. I have arrived at that conclusion principally for the following reasons. Mr Reichenberg is a very experienced solicitor in matters involving banking and insolvency law. He gave his evidence in a most impressive fashion and was not shaken by cross-examination. The evidence Mr Reichenberg gave was corroborated by the evidence of the bank officers present at the meeting, in particular Mr Seychel and by the evidence of Mr Yates. I say in particular the evidence of Mr Seychel because he, too, was a most impressive witness who was unshaken by cross-examination.
Further, and perhaps of more significance, is the fact that Mr Seychel was present at the meeting, not to take part in the meeting itself, but to record the salient features of what was said, and that is precisely what he did. See Exhibit RWS1 to his affidavit of 22 August. Those notes set out the detail of the matters discussed that day and there is no reference in them whatsoever to any assurance given by or representation made by Mr Reichenberg that if Sands got an injunction in relation to the garnishee orders and went into administration, the bank with not appoint a receiver.
By stressing the strengths of the evidence given by Mr Seychel, I do not wish to downplay the effect of the evidence given by the other bank officers and Mr Yates. None of those witnesses was shaken in cross-examination and they, too, gave their evidence in a manner which was impressive.
What I found somewhat surprising about the evidence given by Mr Finkelstein, however, was the absence of any concurrent diary note prepared by him in relation to the meeting of 3 August and the absence of any correspondence from him to ANZ confirming the representation he contends was made by Mr Reichenberg. In the diary notes Mr Finkelstein made some days after the meeting, diary notes I consider he attempted to distance himself from in the sense that before producing them he was at pains to stress that they would not be reliable, he has made no reference to any such representation whatsoever. Further, if such a representation was made at that time, it would have been of such significance to Sands, having regard to its then precarious financial situation, as to call for a letter of confirmation, but no such letter was ever written.
A further matter which caused me to prefer the plaintiff's witnesses' version of what was said on 3 August to that of Mr Finkelstein and Mr Jackson relates to the later meeting on 8 August. Mr Seychel's notes of that meeting contain the following entry:
"After further deliberation and rehashing of same points from Finkelstein, Reichenberg stated that the Bank will act under its rights pursuant to the Corporations Law. Reichenberg reminded Finkelstein that under 5.3 of the Corporations Law the Bank can appoint a Receiver within the first ten days. Meeting concluded at 4.40 p.m."
During his evidence Mr Seychel swore that when Mr Reichenberg made the statements to which I have referred, there was no reaction to them by Mr Finkelstein or Mr Jackson. I accept his evidence in that regard. The failure of Mr Finkelstein, and, for that matter, Mr Jackson, to react in some way to the statements is again to my mind corroborative of the fact that no representation as alleged had been made by Mr Reichenberg at the 3 August meeting.
Finally, in this regard I have no hesitation in rejecting the evidence of Mr Jackson whenever it was in conflict with the evidence given by the plaintiff's witnesses. Mr Jackson was unimpressive as a witness and at times was prepared to prevaricate in an endeavour to extricate himself from difficulty. A clear example of his behaviour in that regard concerned the content of paragraph 2 of his affidavit of 22 August 2000, which reads -
"2.This factor has been well known to the Bank since 1998 when the Bank took over the Tynworth debt from the Westpac Bank. At that time the Tynworth debenture the subject of these proceedings was entered. It secures the Westpac debt of $1.189 million (plus any accrued interest). Tynworth is not responsible for any debts of Sands Print Group Ltd., and there is not, so far as I am aware, any cross-security given by Tynworth."
The statement that "Tynworth is not responsible for any debts of Sands Print Group Ltd., and there is not, so far as I am aware, any cross-security given by Tynworth" is clearly false. Sands and Tynworth gave cross- guarantees and indemnities to ANZ in respect of the moneys advanced to them by ANZ. The cross-guarantees and indemnities are dated 23 December 1998.
When cross-examined about that document, Mr Jackson first denied any knowledge of its content, even though he conceded his signature appeared on the document both in his personal capacity and as a director of Tynworth. Later he said that he knew that what he was signing was a guarantee, but that he did not know what a cross-guarantee was, yet he was able to swear, of course, even though, if you accept the answer that he did not know what a cross- guarantee was, that there was not, so far as he was aware, any cross-security given by Tynworth.
Further, Mr Jackson is a director of both Sands and Tynworth, two companies which he readily acknowledges owe the bank approximately $11.5 million.
In my opinion, it is fanciful to suggest that a person in his position did not appreciate the nature of the documentation he was signing at or about that time.
By August 2000 the financial position of Sands and Tynworth was critical. ANZ had required the company to repay their indebtedness to it by 30 June 2000 and they have been unable to do so. Indeed, as Mr Finkelstein agreed during the course of his evidence, as at 3 August, Sands had no option but to go into administration. In my opinion it is inconceivable therefore that at that time ANZ would tie its hands in any way as to the steps available to it to secure the repayment of its funds.
I am satisfied, therefore, that the representation alleged to have been made was never in fact made and the claim of the first and second defendants in that regard must fail. But even if a representation to the effect alleged had been made by Mr Reichenberg, in my opinion, Sands and Tynworth did not act upon it to their detriment. Both companies would have gone into voluntary administration in any event because they simply had no option but to do so. The Australian Taxation Office was pursuing Sands, GE Capital was pursuing it, and the bank required the financial facilities to be paid by both companies. Sands also had a debt of some $2 million to Amcor. As the minutes of both companies relating to the appointment of the administrators make clear, at that time both companies were insolvent or likely to become insolvent.
The next matter I propose to deal with is the submission made by counsel for the first and second defendants concerning the effect of s.440B of the Corporations Law. Section 440B reads -
"440BDuring the administration of a company, a person cannot enforce a charge on property of the company, except:
(a) with the administrator's written consent;
or
(b) with the leave of the Court."
It is clear in the present case that the receivers and managers were appointed by ANZ without first obtaining the consent of the administrators of Sands and Tynworth and without the leave of the court, but were they required to obtain that consent or leave? In my opinion, the short answer to the question is that by virtue of the provisions of s.441A of the Law, they were not. The relevant sub-sections of s.441A read -.
"441A(1) This section applies where:
(a)the whole, or substantially the whole, of the property of a company under administration subject to a charge; and
...
(d)before or during the decision period, the chargee enforced the charges in relation to all charged property [of the company subject to the charge]:
(ii)whether or not any of the charges was enforced in the same way in relation to all that property;
(3)Nothing in section 437C or 440B, or in an order under subsection 444F(2) prevents any of the following from enforcing the charge, or any of the charges:
(a) the chargee;
(b)a receiver or person appointed as mentioned in paragraph (a), (b) or (d) of the definition of 'enforce' in section 9 as that definition applies in relation to the charge, or any of the charges (even if appointed after the decision period)."
Finally I deal with the contention by the first and second defendants that ANZ cannot bring this proceeding against the three defendants without the consent of the administrators or the leave of the court.
Section 440D(1) of the law reads -
"440D(1)During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with except:
(a) with the administrator's written consent; or
(b)with the leave of the Court and in accordance with such terms (if any) as the Court imposes."
This is certainly not a proceeding brought against Sands or Tynworth. In my opinion it is not a proceeding in relation to any property of those companies. It is a proceeding brought by the receivers and managers to enforce their appointment as receivers and managers of Sands and Tynworth. If that view of the matter is erroneous, I consider that the circumstances are such in this case as to justify the court giving leave to the plaintiffs nunc pro tunc to institute the proceeding.
The following are the orders of the court.
In proceeding 6437 of 2000 I order -
1. The defendant's summons filed 22 August 2000 be dismissed;
2.With one exception, there is no need to alter my injunctive orders of 12 August as they are expressed to run to the trial of the proceeding or further order. So far as paragraph 3 of the orders is concerned, however, I add to the end of the paragraph the words "save that the first and second defendants may enter into possession of and retain possession of the premises at 25 Balmoral Crescent, North Geelong";
3.The summons filed by the plaintiff on 18 August 2000 be adjourned to be heard by Justice Warren in the Corporations List;
4.I order that the first and second defendant pay the plaintiff's costs of the application including the costs reserved on 12 August and 17 August.
In proceeding 6548 of 2000 I order that the plaintiffs summons filed 21 August 2000 be dismissed. I further order that the plaintiffs pay the defendant's costs of that application.
(Discussion ensued.)
I reserve liberty to the parties to apply to the court if any problem arises and it can be dealt with.
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