Seka Pty Ltd (In Liq) v Fabric Dyeworks (Aust) Pty Ltd

[1991] FCA 103

Re: SEKA PTY LTD (IN PROVISIONAL LIQUIDATION)
And: FABRIC DYEWORKS (AUST.) PTY LTD
No. Q G3002 of 1991
FED No. 103
Liens - Corporations
(1991) 9 ACLC 586

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Liens - can lien implied by custom co-exist with express lien.

Corporations - threatened sale under unregistered security - rights of provisional liquidators to injunction.

Corporations Law

HEARING

BRISBANE

#DATE 21:3:1991

Counsel for the applicant: Mr D.B. Fraser

Solicitors for the applicant: Cleary and Hoare

Counsel for the respondent: Mr W.J. Martin QC

with Mr S.R. Horgan

Solicitors for the respondent: Conwell, Kirby and Lilley

ORDER

1. The application for interlocutory relief be dismissed.

2. The application for a change of venue be refused.

3. The respondent's costs of the application for injunctive relief
be its costs in the proceedings.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

In the principal application, the relief sought is a declaration as to the enforceability of a certain lien over the applicant's stock, together with an injunction. The applicant is in provisional liquidation and a winding up order is expected to be made in a week's time. It has traded for some years with a dyehouse business conducted by the respondent in Victoria. The provisional liquidators, Messrs Summerson and Duus, are concerned that the respondent may sell under its lien and have applied for an interlocutory injunction to restrain sale. The basis of the application is that the lien is void for non-registration under s.266 of the Corporations Law, which corresponds with s.205 of the former Companies Code.

1. It appears to be common ground that there is a lien established by a document setting out the conditions upon which the parties traded; it is exhibited to an affidavit of Mr Summerson. The terms of the lien are there set out, in some detail. The applicant says that, in addition to that express lien, it asserts a "general lien which arises by operation of law", as a matter of custom. If the lien arose in that way, it required no registration: s.262(2)(a) of the Corporations Law. Counsel for the respondent says that it desires to call a great deal of evidence from people in the textile trade in Melbourne to prove the relevant custom. The respondent resists the application for an interlocutory injunction and asks that the proceeding be transferred to the Victorian District Registry, on the ground that the witnesses on the custom question live in Melbourne.

2. I dismissed the application for an interlocutory injunction on Monday last and reserved consideration of the question of venue. These are the reasons on both points - i.e., on the question of the injunction and the application for change of venue.

3. The respondent's counsel says a lien by custom can co-exist with an express lien and cites a number of authorities, the most recent of which is In Re London and Globe Finance Corporation (1902) 2 Ch 416. A question which arose in that case was whether the general lien a stockbroker had on securities held for a customer was displaced, in circumstances having no resemblance to the present. A more useful guide is, I think, the decision of the Full High Court in Con-Stan Industries of Australia Pty. Ltd. v. Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 at 236:
   

"A term will not be implied into a contract on the basis of custom where it is contrary to the express terms of

the agreement: Summers v. The Commonwealth (1918) 25

CLR, at p 148; Rosenhain v. Commonwealth Bank of

Australia (1922) 31 CLR 46, at p 53. One explanation

of this principle is that, in so far as it relates to

written contracts, it is simply an application of the

parol evidence rule ... A more fundamental explanation is that the presumed intention of the parties, on which the importation of the custom rests ... must yield to their actual intention as embodied in the express terms of the contract, regardless of whether the contract is written or oral".

1. In Rosenhain's case, it was said that a custom or usage must not "be inconsistent with or repugnant to the expressed terms of the contract ..." (53). Here, it is clear that the custom set up cannot have been intended to form part of the terms of the contract, which is in writing and makes fairly elaborate provision for a general lien. The whole purpose of such a writing is to prevent any argument as to whether there is a lien and what its terms are. I accept the applicant's contention on the custom point. The lien is not one "arising by operation of law" within the meaning of s.262(2)(a) of the Corporations Law.

2. Counsel for the respondent also contended that if (as I have held) the lien is express and not one arising by operation of law, that is of no present consequence because a winding up has not yet occurred. Section 266(1) begins:
   

"Where:

(a) an order is made, or a resolution is passed, for

the winding up of a company ...

a registrable charge on property of the company is void as a security on that property as against the liquidator or official manager, as the case may be ...".

1. The point taken is simply that the voidness is presently merely potential. In answer, counsel for the applicant said that the general purpose of appointment of a provisional liquidator is to preserve the status quo. He referred to the decision of Herring C.J. in Re Row Dal Constructions Pty. Ltd. (In Liq.) (1966) VR 249, under the corresponding provisions of the Victorian Companies Act 1958. There, an unregistered security was given by way of an order for payment of monies due to the debtor company by a third party; those monies were duly paid to the creditor. The debtor, shortly after that, went into liquidation and the liquidator claimed that the security was required to be registered and he was therefore entitled to treat it as void. It was held that the avoidance provision of the then Victorian Act (s.72(1)) did not begin to operate until liquidation and that, therefore, the payment to the creditor was not a preference.

2. Counsel for the applicant here contended that if the respondent is allowed to sell and recover its money under the express lien, then the lack of registration of that security cannot assist any liquidator who may be appointed. It is not necessary to discuss whether the respondent may safely sell before the winding up. Reference was made to s.465(2) of the Corporations Law which, as applied to a case of this sort, deems the winding up to have commenced at the time of the filing of the application for winding up. I need not determine what the liquidator's rights would be in the event of a winding up against the respondent, for I am of the view that the applicant has not shown that it has any present cause of action against the respondent; the provisional liquidators (who have not been joined) are given no right by s.266. I should mention that counsel informed me that, for practical reasons, it is unlikely that there will be a sale under the lien before next Monday.

3. The foregoing are the reasons for dismissal of the application for interlocutory relief. They also provide the explanation for my decision on the application for change of venue which is that the case should stay where it is, in Brisbane. I have come to that conclusion because of my opinion as to the strength of the assertion that the respondent has a lien by custom.

4. The respondent's costs of the application for injunctive relief will be its costs in the proceedings.