Spring Hill Apartments P/L v We Both P/L
[2006] QSC 151
•22 June 2006
SUPREME COURT OF QUEENSLAND
CITATION:
Spring Hill Apartments P/L v We Both P/L & Ors [2006] QSC 151
PARTIES:
SPRING HILL APARTMENTS PTY LTD
(applicant)
VWE BOTH PTY LTD (IN LIQUIDATION)
ACN 090 602 118
(first Respondent)GLOBAL AIR OPERATIONS PTY LTD (RECEIVERS AND MANAGERS APPOINTED)
ACN 101 402 233
(second respondent)LUKE NORMAN BUTLER
(third respondent)GLOBAL AIR GROUP PTY LTD
ACN 103 288 740
(fourth respondent)FILE NO/S:
BS 5965 of 2004
DIVISION:
Trial Division
PROCEEDING:
Trial by way of affidavit evidence
ORIGINATING COURT:
Supreme Court
DELIVERED ON:
22 June 2006
DELIVERED AT:
Brisbane
HEARING DATE:
17 May 2006
JUDGE:
Moynihan J
ORDER:
1. The second respondent pay to the applicant the amount of $2,458,125 including interest.
2. The fourth respondent pay to the applicant the amount of $2,458,125 including interest.
3.The second and fourth respondents deliver up the following chattels to the applicant at Brisbane:
(a)An aircraft, namely a Boeing 747 SP-27, serial number 22302.
(b)The aircraft’s engines, being four Pratt & Whitney JT 9D-7J engines having serial numbers 701-687, 701-692, 701-688 and 701-698 (or any replacement engines therefor). (c)All technical data, manuals, log books and other records kept or maintained in relation to the said aircraft and engines.4.The third respondent procure the second respondent and the fourth respondent forthwith to return the chattels specified in paragraph 3 above to the applicant at Brisbane.
5. The second, third and fourth respondents pay the applicant’s costs of and incidental to this proceeding.
6. A declaration that, as between the applicant and the second, third and fourth respondents, the applicant is entitled to immediate possession of the chattels specified in paragraph 3 above.CATCHWORDS:
PROCEDURE- SUPREME COURT PROCEDURE- PRACTICE UNDER SUPREME COURT RULES- DEFAULT JUDGMENT- judgment in default of attendance at trial by affidavit evidence.
Uniform Civil Procedure Rules 1999 (Qld) ss 476(1). Bankruptcy Act 1966 (Cth) ss 73, 74.
In Re Liddell’s Settlement Trusts [1936] 1 Ch 365
Lam Soon Australia Pty Ltd (Administrator Appointed) Pty Ltd v Molit (No 55) Pty Ltd (1996) 70 FCR 34
Thiess Infraco (Swanston) Pty Ltd v Smith (2004) 50 ASCR 434COUNSEL:
CA Wilkins for the applicant
SOLICITORS:
Russell and Company for the applicant
No appearance by or on behalf of the respondents
MOYNIHAN J: These proceedings were commenced by an originating application. On 19 November 2004 it was directed that they be continued as if they had been started by a claim and directions were given for the exchange of pleadings and disclosure.
On 19 November judgment was also given against the first respondent. It should be noted that the counterclaim is stayed as a consequence of non-compliance with an order that the counterclaiming parties give securities for costs.
The applicant’s proceedings against the second, third and fourth respondents were listed for trial on 17 May 2006 but those respondents did not appear. I directed, pursuant to UCPR 476(1) that the trial proceed by way of affidavit evidence; that course was followed.
The applicant sought judgment in the following terms:-
“1. The second respondent pay to the applicant the amount of $2,458,125 including interest.
2. The fourth respondent pay to the applicant the amount of $2,458,125 including interest.
3. The second and fourth respondents deliver up the following chattels to the applicant at Brisbane:
(a) An aircraft, namely a Boeing 747 SP-27, serial number 22302.
(b) The aircraft’s engines, being four Pratt & Whitney JT 9D-7J engines having serial numbers 701-687, 701-692, 701-688 and 701-698 (or any replacement engines therefor).
(c) All technical data, manuals, log books and other records kept or maintained in relation to the said aircraft and engines.4. The third respondent procure the second respondent and the fourth respondent forthwith to return the chattels specified in paragraph 3 above to the applicant at Brisbane.
5. The second, third and fourth respondents pay the applicant’s costs of and incidental to this proceeding.
6. A declaration that, as between the applicant and the second, third and fourth respondents, the applicant is entitled to immediate possession of the chattels specified in paragraph 3 above.”
Counsel for the applicant identified the issues which arose for consideration at the trial:-
“The proper construction of certain notices and agreements and those, whether the combination of the notices and the agreements allows the applicant to accept the benefit of a promise under section 55 of the Property Law Act and whether the applicant is entitled to the declaratory relief. A final issue is as regards the relief sought against the fourth respondent. Part of that relief is an order that he procure the second and third respondents to bring an aeroplane back to Australia, he was made a bankrupt previously.”
The case for relief can conveniently be considered in terms of headings:
· The applicant’s money claims against Global Air Operations Pty Ltd (‘Operations’) and Global Air Group Pty Ltd (‘Group’)
· The applicant’s entitlement to possession of the charged property
· Specific return of the charged property
· Butler’s guarantee of (Leasing).
Before considering the claims, it is necessary to outline the circumstances in which they arise.
By the mortgage debenture dated 11 December 2000, the first respondent (‘Leasing’) created a charge over its Boeing 747 SP-27 aircraft and ancillary property in favour of the applicant to secure payment of $1.725M, interest, and enforcement costs and expenses[1].
By a deed of guarantee and indemnity also dated 11 December 2000 Butler guaranteed Leasing performance of:
(a) it’s obligation to pay the moneys secured by the mortgage debenture; and
(b) the performance and observance of Leasing’s other obligations to applicant[2].
On or about 1 September 2003, Leasing purported to transfer the aircraft to the Global Air Operations Pty Ltd subject to the applicant’s charge [3].
On or about 19 September 2003, Operations purported to transfer the aircraft to the Global Air Group Pty Ltd subject to the applicant’s charge[4] .
Whether Operations or Group became bound by the terms of the mortgage debenture such that they are indebted to the applicant is in issue in this proceeding[5].
Leasing did not pay any principal or interest to the applicant[6] and these proceedings were commenced against the first, second and third respondents. The fourth respondent was later added.
On 24 September 2004 a Mareva order was made in respect of the chattels the subject of the claim. The first, second and third respondents defended the claim and counterclaimed to have the mortgage debenture set aside.
The applicant’s money claim against Operations and Group
By a document dated 1 September 2003[7], Leasing purported to transfer the aircraft, together with its engines, log books etc., to Operations. Butler’s wife, Simone Butler, was then the sole director of both Leasing and Operations[8]. Leasing and Operations purported to complete this transaction on 12 September 2003[9]. Leasing went into voluntary administration on 10 October 2003, a few weeks after this transaction[10] .
The terms of the transaction are rather unusual:
a) The transfer was expressed to be subject to the applicant’s registered charge but no time was stipulated for Operations’ obligation to “pay the obligations of the Seller to [the applicant]”;
b) Leasing was then in default;
c) The purchase price was US$2.5 million. Of that sum, Operations was to pay US$175,000 and US195,000 to certain creditors of Leasing, leaving US$2.13 million owing;
d) Operations assumed Leasing’s liability to another Global company, Global Air Cargo Pty Ltd, of AUD$1,468,866.65 (which at the then current exchange rate of US645.75 cents amounted to an assumption of liability for US$951,091.12);
e) That left US$1,178,908.88 to pay, which was to be satisfied by:
(i) Operations’ assuming and paying Leasing’s obligations to the applicant (then standing at AUD$1.725 million plus interest of AUD$704,650.67, a total of AUD$2,429,650.67 or US$1,573,198.70); and
(ii) Operations’ assuming liability to Leasing’s solicitors was subsequently identified as AUD$325,000 (US$210,437.50);
and
f) the total of all of the liabilities of Leasing which Operations assumed and promised to pay was thus $US3,104,727.32
The charge was a fixed charge. There was no express provision in the mortgage debenture prohibiting a sale of the charged property without the express written consent of the applicant. The applicant, by notice dated 27 February 2004, accepted the benefit of Operations’ promise to Leasing to pay the applicant the moneys secured by the mortgage debenture.
By a document dated 19 September 2003 (in similar terms to that of 1 September 2003 just referred to), Operations purported to transfer the aircraft, engines etc. to Group. By this time, Butler was the sole director of both Group and Operations. He signed the document dated 19 September 2003 for both of those companies. Operations, Butler and Group admit that the second purported transfer was completed on 19 September 2003.
By the statement of claim (paragraph 18), the applicant accepted the benefit of Group’s promise to Operations to pay the moneys secured by the mortgage debenture.
The first purported transfer provided that “Operations assume liability for Leasing’s obligations to the applicant”. The second provided that Group assume liability for Operations (or its predecessor in title) to the applicant”.
Operations, Butler and Group deny that the promises contained in the two transfers were accepted by the applicant within the meaning of section 55 of the Property Law Act 1974 (Qld).
The applicant submits that the promises contained in these two purported transfers are within the definition of a “promise” in s 55(6); they were, or appeared to be intended to be, legally binding, and “created, or appeared to be intended to create”, a duty enforceable by the applicant.
The defence pleaded that the acceptance of each of the promises did not occur within a reasonable time[11] . This is not the case. The transaction was completed on 12 September 2003. The applicant learnt of the transfer in that month[12] and accepted it on 27 February 2004.
The second purported transfer was completed on 19 September 2003 and the applicant accepted it on 23 November 2004. However, it is to be noted that the second purported transfer came to the attention of the applicant by reason of the affidavit of Mr Harris filed 24 September 2004 which exhibited an affidavit of Butler sworn that day.
Finally, I accept there is no merit in the defence that acceptance of the first purported transfer could not occur without an absolute concession on the part of the applicant that that was a valid transfer.
Alternatively the applicants submit that Operations and Group became liable for Leasing’s indebtedness to the applicants, because, by virtue of the transfers, each became the “mortgagor” in terms of clause 28 of the mortgage debenture.
The applicant is therefore entitled to judgment.
The applicant’s entitlement to possession of the charged property
The chattels the subject of the charge are currently in Indonesia in the possession of an entity described as Garuda Maintenance Facility.
The purported transfer was subject to the applicant’s charge and no basis is demonstrated for Operations or Group to resist the applicant’s claim.
Garuda Maintenance Facility has indicated that it will act in response to the grant of final relief by this court[13].
It is appropriate to grant the declaration against Butler because Garuda Maintenance Facility has adverted to the possibility that he may be the owner[14].
Finally it should be noted that the declaration sought is incidental to the applicant’s enforcement of its rights under the charge and that there is a proper contradictor although the counterclaim has been stayed.
Specific return of the charged property
The basis for this claim for relief is the court’s equitable jurisdiction for the return of chattels of specific value in circumstances where damages might not provide an adequate remedy.
It is submitted that damages would not be an adequate remedy and that this is evidenced by the combined effect of:
(i) the unusual features of the transfers of the lease referred to earlier;
(ii) the long standing default;
(iii) receivers and managers have been appointed to the assets of Operations and Leasing is in liquidation;
(iv) the security for costs for the counterclaim have not been provided and there are indications from Butler that neither he nor Operations or Group are financially capable of pursuing the counterclaim[15].
(v) Operations and Group are currently without directors;
(vi) the order may facilitate the recovery of possession of the charged property in circumstances where there is no reciprocal enforcement of judgments treaty with Indonesia.
The fact that obstacles might arise to giving effect of the order do not prevent it being made in appropriate circumstances; In Re Liddell’s Settlement Trusts [1936] 1 Ch 365 and if there is justification for non compliance with the order, contempt proceedings could not proceed.
For these reasons I am prepared to order the return of the charged property.
Butler’s guarantee of Leasing
Butler guaranteed Leasing’s obligations to the applicant for the payment of “any moneys hereby secured” and “the performance and observance of all obligations hereby secured”. “Obligations hereby secured” is defined to mean:-
“All obligations, covenants, warranties, terms, conditions, provisions, stipulations and work to be observed, performed, or fulfilled by (Leasing) whether pursuant to any security … or … agreement” between Leasing and the applicant”.
The relevant obligations are as to the delivery of the charged property and Leasing’s obligation to provide such information as the applicant “may reasonably request relating to the aircraft”.
Butler was bankrupted on 7 February 2002 but his bankruptcy was annulled by virtue of the operation of s 74(5) of the Bankruptcy Act 1966 (Cth) as a result of a special resolution of creditors pursuant to s 73(4) accepting a composition. A term of the composition that it was binding on Butler’s creditors so far as it related to provable debts and operated as a full release by the creditors of such debt.
The applicant submits that Butler’s contractual obligations as guarantor to ensure Leasing observed its non monetary obligations was not a provable debt because it was not a contingent liability capable of proof under s 82 of the Bankruptcy Act. The applicant moreover did not require Leasing to deliver the property until after 25 February 2004.
The applicant drew my attention to Lam Soon Australia Pty Ltd (Administrator Appointed) Pty Ltd v Molit (No 55) Pty Ltd (1996) 70 FCR 34 when the Full Court of the Federal Court, speaking of “future breaches of (a) covenant” to keep leased premises in repair said it was “not even a contingent claim” because the right to sue before breach was a mere expectation. The proposition not accepted by Finkelstein J in Thiess Infraco (Swanston) Pty Ltd v Smith (2004) 50 ASCR 434 at 440 for cogent reasons.
The relevant right here is however Leasing’s obligation to deliver the aircraft which is the subject of a specific order to deliver in circumstances dealt with in paras [32] to [35].
Those being the considerations, the applicant is entitled to judgment in terms of para [4].
[1]See paragraphs 3 and 4 and subparagraphs 5(a)-(e) of the statement of claim, which allegations have been admitted. See also exhibit “KAM17” to Miller’s affidavit filed 27 July 2005 CFI 5
See paragraphs 20 and 21 of the statement of claim which are admitted by the applicant. See also
exhibit “KAM 17” to Miller’s affidavit filed 27 July 2004 CFI 5
See paragraphs 8 and 10 of the statement of claim, which allegations have been admitted. See also
paragraph 9 of the statement of claim d paragraph 5 of the defence. See also exhibit “KAM 26” to
Mr Miller’s affidavit filed 27 July 2004 CFI 5.
[4]
See paragraphs 14 and 16 of the statement of claim, which allegations have been admitted. See also
paragraph 15 of the statement of claim and paragraph 9 of the defence. See also exhibit “ZAC1”
(pages 10-13) to Casagrande’s affidavit field by leave.
[5]See paragraphs 11 and 17 of the statement of claim and paragraphs 6 and 10 of the defence.
[6]Allegation by para 6 of the statement of claim admitted.
[7]Exhibit “KAM26” to Miller’s affidavit filed 27 July 2005 CFI 5.
[8]See exhibits “ZAC3” and “ZAC4” to the affidavit of Casagrande filed by leave.
[9]See paragraph 10 of the statement of claim which is admitted.
[10]See exhibit “ZAC3” (page 45) to Mr Casagrande’s affidavit filed by leave.
[11]See generally, Re Davies [1989] 1 Ad R 48
[12]See paragraph 4 of Miller’s affidavit filed in the contempt proceeding – exhibit “KAM2” to Mr Miller’s affidavit filed by leave.
[13]Affidavit of Mr Russell filed by leave see exhibit “SCR4”.
[14]Affidavit of Mr Russell filed 22 September 2004 see exhibit “SCR3”.
[15]Affidavit Miller filed by leave see exhibit “KAM2”.
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