Sun-Life Properties Pty Ltd v Chellaston Pty Ltd - [1993] FCA 311

Re: SUN-LIFE PROPERTIES PTY LTD
And: CHELLASTON PTY LTD; DOMINIC MADDESTRA and CUSTOM CREDIT CORPORATION LTD
No. WAG82 of 1992
FED No. 311
Number of pages - 7
Corporations
(1993) 10 ACSR 476

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J(1)

CATCHWORDS

Corporations - receiver appointed under mortgage - mortgaged land sold - mortgage discharged - corporation sued for misleading or deceptive conduct - mortgagee also sued - mortgagee and receiver instructing common solicitors - extent of receiver's powers - directors of mortgagor company claiming right to appoint their own solicitors to conduct defence - possible conflict of interest between mortgagor and mortgagee in proceedings - no sufficient legal connection between proceedings and receiver's powers.

Corporations Law s.420

Re Geneva Finance Ltd (receiver and manager appointed) (1992) 10 ACLC 668

Newhart Developments Ltd v. Co-Operative Commercial Bank Ltd (1978) 1 QB 814

Tudor Grange Holdings Ltd v. Citibank NA (1991) 4 All ER 1

HEARING

PERTH, 23 April 1993

#DATE 30:4:1993

Counsel for the Directors of Chellaston Pty Ltd: Mr P. Kyle

Solicitors for the Directors of Chellaston Pty Ltd: Kyle and Co.

Counsel for the First and Third Respondents: Mr A. Metaxas

Solicitors for the First and Third Respondents: Phillips Fox

ORDER

The Court orders that:

1. Kyle and Co. of 6th Floor, 37 St. George's Terrace, Perth be substituted as solicitors on the record for Chellaston Pty Ltd.

2. Kyle and Co. file an appearance accordingly.

3. Costs of the motion reserved.

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

JUDGE1

Introduction

FRENCH J The applicant in these proceedings sues a corporate property developer, a former director of that company and a finance company. The cause of action is in misleading or deceptive conduct based upon representations made to the applicant by the developer which, it says, induced it in November 1990 to agree to purchase certain land. The applicant alleges that the finance company, which was mortgagee of the land from the developer, was aware of the falsity of the representations. In negotiations with the applicant, for finance to purchase the property, the finance company is said to have engaged in misleading or deceptive conduct by failing to disclose the true position. The developer had granted a first mortgage over the land and a receiver was appointed under that mortgage by the finance company in February 1991. The same solicitors have been instructed by the receiver to represent the developer in these proceedings as represent the finance company. The directors of the developer move for an order that it be represented by solicitors of their choice. They contend that the receiver's powers, which derive from the mortgage, do not extend to the conduct of these proceedings. The mortgage has been discharged over the relevant land but the receiver maintains that the contract between the applicant and the developer amounts to an interest in the land which is part of the mortgaged…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1993] FCA 311
Decision Date: 30 APRIL 1993

CaseChat Overview and Summary

Sun-Life Properties, the mortgagee, appointed a receiver over the property of Chellaston, the mortgagor, who was subsequently sold. Chellaston, as the mortgagor, and the receiver, as the mortgagee's representative, were both sued for misleading or deceptive conduct in relation to the sale. The issue before the court was whether the mortgagor's directors could appoint their own solicitors to conduct the defence against the claim for misleading or deceptive conduct, given that the mortgagee and the receiver were being represented by the same law firm, Kyle and Co. The court had to determine if there was a sufficient legal connection between the proceedings and the receiver's powers that would allow Chellaston to appoint its own solicitors.

The court held that the mortgagor did not have the right to appoint its own solicitors to conduct the defence. The court reasoned that there was no sufficient legal connection between the proceedings and the receiver's powers, and that the receiver's powers were limited to the sale of the mortgaged property. The court further found that the appointment of Chellaston's own solicitors would create a conflict of interest between the mortgagor and the mortgagee in the proceedings. Therefore, the court ordered that Kyle and Co. be substituted as solicitors on the record for Chellaston, and that they file an appearance accordingly. The costs of the motion were reserved.

The court's decision ensures that there is no conflict of interest between the mortgagor and the mortgagee in the proceedings, and that the receiver's powers are not exceeded. The court's order that Kyle and Co. be substituted as solicitors for Chellaston ensures that the mortgagor and the mortgagee are represented by the same law firm, which will facilitate a more efficient and effective resolution of the proceedings. The court's decision also ensures that the mortgagor's directors do not have the right to appoint their own solicitors to conduct the defence, which may have resulted in a conflict of interest and exceeded the receiver's powers.

Orders

Orders of the court

The Court orders that:

1. Kyle and Co. of 6th Floor, 37 St. George's Terrace, Perth be substituted as solicitors on the record for Chellaston Pty Ltd.

2. Kyle and Co. file an appearance accordingly.

3. Costs of the motion reserved.

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

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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