V.A.G. Taxis Pty Ltd v Delrich Tower Pty Ltd
[2014] VSC 164
•3 April 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 0022
IN THE MATTER of the V.A.G. TAXIS PTY LTD (As Trustee of the V.A.G. TAXIS UNIT TRUST)
| V.A.G. TAXIS PTY LTD (As Trustee of the V.A.G. TAXIS UNIT TRUST) (ACN 076 423 062) | Applicant |
| v | |
| DELRICH TOWER PTY LTD (In Liquidation) (ACN 073 294 836) | Respondent |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 April 2014 | |
DATE OF JUDGMENT: | 3 April 2014 | |
PUBLICATION OF REASONS: | 14 April 2014 | |
CASE MAY BE CITED AS: | V.A.G. Taxis Pty Ltd v Delrich Tower Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 164 | |
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CORPORATIONS — External administration — Application for leave to commence proceedings pursuant to s 471B of the Corporations Act 2001 (Cth) in respect of proprietary claim — Application granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P. Crennan | Casonato Lawyers |
| For the Defendant | Mr D. Coleman | Marshalls & Dent |
HIS HONOUR:
The applicant (“VAG”) makes application by originating process filed 7 January 2014 for leave pursuant to s 471B of the Corporations Act2001 (Cth) (“the Act”) to issue a proceeding against the respondent (“Delrich”).
Section 471B provides:
While a company is being wound up in insolvency or by the court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:
(a)a proceeding in a court against the company or in relation to property of the company; or
(b) enforcement process in relation to such property;
except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
On 3 April 2014, I granted VAG the leave that it sought and these are my reasons for doing so.
The evidence
The applicant relies on affidavits of Sanin Pasagic sworn 7 January 2014 and 4 March 2014, Hans Althoff sworn 22 January 2014 and 1 April 2014, Thomas Edward Groves sworn 4 March 2014 and 1 April 2014 and Anthony McKay sworn 12 March 2014.
The liquidators of the respondent oppose the granting of leave. The respondent relies on affidavits of Philip Newman, one of the liquidators of Delrich, sworn 21 February 2014, and Judith May Heeps, the respondent’s solicitor, sworn 28 March 2014.
Factual background
VAG and Delrich are both involved in operating taxis and hire cars. VAG contends that in 2001 and 2003, it entered into contracts of sale to purchase hire car licences, issued by the Victorian Taxi Directorate and numbered MH4653 and MH4654, from Delrich.
VAG states that in November 2001, it entered into an agreement with Delrich for the sale of licence MH4653 for the sum of $45,000. This is said to be evidenced by a contract of sale for the licence dated 1 November 2001. Between 11 December 2001 and 13 March 2002, VAG states that it paid $45,000 to Delrich in four instalments. In Mr Pasagic’s affidavit of 7 January 2014, there are bank statements exhibited which it is contended evidence those payments.
VAG states that in about April 2003, it entered into an agreement in respect of licence number MH4653 by which Delrich was entitled to use that licence in its business in return for paying to VAG a monthly payment of $476. It states that from April 2003, Delrich paid monthly payments of $476 for the right to use the licence. Bank statements are exhibited which are said to evidence such payments.
On or about 28 March 2003, VAG states that Delrich entered into a contract of sale with Santed Motors Pty Ltd (“Santed”) by which Santed purchased licence MH4654 for the sum of $57,500. A copy of the contract for that transaction has not been able to be located. On about 25 June 2003, VAG and Delrich entered into a contract for the sale of licence number MH4654 for $57,500, and VAG paid the purchase price to Santed Motors Pty Ltd on that day.
In June 2003, VAG and Delrich entered into an oral agreement for licence number MH4654 by which Delrich was entitled to use the licence in its business in return for a payment of $476 a month to VAG. Between June 2003 and June 2010, the monthly fees of $476 per licence were paid and they were recorded in VAG’s bank statements, which are exhibited to Mr Pasagic’s affidavit.
On 7 July 2010, Mr Newman and Mr White were appointed liquidators of Delrich. In about August 2010, the two licences were sold and the liquidators hold the proceeds.
From April through to June 2012, VAG’s former solicitor, Mr Anthony Bullard, sent a number of letters to the liquidators with respect to the licences. In those exchanges, the liquidators said that they required further information and rejected VAG’s request for information in respect of the sale of the licences. Further inquiries were directed to the liquidator’s solicitor between January and July 2013. Mr Pasagic says that those inquiries have not been answered.
The licences were never actually transferred to VAG, and VAG contends that from the date of each contract Delrich held its interest in each licence on trust for VAG. VAG contends that the liquidators hold the proceeds of sale of the licences on trust pursuant to the equitable interests arising from the purchase transactions.
The contracts of sale for the licences are each signed on behalf of Delrich by Thomas Groves, who was a director of Delrich at the relevant times. In his affidavit of 4 March 2014, Mr Groves deposes that he was a director of Delrich between October 1997 and August 2003. He deposes to his recollection of the transactions including his execution of the contracts of sale and the existence of the leasing arrangements.
Mr Althoff, in his affidavit of 22 January 2014, deposes that he is a director of VAG. He addresses the issue of the delay that has occurred in the present application being made. He deposes to problems that he suffered with his health during 2013. In summary, from February 2013 to the end of November 2013, he was being treated for cancer. That treatment included amputation of his leg, treatment of secondary cancers, radiation therapy, surgical removal of a cancer and several lymph nodes, and treatment for an associated infection. He deposes that his co-director, Mr Howard, was diagnosed with secondary cancer in his kidneys and bone cancer in his lungs in October 2013. He has since been receiving chemotherapy and radiation treatment, and this is ongoing. Mr Althoff deposes that Mr Howard is not in a condition to swear his own affidavit regarding his health issues, as he is in and out of hospital on a regular basis.
In his affidavit of 21 February 2014, one of the liquidators of Delrich, Mr Newman, sets out to attack the claim being made by VAG. He has made inquiries of the Victorian Taxi Directorate and has been informed that licence MH4653 was purchased by Delrich on 15 March 2002, and he sets out material that supports this position. Mr Newman states that Delrich does not have a copy of the contract of sale or any record of the alleged contract of sale with respect to this licence, nor does it have on record any evidence of the payments referred to in Mr Pasagic’s affidavit.
As to the sale involving Santed for licence MH4654, Mr Newman states that there is no copy of this contract or record in the possession of Delrich nor is there any record of payment of $57,500 from Santed for the licence. The records of the Victorian Taxi Directorate which Mr Newman caused to be searched following his appointment record the licence number MH4654 as being owned by Delrich from 15 March 2002. He deposes as to various queries that have been raised in correspondence from his solicitors to VAG’s respective lawyers, which remain unanswered.
In addition, Mr Newman states that his inquiries of the two of the four directors who held office during the period of the alleged transaction and who he has been able to contact, Mr Baldi and Mr Groves, have resulted in little evidence one way or the other. He states that the two directors have no recollection of events so long past, and/or are unwilling to assist with the inquiries. Mr Newman states that he wishes to declare a first and final dividend distribution in the winding up, and that the existence of these proceedings will delay this.
In her affidavit, Ms Heeps, the liquidator’s solicitor, also confronts the material put up by VAG. She deposes that each of VAG, Delrich and Santed share common directors. The directors of VAG are Mr Althoff and Mr Howard; the directors of Delrich are Lewis Talbot, Mr Groves, Sandro Baldi and Mr McKay. The directors of Santed are Mr Althoff, Mr Howard, Mr Groves and Douglas Thomas. Ms Heeps denies that VAG’s enquiries have not been responded to.
In the final paragraph of her affidavit, which is really by submission, Ms Heeps states that VAG cannot explain how it and Delrich entered into and made payments under a contract with respect to a licence that was not in existence in November 2001 or 13 March 2002, the latter being the last of the four instalment payments. As to the second licence, she makes criticisms in respect of VAG’s case, including the difficulties it will have in proving the elements of its claim.
In its written submissions in opposition to the application, Delrich takes issue with the factual matters alleged by VAG and its affidavit material. It denies that the licences were sold or transferred to VAG and says that the written contracts are not evidence of the transactions. It is contended that they appear to be produced at the same time although allegedly entered into and signed 18 months apart. The first licence, it is contended, did not even exist at the date of the alleged sale to VAG on 1 November 2001 as Delrich did not become the owner of it until 15 March 2002.
Further, it is said that there is no written evidence as to the contract in respect of the second licence which was originally sold to Santed. Messrs Groves and McKay are both directors of Santed and Delrich but they have put forward no evidence of the payment for the $57,500. The respondent also says that the payment by VAG to Santed at $57,500 is noted in the books as both “repay” and “interest” on the same date, which suggests a repayment of a loan. The remainder of the submissions go into some detail as to the criticisms of the allegations being put forward by VAG. The submissions culminate in a contention that VAG would lose the trial of the proceeding that it contemplates commencing and that in consequence, leave should be refused.
In response to these criticisms, Mr Althoff and Mr Groves swore affidavits on 1 April 2014. As to the issue raised by Ms Heeps in her affidavit that the first licence did not exist as at the date of contract of sale of the first licence dated 1 November 2001, Mr Althoff gives what might be described as a fairly convoluted account of the transaction underlying that purchase. In succinct terms, he states that in the late 1990s, VAG contributed a significant amount of funds into Delrich’s business. In late 2001, Mr Howard and Mr Althoff decided they would leave the business of Delrich and Mr Howard would resign as director. Discussions ensued as to how the funds that had been contributed could be repaid by Delrich. Mr Althoff states that in November 2001, he and Mr Howard reached a verbal agreement with Mr Groves whereby VAG would receive a hire car licence from Delrich for the reduced amount of $45,000 as recognition of the capital which VAG had invested in Delrich. He states that it was also agreed that Delrich would make lease payments to VAG in respect of the licences. He states that to the best of his recollection it was some time after they reached the verbal agreement that the contract of sale in regard to the first licence was executed. He says that it is likely that the contract of sale for the first licence was signed after 15 March 2002, when Delrich commenced owning the first licence.
As to the criticism made by Ms Heeps that the contracts of sale for the two licences appear to have been prepared at the same time, Mr Althoff states that to the best of his recollection the same template was used to prepare the contract of sale of the second licence as had been used to prepare the contract for the first licence.
Regarding the respondent’s criticism that VAG, Mr Groves or Mr Althoff have failed to produce any records of Santed despite Mr Althoff and Mr Groves being directors of that company, he states that Santed was deregistered in 2007 following the members voluntary winding up and that its records are likely to have been destroyed.
In regard to the criticism that the licences were never registered in the name of VAG, Mr Althoff states that this was because of the close relationship between himself and Messrs Howard, Groves and Thomas and the substantial amount of trust between them. In addition, the cars the subject of the licences were owned and used by Delrich.
In his affidavit of 1 April 2014, Mr Groves states that he was aware a few months prior to the issuing of the first licence that the Victorian Taxi Directorate would be issuing a licence to Delrich. He also seeks to correct a statement made in his earlier affidavit that the contract of sale for the first licence was executed on about 1 November 2001. He essentially corroborates the evidence given by Mr Althoff regarding the verbal agreement whereby Delrich would sell a hire car licence to them or an entity nominated by them for the amount of $45,000. He states that the sale price of the licence was discounted to take into account moneys that Messrs Althoff and Howard, or a company controlled by them, had contributed to Delrich in previous years. He believes that the contract of sale for the first licence was not executed for a number of months after the verbal agreement was reached with Messrs Althoff and Howard.
Legal principles applicable
The power to grant leave to continue or proceed with proceedings under s 471B is in the discretion of the Court. The Full Federal Court in Vagrand Pty Ltd (In Liquidation) v Fielding and Others summarised the relevant test as to whether leave should be granted to be as follows:
Upon a close reading of the relevant authorities, it is apparent to us that the courts have not in fact required applicants for leave to demonstrate a prima facie case against the company in liquidation in a technical sense of that term. They are required to be affirmatively satisfied that the claim has a solid foundation and gives rise to a serious dispute. [1] (emphasis added)
[1](1993) 113 ALR 128, 134 (‘Vagrand’).
Another factor is whether, rather than being granted leave to commence litigation in a court, the applicants should be obliged to lodge a proof of debt in the winding up so that the company currently in liquidation is not put to the cost of being involved in that litigation.
Counsel for the applicants, Mr Crennan, referred in his submissions to the decision of Refshauge J of the Supreme Court of the ACT in Commonwealth of Australia v Davis Samuel Pty Ltd and Others (No. 5),[2] in which Refshauge J comprehensively collects and reviews the authorities dealing with the section and its precursors. At [33], Refshauge J states that the fundamental question is whether the applicant should lodge a proof of debt to pursue its rights that way, or whether leave should be granted to take a different approach; that is, litigation in a court. Refshauge J refers to the seminal decision of McPherson J in Re Gordon Grant and Grant Pty Ltd, where his Honour stated:
The effect of section 230(3) [the legislative precursor of s 471B] is to require the claim to adopt the course of lodging a proof of debt unless he can demonstrate for some good reason why departure from that procedure is justified in the case of the particular claim in dispute.[3]
[2][2008] ACTSC 124 (Davis Samuel Pty Ltd (No. 5)).
[3][1983] 2 Qd R 314, 317.
At [30], Refshauge J identifies a wide range of discretionary considerations. In the present context, it was submitted by Mr Crennan that a critical issue is ‘the amount and seriousness of the claim together with the complexity of the legal questions involved’.
The essence of VAG’s case against Delrich is that the licences for which it contends it has an equitable interest are its property and that VAG is entitled to the funds derived from the sale of those licences. VAG’s proposed claim would not, as such, lend itself to a submission of a proof of debt. If VAG’s claim is successful, the licences and the proceeds of sale of them do not form part of Delrich’s assets and are not available for distribution to its creditors. VAG, as such, is not a creditor; it is a party pressing for return of its property. As the Full Court of the Federal Court observed in Vagrand:
It is true that, upon the winding up of a company, the appointed liquidator comes under an obligation to take control of the company’s assets and realise them for the benefit of the creditors, after payment of all proper outgoings. But the liquidator takes the assets subject to such liabilities as then attached to them. If a particular asset is subject to a mortgage, the liquidator takes the assets subject to the mortgage. If the asset is held by a company in trust for somebody else, the liquidator is bound by the trust. In the same way, as Marley J pointed out, as a consequence of taking control of an asset a liquidator may be faced with litigation. … The point of course is, that the assets come to the liquidator with their history and inherent characteristics. Although the liquidator takes the assets on behalf of the creditors, third parties retain any rights which enure to them as a result of that history or those characteristics.[4]
[4](1993) 113 ALR 128, 130.
In the decision of In Re David Lloyd and Co; David v David Lloyd and Co James LJ stated at 344:
… These sections in the Companies Act, and the corresponding legislation with regard to bankrupts, enabling the Court to interfere with actions, were intended, not for the purpose of harassing, or impeding, or injuring third persons, but for the purpose of preserving the limited assets of the company or bankrupt in the best way for distribution among all the persons who have claims upon them. There being only a small fund or a limited fund to be divided among a great number of persons, it would be monstrous that one or more of them should be harassing the company with actions and incurring costs which would increase the claims against the company and diminish the assets which ought to be divided amongst all the creditors. But that has really nothing to do with the case of a man who for the present purpose is to be considered as entirely outside the company, who is merely seeking to enforce a claim, not against the company, but to his own property. The position of a mortgagee under such circumstances is, to my mind, exactly similar to that of a man who said, “You the company have got property which you have taken from me; you are in possession of my property by way of trespass, and I want to get it back again.” A landlord might say, “You have property under lease from me; you have broken the covenants of the lease, and I have a right of re-entry in consequence of that breach.” The company ought not, because it has become insolvent or has been minded to wind up its affairs, to be placed in a better position than any other lessee with regard to his lessor. So with regard to a mortgage.[5]
[5](1877) 6 Ch D 339.
I am satisfied that VAG’s claim could not be dealt with by the proof of debt process by reason of its claim being of a proprietary nature; that is, it contends that Delrich has property belonging to it, being the proceeds of sale of the licences, and it should be entitled to bring the proceeding to recover that property.
In addition to the robust criticism of VAG’s claim in Delrich’s submissions, it is contended that the winding up of Delrich is essentially concluded and that VAG has delayed in bringing its claim. It is said that the delay is inordinate and the creditors will be prejudiced if the liquidator is required now to embark on potentially lengthy and expensive litigation.
Having considered that the claim of VAG could not be dealt with by way of proof in the winding up, it remains to be considered whether the claim is such that I can be ‘affirmatively satisfied that the claim has a solid foundation and gives rise to a serious dispute’. That does not require me to effectively predict the outcome of any proceeding that might be brought. In Vagrand the court observed:
The test which is actually been applied is akin to that now used in considering whether interlocutory relief should be granted:
A serious question to be tried:
See Castlemaine Tooheys Limited v South Australia (1986) 161 CLR 148, at 153 where Mason ACJ made it clear with reference to the very same question which arose in the context of an interlocutory debate, that the test of a “serious question to the tried” is generally to be preferred to that of a “prima facie case”. It is appropriate that the same standard of proof of the merits should be required for each of these forms of relief. In a particular case an applicant may need both orders we would think it anomalous if an applicant had to meet a higher requirement merely to commence an action and that necessarily to obtain an order potentially imposing a substantial burden on the respondent. In our opinion Moorling J did not fall into error of law in relation to the evidence required to be found in order for leave. The evidence tendered clearly established the existence of a serious claim in a real dispute. We need not consider whether, as counsel for both sets of respondents contend, the evidence went so far as to demonstrate a prima facie case, in the technical sense of that term.[6]
[6](1993) 113 ALR 128, 134.
In my view, while there is considerable force in Mr Coleman’s submissions that VAG has delayed in bringing about the present proceeding, it has been observed in several authorities, including Refshauge J in Davis Samuel Pty Ltd (No. 5), that delay alone does not prevent leave from being granted. There is a plausible explanation to explain away a certain period of the delay that has occurred here. VAG first raised the claim in April 2012 through its previous solicitors. Further information was sought from the liquidators’ lawyers in early July 2012. There then ensued a delay to January 2013 when Macpherson & Kelley on behalf of VAG renewed the claim and sought information about the sale by the liquidator. Further correspondence ensued between the liquidator and Macpherson & Kelley; this is chronicled in the affidavit material filed by VAG. To my mind, the evidence in regard to the illness of the directors, to which reference has been made above, explains the recent delays that have occurred for the purpose of this application.
I do not consider that the prejudice described by the liquidators should result in the refusal of the leave application. There will be a delay in the distribution of the dividend to creditors, however it is to be remembered that if VAG is successful in its proposed proceeding, the funds from the proceeds of sale of the licences will not be available for distribution to the creditors. On the other hand, if the distribution is allowed to proceed and VAG has good claims, the creditors will be receiving a distribution of property which is not that of the company.
As I indicated on the occasion of the hearing, there are curious features of the evidence put on by VAG as to the background of the transactions, how they are documented and how they arose. There is also the element of delay, upon which Mr Coleman placed much emphasis. I consider, however, that the interests of justice require that VAG be given the right to agitate its proprietary claims because it has demonstrated a serious question to be tried in respect to the ownership of the licences and of the proceeds of their sale. This clearly cannot be dealt with by way of proof in the winding up. I will grant the leave that the applicant seeks.
For completeness, I set out the orders I made on 3 April 2014:
1. Pursuant to section 471B of the Act, the applicant has leave to commence a proceeding against the respondent substantially in the form of the Draft Outline of Claim exhibited as exhibit SP-10 to the affidavit of Sanin Pasagic dated 7 January 2014 and filed in this proceeding.
2. Costs of this application be reserved.
3. The parties have liberty to apply on reasonable notice in relation to the costs of this application.
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