Vodicka Holdings Pty Ltd v Vodicka

[2022] WASC 82

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   VODICKA HOLDINGS PTY LTD -v- VODICKA [2022] WASC 82

CORAM:   MASTER SANDERSON

HEARD:   11 JANUARY 2022

DELIVERED          :   11 MARCH 2022

PUBLISHED           :   11 MARCH 2022

FILE NO/S:   COR 150 of 2021

BETWEEN:   VODICKA HOLDINGS PTY LTD

Plaintiff

AND

PETER VINCENT VODICKA

Defendant

Catchwords:

Corporations Law - Application to set aside statutory demand - Turns on own facts

Legislation:

Corporations Act 2001 (Cth)
Superannuation Industry (Supervision) Act 1993 (Cth)

Result:

Application dismissed

Representation:

Counsel:

Plaintiff	:	B Panov
Defendant	:	J Hammond

Solicitors:

Plaintiff	:	Mendelawitz Morton Commercial Lawyers
Defendant	:	Hammond Legal

Case(s) referred to in decision(s):

Willaire Pty Ltd v Equitrust Limited [2010] QCA 350

MASTER SANDERSON:

1. This is the plaintiff's application to set aside a statutory demand.  A copy of the demand is found as part of attachment PVV 14 to the affidavit of Peter Vincent Vodicka sworn 26 November 2021.  The demand is based upon a judgment obtained in this court for an amount of $795,538.90.  Despite the fact the demand is based upon a judgment, and no application has been made to set aside that judgment, the plaintiff says there is a genuine dispute or some other reason why the demand ought be set aside.  For reasons which follow, that submission ought be rejected. 

2. Peter William Vodicka is the son of the defendant.  Belinda Kate Vodicka is the daughter‑in‑law of the defendant.  Peter William Vodicka and Belinda Vodicka are directors and shareholders of the plaintiff.  The defendant made a loan of $950,000 to the plaintiff in November of 2017.  The plaintiff defaulted under the terms of the loan.  On 8 March 2021, the defendant commenced proceedings to recover the loan.  Default judgment was obtained and was entered on 23 July 2021. 

3. There is no suggestion, in the affidavit filed in support of this application, that judgment was not properly entered.  The plaintiff had ample time to enter an appearance and chose not to do so.  There is nothing in the evidence to suggest that an order could be obtained setting aside the default judgment.  But even if that was a possibility, no steps have been taken by the plaintiff.  It must be inferred, in the circumstances, the plaintiff accepts the defendant was entitled to issue proceedings, was entitled to obtain judgment and that the judgment is in all respects regular. 

4. The plaintiff's position is as follows.  On 15 November 2017, in its capacity as trustee of the Vodicka Super Fund, it entered into a borrowing agreement described as a 'Limited Resource Borrowing Agreement' (LRBA).  The LRBA records the terms and conditions upon which the defendant agreed to lend the principal sum to the plaintiff.  The loan agreement acknowledges the plaintiff is trustee for the Vodicka Super Fund.  Clause 2.6 of the LRBA provides that the borrower must ensure that the trustee provides the collateral security to secure the advance of money.  The collateral security is a first registered mortgage over a property in Balcatta. 

5. Clause 5.4 of the LRBA provides that 'notwithstanding anything to the contrary in this agreement' the rights of the lender against the borrower for, in connection with, or as a result of (whether directly or indirectly) default on the borrowing or the sum of the borrowing and charges relating to the borrowing 'are limited to the rights relating to the (Balcatta property)'.  On 20 November 2017, Hurricane Holdings (WA) Pty Ltd, in its capacity as bare trustee, entered into a mortgage with the defendant.  Presumably, this was the collateral security required by cl 2.6 of the LRBA. 

6. The defendant says, in accordance with s 67 of the Superannuation Industry (Supervision) Act 1993 (Cth) (the Act), the general rule is that a trustee of a regulated superannuation fund must not borrow money or maintain an existing borrowing of money. An exception to that rule can be found in s 67A of the Act which provides that a trustee may borrow money under a limited recourse borrowing agreement if certain conditions contained therein are met. The plaintiff says it is clear from the terms of the LRBA that the plaintiff and the defendant intended to be bound by the provisions of the Act. The plaintiff refers to the recitals contained in the LRBA. Further reference is made to cl 5.4 of the LRBA which is in the following terms.

Limited recourse

Notwithstanding anything to the contrary in this agreement or the Collateral Security:

(a)the rights of the Lender against the Borrower for, in connection with, or as a result of (whether directly of indirectly) default on:

(1)the borrowing, or

(2)on the sum of the borrowing and charges related to the borrowing,

are limited to the rights relating to the Acquirable Asset; and

(b)if, under this agreement or the Collateral Security, the Borrower has a right relating to the Acquirable Asset (other than a right to acquire legal ownership of the Acquirable Asset by making one or more payments after acquiring the beneficial interest), the rights of the Lender or any other person against the Borrower for or in connection with, or as a result of (whether directly or indirectly) the Borrower's exercise of the Borrower's rights are limited to rights relating to the Acquirable Asset.

1. The plaintiff says it is clear from a combination of the Act, the recitals to the LRBA and cl 5.4 of the LRBA that the only recourse available to the defendant in respect of any default under the LRBA is limited to rights relating to the Balcatta property.  The proper course is for the defendant to proceed under the terms of the mortgage.  On that basis, Supreme Court proceedings should never have been issued and the demand ought be set aside.

2. In further support of its position, the plaintiff relies on the decision of the Queensland Court of Appeal in Willaire Pty Ltd v Equitrust Limited [2010] QCA 350. The facts in that case can be summarised as follows. The parties entered into a loan agreement which was secured by way of two mortgages. The total liability of the mortgagor was limited to a total of $3 million. The appellant defaulted on the loan. The respondent issued a statutory demand to the appellant for the total amount outstanding on the loan, irrespective of the limited liability terms contained in the mortgages. In allowing the appeal, the court noted that a central function of the statutory demand procedure was to facilitate proof of a company's inability to pay its debts. Part 5.4 of the Corporations Act 2001 (Cth) constitutes a legislative scheme for a quick resolution to the issue of solvency. The regime did not contemplate the making of a statutory demand in respect of a debt which a creditor was entitled to have satisfied only out of the net proceeds of sale of particular secured property of the debtor. The court concluded the respondent would be using the statutory demand procedure unjustly and unconscientiously if it was used to circumvent the terms of the bargain it struck with the appellant.

3. The main difference between this case and the Willaire decision is that here the defendant has based its statutory demand on a judgment.  It seems to me that the terms of the LRBA make it clear it was never intended the plaintiff would repay the money it borrowed.  Any recovery would require action to be taken under the terms of the mortgage.  But it is the plaintiff which borrowed the money and it is primarily liable for the debt.  By not defending the Supreme Court proceedings the plaintiff then admitted as much.  There is no basis for setting aside the demand. 

4. The plaintiff's application will be dismissed.  The plaintiff should pay the defendants costs of the application including reserved costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

MM

Court Officer

11 MARCH 2022