Westpac Banking Corporation v McMillan & Melbas on the Park Pty Ltd (Formerly Credit Systems Australia Pty Ltd)
[2008] QSC 206
•2 September 2008
SUPREME COURT OF QUEENSLAND
CITATION:
Westpac Banking Corporation v McMillan In His Own Capacity And In His Capacity As Trustee for the CSA – Melbas Unit Trust and Melbas On The Park Pty Ltd (Formerly Credit Systems Australia Pty Ltd) [2008] QSC 206
PARTIES:
WESTPAC BANKING CORPORATION ABN 33 007 451 141
(applicant)
V
GEORGE CECIL MCMILLAN IN HIS OWN CAPACITY AND IN HIS CAPACITY AS TRUSTEE FOR THE CSA – MELBAS UNIT TRUST
(respondent)
AND
MELBAS ON THE PARK PTY LTD (FORMERLY CREDIT SYSTEMS AUSTRALIA ACN 079 694 063
(respondent)
FILE NO/S:
6294/08
DIVISION:
Trial Division
PROCEEDING:
Originating Application
ORIGINATING COURT:
Supreme Court of Queensland
DELIVERED ON:
2 September 2008
DELIVERED AT:
Brisbane
HEARING DATE:
31 July 2008, 1 August 2008
JUDGE:
White J
ORDER:
1. The terms of the order about the Deed of Assignment and the business name and corporations name declarations are to be settled by counsel consistently with these reasons.
2. The first respondent and the second respondent shall within seven days of this order deliver up to the applicant all books, records, statements, invoices, cheque butts, receipts, pay slips and other documents in their possession, power or control which are the property of Rynah Pty Ltd or relate to the business carried on under the business name “Melbas” or “Melba’s On The Park” at or from 46 Cavill Avenue, Surfers Paradise, Queensland.
3. It is declared that the applicant is not bound by the terms of the Joint Venture Agreement dated 1 July 2007 between Rynah Pty Ltd and Melbas On The Park Pty Ltd (formerly Credit Systems Australia Pty Ltd).
CATCHWORDS:
MORTGAGES – MORTGAGES AND CHARGES GENERALLY – PARTICULAR MORGAGES AND ENCUMBRANCES – CHARGES AND LIENS – OTHER MATTERS – the first respondent gave the applicant charges over certain property – whether the property in the business name “Melba’s On The Park” and the associated logo is encompassed within that property
INTERPRETATION – GENERAL RULES OF CONSTRUCTION OF INSTRUMENTS – GENERAL MATTERS – a deed of assignment transferred of certain property – evidence of the circumstances of the parties and their relationship was admitted to clarify the nature of the assignment – whether the assignment was a true transfer of title to the property or a security
MORTGAGES – MORTGAGES AND CHARGES GENERALLY – PARTICULAR MORGAGES AND ENCUMBRANCES – CHARGES AND LIENS – OTHER MATTERS – the first respondent gave the applicant charges over certain property – the charges prohibited the property being disposed of or encumbered without the applicant’s consent –the first respondent purported to assign the property to the second respondent without the consent of the applicant – whether the assignment was effective
Business Names Act 1962(Qld), s 3, s 5, s 7, s 12, s 17, s 18, s 21, s 24
Corporations Act 2001 (Cth), s 147, s 280
Re ABC Plastik Pty Ltd (1975) 1 ACLR 446, followed
Architects (Australia) Pty Ltd t/a Architects Australia v Witty Consultants Pty Ltd [2002] QSC 139, cited
Ashby, Warner & Co Ltd v Simmons [1936] 2 All ER 697, cited
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981-1982) 149 CLR 337, cited
Dennis Pethybridge v Stediks Holdings Pty Ltd [2007] NSWCA 154, cited
Gurfinkel v Bentley Pty Limited (1966) 116 CLR 98, cited
Kelly v Kitty O’Sheas Pty Ltd (1995) 32 IPR 507, cited
Re National Westminster Finance Australia Limited [1991] 1 Qd R 130, cited
Row Dal Constructions Pty Ltd (in liq) [1966] VR 249, citedWestfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194, cited
COUNSEL:
Mr B O’Donnell QC for the applicant
Mr C J Crawford for the first respondent
Mr N J Thompson for the second respondent
SOLICITORS:
Allens Arthur Robinson for the applicant
Queensland Law Group for the first respondent
Freestone & Kumnick for the second respondent
Westpac Banking Corporation (“Westpac”), a secured creditor of Rynah Pty Ltd (Receivers and Managers Appointed) (In Voluntary Administration) (“Rynah”), filed an originating application seeking declarations that:
· Rynah is carrying on business from premises at 46 Cavill Avenue, Surfers Paradise under the business name “Melba’s On The Park”.
· Rynah is entitled to be registered on the register of business names maintained by the registrar under the Business Names Act 1962 (Qld) as a corporation carrying on business under the name “Melba’s On the Park”.
· The first respondent, George McMillan (in his own capacity and in his capacity as trustee for the CSA – Melbas Unit Trust) is not entitled to be registered on the register of business names maintained by the registrar under the Business Names Act as the person carrying on the business under the name “Melba’s On The Park”.
· The name “Melba’s On The Park Pty Ltd” is not available to the second respondent, Melba’s On The Park Pty Ltd, formerly Credit Systems Australia Pty Ltd, pursuant to s 147 of the Corporations Act 2001 (Cth).
· The Joint Venture Agreement dated 1 July 2007 between Rynah and the second respondent is not binding on Westpac.
Westpac seeks orders that the respondents deliver up the books, records, statements, invoices, etc in their possession, power or control which are the property of Rynah or relate to the business of “Melba’s On the Park” carried on at the property in 46 Cavill Avenue, Surfers Paradise.
Westpac seeks other ancillary orders.
Mr N J Thompson for the second respondent contended that the summary relief sought by Westpac is unsuitable for determination in what is a summary way and that there ought to be pleadings and more extensive evidence. No deponent of an affidavit relied on was required for cross-examination nor was there an application for further evidence to be adduced orally. The application was brought on with ample notice of the issues to those interested and was adjourned by Mullins J on 28 July 2008 to 31 July when the first respondent produced an affidavit deposing that the business name under which Rynah traded had been assigned to him in 1996 information previously unknown to Westpac. I will refer to the evidence more particularly but I was not and continue not to be persuaded that there is unfairness in proceeding summarily with the issues raised in the originating application.
Overview
Rynah carries on business as a restaurant, night club and gaming establishment from premises owned or occupied by it at 46 Cavill Avenue, Surfers Paradise under the name “Melba’s On The Park”. Rynah was registered in 1981. Mr Paul Allen is and has been a director and shareholder of Rynah since inception. He has been a director and shareholder of the second respondent since 26 May 2008. Until then the first respondent, Mr McMillen, was director and shareholder.
In 2006 Westpac provided Rynah with certain financial facilities secured by charges over Rynah’s property (and the property of associated companies). On 2 June 2008 Westpac appointed William James Harris and John Patrick Cronin as receivers and managers of all the assets and undertaking of Rynah pursuant to the several charges granted to it by Rynah and other associated companies. Since then the receivers and managers have carried on the business.
The appointment arose as a consequence of certain events of default by Rynah and the company’s failure to repay an amount of some $13.4 million.
The receivers and managers are desirous of continuing to operate and, in due course, selling the business of Rynah as a going concern but are hampered because they do not have access to many of the books and records of the company and because the business name “Melba’s On The Park” has been transferred by Rynah to the second respondent by a Joint Venture Agreement entered into between Rynah and the second respondent. Further, since Mr Harris and Mr Stewart Meager, Manager – Legal for Westpac in Queensland, executed their principal affidavits Mr George McMillan, the first respondent has produced the Deed of Assignment of 1006, something previously unknown to Westpac.
The issues
The issues for decision are:
· Whether the property in the business name “Melba’s On The Park” and the associated logo is encompassed in the property the subject of the charges granted to Westpac.
· Whether a Deed of Assignment between “Raynah” [sic] Pty Ltd[1] and George McMillan dated 4 December 1996 assigning, inter alia, the business name “Melba’s On The Park” and logo pertaining thereto was a true transfer of title or a security which Rynah could redeem.
· Whether a Joint Venture Agreement dated 1 July 2007 between Rynah and Credit Systems Australia Pty Ltd made without notice to Westpac was effective as against Westpac to transfer the business and all its undertakings from Rynah to Credit Systems Australia Pty Ltd.
· Whether any further orders ought be made for the production of Rynah’s books and records.
[1]The ACN for Rynah and Raynah are the same.
Securities granted by Rynah in favour of Westpac
By a Business Finance Agreement dated 5 May 2006 as amended by Letters of Variation dated 13 March 2007 and 8 June 2007 between Westpac and Rynah, Westpac agreed to provide Rynah with a Commercial Bill Facility of $13.2 million, a Business Overdraft of $200,000 and a Business Loan of $300,000. Pursuant to the agreements Rynah (and other companies associated with Rynah) agreed to grant Westpac securities to secure Rynah’s obligations under these agreements.
On or about 26 January 2006 Rynah granted Westpac a fixed and floating charge over all of its present and future assets and undertaking registered with the Australian Securities and Investments Commission (“ASIC”) as charge number 1259708 (“the First Charge”). It is described on the face of the document as “Rynah Pty Ltd ABN… T/A Melbas On The Park”. The First Charge incorporates by reference the Memorandum of Common Provisions retained by the Queensland Office of the Registrar of Titles Brisbane (“the Common Provisions”).
On or about 2 June 2006 Rynah granted Westpac a fixed and floating charge over all of its present and future assets and undertaking registered with ASIC as charge number 1324514 (“the Second Charge”).
These charges operated as a fixed charge in favour of Westpac over, among other things, all of Rynah’s present and future:
(a) Accounting records, registers, minute books, statements, invoices, accounting and other records (including, without limitation, those recorded electronically) and all software.
(b) Intellectual property and goodwill.
(c) “Authorisation” which is defined to mean a liquor licence, gaming machine licence, consent, authorisation, licence, registration, exemption or other recognition by a government agency.
(d) Other assets not required for disposal in the ordinary course of Rynah’s business.
The First Charge and the Second Charge each operated as a floating charge over all other assets charged until, in the case of the First Charge, the happening of an event set out in cl 2.4 of the First Charge and in the case of the Second Charge, the happening of an event detailed in cl 5.3(b).
Business Name
Rynah was registered as carrying on business under the name “Melba’s On The Park” on the register of business names maintained pursuant to the
Business Names Act1962 between 8 March 1994 and 3 December 2007. Upon their appointment the receivers discovered that the trading name “Melba’s On The Park” had been surrendered by Rynah and registered under the name of the first respondent, George McMillan, on and from 3 December 2007. It occurred without the consent of Westpac. When Mr McMillan lodged the form he wrote that Rynah Pty Ltd had ceased to carry on business under that name and that he, George McMillan as trustee for the CSA – Melbas Unit Trust, commenced carrying on that business on 3 December 2007. The form was signed by Mr Paul Maxwell Allen as director of Rynah dated 3 December 2007 and Mr Geoffrey Francis Sullivan, a (then) director and company secretary of Rynah.
Rynah holds a Liquor Licence dated 27 March 2008 under the name “Melba’s On The Park” in respect of the premises where it carries on business at 46 Cavill Avenue. Since 26 July 2005 it has held a Gaming Machine Licence to operate 40 electronic gaming machines under name “Melba’s On The Park” at or from 46 Cavill Avenue. Rynah is a party to a number of Hire Purchase Agreements and Commercial Loan Agreements with Westpac in respect of equipment used in the business conducted under the name “Melba’s On The Park” at or from 46 Cavill Avenue. These include computers, speakers, amplifiers, televisions and lighting and other equipment; air conditioning systems; a motor vehicle; cameras and security equipment; refrigeration and other kitchen equipment; tables and chairs; cash registers; signage and other fit out.
Rynah is party to a credit facility with Complete Hospitality Supplies dated 9 January 2008 for the supply of goods used in the business in which its trading name is described as “Melba’s On The Park”. Rynah has a supply agreement with Cadbury Schweppes Pty Ltd for drinks and packaged goods current as of
20 June 2008 in which it is described as “Trading as Melba’s On The Park”.
It is party to an agreement for services with Waste Corp Pty Ltd for the removal of waste from 46 Cavill Avenue and a tax invoice dated 1 June 2008
describes Rynah as “T/a Melbas on park”. It is party to a service agreement with Banktech Australia Pty Limited with respect to an automatic teller machine installed at 46 Cavill Avenue in which Rynah is described as “trading as Melbas On The Park”. That agreement is from 23 June 2007 to 23 June 2012.
Rynah is party to a Keno Agency Agreement with Jupiters Gaming Pty Ltd in which it is described as “Melba’s On The Park”.
All of these agreements have been executed for Rynah by Mr Paul Allen and Mr Sullivan.
The domain name “melbas.com.au” is registered to Rynah.
The Australian Government Workplace Ombudsman issued a breach
notice to “Mr Paul Allen Rynah Pty Ltd Trading as Melbas On The Park” dated 17 June 2008.
The company presently employs approximately 110 staff who work in various roles in the business conducted from 46 Cavill Avenue including bar staff, kitchen staff, waiters, gaming room attendants, duty managers and cleaners.
Telephone charges in respect of telecommunication services supplied to 46 Cavill Avenue by Telstra are invoiced to “Rynah Pty Ltd Melbas Nightclub”.
Company Name
On 26 May 2008 ASIC was notified by Mr McMillan, as director, of a resolution whereby Credit Systems Australia Pty Ltd changed its name to Melbas On The Park Pty Ltd. In the company extract dated 1 July 2008 George McMillan is shown as a previous director who ceased on 20 June 2008. Paul Maxwell Charles Allen is shown as being appointed director on 26 May 2008 and his son, David Paul Allen, as being appointed a director on 20 June 2008.
Intellectual property
An application dated 10 June 2008 was lodged with IP Australia (Australian Trade Mark Office) seeking to have the words “Melba’s On The Park Restaurant and Club” and “Melbas” and the image of “Melba’s” in which a palm tree silhouette forms the lower case letter “L” registered to George McMillan as trustee for the CSA-Melba’s Unit Trust.
Joint Venture Agreement
By a document dated 1 July 2007 entitled “Joint Venture Agreement” Rynah and Credit Systems Australia Pty Ltd, described respectively as the First Venturer and the Second Venturer, entered into a Joint Venture Agreement. Rynah is described as:
“…the owner, inter alia, of a gaming nightclub and restaurant business conducted under the name and style of ‘Melba’s On The Park’ (“the Business”)”
and Credit Systems Australia Pty Ltd is described as:
“…a contract consulting group providing consulting, corporate, financial and structuring advice and services”.
The Second Venturer states that it is desirous of conducting a joint venture business with the First Venturer. Preambular clause 4 states that the First Venturer has agreed to assign and/or sell to the Second Venturer:
“…the stock in trade, custody of all intellectual property, business records and statements, management staff and general staff and all facilities or property owned, leased or rented and relating to the Business on the day and date this Agreement is executed and has granted to the Second Venturer the right to utilise the data base, Business manuals and programs to allow it to conduct the JV Business.”
Amongst the First Venturer’s obligations are to:
“…supply all intellectual property, business records and statements, management staff and general staff and all facilities or property owned, leased or rented, data base, facilities and all other chattels associated with the Business to the Second Venturer as required by the Second Venturer to enable the Second Venturer to conduct the JV Business.”[2]
[2]Clause 2.2.
By cl 2.3 the First Venturer further agreed to:
“Assign to the Second Venturer the rights and title of the First Venturer’s business name/s intellectual property, licences and permits and company logos”.
By cl 3.2 the First Venturer agreed to execute an assignment agreement assigning to the Second Venturer:
“…all relevant business name, intellectual property, licences and permits that it holds, and company logos, that are required to operate the JV business...”
Clause 3.3 provides for the Second Venturer to take by way of assignment all plant and equipment leased, rented or hired and used in the joint venture business at its expense.
The gross turnover to be derived from the joint venture business was to be divided in the proportion of 60 per cent to the First Venturer and 40 per cent to the Second Venturer. Any goodwill generated by the joint venture business is to remain the property of the Second Venturer who has the right to assign, sell or charge any part or parts of the goodwill of the joint venture business. The agreement expressly provides that it is not a partnership.
The Memorandum of Common Provisions incorporated into the First Charge given by Rynah to Westpac provides that Rynah may not:
“…sell or otherwise dispose of any Property or any interest in it…;
give anyone an interest in any of the Property or a right over or to use any of it;
unless the Lender first gives its consent.”
The “Property” mentioned above includes the property purportedly assigned by Rynah to the second respondent.
Similarly the Second Charge prohibited Rynah from disposing or giving an encumbrance over any part of the mortgage property without Westpac’s consent.
Westpac has not consented to Rynah disposing of, encumbering, or in any way dealing with its assets charged pursuant to the First Charge and the Second Charge as expressed in the Joint Venture Agreement.
Events of Default
In April 2008 an application was made in the Supreme Court of New South Wales seeking orders for the winding-up of Rynah and on 22 May 2008 Westpac received a garnishee notice from the Deputy Commissioner of Taxation in respect of outstanding tax liabilities payable by Rynah. Each constituted an act of default under the various agreements between Rynah and Westpac. Westpac served a notice of demand for repayment of the monies advanced which, as at 30 May 2008, amounted to $13.478 million. Rynah failed to pay the amount demanded and Westpac appointed Messrs Harris and Cronin pursuant to the First Charge and the Second Charge to all of Rynah’s assets and undertaking.
Deed of Assignment
Mr McMillan deposed in his affidavit filed by leave on 28 July 2008, the date Westpac’s application was to be heard, that in or about 1996 he loaned approximately $200,000 to Paul Maxwell Allen for:
“monies that he required to continue his business operation then known as Melba’s (Rynah Pty Ltd t/as)”.
He deposed that in order to secure that loan he had his former solicitor prepare a Deed of Assignment in order to have transferred to him the name of the business should Rynah or Paul Maxwell Allen default on the loan. He deposed that the loan “is now” in default and he intended to register his security document “that is the Deed of Assignment of the business name”. Mr McMillan was not, at the date of swearing that affidavit, able to produce a copy of the Deed of Assignment but did so subsequently and exhibited it to his affidavit sworn on 30 July 2008 and filed by leave on 31 July. The document has no paragraph numbering and some oddities of punctuation.
In that document the parties are described as “Paul Maxwell Allen in his capacity as director of Raynah Pty Ltd ACN 010 238 990” as “the Assignor” and “George McMillan” described as “the Assignee”. It is dated 4 December 1996. The preambular clauses state, inter alia:
“The Assignor is the author and proprietor of certain works including papers, documents, manuals and materials relative to described in the Schedule (“the works”).
The Assignor is the proprietor of the marks set out in the Schedule (“the marks”).
The Assignor has applied for Trade Marks, Names in Australia as set out in the Schedule (“the Trade Marks, Names”).
The Assignor is the proprietor of the assets set out in the Schedule (“the assets”).
The Assignor possess [sic] confidential information as hereinafter defined in relation to the commercializa [sic], exploitation, manufacturing and marketing of the works
The Assignee has requested the Assignor to sell, assign, transfer and set over to the Assignee all his respective right title and interest in and to the works, the marks, the Trade Marks, Names, the assets and the confidential information which the Assignor has agreed to do upon the terms and conditions herein set out.”
The agreement provides:
“…in consideration of the sum paid to the Assignor by the Assignee receipt of which is hereby acknowledged:-
The Assignor assigns absolutely to the Assignee the entire copyright throughout the world and all other rights of the like nature now subsisting or conferred in respect of the works by the law in force in any part of the world and further assigns the Assignee the copyright and all other rights of the like nature belonging to the Assignor which may be conferred or subsist in any alterations or additions to the works created in any time at the request or direction of the Assignee.
The Assignor hereby assigns, transfers and sets over to the Assignee all its right title and interest in and to the marks together with the goodwill associated with its trade in the particular goods and services or classes of goods and services or in relation to which the marks have been used.
The Assignor as beneficial owner hereby assigns, transfers and sets over to the Assignee all his right title and interest in and to the Trade Marks, Names including the right to apply for or obtain corresponding Trade Marks, Names in any country throughout the world together with all the benefit of the Trade Marks, Names and all rights obtainable in respect of the trade marks and names the subject of the trade mark and in the priority dates of the Trade Marks and all know-how and technical information relation to the Trade Marks and Names and all rights powers liberties and immunities arising or to arise from any applications and from any Trade Marks, Names granted in relation to the Trade Mark to hold unto the Assignee absolutely from the date of this Deed and the Assignor undertakes at the expense of the Assignee to do all acts and execute all documents necessary or desirable for effecting the title of the Assignee to the Trade Marks, Names and in case of default the Assignor hereby appoints the Assignee a his attorney for such purpose.
The Assignor hereby transfers, assigns to the Assignee absolutely all its right title and interest in and to the assets.”
The agreement further provides:
“The Assignor forever abandons and gives up in favour of the Assignee all and any right held by the Assignor in relation to the business names previously used and conducted by the Assignor relative to or in connection with the works, the marks, the assets, the Trade Marks, Names and any one or more of them.”
The Schedule to the Deed, describes “The works” as “Staff Training Manuals”; “The Marks & Names” as “Palm tree as the Letter L and the branch as the break between the letter a and s”; “The Assets” as “Not Applicable”; and under the heading “Financial Consideration Paid” appears “Two Hundred Thousand Dollars ($200,000.00)”. Under the heading “License to Use Trade Marks, Names” appears:
“Rynah Pty Ltd are [sic] authorised to use the works names and trade marks in consideration of the Assignee receiving at the beginning of every month from this date, the sum of $1,000.00 dollars per month until such time as the Assignee agrees to sell the works, Trade Marks and Names back to the Assignor.”
Mr Paul Allen deposed in his affidavit sworn on 31 July 2008 that he executed the Deed of Assignment on behalf of Rynah on 4 December 1996 and that the business name then used and/or registered by Rynah was “Melba’s On The Park”. Thereafter, he deposed, Rynah traded under the licence referred to in the Schedule to the Deed of Assignment. Westpac has not challenged the provenance of the Deed of Assignment.
Is the Deed of Assignment a Charge?
If the Deed of Assignment transferred title in the business name “Melba’s On The Park” and the logo, Westpac’s application, so far as it relates to the business name, must fail. Mr Crawford, for the first respondent, submitted that Westpac’s securities over the assets of Rynah are not apt to include the business name as forming part of Rynah’s intellectual property. At the least, the business name and logo are “other assets”, but are likely to be part of the goodwill of the company. However, the important threshold question for resolution is whether the Deed of Assignment between Rynah and Mr McMillan operated as a transfer of title or as a security. Once that is determined the question of whether the relief sought by means of declarations may be considered.
The Deed does not refer in terms to “Melbas” or “Melba’s On The Park” in the body of the Deed or in the Schedule. There is reference to Rynah “giving up” to Mr McMillan any business name used in connection with the property identified in the preambular clauses. What the Deed states is that the Assignor is the proprietor of “the marks” set out in the Schedule. Under that heading is the description of the distinctive mark of the palm tree as the letter “L” and the branch as the break between the letter “a” and “s”. No sketch accompanies that description. It has been assumed by the parties that the name “Melbas” or “Melba’s On The Park” falls within that description or “the business names” expression in the final paragraph. Mr Paul Allen deposed that after entering into the Deed of Assignment Rynah carried on business using that name under licence from Mr McMillan. Neither he nor Mr McMillan give evidence about the relationship of the Deed of Assignment to the Joint Venture Agreement. The apparent duplication of Rynah assigning its property to Mr McMillan personally in 1996 and then to him personally and as trustee in 2007 I will consider further. First the structure of the Deed of Assignment should be considered.
The Deed of Assignment clearly intends to identify and confine the property to be assigned by reference to the Schedule apart from “confidential information” which is defined in the body of the Deed.
The expression “confidential information” is defined in the Deed of Assignment itself.
“The Assignor hereby transfers, assigns and sets over to the Assignee his entire right title and interest in and to the confidential information in his power possession and control relative to his business and the expression “confidential information” shall mean and include any and all intellectual and industrial property rights including but not limited to copyright, know-how, specifications and technical data, records including customer lists, existing contracts, potential customer lists, accounting records and processes, contracts with major suppliers, existing licences, marketing plans, policies, transactions, business plans and business names.”
The expression “confidential information” in its natural meaning connotes privacy, secrecy or, not in the public domain, and is not apt to cover a business name; it is its antithesis. Neither is the defined meaning apt to include a business name when reference is made to the enumerated examples, such as, specifications and technical data, customer lists and the like. The goodwill associated with the trading name, wherein its value for the most part lies,[3] is not encompassed in either the ordinary meaning of confidential information nor in its particular meaning within the Deed of Assignment. The language of the Deed of Assignment does not illuminate what is meant by the expression “business names”. However, extrinsic material as to what was Rynah’s business name, as appears from Mr Paul Allen’s affidavit, is admissible to resolve the ambiguity.[4]
[3]Kelly v Kitty O’Sheas Pty Ltd (1995) 32 IPR 507.
[4]Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981-1982) 149 CLR 337 per Mason J at 347-350.
Assuming, then, that the Deed of Assignment does extend to the business name “Melba’s On The Park”, the question is whether the Deed operates as an assignment outright or whether it confers a right of redemption. There is nothing in the material to value the property identified in the Schedule but the training manuals and logo description, given the nature of the business, might be thought highly priced at $200,000. The “confidential information” is impossible to value but the nature of the business would not suggest a high value. The licence fee of $1,000 per month for using the training manuals, “names” and logo looks rather like a repayment program, albeit a drawn out one.
The starting point when ascertaining whether a document effecting a transaction is to be characterised as an absolute assignment or a charge is to construe the document itself with that object in mind. The Deed expresses the transfer of title of Rynah’s property in absolute terms, save that the Schedule, which is a necessary part of the document, raises some limitations. The authorities direct that in answering the question whether the document evinces an absolute conveyance or mortgage, a court must look at the reality or substance of the transaction and not merely its form, examining the surrounding circumstances and the relationship of the parties.[5]
[5]Ashby, Warner & Co Ltd v Simmons [1936] 2 All ER 697, 700, cited with approval in Re National Westminster Finance Australia Limited [1991] 1 Qd R 130; Row Dal Constructions Pty Ltd (in liq) [1966] VR 249 at 259. See also the discussion in Ford’s Principles of Corporations Law, 12th ed, (2005) at 923; Fisher & Lightwoods Law of Mortgage 2nd Aust ed (2005), 228-229; Gough Company Charges, 2nd ed (1996).
Parole evidence is admissible to prove the true nature of the transaction.[6] The two parties[7] to the Deed of Assignment have sworn in their affidavits that Mr McMillan loaned Mr Paul Allen $200,000 to allow him to continue his business operation known as “Melbas” and that the Deed of Assignment was drawn up and executed to secure the repayment of that loan. Mr McMillan deposed that because the loan “is now in default” he intended to register his “security documents”, that is “the Deed of Assignment of the business name”. Mr Thompson submitted that the Deed of Assignment contains nothing about interest repayments for the loan or the repayment of capital such as to suggest a charge. Neither, he pointed out, does the licence arrangement in the Schedule contain any entitlement to redeem the property. It merely requires the payment of the monthly fee “until such time as the Assignee agrees to sell the works, Trade Marks and Names back to the Assignor”. All of that may be accepted.
[6]Gurfinkel v Bentley Pty Limited (1966) 116 CLR 98. See Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194 for a discussion by Young J (as his Honour then was) on the right to redeem.
[7]Mr Paul Allen being the alter ego of Rynah.
Neither Mr McMillan, who has sworn two affidavits about the Deed of Assignment, nor Mr Paul Allen, have provided any evidence about how many, if any, monthly payments were made by Rynah for the use of the logo and name, or whether any amount was otherwise paid off the debt. No correspondence or letter of demand is revealed. It is 13 years since the Deed of Assignment. Rynah has conducted its business as if it had never parted with the ownership of the business name or the logo. It may be the case that that course of conduct, as Mr Thompson submitted, is not inconsistent with a licence to do so. But in the absence of any other evidence, the continuation of a licence over such a long period, otherwise unrecorded, seems unlikely. More tellingly, Rynah and Mr McMillan entered into the joint venture agreement in 2007 as if Rynah had never assigned its business name and other property mentioned in the Deed of Assignment. Rynah is described in the preambular clause to the Joint Venture Agreement as “owning” the “gaming, night club and restaurant business conducted under the name and style of “Melbas On The Park”. Neither was the Deed of Assignment raised in answer to the receivers and managers demand that Mr McMillan “convey” back to Rynah the business name and cancel the name change of Credit Systems Australia Pty Ltd to Melbas On The Park Pty Ltd in correspondence of 19 June 2008 whereas shortly after their appointment on 2 June 2008 they were given a copy of the joint venture agreement by Mr McMillan.
It is, according to Mr McMillan, the failure to repay the loan which now, 13 years later, has prompted him to register his entitlement to the business name and, presumably, to change the name of his former company, Credit Systems Australia Pty Ltd, to Melba’s On The Park Pty Ltd, and apply for the intellectual property in the logo for Melbas – and, presumably, to retain the books, records and manuals of Rynah’s business. All of which sits uneasily with the assignment of all of Rynah’s property to Melbas On The Park Pty Ltd (formerly Credit Systems Australia Pty Ltd) and Mr McMillan exiting that company in favour of Mr Paul Allen and his interests.
The Deed of Assignment is poorly drawn and does not clearly identify the property conveyed. The relationship between the parties and the circumstances are such, as revealed by the parties themselves, that I am led to conclude that the assignment was, in fact, given as security. Although the right to redeem is not well expressed, nonetheless, enough is to be found in the document which, together with Mr McMillen’s own affidavits, allow the conclusion that equity would grant a right of redemption to Rynah.[8]
[8]Row Dal Constructions at p 259.
Since the Deed of Assignment is an unregistered security, the Westpac securities take priority.[9]
[9]Corporations Ac t, s 280(1)(b).
Declaratory relief with respect to the business name and company name
A business name is defined in the Business Names Act 1962 to mean “a name, style, title or designation under which a business is carried out”.[10] A person shall not carry on business in Queensland under a business name unless:
“…the business name is registered under this Act in relation to that person…”.[11]
[10]Section 3.
[11]Section 5.
An application for the registration of a business name is made by lodging with the registrar a statement in the approved form, signed by the person carrying on or proposing to carry on business in Queensland under that name.[12] Section 12 provides for the notification of the cessation of carrying on business by a person or corporation. Where a person ceased to carry on business under the registered business name the person must lodge with the registrar within a month a statement notifying the registrar of the cessation and the date on which the person ceased to carry on business under that name.[13] By s 17 a person must not give a document to the registrar containing information that the person knows is false or misleading in a material particular.
[12]Section 7.
[13]Section 12(3).
If the registrar has reasonable cause to believe that a person in relation to whom a business name is registered is not carrying on business in Queensland under that name the registrar may give notice to that person enquiring whether that person is carrying on business under that name and requiring to be satisfied within a specified time of that fact otherwise the registration of the business name may be cancelled.[14] A registrar may, on any evidence that the registrar considers sufficient, correct any error in any entry in the register or in any certification of registration of a business name.[15]
[14]Section 18.
[15]Section 21(1).
Registration of a business name is prima facie evidence of the information contained in the registration document,[16] however, the registration of a business name does not operate to vest ownership of it in a person who is not carrying on that business.[17] In Re ABC Plastik Pty Ltd Needham J concluded that the evidence showed that the respondent, who was registered as the owner of the business name, was not carrying on business under the business name but that a company was. His Honour observed:[18]
“In such circumstances, a certificate of registration showing that the respondent was carrying on business under the business names would prove nothing. When the company was formed and commenced to carry on business using the business names it was the duty of the respondent to lodge with the Registrar a statement in the prescribed form signed by him notifying the Registrar of the change in particulars…There is nothing in that Act which vests ownerships of a business name in a person who is not carrying on business”.
[16]Section 24.
[17]Re ABC Plastik Pty Ltd (1975) 1 ACLR 446.
[18]At 450.
His Honour’s approach was approved by the New South Wales Court of Appeal in Dennis Pethybridge v Stediks Holdings Pty Ltd.[19]
[19][2007] NSWCA 154 at [55] per Campbell JA with whom Beazley and Basten JJA agreed.
The evidence is all one way that Rynah is carrying on business under the name “Melba’s On The Park” and not the first respondent, notwithstanding that he appears to have moved into some consulting role in the business as noted by the receivers and managers and Mr Paul Allen. Since their appointment the receivers have continued to operate the business “Melba’s On The Park” under that name from its premises at 46 Cavill Avenue, Surfers Paradise.
The Business Names Act confers no power on the court to direct an alteration of the register of business names and the declarations sought in the originating application are submitted to be sufficient to satisfy the registrar that the prima facie ownership of the business name in George McMillan should be cancelled.[20]
[20]A not dissimilar approach commended itself to Chesterman J in Architects (Australia) Pty Ltd t/a Architects Australia v Witty Consultants Pty Ltd [2002] QSC 139 although the orders were couched in restraints rather than declarations.
Similarly, the name of the second respondent, Melba’s On The Park Pty Ltd, ought not be available to the second respondent pursuant to s 147(1)(b) of the Corporations Act 2001 (Cth).
Joint Venture
On or about 6 June 2008 Mr McMillan sent by facsimile transmission a copy of the Joint Venture Agreement dated 1 July 2007 to Mr Harris, one of the receivers and managers, which he then provided to Westpac. Westpac was not asked to give its consent to the Joint Venture Agreement prior to its execution and has not consented to that agreement whereby Rynah disposed of the assets charged in favour of Westpac to the second respondent. The Memorandum of Common Provisions incorporated in the First Charge and Clause 10 of the Second Charge prohibits Rynah from disposing of or granting an encumbrance over any part of the mortgaged property without Westpac’s consent. The Joint Venture Agreement purports to transfer all of the assets and undertaking of Rynah as First Venturer to the second respondent as Second Venturer. Notwithstanding Mr Thompson’s submissions to the contrary, the Joint Venture Agreement is expressly not a partnership.
By letter dated 10 June 2008, Westpac’s solicitors notified Mr McMillan, Melbas On The Park Pty Ltd, Mr Paul Allen and Rynah that it did not give consent for Rynah to enter into the Joint Venture Agreement and did not recognise any other interest in Rynah’s property. Accordingly, Westpac is not bound by the terms of the Joint Venture Agreement between Rynah and the second respondent and any purported assignment or transfer of property, the subject of the First Charge and the Second Charge in favour of Westpac is, as against Westpac, of no effect.
Books and records of Rynah
The receivers and managers contend that they have not been provided with all the books and records of Rynah which would be expected to be held by a company carrying on the business that Rynah does. The only recent accounts or business records relating to “Melba’s On The Park” are the profit and loss statement from July 2007 to February 2008, the balance sheet at February 2008 and gaming machine revenue figures for the months from September 2007 to February 2008. In their correspondence, the solicitors for Westpac, writing to Mr McMillan’s solicitors, stated that they would expect Melbas to have accounts and business records such as monthly management accounts, budgets, cash flow forecasts, banking records, supply invoices, lease agreements for premises, vehicles and equipment, copies of supplier agreements, body corporate records, building plans and employee contract awards, pay rates and entitlements. In order to manage the business properly the receivers and managers required the trading accounts and business records for at least the past 12 months.
Mr Jason Pietzner, a senior manager with the firm McGrathNicol, working under the supervision of the receivers and managers, deposed that on 2 June 2008 in company with Mr Harris he attended at 46 Cavill Avenue, Surfers Paradise and asked to speak to a manager. Mr McMillan identified himself as the General Manager. They were also introduced to Mr Paul Allen, Mr Geoffrey Sullivan and Mr David Allen, who was introduced as the General Manager of the business. Mr Pietzner asked Mr McMillan about his role in the business and what he did. Mr Pietzner has deposed that Mr McMillan replied in words to the following effect:
“The Business is carried on by Melbas in the Park Pty Ltd, a company wholly controlled by me, pursuant to the terms of a Joint Venture Agreement between Melbas on the Park Pty Ltd and Rynah. I am managing all the various cost centres of the business. Mr Allen is still a shareholder and director of Rynah and I am the CEO. I have employed a bookkeeper. Geoff (which I understood to be a reference to Mr Geoff Sullivan) is out of the operational control of the business but is still working for the business. Physical stock takes are performed every day and I review the stock levels, check what stock has been consumed, review and then approve purchase orders for for stock based on current stock levels and consumption levels. I have arranged for a number of new employees to be employed as I am able to negotiate better pay rates with the employees…I come in unannounced usually – not on set times – some days I came in for 1 or 2 hours, other days I will come in for the afternoon or at night…Sometimes in the morning.”
Mr Pietzner sought information from Mr Paul Allen, Mr David Allen
and Mr Sullivan about the books and records which could not be found at
46 Cavill Avenue. They indicated that Mr McMillan was assisting.
Mr McMillan had indicted to Messrs Harris and Pietzner that he had a number of boxes containing books and records relating to the business’ trading and had hired a new bookkeeper because KPMG, who had previously been doing the accounts, had not dealt with inter-company transactions correctly. It appears, however, that KPMG had done little or no work for Rynah or any of the companies associated with Melbas since 2005. KPMG was not in possession of any current books of account or business records. All persons approached by the receivers and managers who might have been expected to have some knowledge of the whereabouts of the books and records of the business directed enquiries to Mr McMillan.
Mr Allen has deposed that neither he nor the second respondent hold any of Rynah’s documents, books or other records.
Mr Crawford submitted that Mr McMillan was prepared to swear a further affidavit that none of Rynah’s documents are in his possession. It may be that Mr McMillan is relying upon the Joint Venture Agreement that Rynah now owns virtually nothing to do with the Business. All of the conversations which have been held by the receivers and manages or their employees point to Mr McMillan being in control of the books and records relating to the Business of Melba’s On The Park. Mr McMillan and the second respondent have demonstrated no entitlement to any of Rynah’s books, records or other documents as against Westpac or the receivers and managers and must provide those documents to the receivers and managers promptly.
Conclusion
I am satisfied the Deed of Assignment operates as a charge over the property of Rynah and may be redeemed. If that occurs, then it is appropriate that the declarations sought by Westpac be made. The precise terms of an order to reflect that conclusion may be provided by counsel.
I have concluded that Mr George McMillan and/or those controlling the second respondent are able to provide Westpac with the documents sought or can say where they are and an order will reflect that conclusion.
Finally, I have concluded that Westpac is not bound by the Joint Venture Agreement between Rynah and George McMillan.
Orders
1. The terms of the order about the Deed of Assignment and the business name and corporations name declarations are to be settled by counsel consistently with these reasons.
2. The first respondent and the second respondent shall within seven days of this order deliver up to the applicant all books, records, statements, invoices, cheque butts, receipts, pay slips and other documents in their possession, power or control which are the property of Rynah Pty Ltd or relate to the business carried on under the business name “Melbas” or “Melba’s On The Park” at or from 46 Cavill Avenue, Surfers Paradise, Queensland.
3. It is declared that the applicant is not bound by the terms of the Joint Venture Agreement dated 1 July 2007 between Rynah Pty Ltd and Melbas On The Park Pty Ltd (formerly Credit Systems of Australia Pty Ltd).
0
4
2