Williams, C.J. v National Australia Bank Ltd
[1995] FCA 364
•30 May 1995
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION No VG 3245 of 1995
IN THE MATTER of Section 418A of the Corporations Law
and
IN THE MATTER of SELMOORE PTY LTD (ACN 053 244 152) (RECEIVER AND MANAGER APPOINTED)
CAROL JANE WILLIAMS and BARRY JOHN WILLIAMS
Applicants
-and-
BARRY LORNE JENNER
First Respondent
-and-
NATIONAL AUSTRALIA BANK LIMITED
Second Respondent
Coram: Olney J
Place: Melbourne
Judgment 30 May 1995
Reasons 1 June 1995
published:
REASONS FOR JUDGMENT
On 12 May 1995 the applicants filed an application seeking, inter alia, orders pursuant to s 418A of the Corporations Law declaring that:
a)the purported appointment of the first respondent (Jenner) as receiver and manager of Selmoore Pty Ltd (Selmoore) was invalid;
b)Jenner did not validly enter into possession or assume control of the property of Selmoore under the terms of registered charge 439909.
Section 418A of the Corporations Law provides:
418A(1)Where there is doubt, on a specific ground, about:
(a)whether a purported appointment of a person, after the commencement of this section, as receiver of property of a corporation is valid; or
(b)whether a person who has entered into possession, or assumed control, of property of a corporation after the commencement of this section did so validly under the terms of a charge on that property;
the person, the corporation or any of the corporation's creditors may apply to the Court for an order under subsection (2).
(2) On an application, the Court may make an order declaring whether or not:
(a)the purported appointment was valid; or
(b)the person entered into possession, or assumed control, validly under the terms of the charge;
as the case may be, on the ground specified in the application or on some other ground.
The applicants have brought the proceeding in their capacity as directors of Selmoore. It would seem that they have no standing in that capacity to seek relief under s 418A. Be that as it may, the question of standing has not at this stage been put in issue by the respondents and the matter has proceeded thus far on the unstated assumption that the applicants have the necessary standing to institute the proceeding.
The applicants have filed in support of the application affidavits of:
a)Carol Jane Williams (Carol Williams) (the first-named applicant and a director of Selmoore) sworn 12 May 1995;
b)Tracey Lee Williams (Tracey Williams) (Carol Williams' daughter) sworn 12 May 1995;
c)Geraldine Bradley Dann (Ms Dann) (a solicitor employed by the applicants' solicitors) sworn 12 May 1995.
The application was returnable on 18 May 1995. On that occasion orders were made for:
a)the filing of affidavits in opposition to the application by 4.00pm on 24 May 1995;
b)the filing of affidavits in reply by 4.00pm on 31 May 1995;
c)mutual discovery by 4.00pm on 7 June 1995;
d)the adjournment of the directions hearing to 22 June 1995.
In addition, the applicants were given leave to file and serve a notice of motion returnable on 25 May 1995 seeking orders relating to the property of the company.
On 19 May 1995 the applicants filed notice of a motion (which was in fact made returnable on 26 May 1995) seeking an order that Jenner be restrained from selling or otherwise dealing with the assets and undertaking of Selmoore until the hearing and determination of the application.
A further affidavit of Carol Williams sworn 24 May 1995 was filed in support of the motion, as was a further affidavit of Ms Dann sworn 26 May 1995.
The respondents have filed a number of affidavits in response to the application and motion, namely affidavits of:
a)Frank D'Acunto (D'Acunto) (a business manager's clerk employed by the second respondent (NAB)) sworn 24 May 1995.
b)James Richard Francis Williams (J.R.F. Williams) (a legal advisory manager employed by NAB) sworn 25 May 1995;
c)Joseph John Desira (Desira) (a business banking manager employed by NAB) sworn 24 May 1995;
d)Jenner sworn 26 May 1995;
e)Victor Anthony Harcourt (Harcourt) (a solicitor employed by the respondents' solicitors) sworn 26 May 1995.
f)Peter Barbetti (Barbetti) (a business banking manager employed by NAB) sworn 25 May 1995.
None of the deponents on either side was required for cross-examination. Accordingly, I am not in a position to make any findings as to credit in respect of any conflict in the affidavit evidence.
The facts asserted on behalf of the applicants are these:
a)The applicants are the directors of Selmoore. They are the lessees of the premises at 5 Bolinda Road Campbellfield where the registered office of Selmoore is situated. (It is common cause that until October 1994 companies associated with the applicants carried on business at 5 Bolinda Road Campbellfield and in the course of that business the plant and equipment referred to hereafter was used);
b)On 23 May 1994 a debenture in favour of NAB over the assets, undertaking and goodwill of Selmoore was registered and is identified as no 439909;
c)Tracey Williams collects mail addressed to Selmoore's registered office and takes it home to her parents each evening;
d)On 28 April 1995 Tracey Williams was at 5 Bolinda Road Campbellfield. At about 9.15am on that day, 3 persons attended there, two of whom identified themselves as Jenner and his assistant Andrew Cameron. The third person did not identify himself. Ms Williams was handed a notice of appointment of Jenner as receiver and manager of Selmoore.
e)The notice handed to Tracey Williams was dated 26 April 1995 and was signed by Jenner. The thrust of the notice, which was given pursuant to s 429(2) of the Corporations Law, was that Jenner had been appointed receiver and manager of the company by NAB under the powers contained in a debenture dated 19 April 1994 registered no 439909.
f)At about 10.33am on 28 April 1995 an employee of Jetsource Pty Ltd (Jetsource) gave Tracey Williams an envelope bearing on its face the name of NAB. The envelope was addressed to Selmoore. It was postmarked at Melbourne on 27 April 1995. At the request of her mother, Tracey Williams opened the envelope and found it to contain a document dated 21 April 1995 signed on behalf of NAB which demanded payment by Selmoore of all moneys owing to NAB pursuant to the debenture dated 19 April 1995 registered no 439909.
g)The directors of Selmoore deny having received any notice of demand from NAB other than the notice referred to above.
h)On 8 May 1995, Jenner (in his capacity as receiver and manager of Selmoore) in a proceeding in the County Court at Melbourne in which he is the plaintiff and Jetsource is the defendant and in which Overmaster International Pty Ltd (Overmaster) interpleaded (the County Court proceeding), obtained an order, inter alia, restraining Jetsource pending trial of the County Court proceeding from dealing with property of Selmoore the subject of debenture 439909 in its possession. Jenner obtained this order upon giving an undertaking, inter alia, to keep the property on the premises at 5 Bolinda Road Campbellfield for a further 21 days from the date of the order. Jetsource has now applied to the County Court to vary the terms of the order to obtain the use of the property in question to enable it to continue to trade. That application is still pending.
On 18 May 1995 the applicants' solicitors sought an undertaking from Jenner that he would not deal with the assets of Selmoore pending the outcome of the application and that he would not advertise any proposed sale of goods in the media on 20 May 1995. Jenner did not give the undertakings sought and through his solicitor informed the applicants' solicitors that he would oppose any application for an injunction. The applicants' solicitors served a copy of the notice of motion on the respondents' solicitors on the afternoon of 19 May 1995.
j)On Monday 22 May 1995 Jenner and others employed by him attended at 5 Bolinda Road Campbellfield and:
i)disconnected all the machines, in some cases by cutting live electrical wires; and
ii)stacked up furniture at the premises including furniture not under his possession.
The facts asserted on behalf of the respondents are as follows:
a)On 16 March 1994 the second named applicant (Barry Williams) wrote to Barbetti, NAB Manager at 415 High Street Preston, seeking an overdraft facility of $100,000 and offered as security "a registered first debenture charge over Selmoore Pty Ltd which owns the whole of the stock, plant and equipment of the business". The same letter enclosed a valuation of
the stock, plant and equipment addressed to Selmoore.b)On 11 April 1994 Barry Williams wrote to Barbetti, and forwarded, inter alia, a copy of a deed bearing date 1 July 1993 whereby Overmaster transferred all right title and interest in the plant and machinery to Selmoore.
c)On 3 January 1995 D'Acunto served on Selmoore a notice of demand dated 30 December 1994 signed by one Peter Norton, Credit Manager of NAB, by posting same by ordinary post in an envelope addressed to Selmoore at 5 Bolinda Road Campbellfield at the Coburg Post Office. The demand required Selmoore to pay $104,129.72 in respect of account no 62-457-1055. At the same time, a demand addressed to Deyman Pty Ltd, another of the applicants' companies, was served in a similar manner.
d)In early January 1995 Carol Williams telephoned Desira and said words to the effect,
"Not only have I got the demands from you but I have to pay the stamps because there were not any on them".
e)At about 2.00pm on 21 April 1995 J.R.F. Williams on behalf of NAB signed a notice of demand dated 21 April 1995 addressed to Selmoore which he gave to his secretary who then typed Selmoore's name and address on an envelope, placed the demand in the envelope, sealed the envelope and placed it in the mail basket at 2nd floor South 271 Collins Street Melbourne. In the ordinary course of business the mail basket is cleared 6 times a day and the contents taken to the correspondence department, franked and then delivered to the Flinders Lane Post Office for posting. (The demand referred to above is clearly the same document as is referred to in the evidence adduced by the applicants).
f)In the County Court proceeding Tracey Williams deposed that all plant and equipment used by Jetsource in its business operations was owned by Overmaster and was used pursuant to a licence at will for which the consideration was that Jetsource would maintain the same in a fair and reasonable condition at its own expense.
g)In the County Court proceeding Carol Williams deposed that the plant and equipment was owned by Overmaster.
h)On 19 May 1995 Jenner and other persons in his employ attended at 5 Bolinda Road Campbellfield because of Jenner's concern that assets of Selmoore were being used by unauthorised persons. To ensure that the equipment could not be used he took steps which included disconnecting the power but not the cutting of live wires.
Although the terms of debenture no 439909 were not canvassed in argument, a copy of the document was put in evidence as an exhibit to Carol Williams' affidavit of 12 May 1995. The debenture was executed on 19 April 1994. It contains a covenant by Selmoore to pay NAB on demand all the "secured amounts" referred to in the demand. The term "secured amounts" is defined comprehensively to include, inter alia, all amounts which NAB has advanced or paid to or on behalf of Selmoore including contingent liabilities and interest.
There is evidence before the Court capable of supporting a finding that NAB made a demand for payment of Selmoore's overdraft account liability in January 1995. It is common cause that the debt has not been paid and remains outstanding. Although the evidence of the serving of the demand taken in isolation would be less than satisfactory, there is evidence of the receipt of the demand being acknowledged by Carol Williams shortly after the demand is said to have been sent. The applicants through Carol Williams have made a general denial that any demand other than that received by post on 28 April 1995 was made, but they have not specifically addressed the evidence adduced from employees of NAB in relation to the earlier demand.
There is in my opinion a triable issue as to whether a demand was made in January 1995. The triable issue is a serious issue in that it raises a question which goes to the heart of Jenner's authority to act as receiver and manager but it seems that apart from Carol Williams' general denial, the evidence is at present all one way on that issue, and it suggests that a demand was in fact made in January 1995. If this is so, in terms of the debenture, an "event of default" has occurred which would entitle NAB to appoint a receiver. It is not suggested that the demand dated 21 April 1995 which on the evidence was not delivered to Selmoore until after Jenner's appointment as receiver and manager on 26 April 1995 could give rise to a default justifying the appointment of a receiver.
It is not in issue that Selmoore is indebted to NAB and that the debt is secured by registered charge 439909, nor is there any doubt that NAB has made demand on Selmoore for payment of the debt. There is an issue as to whether or not the demand was made in January 1995 or on 28 April 1995, but the applicants do not dispute that a demand has been made, and that the debt has not been paid. If it be later held that the appointment of Jenner as receiver and manager on 26 April 1995 was invalid, NAB could, so long as Selmoore's default continues, re-appoint Jenner or some other person as receiver and manager. This may mean that Jenner or NAB could be held liable to Selmoore for any damage sustained as a result of the invalid appointment. However, in a practical sense the undoubted financial standing of NAB is such that any damages would be readily recoverable by Selmoore. Assuming for present purposes that there is a serious question to be tried in relation to the validity of Jenner's appointment, it seems to me that this is a case in which damages would be an adequate remedy. As the applicants are not prepared to bring into Court the amount of the debt, the balance of convenience lies heavily in favour of refusing the interlocutory relief sought by the applicants. The motion should be dismissed.
I certify that this and the preceding 11 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney
Associate:
Dated:
Heard: 26 May 1995
Place: Melbourne
Judgment: 30 May 1995
Reasons 1 June 1995
published:
Appearances:
Mr D.H. Denton (instructed by Cornwall Stodart) appeared for the applicants.
Mr G. Watkins (instructed by Russell Kennedy) appeared for the respondents.
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