Wyatt v Charles Phillipe Louis Nilant as Liquidator of Icenet Pty Ltd (in Liq)

[2002] WASC 312

WYATT & ANOR -v- CHARLES PHILLIPE LOUIS NILANT as Liquidator of ICENET PTY LTD (IN LIQ) [2002] WASC 312

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2002] WASC 312
Case No:	CIV:1509/2002	Heard:	11 DECEMBER 2002
Coram:	MASTER SANDERSON	Delivered:	17/12/02
No of pages:	6	Judgment Part:	1 of 1
Result:	Action dismissed
Category:	B
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Parties:	CHRISTOPHER WYATT JANE WYATT CHARLES PHILLIPE LOUIS NILANT as Liquidator of ICENET PTY LTD (IN LIQ)
Catchwords:	Ownership of property the subject of charges Turns on own facts
Legislation:	Nil
Case References:	Nil Campbell v Michael Mount PPB (1996) 14 ACLC 218 Cashmanv 7 North Golden Gate Gold Mining Co (1897) 7 QLJ 152 Kratzman Pty Ltd (In Liq) v Tucker, Liquidator of Murray Reid Murray Developments (Qld) Pty Ltd (In Liq) [No 2] (1968) 123 CLR 295 Re Yaterphone Ltd [1935] 1 Ch 392

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION : WYATT & ANOR -v- CHARLES PHILLIPE LOUIS NILANT as Liquidator of ICENET PTY LTD (IN LIQ) [2002] WASC 312 CORAM : MASTER SANDERSON HEARD : 11 DECEMBER 2002 DELIVERED : 17 DECEMBER 2002 FILE NO/S : CIV 1509 of 2002 BETWEEN : CHRISTOPHER WYATT

JANE WYATT
Plaintiffs

AND

CHARLES PHILLIPE LOUIS NILANT as Liquidator of ICENET PTY LTD (IN LIQ)
Defendant

Catchwords:

Ownership of property the subject of charges - Turns on own facts

Legislation:

Nil

Result:

Action dismissed

(Page 2)

Category: B

Representation:

Counsel:

Plaintiffs : Mr S R Sirett
Defendant : Mr T B Lyons

Solicitors:

Plaintiffs : Wojtowicz Kelly
Defendant : Gibson Lyons

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

Nil

Case(s) also cited:

Campbell v Michael Mount PPB (1996) 14 ACLC 218
Cashmanv 7 North Golden Gate Gold Mining Co (1897) 7 QLJ 152
Kratzman Pty Ltd (In Liq) v Tucker, Liquidator of Murray Reid Murray Developments (Qld) Pty Ltd (In Liq) [No 2] (1968) 123 CLR 295
Re Yaterphone Ltd [1935] 1 Ch 392

(Page 3)

1 MASTER SANDERSON: Occasionally cases which on the pleadings give rise to complicated questions of law and fact, resolve themselves so that what is left to be determined at trial is one simple issue. This is such a case. At trial there was only one issue between the parties and virtually all of the facts were agreed. That being so, it is unnecessary for me to go through the pleadings or the majority of the evidence. The plaintiffs' claim can be summarised by saying that they seek declarations as to the validity of certain charges they presently hold. The precise nature of the relief claimed and the way in which the cause of action arises emerges from the evidence.

2 The plaintiffs relied on the evidence of Christopher Wyatt, the firstnamed plaintiff, and Maxine Lesley May ("May"). The defendant gave evidence, as did his associate, Brendan Joseph Buckley ("Buckley"). Evidence was tendered by affidavit supplemented in each case by brief evidence-in-chief. Each of the witnesses was cross-examined. The relevant facts which emerged from the evidence and cross-examination may be summarised in the following way.

3 On 23 August 2000 Westpac Banking Corporation ("the Bank") took a fixed and floating charge over the assets and undertakings of Icenet Pty Ltd ("Icenet"). On 5 December 2000 the Bank took the further fixed and floating charge over Icenet's assets. On 30 April 2001 there was a purported transfer of the assets of Icenet to Janice Robson as trustee for the Hepburn Trust. Such a transfer ran counter to the provisions of the Bank's charge. On 24 May 2001 Kingsport Holdings Pty Ltd ("Kingsport Holdings") was appointed trustee of the Hepburn Trust and commenced to run the business of Icenet. On 16 August 2001 there was a physical handover of Icenet's assets to Kingsport Holdings.

4 On 30 July 2001 May of the Bank and the plaintiffs met to discuss the breach of the charges by Icenet. On 10 August 2001 notice of demand was issued by the Bank to Icenet pursuant to default in repayments due under the charges. On 23 August 2001 the defendant was appointed liquidator of Icenet. Some time late in August the liquidator contacted the Bank by telephone to advise of his appointment and to discuss possible action. On 29 August 2001 the liquidator sent to the Bank a facsimile requesting confirmation the Bank had not consented to the sale of Icenet's assets to Kingsport Holdings. The Bank responded by letter to the liquidator on 30 August 2001 confirming that there had been no such consent. On 31 August 2001 the liquidator sent a facsimile to the Bank informing the Bank that the liquidator had requested offers for the purchase of the business assets of Icenet. On 3 September 2001 the

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liquidator sent a further facsimile to the Bank outlining an offer received for the purchase of the business assets. On 6 September 2001 the liquidator spoke with May concerning the Bank's intentions as to the appointment of a receiver and manager, a power reserved for the Bank under the terms of the charges.

5 All parties accept the facts as set out above. In particular, the plaintiffs accept that it was not open to Icenet to transfer its assets to Kingsport Holdings. It is accepted by the plaintiffs that the purported transfer was ineffective and that as at 6 September 2001 the assets were retained by Icenet and subject to the charges to the Bank. Furthermore, consequent upon Icenet's failure to comply with the default notice, the charges had crystallised. That being the case, the liquidator could only deal with the assets subject to the rights of the Bank.

6 Pursuant to the terms of the charge, the Bank, as at 6 September 2001, had at least three options. First, it could allow the liquidator to obtain what he could for Icenet's assets and retain the proceeds of sale. The Bank was protected because it had alternative security. Secondly, the Bank could have appointed a receiver/manager. It had not taken this step in July or early August when default occurred, but even after the appointment of a liquidator to Icenet, the Bank still had the power to appoint a receiver/manager over the assets covered by the charge. Thirdly, the Bank could have allowed the liquidator to dispose of Icenet's assets with the proceeds of sale of those assets being passed onto the Bank. If this course was adopted, the Bank would have been entitled to all of the proceeds of the sale of the fixed assets of Icenet and the liquidator would have been entitled out of the floating assets to make payment of his fees before passing the rest of the proceeds of sale onto the Bank. Once again, all parties accepted that these three options were open to the Bank.

7 At approximately 12.45pm on 7 September 2001 May telephoned the liquidator's office. Neither the liquidator nor Buckley was available. May left a message to call back. Very soon thereafter, at around 12.52pm, the liquidator sent a facsimile to the Bank. A copy of this facsimile appears as annexure "LN7" to the defendant's affidavit sworn 21 October 2002: Exhibit "A". The facsimile refers to an offer by a company known as Broadband Holdings Pty Ltd ("Broadband") to purchase the assets of Icenet. Relevantly, the letter reads:

"Whilst the offer presently refers to the consent of the secured creditor as a condition of acceptance, my legal advice is to the

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effect that property recovered from such proceedings (that is proceedings under s 588FE and 588FF of the Corporations Act) would not be subject to the fixed and floating charge held by the Bank."

8 It would appear then that at the time the liquidator sent that facsimile he was under the mistaken impression that he was free to deal with Icenet's assets, the subject of the charge, without reference to the Bank. Clearly that was wrong. It was of no consequence that property was in the hands of Kingsport Holdings. It was still subject to the Bank's charges.

9 At around 2.55pm on 7 September 2001, Buckley telephoned May. In his affidavit sworn 21 October 2002 (Exhibit "B") Buckley says of this conversation (par 5):

"She (May) advised me that the Bank had no objection to the course of action proposed by Mr Nilant and in particular to the sale of the assets to Fleet Broadband Pty Ltd …"

Buckley refers to annexure "BJB1" to his affidavit, being a copy of a handwritten memo which he says he completed at the time of the conversation. It appears to support what he says as to the discussion. In her affidavit sworn 21 November 2002 (Exhibit "1") May says that she does not recall specifically the discussion with Buckley. She then goes on to say (par 25):

"My general recollection is that I conveyed to Mr Nilant (either directly or through one of his colleagues) that the Bank had no objection to him conducting negotiations for the sale of Icenet's business assets. By this, I meant that the Bank had no objection to Mr Nilant acting in relation to the assets as long as he accounted to the Bank in full as a secured creditor under the Charges."

10 It must be remembered that this evidence was led by the plaintiffs. The plaintiffs cannot discredit their own witness and to be fair to counsel, he did not attempt to do so. May was subjected to limited cross-examination and her position remained consistent throughout. She impressed me as a witness of truth and I have no hesitation in accepting her evidence. In my view, it is clear that at no time did the Bank indicate they would relinquish their interest in Icenet's assets. Rather, they decided as a matter of convenience that they would allow the defendant to realise these assets, provided he accounted to them for the proceeds of sale.
(Page 6)

11 What occurred thereafter can be briefly summarised. The liquidator concluded an agreement to sell Icenet's assets. On 13 November 2001 the liquidator commenced proceedings under the Corporations Act against Kingsport Holdings seeking recovery of the assets. On 7 March 2002 the Bank assigned the charges to the plaintiffs for an amount of $286,388.86. On 26 March 2002 the liquidator obtained orders requiring Kingsport Holdings to transfer to it any assets of Icenet: see COR 404 of 2001. On 19 April 2002 the plaintiffs commenced these proceedings.

12 Essentially what the plaintiffs argue is that they are entitled to deal with the assets of Icenet as assignees of the Bank. They say these assets are still subject to the charges. They say that it was not ever open to the liquidator to dispose of the assets. As a corollary to this, they say that the liquidator is not entitled to recover from Kingsport Holdings the assets of Icenet presently in its possession - as these assets are subject to the charges and they are the assignees of those charges, it is up to them to determine what becomes of the property.

13 On all the evidence I am satisfied that the Bank, through May, authorised the liquidator to deal with Icenet's assets. I accept that the liquidator may well have acted in the mistaken belief he was entitled to deal with the assets the subject of the charges without reference to the Bank. But the mistake on the part of the liquidator cannot affect the legal position so far as the Bank was concerned. May determined, on behalf of the Bank, as a matter of expediency, it was best to allow the liquidator to deal with Icenet's assets. The Bank was quite entitled to take that course. It may well be that as a consequence the liquidator was an agent of the Bank and is liable to account to the Bank for the proceeds of sale. That would mean, given that the plaintiffs are now the holders of the charges, they could call on the liquidator to account. That is not a matter which I need deal with in the context of these proceedings. All I have to determine is whether the plaintiffs have any rights to Icenet's property which was the subject of the charges. I am satisfied they do not.

14 Accordingly I would dismiss the plaintiffs' claim. The plaintiffs should pay the liquidator's costs of the action to be taxed.