Apostolou v VA Corporation Aust Pty Ltd

REASONS FOR JUDGMENT 1 John Matthies & Co, a firm of solicitors, seeks an order that it be paid $41,300 out of the proceeds of the sale of the property at 181-185 St Kilda Road, St Kilda (the St Kilda Road property). Those proceeds (less amounts already paid out pursuant to previous orders) are presently in court to be paid to the persons who have a claim over them. John Matthies & Co is one of those claimants. 2 Prior to the sale of the St Kilda Road property, the registered proprietor was VA Corporation of Australia Pty Ltd (VA Corporation). That company held the property in its capacity as trustee of the VA Unit Trust, a trust that had been established for the benefit of the Vasiliou family. 3 On 29 March 2006 VA Corporation was wound up in insolvency by order of the Supreme Court of Victoria. Messrs White and Quin were appointed as the liquidators of the company. 4 The St Kilda Road property was an asset of the VA Unit Trust. It had been mortgaged to Perpetual Trustee Company Limited. Following the appointment of liquidators, the mortgagee took possession of the St Kilda Road property and arranged for its sale by public auction. 5 Prior to the auction Ms Apostolou, who claimed to have been appointed as trustee of the VA Unit Trust in place of VA Corporation, applied for an interlocutory injunction to restrain the sale. One basis upon which the injunction was sought was that finance had been arranged to pay out the debt due to the mortgagee. 6 On the day prior to the auction Mr Vasiliou (Ms Apostolou's husband) had approached Mr Matthies of John Matthies & Co seeking to refinance the property. John Matthies & Co had previously arranged finance to Mr Vasiliou, or one of his companies. 7 Following the usual inquiries and the receipt of a 2007 valuation, John Matthies & Co made a written offer of finance on behalf of a client. The offer was contained in a letter dated 5 March 2008 addressed to "Ms Vasiliki Apostolou & The Directors V.A. Corporation of Australia Pty. Ltd.". The letter offered finance in the sum of $2.5 million at an interest rate of 14.5% pa to be secured by a registered first mortgage over the St Kilda Road property, a registered mortgage debenture, directors' guarantees, a guarantee from Andrew Vasiliou (according to evidence he had been appointed a director on 2 February 2008) and a guarantee from the registered proprietor of property at 10 Claremont Street, South Yarra. 8 The offer provided for the payment of a fee being "the mortgagees [sic] solicitors usual scale legal costs, 1.5% application fee together with GST, reimbursement of out-of-pocket expenses and any additional costs arising from further work undertaken …". 9 The offer was conditional. Among the conditions were the following: 6(a) In order to better secure all and any monies owing from the borrower and/or guarantor to the Lender or its Solicitors, the borrower and/or guarantor hereby charge all their interest in the proposed security property and any other freehold property in Victoria in which the Borrower or guarantor have an interest with payment of all monies owing pursuant to this agreement or otherwise. … 6(c) The borrower when and if required by the Lender or its Solicitors will execute a Mortgage in favour of the Lender or its Solicitors to better secure all and any monies owing with such Mortgage to be in a registrable form most recently published by the Law Institute of Victoria with the normal and common terms and conditions of such Mortgage as prescribed by the Law Institute of Victoria. 10 The offer was signed by Ms Apostolou and Mr Vasiliou and delivered to John Matthies & Co on the day of the auction. It is to be noted that the offer was not signed by the liquidators who were, by then, in charge of the affairs of VA Corporation. 11 When the application for the interlocutory injunction was heard by me, I was informed of an offer for refinancing. Mr Matthies attended a part of the hearing. He informed me that the funds to pay out the mortgagee were available but prior to advancement the lender would require the execution of mortgage documentation by the borrower, which, with liquidators having been appointed, would require execution by the liquidators. Mr Matthies said that subject to this, the lender was in a position to settle the loan immediately. Mr Matthies inquired whether he could be guaranteed that the liquidator would execute the mortgage document in which case the funds would be made available immediately. 12 The liquidator did not offer to execute the mortgage on behalf of VA Corporation. Nor was it proper that they be compelled to do so. Accordingly, no loan monies were advanced, the interlocutory injunction was refused, the auction sale proceeded and the property was sold. 13 John Matthies & Co claims payment of $41,300 being the application of the fee of 1.5%, GST on the application fee plus legal costs less an amount paid on account of those costs and expenses. It claims to be entitled to these amounts out of the proceeds of sale "as an equitable chargee and equitable mortgagee". It says it is a chargee or mortgagee by reason of the terms of the letter of offer. 14 In my opinion John Matthies & Co is neither a chargee nor a mortgagee. It is not a chargee or mortgagee because, first, the offer which was "accepted" by Mr Vasiliou and Ms Apostolou did not result in a binding contract and, second, if it did result in a binding contract, John Matthies & Co was not a contracting party. 15 Dealing first with the parties issue, it is to be noted that the letter of offer makes clear both in the opening and concluding paragraphs that John Matthies & Co was not acting on its own account but making the offer as solicitor for an unnamed client. The relevant paragraphs of the letter read: We acknowledge receipt of your recent application and advise that subject to the conditions listed below a client of this office is prepared to advance the sum of $2,500,000.00 over the security of the abovementioned property on the following terms and conditions: … Our client reserves the right to withdraw or amend the loan approval at any time without liability and at its absolute discretion if, in its opinion or in our opinion there arises any matter which may adversely affect the proposed loan. Any changes to the terms and conditions contained herein shall be shown in loan documentation which will also give further and better particulars of the loan. These are not the only portions of the letter which make clear that John Matthies & Co was not making an offer as principal. 16 As to the "no binding contract" point, it will be recalled that the offer was made to Ms Apostolou and the directors of VA Corporation. It is to be assumed (it could hardly be otherwise) that the offer to the directors was made to them in that capacity so that, if they accepted the offer, that would bind the company. 17 But, by reason of s 471A(1) of the Corporations Act 2001 (Cth) the power of the directors ceased upon the appointment of the liquidators. There are exceptions. A director may exercise a function or power as a director of a company with the liquidator's written approval or with the approval of the court. Here, however, no such approval was sought or granted. 18 The application will be dismissed. There will be no order for costs because Mr Vasiliou, who argued against the application, did not incur any legal costs in so doing. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.