C2C Investments Pty Ltd, in the matter of C2C Investments Pty Ltd v Leigh

The plaintiffs' contentions 16 The plaintiffs acknowledge that the principal proceeding and the cross-claim raise disputed questions of fact, particularly in relation to what had transpired at the first meeting. In this connection the plaintiffs will contend at trial, contrary to the first defendant's position, that no resolution was passed at the first meeting providing for the first defendant to execute and register the mortgage. They will contend that the minutes of the first meeting on which the first defendant relies are false and were known to be false by the first defendant at the time the mortgage was executed and registered. 17 Notwithstanding this, they submit that there are reasons why the first defendant has no reasonable prospect of successfully prosecuting his cross-claim which transcend their factual controversy with him and which lead to the conclusion that the first defendant's cross-claim should be summarily dismissed. 18 First, the plaintiffs submit that the mortgage is obviously invalid and of no force or effect. 19 Secondly, they submit that the resolutions that were passed at the first meeting fixing the first defendant's remuneration in respect of his administration of C2C Investments, and the resolution that was passed at the second meeting fixing the first defendant's remuneration in respect of his administration of C2C Developments, are invalid because, in each case, the resolution failed to comply with s 449E(1B) of the Corporations Act 2001 (Cth) (the Corporations Act). 20 Thirdly, the plaintiffs submit that the bringing of the cross-claim in respect of the first defendant's remuneration and expenses in relation to his administration of C2C Developments is foreclosed by the provisions of the Deed of Company Arrangement. 21 Fourthly, the plaintiffs submit that the first defendant's cross-claim based on estoppel cannot succeed because no representation of any existing fact, circumstance or thing, or any prior event, is pleaded on which an estoppel can be properly grounded. 22 I will consider each of these matters in turn. However, before doing so, there are some preliminary observations I wish to make about the relevant principles to be applied.

Relevant principles 23 Although the parties' written submissions canvassed, in some considerable detail, the relevant principles to be applied on a motion for summary judgment, ultimately there was no real contest between them in this regard. The parties did not seek to analyse or address any particular relationship between O 20 r 5(1)(a) and s 31A of the Federal Court Act. Nevertheless, the first defendant accepted that, at the end of the day, s 31A would govern the fate of the plaintiffs' motion and that that provision had changed the approach to the giving of summary judgment described in cases such as Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. 24 Section 31A of the Federal Court Act provides: (1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers that the Court has apart from this section. (5) This section does not apply to criminal proceedings. 25 The effect of this provision was discussed in Spencer v The Commonwealth of Australia (2010) 241 CLR 118. In that case, Hayne, Crennan, Kiefel and Bell JJ said: [52] … effect must be given to the negative admonition in sub-s (3) that a defence, a proceeding, or a part of a proceeding may be found to have no reasonable prospect of successful prosecution even if it cannot be said that it is "hopeless" or "bound to fail". It will be necessary to examine further the notion of "no reasonable prospect". But before undertaking that task, it is important to begin by recognising that the combined effect of sub-ss (2) and (3) is that the inquiry required in this case is whether there is a "reasonable" prospect of prosecuting the proceeding, not an inquiry directed to whether a certain and concluded determination could be made that the proceeding would necessarily fail. [53] In this respect, s 31A departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail. That this was the basis of earlier decisions may be illustrated by reference to two decisions of this Court often cited in connection with questions of summary judgment: Dey v Victorian Railways Commissioners and General Steel Industries Inc v Commissioner for Railways (NSW). 26 Later, their Honours said: [56] Because s 31A(3) provides that certainty of failure ("hopeless" or "bound to fail") need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different inquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression "no reasonable prospect of successfully prosecuting the proceeding" by reference to what is said in those earlier cases. 27 My consideration of the plaintiffs' motion for summary dismissal proceeds on the basis of the observations I have quoted.

The validity of Mortgage AE339782W 28 The plaintiffs advance two main reasons why Mortgage AE339782W is invalid and of no force or effect. 29 First, they submit that the mortgage was executed after the administration of C2C Investments had come to an end. In this connection they submit that the first defendant could not have effectually executed the mortgage on behalf of C2C Investments when he did, and certainly could not have done so as its "Administrator" (as he had purported to do). They also submit that the first defendant was never the proprietor of, or of any estate or interest in, the Kelman Estate and, therefore, the mortgage was not executed in accordance with s 56(1) of the Real Property Act, which provides: Whenever any land or estate or interest in land under the provisions of this Act is intended to be charged with, or made security for, the payment of a debt, the proprietor shall execute a mortgage in the approved form. 30 Secondly, the plaintiffs submit that the resolution on which the first defendant relies did not, in any event, authorise him to execute and cause to be registered a mortgage which provided for a principal sum of $170,000 or which incorporated the provisions of Memorandum Q860000. 31 The first respondent submits that the resolution on which he relies must be considered against the background of other matters referred to in the minutes of the first meeting. Those matters include the fact that the second plaintiff had advised the first meeting that he wished to have C2C Investments released from administration to enable finance to be raised from the sale of "surplus property" to assist the financial position of the other companies in the C2C Group. It was in this context, the first defendant says, that the resolution on which he relies should be construed. The resolution, in terms, contemplated the sale of the Kelman Estate and the retention of funds from that sale to be applied in payment of the first defendant's remuneration and expenses and otherwise for the benefit of creditors, it being remembered that, under s 443D of the Corporations Act, the first defendant had a right to be indemnified out of C2C Investments' property for his remuneration as fixed under s 449E of the Act (including by resolution of its creditors). Given that, at the same meeting, it was known that it was to be proposed that C2C Investments be released from administration, the first defendant submits that the resolution can only be sensibly understood as conferring on him a continuing agency to execute the mortgage that was proposed, after C2C Investments was released from administration. 32 Thus, the first defendant submits, it is not to the point that the mortgage was in fact executed after his administration formally came to an end on the day that the resolution was passed. On the first defendant's case, it was always going to be the case that the mortgage would be executed at some time after the meeting and the resolution must be understood in that context. 33 The first defendant also submits that it is not to the point that he (possibly incorrectly) signed the prescribed form as "Administrator" or that he is referred to as such in the mortgage. He submits that, even if it was not correct for him to be so described at that time, any misdescription is no more than an inconsequential misnomer. 34 It was acknowledged on behalf of the first defendant that the resolution did not specify the amount of $170,000 as the principal sum and that there was no evidence presently before the Court that could easily explain why or how that sum came to be inserted in the mortgage. The first defendant made no separate submission about the incorporation of the terms of Memorandum Q860000 (an aspect of the argument that the plaintiffs, in any event, acknowledge they only raise faintly at the present time). However, the first defendant points to and relies on s 41(1) of the Real Property Act, which provides: No dealing, until registered in the manner provided by this Act, shall be effectual to pass any estate or interest in any land under the provisions of this Act, or to render such land liable as security for the payment of money, but upon the registration of any dealing in the manner provided by this Act, the estate or interest specified in such dealing shall pass, or as the case may be the land shall become liable as security in manner and subject to the covenants, conditions, and contingencies set forth and specified in such dealing, or by this Act declared to be implied in instruments of a like nature. 35 The first defendant submits that the effect of this provision is that Mortgage AE339782W is to be given effect according to its terms in the absence of an order varying the terms of the registered dealing. Those terms include that Mortgage AE339782W is for the principal sum of $170,000 and that it stands as security for the first defendant's remuneration and costs and all further monies to which the first defendant may become entitled. 36 Significantly in this regard, the first defendant also relies on the indefeasibility of his registered interest as mortgagee under Mortgage AE339782W. He relies on s 42(1) of the Real Property Act which relevantly provides: Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except … 37 The first defendant submits that in the absence of actual fraud by him being established by the plaintiffs, or some other personal equity that is enforceable against him, his estate or interest as mortgagee in accordance with the terms of Mortgage AE339782W is indefeasible under the Real Property Act: Provident Capital Ltd v Printy [2008] NSWCA 131 at [40]-[41]; Small v Tomassetti [2001] NSWSC 1112 at [7]-[15]; Pyramid Building Society (In liquidation) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 at 196. Whether the first defendant's estate or interest under Mortgage AE339782W is indefeasible or can be defeated will inevitably involve the determination of the factual controversy that the plaintiffs accept exists. 38 I am not satisfied that the plaintiffs have shown that the first defendant has no reasonable prospect of successfully prosecuting this part of his cross-claim. In my view it is, at the very least, reasonably arguable on the evidence before me that the first defendant was granted a continuing authority by C2C Investments to execute the mortgage on its behalf and, thereafter, to cause it to be registered. As this authority was apparently one to execute the mortgage on behalf of C2C Investments, no question of non-compliance with s 56 of the Real Property Act would appear to have been involved: on the first defendant's case, the mortgage was executed in approved form by the proprietor through the first defendant acting as its authorised agent. 39 More fundamentally, I am satisfied that, for the purposes of this motion, the provisions of ss 41 and 42 of the Real Property Act impose an insuperable obstacle for the plaintiffs. The first defendant has adduced evidence on this motion of his registered title under Mortgage AE339782W. The registered proprietor of an interest in land registered under the provisions of the Real Property Act will have a valid title even if the transaction immediately antecedent to registration of the interest was void: Breskvar v Wall (1971) 126 CLR 376 at 406-407. Whether the first defendant's registered title can be defeated will involve a contest about the facts, matters and circumstances underlying the granting and registration of the mortgage. The plaintiffs accept that I should proceed on the basis that those events (on which full evidence has not been adduced) can only be resolved at trial. In my view, it is those events that lie at the heart of the plaintiffs' claim and, equally, at the heart of the first defendant's cross-claim. This being the case, the plaintiffs cannot establish on the evidence before me that the first defendant has no reasonable prospect of successfully prosecuting his cross-claim. 40 There is, in any event, a significant discretionary reason why summary dismissal should not be granted in this regard. The plaintiffs do not seek summary judgment in relation to precisely the same issues raised in the first defendant's defence. In these circumstances, summary dismissal of this part of the first defendant's cross-claim would not obviate the need to hear and determine these contested issues. 41 This part of the first defendant's cross-claim should, therefore, proceed to trial.

The validity of the resolutions fixing remuneration 42 The administrator of a company under administration is entitled to receive such remuneration as is determined by, amongst other things, a resolution of the company's creditors: see s 449E(1) of the Corporations Act. 43 The plaintiffs submit that the resolution passed by creditors at the first meeting, fixing the first defendant's remuneration as administrator of C2C Investments, is invalid because that resolution is properly characterised as part of a "composite" resolution. The plaintiffs advance a similar submission regarding the resolution passed at the second meeting fixing the first defendant's remuneration as administrator of C2C Developments. 44 In this connection the plaintiffs rely on s 449E(1B) of the Corporations Act which says that, to be effective, such a resolution "must deal exclusively with remuneration of the administrator". They refer to the note to the subsection which states: This means that the resolution must not be bundled with any other resolution. 45 The first defendant submits that the plaintiffs' contention proceeds on a misreading of s 449E(1B) and amounts to saying that s 449E(1B) requires a creditors' resolution fixing remuneration to be passed at a separate meeting at which that is the only resolution proposed and passed. He submits that this cannot be the proper construction of the provision. He submits that all s 449E(1B) requires is that the relevant resolution must itself deal exclusively with the administrator's remuneration and it does not matter that such a resolution is passed at a meeting at which other resolutions are proposed and passed. 46 In my view it is most unlikely that, in each case, the resolution fixing the first defendant's remuneration can be properly characterised as part of a "composite" resolution. The minutes on which the first defendant relies shows that a number of resolutions were proposed and passed at each meeting. On the face of the minutes, each resolution appears to be a discrete resolution. Certainly each resolution fixing the first defendant's remuneration does not appear to be "bundled" with any other resolution proposed or passed at the meetings. 47 I do not think that, at this juncture, I should proceed to make any final determination about the construction of s 449E(1B) or how it applies to the relevant resolutions in this case. It is sufficient for me to say that I am not satisfied that the plaintiffs have shown that the first defendant has no reasonable prospect of successfully prosecuting this part of his cross-claim. The construction of s 449E(1B) for which the first defendant contends is one that is certainly open to him. On that footing it is reasonably open to be argued on the evidence before me that each of the relevant resolutions complies with s 449E(1B), so construed. It follows that this part of the first defendant's cross-claim should proceed to trial. 48 The plaintiffs make a related submission concerning the first defendant's claim that the granting of the mortgage was ratified. The plaintiffs submit, in that connection, that it is not possible to ratify an invalid obligation. In conformity with their other submissions, they submit that any obligation resulting from the passing of the resolution fixing the first defendant's remuneration in relation to C2C Investments was not capable of being ratified because, by reason of s 449E(1B), the resolution was not effective. The fate of this submission is plainly dependent on the resolution at trial of the question of the proper construction and application of s 449E(1B) to the relevant resolutions in this case.

Whether the claim for remuneration in respect of C2C Developments is foreclosed 49 This aspect of the plaintiffs' submissions can be addressed shortly. The Deed of Company Arrangement contains a moratorium in favour of C2C Developments in respect of the institution and prosecution of certain claims in legal proceedings. It also contains a release of certain claims. In this regard both the moratorium and the release concern claims "which arose on or before the Admissible Claim Date". This date is defined in the Deed of Company Arrangement as 29 September 2008, being the date when the first defendant was appointed as administrator of C2C Developments. 50 The plaintiffs' submit that the claims of the first defendant under the cross-claim "to fees and expenses arose before the date specified in the Deed under [s] 444A(4)(i) of the Corporations Act". That submission, with respect, is plainly wrong. The first defendant's claim to "fees and expenses" as administrator of C2C Developments can only be with respect to the period that commenced with his appointment. It is not suggested that the remuneration fixed by creditors' resolution at the second meeting related to any period before the date of the first defendant's appointment on 29 September 2008. It would seem that the plaintiffs' submission in this regard proceeds on the mistaken basis that the relevant date is the date of execution of the Deed of Company Arrangement rather than the date specified in the Deed as the day on or before which claims must have arisen if they are to be admissible under the Deed (which must, by dint of s 444A(4)(i), be no later than the day when the administration began). 51 It follows that the plaintiffs have not established, on this basis, that the first defendant has no reasonable prospect of successfully prosecuting this part of his cross-claim. This part of the first defendant's cross-claim should proceed to trial.

Whether the case on estoppel can succeed 52 This aspect of the plaintiffs' submissions can also be addressed shortly. The plaintiffs' submissions appear to proceed on the basis that the first defendant is raising a claim of conventional estoppel in his cross-claim. This is not correct. 53 As I read the cross-claim, and as the first defendant stressed in the course of oral argument, the claim in this regard is based on promissory estoppel. The first defendant says that, prior to the second meeting, the second plaintiff represented to him that, if he would reduce his claim for remuneration, C2C Investments (by whose authority the second plaintiff was said to be acting) "would agree" that the first defendant's remuneration and expenses in respect of his administration of both C2C Investments and C2C Developments would be secured by Mortgage AE339782W. I would understand the use of the words "would agree" in the cross-claim to convey, in this regard, that C2C Investments, through the second plaintiff, agreed that the first defendant's remuneration and expenses would be secured by Mortgage AE339782W. I think that this is the only sensible way to read this aspect of the pleading. 54 The first defendant says that he acted on this assurance and reduced his fee to an amount that was agreed with the second plaintiff. The question of the first defendant's remuneration for this agreed amount was then put to creditors and fixed in this amount by resolution at the second meeting. The first defendant submits that the relevant principles are those set out in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 428-429. 55 I am not satisfied that the first defendant has no reasonable prospect of successfully prosecuting this part of his cross-claim. Certainly I do not accept the plaintiffs' submission that, in the present case, the estoppel claim cannot succeed because the pleaded representation is not in relation to an existing or past event but only in relation to a future state of affairs. 56 The plaintiffs also make a number of subsidiary submissions with respect to the intersection of the estoppel claim with the requirements of s 56(1) of the Real Property Act and s 449E(1B) of the Corporations Act and the claimed invalidity of Mortgage AE339782W. It is not necessary for me to deal separately with those subsidiary submissions. They all relate to matters in respect of which I have found that the cross-claim should proceed for determination at trial. 57 As an incident of their argument in respect of the estoppel claim, the plaintiffs also raised the requirements of s 23C of the Conveyancing Act 1919 (NSW). The argument was not developed or indeed advanced in any significant way. In the circumstances, I do not propose to dwell on it. I am satisfied in all the circumstances that the estoppel claim should proceed to trial.

Conclusion 58 For the foregoing reasons, the plaintiffs' motion for summary dismissal fails.

pleading matters 59 The plaintiffs raise, in a general way, some pleading issues. 60 First, they submit that paragraph 42 of the cross-claim should be struck out as not being supported by the pleading of material allegations of fact. Paragraph 42 of the cross-claim now reads: Further, the sum of $72,574.58 referred to in paragraph 8(a)(ix)(3) above is charged against Kelman Estate pursuant to s 443D of the Corporations Act. 61 This paragraph of the cross-claim is based on the allegation that, at the first meeting, the creditors of C2C Investments fixed the first defendant's remuneration in the amount of $49,928.00 plus GST and that the first defendant had incurred certain expenses in the course of his administration. Allowing for certain moneys received, the first defendant's allegation is that he is entitled to be indemnified out of C2C Investments' property for the total amount of $72,574.58 under s 443D of the Corporations Act and that, as events have transpired, and for the reasons he has pleaded, that sum is secured by Mortgage AE339782W. 62 In my view these allegations are sufficiently revealed by the pleading in the cross-claim. The supporting allegations do contain some obvious typographical mistakes, which should in due course be corrected. But these mistakes do not make the allegations unclear and, in particular, do not make paragraph 42 unclear. Therefore, I am not persuaded that paragraph 42 of the cross-claim should be struck out. 63 Secondly, the plaintiffs submit that there are no material allegations of fact in the cross-claim that support the allegation in paragraph 38 that the mortgage was ratified. In my view the allegations relied upon by the first defendant are clear. They are in large measure bound up with the allegations on which the estoppel claim is based and are to be found in paragraphs 33 to 37 of the cross-claim, in particular paragraphs 35 and 37. Whether these facts, if proved at trial, make out a case of ratification in light of all the evidence then adduced is another matter. However, I am not persuaded that, as a matter of pleading, there is a sound basis to strike out paragraph 38 of the cross-claim, and I do not propose to do so.

disposition 64 The amended notice of motion dated 2 May 2011 should be dismissed with costs. I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.