Celestial Finance Australia Pty Limited v BHAUS Pty Limited & Anor

EX TEMPORE Judgment

1. These proceedings concern premises at Campbell Parade, Bondi at which a bar known as Bar 34 is operated (the "premises").
2. On 1 September 2013, the registered proprietors of the premises (the "Kocics") entered into a five year lease of part of the premises with Louvre Group Pty Limited.
3. On 4 February 2015, that lease was transferred to the first defendant ("BHAUS"). At the time of the transfer the director of BHAUS was Mr Alan Cunningham. The sole shareholder in BHAUS was Spirit Pacific Pty Limited, of which the sole director, secretary and shareholder was Mr Cunningham. The evidence discloses that Spirit Pacific Pty Limited has since been deregistered, although nothing turns on that.
4. In connection with the transfer of the lease of the premises to BHAUS, the plaintiff ("Celestial") entered into a loan agreement with BHAUS on 4 February 2014 whereby Celestial advanced to BHAUS the sum of $144,000 for a period of six months (the "Loan Agreement"). Interest was to be paid monthly.
5. In addition to the Loan Agreement, Celestial secured its interest by a General Security Agreement of the same date with BHAUS ("the GSA"). On 4 February 2014, under the GSA, BHAUS granted a fixed and floating charge over its property to Celestial.
6. BHAUS went into default under the Loan Agreement. It did not make all of the interest repayments and it did not repay the principal.
7. Unbeknown to Celestial, on 30 June 2015 Mr Cunningham caused BHAUS to surrender its lease over the premises. By a new lease dated 8 July 2015 (being for a period of five years commencing on 1 July 2015) the Kocics leased the premises to the second defendant ("34 Bondi"). Mr Cunningham is a director and shareholder (albeit not the only one) of 34 Bondi.
8. The GSA included the following provisions, all of which Celestial submitted had been engaged in the present case: 5. Events of Default If any one or more of the following occur, an Event of Default will have occurred. (a) (cross default) There is material default by the Grantor in the performance of any term, agreement, or condition contained in or implied by this document or Loan Agreement. … (c) (cessation of business) The Grantor ceases or threatens to cease to carry on its business or a material part of its business or disposes of or threatens to dispose of substantially all of its assets. … (n) (loss of control) If any of the Secured Property is taken out of the effective management and control of the Grantor (except upon a permitted dealing with that property).