Conlan v Pratt

INTRODUCTION 1 The applicant (the Liquidator) seeks a declaration under s 468(1) of the Corporations Act 2001 (Cth) (CA) that the disposition of a truck with former vehicle plate number 1CBA538 (the Truck) from PB Enterprises (WA) Pty Ltd (PB Enterprises) to the second respondent (Southland) is void. By way of interim relief, the Liquidator sought a warrant pursuant to s 530C CA for the seizure of the Truck. 2 The application is supported by two affidavits of the Liquidator, the first being sworn on 17 February 2012 and the second on 19 April 2012. The application is opposed by the first respondent (Mr Pratt) who supports his opposition with an affidavit sworn on 27 September 2012.

THE EVIDENCE 3 In his 17 February 2012 affidavit, the Liquidator records that the directors of PB Enterprises, as at 8 May 2011, were Ms Belinda Anne Topping and Mr Paul McKenzie Topping of Bullsbrook in Western Australia. On that date, PB Enterprises was the registered proprietor of the Truck. 4 A notification of change of ownership form was purportedly signed by Ms Topping in favour of 'SAH P/Earls ATF Southland Trust' (SAH) on the same day. Exhibited extracts of the records of the Australian Securities and Investments Commission (ASIC) in relation to Southland, as at 22 November 2011, confirm that the Truck was transferred to Southland on the same day. The notification of change of ownership was signed on the part of SAH by Mr Pratt. 5 Based on company extract for Southland, the Liquidator was of the view that the Truck was located at an address in Lamington in Western Australia. The Liquidator believed that the transfer of the Truck was a void disposition of PB Enterprises' property having been made after the date of the winding up on 25 January 2011. The Liquidator contended that he was entitled to possession of the Truck. Given it was highly movable and that there was risk that it could be moved in an attempt to thwart his taking possession, he sought a seizure warrant from the Court. 6 In his 19 April 2012 affidavit, the Liquidator produced a copy of the licence and third party insurance policy for the Truck. It specified that the chassis number for a vehicle with the vehicle plate number KBC686A was the same chassis number for the Truck. He believed, accordingly, that the vehicle plate number for the Truck had changed to KBC686A. 7 Mr Pratt contends that he purchased the Truck on an entirely lawful basis. An agreement was reached by the parties that rather than depriving him of use of the Truck, he could indemnify the Liquidator for any damage caused to the Truck from the date of undertaking which was filed with the Court on 17 September 2012. 8 Mr Pratt's affidavit confirms that he is the sole director and secretary of Southland. In about January or February 2011, he met Mr Topping in Kalgoorlie, Western Australia, in the company of an identified mutual friend (the Friend). Mr Topping mentioned to Mr Pratt that he was in the transport business and had trucks in Perth. Mr Pratt knew nothing else about him. In about April or May 2011, he had another discussion with the Friend in Kalgoorlie. He asked Mr Pratt if he would have any use for the Truck. 9 At this time, Mr Pratt was of the view that the fair value of the Truck would have been about $60,000. He based this view on his experience of buying and selling equipment. Over the past 30 years he has purchased 15-20 trucks, many sight unseen and all second hand. 10 He had been told that the Truck had travelled some 500,000 kilometres during 11,000 engine hours. That suggested to him that the Truck would be towards the end of its life. At that time he was not specifically looking to purchase a new truck. He asked the Friend about the history of the Truck. 11 Mr Pratt was told that Mr Topping was fighting an action against a liquidator and the Truck was owned by Mr Topping and his wife personally. He was told the Toppings needed to sell the Truck to finance the legal action against the Liquidator. The Friend said that a man who was identified but whom I will simply call 'the Representor' from a company based in the eastern states was representing the Toppings. The Friend showed Mr Pratt a photograph of the Truck. 12 Mr Pratt spoke to the Representor on the telephone in or about the end of April or beginning of May 2011. The Representor confirmed that he represented the Toppings and said words to the effect that 'Paul Topping was not well' and gave details of the medical condition. The Representor said that he held powers of attorney for the affairs of both of the Toppings. He reiterated to Mr Pratt that someone had to buy the Truck so that Mr Topping could fund the action to oppose the liquidation. Mr Pratt said that the Toppings proposed to sell the Truck because it was owned by them personally and not by the business and that the sale would enable them to keep their property in Bullsbrook and their other trucks and assets. 13 Mr Pratt asked the Representor whether the Truck was encumbered in any way and the Representor assured him on a number of occasions that it was free from any encumbrance. The Representor said, in substance, that the Truck was registered in the name of the business for tax purposes only but, in fact, was owned by the Toppings personally. Mr Pratt said he did not think anything was unusual about that set up as he knows that there may be advantages available for registering equipment in particular ways. He gave an example of a trailer which was owned by his brother but which was registered in the name of Southland. At no stage did the Representor inform Mr Pratt that the Truck was a business asset or part of a liquidation. 14 Mr Pratt took the additional step of examining the Register of Encumbered Vehicles (REV) website to ensure that the Truck was unencumbered. He deposes that his search revealed no encumbrances however he did not print out the results of the search at that time or purchase a REV certificate at the time. 15 Mr Pratt explained that on or about 5 May 2011 he offered on behalf of Southland $66,000 inclusive of goods and services tax (GST) for the Truck. The offer was accepted by the Representor. During the conversation the Representor tried to negotiate a higher price but Mr Pratt made it clear that this was his final offer. The Representor pressed him for urgent payment, saying that the Toppings needed the money urgently and it was necessary to come to an arrangement as quickly as possible. Mr Pratt says that if the offer had not been accepted, he simply would not have purchased the Truck. 16 The Representor asked for payment of the entire amount straight away but Mr Pratt indicated that he would need to secure the funds. The Representor pressed him for $20,000 to engage a forensic accountant to help them fight for liquidation urgently so Mr Pratt did agree to pay the $20,000 deposit as soon as possible and to pay the balance as soon as he could arrange the funds. The Representor wanted to arrange payment swiftly and Mr Pratt wanted to arrange for final payment to coincide with taking possession of the Truck. Nevertheless he hoped that this would not take longer than a week. 17 Accordingly, instead of arranging finance, Mr Pratt borrowed $46,000 from a friend to whom he had spoken in late April or early May on the topic. The funds were advanced quickly on the basis that Mr Pratt would repay the Friend the principal sum and interest when he was in a position to do so. The funds were transferred into Mr Pratt's account on 12 May 2011. Southland paid the deposit on 6 May 2011. It was paid into an account held by the company based in the eastern states, the details of which were provided to Mr Pratt by the Representor. The Representor issued Southland an invoice for the purchase price of $66,000 and issued Southland a memorandum authorising the collection of the Truck from Mr Topping's property. The balance of the invoice for the Truck was paid by Southland on 12 May 2011. After speaking to a friend who informed Mr Pratt that a REV check was insufficient and that a REV certificate is what protects against repossession, he decided that he should purchase a REV certificate for Southland's records. On 20 May 2011, Mr Pratt undertook a second REV check in respect of the Truck. The REV check, again, indicated there were no encumbrances on the Truck. He ordered a REV certificate on this occasion. 18 At around this time and shortly after paying the balance of the purchase price, Mr Pratt went to Perth to pick up the Truck which he considered to be his property as a result of paying for it. While he was in Perth collecting the Truck, he provided the Representor with transfer papers for the Truck and asked him to sign them and return them. Mr Pratt had filled in all of his details and used a date around the date of the deposit date as the transfer date. After taking possession of the Truck while still in Perth, the Representor then contacted Mr Pratt to say that he had another buyer willing to pay a higher price for the Truck. He asked if Mr Pratt would be happy to have his money back. At that stage the Truck had not been transferred into Mr Pratt's name or Southland's name and Mr Pratt needed $20,000 for another transaction he was organising. Mr Pratt did not believe that the Truck was worth any more than what he had paid for it so he agreed to the proposal advanced by the Representor as long as his money was returned. 19 Mr Pratt told the Representor he needed $20,000 immediately from that money. That sum was put back into Mr Pratt's account soon after. Mr Pratt then met the new buyer when he undertook a test drive of the Truck. The new buyer seemed happy with the Truck and said that he was going to pay $88,000 inclusive of GST for it, although Mr Pratt had no confirmation of this. After a week and a half had passed following the return of the $20,000, the Representor contacted Mr Pratt to say that the deal with the other purchaser had fallen through. The Representor wanted to proceed with the sale to Mr Pratt. 20 Mr Pratt says that by this stage he was getting nervous as the remaining $46,000 of what he had paid to the Representor had not been returned to him and nor had the transfer papers to transfer the Truck. He agreed, once again nevertheless, to go ahead with the sale saying that he would repay the $20,000. The Representor said that he would send the registration papers to Mr Pratt. Following this exchange, Mr Pratt, in accordance with instructions from the Representor, paid $16,000 of the money back into the account previously given to him by the Representor in two payments of $10,000 and $6,000. The last $4,000 was paid into a separate trust account operated by his then lawyer. Mr Pratt made the payments in this way as his daily transfer limit was $10,000. 21 Over the period of making these transfers, he formed a view after discussion with a friend that the payments should be made into a trust account. Originally he was not worried as he had seen the power of attorney and considered that it was safe to deal with the Representor directly. By this stage, he was less confident. Accordingly Mr Pratt tried to stop payment of the $16,000. He was unable to do so. It was for that reason he put the remaining $4,000 into his lawyer's trust account. 22 A little later, on about 20 May 2011, the Representor provided Mr Pratt with a letter from a lawyer which, while stating that the Truck was owned by 'his client' whom he stated to be Mr Topping, suggested that the Truck was owned PB Enterprises and that Mr Topping's power of attorney was revoked. However, at this time Mr Pratt had already completed the transaction under what he believed was a valid power of attorney and he had paid for the Truck. He believed there was nothing else he could do but finalise the transfer of the registration to Southland. 23 On 1 June 2011, Mr Pratt attended the Kalgoorlie licensing centre to transfer the registration of the Truck into the name of Southland. The Department of Transport wanted to sight the power of attorney held by the Representor. Mr Pratt phoned the Representor while he was at the licensing centre and requested him to email direct to that centre copies of the signed transfer papers and the power of attorney documentation. Those were emailed by the Representor as requested. At some point a copy of the email was forwarded to Mr Pratt. Prior to receipt of the email he had seen the power of attorney from Mr Topping but had not seen the one from Mrs Topping until that time. Whilst he was at the licensing centre, Mr Pratt changed the registration plates on the Truck to Kalgoorlie plates to bring them into line with his other trucks which were all located in Kalgoorlie. 24 After registering the Truck in the name of Southland, Mr Pratt proceeded to undertake a 'major program' of maintenance and repair of the Truck as it had been neglected and was in poor condition. He spent some $17,000 on those repairs, parts and maintenance. He was then offered the opportunity to cart grain in Esperance for the 2011/2012 harvest season and used the Truck for that purpose. Since completion of the harvest season in early February 2012 he has regularly driven the Truck until recent times when he has refrained from doing so in light of the undertaking given to indemnify the Liquidator against any damage to the Truck. He ceased using the Truck in August 2012. 25 Mr Pratt has suffered personal financial hardship as a result of the events which have transpired. It has been his plan to move with his family to Albany. He put an offer on a business in Albany with the intention of selling the Truck and other assets in order to undertake a purchase of the business. He sold assets that he knew he would not need for that business. In July 2012 he made arrangement for the sale of the Truck to the operator of another business in Kalgoorlie. That sale fell through when he was informed by the prospective purchaser that there was some sort of encumbrance on the Truck. This came as a surprise to Mr Pratt because there had been no encumbrance revealed by the REV certificate when it was purchased by Southland. 26 Following this, Mr Pratt had contact with the Liquidator and became involved in these proceedings. He was unable to pursue the purchase of the Albany business and unable to move his family from Kalgoorlie to Albany as planned. In the meantime, the Representor has disappeared. Mr Pratt has had no contact with either the Representor or Mr Topping since late 2011. He has assisted the Western Australian police with enquiries concerning the circumstances in which representations were made to him in relation to the Truck sale. He has now lost opportunity to take the potential proceeds of the sale of the Truck to the Kalgoorlie business, which has purchased another truck. The sale was at a higher price than he paid having spent considerable time and money on improving the Truck. The proceedings have quite understandably caused Mr Pratt considerable stress over and above the financial hardship.