//
[2016] VSC 231
General information, not legal advice.
Supreme Court of Victoria
2016-05-10
Gardiner AsJ
Original judgment source is linked above.
CORPORATIONS - Voidable transaction claim under Part 5.7B of Corporations Act 2001 (Cth)- allegation that defendant was unsecured creditor at the time of each of the payments - defendant contends that plaintiff was aware that defendant secured under instrument registered under the Personal Property Securities Act 2009 (Cth) and plaintiffs therefore not entitled to plead matters which defendant contends are to the knowledge of the plaintiffs untrue and unsupportable - application pursuant to rule 23.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules'), or section 18 of the Civil Procedure Act 2010 (Vic) ('CP Act'), that plaintiffs' claim be stayed, alternatively there be judgment for the defendant - alternatively, pursuant to section 62 of the CP Act, that there be summary judgment for the defendant, alternatively, pursuant to rule 23.02(c) or (d) of the Rules, or section 19 of the CP Act, that parts of the claim be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the proceeding or because they are an abuse of process - application dismissed save for order that plaintiff replead allegation in respect of solvency of the company at the time of the payments the subject of the claim.
1 In this proceeding, the plaintiffs, by their Amended Statement of Claim ('ASOC'), claim that payments totalling $3,652,317.70 ('the payments') made by Australian Music Pty Ltd ('Australian Music') between February 2012 and 23 August 2012 are voidable transactions within the meaning of Part 5.7B of the Corporations Act 2001 (Cth) ('the Act') by reason that the payments are unfair preferences pursuant to s 588FA of the Act and insolvent transactions pursuant to s 588FC of the Act.
2 Section 588FA of the Act provides relevantly:
(1) A transaction is an unfair preference given by a company to a creditor of the company if, and only if:
(a) the company and the creditor are parties to the transaction (even if someone else is also a party); and
(b) the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company;
even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency.
(2) For the purposes of sub-s (1), a secured debt is taken to be unsecured to the extent of so much of it (if any) as is not reflected in the value of the security.
[Emphasis added]
3 By a summons filed 23 December 2015, the defendant ('Yamaha') makes application for, among other things, the following orders:
(a) pursuant to rule 23.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules'), or section 18 of the Civil Procedure Act 2010 (Vic) ('CP Act'), that the claim set out in the Amended Statement of Claim dated 25 November 2015 ('ASOC') be stayed, alternatively there be judgment of the defendant ('Yamaha') in respect of the plaintiffs claim as contained in paragraphs 10, 11, 13, 15 and 17 of the ASOC, on the ground that the plaintiffs' said claim does not, on the factual and legal material available to the plaintiffs at the time of the making of the claim, have a proper basis;
(b) alternatively, pursuant to section 62 of the CP Act, that summary judgment be granted in favour of Yamaha on the ground that the plaintiffs' claim, or such part of the plaintiffs' claim as set out in paragraphs 10, 11, 13, 15 and 17 of the ASOC, has no real prospect of success;
(c) alternatively, pursuant to rule 23.02(c) or (d) of the Rules, or section 19 of the CP Act, that paragraphs 10, 11, 13, 15 and 17 of the ASOC be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the proceeding or because they are an abuse of process; and
(d) alternatively, that the plaintiffs provide further and better particulars of the allegations in paragraph 17 of the ASOC.
4 Paragraph (a) of the summons seeks to stay or summarily dismiss the proceeding in reliance on r 23.01(1)(b) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules'), alternatively s 18 of the Civil Procedure Act 2010 (Vic) ('CP Act'). Paragraph (b) of the summons seeks summary judgment pursuant to s 62 of the CP Act. Paragraph (c) applies to strike out various paragraphs of the ASOC relying on r 23.02 (c) and (d) (which are respectively the 'prejudice, embarrass or delay' and 'abuse of process' grounds), together with s 18 of the CP Act. Paragraph (d) seeks further and better particulars of how it is contended that Australian Music was insolvent at the time of the payments which are sought to be impugned.
5 Whereas an application under r 23.01 may be supported by evidence on affidavit, under r 23.02 the argument is confined to the face of the pleading.[1] Section 62 of the CP Act is a statutory formulation of the summary dismissal test.
6 In substance, Yamaha's application has two aspects. The first is whether the plaintiffs should be entitled to plead facts which Yamaha contends are, to Mr Blakeley's knowledge, incorrect and untrue. The second aspect of Yamaha's application is concerned with the form of paragraph 17 of the ASOC. Yamaha says that in its present form it is embarrassing and should be struck out. I shall consider each aspect in turn.
7 For the reasons which follow, I do not consider that Yamaha is entitled to the relief that it claims in paragraphs (a), (b) and (c) of its summons but the plaintiffs should be required to replead paragraph 17 of the ASOC.
8 Yamaha relies on an affidavit of its solicitor, Wayne Kelcey, sworn 21 January 2016. The plaintiffs rely on an affidavit of their solicitor, Marelda Hibberd, sworn 22 January 2016.
9 On 23 August 2012, the first plaintiff (Mr Blakeley), together with Andrew Schwartz, were appointed as joint and several administrators of the 17 companies identified collectively as the Australian Music Group.
10 On 23 August 2012, following the appointment of the administrators, a secured creditor of Australian Music, Revere Capital Pty Ltd ('Revere'), appointed receivers and managers under the terms of a security interest registered on the Personal Property Security Register ('PPSR'). Revere is apparently still owed $4.5 million after the sale by the receivers of the property the subject of its security and, as such, is an unsecured creditor of Australian Music for that sum.
11 On 25 January 2013, by resolution of the creditors pursuant to s 439C of the Act, Mr Blakeley and Mr Schwartz were appointed as joint and several liquidators of Australian Music and the other related companies within the Australian Music Group. On 26 March 2014, after Mr Schwartz resigned, Mr Blakeley proceeded to act as the sole liquidator of the companies in the Australian Music Group.
The relevant paragraphs of the amended statement of claim
12 Paragraphs 7, 8, 10, 11, 13, 15 and 17 of the ASOC plead:
Particulars
The Deed is in writing dated 26 June 2012 and executed by the related bodies corporate within the Australian Music Group. A copy of the Deed is in the possession of the plaintiffs' solicitors and may be inspected by prior appointment.
(a) eligible to prepare consolidated accounts and maintain the books and records of Australian Music Group; and
(b) jointly and severally liable for each other's debts in accordance with the Deed.
...
[The ASOC sets out a table of payments dating from 19 March 2012 to 21 August 2012 totalling $3,652,317.70].
Particulars
The Payments were made by AMPL by way of electronic funds transfer from the AMPL's bank accounts with the National Australia Bank or Commonwealth Bank of Australia or by cheque drawn on these accounts. The Payments are recorded in bank statements issued by NAB or CBA to AMPL during the Relation Back Period.
Copies of the bank statements are in the possession of the Plaintiffs' solicitors and may be inspected by prior appointment.
...
Particulars
The Receivers and Managers completed the sale of the business of the Australian Music Group on about 25 November 2012 and made a distribution to Revere as secured creditor. After that distribution, a shortfall remains of at least $4.5 million owing to Revere. The deficit to Revere has resulted in no surplus funds being available for distribution to any other class of creditor of the Australian Music Group.
...
Insolvent Transactions
[Eight paragraphs of particulars as to how it is contended that Australian Music was insolvent from at least 30 June 2010 are subjoined to this paragraph]
[Emphasis added].
13 As will be seen, paragraphs 10 and 13 of the statement of claim, contend that at the time of the payments Yamaha was an unsecured creditor of Australian Music. Paragraph 15 then contends that Yamaha has received from Australian Music, in respect of the unsecured debt, more than Yamaha would receive if the transactions were set aside and Yamaha was to prove in the winding up of Australian Music. Yamaha contends that the plaintiffs are not entitled to plead that Yamaha is an unsecured creditor of Australian Music. If that be so, the plaintiffs would not be able to sustain their claim that the payments are voidable transactions under Part 5.7B of the Act as s 588FA applies only to payments of unsecured debts.
14 The respective positions of the parties on this issue is set out in correspondence passing between them which is exhibited to Mr Kelcey's affidavit. On 16 October 2015, Yamaha's solicitors, Hall & Wilcox, wrote to Maddocks, the plaintiffs' solicitors, summarising what they considered to be the position. They contended that since 2 February 2012, a date prior to the commencement of the relation back period in the winding up of Australian Music, Yamaha has held a security interest registered on the Personal Property Security Register ('PPSR') maintained pursuant to the Personal Property Security Act 2009 (Cth) (PPSA), securing a debt which, as of 24 August 2012 stood at $1,813,509.00. The letter states:
Since 2 February 2012, prior to the commencement of the relation-back period, our client has held a PPSR-registered security interest ... over all products supplied by Yamaha to [Australian Music] and the proceeds of disposal of those products, pursuant to an 'all monies' retention of title clause in its terms and conditions, constituting a PPSA security interest for the purpose of s 51 of the Corporations Act 2001 (Cth).
We understand your clients' position to be that only goods supplied by Yamaha to [Australian Music] on a retention of title basis after the registration of Yamaha's security interest on the PPSR on 2 February 2012 could give rise to a secured debt.
Without any way accepting your clients position is correct, it is abundantly clear that on no view could the alleged 'Debt' in the SOC, totalling $4.053 million, be entirely unsecured, having regard to the fact that our client supplied goods to AMPL after 2 February 2012, including goods supplied on credit terms. We note further that as the retention of title arrangements secured all monies owing to our client, even if your client's position is correct, all goods supplied by Yamaha (whether on a cash with order basis, or on credit terms) after 2 February 2012 would result in the Debt being secured against those goods, at least in part.
In our opinion, paragraphs 10 and 13 of the SOC must be amended to accurately reflect what we understand to be your client's true position in respect to this dispute, including by properly pleading (in accordance with your and your client's obligations under the Civil Procedure Act 2010 (Vic)) the true and correct security position. We note that if - contrary to our understanding - your client's allegation remains that the entire Debt was at all times in fact unsecured, that proposition is one which is clearly and demonstrably false, and may be the subject of a strike out application unless properly amended, and we invite you to make these amendments accordingly.
While we accept that properly pleading your client's case - in relation to what, if any, part of the alleged Debt was actually unsecured - may be extremely difficult (if not impossible) when regard is had to the limited information that we understand is available in both AMG's and Yamaha's records regarding what stock was in AMPL's possession at all relevant times, this does not excuse what is currently a plainly defective - and in our view, misleading - pleading, and should instead serve as a warning as to the very significant, and potentially insurmountable, forensic difficulties your clients will face in attempting to prove their case against our client.
15 Yamaha submits that the allegation that it was an unsecured creditor for the sum alleged in paragraph 11 of the ASOC is, in light of the matters which it says have been known to the plaintiffs since 2 February 2012, untrue and unsupportable, and say that the plaintiffs ought be required to plead their claim in accordance with what Yamaha contends is unassailably the correct security position.
16 Yamaha also contends that a significant proportion of the payments were, on the basis of a 'Commercial Arrangement' set out in a letter from Yamaha to Australian Music of 19 January 2012, required to be appropriated on a '50-50 basis' towards, as to one half, reducing Australian Music's existing indebtedness (which it contends was secured pursuant to the PPSA), with the other half of each payment required to be appropriated in payment of cash on delivery transactions.
17 Yamaha says that neither part of such payments are susceptible of being characterised as preferential payments; the first by reason of the payments being made in discharge of a secured debt pursuant to the PPSA and the second, on the basis of the authorities dealing with cash on delivery transactions, not susceptible of being characterised as preferential payments.[3]
18 Dr Trichardt, counsel for Yamaha, complains that the plaintiffs have proceeded to seek recovery of the full amount of each of the payments without regard to the '50-50' arrangement. It is said that, notwithstanding the defences that may be available to Yamaha, in circumstances where the plaintiffs and their solicitors have 'actual knowledge' that a significant proportion of the payments received by Yamaha were in respect of cash on delivery transactions and could not therefore constitute unfair preference payments, it is inappropriate of the plaintiffs to maintain these allegations in their claim.
19 As to the balance of the payments, which under the arrangement were to be applied to discharge past indebtedness, that past indebtedness was, Yamaha contends, secured by the retention of title provisions of the pre-PPSA agreements or the PPSA security and, as such, those payments were also not made to Yamaha in its capacity as an unsecured creditor. Yamaha contends that the plaintiffs have no proper basis to plead that the Yamaha debt was wholly unsecured and that every payment made to Yamaha was in respect of that unsecured debt.
20 Yamaha says that on the basis of these matters it is entitled to the relief claimed in paragraphs (a), (b) or (c) of its summons.
21 On 25 November 2015, Maddocks Lawyers, the solicitors for the plaintiffs, wrote to Yamaha's solicitors stating by way of response to their letter of 16 October 2015:
The Liquidator's position is that the debts were unsecured. If your client maintains otherwise, it is for your client to plead the material facts that support those allegations in its defence. It will then be open to our clients to either accept the facts pleaded in your client's defence, or dispute them, if necessary, by way of reply.
We acknowledge that your client has a registration on the Personal Property Securities Register against AMPL. We also acknowledge that your client claims that some or all of the debts were secured by reason of the registration and other matters that have been referred to in correspondence.
As a matter of pleading, it is for your client to set out the material facts on which it relies to make good its defence that some or all of the debts claimed by our client were secured. The onus is not on our client to do so. Essentially what you are asking us to do is to accept the security position as your client has asserted it to be, without the defence being pleaded or approved. That is not how pleadings function. Pleadings are intended to define the issues in dispute between the parties. It is not for our client to anticipate what your client's defence might be and then plead a response to that in the statement of claim.
22 As to the contention by Yamaha in respect of the '50-50' arrangement, the plaintiffs' solicitors stated:
Presumably, your client intends to plead in its defence that a significant amount of the payments made during the preference period were made on a cash on delivery basis as the price of goods delivered, and were not payments in respect of an unsecured debt. If that is the case, it is for your client to plead that allegation in its defence and to plead the material facts on which it relies in respect of the affected payments.
Although we are generally aware of the defence that your client has raised, we are not aware of any details and it is not for us to anticipate the point.
23 Mr McKillop, counsel for the plaintiffs, submitted that the assertion that the relevant debts were unsecured is a negative proposition which the plaintiffs are required to plead as an element in the cause of action under s 588FA, and pleading that proposition does not infer the existence of any further material facts. He contrasted the plaintiffs' position with a negative proposition in a negligence action in the form 'the defendant failed to take reasonable care'. Describing the actions taken or not taken, which constitute the failure to take care, could in that circumstance provide particulars of that allegation.
24 In this regard, Mr McKillop referred to a passage in Odgers Principles of Pleading and Practice in Civil Actions in the High Court of Justice[4] where the authors state:
But the pleader should never allege any fact which is not material at the present stage of the action, even though he may reasonably suppose that it may become material hereafter.
It is sufficient that each pleading in turn should contain in itself a good prima facie case, without reference to possible objections not yet urged. It is not necessary to anticipate the answer of the adversary; to do so according to Hale CJ is 'like leaping before one comes to the stile'. 'It is not part of the statement of claim to anticipate the defence and to state what the plaintiff would have to say in answer to it.[5]
25 Mr McKillop contends the plaintiffs have a complete answer to the assertion that Yamaha is a secured creditor and that is why it has been pleaded in the way it has; it is not known by the plaintiffs whether Yamaha are going to assert their prePPSA retention of title position until they plead it, but the plaintiffs are not required to anticipate or speculate on Yamaha's position in this regard. There are no further material facts, he says, which the plaintiffs could provide and it is not incumbent on the plaintiffs to allege that any particular form of security might exist and to debate its effectiveness
26 I agree with that submission. In my view it is for Yamaha to confront the plea that it was unsecured at the time of each of the payments. It knows the facts best to confront that allegation. Mr McKillop accepted that under the terms of the CP Act, the plaintiffs are required to have a proper basis to bring the proceeding. In this regard, the liquidator has deposed that he has investigated the matter and, as has been indicated, he has examined a director of Yamaha in an examination conducted under Part 5.9 of the Act in the Federal Court. The plaintiffs are not required to plead about assertions that have been made by Yamaha about its security position in correspondence and refute them in the statement of claim.
27 The pre-PPSA retention of title clauses appear in the same form in Yamaha's 2008 and 2011 Terms of Trade. The retention of title clauses in the 2008 terms provide as follows:
28 On 8 March 2012, Yamaha wrote to Australian Music in regard to the introduction of the PPSA on 30 January 2012. The letter enclosed a new iteration of the Terms of Trade, adapted to accommodate the introduction of the PPSA. The letter stated:
New products under your existing Terms of Trade supplied on or after 30 January 2012 will be subject to the new rules even though your Terms of Trade were signed before the start date of the PPSR.
In order to cater for the new PPSR, we enclose two copies of our new Terms of Trade to replace your current Terms of Trade incorporating the PPSR and other minor updates. These new Terms of Trade will apply to all products supplied by us on or after 30 January 2012. ...
Unless otherwise notified, [Yamaha] will take this as the final communication required to confirm that you have agreed to the new Terms of Trade as attached.
29 The PPSA Terms were drafted so as to adopt the terminology of the PPSA and purported to create an effective PPSA security. Paragraphs 25 and 26 of the PPSA Terms of Trade provided as follows:
25 [Australian Music] acknowledges that:
(a) it grants a Security Interest(s) to [Yamaha] under this Agreement; and
(b) this Agreement constitutes a Security Agreement for the purposes of the PPSA.
The term "Products" is defined in clause 3 of the Terms of Trade as follows:
Products means the products to be supplied by [Yamaha] to [Australian Music] under the terms of this agreement.
30 On 24 August 2012, the day after the appointment of the administrators, Cornwall Stodart, Yamaha's then solicitors, wrote to the administrators noting that Australian Music was currently indebted to Yamaha for $1,813,509.00:
...for goods supplied by [Australian Music] by [Yamaha] pursuant to Terms of Trade dated 17 May 2011 (Debt). We enclose a copy of the Terms of Trade for your information.
31 The author then recites the retention of title provisions in the 2011 terms which are in identical terms to the 2008 terms extracted above. The letter then refers to the registration a little over six months before, on 2 February 2012, by Yamaha on the PPSR of the PPSA Terms of Trade which were appended to the 8 March 2012 letter. The author observes:
We note that the Registration is a PMSI Purchased Monies Security Interest ('PMSI') and is not transitional'.
Having regard to the ROT Clauses and the Registration, you are hereby on notice that [Yamaha] holds an 'all monies' retention of title claim and a PMSI over all stock (and any proceeds thereof) supplied by [Yamaha] to [Australian Music].
Pursuant to the ROT Clauses our client intends to undertake a stocktake of all [Yamaha] stock located on [Australian Music] premises with a view to collecting [Yamaha] stock to the value of the Debt.
32 Prior to the introduction of the PPSA, by reason of the application of the High Court's reasoning in Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In Liq),[6] a retention of title clause of the type found in the Terms of Trade in the 2008 and 2011 iterations did not afford security in the context of the voidable transaction provisions of the Corporations Act 2001 (Cth) and its precursors. The effect of Associated Alloys was that suppliers could not register retention of title clauses as charges under the Act because they were not registerable charges and as such, were not secured creditors. In Radio Frequency Systems Pty Ltd v Guthrie Suppliers (as liquidator of ULT)(Receiver Appointed) (In Liq)[7] Steytler J stated:
...a provision which reserves title to goods sold to the seller while until payment, not only of their purchase price, but of all debts due to it, does not amount to the creation by the buyer of a right of security in favour of the seller (Armour v Thyssen Edelstahlwerke AG (1991) 2 AC 339)...
...while a provision of this kind does, in a sense, give the seller security for the unpaid debts of the buyer, "it does so by way of a legitimate retention of title, not by virtue of any right over his own property conferred by the buyer". (Armour at 353 per Lord Keith).
33 The remedy of a supplier such as Yamaha, who traded under the terms of a pre-PPSA retention of title clause and who was unpaid, was to enter and take possession of the property under the retention of title provisions in the Terms of Trade. Indeed, I note that Yamaha, through its solicitors in their letter of 24 August 2012, indicated its intention of doing just that. However, a supplier such as Yamaha who receives payment in respect of a pre-PPSA retention of title provision is not receiving payment as a secured creditor, rather it is receiving a payment in respect of an unsecured debt, which is susceptible of being characterised as a preferential payment.
34 The plaintiffs' position is that, in these circumstances, the prePPSA stock belonged to Yamaha under the retention of title clauses that applied from time to time, but that when it received payment for that stock, it was not in the capacity of secured creditor. I agree with that analysis.
35 Yamaha has not led any evidence in this application as to the amount or value of the stock which was supplied post-PPSA at the date of each of the alleged preference payments, or of any proceeds of sale of that stock held in a proceeds account. The type of evidence that could determine whether the stock claimed is subject to the PPSA security would consist of stock labelling or other documents enabling identification of particular stock and when it was supplied.
36 When the PPSA was introduced, provision was made that retention of title arrangements be considered, by a statutory construct, to afford a security interest and as such modified the situation which applied the reasoning of the High Court in Associated Alloys. These arrangements are styled as Purchase Money Security Interests ('PMSI's') which are very specifically defined under s 14 of the PPSA. They only have effect in respect of dealings which took place after the PPSA was introduced. A PMSI can only secure an unpaid purchase price of the stock itself, not other debts owing to the creditor for other purposes. If the purchase price of the stock has been paid for by Australian Music by either cash on delivery or by later payment, there is no PMSI over that stock. Mr McKillop submitted that the PPSA security that Yamaha registered was in terms of being an 'all monies' security and as such did not meet the specific statutory requirements for a PMSI under s 14 of the PPSA and Yamaha's security is therefore in the nature of a general security interest.
37 Even assuming there is some post-PPSA stock that is security for Yamaha's security interest, Yamaha must also establish that it has some value as security. As noted, Revere has a registered charge over all of the assets and undertaking of Australian Music with priority over Yamaha; Revere's secured debt exceeded the total value of its security if Revere's security has priority over Yamaha's by reason of prior registration. Pursuant to s 588FA(2) of the Act, to the extent that Yamaha's debt exceeds the value of any security it holds, it is taken to be unsecured.
38 In the context of consideration of this application, it is clearly arguable that the PPSA Terms of Trade only operate prospectively and do not purport to create any security interest in the stock which was supplied prior to the introduction of the PPSA. This is because the PPSA Terms of Trade do not create a security interest in any stock supplied to Australian Music unless the stock is supplied under 'this agreement' (thus excluding pre-PPSA stock), full payment of the stock has not been made or there remain other monies owing to Yamaha by AMPL on any account.[8]
39 Mr McKillop submitted that, by reason that Yamaha contend that they did not supply any stock post2 February 2012 on credit (by reason of the so-called 50/50 agreement), there cannot be any stock in Australian Music's possession at the time of the payments which are sought to be impugned which was subject to the PPSA security. This is because in order for the PPSA to apply and give security over the stock, the supply of such stock would necessarily have to have occurred after the PPSA registration. Thus, if Yamaha's position is accepted and that all money that was paid to Yamaha after the date of the 50/50 agreement was either retirement of existing debt or cash on delivery payments, then there has not been provision of any new credit in the PPSA period and therefore no security comes in to existence in the PPSA period.
40 As I have said, there is no evidence before the Court in this application as to when the stock which is said to be the subject of Yamaha's security at the time of the payments was supplied, in particular, whether it was supplied prior to the PPSA security or afterwards. In these circumstances, the relevant chronology extends over the transitional period between the prePPSA and postPPSA regimes. Australian Music had a long trading history with Yamaha and Mr McKillop contended that a large proportion of the debts which were discharged by the payments came into existence before the PPSA came into effect. As such the contractual position between the parties will be governed by the Terms of Trade which applied from time to time, in particular, the retention of title clauses in the various iterations of the Terms of the Trade between Yamaha and Australian Music.
41 The effect of the position that has been put by Yamaha is that the Court is asked to go behind the assertion that the plaintiffs have certified that they have a proper basis for bringing the claim and that the plaintiffs are obliged to accept that Australian Music, by reason of the retention of title clauses, which applied to the trading between the parties from time to time prior to the introduction of the PPSA and registration under the PPSA after its introduction, conclusively determines the question in Yamaha's favour that it is a secured creditor at all relevant times for all the payments made, which are now the subject of the plaintiffs' claim. As the foregoing discussion clearly illustrates, the position as to whether Yamaha was a secured creditor in the relevant sense at the time of each of the payments is complex and requires a good deal more evidence and analysis for a determination to be made on this issue.
42 In these circumstances, Yamaha's application, which includes an application for summary judgment, requires the Court to be satisfied that the action has no real prospect of success. In my view, by reason of many unresolved questions surrounding the security issue, the Court cannot be so satisfied. That would require Yamaha to have incontrovertible evidence that satisfies the Court that there is no real prospect of the plaintiffs contending that Yamaha are unsecured creditors.
43 Mr McKillop contends that the matter is much more complex than Yamaha would have it, and I agree. Mr McKillop stated that the situation in regard to pre and post-PPSA transactions is not known with any certainty at this juncture and those matters have to be exposed in the pleadings and in discovery and dealt with in evidence at the trial; it is certainly not an issue capable of being determined at a summary or interlocutory level.
44 As to the 50/50 agreement, I agree that it is not simply a matter of contending that there is such an agreement; it has to be demonstrated the agreement has been complied with by way of the actual appropriation of the payments and then demonstrated that the payments that the plaintiffs are trying to recover are subject to that defence.
45 As such, I consider that the first aspect of the defendant's application cannot be sustained. In my view, it is not for the plaintiffs to anticipate the position as to the efficacy of what Yamaha contends as to the existence of the alleged security it says it held at the time of the subject payments. For the purposes of this application, I accept Mr McKillop's submissions that the situation is much more complex than that and will need to be exposed by discovery and if necessary a trial. If Yamaha contends it has a security in respect of the debts, the subject of the payments or part thereof, it is for Yamaha to plead and particularise why it contends this to be the position.
46 To summarise, in terms of the relief claimed by Yamaha in its first three paragraphs of its summons, I consider as follows. The relief sought in paragraph (a) pursuant to r 23.01 should not be awarded to Yamaha. The position as to the existence of security in these circumstances is a matter for Yamaha to plead and establish. It is obvious from the foregoing discussion that the matter is of some considerable factual and legal complexity but in the current context Yamaha has not successfully made out that the plaintiffs' claim in respect of the existence of security does not have a 'proper basis'. As to the relief sought in sub-para (b), the matter is very clearly not apt for summary judgment. Just on the security issue alone there are matters of considerable factual and legal complexity which warrant a trial of the proceeding. Suffice to say, it is clear that it could not be said, on the application of the relevant authorities, that the plaintiffs have 'no real prospect of success'. For the same reasons I consider that the application made in sub-paragraph (c) of the summons pursuant to r 23.02(c) and (d) of the Rules or s 19 of the CP Act is not made out. The plaintiffs are entitled to plead that Yamaha was an unsecured creditor at the time of the payments. Such a plea is, on its face, sustainable, not embarrassing or an abuse of process.
47 The second aspect of Yamaha's application is that it has complaints about the form of paragraph 17 of the ASOC and whether it is properly pleaded insofar as it pertains to the alleged insolvency of Australian Music from at least 30 June 2010.
48 In paragraph 17 of the ASOC, the plaintiffs contend that by reason of the matters pleaded in paragraphs 7 and 8 of the ASOC, Australian Music was insolvent at all relevant times from at least 30 June 2010 in that it was unable to pay its debts as and when they became due and payable.
49 In correspondence, more particularly the October 2015 letter, Yamaha point out that paragraph 7 of the SOC (now the ASOC), refers to a Deed of CrossGuarantee allegedly executed on 26 June 2012 in support of an allegation that Australian Music has been insolvent by reason of that deed since 30 June 2010 (two years earlier). There is no pleading of a factual basis for the alleged joint and several liability of Australian Music for the debts of its related entities prior to the date of that deed and Yamaha contends that the pleading is embarrassing. Yamaha says it is no answer to say that the plaintiffs will put forward evidence as to Australian Music's insolvency by way of discovery or by way of expert reports and I agree.
50 Mr McKillop states in reply to this contention that paragraph 8 refers to Australian Music and its related bodies corporate being able to, because of the crossorder, prepare consolidated accounts and be jointly and severally liable. It was contended that the group was preparing accounts on a consolidated basis well before the Deed of CrossGuarantee was signed and before the order described in the pleadings made by ASIC.
51 Mr McKillop contended that it is to be clearly inferred from the use of the date 'from at least 30 June 2010' that the pleading is referring to the solvency or otherwise of the company prior to 26 June 2012 and the particulars of insolvency under paragraph 17 go beyond the Deed of CrossGuarantee. I do not accept that submission.
52 In my view, the mention in paragraph 7 of the ASOC of a reference back to paragraphs 7 and 8 and a contention that by reason of those paragraphs Australian Music was insolvent at all relevant times from at least 30 June 2010 is embarrassing and amendment of the pleading is warranted.
[2] Australian Music is referred to as AMPL in the ASOC.
[3] See Airservices Australia v Ferrier (1996) 185 CLR 483 at 502-3.
[4] D Casson and I Dennis London, Stephens and Sons, 1981.
[8] See paragraph 26 of the PPSA Terms of Trade.
Ross Andrew Blakeley & Australian Music Pty Ltd
Yamaha Music Australia Pty Ltd [2016] VSC 231
(1996) 185 CLR 483
(2002) 202 CLR 588