Heggies Bulkhaul v Shirlaw

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

3054/04 HEGGIES BULKHAUL LIMITED v KEVIN SHIRLAW & ORS JUDGMENT - Ex Tempore; Revised 30 August 2004 1 HIS HONOUR: This is a notice of motion which seeks the following orders: "1. A declaration that the Plaintiff is entitled to have the Plaintiff's Lease registered on the folios of the Register having Folio Identifiers 1, 2, 3, 4 and 5/253462 in priority to the mortgage having distinctive reference number 9585643 between Global Minerals Australia Pty Limited as Mortgagor and Ostabridge Pty Ltd (in Liquidation) (Receiver and Manager Appointed) and Kevin Richard Shirlaw as Mortgagees. 2. An order that the Fifth Defendant do all things necessary to forthwith register the Plaintiff's Lease on the folios of the Register having Folio Identifiers 1, 2, 3, 4 and 5/253462. 3. An order that the injunction against the Fifth Defendant contained in paragraph 3 of the Orders made on 1 June 2004 otherwise be continued until further order." 2 The circumstances from which the dispute arises are that until May 2000 Australia Machinery Equipment Sales Pty Limited ("AMES") was the registered proprietor of the five lots of land which the first prayer for relief in the notice of motion refers to. 3 For the purpose of this judgment I accept various facts, set out more specifically later in the judgment, which have been outlined to me by Mr Ireland QC, counsel for the first defendant. There was, it is common ground, a lease from AMES to the plaintiff on 9 November 1995, which had options for extension. In September 1999 there were dealings between AMES and Heggies Bulkhaul Limited ("Heggies") concerning the exercise of that option. 4 The five lots of land were transferred in December 1999 by AMES to the present registered proprietor, Global Minerals Australia Pty Limited ("Global"). 5 In November 2000 the original term of the lease from AMES to Heggies expired. A dispute then arose about whether Heggies was entitled to a fresh lease by virtue of having exercised the option, or a fresh lease as a substitute for a lease arising under the exercise of the option. That substituted lease was one which Heggies asserted arose from the negotiations which had taken place between Heggies and AMES in September 1999. 6 The dispute which so arose led to litigation being commenced in this Division of the Court, proceedings number 2810/01, brought by Heggies against Global. 7 On 18 September 2001 Heggies lodged a caveat against the title to the five lots of land. The interest it claimed was: "… an interest as lessee of the whole of the land for a term of 11 years commencing on 10 November 2000 and terminating on 9 November 2011, together with two options to renew for further terms of 11 years each." 8 The caveat stated two alternative bases on which that interest arose, namely: "(1) On 20 September 1999 the caveator validly exercised the option to renew contained in lease registered number O691505, or (2) On or about 20 September 1999 the caveator and the predecessor in title to the registered proprietor (Australia Machinery Equipment Sales Pty Limited) entered into an agreement to lease providing for the grant of the lease interest claimed by the caveator." 9 The proceedings which Heggies had brought against Global were heard by Austin J on dates extending from December 2001 to July 2003. His Honour delivered judgment on 19 September 2003: Heggies Bulkhaul v Global Minerals Australia [2003] NSWSC 851. 10 His Honour did not uphold the contention that there had been a valid exercise of the option. His Honour did however uphold the alternative contention. Orders were made pursuant to his Honour's judgment on 13 October 2003 whereby his Honour declared: "1. On 20 September 1999, the Plaintiff entered into an agreement for a new lease with Australian Machinery Equipment Sales Pty Limited ( AMES ) of the land comprising Folio Identifiers 1, 2, 3, 4 and 5/253462 ( Land ) for a term of 11 years commencing 10 November 2000 on the same terms and conditions as lease registered number 691505 between the Plaintiff and AMES dated 10 November 1995 ( Old Lease ), with the following amendments: (a) The deletion of clauses 3.03 and 8.01; (b) Clause 3.04(b) was amended to replace "12.5%" with "11%"; and (c) The Prevailing Rate for determining the Royalties payable pursuant to Clause 3 for the first year of the new lease shall be determined as set out in Clause 8.02 of the Old Lease as at the date of commencement of the new lease as if that were a date of review under the term of the new lease. (New Lease Agreement) 2. pursuant to s.118 of the Conveyancing Act 1919 , the Plaintiff is entitled to specific performance of the covenants of the New Lease Agreement as against the Defendant; 3. the Defendant holds the fee simple of the Land in trust to grant a new lease to the Plaintiff pursuant to the New Lease Agreement; 4. the Defendant is estopped from denying the existence of the New Lease Agreement"

His Honour also ordered that Global specifically perform the New Lease Agreement, and made other consequential orders. 11 That judgment led to the execution of a lease document whereby the five lots of land were leased by Global to Heggies, on the terms of the agreement his Honour had found to exist. That lease has been lodged with the Registrar General, but for reasons which do not matter for the purpose of this application, has not yet been registered. 12 In the meantime, in May of 2001 Ostabridge Pty Limited started proceedings which claimed certain rights in relation to AMES and a setting aside of the transfers to Global of the five lots of land for fraud. Those proceedings were settled by a deed entered on 10 January 2003. Pursuant to those terms of settlement, Global granted to Ostabridge a mortgage over the five lots of land. The mortgage to Ostabridge was lodged for registration with the Registrar General in May 2003, before the lease which Austin J had ordered be entered was lodged for registration. That mortgage has not, however, yet been registered. 13 The present proceedings are ones which Heggies brings against a variety of defendants. It is only the first defendant, who is the receiver and manager of Ostabridge, who is taking any active role. All the other defendants have entered submitting appearances. 14 There are two issues in contention in the proceedings. One of them is whether the lease which Heggies obtained from Global has priority over the mortgage which Ostabridge obtained from Global. The other is whether a mortgage which Heggies obtained from Global has priority over the mortgage which Ostabridge obtained from Global. The active parties to the litigation accept that the second of these questions must go to trial. The point of the present application is for the plaintiff to obtain summary relief in relation to the first of the applications. 15 If the orders which are paras 1 and 2 in the notice of motion were to be granted, it would in effect be granting to Heggie, on a summary basis, the relief it seeks concerning the first of those issues. 16 Heggies puts its case for summary relief in two different ways. The first way is dependent upon certain admissions which have been made by the first defendant in his defence, and an admission which is alleged to be contained in a particular e-mail which the solicitor for the first defendant sent to a solicitor for Heggies. 17 The second way in which Heggies seeks its relief is dependent upon an argument that the facts which are uncontrovertibly in existence are such that it is bound to win at any trial, regardless of what the first defendant might have admitted. 18 There has been filed in court today an affidavit from the solicitor acting for the first defendant, who says that certain of the admissions upon which Heggies relies are ones which he made by mistake. He seeks leave to amend the pleading so that admissions which currently arise on the pleadings are no longer made, and also disputes that he intended to make, in the e-mail, remarks which had the meaning which Heggies has placed on those words. 19 The first defendant seeks leave, as part of its defence to the summary judgment application, to amend it's pleading to withdraw these admissions. The making of that amendment is opposed by the plaintiff. 20 Mr Simpkins SC for the plaintiff refers me to the decision of Rogers CJ in Comm D in Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 where his Honour held that in determining the application for leave to withdraw an admission the court may have regard not only to whether the admission was made in error but also to the public interest in the efficient administration of justice. The court will not allow an admission to be withdrawn if the effect of that admission being withdrawn is to put in issue some matter which does not properly deserve to go to trial. 21 I propose to deal with the second basis upon which Heggies seeks summary judgment before I consider the first basis, and before I consider the application to amend the pleadings by withdrawing the admissions. The view which I take of the arguability of the case, based on matters which are not in dispute, will affect how those matters just mentioned should be decided. 22 One of the matters which is alleged in the Statement of Claim is that on or about 20 September 1999 Heggies entered into an agreement with AMES to lease the land for a term of eleven years commencing on 10 November 2000, on certain terms and conditions. That allegation in the Statement of Claim is admitted by the first defendant. The Statement of Claim next, in para 10, alleges that Austin J delivered judgment on 19 September 2003 in the Global proceedings, and on 13 October 2003 made the orders to which I have previously referred. That allegation is also admitted by the first defendant. 23 Paragraph 34 of the Statement of Claim alleges that in or about May 2003 Global purported to grant a mortgage over the land to Ostabridge and the first defendant. Apart from quarrelling with the word "purported" that allegation is in substance admitted by the first defendant. 24 Paragraph 36 of the Statement of Claim alleges "In the circumstances, the Plaintiff is entitled to have the New Lease ... registered on the folios of the Register relating to the Land prior to the Ostabridge Mortgage". 25 The defence which the first defendant has filed says, in relation to that allegation, that it admits that the plaintiff is entitled to registration upon the folios relating to the said land and its lease dated 20 October 2003. Thus that pleading does not deal in express terms with the allegation in para 36 that Heggies is entitled to have its lease registered prior to the Ostabridge mortgage. 26 Pursuant to Pt 15 r 20 Supreme Court Rules 1970 the failure to refer to that topic would count as an admission. This admission is the first of the admissions which the first defendant seeks to withdraw. It seeks to include in its defence a statement that it "denies that the lease ... is entitled to registration in priority to the Ostabridge Mortgage". 27 Paragraph 37 of the Statement of Claim contains an allegation, contrary to fundamental rules of pleading about not pleading evidence, that "The First Defendant has admitted that the New Lease was created before and has priority to the Ostabridge Mortgage". That allegation was itself admitted by the first defendant's defence. That admission is one which is said to have been made by mistake, and is sought to be replaced by a statement that "The first defendant does not admit the allegations in para 37 of the statement of claim". It is only in relation to paras 36 and 37 of the Statement of Claim that the first defendant seeks to amend its pleading. 28 I also note that the first defendant, in para 38 of its defence, sets out a long list of facts which result, in its contention, in the mortgage which was granted to Heggies having lost any priority it otherwise might have had. I mention that because there is no corresponding allegation about facts which caused the lease to Heggies to have lost priority. 29 In a situation where both the Heggies lease and the Ostabridge mortgage are unregistered, neither interest has the effect of an interest in law under the provisions of the Real Property Act 1900. Each of them is an equitable interest. There is no allegation in any pleading that the priority situation is complicated in any way by the provisions of s 43A of the Real Property Act 1900. In light of the terms of the caveat which I have mentioned, this is no oversight. 30 Thus the priority question boils down to a simple matter of which interest is first in time. It is undisputable that the lease interest of Heggies was first in time. 31 Mr Ireland QC for the first defendant sought to persuade me that the Statement of Claim pleads a priority which dates only from the time of creation of the new lease which was given by Global to Heggies. Undoubtedly that new lease, in the form of a registrable document, has come into existence only after the Ostabridge mortgage. 32 Furthermore the new lease, being the current embodiment of the right to a lease which Heggies has, is appropriately made the subject of the orders concerning priority of the lease which Heggies seeks in the proceedings. However, the priority to which that new lease is entitled is itself dependent upon the time that the agreement to lease, which it gives effect to, was entered. From the time of that agreement for lease there was an equitable interest because there was a specifically performable agreement for lease: Walsh v Lonsdale (1882) 21 Ch D 9. 33 That equitable interest, arising at it did on 20 September 1999, is earlier in time than the equitable interest of Ostabridge's mortgage. No postponing conduct is pleaded which could, if made out, reverse the prima facie priority which is accorded to the first equitable interest in time. 34 In the circumstances, on the undisputed facts, Heggies is bound to win, or would be bound to win at any trial of the priority competition between its lease and Ostabridge's mortgage. That means it is appropriate for Heggies to be granted the summary relief which it seeks. 35 It also means that it is inappropriate, in accordance with the principles outlined by Rogers CJ in Comm D in Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738, for leave to be granted to the first defendant to make the amendments which he seeks to make. 36 The third order contained in the notice of motion is one which the plaintiff seeks as a precaution. There is already on foot an order of the court, made on 1 June 2004, which continues until further order an injunction against the fifth defendant (the Registrar General), which restrains him from registering or recording any dealing on the folios of the register for the five lots of land in question. 37 The fear of the plaintiff was that if the court were to make orders 1 and 2 contained in the notice of motion, that might possibly be construed as a "further order" which would cause the injunction made on 1 June 2004, to which I have just referred, to cease to operate. I doubt that that is correct, but even so it seems to me to be preferable for there to be no room for doubt at all about what orders the court has made, and about the effect of those orders. The orders I therefore make are:

1. A declaration that the Plaintiff is entitled to have the Plaintiff's Lease registered on the folios of the Register having Folio Identifiers 1, 2, 3, 4 and 5/253462 in priority to the mortgage having distinctive reference number 9585643 between Global Minerals Australia Pty Limited as Mortgagor and Ostabridge Pty Ltd (in Liquidation) (Receiver and Manager Appointed) and Kevin Richard Shirlaw as Mortgagees.

2. An order that the Fifth Defendant do all things necessary to forthwith register the Plaintiff's Lease on the folios of the Register having Folio Identifiers 1, 2, 3, 4 and 5/253462.

3. An order that save to the extent that the Registrar-General is required to register dealings pursuant to orders 1 and 2 above, the injunction against the fifth defendant contained in para 3 of the orders made on 1 June 2004 be continued until further order. 38 I order the first defendant to pay the costs of the plaintiff of the notice of motion. The exhibits may be returned. 39 The first defendant seeks a stay of the order I have just made for the period of seven days to see whether it can obtain a further stay from the Court of Appeal, if advised to appeal against that order. 40 There has been some evidence presented that there are two current commercial pressures on Heggies which relate to the lease. One commercial pressure is that A A Scott Pty Limited has made a takeover offer to the shareholders of Heggies to acquire their shares for thirty-five cents a share. That offer is one which was made on 30 July 2004, and will remain open for acceptance until 31 August 2004, unless it is withdrawn or extended in accordance with the Corporations Act 2001 (Cth). The second pressure arises from the fact that on 23 August 2004 Heggies made an announcement to the Stock Exchange that it had, that day, entered into an agreement for the sale of its Penrose quarry interests, (which includes the five lots of land subject to the lease) to Boral Resources (NSW) Pty Limited. Boral is, it seems, obliged to complete that agreement following registration and assignment of the lease. 41 The agreement is one under which Boral will pay 7.25 million dollars to Heggies for the quarry inventory, plant and equipment and related assets, and an assignment of the quarry lease. There are some other considerations as well. The transaction is one which will result in Heggies realising a profit of approximately $3 million. 42 The terms of that announcement to the Stock Exchange demonstrate that these leases are of significant value. They are the sort of asset which could be material in considering the adequacy of the takeover offer made for Heggies. 43 Counsel for the first defendant has no instructions to give an undertaking as to damages for any stay. It seems to me that there is a potential for significant damage to arise, in particular to the shareholders in Heggies, if the existence of a stay were to interfere with the operation of the takeover offer. 44 The usual undertaking as to damages enables the court to require a person who obtains interlocutory relief to pay such damages as the court thinks fit, not only to the opposite party in the litigation, but also to such other person or people as the court thinks appropriate. 45 The combination of the clear view which I have reached about the merits of the application, and the absence of an undertaking as to damages, in the particular circumstances affecting the leased land, leads me to decline the stay which is sought. **********

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