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[2013] NSWSC 98
Supreme Court of NSW
2013-02-07
Brereton J
Original judgment source is linked above.
Judgment (ex tempore) 1HIS HONOUR: By an originating process filed on 19 October 2012 and amended on 30 October 2012, the plaintiff Austino Wentworthville Pty Ltd claims, by way of an appeal from a decision of the second defendant David Levi, as administrator of the first defendant Metroland Australia Limited, an order that the administrator's decision to admit Austino to vote at the second creditors' meeting for only $353,000 be modified so as to admit Austino to vote for a sum of $2.8 million and, as a result, that the resolution of that meeting that the company should enter into a Deed of Company Arrangement and that deed itself be declared void, and consequential relief. 2Mr Levi was appointed voluntary administrator of the first defendant Metroland Australia Ltd on 21 August 2012. The first creditors' meeting was held on 11 September 2012. Prior to that meeting, Austino had lodged a proof of debt for a sum of $353,000, and for the purposes of the first meeting was admitted to vote in that amount. 3The second creditors' meeting, held on 5 October 2012, resolved that the company enter into a Deed of Company Arrangement. Austino voted against that resolution. The deed was entered into that same day, together with various subsequent transactions, including a creditors' trust deed. 4Prior to the second meeting, Austino had lodged a proof of debt in the sum of $2.8 million. At the second creditors' meeting, the administrator admitted it for the purposes of voting only in the sum of $353,000, being the amount of the first proof. Had it been admitted to vote in respect of the sum of $2.8 million, Austino would have had a significant majority in value, though not in number, of creditors at the second creditors' meeting, and the fate of the Deed of Company Arrangement would have depended on the liquidator's casting vote. Were it necessary to resolve the question, on the evidence that has emerged in the proceedings, I would not be satisfied that that vote must have been exercised in favour of the Deed of Arrangement (or, alternatively, that there was no possibility that in a meeting at which Austino was admitted to vote for $2.8 million and had an overwhelming majority in value, the liquidator would not have cast his vote with the majority in value, against the deed. 5Austino's proof of debt arose under a rental guarantee given by Metroland in respect of the rents to be derived by Austino from a shopping centre acquired by it from a related company of Metroland, over a period of four years. The first proof of debt was for the shortfall in rents received under the guaranteed amount for the first six months of the four-year period, plus "additional and continuing liabilities" as set out in a statement of claim that had been filed in the Common Law Division, and which was attached (together with extensive other documentation) to the proof of debt. The second proof of debt quantified the claim for the total four-year period, by multiplying the sum claimed in the first by eight. 6On a date which is not entirely apparent but on all the evidence is agreed to have been before the company went into administration, Austino executed a Deed of Assignment, from it to the Bank of China Ltd, of "all the right, title, benefit and interest in and arising out of the rental guarantee..." 7By clause 3, the Deed provided as follows: 3. ASSIGNMENT In further pursuance of the consideration provided to the Assignor by the Assignee, the Assignor, as beneficial owner, assigns to the Assignee all its right, title, benefit and interest in and to all monies now payable or to become payable and the full benefit of all the provisions of the Rental Guarantee and the Management Contract such that the Assignee is forthwith subrogated to all rights of the Assignor under or pursuant to the Rental Guarantee and the Management Contract. 8Clause 5 of the Deed provided as follows: 5. FURTHER ASSURANCES AND DOCUMENTS The Assignor shall upon request by the Assignee execute such formal assignments, deeds or other documents and do all such other acts, matters and things as the Assignee may reasonably require for perfecting the assignment constituted by this Deed. 9Clause 7 provided as follows: 7. NOTICE TO DEBTORS In pursuance of this Deed the parties hereto shall execute the Notice to Debtors in the form annexed hereto and marked 'A". 10The notice provided as follows: Notice to Debtors To Global Real Estate Assets Corporation Pty Ltd ACN 118 983 403 and Metroland Australia Limited ACN 009 138 149 ("Debtors") BANK OF CHINA LIMITED ABN 29 002 979 955 of 39-41 York Street, Sydney NSW 2000 ("assignee") and AUSTINO WENTWORTHVILLE PTY LTD ACN 146 623 421 as trustee for the WENTWORTHVILLE UNIT TRUST of Suite 145, 416-418 Pitt Street, Sydney NSW 2000 ("Assignor") HEREBY GIVES YOU NOTICE THAT, by Deed of Assigned dated April 2011 between the Assignor and the Assignee, the Assignor assigned absolutely all its right, title, benefit and interest in and to including any all claims, chose in actions or rights and remedies whatsoever whether at law or in equity or pursuant to any statute in relation to or arising out of the Rental Guarantee and the Management Contract and the Debt as hereunder defined. "Debt" means the total of the indebtedness of the Debtors to the Assignor pursuant to the Rental Guarantee and the Management Contract together with any and all other amounts of whatsoever nature (including but not limited to principal, interest, charges, fees, further advances) arising out of or relating to the Management Contract and/or Rental Guarantee). "Management Contract" means the management contract between Global Real Estate Assets Corporation Pty Ltd ACN 118 983 403 and the Assignor, a copy of which is annexed hereto and marked "A". "Rental Guarantee" means the rental guarantee provided by Global Real Estate Assets Corporation Pty Ltd ACN 118 983 403 and Metroland Australia Limited ACN 009 138 149 in favour of the Assignor, a copy of which is annexed hereto and marked "B". 11The defendants contend that Austino has no standing, by reason that the assignment of all its right, title, benefit and interest in and to all moneys payable, or to become payable, under the guarantee means that it no longer stands in a relationship of creditor and debtor with Metroland, and that any debt under the guarantee is owed to the Bank of China and not to Austino. 12For Austino, it was contended that the assignment was not an absolute legal assignment, but an assignment only in equity by way of charge. It is clear enough that the assignment was in order to secure indebtedness of Austino to the Bank of China, and was by way of security, however, that is not to say it was not absolute but only by way of charge: a common law (old system) mortgage is an absolute assignment, not a mere charge. 13To my mind, the fact that the assignment was one of a bundle of securities for the indebtedness in question, the others of which were in the nature of charges or hypothecations rather than legal assignments, is beside the point. It is the nature of the property over which security is given that typically dictates the nature of the security. Thus had the land which formed part of the security been old system title land the relevant security would have been an absolute legal assignment; but as it was Torrens Title land, the security was by way of Real Property Act mortgage, which is more in the nature of a hypothecation. As part of the security given included the assets and undertaking of the company, the security over that property was by way of fixed and floating charge. That is, in my view, no indication that security over a debt would be by way of charge only and not legal assignment. 14The words of clause 3 of the Deed of Assignment, although they do not use the word "absolute" are, in their terms, indicative of an absolute assignment, with one possible exception, to which I shall come. The words, " as beneficial owner, assigns to the Assignee all its right, title, benefit and interest in and to all moneys now payable or to become payable and the full benefit of all the provisions of the Rental Guarantee" are indicative of an absolute assignment. 15The possible exception is constituted by the following words: "Such that the Assignee is forthwith subrogated to all rights of the Assignor". However, I do not think that that phrase was intended to reflect that the rights of action in respect of the debts would remain vested in the assignor, with the assignee subrogated to them. In my view the words are used, perhaps inelegantly, to indicate that, from that point on, it was the assignee and not the assignor who was entitled to exercise all the rights of the creditor, formerly held by the assignor, under the rental guarantee. 16So far as concerns clause 5, a covenant for further assurance of that kind is commonplace in legal conveyances. It imposes on the transferor an obligation, if required, to execute further documents to perfect the transferee's title; but it does not indicate that the initial assurance was intended to be anything but absolute. 17To my mind, however, the strongest indicia that this was an absolute assignment is to be found in the notice to debtors annexed to the Deed and which, as it seems to me, being an annexure to the Deed and referred to in the Deed, may properly be resorted to for illumination of the intention of the parties to the Deed. It expressly states "The Assignor assigns absolutely all its right, title, benefit and interest...". Nothing could more clearly reveal that the intent of the parties to the deed was that it affect an absolute assignment. 18For those reasons it seems to me that, whatever might otherwise be the merits of the case, Austino has no standing, and the proceedings must, therefore, be dismissed.
Counsel addressed as to costs 19On all the evidence in the proceedings, and on the pre-trial submissions of the parties, I have formed a strong inclination that Austino would have succeeded on the merits on the appeal from the liquidator's decision in respect of admission of its proof of debt to vote at the second creditors' meeting; however, that is a view which remains a preliminary one, without having heard the final submissions of the parties. 20I am not able to express any such preliminary view, one way or the other, so far as concerns the consequences of the subsequent transactions, including the creditors trust, on the ability of the Court to review the administrator's decision - although it is fair to say that the court might have striven mightily to find a way to prevent its ability to do so being defeated by subsequent transactions on the same day. 21Regardless, these can only be preliminary views. More significant is the point that Austino, having brought the defendants to court, has failed on an issue that was essential to its case, and which was raised from the outset. In those circumstances, I do not think I can resist the conclusion that the plaintiff must pay the defendants' costs. 22My order is that the proceedings be dismissed with costs. 23The exhibits will be retained for a period of 28 days and, if an application for leave to appeal is lodged, pending the hearing of any such application.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 February 2013