Luckins (Receiver & Manager of Australian Trailways Pty Ltd) v Highway Motel

Luckins (Receiver & Manager of Australian Trailways Pty Ltd) v Highway Motel - [1975] HCA 50 - HCA 1975 case summary — Zoe

[28]

The argument on behalf of the execution creditor was that because the charge was not registered under s. 100 of the Companies Act, 1961 W.A., as amended ("the Act"), the charge so far as any security is thereby conferred on Trailways' property in Western Australia, is void as against any creditor of the company. In reply to this argument the appellant advanced two propositions, first, that if a charge over the bus was lawfully created on 13th August 1973 in the place where the bus was then situate the charge will be recognized in Western Australia unless there is anything in div. 7 of Pt IV of the Act which provides to the contrary, and secondly, that the Act did not have the effect of invalidating the charge as a security. No objection can be taken to the first of these propositions in the form in which it was stated, since on the one hand it admits that the question is governed by div. 7 of Pt IV of the Act, and on the other hand it was not suggested that any other law of Western Australia is relevant to the validity of the charge. However, as stated the proposition tends to obscure some difficult questions. It may be accepted, although there is not a great deal of authority on the point, that in general the validity of a charge on chattels is to be determined in accordance with the law of the place where the chattels are situated when the charge is created. The two Australian cases to which we were referred on this aspect of the matter - Hockey v. Mother o' Gold Consolidated Mines Ltd. [4] , and In re Australian Federal Life and General Assurance Co. Ltd. [5] - do not decide the question, because although the assets over which the charges were said to have been given in those cases were situated in Victoria when the question fell to be decided in the courts of that State, it does not appear whether or not they were so situated when the charges were created. However, there seems no reason to doubt the general correctness of the opinions of the text-writers on this matter - see Dicey and Morris, Conflict of Laws, 9th ed. (1973), pp. 534-539; Nygh, Conflict of Laws in Australia, 2nd ed. (1971), pp. 614-618 - although perhaps it could be suggested that the validity of a floating charge should be determined by the laws of the place where the assets were situated when the charge crystallizes. It may also be accepted that if the bus had been validly subjected to a charge in Victoria, the debenture holder in whose favour the charge was given would not lose his rights simply because the bus was moved from Victoria to Western Australia: Taylor v. Lovegrove [6] ; Dicey and Morris, op. cit., pp. 542-544; Nygh, op. cit., pp. 620-624. Nevertheless, it is within the competence of the legislature of Western Australia to enact that a charge on goods within the State, even if valid elsewhere, shall be void unless the requirements laid down by that legislature have been complied with: cf. Dulaney v. Merry & Son [7] . This was not, and in my opinion could not be, challenged and on the argument submitted by the appellant the case depends on whether div. 7 of Pt. IV of the Act, on its proper construction, made the registration of the charge in Western Australia essential to its validity as a security over chattels in Western Australia.

[30]

However in fact there was no evidence to show where the bus was situated when the charge was created. All that is known is that the bus was at all times registered in Queensland and was not in fact in Western Australia on 13th August 1973. If on that date the bus was in some State other than Victoria it has not been shown whether the facts were such that the registration of the debenture was required under the companies legislation of that State. In my opinion, in these circumstances, the appellant has failed to prove that the debenture was validly made under the law of the State where the bus was then situated. I further consider that the appellant bore the onus of making out his claim. The interpleader summons was brought under O. 17 of the Rules of the Supreme Court of Western Australia which, we were told, applies to proceedings in the District Court of that State. Under O. 17, r. 5 it may be ordered (inter alia) that an issue between the claimants be stated and tried and directions may be given as to which of the claimants is to be plaintiff and which defendant and as to the method of trial. In the present case no order appears to have been made under O. 17, r. 5. The learned District Court judge proceeded upon a summons which called upon the parties to "state the nature and particulars of their claims on one 41 seater Passenger Bus seized and held by the Bailiff in this action and maintain and [sic] relinquish them". In accordance with long-standing practice, where an interpleader summons has been taken out by a sheriff who has seized under a writ of execution goods in the possession of the judgment debtor, the claimant is generally made plaintiff and the execution creditor defendant in the issue and the burden of proof is on the claimant to prove his title to the goods or his right to possession of them: see Supreme Court Practice 1973, pp. 246-247, par. 17/5/4; Halsbury's Laws of England, 3rd ed., vol. 22, pp. 479-480. The explanation given for this practice in Chase v. Goble [8] was that the judgment creditor is in possession and would therefore be the party against whom the action of trover, or for money had and received, would have been brought. However, it does not seem correct to say that the execution creditor is in possession - see Richards v. Jenkins [9] ; it is the fact that the judgment debtor was in possession that casts the burden of proof on the claimant: cf. Yorke v. Smith [10] . Similarly, where the interpleader proceedings are brought by a person other than a sheriff or similar officer, the claimant who was not in possession bears the burden of proof and is properly put in the position of plaintiff: see De La Rue v. Hernu, Peron & Stockwell Ltd. [11] . On the same reasoning, where the claimant was in possession of the goods at the time of their seizure by a sheriff, the execution creditor will generally be made plaintiff. There can be no doubt that where an order is made that the claimant be the plaintiff in the issue against the execution creditor, the plaintiff bears the burden of proof. Where, as in the present case, no formal order is made under O. 17, r. 5, the claimant who was not in possession of the goods at the time of seizure still bears the onus of establishing the facts on which his claim depends. This is clear in principle, and it was, I think, recognized in Peake v. Carter [12] . In that case no formal order appears to have been made that the claimant should be plaintiff in the issue but it was nevertheless accepted that the claimant must prove such an interest as would make it wrongful as against him that the goods should be seized to satisfy the debt from the execution debtor [13] . In the present case the bus was in the possession of Trailways, the execution debtor, at the time when it was seized. The execution creditor had no onus of proving anything once it appeared that the vehicle was taken in execution under the writ. On the other hand, the appellant, as a claimant who was never in possession, bore the onus of showing that the bus was subject to a valid charge. To discharge this onus it was not enough to show that the debenture was registered in Victoria when it was not shown and could not be inferred that the vehicle was situated in that State at the time when the charge was created; it was necessary to show that the facts were such that the debenture did not require registration under the law of the State in which the vehicle was situated at the time of the creation of the charge. For these reasons I consider that the appellant failed to make out his claim in the District Court. I would not base my decision on this ground, since it does not appear to have been taken in the courts below, but since the question of the onus of proof is not unimportant in relation to another aspect of the case, I have thought it convenient to consider it. The substantial question argued in the courts below was whether the debenture was void as a security in respect of the bus by reason of the fact that it was not registered in Western Australia, and I now turn to consider that question.

[37]

The expression "carrying on business" may have different meanings in different contexts. It would usually connote, at least, the doing of a succession of acts designed to advance some enterprise of the company pursued with a view to pecuniary gain. It is clear from the words of s. 344 (1) that a company may carry on business within a State although it has no place of business there. The expression "carrying on business" is defined by s. 344 (2) to include "establishing or using a share transfer or a share registration office or administering, managing or otherwise dealing with property situated in the State as an agent, legal personal representative, or trustee, whether by servants or agents or otherwise ". Obviously this definition is not exhaustive; for example, there could be little doubt that a company that dealt with property situated in the State for itself and not as an agent would be carrying on business within that State if the dealings were not merely isolated transactions and were done in the course of the business of the company. The provisions of s. 344 (1), and of the definition in s. 344 (2), make it clear that a company can carry on business within the meaning of s. 344 although it does not reside in the State and although its "real business" - in the sense of the business "carried on where the central management and control actually abides" (to use the wellknown words from De Beers Consolidated Mines Ltd. v. Howe [14] ) - is not carried on there. Section 344 (3) has the effect that certain other activities in themselves do not amount to the carrying on of business within the State - in particular, a company is not to be regarded as carrying on business within the State simply because it conducts an isolated transaction there. Subject to the limits indicated by these provisions, the question whether a company is carrying on business within the State is simply one of fact and must be decided by having regard to all the circumstances of the case. In the present case Trailways would not have conducted business within Western Australia simply because travel agents within that State received requests for bookings and transmitted them to Victoria for confirmation. It is unnecessary to consider whether the company would have carried on business within Western Australia if the only relevant fact had been that its tours had proceeded through that State without receiving or depositing passengers and if its employees or agents had no dealings with persons within the State. That, however, was not the case. It can be inferred from the evidence that the company agreed to provide the tourists, whom it conveyed through Western Australia on its buses, with food and either accommodation or camping facilities, and that to fulfil its obligations it bought food, and hired accommodation of camping sites, from persons within Western Australia. It was submitted on behalf of the appellant that a motel proprietor, for example, who supplied accommodation to one of the tourists would have been carrying on his own business and not the business of Trailways, but the proper inference to be drawn is that such a motel proprietor would have been doing business with Trailways and not directly with the tourists. The evidence thus supports the conclusion that for the purposes of its business Trailways despatched busloads of passengers through Western Australia and in the course of so doing entered into commercial transactions with various people in various parts of the State and that it did so not merely on isolated occasions but from time to time during 1973 and the early part of 1974. There was no direct evidence that Trailways had a bus within the State on 13th August 1973 but on the evidence outlined above it was open to the courts in Western Australia to reach the conclusion that the activities of Trailways were carried on within the State throughout 1973. In any case, for the reasons I have already given, the onus of proving that the debenture did not require registration in Western Australia lay upon the appellant as claimant in the interpleader proceedings. If in fact Trailways was not carrying on business within the State on 13th August 1973 this could readily have been proved, and it was incumbent on the appellant to prove it.

[38]

I hold, therefore, that Trailways was at the time of the execution of the debenture a company within the meaning of s. 100 of the Act, and that the charge required registration to give it validity as a security unless it was "a charge on property outside the State" within s. 110. It was submitted on behalf of the appellant that the charge did answer this description, since Trailways had no property within the State when the charge was created. In fact it must follow from the conclusion that Trailways was carrying on business within the State on 13th August 1973 that it had some property within the State on that date - at least a bus. In any event, the contrary has not been proved; all that has been shown is that the particular bus the subject of the present proceedings was not within the State on that date. However, I respectfully agree with the view taken in the Supreme Court that in the case of a floating charge it is not the actual situation of the property but the scope or ambit of the charge that is the material consideration. The question whether a charge answers the description of "a charge on property outside the State" should be answered by looking at the words of the charge. Where, as in the present case, a floating charge is given over all the property of the company "whatsoever and wheresoever both present and future", the property over which the charge is given may change its situation and may at one time be within the State and at another outside it, but it will attach to any property that happens to be within the State when the charge crystallizes. Such a charge is in my opinion misdescribed by calling it "a charge on property outside the State" because it affects all the property of the person giving it whether it is within the State or not, and will be a charge on property within the State if any such property exists during the currency of the charge. Of course a floating charge which by its terms is confined to property in one State will be a charge on property outside another State.

[39]

In my opinion a construction of the provisions of div. 7 of Pt IV of the Act that had the effect that a floating charge given by a foreign company over all its assets did not require registration because at the time of its creation there were no assets within the State would tend to defeat the purposes of that division, which are to enable it to be discovered whether a company carrying on business within the State has encumbered the assets of which it has possession. If registration were required only if the foreign company had assets within the State at the time the floating charge was given, foreign companies would be enabled, by bringing property into the State after a floating charge had been given, to "have an appearance of assets when they had no assets at all": Hockey v. Mother o' Gold Consolidated Mines Ltd. [15] . No doubt the purposes of the Act could be fulfilled in another way, by requiring registration when property was first brought into the State, although that would lead to practical difficulties, but for the reasons given I consider that it is the scope of the charge as determined by its proper construction that determines whether or not it requires registration. On behalf of the appellant, some reliance in argument was placed on s. 102 of the Act, which section requires a company in certain circumstances to register charges made at an earlier date but which does not expressly provide that a failure to register invalidates the charge. It is enough to say that s. 102 has no application to a case in which a foreign company has created a floating charge over all its property and has subsequently, and for the first time, brought some of that property into the State. That section neither applies to the present case nor materially assists in the construction of ss. 100 and 110. It follows from what I have said that in some cases a charge, to be valid, will require to be registered in a number of States, but this is recognized by s. 100 (4), whose provisions appear in the companies legislation of all the States.

At a glance

Court

Decision date

Before

Source

Judgment (81 paragraphs)

Parties