BETWEEN : PORT KENNEDY GOLF COUNTRY CLUB PTY LTD (ACN 060 885 252)

Corporations - Winding up - Just and equitable ground - Whether creditor may apply under just and equitable ground

Practice and procedure - Statement of claim - Unnecessary allegation - Pleading evidence - Striking out

Ebrahimi v Westbourne Galleries Ltd & Ors [1973] AC 360

Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd [2000] WASCA 170; (2000) 34 ACSR 469

Heuston v Swans Ltd, unreported; SCt of NSW; Library No. 3647 of 1994; 2 September 1994

Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606

Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692

O'Neill & Anor v Phillips & Ors [1999] UKHL 24; [1999] 1 WLR 1092

Re Alfred Melson & Co Limited [1906] 1 Ch 841

Re Bellador Silk Ltd [1965] 1 All ER 667

Re Western Transport Pty Ltd; Re Industrial Securities Pty Ltd; Bell Group Finance Pty Ltd (In Liq) (Receiver and Manager Appointed), unreported; SCt of WA; Library No 950668; 1 December 1995

Vujnovich & Anor v Vujnovich [1990] BCLC 227

1 ANDERSON J: I have before me an application for summary judgment pursuant to the Rules of the Supreme Court O 16 and an application to strike out parts of the further amended consolidated statement of claim, brought pursuant to O 20 r 19. The applications are brought by the first, second, third and fourth defendants.

2 In par 62(e) of the further amended consolidated statement of claim dated 30 May 2000, which for convenience I will refer to simply as the statement of claim, it is pleaded that "it is just and equitable (within the meaning of s 461(1)(k) of the Corporations Law) that [Port Kennedy Resorts Pty Ltd] be wound up". In par 9 of the prayer for relief, all of the plaintiffs claim an order pursuant to s 461(1)(k) of the Corporations Law that Port Kennedy Resorts Pty Ltd be wound up. None of the plaintiffs are members of Port Kennedy Resorts Pty Ltd and Mr Solomon on behalf of the applicant defendants asks for summary judgment on the ground that none of the plaintiffs therefore have any standing to obtain a winding-up order on the just and equitable ground.

3 The section in the Corporations Law is in the following terms:

The court may order the winding-up of a company if:

(k) The court is of opinion that it is just and equitable that the company be wound up."

4 In terms therefore the section contains no restriction on the categories of persons who may make application to the court.

5 There is nothing in the Law itself which suggests that the availability of the just and equitable ground is restricted to members. Section 462(2) provides:

Subject to this section, any one or more of the following may apply for an order to wind up a company:

(b) a creditor (including a contingent or prospective creditor) of the company; or

(f) the commission (in the circumstances set out in subsection (2A)); or

6 Prima facie each of the above categories of persons may apply on any ground on which a company may be wound up. Support for that approach is to be found in Australian Securities Commission v A S Nominees Ltd [1995] FCA 1663; (1995) 62 FCR 504. I was not referred to any authority for the proposition that the just and equitable ground in s 461(1)(k) should be treated as being presented only for the benefit of members. It is at least arguable that the ground is available to all of the persons mentioned in s 462. In my opinion, the application for summary judgment must be dismissed.

Application to strike out pars 11, 12A, 14, 16, 22A, 48, 49 and par 1 of the prayer for relief

7 It is submitted that these paragraphs should be struck out as disclosing no cause of action when read together with the documents to which they refer, namely, the deed of charge and the Paribas Letter.

8 In order to understand the opposing arguments, it is unfortunately necessary to set out a number of paragraphs of the statement of claim, including the paragraphs which are attacked. Extensive though they are, they are but a small part of the statement of claim which runs to 57 pages and contains a prayer for relief of five pages. The purpose of the particular paragraphs in question is to plead a cause of action on the deed of charge pleaded in par 11(c) of the statement of claim set out below. As can be seen the deed is a deed of charge between Port Kennedy Resorts Pty Ltd and Pac-Asia Holdings Pte Ltd of 1 June 1995. It will be convenient to refer to the latter company simply as Pac-Asia. I have seen the deed. Both counsel referred to it at some length during the pleading argument. I found it to be a difficult document to understand on a quick reading, although that, perhaps, does not matter for the present.

9 The relevant paragraphs of the statement of claim are as follows:

"11 There were express terms of the Investment Agreement, in effect that -

(d) Pac-Asia promised to PKR and further or alternatively Fleuris that it would:

(i) arrange for the provision to PKR of funding pursuant to a standby credit facility in an amount of $5 million by which the parties meant a loan, letter of credit or guarantee from a reputable bank to PKR or to a lender to PKR, in an amount of $5 million ...;

(ii) arrange for the issue to the Minister for Planning, Western Australia, of a letter from a reputable bank confirming (inter alia) that it would make available to PKR the aforesaid $5 million standby credit facility;

(iii) provide or procure the deposit of $5 million or other security in that amount to the provider of the aforesaid $5 million standby credit facility;

13 The following documents were executed pursuant to the Investment Agreement or alternatively each of the following documents was entered into:

(c) a deed of charge between PKR and Pac-Asia dated 1 June 1995 ('Deed of Charge').

14 Further, pursuant to the provision of the Investment Agreement pleaded in paragraph 11(d) above:

(a) Pac-Asia procured the issue by Paribas Private Banking Asia Ltd ('Paribas'), a reputable bank, of a letter dated 29 March 1995 to the Minister ('the Paribas Letter');

(b) The Paribas Letter contained (inter alia) confirmation that Paribas would issue to any lender a standby letter of credit or guarantee of up to $5 million as security for such lender to lend up to $5 million to PKR;

(c) Pac-Asia procured Paribas to be placed in funds to (inter alia) enable Paribas to provide the standby letter of credit or guarantee pleaded in subparagraph (b) above;

(d) The Paribas Letter contained (inter alia) confirmation of the matters pleaded in subparagraph (c) above;

16 There were express terms of the Deed of Charge that:

(a) PKR charged all of the present and future undertaking, assets and rights of PKR to Pac-Asia as security for (inter alia) the due and punctual payment of liabilities under a standby letter of credit banking facility in an amount of $5,000,000 granted by Pac-Asia to PKR (clause 2.1 read with the definition of 'Secured Moneys' and 'Charged Property' in clause 1.1);

(f) Secured Moneys under the Deed of Charge were repayable on demand ((clause 5.1);

(g) PKR would duly and punctually pay to Pac-Asia, on demand, the Secured Moneys (clauses 5.1 and 9.12);

(h) 'Banking Facility' was defined to mean ' ... in connection with or contemplated by the Paribas Letter, any loan, advance, guarantee or other banking facility or accommodation': (clause 1.1 definition of 'Banking Facility');

(i) the 'Paribas Letter' was defined to mean the letter dated 29 March 1995 from Paribas Private Banking Asia Limited to the Minister as amended, modified or replaced from time to time (clause 1.1 definition of 'Paribas Letter' and 'Paribas');

(j) the 'Secured Moneys' were defined to mean any and all claims, demands, losses, deficiencies, costs and expenses suffered, incurred or sustained by Pac-Asia in connection with (inter alia) any Banking Facility granted or to be granted by Pac-Asia or any other person to PKR (clause 1.1 definition of 'Secured Moneys');

(k) upon the occurrence of an Event of Default, Pac-Asia might declare by written notice to PKR that the Deed of Charge is immediately enforceable (clause 6.1);

(l) PKR must upon receipt of the written notice referred to in subparagraph (h) above, repay in full the Secured Moneys in accordance with that notice (clause 6.1);

(m) an Event of Default would occur if any person other than Pac-Asia were to allege or claim that:

(1) all or any part of any provision of the Deed of Charge were or had become illegal, void, voidable, unenforceable or otherwise of limited force or effect; or

(2) that the person was entitled to terminate, rescind or avoid all or any material part or material provision of the Deed of Charge (clause 7.1(m)).

(n) by necessary implication and as a matter of law, PKR could not deal with the Charged Property under the Deed of Charge (save as provided in clause 3.3) without the consent of Pac-Asia.

(a) During the period from June 1996 to November 1996 Pac-Asia advanced funds in a total of $5 million ('the Deed of Charge Advance') to or in favour of or on behalf of PKR;

(b) particulars of the Deed of Charge Advance are contained in Schedule 2(a) hereto.

48 The Deed of Charge Advance from Pac-Asia to PKR pleaded in paragraph 22A above comprised:

(a) funds borrowed by Pac-Asia from National Australia Bank (Singapore Branch) upon the security of a letter of credit in the sum of $5 million issued by Paribas to the National Australia Bank;

(b) by reason of the matters in subparagraph 48(a) above and the terms of the Paribas Letter pleaded in paragraph 14 above, a loan, advance, banking facility or accommodation in connection with or contemplated by the Paribas Letter;

(c) by reason of the matters in subparagraphs 48(a) and (b) above, a 'Banking Facility' within the meaning of that phrase as defined in the Deed of Charge as pleaded in paragraph 16(h) above;

(d) by reason of the matters in subparagraphs 48(a), (b) and (c) above, a claim, loss, deficiency, cost or expense suffered or incurred by Pac-Asia in connection with a Banking Facility granted or to be granted by Pac-Asia or any other person to PKR; and

(e) by reason of the matters in subparagraphs 48(a), (b), (c) and (d) above, 'Secured Moneys' within the meaning of that phrase in the Deed of Charge as pleaded in paragraph 16(j) above.

(a) made by Pac-Asia, and accepted by PKR, in satisfaction of the obligation pleaded in paragraph 11(d)(i) above and pursuant to the Deed of Charge;

(b) alternatively, made by Pac-Asia, and accepted by PKR, pursuant to the Deed of Charge;

(c) Further and in any event, made at the request of PKR.

49 The Deed of Charge Advance was repayable by PKR to Pac-Asia on demand in accordance with clauses 5.1 and 9.12 of the Deed of Charge or alternatively in accordance with Clause 6.1 of the Deed of Charge, as Secured Moneys under the Deed of Charge.

50 By a letter dated 13 May 1998 from the Minister for Planning, Western Australia, to the first named second defendant, it was stated that the Deed of Charge might be void and of no effect.

51 Further, by a letter dated 4 March 1999 from Solomon Brothers to the fourth plaintiff's solicitors, Solomon Brothers on behalf of the second defendants and also purporting to act on behalf of PKR, alleged that the Deed of Charge was unenforceable and was illegal.

52 In the premises, and by reason of the provisions of the Deed of Charge pleaded in paragraph 16 above, one or more events of default occurred under the Deed of Charge.

53 By notice dated 11 June 1999 and served on PKR on 14 June 1999 Pac-Asia:

(1) declared that one or more events of default had occurred and that the Deed of Charge Advance was immediately due and payable by PKR; and

(2) demanded the immediate payment of the Deed of Charge Advance.

54 Despite such demand PKR has failed to pay the Deed of Charge Advance or any part thereof which remains due and owing to Pac-Asia."

3 Alternatively to (1) above, and pursuant to paragraphs 48 to 54 above (and, or alternatively, paragraph 60(a) above) the sums of $5 million and $1,992,000 from PKR."

10 The above paragraphs appear to be all of the paragraphs which plead the plaintiffs' cause of action on the deed of charge pleaded in par 13(c). They certainly include all of the paragraphs to which counsel for the plaintiffs, Mr Standing, referred in his submissions to me. Mr Standing submitted that these paragraphs were intended to, and did, plead a straightforward cause of action. As best I understood him, the cause of action is along the following lines:

(1) Between 1 July 1996 and 6 September 1996, Pac-Asia made 11 advances to Port Kennedy Resorts Pty Ltd amounting to $5,000,000 in round figures.

(2) These loans were secured by the deed of charge which contained a covenant to repay on demand.

(3) The deed also contained provisions specifying certain events as events of default.

(4) The deed provided that upon the occurrence of an event of default Pac-Asia became entitled to give notice of default, whereupon Port Kennedy Resorts Pty Ltd became obliged to repay in full the secured moneys.

(6) Pac-Asia gave notice of the occurrence of the events of default and demanded payment of the $5,000,000 referred to in (1) above, as it was entitled to do.

(7) Port Kennedy Resorts Pty Ltd has not made payment in compliance with the demand.

11 Mr Standing submitted that the paragraphs of the statement of claim which are set out above are easy to understand and, when properly understood, do unambiguously disclose a cause of action along the lines outlined above. For his part, Mr Solomon for the defendants made a wide-ranging attack on this part of the pleading. As I understood his submission, he made two main complaints, speaking broadly. First he said that on the face of the deed of charge, the pleaded advances - the 11 advances amounting to $5,000,000 - were simply not secured by the deed of charge. He submitted that they were not "Secured Moneys" as defined in the deed of charge. Secondly, he submitted that in point of form the pleading is "so convoluted and difficult to understand as to be embarrassing".

12 As to Mr Solomon's first point, this seems to me to raise a construction issue which I would not be prepared to resolve on a strike-out application. It is true that on one reading of the deed which, as I say, is a difficult document, it does not secure advances made by Pac-Asia itself to Port Kennedy Resorts Pty Ltd, but secures only the obligation of Port Kennedy Resorts Pty Ltd to indemnify Pac-Asia against loss and expenses incurred by Pac-Asia in underwriting advances by others to Port Kennedy Resorts Pty Ltd. However, the deed is so bedevilled by defined terms that one cannot be confident that any sentence in the definition clauses has its natural meaning. I think that the argument as to whether the 11 advances in question, or any of them, are "Secured Moneys" as defined in cl 1.1 must await another day.

13 As to the other main submission or set of submissions which Mr Solomon made, I accept that the pleading in question is very difficult to follow. At any rate, I find it to be so.

14 It is hard to see the purpose of par 11(d). This paragraph pleads terms of an informal arrangement called the "Investment Agreement" by the pleader. The terms of this arrangement which are pleaded in par 11(d) are not sought to be enforced in this action, and nor could they be enforced in an action on the deed. If one thing is clear, it is that Pac-Asia's claim for payment of the money in question arises under the deed. The claim does not arise under the so-called investment agreement. So it is puzzling to know why it is in the statement of claim. Mr Standing submitted that it was proper to plead these terms of the investment agreement in order to explain what was meant in the deed by the terms "Paribas" and "Paribas Letter". I do not accept that submission. Both those terms are defined in the deed itself. It seems to me that par 11(d) is nothing more than a plea of evidence, which is not permitted: O 20 r 8(1).

15 The same observations apply to par 14. If, as Mr Standing told me, the moneys which are the subject of the plaintiffs' claim are moneys which were advanced to Port Kennedy Resorts Pty Ltd by Pac-Asia, it is difficult to see how the matters pleaded in par 14 can be material to the cause of action. This paragraph pleads a document and a set of arrangements which in terms have nothing to do with the transaction actually alleged which is the giving of a security with respect to advances by Pac-Asia itself to Port Kennedy Resorts Pty Ltd. Mr Standing submitted, I think, that what Pac-Asia did in performance of the investment agreement assists in the proper construction of the deed of charge. I am unable to see how this could be so, on the pleadings as they presently stand. If it is there because it is said to be part of the factual matrix, then it is mere evidence. I would observe that there appears to be some inconsistency between the facts pleaded in par 14(c) and the facts which are said to sustain Pac-Asia's cause of action in these proceedings. The proposition which appears to underlie par 14(c) is that Pac-Asia was merely a surety in respect of a loan transaction between Port Kennedy Resorts Pty Ltd and another. It is for this reason all the more difficult to see how Pac-Asia's pleaded case is assisted by proof of the facts pleaded in par 14(c).

16 Paragraph 16(a) is, I think, embarrassing for this same reason. It pleads or implies that Pac-Asia granted to Port Kennedy Resorts Pty Ltd a stand-by letter of credit banking facility in an amount of $5,000,000. I do not see how this is consistent with a case that Pac-Asia itself loaned the $5,000,000 to Port Kennedy Resorts Pty Ltd. This is not just an exercise in semantics. If it is not Pac-Asia's case that the $5,000,000 was loaned by it to Port Kennedy Resorts Pty Ltd, it would be very difficult to see on what basis Pac-Asia could lay claim to payment (in the sense of repayment) of the money. Pac-Asia does not sue in these proceedings as a surety, but as a lender.

17 Paragraph 22A(a) is elliptical. It is an incomplete and therefore an embarrassing plea. The pleader gets to the point of asserting that the 11 advances made by Pac-Asia to Port Kennedy Resorts Pty Ltd are secured by the deed of charge by simply defining those advances as "the Deed of Charge Advance". I should, of course, observe that the term "Deed of Charge Advance" is not taken from the deed, in which the relevant term is "Secured Moneys". This pleading technique is plainly embarrassing. It raises the false issue whether the sums in question ought properly to be regarded as something called a "Deed of Charge Advance", when the true question is whether the moneys in question are secured by the deed, that is, whether they are "Secured Moneys" as defined in the deed.

18 The impermissible pleading technique fatally infects par 48, par 48A and par 49.

19 Paragraphs 48A(a) and (b) are also embarrassing for incompleteness and uncertainty of meaning. Underlying the pleas in these subparagraphs appears to be a variation of contractual obligations, or some such thing as that. It is not made clear how this is said to affect the proper construction of the deed of charge. If that is not the purpose of the pleading, it is difficult to know what its purpose is. It is also difficult to know what is meant by the expression "pursuant to the Deed of Charge" in these subparagraphs. If the phrase is intended to mean that the 11 advances were advances which were made by Pac-Asia in performance of Pac-Asia's obligations under the deed of charge, the plea is open to the objection that nowhere in the statement of claim is there a plea to the effect that Pac-Asia had an obligation under the deed of charge to advance any moneys. I observe in passing that there is nothing in the deed itself to that effect either.

20 For the above reasons, I must accede to the defendants' application to strike out par 11(d), par 14, all the words after "security" in par 16(a), par 22A, par 48, par 48A and par 49.

21 Mr Solomon submitted that the whole of par 11 ought to be struck out because there is no plea of consideration. The rule is that unless the contract is under seal, the consideration for it must be set out: Bullen & Leake, 12th ed, 57. I think it sufficiently appears from the pleading in par 11 what the consideration was in each contractual arrangement. Essentially, there was an exchange of promises.

22 Mr Solomon sought an order that par 12A be struck out. That paragraph pleads:

"12A Each obligation pleaded in paragraphs 11 and 12 above was owed by and to the parties therein pleaded or alternatively was an obligation owed to each other party to the Investment Agreement."

23 I agree that a plea such as this ought not to be allowed. It is nothing more than the statement of a legal conclusion. Who owed which obligations to whom is to be resolved by reference to the terms and effect of the contractual arrangement as pleaded and proved. I would accede to the application to strike out par 12A.

24 Mr Solomon also attacked par 22B which is in the following terms:

"22B During the period from about October 1996 to February 1998 Pac-Asia or entities associated with Pac-Asia provided to PKR or to the account of PKR (and at PKR's request) additional funding in the order of $3 million or thereabouts in contemplation of, or pursuant to, the Investment Agreement as varied by the further agreement pleaded in paragraph 20, alternatively, pursuant to the further agreement as pleaded in paragraph 20A above, and which sum included the sum of $1,992,000.00 ('Further Advances') particulars of which are contained in Schedule 2(b) hereto."

25 Mr Standing accepts that the words "or entities associated with Pac-Asia" are embarrassing and he will amend to delete them. Mr Solomon submitted that this was otherwise a bad plea because of some anomaly between the date of the variation of the investment agreement under which the additional funding is pleaded to have been provided and the date or dates on which the funding is pleaded to actually have been provided. He submitted that the funding could not have been provided pursuant to the variation as alleged if, as is pleaded, the variation came later. This is a subtle argument. I do not see why parties cannot make a formal agreement with respect to antecedent transactions as long as there is good consideration. I agree that par 22B is not cast in language which expresses the fact that advances were made and an agreement was subsequently made to regulate the rights and obligations of the parties with respect to those advances. And I agree that the words "in contemplation of" in the phrase "Pac-Asia ... provided ... additional funding ... in contemplation of ... an agreement" have no legal significance. But these matters are not so serious as to warrant a striking-out. In my opinion, it is clear enough that Pac-Asia will allege that the rights and obligations of the parties with respect to the advances pleaded in par 22B are regulated by the agreement pleaded in par 20.

26 The defendants' summons seeks orders for the striking-out of a number of other paragraphs, or parts of paragraphs, of the statement of claim. Most of the complaints made about these paragraphs have been accepted as valid by Mr Standing and for the most part they are small matters which would, in any event, hardly warrant a striking-out order. I will not delay this judgment further by going into them in any detail. It is sufficient to say that, accepting that Mr Standing will make the amendments he has said will be made, I am not persuaded that these other paragraphs of the statement of claim, the subject of the summons which is before me, ought to be struck out.

27 There is a question as to whether the plaintiffs ought to have liberty to replead the cause of action based upon the deed of charge. It seems obvious that the stumbling block is the narrowness of the definition of "Secured Moneys" in the deed of charge. Pac-Asia wishes to say that on a proper construction of the deed of charge, it secures the advances in question. Provided such a claim is properly pleaded, there is no reason why Pac-Asia should be prevented from bringing it. However, I think on this occasion such amendments as Pac-Asia wishes to make by way of repleading ought to be the subject of an application for leave to amend. This might perhaps avoid yet another strike-out application. The order which I would propose to make, therefore, is that the plaintiff, Pac-Asia, be at liberty to bring an application to amend the statement of claim with respect to its cause of action for enforcement of the deed of charge. This application should, I think, be brought to me on a special appointment.

28 I think each party should pay their own costs of this application, but will hear submissions if either counsel wish to attempt to persuade me to a different view.