The plaintiff, Senworth Capital Pty Ltd as trustee for The Car Loan Security Trust, commenced proceedings by summons filed on 12 August 2022, seeking orders designed to authorise and facilitate the enforcement of its security interests over certain motor vehicles of the defendant, Galleria SUV Pty Ltd. On 16 August 2022, Fagan J dismissed an ex parte application for interlocutory orders, for the reasons set out in Senworth Capital Pty Ltd v Galleria SUV Pty Ltd [2022] NSWSC 1513.
On 7 November 2022, however, Fagan J made orders which included the following:
"2. The plaintiff has leave to file an amended summons.
3. The amended summons and affidavit filed in this proceeding are to be served on the defendant within 7 days."
On 11 November 2022, the plaintiff filed an amended summons in which it sought the following orders:
"2 A declaration that the Plaintiff is entitled to take possession of the goods described in Schedule 1 of this Summons by reason of section 123 Personal Properties Security Act 2009.
[Prayers 1 and 3 to 8 were deleted]
9 Costs on an indemnity basis pursuant to a contractual indemnity."
Although schedule 1 to the amended summons related to more than one vehicle, the plaintiff only pressed its claim for final relief in relation to one vehicle, a Mercedes Benz C63 AMG S 2018, identified as item 1(d) in schedule 1 to the amended summons, (the Mercedes).
The amended summons, affidavits and written submissions were served on, and notice of the hearing on 28 February 2023 was given to, the defendant. The defendant did not, however, appear at the hearing.
The proceedings arise out of the following circumstances. The plaintiff and two other companies agreed to lend up to $2.058 million for four months to the defendant and another company pursuant to a Facility Agreement dated 18 March 2020.
In the Facility Agreement, the plaintiff was described not only as one of the three companies which were the "Lender" but also as the "Security Trustee" and the defendant was one of the companies described as the "Borrower".
In addition, the Facility Agreement provided that:
1. "Motor Vehicle Assets" were "the motor vehicles specified in Schedule 4 or any other motor vehicle provided in substitution for the motor vehicle specified at the Initial Advance date and, such substitution motor vehicle has been accepted by the Lender as a suitable substitution Security";
2. "Security Interest" was, inter alia, "a security interest as defined in the [Personal Property Securities Act 2009 (Cth) (the PPS Act)]"; and
3. the "Termination Date" of the loan was four months from the date of the initial advance, subject to extension;
4. the term "Transaction Documents" was defined as including "each Security" which, in turn, included the "Registered General Security Agreement over the whole of the assets and undertaking of [the defendant] in favour of the Security Trustee [which was the plaintiff]".
By cl 2 of the Facility Agreement, the Lender agreed to make available to the Borrower "a fixed rate fully drawn interest only line of credit facility of the amount of the Limit [$2.058 million]".
By cl 3 of the Facility Agreement, and item 10 of schedule 1, the purpose of the loan was stated to include to assist the defendant, as one of the Borrowers, in the operation of its car dealership.
Clause 5 provided:
"5.1 Repayment
(a) The Borrower must pay to the Lender the aggregate of Advances outstanding and the balance, if any, of the Debt on the Termination Date. The Borrower may not repay the Debt except in accordance with the express provisions of this Agreement.
(b) The Borrower must repay to the Lender the proceeds of sale of any Motor Vehicle Assets upon the sale of that Motor Vehicle Asset with such payment to be attributed toward reduction of the relevant portion of the Debt equivalent to those sale proceeds.
(c) The Lender may in its absolute discretion elect to receive a substitution Motor Vehicle Asset in lieu of the mandatory repayment from the sale proceeds provided the Lender is satisfied in all respects with the Motor Vehicle Asset offered and a substitute Security in place of the sold Motor Vehicle Asset."
Clause 9.4 of the Facility Agreement relevantly included:
"(b) The lender may enter land and buildings owned or occupied (including the Business Premises [defined as XXXXX Kingsgrove]) by the Obligors [which included the defendant], any place where the motor Vehicles are located, the Obligor's places of business, and the Obligor's registered office to:
(ii) take possession of the Motor Vehicle Assets."
In cl 10 of the Facility Agreement many Events of Default were specified including most relevantly:
"(a) (cross default) There is default (other than by the Lender) in the performance of any term, agreement, or condition contained in or implied by any Transaction Document.
(b) (non-payment) Any Financial Indebtedness of any Obligor [which included the defendant] to any person including the Lender is not paid, met, or satisfied when due or becomes due and payable before its specified maturity or any creditor of any Obligor becomes entitled to declare any Financial Indebtedness of any Obligor due or any Obligor defaults under any Security Interest in favour of any person."
As part of the same transaction, a General Security Agreement dated 18 March 2020, was entered into between the plaintiff as "Secured Party" and the defendant as "Grantor" by which the defendant agreed to grant a security interest to the plaintiff over all the "Secured Property" to secure financial accommodation now or in the future to be provided to or at the request of the defendant. This General Security Agreement was one of the Transaction Documents, as defined in the Facility Agreement.
The definitions in cl 1.1 of the General Security Agreement included:
1. "Terms defined in the Facility Agreement have the same meaning when used in this document unless otherwise defined in this document."
2. "Facility Agreement means the agreement made on or about the date of this document between the [plaintiff], the Lender … and the [defendant] …";
3. "Secured Money means all money … which … is or becomes due by the [defendant] … to the [plaintiff] for any reason and includes any money due: (a) pursuant to this document or any other Transaction Document; (b) to any person on whose behalf the [plaintiff] holds this security; … ";
4. "Secured Property means whole of the undertaking property and assets of the [defendant] both present and after-acquired property and includes: … (b) any serial numbered property or goods; …"; and
5. "Transaction Documents means: (a) this document; (b) the documents specified in Item 1 [which included the Facility Agreement] …".
Clause 2.1 of the General Security Agreement is in the following terms:
"2.1 Security Interest and charge
(a) The [defendant] hereby charges and grants a Security Interest in the Secured Property to the[plaintiff]:
(i) for payment of the Secured Money; and
(ii) to secure performance of the obligations imposed on the [defendant] under the Transaction Documents.
(b) The [defendant] grants this charge and security interest as legal and beneficial owner except for any Secured Property which the [defendant] owns as trustee of a trust, in which case the [defendant] does this as sole trustee of the relevant trust."
Clause 3 of the General Security agreement restricted the ability of the defendant to deal with any of the Secured Property and relevantly provided:
"During the continuance of this security (and where appropriate from time to time) the [defendant] must comply with the following provisions.
…
(c) Dealings with Secured Property
(i) Not sell, assign, let, part with possession, mortgage, charge, encumber , grant a security interest, give control, or otherwise dispose of or deal with the Secured Property except for disposal of Circulating Assets in the ordinary course of its business.
…".
Clause 7 of the General Security Agreement dealt with Events of Default and included the following:
"If any one or more of the following occur, and Event of Default at the [plaintiff's] option will have occurred. A determination by the [plaintiff] in its absolute discretion that any one or more has occurred will be final and binding on the [defendant].
(a) (cross default) There is default (other than by the [defendant]) in the performance of any term, agreement, or condition contained in or implied in this document or any Transaction Document.
(b) (non-payment) Any indebtedness or obligation of the [defendant] to any person including the [plaintiff] is not paid, met, or satisfied when due or becomes due and payable before its specified maturity or any creditor of the [defendant] or becomes entitled to declare any indebtedness of the [defendant] due or the [defendant] defaults under any Encumbrance in favour of any person.
…".
Clause 8 of the General Security Agreement made provision for the rights of the plaintiff on default and included the following:
"8.1 Despite any other provision of this document, at any time after an Event of Default occurs how and when the [plaintiff] in its absolute discretion decides, the [plaintiff] may… do anything the [plaintiff] considers appropriate to recover the Secured Money and deal with the Secured Property.… Without limitation, the [plaintiff] may do any one or more of the following.
…
(c) Take possession of and withdraw from possession of the Secured Property, and enter any premises where the Secured Property may be located.
…".
As to the costs and expenses which may be incurred by the plaintiff in exercising its security, cl 11.1 of the General Security Agreement relevantly provides:
"(a) The [defendant] must pay the [plaintiff] for:
…
(ii) the [plaintiff's] costs, charges and expenses in connection with any consent, or any exercise… of rights (including those arising from any Event of Default]; and
…
(iv) Including in each case:
(A) the [plaintiff's] reasonable internal administration costs;
(B) legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is higher.
…".
Between 4 March and 4 May 2020, the plaintiff advanced to the defendant a total of $2,058,000 (the Principal) under the Facility Agreement. The defendant applied the loan funds to finance the purchase of vehicles which it proposed to resell or lease to third parties.
The Roads and Maritime Services records dated 4 August 2022 indicate that the Mercedes was transferred to the defendant on 23 April 2020 and the usage was stated as being "held for re-sale by a licensed motor dealer". I infer that from 23 April 2020 the Mercedes was the property of the defendant and this continued to be the case as at 4 August 2022. In light of cl 3 of the General Security Agreement and in the absence of evidence to suggest that the Mercedes had ceased to be the property of the defendant after 4 August 2022, I find that the Mercedes has remained the property of the defendant since that date.
Mr Zhang's evidence was that on or about 12 March 2021, the Mercedes was provided as security by the defendant. On this basis, I infer that on about 12 March 2021, the Mercedes was substituted as one of the "Motor Vehicle Assets" and, being present or after acquired property of the defendant and having a serial number, it became "Secured Property" within the meaning of the General Security Agreement and by operation of that agreement the defendant granted to the plaintiff, in respect of the Mercedes, a "Security Interest" which was defined as including "a security interest as defined in the [PPS Act)]".
Section 20 of the PPS Act deals with the enforceability of security interests against third parties and relevantly provides:
"20 Enforceability of security interests against third parties
General rule
(1) A security interest is enforceable against a third party in respect of particular collateral only if:
(a) the security interest is attached to the collateral; and
(b) one of the following applies:
(i) the secured party possesses the collateral;
(ii) the secured party has perfected the security interest by control;
(iii) a security agreement that provides for the security interest covers the collateral in accordance with subsection (2).
Written security agreements
(2) A security agreement covers collateral in accordance with this subsection if:
(a) the security agreement is evidenced by writing that is:
(i) signed by the grantor (see subsection (3)); or
[…] and
(b) the writing evidencing the agreement contains:
[…] or
(ii) a statement that a security interest is taken in all of the grantor's present and after‑acquired property; or
(iii) a statement that a security interest is taken in all of the grantor's present and after-acquired property except specified items or classes of personal property.
…".
As to "attachment", s 19 of the PPS Act relevantly provides:
"(2) A security interest attaches to collateral when:
(a) the grantor has rights in the collateral, or the power to transfer rights in the collateral to the secured party; and
(b) either:
(i) value is given for the security interest; or
(ii) the grantor does an act by which the security interest arises." (emphasis in the original)
On 12 March 2021, the plaintiff's security interest in the Mercedes was registered on the Personal Property Securities Register. Accordingly, the plaintiff's security interest in the Mercedes was perfected at that time in accordance with s 21 of the PPS Act, which relevantly states:
"(1) A security interest in particular collateral is perfected if:
(a) the security interest is temporarily perfected, or otherwise perfected, by force of this Act; or
(b) all of the following apply:
(i) the security interest is attached to the collateral;
(ii) the security interest is enforceable against a third party;
(iii) subsection (2) applies.
(2) This subsection applies if:
(a) for any collateral, a registration is effective with respect to the collateral; or
…". (emphasis in the original)
In the circumstances, the plaintiff's security interest has attached to the Mercedes and it is enforceable against third parties.
Neither the Principal nor any interest or other amount was repaid on 4 July 2020, the Termination Date in the Facility Agreement, or subsequently.
On 31 October 2020 a notice of default and demand to borrower was issued to the defendant demanding payment of the Principal, interest, arrears and costs due as at 30 October 2020 in the sum of $2,281,500.00.
On 24 May 2021, receivers were appointed to the defendant.
Steps were taken to locate vehicles of the defendant, including the Mercedes, over which the plaintiff had a Security Interest.
By 26 October 2022, information had been received by the plaintiff that the Mercedes had been impounded by the New South Wales Police and was being held by them.
On 26 October 2022, the plaintiff's solicitors sent an email to Detective Senior Constable Wyburg, serving with the State Crime Command, enquiring whether the information they had received was correct and seeking confirmation that the New South Wales Police would not take any steps to dispose of the Mercedes without the providing 14 days' notice to the plaintiff's solicitors. In the letter, an enquiry is made whether the New South Wales Police intended to contest the plaintiff seeking a repossession order for the Mercedes.
On 26 October 2022, Detective Senior Constable Wyburg responded by email stating:
"I can confirm that we will not contest your client seeking a repossession order for the vehicle and will comply with any order made by the court to release the vehicle to your client or any representative of your client.
We have no intention to dispose of this vehicle prior to the making of a court order."
As at 10 November 2022, the amount owed by the defendant, including principal interest and costs, totalled $3,627,343.97.
On 29 November 2022 another of the Motor Vehicle Assets over which the plaintiff had a security interest, a Tesla Model X 2020, was sold and $170,000 was applied in reduction of the amount owed by the defendant, being $3,457,343.97.
Interest has continued to accrue on the unpaid Principal since November 2022.
On 17 February 2023 the receivers filed a form 505 ceasing their appointment as receivers of the defendant and the receivership ended on that day.
Chapter 4 of the PPS Act (ss 107-144) concerns the enforcement of security interests. Section 116 provides that Ch 4 does not apply in relation to property while a person is a controller of the property as a receiver. The ceasing of the receivership on 17 February 2023 has the effect, in the present case, that Ch 4, and in particular s 123, currently applies in relation to the Mercedes.
Section 123 of the PPS Act relevantly provides:
"123 Secured party may seize collateral
(1) A secured party may seize collateral, by any method permitted by law, if the debtor is in default under the security agreement."
"Collateral" is defined in s 10 of the PPS Act as including "means personal property to which a security interest is attached" and, consequently, the Mercedes is collateral within s 123. "Security agreement" is defined as including "an agreement … by which a security interest is created, arises or is provided for", the Facility Agreement and the General Security Agreement meet that description and the defendant is in default under those agreements. Accordingly, the plaintiff, as a secured party under the General Security Agreement, has the right to seize the Mercedes.
As noted above, the principal relief sought by the plaintiff is a declaration that the Plaintiff is entitled to take possession of the Mercedes by reason of s 123 of the PPS Act.
The word "seize" in s 123, read in light of its context and the scope and purpose of the PPS Act, should be construed as encompassing, at least, taking possession of. Accordingly, provided this Court has jurisdiction in this matter and the making of a declaration is otherwise permitted, the declaration should in my view be made as it will provide a proper basis for the New South Wales Police to release the Mercedes from where it is currently impounded so as to enable the plaintiff, or its representatives, to take possession of it, as they are entitled to do under s 123.
As to the Court's jurisdiction to deal with this matter, Pt 6.2 of the PPS Act is entitled "Judicial proceedings generally" and includes ss 206 and 207. Section 206 relevantly defines a "PPS matter" as including a matter arising under the PPS Act or otherwise arising in relation to a security interest. Given its nature, the present case is a PPS matter.
Section 207 confers jurisdiction on various courts, including this Court, to deal with PPS matters, subject to the "court's general jurisdictional limits". Since the Mercedes is located in New South Wales, I am satisfied that this Court has jurisdiction over the matter in light of s 207 of the PPS Act and s 23 of the Supreme Court Act 1970 (NSW), which grants this Court all jurisdiction for which may be necessary for the administration of justice in New South Wales.
As to the permissibility of making a declaration in the present case, s 75 of the Supreme Court Act provides:
"No proceedings shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby and the Court may make binding declarations of right whether any consequential relief is or could be claimed or not."
Furthermore, Gibbs J held in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8; [1972] HCA 61 that although it is neither possible nor desirable to fetter the broad discretion to grant declaratory relief by laying down rules as to the manner of its exercise. However, the following should in general be satisfied before the discretion is exercised in favour of making a declaration:
1. the question must be a real and not a theoretical question;
2. the person raising it must have a real interest to raise it;
3. there must be a proper contradictor, that is to say, someone presently existing who has a true interest to oppose the declaration sought.
The requirement for there to be a proper contradictor is satisfied where there are proceedings commenced against a party who has an interest in resisting the declaratory relief sought even though, by the time of the final hearing, that party has decided not to oppose the relief being granted: Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378; [2012] FCAFC 56 at [30] (Greenwood, Logan and Yates JJ) and the authorities there cited. The absence of a contradictor at the hearing is more appropriately seen as relevant to the exercise of the discretion rather than to jurisdiction to make the declaration. The defendant has an interest in resisting the relief if it wished to maintain its ownership and possession of the Mercedes. This, in my view, is sufficient to make it a proper contradictor, even though it has not appeared in the proceedings.
Furthermore, the entitlement of the plaintiff to possession of the Mercedes raises a real not a theoretical question and since it will facilitate the plaintiff's obtaining possession of the vehicle from the New South Wales Police the plaintiff has a real interest in raising the issue for resolution by way of declaration.
In all the circumstances, I am of the view that the declaration sought should be made.
In addition, the plaintiff sought an order for indemnity costs based on its contractual entitlement to costs on that basis set out in cl 11.1(a)(iv)(B) of the General Security Agreement, which has been quoted above. During the hearing, Mr Hughes, who appeared for the plaintiff, indicated that if an election were required to be made between the two bases of assessment of costs referred to in cl 11.1(a)(iv)(B), the plaintiff would elect indemnity costs in accordance with r 42.5(b) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) which permits recovery of "all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount)".
The plaintiff has been successful and there do not appear to me to be any circumstances which would justify not making an order for costs in the plaintiff's favour.
In the circumstances of the present case, including the contractual entitlement of the plaintiff to costs on "a full indemnity basis", the indication from counsel that the plaintiff would accept an award of indemnity costs determined in accordance with UCPR r 42.5(b) and the absence of any apparent prejudice to the defendant who would be liable for at least those costs in any event under the General Security Agreement, I am prepared to make the costs order sought by the plaintiff, having power to do so under s 98(1) of the Civil Procedure Act 2005 (NSW).
For all of these reasons, the orders of the Court are:
1. A declaration that the plaintiff, Senworth Capital Pty Ltd, is entitled to take possession of Mercedes Benz C63 AMG S 2018 with registration plate number NBZ 95J and VIN WDD2050872F696378 pursuant to section 123 of the Personal Properties Security Act 2009 (Cth).
2. The defendant is to pay the plaintiff's costs on an indemnity basis.
3. Otherwise, the amended summons is dismissed.
[3]
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Decision last updated: 01 March 2023
Parties
Applicant/Plaintiff:
Senworth Capital Pty Ltd atf The Car Loan Security Trust