Bechara v Sotrip Pty Ltd (In Liquidation) (No. 2) [2013] QSC 160 [2013] 26 QLR

SUPREME COURT OF QUEENSLAND CITATION: Bechara v Sotrip Pty Ltd (In Liquidation) (No. 2) [2013] QSC 160 PARTIES: BUDDY BECHARA (plaintiff) V SOTRIP PTY LTD (IN LIQUIDATION) ACN 085 132 378 (first defendant) AND RELIANCE FINANCIAL SERVICES PTY LTD ACN 003 478 966 (second defendant) AND SOTRIP NSW PTY LTD ACN 139 174 744 (third defendant) AND RELIANCE FINANCIAL SERVICES PTY LTD (NSW) ACN 131 889 766 (fourth defendant) AND STEPHEN BAKER, AS LIQUIDATOR OF SOTRIP PTY LTD (IN LIQUIDATION) ACN 085 132 378 (further applicant) FILE NO/S: BS 9372 of 2006 DIVISION: Trial PROCEEDING: Oral application and application ORIGINATING COURT: Brisbane DELIVERED ON: 19 June 2013 DELIVERED AT: Brisbane HEARING DATE: 4 June 2013 JUDGE: Jackson J ORDERS: 1. Application to dismiss the amended application -- 1 of 9 -- 2 filed on 24 May 2013 is dismissed. 2. Application to set aside paragraph 1 of the order of McMurdo J made on 17 April 2013 is dismissed. 3. Direct the parties to make brief submissions in writing as to costs forthwith. CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNFORM CIVIL PROCEDURE RULES AND PREDECESSORS – PAYMENT INTO AND OUT OF COURT – where the proceeds of sale were paid into the court – where an order of the court was made to pay out and retain part of the money “subject to further order” – where two subsequent orders dealt with the monies in court – where parties seek to vacate the initial order – whether an order of the court that is “subject to further order” can or should be vacated – whether the court should exercise its inherent jurisdiction to vary the order Uniform Civil Procedure Rules 1999 (Qld), r 560, r 561, r 667, r 882 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (In liquidation) [1999] FCA 144; (1999) 30 ACSR 377, cited Bechara v Sotrip Pty Ltd (in liquidation) [2013] QSC 100, cited Duncan (as trustee for the bankrupt estate of Garrett) v National Australia Bank Limited [2006] SASC 239; (2006) 235 ALR 385, cited JKB Holdings Pty Ltd v de la Vega [2013] NSWSC 501, followed McIntosh & Anor as Trustees of the Estate of Camm (A Bankrupt) v Linke Nominees Pty Ltd & Anor [2008] QCA 410, cited Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, cited Re: Crown Meats Pty Ltd (In liquidation) [2013] VSC 118, cited Re: Universal Distributing Co Ltd (In liquidation) [1933] HCA 2; (1933) 48 CLR 171, cited COUNSEL: P Tucker for the first defendant and further applicant M Ashurst SC & JC Ashcroft for the third and fourth defendants SOLICITORS: Brown and Partners Solicitors for the first defendant and further applicant Dib Lawyers for the third and fourth defendants -- 2 of 9 -- 3 [1] JACKSON J: By the amended application filed on 24 May 2013 (“amended application”), the first defendant and further applicant apply for the following orders: “1. That order 1 of the orders made by his Honour Justice McMurdo on 17 April 2013 be vacated. 2. That subject to further order of the court, the monies presently in court in relation to these proceedings less the sum of $290,653.19, be paid out to the solicitors for the third and fourth defendants on 16 May 2013.” [2] On 24 May 2013, I ordered that the monies presently held in court in relation to these proceedings less the sum of $290,653.19 be paid out to the solicitors for the third and fourth defendants forthwith. [3] The remaining question is whether order 1 of the orders made by Philip McMurdo J dated 17 April 2013 (“Philip McMurdo J‟s order”) can or should be vacated. [4] That order appears to be sought in support of other orders sought in the amended application, culminating in an order (“the substantive relief”): “In respect of the proceeds of the sale undertaken in accordance with the orders made by the Court on 28 July 2008, and paid into court, the liquidator be: (A) exonerated as to the sum of $156,371.70, and such sum be paid out to the liquidator, on account of capital gains tax liability arising in consequence of the sale of the assets of the Trust; and (B) entitled to recoup the sum of $89,281.49 in respect of costs and expenses in relation to:- (1) the winding up of the First Defendant; or, alternatively, (2) the administration of the Trust.” [5] Philip McMurdo J‟s order provided: “The order of the court is that: 1. Subject to further order, the monies presently in court in relation to these proceedings less the sum of $156,371.70, will be paid out to the solicitors for the third and fourth defendants on 16 May 2013. 2. Application filed on behalf of the first defendant will be adjourned to a date to be fixed. 3. Applicant has leave to file an amended application.” [6] The application referred to in paragraph 2 of the order which was adjourned was an application by the first defendant for orders that the money held by the court in the proceedings be kept in court for six weeks from the judgment date and that the first defendant file an amended application on or before six weeks from the judgment date. In support of that application, the first defendant filed an affidavit of Stephen Gower Baker sworn 25 March 2013. -- 3 of 9 -- 4 [7] The first defendant and the further applicant filed the amended application in reliance on the leave given in paragraph 3 of the order. [8] The dispute between the parties is between the first defendant and the further applicant on the one hand and the third and fourth defendants on the other hand, as to the addition of the further applicant as a party to the amended application and the orders sought by the amended application. However, the only question to be decided at present is whether order 1 of Philip McMurdo J‟s order can or should be vacated. [9] It will be observed at the outset that Philip McMurdo J‟s order was made “subject to further order”. That expressly allowed for a further order about the disposition of the moneys in court before they were paid out to the solicitors for the third and fourth defendants. [10] In fact, two further orders of that kind have been made. First, on 16 May 2013, Margaret Wilson J ordered that: “1. Subject to the further order or earlier order, the time in paragraph 1 of the orders made on 17 April 2013 is extended from 16 May 2013 to 5pm on 24 May 2013.” [11] Further, on 24 May 2013 I ordered that: “2. The sum of $290,653.19 presently held in court in relation to these proceedings continue to be held in court until the determination of the Amended Application of the Further Applicant and First Defendant filed 21 May 2013, subject to further earlier order.” [12] Neither of the parties has sought to vary that part of my order dated 24 May 2013. [13] In those circumstances, it may seem a little curious that the parties pressed on for a determination of the application for an order that paragraph 1 of Philip McMurdo J‟s order be vacated. The simple answer is that there is no purpose in deciding that question, because in any event Philip McMurdo J‟s order has been overtaken by paragraph 2 of my order dated 24 May 2013. [14] However, the parties appeared to have joined battle on the question of whether any order which might have the effect of interfering with the operation of paragraph 1 of Philip McMurdo J‟s order can or should be made, to the extent that it would have released the difference between $290,653.19 and $156,371.70 to the solicitors for the third and forth defendants. Instead of arguing over the relief which is actually applied for in paragraph 1 of the amended application, the parties‟ arguments joined over whether or not the whole of the amended application (which was not listed for hearing) should be dismissed. On that question, the third and fourth defendants were in effect the moving party and I will deal with the submissions which were made accordingly. [15] First, the third and fourth defendants contended that the application “to vary the orders” is brought too late. They relied on UCPR 667 for the contention that the court‟s power to set aside or vary an order is limited to an application made before the earlier of either the filing of the order or seven days after the order was made. -- 4 of 9 -- 5 [16] In my view, the answer to that contention is that Philip McMurdo J‟s order was expressed to be “subject to further order”. That reservation is commonly used and it is used in a way which ordinarily has the meaning that another order may qualify or alter the operation of the order to which it applies. That is precisely what the orders made by Margaret Wilson J on 16 May 2013 and by me on 24 May 2013 did. There was no need to make application under UCPR 667 at all, in order to make either of those orders. [17] Secondly, where it is necessary to make application under UCPR 667 to set aside an order, it is correct that an application made under sub-rule (1) is required to be made before the earlier of the filing of the order or the end of seven days after the making of the order. However, contrary to the submission made by the third and fourth defendants, that time limit is one which can be extended after it has expired: McIntosh & Anor as Trustees of the Estate of Camm (A Bankrupt) v Linke Nominees Pty Ltd & Anor.1 [18] The next contention of the third and fourth defendants was that UCPR 882 does not operate in respect of this proceeding because it constituted “completed proceedings”. That contention must be rejected. The condition on which UCPR 882 operates is that a person “claims an interest in or a charge on money or a security in court, whether under this part or otherwise”. It is provided that a person “may apply to the court for a stop order preventing payment or delivery or transfer of the money or security without notice to the person”. Such an application “must be brought in the proceeding for which the money or security stands in the court”. It operates in aid of the provisions of UCPR 560 and 561. In particular, UCPR 561(1) requires an application for payment out of court of money paid into or deposited in court in a proceeding to be served on all other parties. [19] There are various statutory provisions which require or permit payment of money into court, as well as provisions under the UCPR. However, the inherent jurisdiction of the court to make an order for payment into court is much broader than that. It was recently comprehensively discussed in relation to the similar powers of the Supreme Court of New South Wales by Lindsay J in JKB Holdings Pty Ltd v de la Vega.2 As Lindsay J said: “Once moneys are paid into court they come under the general control of the court and are liable to be dealt with, in the ordinary course of the business of the court, subject to such orders as may be made by the court from time to time.”3 [20] There are a myriad of circumstances in which money may come to be paid into court. They include a case such as this, where the money is paid into court under an order of the court. Nothing suggests that the power under UCPR 882 is confined to an order which is applied for before a judgment or final order in a proceeding is made. [21] Turning to the present proceeding, the claim brought by the plaintiff was that the first defendant was indebted to the plaintiff for a loan of $450,000 and had granted or agreed to grant a mortgage over the relevant land. That land was held by the first 1 [2008] QCA 410 at [8]. 2 [2013] NSWSC 501. 3 At [8]. -- 5 of 9 -- 6 defendant as trustee of the Mudgeerabah Trust (“the Trust”). The first defendant sold the land and paid the balance of the proceeds into court. From 31 August 2009, the third defendant was appointed trustee. The plaintiff‟s claim was dismissed by the judgment of Philip McMurdo J given on 17 April 2013. [22] By counterclaim the third and fourth defendants claimed that they were entitled to declaratory relief that the balance of the proceeds of sale of the land were the property of the Trust and that the fourth defendant, as chargee of the land before sale, was entitled as a secured creditor to the balance of the proceeds of sale and therefore to an order for the payment to it of the money in court. In his reasons for judgment delivered on 17 April 2013, Philip McMurdo J identified the third defendant‟s claim that the funds in court belonged to it subject to the claim by the fourth defendant. [23] The third claim identified in those reasons for judgment was one described by his Honour as a claim by the liquidator of the first defendant for some of the funds. [24] Paragraph [4] of the reasons4 stated: “[the first defendant] and the second defendant took no part in the trial and appeared to accept, consistently with the judgments in New South Wales to which I will come, that their respective interests had passed to [the third defendant] and [the fourth defendant]. But since the trial, the liquidator of [the first defendant] has applied to have some of the funds in court paid out to him, in order to discharge [the first defendant]‟s liability for capital gains tax arising from the sale of the lots. That application requires oral submissions and it is affected by the outcome between [the plaintiff, third defendant and fourth defendant] as determined by this judgment.” [25] Philip McMurdo J made findings that the property was held by the first defendant as trustee of the Mudgeerabah Trust, that the first defendant had borrowed the funds for the purchase from the predecessor of the fourth defendant, and that the first defendant granted a charge to secure that debt. [26] As against the plaintiff‟s claim, Philip McMurdo J held that “the monies in court belonged to [the fourth defendant] because the amount owing under the 1998 agreement, with accrued interest, now well exceeds the amount in court”. [27] However, his Honour‟s reasons concluded: “The plaintiff‟s claim will be dismissed. The disposition of the monies in court will then depend upon the outcome of the recent application by the liquidator of [the first defendant].” [28] Paragraphs 1 to 3 of Philip McMurdo J‟s order followed on that day. [29] In my opinion, there is no basis in those facts for a contention that in some way proceeding 9372 of 2006 is a “completed proceeding” which precluded an application by the first defendant and the further applicant for an order under UCPR 882. However, the amended application, even to the extent that it is before 4 [2013] QSC 100. -- 6 of 9 -- 7 me, is not now an application for a stop order under UCPR 882. The substantive relief sought is not an order that the money in court not be paid out without notice to the first defendant or the further applicant. It is for orders that the money in court to the extent of $290,653.19 be paid to the first defendant and the further applicant. Hence it must be brought under UCPR 561 and in the inherent jurisdiction of the court. [30] The second contention made by the third and fourth defendants is that “the subject monies are not trust assets because they are subject to the [fourth defendant‟s] secured interest and are therefore the property of that entity”. [31] Despite the reasoning of the Full Court of the Supreme Court of South Australia in Duncan (as trustee for the bankrupt estate of Garrett) v National Australia Bank Limited,5 in my view the correct analysis is that made by Lindsay J in JKB Holdings: “Whether or not a party has a „security interest‟ in funds in court may depend on the character of payments into court and the purposes for which the payments were made. To speak of such an interest is to speak of the rights of the parties as between themselves, not of a private property right vis à vis the Court. Any obligation on the part of the court to recognise, or give effect to, such interested parties may have inter se arises not from the law of property, but from the obligation of the Court to administer justice and discharge of its judicial functions.” [32] In the end, I consider that the third and fourth defendant‟s contention on this point was but a variation of its contention that there is an “Anshun” estoppel which applies in the circumstances, relying on Port of Melbourne Authority v Anshun Pty Ltd.6 [33] In my view, that contention cannot be accepted. That conclusion follows both from the parts of the reasons of Philip McMurdo J previously set out and from Philip McMurdo J‟s order. In the context of the application which had then been filed and which was to be amended, it seems to me that no determination was made by Philip McMurdo J as to the first defendant‟s or the liquidator‟s rights in respect of the money in court as part of that judgment and order. [34] From the further amended defence and counterclaim of the third and fourth defendants and the answer of the first defendant filed in the proceeding, it is true to say that the third and fourth defendants made a claim in the proceeding for declaratory relief and for a consequential order for the amount held in court to be paid to the fourth defendant up to a certain amount and the balance, if any, to the third defendant. However, it does not appear from either the reasons for judgment or from the terms of paragraphs 1 to 3 of Philip McMurdo J‟s order that the counterclaim in that respect proceeded to judgment on 17 April 2013. Rather, as between the first defendant and the third and fourth defendants, the question of the liquidator of the first defendant‟s claims “for some of the funds” was not determined. The third and fourth defendants contend that was only true in respect of 5 [2006] SASC 239 at [56]; (2006) 235 ALR 385 at 399. 6 [1981] HCA 45; (1981) 147 CLR 589. -- 7 of 9 -- 8 the sum of $156,371.70. However, there is nothing in the reasons for judgment or Philip McMurdo J‟s order which confirms that his Honour made a final declaration or other determination as to the entitlement to the balance of the proceeds of sale or money in court, as between the first defendant and its liquidator on the one hand and the third and fourth defendants on the other. [35] The third contention advanced by the third and fourth defendants was that the substantive relief sought by the amended application is “not a claim in respect of the costs of selling the property”. Referring to the affidavit of the liquidator filed 28 March 2013,7 they identified a number of items as “costs associated with the sale” and submitted that the liquidator “is not entitled to be indemnified for the general costs of the liquidation”. [36] This is partly a contention about the facts. However, the third and fourth defendants‟ argument seemed to be that any lien which may be available to the first defendant or its liquidator as a matter of law must be confined to expenses which can be identified as “costs of selling the property”. In response, the first defendant and the further applicant submitted that the principles which give rise to the lien they claim over the proceeds of sale of the property are based on Re: Universal Distributing Co Ltd (In liquidation)8 as explored in Re: Crown Meats Pty Ltd (In liquidation)9 as follows: “The expression „care, preservation and realisation‟ is to be understood widely, as it includes identifying or attempting to identify the assets; recovering or attempting to recover the assets; realising or attempting to realise the assets; protecting or attempting to protect the assets; and distributing the assets to the persons beneficially entitled to them…”.10 [37] For present purposes, it is important to keep in mind that the only question I am deciding is whether the first defendant and further applicant‟s application should be summarily dismissed. This is not the hearing of their final application for the substantive relief. Although there is no provision made in the UCPR for a summary judgment application of an originating application which is not brought by claim, the parties submitted the question for the present determination as a matter of summary dismissal rather than final decision. For present purposes, in my view, the first defendant and the further applicant have a real prospect of succeeding on their application for the substantive relief. [38] Accordingly, it seems to me that it is not appropriate to make an order for summary dismissal of the amended application filed on 24 May 2013. [39] Because order 1 was made “subject to further order”, and because of the orders which have since been made, it is unnecessary to make an order that order 1 of Philip McMurdo J‟s order be “vacated”.11 It is also unnecessary to consider further 7 Wrongly described as filed 24 May 2013 in the third and fourth defendant‟s outline of argument. 8 [1933] HCA 2; (1933) 48 CLR 171 at 174-175. 9 [2013] VSC 118 at [44]. 10 And see 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (In liquidation) [1999] FCA 144 at [34]; (1999) 30 ACSR 377 at 385. 11 I note that the UCPR does not use the word “vacated”. That word is used most commonly in relation to an order when a Judge orally vacates an order previously made by him or her but not taken out, -- 8 of 9 -- 9 the scope of either the inherent power of the court or the power under UCPR 667 to set aside an interlocutory order.12 [40] I will hear the parties as to costs. My tentative view is that the costs of the hearing on 4 June 2013 should be made costs in the application. after which it would be “set aside” in the language of UCPR 667. It may be preferable that “vacate” which does not appear in any current Queensland statute regulating civil procedure or the UCPR is avoided. 12 Woods v Sheriff of Queensland (1895) 6 QLJ 163 at 164; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 at 178; Bailey v Marinoff [1971] HCA 49; (1971) 125 CLR 529 at 531-532 and 539-540; Wentworth v Attorney-General (NSW) [1984] HCA 70; (1984) 154 CLR 518 at 526; Prestney v Colchester Corporation (1883) 24 Ch D 376 at 385; Kelsey v Doune [1912] 2 KB 482; Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 at [23]-[28]; Galladin Pty Ltd v Aimnorth Pty Ltd BC9400535 at 2-3; Hydronic Industries Pty Ltd (In liquidation) v Taylor [1992] 2 Qd R 116 at 118; JKB Holdings at [60]-[64]. -- 9 of 9 --