Bidjara Aboriginal Housing & Land Co Ltd (Receiver & Manager appointed) v ATSIC & Ors [2005] QSC 123 [2005] 2 Qd R 468

SUPREME COURT OF QUEENSLAND CITATION: Bidjara Aboriginal Housing & Land Co Ltd (Receiver & Manager appointed) v ATSIC & Ors [2005] QSC 123 PARTIES: BIDJARA ABORIGINAL HOUSING AND LAND COMPANY LIMITED (RECEIVER AND MANAGER APPOINTED) (ACN 010 017 955) (plaintiff/respondent) v ABORIGINAL AND TORRES STRAIT ISLANDER COMMISSION (first defendant/applicant) ROSS ANDREW DUUS and GARRY JOHN HAMILTON (second defendants/applicants) FILE NO/S: BS9905 of 2003 DIVISION: Trial Division PROCEEDING: Interlocutory applications DELIVERED ON: 13 May 2005 DELIVERED AT: Brisbane HEARING DATE: 22 March 2005 JUDGE: Mullins J ORDER: 1. The Commonwealth of Australia be substituted for Aboriginal and Torres Strait Islander Commission as the first defendant. 2. Judgment for the first defendant be given against the plaintiff in respect of that part of the plaintiff’s claim based on the allegations in paragraphs 5, 6, 10, 11, 12(b) and 12(c) of the plaintiff’s statement of claim filed on 24 January 2005. 3. Paragraphs 7, 8, 9 and 13 of the statement of claim filed on 24 January 2005 be struck out. 4. The proceeding be stayed until further order or Darlene Roberta Robinson, Betty Wyman, Annette Lynn Wyman and Elizabeth Michelle Murphy (“the directors”) have provided an indemnity to the plaintiff against the future costs incurred by the plaintiff in this proceeding and any costs which the plaintiff may be ordered from and including the date of this order to pay any other party in this proceeding which is supported by security that is not provided by the plaintiff and is in a form and for an -- 1 of 16 -- 2 amount that is agreed upon by the directors and the defendants to this proceeding and, failing agreement, is determined by the court. 5. Liberty to the directors of the plaintiff or any party to apply on 2 days’ notice in writing to the other parties and the directors. CATCHWORDS: STATUTES – ACTS OF PARLIAMENT – STATUTORY POWERS AND DUTIES – CONSTRUCTION – where plaintiff granted deed of charge to ATSIC – whether deed of charge granted interest in land to ATSIC – whether no written consent by ATSIC to plaintiff’s disposal of interest in land – whether deed of charge invalid under s 21 Aboriginal and Torres Strait Islander Commission Act 1989 (Cth) – whether ATSIC required to give written consent to the disposal of an interest in land where the disposal in favour of ATSIC PROCEDURE – QUEENSLAND – SUMMARY JUDGMENT – where defendant applied for summary judgment – r 293(2) UCPR (Q) – whether plaintiff has no real prospect of succeeding on all or a part of the plaintiff’s claim and there is no need for a trial of the claim or the part of the claim CORPORATIONS – RECEIVERS MANAGERS AND CONTROLLERS – where directors of company in receivership institute proceeding against chargee and receiver – whether directors should indemnify company as to costs – whether interests of chargee could be adversely affected by the proceeding Aboriginal and Torres Strait Islander Commission Act 1989 (Cth) Corporations Law UCPR r 173, r 293 Deangrove Pty Ltd (Receivers and Managers Appointed) v Commonwealth Bank of Australia (2001) 108 FCR 77 Farrow Mortgage Services Pty Ltd (in liq) v Slade (1996) 38 NSWLR 636 Gray v Morris [2004] 2 Qd R 118 Smart v Australia & New Zealand Banking Group Ltd [2002] VSCA 111 COUNSEL: L A Stephens for the plaintiff/respondent P E Hack SC and S D Anderson for the first defendant/applicant D G Clothier for the second defendants/applicants SOLICITORS: Frank Jongkind & Co for the plaintiff/respondent Australian Government Solicitor for the first -- 2 of 16 -- 3 defendant/applicant Minter Ellison for the second defendants/applicants [1] MULLINS J: On 26 November 2004 Atkinson J ordered that this proceeding which had been commenced by the filing of an originating application on 4 November 2003, continue as if started by claim. The plaintiff’s statement of claim was filed on 24 January 2005. The first defendant filed its defence on 22 February 2005. The second defendants filed their defence on 21 February 2005. [2] By application filed on 1 March 2005 the first defendant seeks summary judgment pursuant to r 293 of the UCPR or alternatively an order pursuant to r 171 striking out all or part of the statement of claim as disclosing no reasonable cause of action. If the first defendant were not to be successful in obtaining orders that had the effect of bringing the proceeding to an end, the first defendant also seeks an order requiring the directors of the plaintiff to be personally liable for any costs order made in the proceeding in favour of the first defendant against the plaintiff. [3] The second defendants are the receivers and managers that were appointed to the plaintiff by the first defendant on 5 August 2003. By application filed on 8 March 2005 the second defendants seek orders that have the effect of requiring the directors of the plaintiff who have caused the plaintiff to commence this proceeding to indemnify the plaintiff for its costs of the proceeding and any costs that it may be required to pay to the other parties to the proceeding and to provide security for any such indemnity. Background [4] The plaintiff is a company limited by guarantee which carries on business as the owner of a number of residential, commercial and rural properties in and around Charleville. In 2000 the plaintiff wished to buy the Holden dealership in Charleville that was for sale. It applied to the first defendant for funding. For the purpose of the acquisition the plaintiff entered into a joint venture with Badman Motor Group Pty Ltd. As a result Bidjara Motor Corporation Pty Ltd (“Bidjara Motors”) was incorporated in which the shares were held by the plaintiff and Badman Motor Group Pty Ltd. [5] On 14 September 2000 the State Manager for Queensland of the first defendant, Mr Richard Allmark, advised the plaintiff that, subject to entry into formal documentation acceptable to the first defendant, its application for funding of $1,564,150 would be approved by the first defendant to assist with the purchase of the business known as “Charleville Holden” and for working capital for use in respect of that business. [6] Bidjara Motors as borrower entered into a loan agreement with the first defendant that was dated 13 October 2000 for a loan of $852,650 for refitting the CDEP shed and working capital for the Holden dealership. Under clause 2 of the loan agreement the parties agreed that the security for the loan would be in such form as the first defendant may require from time to time and as specified in the schedule. Item 7 of the schedule specified mortgages over the Holden dealership, School of Arts Hostel, Bidjara Office and CDEP Complex and a bill of sale over the plant and equipment purchased with the Holden dealership. -- 3 of 16 -- 4 [7] The Australian Government Solicitor (“AGS”) acted on behalf of the first defendant in relation to the loan. It appears that it was AGS that decided that because the real property which the first defendant required to be mortgaged in support of the loan was owned by the plaintiff, it was necessary for the plaintiff to sign a deed of guarantee and indemnity to enable the first defendant to take security over that real property. Although the loan agreement had also specified that security in the form of a bill of sale over plant and equipment purchased with the Holden dealership was required, AGS described that requirement in their letter dated 13 October 2000 to the plaintiff as “Deed of Charge over various assets”. AGS forwarded under cover of the letter dated 13 October 2000 to the plaintiff deed of guarantee and indemnity, deed of charge and bill of mortgage. The deed of guarantee and indemnity stipulated the deed of charge as one of the collateral securities. The letter dated 13 October 2000 did not draw the plaintiff’s attention to the difference in effect between the deed of charge that had been prepared by AGS and the bill of sale over specified plant and equipment that had been listed as part of the secured property in the loan agreement. AGS did advise the plaintiff not to treat the letter of 13 October 2000 as legal advice and strongly recommended that, prior to executing the documents, the plaintiff seek independent legal advice about the effects of the documents and the extent of the liability which may accrue to the plaintiff, if it were to execute the deed of guarantee and indemnity. There is no suggestion that the plaintiff did act on that recommendation and seek independent legal advice, before executing the documents. All the documents submitted by AGS to the plaintiff for execution under cover of the letter dated 13 October 2000 appear to have been executed by the plaintiff on 18 October 2000 and were returned to AGS by the plaintiff under cover of the letter dated 18 October 2000. [8] The deed of charge was stamped on 27 October 2000. The date on which the deed of charge was shown as being made was amended from 18 October 2000 (which appears to be the date of execution of the deed by the plaintiff) to 9 November 2000 (which appears to be the date of execution of the deed by the first defendant). Particulars of the deed of charge were lodged with Australian Securities and Investments Commission (“ASIC”) on 19 January 2001. [9] It appears that the first defendant did not advance the full amount of the loan contemplated by the loan agreement and that, as at 4 August 2003, an amount of $146,330 was undrawn. [10] Under the loan agreement the first repayment and interest instalment was due by Bidjara Motors on the 15th day of the calendar month following the release of the loan to Bidjara Motors. The first defendant by facsimile sent to the plaintiff on 19 December 2000 confirmed that the interest on the loan did not start accruing until the loan was fully drawn and settled. By letter dated 4 October 2002 the first defendant notified Bidjara Motors that as the loan had been partially drawn since 26 October 2000 with an amount of $146,330 remaining undrawn, the first defendant required the loan to be fully drawn by 31 October 2002 or it would revoke the undrawn balance of the loan. Negotiations then ensued between the plaintiff and the first defendant about that undrawn balance which did not result in any concluded agreement. [11] On 6 March 2003 Bidjara Motors was placed in liquidation. That was relied on by the first defendant as an event of default by Bidjara Motors under the loan agreement. By notice in writing dated 4 August 2003 the first defendant demanded -- 4 of 16 -- 5 payment within 24 hours from the plaintiff, as guarantor under the deed of guarantee and indemnity, of the amount of the principal of $706,320 claimed by the first defendant to be then due and payable by Bidjara Motors pursuant to the loan agreement. [12] As payment in accordance with the demand was not made, the first defendant appointed the second defendants as receivers and managers of the plaintiff by deed of appointment dated 5 August 2003. [13] The relief sought by the plaintiff in the originating application included declarations as to the invalidity of the deed of charge and the invalidity of the appointment of the second defendant. [14] At the hearing before Atkinson J on 26 November 2004 counsel for the plaintiff identified the source of his instructions as the directors of the plaintiff who were identified in the affidavit of Ms Darlene Roberta Robinson sworn on 22 November 2004 as Darlene Roberta Robinson, Alf Deeran Lee Dodd, Betty Wyman, Annette Lyn Wyman, Christopher James Ebsworth and Elizabeth Michelle Murphy. Preliminary point [15] At the outset of the hearing of the application the plaintiff objected to the first defendant being represented by Mr Hack of Senior Counsel, Ms Anderson of Counsel and AGS on the basis that by resolution dated 18 February 2005 the first defendant had terminated any retainer made between the first defendant and AGS in respect of this proceeding. The effectiveness of that termination is disputed by AGS for the reasons that are set out in the affidavit of one of its solicitors, Mr Barry Cosgrove, filed on 14 March 2005. It is not necessary to determine this point as by 24 March 2005, while the decision on this application was reserved, the provisions of the Aboriginal and Torres Strait Islander Commission Amendment Act 2005 (Cth), whereby the Commonwealth of Australia succeeded to the assets of the first defendant, became responsible for its liabilities and was substituted as the first defendant in this proceeding, commenced. Mr Hack foreshadowed that, if it were necessary, he had instructions to appear on behalf of the Commonwealth. It is appropriate to make the formal order of substitution of the Commonwealth as the first defendant. In these reasons, however, the expression “the first defendant” has been used to refer to the Aboriginal and Torres Strait Islander Commission. The statement of claim [16] The allegations made in the statement of claim can be summarised as follows: (a) the deed of charge was executed by persons without authority of the board of the plaintiff (paragraph 5); (b) the deed of charge is invalid because s 21 of the Aboriginal and Torres Strait Islander Commission Act 1989 (Cth) (“the ATSIC Act”) was not complied with (paragraph 6); (c) the plaintiff executed the deed of charge in the belief that it was part of the securities provided for in the loan agreement and agreed to be given collateral to the deed of guarantee and indemnity, but it was not, in fact, part of the agreement reached and it was drawn up and signed under a mutual mistake of fact, as the plaintiff had never agreed to the terms contained in it (paragraphs 7, 8 and 9); -- 5 of 16 -- 6 (d) the deed of charge is void by reason of a material alteration to it, namely changing the date after execution by the plaintiff from 18 October 2000 to 9 November 2000 (paragraph 10); (e) the deed of charge was not lodged with ASIC within the requisite period after creation of the charge making the certificate of entry of charge in respect of the deed of charge invalid (paragraph 11); (f) the deed of appointment of the second defendants was invalid because the deed of charge was invalid or the loan to Bidjara Motors was not in default or there was no prior consent of the first defendant pursuant to s 21 of the ATSIC Act (paragraph 12); (g) the first defendant and the second defendants have failed to account to the plaintiff in relation to the receipts received and payments by the second defendants (paragraphs 13 and 14); (h) alternatively, the second defendants have failed to proceed with due diligence in the raising of the money to pay out the debt to the first defendant (paragraph 15). When summary judgment may be given [17] Under r 293(2) of the UCPR the court’s discretion to give summary judgment in favour of a defendant depends upon the court being satisfied that the plaintiff has no real prospect of succeeding on all or a part of the plaintiff’s claim and there is no need for a trial of the claim or the part of the claim. The Court of Appeal confirmed in Gray v Morris [2004] 2 Qd R 118 that the power to give summary judgment under r 293(2) must be exercised with care and only if there were no real prospect of success in respect of the relevant part of the claim (at paragraphs [15], [19] and [46]). Chesterman J at [15] and [18] described a claim which has no real prospect of succeeding as “one which is ‘hopeless’ or one which is ‘bound to fail’”. Unauthorised execution [18] The plaintiff relies on an affidavit of Ms Elizabeth Adams filed on 13 November 2003. The signatures witnessing the affixing of the plaintiff’s common seal to the deed of charge are identified on the deed of charge as that of Deearne Dodd as treasurer/director and Ms Adams as director. Ms Adams states in her affidavit that a search of the committee records of the plaintiff shows that she was not given authority to sign the deed of charge. Even accepting that there had been no board meeting authorising the execution of the deed of charge, the difficulty for the plaintiff is the assumptions that the first defendant was entitled to make about the deed of charge being duly executed by virtue of ss 128 and 129 of the Corporations Law (“the Law”) which was then in force. The first defendant would not have been entitled to make an assumption about the due execution of the deed of charge by the plaintiff, if at the time of the dealings the first defendant knew or suspected that the assumption was incorrect: s 128(4) of the Law. The plaintiff does not plead any such knowledge or suspicion and there is no evidence put forward by the plaintiff to raise the existence of such knowledge or suspicion. There is no prospect of the plaintiff succeeding with its allegation in paragraph 5 of the statement of claim and the first defendant should have judgment in respect of that part of the claim. -- 6 of 16 -- 7 Section 21 ATSIC Act [19] The facts relied on by the plaintiff to allege invalidity by virtue of s 21 of the ATSIC Act are that the deed of charge purported to dispose of an interest in land, s 21 required the consent of the Board of the first defendant before the plaintiff could execute the deed of charge and no consent in the form of a resolution of the Board was given. [20] The plaintiff relies on subsections (2), (3) and (5) of s 21 of the ATSIC Act: “ No disposal without Commission’s consent (2) The individual or body must not dispose of the interest without the Commission’s written consent to that particular disposal or to a disposal of that kind. Consent must specify person who is to acquire interest (3) The consent must specify the disposal, or the kind of disposal, it covers by identifying the person or class of persons to whom the interest is to be disposed of. … Disposal without Commission’s consent is invalid (5) A purported disposal of the interest by the individual or body has no effect unless it is covered by the Commission’s written consent.” [21] Subsection (1) of s 21 of the ATSIC Act sets out when an acquisition of land attracts the operation of s 21. In general terms, s 21 of the ATSIC Act applies when a body corporate has acquired an interest in land using money granted to the body by the first defendant or finance that was guaranteed by the first defendant, the interest was acquired from the first defendant or the interest was acquired under or as a result of a grant under the Aboriginal Development Commission Act 1980 (Cth). [22] The first defendant relies on the failure of the plaintiff to plead that the deed of charge applied to an interest in land that was acquired in circumstances that gave s 21 of the ATSIC Act operation. It is not suggested in the affidavits relied on for the purpose of the application or by the first defendant that the plaintiff’s interest in land to which the deed of charge relevantly applied was not an interest to which s 21 of the ATSIC Act applied. That shortcoming in the pleading can be remedied by the plaintiff and Mr Stephens of Counsel on behalf of the plaintiff at the hearing of the application foreshadowed making the necessary amendment. [23] The first defendant then submits that, on the basis that s 21 of the ATSIC Act was applicable to the plaintiff’s interest in land, the granting of the deed of charge over that interest in land was not a disposal of the interest that the plaintiff acquired in the land. This is put on the basis that by granting the deed of charge the plaintiff has given certain rights to the first defendant as creditor in relation to the land, but retained both legal and beneficial ownership. -- 7 of 16 -- 8 [24] The deed of charge operates as a fixed charge over the real property in respect of which the plaintiff granted the mortgages to the first defendant. The plaintiff owns real property other than that which was the subject of the mortgages granted to the first defendant as collateral security in support of the deed of guarantee and indemnity. The deed of charge therefore created a floating charge over the real property belonging to the plaintiff that was not the subject of the fixed charge. [25] The definition of “interest” in s 4 of the ATSIC Act is: “interest, in relation to land, includes: (a) a legal or equitable estate or interest in the land; or (b) a right, power or privilege over, or in connection with, the land.” [26] The rights or powers conferred on the first defendant, as a result of the floating charge created by the deed of charge over real property belonging to the plaintiff, fall within the definition of “interest” in s 4 of the ATSIC Act. [27] The plaintiff therefore alleges that the deed of charge could have been validly granted by the plaintiff to the first defendant only if the plaintiff had obtained the written consent of the first defendant to the disposal of the interest created by the deed of charge. [28] The first defendant also submits that if consent were required before the granting of the deed of charge by the plaintiff, that was done in writing by the first defendant’s execution of the deed of charge. The second defendants put forward a different proposition. They submit that, even if the creation of a floating charge over land constitutes the disposal of an interest in land that would otherwise be caught by s 21 of the ATSIC Act, that provision should not be construed as applicable to a disposition of an interest in favour of the first defendant. Mr Clothier of Counsel on behalf of the second defendants submits that it was nonsensical to construe s 21 of the ATSIC Act, so that the first defendant would have to approve of a disposition of an interest in land in favour of itself, when it required that interest in land as security for the loan it was making. Section 21 of the ATSIC Act regulates the disposal of an interest in land to which the provision applies by requiring that the disposal be effected with the first defendant’s consent. Its purpose is to protect the real property that has been acquired as a result of financial assistance provided by the first defendant. Where the first defendant is the other party to the proposed disposition, the disposition can be proceeding only with the full knowledge of the first defendant. It makes sense to construe s 21 of the ATSIC Act, so that the first defendant was not required to give written consent to the disposal of an interest in land to which s 21 otherwise applied, where the disposal was in favour of the first defendant. [29] If that construction were found to be incorrect, then the written consent was given by the execution of the deed of charge by the first defendant. Such execution of the deed of charge itself identified the first defendant as the person to whom the interest was granted. [30] Even if the plaintiff were allowed to amend paragraph 6 of the statement of claim to overcome the existing shortcoming that there was no pleading that the deed of charge applied to an interest in land to which s 21 of the ATSIC Act applied, there is no prospect of the plaintiff succeeding with its allegation in paragraph 6 of the -- 8 of 16 -- 9 statement of claim and the first defendant should have judgment in respect of that part of the claim. Mistake [31] Paragraph 7 of the statement of claim relevantly pleads: “… the Deed of Charge was signed by the Plaintiff and Defendant in the belief that it was part of the securities provided for in the loan agreement dated 13 October 2000 and agreed to be given collateral to the guarantee and indemnity dated 18 th day of October 2000, but it was not part of the agreement reached. It was drawn up and signed under a mutual mistake of fact and Bidjara Housing never agreed to the terms contained in it. The Deed of charge grants a floating charge over the any legal or equitable interest of the Chargor in any present and future undertaking and property of and incidental to the conduct of Bidjara Housing business.” [32] It is not immediately apparent from paragraph 7 of the statement of claim what is meant by “the agreement reached”. There is reference in paragraphs 2 and 3 of the statement of claim to the loan agreement dated 13 October 2000 between the first defendant and Bidjara Motors, but the plaintiff is not a party to the loan agreement. Paragraph 4 of the statement of claim pleads: “Bidjara Housing agreed and has given to ATSIC a guarantee and indemnity dated 18 th day of October 2000 and mortgages and a bill of sale in accordance with the aforesaid agreements.” [33] No particulars have been provided in the statement of claim of the agreement that is the subject of paragraph 4 of the statement of claim. [34] It became apparent in the submissions made on the hearing of the application on behalf of the plaintiff that the agreement relied on by the plaintiff was an oral agreement negotiated by the then chairman of the plaintiff, Mr Raymond Robinson, on behalf of the plaintiff with the first defendant and Bidjara Motors about the security which the plaintiff would provide to the first defendant, in order to support the loan proposed by the first defendant to Bidjara Motors. [35] Mr Robinson was the chairman of the plaintiff from 1991 to 16 June 2003. Paragraphs 12, 13 and 14 of his affidavit filed on 29 July 2004 state: “12. I was involved in the negotiations of that loan on behalf of Bidjara Motor Corporation and Bidjara Housing. In the negotiations Bidjara Housing agreed to guarantee the loan by mortgaging the properties that are listed in the Deed of Guarantee and Charge. At no time was a security document discussed where Bidjara Housing would give ATSIC the power to appoint a receiver/manager to all Bidjara Housing’s legal and equitable interests, should Bidjara Motor Corporation default on the loan. 13. The security that was agreed related to the properties referred to in the Deed of Guarantee and these assets were valued by ATSIC and were listed in the Deed of Guarantee. -- 9 of 16 -- 10 14. I was not aware that ATSIC proposed a Deed of Charge that they now rely upon, I never discussed that document, I never saw that document and I would never have agreed to such a document.” [36] Mr Allmark in his affidavit filed on 5 August 2004 stated: “5. I was involved in the negotiations to finalise the loan, and the only security for the loan sought by ATSIC was a mortgage over four stated properties and a Bill of Sale over Plant and Equipment belonging to the Car Dealership. This is reflected in paragraph 7 of the Loan Agreement’s Schedule, and in Schedule 1 and 2 of the Deed of Charge.” [37] The deed of charge considerably extends the security provided by the plaintiff to the first defendant above what was contemplated in the loan agreement. What Mr Robinson’s complaint appears to be is that, if brought to his attention, he would not have agreed on behalf of the plaintiff to the granting of a deed of charge over all of the plaintiff’s assets which also conferred on the first defendant the power to appoint a receiver/manager over all of the plaintiff’s assets. Mr Robinson does not suggest in his affidavit, and nor is it alleged in the statement of claim, that it was a condition of the agreement that Mr Robinson negotiated with the first defendant that the first defendant could not seek security from the plaintiff that was more extensive or with greater potential consequences for the plaintiff, than that listed in the loan agreement or without obtaining the confirmation of Mr Robinson to any change in the requirements for security from the plaintiff. Although chairman of the plaintiff at the time that the approval in principle for the loan to Bidjara Motors by the first defendant supported by security from the plaintiff was reached, Mr Robinson was only one of a number of directors of the plaintiff. [38] It appears that the plaintiff had no problem with the requirement of AGS that a deed of guarantee and indemnity be provided (which was an additional requirement above that specified in the loan agreement). [39] Apart from not pleading in a proper manner the oral agreement between the plaintiff and the first defendant that the plaintiff seeks to rely upon to set up the allegation of mutual mistake, paragraph 7 of the statement of claim does not identify who on behalf of the plaintiff it is alleged had the belief that the deed of charge was required by the agreement that Mr Robinson claims he negotiated on behalf of the plaintiff with the first defendant about the securities that would be provided by the plaintiff. In addition, the plaintiff does not identify the belief which the first defendant had about the deed of charge at the time it was executed by the first defendant which has to be the basis of the allegation that there was a mutual mistake of fact made about the requirement of the deed of charge as a security to support the loan from the first defendant to Bidjara Motors. [40] The involvement of AGS on behalf of the first defendant in deciding to require the deed of charge as one of the securities from the plaintiff does not suggest that there are any significant prospects of the plaintiff being able to successfully pursue a claim of mutual mistake in relation to the execution of the deed of charge. It is premature to express a final view on the prospects of success of this claim, in light of the need for the plaintiff to amend paragraph 7 of the statement of claim to plead in proper terms the agreement that is relied upon by the plaintiff. As paragraphs 7, -- 10 of 16 -- 11 8 and 9 presently stand, the pleading is unsatisfactory and should be struck out, but the plaintiff should be given an opportunity to replead in respect of the claim that has its genesis in paragraphs 12, 13 and 14 of Mr Robinson’s affidavit filed on 29 July 2004. Alteration to the date [41] It is clear that the deed of charge was originally dated 18 October 2000 and that date was altered by substituting the date of 9 November 2000. The plaintiff claims that is a material alteration. The first defendant admits that, after execution of the deed by the plaintiff, the date was altered. The first defendant denies, as a matter of law, that was a material alteration. A material alteration includes one that imposes a greater liability on the party affected by the alteration or saves the deed from invalidity which would otherwise exist or alters the legal position of the parties to the deed: see Farrow Mortgage Services Pty Ltd (in liq) v Slade (1996) 38 NSWLR 636, 640, 649; Smart v Australia & New Zealand Banking Group Ltd [2002] VSCA 111 at paragraph [16]. As a matter of law, the alteration of the date of the deed of charge would not, in the circumstances, be characterised as a material alteration, as it merely reflected the date on which the last party to sign the deed did so. The first defendant should therefore have judgment in respect of that part of the claim that alleges there was a material alteration to the date of the deed of charge which made the deed of charge void. Failure to lodge with ASIC [42] The first defendant admits that the notice of the deed of charge was lodged with ASIC on 19 January 2001 and that the time period for lodging the relevant notice under s 263(1) of the Law was not complied with. The issue raised by the pleadings is whether that had any effect on the validity of the deed of charge, as between the plaintiff and the first defendant. Although the date of registration of a charge in accordance with the Law may have affected its order of priority under Pt 2K.3 of the Law, s 262(11) of the Law expressly stated that a charge on property of a company is not invalid merely because of the failure to lodge the relevant notice required under the Law. As a matter of law, the plaintiff has no prospect of succeeding in the claim made in paragraph 11 of the statement of claim and judgment should be given for the first defendant in respect of that part of the claim. Invalid appointment [43] The first ground on which the plaintiff relies to allege that the deed of appointment of the second defendants was invalid is that the deed of charge was invalid. As the first defendant is entitled to judgment in respect of the claims that rely on paragraphs 5, 6, 10 and 11 of the statement of claim, the only basis on which the plaintiff could possibly be successful in challenging the validity of the deed of charge is if it were able to replead paragraphs 7, 8 and 9 of the statement of claim in a way that discloses a reasonable cause of action and is otherwise unobjectionable. At this stage, paragraph 12(a) of the statement of claim should remain to accommodate that possibility. [44] The second ground on which the plaintiff relies to allege the deed of appointment of the second defendants was invalid (which is set out in paragraph 12(b) of the statement of claim) is that the loan to Bidjara Motors was not in default. The plaintiff relies on the fact that the loan had not been fully drawn in that an amount of -- 11 of 16 -- 12 $146,330 remained undrawn, in order to allege that the liability of Bidjara Motors to make repayments did not arise under the loan agreement. Although the loan was not fully drawn, funds of $706,320 had been advanced to Bidjara Motors under the loan agreement. It is irrelevant that the liability of Bidjara Motors to make repayments may not have arisen under the terms of the loan agreement, as the event of default relied upon by the second defendant was the winding up of Bidjara Motors. [45] Clause 11.1(f) of the loan agreement defined the issue of a bankruptcy notice or bankruptcy petition to the borrower as an event of default. As winding up of a corporation is equivalent to the bankruptcy of a natural person, that provision of the loan agreement can be construed as covering the equivalent steps relating to a corporation. The winding up of Bidjara Motors means that an event of default under the loan agreement had occurred which entitled the first defendant under clause 11.2 of the loan agreement to immediate payment of the moneys payable under the agreement. There is no prospect of the plaintiff being successful in challenging the deed of appointment of the second defendants on the grounds set out in paragraph 12(b) of the statement of claim and judgment should be given for the first defendant in respect of the relevant part of the claim. [46] The third ground on which the plaintiff relies to allege the deed of appointment of the second defendants was invalid which is set out in paragraph 12(c) of the statement of claim is that it purported to dispose of an interest in land and there had not been compliance with s 21 of the ATSIC Act. The appointment of receivers and managers pursuant to a deed of charge is the exercise by the chargee of rights conferred by the deed of charge. Such appointment is not itself the disposal of an interest in land pursuant to s 21 of the ATSIC Act. The first defendant should therefore have judgment in respect of that part of the claim which relies on paragraph 12(c) of the statement of claim. Failure to account [47] The plaintiff does not allege in the statement of claim any basis on which it is entitled to claim an account against the first defendant, such as where there is alleged to be a sale by a mortgagee at an undervalue. When the second defendants were appointed as receivers and managers of all the assets and undertaking of the plaintiff, all that was owed by the plaintiff under the deed of guarantee and indemnity given to the first defendant was the amount of the principal sum that had been lent by the first defendant to Bidjara Motors. The period in respect of which the plaintiff must be seeking an account coincides with the period of the receivership. The claim by the plaintiff against the first defendant for an account must relate to the receivership. The second defendants are the agent of the plaintiff pursuant to the deed of appointment of the second defendants and in accordance with clause 6.1(k)(ii) of the deed of charge. Clause 6.5 of the deed of charge is also relevant to the lack of obligation on the part of the first defendant to account to the plaintiff. The second defendants have been lodging accounts as required under s 432 of the Corporations Act 2001. Paragraph 13 of the statement of claim does not disclose facts which give the plaintiff a right to pursue the plaintiff for an account. It should therefore be struck out. -- 12 of 16 -- 13 Allegations against second defendants [48] The allegations made in paragraphs 14 and 15 of the statement of claim are against the second defendants who do not seek to strike them out. It is therefore not necessary to consider them. Resolutions of the first defendant made on 18 February 2005 [49] The first defendant at a meeting held on 18 February 2005 made a number of resolutions or decisions relevant to this proceeding. Amongst them was a decision revoking the appointment of the second defendants as receivers and managers of the property of the plaintiff. That decision was made without giving the relevant Minister 60 days notice in writing of its decision and a statement of reasons for its decision, before it revoked the appointment of the second defendants, as required by the Aboriginal and Torres Strait Islander (Supervision of Debts) Direction 2004. The plaintiff submits that it was not required to comply with that direction because the appointment of the second defendants in the first place was invalid. If the appointment of the second defendants was valid, the resolution on 18 February 2005 to revoke their appointment was invalid. While the challenge by the plaintiff to the validity of the appointment of the second defendants subsists, the effect of the resolution of the first defendant made on 18 February 2005 cannot be definitively determined. [50] At the same meeting the first defendant also passed a resolution that it agreed with the plaintiff that the loan to Bidjara Motors be discharged forthwith. That resolution was made without compliance with the Aboriginal and Torres Strait Islander (Forgiveness of Debts) Direction 2004 and therefore was invalid. That resolution has no effect on this proceeding. Whether indemnity from directors of the plaintiffs for costs is required [51] It was common ground that on the date of the hearing of the application that the directors of the plaintiff had reduced to 4 in number and they were Darlene Roberta Robinson, Betty Wyman, Elizabeth Murphy and Annette Wyman. The second defendants had served each of those directors with their application filed on 8 March 2005 and supporting affidavits. Mr Stephens announced during the hearing of the application that he had received instructions to appear on behalf of those directors and that none of them had sufficient assets to enable them to provide any security for costs in respect of the proceeding, but that they were willing to provide security from the plaintiff’s assets. [52] The second defendants relied on the authorities that were canvassed in Deangrove Pty Ltd (Receivers and Managers Appointed) v Commonwealth Bank of Australia (2001) 108 FCR 77 (“Deangrove”). Sackville J summarised the following proposition from the authorities at 87 [40]: “… where a company in receivership has a claim against the debenture holder and the receiver declines to pursue the claim, the directors are entitled to initiate and maintain proceedings in the name of the company, provided the directors offer the company a satisfactory indemnity against costs. The latter requirement is designed to ensure that the interests of the debenture holder, qua debenture holder, are not prejudiced …” -- 13 of 16 -- 14 Sackville J expressed the view at 88 [47] that those giving instructions on behalf of the company in receivership to bring the proceedings must demonstrate that nothing in the course of the proceedings is going to threaten the interests of the debenture holders. The interests of the debenture holders would be affected if the company’s funds were diminished as a result of the proceeding and that jeopardised repayment to the debenture holders. [53] The second defendants’ solicitors made a request of the plaintiff for security for costs on 3 February 2005. On 4 March 2005 the second defendants’ solicitors foreshadowed that, in the absence of a proposal for security for costs from natural persons who stand behind the plaintiff, the second defendants would apply to the court for such security. [54] Because of the appointment of the second defendants as the receivers and managers of the property of the plaintiff, the only way in which this proceeding could have been commenced was by the exercise by the directors of the plaintiff of their residual power to bring proceedings against the first defendant as the chargee and the second defendants as the receivers and managers appointed by the chargee on the basis that this is a proceeding which would not be prosecuted by the first and second defendants. Prima facie the directors of the plaintiff should therefore indemnify the plaintiff against costs it incurs and might be ordered to pay to other parties to this proceeding, if such costs could adversely affect the capacity of the plaintiff to repay the debt owed under the deed of guarantee and indemnity to the first defendant. [55] The affidavits of the second defendants deal with various steps undertaken in the receivership. The second defendants have concluded that many of the books and records of the plaintiff were removed from its office in May or June 2003 and have been unable to be located. The most up to date financial accounts of the plaintiff that were provided to the second defendants were the accounts for the year ended 30 June 2002. The second defendants consider that the reports as to affairs of the plaintiff provided to them by a former director and the directors of the plaintiff were largely inadequate. The second defendants have been unable to prepare proper accounts for the plaintiff, without the missing books and records. [56] The statement of financial position of the plaintiff as at 30 June 2002 shows a total equity of $6,637,620.97. Total current assets were shown as $1,085,864.56 with current liabilities shown as $242,580.04. Those accounts show that the plaintiff had accumulated losses to 30 June 2002 of $1,122,286. [57] The second defendants estimate that there are further actual, as well as possible, losses to the plaintiff of investments, loans, guaranteed debts and insolvent trading claims totalling $2,256,162 (which excludes trading losses from 1 July 2002 to 5 August 2003 and any necessary write down of asset values for possible overvaluations). [58] The second defendants estimate that the debt owed by the plaintiff to the first defendant in respect of the loan to Bidjara Motors has increased by the addition of accrued interest and cost of the receivership to an amount of approximately $1.5m. There have been a number of legal proceedings involving the plaintiff during the period of the receivership. The second defendants have sold a real property and -- 14 of 16 -- 15 some plant and equipment for which net proceeds in the vicinity of $195,000 have been received. [59] The plaintiff is the registered owner of approximately 30 residential, industrial and rural properties, the majority of which are subject to a Quistclose trust in favour of the first defendant which is secured by a number of mortgages and caveats in favour of the first defendant. Most of these properties are residential properties in Charleville which the second defendants are concerned could take up to 5 years to sell. [60] The plaintiff relies on affidavits of Mr Robinson, Ms Robinson, Mr Kinivan and Mr Alexander to show the significant asset position of the plaintiff. The problem with the material relied on by the plaintiff is that it is incomplete in that it does not deal in any detail with existing and contingent liabilities. No information is provided by the plaintiff on how it has been funding its costs of this proceeding to date. [61] The volume of the material before me on this application indicates that the receivership has been an unhappy one, with the second defendants being frustrated with the lack of cooperation from those associated with the plaintiff and with the directors of the plaintiff and Mr Robinson frustrated at the turn of events that has taken the plaintiff out of their control. [62] One of the second defendants, Mr Duus, has experience of over 20 years as an official liquidator. In one of his affidavits filed on 10 March 2005 he expressed the opinion that any moneys obtained from the sale of the plaintiff’s properties are unlikely to discharge the total debt owed by the plaintiff to the first defendant under the Quistclose trust and would not leave any moneys available to discharge the monies owed by the plaintiff to the first defendant in respect of the loan to Bidjara Motors or to satisfy any costs order made against the plaintiff in favour of the first or second defendants. Mr Duus also states that he does not believe that moneys could be obtained from the sale of the unencumbered residential properties that would be sufficient to discharge in full the moneys owed by the plaintiff in respect of the loan to Bidjara Motors or to satisfy any adverse costs order and that there would be a significant shortfall. The expression of such an opinion by an experienced liquidator must be treated seriously and no attempt was made by the plaintiff to respond to that opinion in the detail that would be required to answer it. [63] The state of the material, as to the true financial position of the plaintiff, is unsatisfactory. Consistent with the approach in Deangrove, it is for those standing behind the plaintiff to provide a worthwhile indemnity in favour of the plaintiff against the costs incurred by the plaintiff and which it may be ordered to pay other parties in this proceeding, unless they can satisfy the court that such an order is unnecessary because there are sufficient funds to which the plaintiff has recourse, so that all such costs will be satisfied, in addition to the payment to the first defendant of what it is owed. As the directors of the plaintiff have not satisfied the court that such an order is unnecessary, the proceeding should be stayed until they provide an appropriate indemnity or can satisfy the court that such indemnity is unnecessary. [64] As the defendants allowed the proceeding to continue without insisting on that indemnity until 8 March 2005, the indemnity should be only in respect of the future costs of the plaintiff incurred in this proceeding and any costs orders made against -- 15 of 16 -- 16 the plaintiff in favour of the other parties to the proceeding as from and including the date of the publication of these reasons. [65] I am satisfied that otherwise there is no discretionary consideration that would weigh against making such a stay order. The disposal of some of the issues in the proceeding, as a result of the summary judgment application, should result in reduced estimates of costs for the further conduct of the proceeding. Orders [66] It follows that the orders which should be made are: 1. The Commonwealth of Australia be substituted for Aboriginal and Torres Strait Islander Commission as the first defendant. 2. Judgment for the first defendant be given against the plaintiff in respect of that part of the plaintiff’s claim based on the allegations in paragraphs 5, 6, 10, 11, 12(b) and 12(c) of the plaintiff’s statement of claim filed on 24 January 2005. 3. Paragraphs 7, 8, 9 and 13 of the statement of claim filed on 24 January 2005 be struck out. 4. The proceeding be stayed until further order or Darlene Roberta Robinson, Betty Wyman, Annette Lynn Wyman and Elizabeth Michelle Murphy (“the directors”) have provided an indemnity to the plaintiff against the future costs incurred by the plaintiff in this proceeding and any costs which the plaintiff may be ordered from and including the date of this order to pay any other party in this proceeding which is supported by security that is not provided by the plaintiff and is in a form and for an amount that is agreed upon by the directors and the defendants to this proceeding and, failing agreement, is determined by the court. 5. Liberty to the directors of the plaintiff or any party to apply on 2 days’ notice in writing to the other parties and the directors. [67] I will hear submissions from the parties on the question of the appropriate costs orders to be made in respect of the respective applications filed on 1 and 8 March 2005. -- 16 of 16 --