Clevemere Pty Ltd v Cooke Investments (Gold Coast) Pty Ltd [2002] QSC 461

State Reporting Bureau Queensland Government Department of Justice and Attorney-General Transcript of Proceedings Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. REVISED COPIES ISSUeF State Reporting Bureau Data*V7 /?7 o b- SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION BYRNE J No 11419 of 2002 CLEVEMERE PTY LTD ACN 085 993 059 Applicant and COOKE INVESTMENTS (GOLD COAST) PTY LTD ACN 095 876 814 Respondent BRISBANE .. DATE 20/12/2002 JUDGMENT WARNING: The publication of information or details likely to lead to the identification of persons in some proceedings is a criminal offence. This is so particularly in relation to the identification of children who are involved in criminal proceedings or proceedings for their protection under the Child Protection Act 1999, and complainants in criminal sexual offences, but is not limited to those categories. You may wish to seek legal advice before giving others access to the details of any person named in these proceedings. 1 1 4 th Floor, The Law Courts, George Street, Brisbane, Q. 4000 Telephone: (07) 3247 4360 Fax: (07) 3247 5532 -- 1 of 8 -- HIS HONOUR: The first applicant ("Clevemere") challenges the entitlement of the first respondent ("Cooke") to have appointed the second and third respondents as receivers of its assets and undertakings. Such an appointment was made on 11 December, purportedly pursuant to a deed of charge dated 24 May 2002. This is the trial of the proceeding. The contest centres on the significance of contractual arrangements made between Clevemere and CBD Hotel Group Pty Ltd ("CBD") on 1 November. On Cooke's case, the making and carrying into effect of this bargain constitutes an "event of default" triggering the entitlement to have appointed the receivers . By clause 9(7), an event of default occurs where Clevemere "ceases...to carry on its business...". Accordingly, the question is whether Clevemere has proved that it is more probable than not that it has not ceased to carry on its business through the conclusion and implementation of the 1 November arrangements. This requires a comparative analysis of Clevemere ' s business activities on 24 May and 11 December. The deed of charge does not contain a definition or description of Clevemere ' s business at the time the security 20122002 mbl (Byrne J) 2 JUDGMENT -- 2 of 8 -- 20122002 mbl (Byrne J) was created. The nature of the business must therefore be gathered from other evidence. As it happens, there is little of it . Mr Wilson, who controls Clevemere, deposes: " Clevemere: a operates a hotel business known as Nerang Fair Tavern located at the Nerang Fair shopping centre, Nerang/Beaudesert Road, Nerang ("the tavern"); b operates a bottle shop in the Nerang Fair shopping centre ("the Nerang Fair bottle shop"); c operates a detached bottle shop in the Earl Plaza shopping centre, Price Street, Nerang; d is the lessee of the premises from which the tavern and the Nerang Fair bottle shop operate; and e has very few removable physical assets, being plant and equipment located in the tavern, and accordingly its major assets are the tavern business and the associated leases. Sirapot: 3 JUDGMENT -- 3 of 8 -- 20122002 mbl (Byrne J) a is a subsidiary of Clevemere; b is the licensee associated with Clevemere's business operations ; c is the lessee of premises from which the Earl Plaza bottle shop operates; d has trading accounts with Carlton & United Breweries, Castlemaine Perkins Breweries and Australian Liquor Marketers (which is the only supplier of the complete range of wines and spirits in Queensland) ; and e has very few physical assets (being stock to the approximate value of $125,000) and accordingly its major assets are the liquor licence associated with Clevemere' s business and the Earl Plaza bottle shop lease ." These assertions relate to circumstances prevailing when the affidavit was recently sworn. Other passages in Mr Wilson's affidavit, construed favourably from Clevemere's perspective, seem to justify the inference that those summaries of Clevemere ' s and Sirapot's businesses are also intended by Mr Wilson to describe things as they were on 4 JUDGMENT -- 4 of 8 -- 20122002 mbl (Byrne J) 24 May 2002. As statements of fact concerning the circumstances as they existed when the affidavit was made, however, the statements are controversial. That is because the parties are in dispute as to the significance of the changes that have resulted from the 1 November arrangements with CBD and their subsequent implementation. Although the evidence is sparse, it appears to indicate that, on 24 May 2002, Clevemere was the proprietor and operator of the tavern and bottle shop businesses, employing staff, paying wages and other expenses, buying stock (other than alcoholic beverages) and selling it to customers, receiving income from sales and, presumably, banking it to the credit of Clevemere ' s accounts. This impression receives support from a recital to the 1 November management agreement between Clevemere and CBD, which records that Clevemere "owns and operates" the tavern and the detached bottle shop. The arrangements of 1 November have changed things markedly. Under the 1 November arrangement, CBD is to "manage the tavern" - see clause 1. CBD is to employ staff to discharge that responsibility - clause 2. CBD is expressly not Clevemere' s employee - clause 20. Nor, importantly, is it subject to Clevemere's directions concerning the way in which CBD runs the tavern: contrast Sirapot's power under 5 JUDGMENT -- 5 of 8 -- 20122002 mbl (Byrne J) clause 14 to direct CBD "in respect of the conduct of the tavern business generally" . CBD is responsible for all insurances, including worker's compensation for tavern staff. The electricity and gas accounts become CBD's responsibility. CBD is also to pay the cost of all purchases (other than alcohol) and all operational expenses, such as those for cleaning, repairs, maintenance and, more generally, "the cost of other services provided to the tavern". Consistently with CBD's having an express entitlement to use plant and equipment on the tavern premises - see clause 16 - by clause 21, which requires the employment of all Clevemere employees to be terminated before the "commencement" of the agreement, Clevemere disabled itself from a capacity to operate the tavern business itself. There are other illustrations of the extent to which the character of Clevemere ' s business has been affected by the agreement . CBD is free to select its own suppliers. It is also at liberty to fix its own prices for the goods it sells to tavern customers. 6 JUDGMENT -- 6 of 8 -- 20122002 mbl (Byrne J) Significantly, the effect of several provisions of the agreement and annexure - see clauses 7, 12, 15 and 26 of the agreement and clauses 6, 8, 9 and 10 of the annexure - is that from 1 November Clevemere ceased to receive the income of the business, ceased to pay for purchases of goods to be sold to customers, and ceased to be entitled to the profits, if any, of the business. CBD is no mere agent of Clevemere, managing Clevemere's tavern business. Despite reference in the 1 November contract to a management role, the substance of the re-arrangements achieved by the CBD contract and through its implementation is that Clevemere no longer derives income from the operation of a business of tavern proprietor. Now it receives its remuneration for permitting CBD to conduct such a business in Clevemere ' s stead . Clevemere has failed to establish that it is more probable than not that it has not ceased its business . The challenge to Cooke's entitlement to have appointed the receivers therefore fails. 7 JUDGMENT -- 7 of 8 -- 20122002 mbl (Byrne J) I will hear the parties with respect to the form of order and costs. JUDGMENT -- 8 of 8 --