Compactor Services Pty Ltd v Homan Industires Pty Ltd & Ors [2000] QSC 237

State Reporting 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.j· SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION JUSTICE MACKENZIE COMPACTOR SERVICES PTY LTD ACN 061 497 390 and HOMAN INDUSTRIES PTY LTD ACN 010 031 482 and IAN RICHARD HALL and NATIONAL AUSTRALIA BANK ACN 004 044 937 TOOWOOMBA .. DATE 29/05/2000 JUDGMENT 1 Applicant First Respondent Second Respondent Third Respondent -- 1 of 12 -- '29052000 D.1 T 1/GP M/T TWBSC00/46 (Mackenzie J) HIS HONOUR: Yes, this is the matter of Homan Industries, Compactor Services and the receiver and the bank. The relevant history of the matter is as follows: On 15 April 1997 the applicant served a notice of statutory demand on the first respondent for $104,612.06. An application to set this aside was made on 2 May 1997. On hearing of the summons on 20 July 1997 Mr Justice Dowsett made consent orders, the relevant clauses of which are in the following terms: 1. The statutory demand served upon the applicant by the respondent be set aside conditional upon the applicant within 21 days of the date of this order providing security to the satisfaction of the Deputy Registrar of the Supreme Court held at Toowoomba for the sum of $70,123.06. 3. That the applicant pay the respondent's costs of and incidental to the summons. 4. That the respondent shall commence proceedings for the recovery of the amount claimed under the statutory demand in a Court of appropriate jurisdiction within one month after the 21 day period for the provision of security has expired. Security in the form of a guarantee from the third respondent was provided on 10 September 1997. Proceedings to recover the debt were commenced in the District Court, Parramatta, on 10 October 1997. 2 JUDGMENT 10 20 30 40 50 60 -- 2 of 12 -- 29052000 D.1 T 1/GP M/T TWBSC00/46 (Mackenzie J) On 16 June 1998 the costs referred to in paragraph 3 of Justice Dowsett's order were taxed and a notice of statutory demand was served in respect of them. On 10 November 1998 Justice Ambrose stayed Mr Justice Dowsett's order pending the outcome of the proceedings in the District Court of New South Wales. On 20 March 2000 judgment was given without opposition in the District Court at Parramatta for the sum claimed with costs. An order was also made that the defendant procure the doing of all things, and signing of all documents necessary to have the $70,123.06 secured by bank guarantee lodged by the defendant in the Supreme Court of Queensland on 10 September 1997 paid to the plaintiff. By the time that judgment had been given the second respondent had been appointed receiver and manager on behalf of the third respondent. However, he exercised a deliberate choice not to take part in the New South Wales proceedings. On 21 March 2000 the applicant faxed the solicitors acting for the second and third respondents asking whether an application to have the funds paid in to Court paid out to the applicant would be necessary. It also raised the issue of the costs order being enforceable because the New South Wales proceedings had been finalised. 3 JUDGMENT 10 20 30 40 50 60 -- 3 of 12 -- 29052000 D.1 T 1/GP M/T TWBSC00/46 (Mackenzie J) A di~pute developed as to the character of the moneys paid in to Court. It was asserted that the applicant was not entitled to them and that it was only an unsecured creditor. One issue was whether the guarantee had been required to establish solvency, or whether it was given bedause Mr Justice Dowsett was prepared only to set the demand aside if money was available to meet the applicant's claim if it succeeded in the District Court. The present application seeks the following orders: 1. The Registrar of the Supreme Court of Toowoomba require payment to him by the third respondent of the security provided in the form of a bank guarantee given by the third respondent in favour of the Registrar in the amount of $70,123.06, pursuant to the consent order of Dowsett J made on 20 August 1997. 2. The Registrar pay the said $70,123.06 to the applicant's solicitors on behalf of the applicant in compliance with paragraph 3 of the judgment dated 20 March 2000 of the District Court of New South Wales at Sydney in proceeding 3060/1998. 3. The second and/or third respondents pay the applicant's costs of the application on an indemnity basis. 4. That the stay ordered in paragraph 2 of the order of Justice Ambrose dated 10 November 1998 be lifted and that the first respondent pay the applicant's costs of and incidental to the summons in OSS/1997, amounting to $8,684.98, as appears on the certificate of taxation dated 16 June 1998. 4 JUDGMENT 10 20 30 40 50 60 -- 4 of 12 -- 29052000 D.1 T 1/GP M/T TWBSC00/46 (Mackenzie J) 5. That the first respondent pay the applicant's costs of and incidental to the notice of motion in OS4/1998. 6. To the extent that leave is necessary the applicant have leave pursuant to section 471B of the Corporations Law to commence or continue this application. The usual clause seeking any other relief was also included. The third respondent does not resist the proposition that the condition requiring payment of money under the guarantee be made has been satisfied and has been released from the application by the applicant on that basis. However, the second respondent claims that the guarantee is an asset of the first respondent that falls within the terms of the third respondent's security and is therefore available to him to recover on behalf of the bank. The matter was complicated by the fact that on 13 April 2000 the third respondent applied for winding up of the first respondent after failure to comply with a notice of statutory demand, and on 18 May 2000 the first respondent was ordered to be wound up. This was one of two grounds of resistance to the application developed in the written submissions on behalf of the second respondent. Leave is therefore necessary for the application to proceed. It was submitted that leave should only be granted if there was no prejudice to creditors or to the orderly winding up of the company if the application were to be allowed to proceed. 5 JUDGMENT 10 20 30 40 50 60 -- 5 of 12 -- 29052000 D.1 T 1/GP M/T TWBSC00/46 (Mackenzie J) Reliance was placed on re Gordon Grant and Grant Proprietary Limited (1982) 1 Australian Company Law Cases 196. There is no evidence before me that the orderly winding u.r will be prejudiced. The case is far removed from those where the intended proceedings will take a considerable time to finalise, nor is it one where substantial cost will be involved in resolving the present proceedings. Further, there is no evidence that there are creditors other than the third respondent at all, or assuming that there are, creditors who will suffer any real prejudice in the sense of being deprived of a dividend which they would get if the present application were to be successful, since the third respondent is a secured creditor. Further, the only way of resolving the entitlement to the guarantee, or money in substitution for it, is in proceedings and it can be at least conveniently resolved in the present proceedings as in some other proceedings brought by the liquidator who did not seek to appear on this application, notwithstanding that the company was served in a timely way, and there is no reason to suppose was unaware of the proceedings or one of the parties to the present application. 6 JUDGMENT 10 20 30 40 50 60 -- 6 of 12 -- 29052000 D.1 T2/SH M/T TWBSC00/46 (Mackenzie J) It is a case where not allowing the present proceeding to proceed is more likely to impede the winding-up and cause more · costs to be incurred. I therefore propose to give leave nunc pro tune to continue the application. The second respondent's resistance to the application proceeds on the premise that the applicant is an unsecured creditor. The applicant claims that it has the status of a secured creditor. It relies on WA Sharratt Limited v. John Bromley (Church Stretton) Ltd (1985) 1 Queen's Bench, 1038, where two conflicting lines of English authority were discussed in detail, as authority for the proposition. The decision was referred to by Mr Justice McPherson, then SPJ, in Hydronic Industries Proprietary Limited v. Taylor (1992) 2 Queensland Reports 116 at 118, but in the context of a case where the applicant had paid money into Court and was trying to recover it after it had passed to the Corporate Affairs Commission upon dissolution of the company. Mr Justice McPherson referred to Brown v. Feeney (1906) 1 King's Bench 563 at 567, and Singer v. Wills Gilchrist and Sanderson Proprietary Limited 1950 Weekly Notes New South Wales 89 at 91 as authority for the proposition that money paid into Court does not become the property of nor belong to the plaintiff. That is not precisely what is in issue here where the question is one of priority or relativity between two competing claims to money paid in in consequence of a judicial order. 7 JUDGMENT IO 20 30 40 50 60 -- 7 of 12 -- 29052000 D.1 T2/SH M/T TWBSC00/46 (Mackenzie J) In the present case there is no basis for believing that Justice Dowsett's order was other than intended to ensure ,that there was a fund from which the applicant might satisfy its debt in the event that the debt which was denied by the first respondent was found to be owing. 10 The order itself refers to provision of security. It also required the present applicant to commence proceedings to recover the amount claimed within a specified period of time. In the circumstances it is difficult to construe the order simply as referring to the issue of solvency. The remaining aspect of this issue is whether such a situation survives the order for liquidation of the company. Both the receivership and winding-up order post-date Justice Dowsett's order. In Sharratt at page 1056, after referring to the notion that there was something inequitable or unfair in the plaintiff achieving a preference in the event of achieving judgment, . . . . Lord Justice Oliver said the following: "For myself I do not see why this should be. Subject to the barikruptcy rules relating fraudulent preferences there has never been any restriction upon a debtor preferring a particular creditor if he wishes to do so. I am not clear why it should be thought desirable that a credit who has a valid claim but is kept out of his money by a defence which ultimately fails should be deprived of the advantage which he gains by a payment into Court. In the ordinary way his claim ought to have been dealt with and discharged when payment was demanded and if this had been done no question would arise. Why? Because he has been made to wait for payment as a result of an unsuccessful defence until the defendant has gone into liquidation, his position in the meantime being secure to the extent of the money in Court should he be put in a worse position than a creditor of equal degree whose claim has been admitted and paid." 8 JUDGMENT 20 30 40 50 60 -- 8 of 12 -- 29052000 D.1 T2/SH M/T TWBSC00/46 (Mackenzie J) He also doubted the correctness of the proposition that money in Court remained an asset of a defendant which on bapkruptcy forms part of his property available for distribution. In the present case the applicant was held out of his•money by 10 a defence mounted by the first respondent, which the second respondent chose not to adopt. Had the defence which was not pursued not been mounted, the applicant would have been paid in the ordinary course of business long before the receiver was appointed. I respectfully agree with the view expressed in the quotation above, having regard to all of the circumstances. ~n my view the oppli0ant ha• =•t4bliahod o ~ight to h~v= the benefit of the proceeds of the guarantee which the third respondent is obliged and has expressed a willingness to convert into money. One further matter requires to be resolved. The second respondent submitted that the applicant is seeking to enforce an interstate judgment, and that the procedure is sections 27 to 29 of the Supreme Court Act 1995 has not been complied with. It is said that the application is therefore not competent. The applicant seeks to establish the right to payment of money in Court to it. The basis of the right is obtaining of judgment in that sum in the District Court New South Wales. 9 JUDGMENT 20 30 40 50 60 -- 9 of 12 -- 29052000 D.1 T2/SH M/T TWBSC00/46 (Mackenzie J) The issue raised is whether applying for an order requiring the Registrar t? pay the money to the applicant is enforcement of a New South'Wales judgment in the relevant sense. However that may be, in the present case it is plainly accepted on behalf of the second respondent that judgment was obtained in the New South Wales District Court relating to the money in question. The letter from his solicitors dated 18 April 2000, after receipt of a copy of the sealed judgment, accepts that the order was made against the company. The only dispute in consequence of that admission is the effect it has on the receiver's rights, and in particular whether the applicant has an inferior right to the receiver and to the bank. The applicant was positively discouraged from registering the judgment in that letter or other correspondence by the assertion that it would be futil~. The letter also gives an intimation that the third respondent would wish to be heard on the application, which option was ultimately not availed of since it sought to be and was released from the application at its request on indicating that it was prepared to pay the money under the guarantee into Court. In view of this, there is good reason why the second respondent should not now be allowed to succeed on this point as between him and the applicant, assuming that the point is 10 JUDGMENT 10 20 30 40 50 60 -- 10 of 12 -- 29052000 D.1 T2/SH M/T TWBSC00/46 (Mackenzie J) made out, which is inconsistent with the concession as to the content of the judgment in the correspondence. The admission as to the effect of the judgment, in my vtew, should be taken as binding in the circumstances. I therefore propose to make the following orders: (1) That in accordance with its intimation that it would pay to the Registrar of the Supreme Court Toowoomba the sum of $70,123.06 in respect of the security in the form of a bank guarantee given by it in favour of the registrar pursuant to the consent order of Justice Dowsett made on 20 August 1997, the third respondent pay such sum forthwith to the registrar. (2) That the Registrar pay the said $70,123,06 to the applicant's solicitors on behalf of the applicant in satisfaction of the judgment dated 20 March 2000 of the District Court of New South Wales at Parramatta in proceeding 3060 of 1998. (3) That the second respondent pay the applicant's costs of the application on a standard basis, such costs to be recoverable by him as expenses of the receivership. (4) That the stay ordered in paragraph 2 of the order of Justice Ambrose dated 10 November 1998 be lifted and that the first respondent pay the applicant's costs of and incidental to the summons in OS5 of 1997 amounting to $8,684.98 as appears from the Certificate of Taxation dated 16 June 1998. (5) That the first respondent pay the applicant's costs 10 20 30 40 50 .ot and incidental to the Notice of Motion in OS4 of 1998. 60 1 1 JUDGMENT -- 11 of 12 -- 29052000 D.1 T2/SH M/T TWBSC00/46 (Mackenzie J) (6) I give leave to the applicant pursuant to section 471B of the Corporations Law to commence and continue the present application. That is what I rule. Thank you. 12, JUDGMENT 10 20 30 40 50 60 -- 12 of 12 --