Farm Pride Foods Limited, Re [1999] QSC 247

i 31C'5/ State Reporting sc 1Q/0247 Bureau ~n(~ 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 COPfES ISSueD State Reporting Bureau Date:26, \,~ SUPREME COURT OF QUEENSLAND ( CIVIL JURISDICTION DERRINGTON J No 5641 of 1999 IN THE MATTER OF ORDER 64 OF THE SUPREME COURT RULES and IN THE MATTER OF THE LAND TITLE ACT 1994 IN THE MATTER OF CAVEAT NUMBERS 703319106, 703319101 AND 703319104 LODGED BY FARM PRIDE FOODS LIMITED ACN 080 590 030 BRISBANE .. DATE 13/07/99 JUDGMENT 1 It II F11111r, Thc l.aIV COllrts, Gl'''''IIC Slrcet, Brlsh:lllc, (), .tOO() l' 1 1 (1)7) JZ '7 "(il) I' (1)7) ~"7 '"<: " .... C cp IIJI\(~: • 't 't. I 'ax: .'_'t~ ••'_ -- 1 of 8 -- 130799 T12/KRB16 M/T 2803/00 (Derrington J) MR BRANDOS: I am instructed that my client Farm Pride Foods Limited will undertake to compensate the respondents to this application for any loss which they might suffer by reason of the relodgement of the caveats in the period between that relodgement and the final disposal of the appeal. And I am also instructed to offer this undertaking as well, that if the caveats are relodged, should the respondents to this appeal wish to deal with the two properties, my client will consent to such dealing provided, pending the final determination of the appeal, the proceeds of any sale of the properties are paid into Court. HIS HONOUR: Yes, all right. That was quite short of the question that I asked you before, was it not? MR BRANDOS: Well, Your Honour, those are my instructions. HIS HONOUR: Yes, I understand. So your answer was that 10 your clients were not prepared to go that far. Very well, 20 thank you. That is perfectly in order, Mr Brandos. That is all you have? MR BRANDOS: Your Honour, I would not want the matter to be disposed of on the basis of a misunderstanding. HIS HONOUR: It will not be anyhow. It does not make any difference in the circumstances. MR BRANDOS: As Your Honour pleases. HIS HONOUR: But I wanted to have it down as to what was being offered that is all. This is an application by a party claiming to be a secured creditor first for a stay of an order for the removal of caveats over certain land pursuant to the alleged security or, in the alternative, for leave to reinstitute the caveats. The land consists of three parcels, one owned exclusively by the respondent who signed a guarantee under 30 40 which the debt is claimed, the validity of which has been 50 put in issue; and the other two being owned by that party and his wife jointly, the wife not having signed the guarantee. 60 2 JUDGMENT -- 2 of 8 -- ( \ 130799 T12/KRB16 M/T 2803/00 (Derrington J) The history is fairly simple and not unusual. The respondent and his wife were the directors of a company which dealt in products supplied by the applicant and ran up and account of a very substantial debt in respect of those supplies. The applicant sought personal guarantees from the two directors. The guarantee was to provide security for any liability under it by consenting to caveats against the three parcels of land. The guarantee document was prepared in the names of both directors, but it was signed only by the present respondent. For some reason irrelevant here, his wife did not execute that document or any counterpart of it. The applicant lodged caveats against the titles of the three parcels of land and an application was brought for their removal. The argument in that hearing turned on the proposition that, because the guarantee contemplated the execution of it by, and the binding of, both proposed guarantors to the guarantee, the failure of one to subscribe and bind herself to that transaction released the other, even though that other had executed it. The foundation,for that argument is that if the arrangement in fact contemplates dual execution, then each guarantor has the comfort of contribution from the other guarantor in the event of being called upon to meet his or her obligations under it. 3 JUDGMENT 10 20 30 40 50 60 -- 3 of 8 -- 130799 T12/KRB16 M/T 2803/00 (Derrington J) However the authorities clearly show that whether or not this position obtained depends upon the intention of the parties, and there is ample cluthority, particularly in the Court of Appeal of this stat~, to the effect that the mere form of the guarantee is not conclusive of such an intention. And the intention of the parties to the guarantee, including the party who was to receive the benefit of the guarantee, is the decisive point. That is certainly true, but it seems to be also implicit in the ~uthorities that the form of the guarantee is some prima facie evidence of such an intention that neither party is to 10 20/-', , J ",---"J be bound until both are bound. And it would seem that, in ~I the present case, there is little evidence one way or the other to disturb the prima facie inference. 30 There are the terms of a letter which purports to record the agreement of the parties giving rise to the guarantee. It is quite equivocal upon the point. However, it is not C) necessary at this stage to decide these matters. Judgment 40 was given by the learned primary Judge in favour of the present respondent. He was of the view that there was no reasonably arguable case in support of the caveats, and he ordered their removal. An appeal has been instituted and the applicant seeks to retain its security pending its 50 determination. In the meantime, the order for removal was complied with and, after this fait accompli, there is no logical basis for 60 4 JUDGMENT -- 4 of 8 -- 130799 T13/CAL23 M/T 2803/99 (Derrington J) any stay. However, that is a mere technical difficulty which could be easily overcome by an order of this Court granting the present applicant leave to lodge a second caveat in respect of each of the parcels of land, and that would achieve the same result. The matter gives rise to two issues. The first is the strength of the appeal. The second is whether or not special circumstances are shown supporting an order that would be tantamount to a stay. As the respondent has the benefit of a determination in his favour, the applicant must show special circumstances before obtaining a stay. And whilst a stay is not appropriate, the alternative relief, having the same effect, shouJ.d be approached in the same 10 20 way, that is, that an order granting leave to lodge a second 30 round of caveats should not ce granted unless there are special circumstances. As to the first point, it is argued that the learned primary Judge was wrong on two bases. The first is that he is said 40 to have approached the matter purely upon the basis that the form of the guarantee document was conclusive of the agreement that neither party should be bound unless both were bound. 50 That does not seem to be correct. His Honour correctly regarded the terms of the agreement as being the primary source of interest to the Court as indicating the basis upon which the guarantee was signed by the respondent. That does 60 5 JUDGMENT -- 5 of 8 -- 130799 T13/CAL23 M/T 2803/99 (Derrington J) not necessarily mean that the applicant here is not entitled to argue to the Court of Appeal that, in some way, he fell into error in his interpretation of the parties· agreement. These remarks are not intended to suggest for one moment that His Honour was in error in any way but, merely, to indicate that the issue is open to be argued on appeal. But the point is that it is not apparent, as the applicant argues, that His Honour did not direct his attention to the parties· agreement. The second basis upon which it is said that His Honour erred was that the issue in respect of the removal of the caveats was simply whether there was an arguable case. It is • I 10 20(1 ~J submitted that His Honour made a final determination of the 30 matter in proceedings which were not designed to that result, and that he should only have considered whether there was an arguable case; and, it is further submitted, there was at least an arguable case and that therefore the caveats should not have been removed. 40 This is a matter of degree in the assessment of His Honour·s approach. It seems that His Honour was probably aware of the correct issue and may well have concluded that there was simply no arguable case. Whether that is so or nob remains 50 to be determined by the Court of Appeal. There is nothing about the present situation that is compelling in this application. The result is that upon matters relevant to the present application, the position is inconclusive. 60 6 JUDGMENT -- 6 of 8 -- 130799 T14/KLF26 M/T 2803/99 (Derrington J) The second major issue is whether special circumstances have been shown for the reinstatement of the caveats. It is suggested that the respondents have acted to sell one of the properties in contravention of undertakings made to the Court prior to the Judgment by the primary Judge. That 10 submission is not made out. It is submitted also that the sale is being made at a serious under-value. That proposition too is not made out. It is based upon a mis- construction of statements made by the respondent's solicitors to the applicant's solicitors which were 20 completely open and frank. In those circumstances they r- should be read in a reasonable way and not with the strained \ construction that is put upon them in argument in order to sustain the proposition advanced. Indeed, it would be surprising for the respondent's solicitors to have told the 30 applicant's solicitors such information if in fact such a state of affairs had existed. ( There are no other special cjrcumstances that would support an order. While it is far from clear that the respondent 40 would suffer any disadvantage by the reinstatement of the caveats, and the arguments presented in support of such a claim of such prejudice are totally without foundation, never-the-less, that is not the point. 50 The respondent will receive a very substantial amount of money from the sale of his property even after the liquidation of a debt which he owes to the purchaser, and there is nothing to suggest that he would not have 60 7 JUDGMENT -- 7 of 8 -- 130799 T14/KLF26 M/T 2803/99 (Derrington J) sufficient assets to meet any judgment on the guarantee that might be obtained against hint. The insolvency of his company is not reflected in tis private financial affairs. With his wife he will remain the joint owner of two other parcels of land and if the guarantee against him is 10 established in the Court of Appeal, he will continue to have assets that will be sufficient to meet it, or alternatively he may be pursued for breaches of the Bankruptcy Act. Whilst it is true that that position might not be as satisfactory as the mere statement of it would suggest, the position from the applicant's point of view is far from demonstrably desperate or even prejudiced in any serious extent that would justify the order that is sought. The application is dismissed with costs. 30 40 50 60 8 JUDGMENT -- 8 of 8 --