Burleigh Australian Rules Football Club Inc v GWIBG & B Pty Ltd & Large [1997] QSC 13

ME COURT Thi~)Ud&ment is to be copied for the purpose of research and private study QJh~ijf hMW, be resold or used for republication in any other way without permission. No. 10756 of 1996 [GWIBG & B PIL & Ors v. Burleigh ARFC Inc BETWEEN: GWIBG & B PTY LTD AND ROBERT THOMAS ADCOCK RECEIVER AND MANAGER OF THE BURLEIGH AUSTRALIAN RULES FOOTBALL CLUB Plaintiffs AND: BURLEIGH AUSTRALIAN RULES FOOTBALL CLUB INC Defendant No. 10907 of 1996 [Burleigh ARFC·Inc v. GWIBG & B PIL & Anor] BETWEEN: BURLEIGH AUSTRALIAN RULES FOOTBALL CLUB INC Plaintiff AND: GWIBG & B PTY LTD First Defendant AND: ROBERT CHARLES HAROLD LARGE Second Defendant REASONS FOR JUDGMENT - THOMAS J Delivered: 2 January 1997 CATCHWORDS: mcorpomted Association - Whether association has power to grant bill of sale with right of creditor to appoint receiver on default - Regulation 14e, 14g Associations Incorporation Regulation 1982 - SSM 25, 28, 60 Associations Incorporation Act 1982 Counsel: Mr A. Ryan for the Plaintiffs (GWIBG & B PIL & Robert Adcock) Mr D. Hawes for the Defendant (Burleigh ARFC) Solicitors: Hawthorn Cuppaidge & Badgery for the Plaintiffs Coombe & Partners for the Defendant Goltons for the Second Defendant (Robert Large) Hearing Date: 2 January 1997 -- 1 of 10 -- 020197 LH (Thomas J) HIS HONOUR: This is an application for an interlocutory injunction against Burleigh Australian Rules Football Club Inc .( "the Club"). The Club is an association incorporated under the Associations Incorporation Act. The applicant GWIBG & B Pty Ltd ("GW") is the holder of a bill 10 of sale over the chattels of the Club. On 25 November 1996, it appointed Mr Adcock as the receiver to take possession of the Club's assets and to manage its business. The injunction which is sought on behalf of GW and on behalf 20 of Mr Adcock is that the defendant be restrained from interfering with Mr Adcock taking possession of the property of the Club which is described in the relevant bill of sale. The Club refuses to accept the validity of the bill of sale or any entitlement on Mr Adcock's part to take possession. 30 Indeed, it alleges fraud in relation to the grant of the bill of sale although, as it seems to me, not in a very convincing or very well particularised way. It is contended on behalf of the Club that moneys allegedly 40 advanced by GW were not advanced to the Club and that substantial amounts were paid to third parties without the knowledge or approval of the Club. In the event the Club has physically resisted Mr Adcock's attempts to obtain possession and take over its business. The matter came before Justice Dowsett on 20 December last and an interim order was made which gave limited rights to Mr Adcock of access and to the obtaining of copies of the books 50 2 60 ORDER -- 2 of 10 -- 020197 LH (Thomas J) of account. Undertakings were given by the defendant Club to permi t such access, along with a further undertaking not to ~eal with assets, chattels or property secured by the bill of sale, other than in the ordinary course of trading. It further undertook not to draw any cheques without the prior consent of Mr Adcock or a manager employed by him provided 10 that such consent should be reasonably available. There is extensive conflicting evidence before me both in relation to the circumstances of the granting of the bill of sale, and the quantum of the debt that is now secured by it. w That evidence, I may say, is unconvincing just as the evidence against it does not seem to carry any particular persuasion. However, I am well satisfied that there is a serious question to be tried in relation to the existence of a bill of sale and 30 as to the existence of a debt secured by means of it. Of course, the possible results vary from the recovery of nothing at all up to the maximum claim of approximately $309,000 plus interest which is continuing at the rate of 15 40 per cent. An argument was advanced on behalf of the Club to the effect that there is no power to permit a receiver to be appointed to manage the business of the Club. This argument is based upon 50 regulation 14e and 14g of the Associations Incorporation Regulation 1982. It is also, in part, based upon section 60 of the Associations Incorporation Act. Regulation 14e states: "The Associations' Management Committee must - (i) approve or ratify all the Associations's 60 3 ORDER -- 3 of 10 -- 020197 LH (Thomas J) expen~iture; (ii) ensure the approval or ratification is recorded in the Management Committee's minute book." Regulation 14g states: "All negotiable instruments issued by the Association must be signed by any two of the following members of the Association; (i) the President; (ii) the Secretary; (iii) 10 the Treasurer; (iv) another member approved by the Association's Management Committee." Section 60 of the Act provides: "Subject to this Act, the business and operations of an incorporated association shall be controlled by a Management Committee." The submission is that these provisions are inconsistent with the appointment of a receiver. However, section 25 of the Act provides that an incorporated association has in the exercise of its affairs all the powers of an individual. It may for example enter into contracts, and s. 25 (2) (d) expressly states that an association "may do other things necessary or convenient to be done in carrying out its affairs". Section 28 gives further recognition to the power to make contracts and subsection 2 of that section provides that all contracts made under that section shall be effectual in law and shall bind the incorporated association and its successors and all other parties thereto. Counsel for the Club pointed out that there is no express conferral of powers upon a receiver such as that which is contained in section 420 of the Corporations Law. I do not think that statutory recognition is a pre-condition of a power 4 ORDER 20 30 40 50 60 -- 4 of 10 -- ,020197 LH (Thomas J) being gran~ed by a borrower in permit default to be remedied favour of a lender that will ~eceiver with powers borrower's property. by of possession the and lender appointing a management of the The powers recognised by ss 25 and 28 of the Associations Incorporation Act are sufficient to permit, the present bill of sale to be entered into. Section 60 and 10 regs 14e and "14g do not provide immunity against the appointment of a receiver if default occurs. The result of the interpretation sought by the Club would be that such Clubs could not lawfully grant a creditor the right 20 to perfect a security through the appointment of a receiver. That would be a considerable impediment, I should think, to the raising of money on behalf of such Clubs and associations. It seems to me that if a Management Committee involuntarily loses control of management during the period of a 30 receivership, there is no breach of regulation 14, and I would not read those regulations as destroying power to enter into a contract such as the bill of sale in the present matter. Accordingly, I would reject that particular submission 40 advanced on behalf of the Club. I turn to the question of balance of convenience. The applicant GW wishes to enter into possession and, in effect, take over the business until its debt is paid. There is, of ~ course, an initial difficulty in deciding how much of the alleged debts should be permitted to be received and accounted for to the lender in view of the serious doubt that is cast upon the quantum of any moneys secured by the bill of sale in 5 60 ORDER -- 5 of 10 -- s 020197 LH (Thomas J) question. There has been some difficulty in the carrying out of Justice Dowsett I s order. I have conflicting explanatiens from both sides. In the event, the receiver has not succeeded in obtaining all the books which were intended to have been made 10 available. No doubt the Christmas/New Year period has been responsible for some of the difficulties. I do, however, suspect a degree of obstruction or at least non-cooperation on the part of the respondent and this is a difficulty in the path of framing an appropriate interlocutory order which will 20 allow orderly management to ensue. I may say that I intend to frame an order which will allow liberty to apply if the basic accounting information is not made available. 30 It may also be mentioned that there was a technical breach of the order in that wages had to be paid on a day when contact was not able to be made between the parties, and cheques were written without actual authority of Mr Adcock or his delegate. 40 However, I am satisfied that the continuation of some such arrangement as that proposed by Justice Dowsett would work if the parties applied proper cooperation to it. The Club did not, until pressed during argument, offer to 50 secure or pay the debt that is in question. Conversely, the applicant company did not provide any information in relation to its own financial substance. The value of any undertaking as to damages given by it is not shown to be substantial. I 6 60 ORDER -- 6 of 10 -- 020197 LH (Thomas J) have less reservation in relation to the undertaking offered by Mr Adcock in person although there is no express evidence as to his capacity to pay such damages. One factor which I regard as fairly important is that there i~ at least some doubt as to whether Mr Adcock would be permitted 10 by relevant licensing authorities to continue the business which this football Club has been running. The two principal licences are a liquor licence, and a gaming licence. There is some evidence that in the event of Mr 20 Adcock obtaining possession, his application for continuation of the licence would be favourably considered, but there is no certainty of this. Past experience when a former receiver was appointed, suggests that that receiver failed to obtain a continuation of the licence, and in the result trading ceased 30 for a week at an estimated loss of $20, 000. If either of these licences were unable to be continued, the result would be disastrous so far as the continuation of any income-earning activity is concerned. 40 Another factor which I regard as relevant is that there are very few unsecured creditors of the Club. No creditor, other than the present applicant, seems to be pressing for payment. On the other hand, there is no acceptable evidence of either sol vency or insolvency on the part of the Club. As against 50 this, the Club is a going concern, and apparently has a reasonable trade that is regarded as normally being profitable. 7 60 ORDER -- 7 of 10 -- , 020197 LH (Thomas J) In short, the contest between the two present parties does not, as one commonly finds in these situations, raise the .prospect of damage to unsecured creditors. I would not, however, allow the Club to continue either unsupervised or free from making some payment which would at 10 least minimise the prospects of increasing loss to the plaintiff GW. Some level of payment needs to be secured. I note that the interest which would be accruing, from the date of appointment of the receiver, on the assumption that 20 the debt to the plaintiff is of the order of $300,000, would be $3,750 per month. I propose to round this down to a required payment of $3,000 per month and having regard to the month and a half that has already expired, to require an immediate payment, that is to say, wi thin seven days, of 30 $5,000. I, therefore, propose to grant an injunction or accept an undertaking, at the choice of the parties, that $5,000 be paid on or before 9 January 1997, and that further payments of $3,000 per month be paid on or before the first day of each succeeding month, the first payment to be made on 40 or before 1 February 1997. The moneys should be paid into a trust account to be designated by the parties in a draft. There should be liberty for agreed investment between the parties to be made with 50 respect to such funds. The monies in the trust account would abide the order of the Court in due course. The balance of the injunction should contain similar 8 60 ORDER -- 8 of 10 -- 020197 LH (Thomas J) conditions to those ordered by Justice Dowsett which will include access to the premises by Mr Adcock or his nominee manager, and to permit copies to be obtained of all relevant books of account of the Club. There should also be the restraints against dealing with 10 property other than in the ordinary course of trading. Now, I think that a manageable clause could be worked out between the parties in relation to notice, so far as the signing of cheques is concerned, and it would seem to me that you would need something in the nature of an appointment every second 20 day. Perhaps ten minutes of somebody's time would be necessary, but I would rather that the parties work out what they think is feasible so that people's time is not unnecessarily thrown away. As I have no conceptions as to the eventual merits, I would not be disposed to make an order for costs that favour one party unduly over the other. I will either order that costs be costs in the cause of each party or reserve them. HIS HONOUR: There should be liberty to apply. There will certainly be liberty to apply upon two clear days' notice to 30 40 the other party. 50 HIS HONOUR: I will certify for a speedy trial. 9 60 ORDER -- 9 of 10 -- 020197 LH (Thomas J) HIS HONOUR: I reserve costs of the consolidation summons. HIS HONOUR: Your client's costs are reserved, Mr Ryan. 10 10 20 30 40 50 ~ ORDER -- 10 of 10 --