ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd (Receivers & Liquidators Appointed) [1990] QSC 79

1:1 l'I :ii i I ii I I ,I I,, i! ii 'I , I ·.• . 10 20 30 40 so 60 IN THE SUPREME COURT OF QUEENSLAND CHAMBERS No. 316 of 1990 REVISED COPIES -ISSUED Courl R€porting Bureau BEFORE SENIOR MASTER EORTON Q.C. BRISBANE, 23 MARCH 1990 Dated(,2 I 3 .! 70 _ BETWEEN": (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter,Court Reporting Bureau.) A.N.Z. EXECUTORS AND TRUSTEE COMPANY LIMITED -and- QINTEX AUSTRALIA LIMITED (RECEIVERS AND LIQUIDATORS APPOINTED) JUDGMENT Plaintiff Defendant HIS HONOUR: This is an application for summary judgment by the plaintiff with respect to a claim for some $100,460,000 by way of ,,principal, together with interest in the sum of $9,953,478.59 calculated as at today. The relationship between the parties ei.i.erges from the special endorsement on the .. ·. writ . It is alleged that the plaintiff as a trustee company was created trustee pursuant to three deeds dated respectiv~ly 1 July 1988, 1 July 1988 and 15 February 1989. These deeds were between the plaintiff and the defendant for the issue of certain notes to the values respectively of $85,000,000 being Q.A.L. 1988, a convertible note D; $85,000,000 referred to as Q.A.L. floating rate D; and $15,500,000 referred to as the Q.A.L. 1989 deed. It would appear that the full amount authorised pursuant to the second deed was not -subscribed and in fact .a sum of -Govt. Printer, Old. 1 10 20 30 40 so 60 -- 1 of 7 -- ! ' r 10 20 30 40 $15,600,000 only was subscribed. It is common ground that defaults ·have occurred under the respective deeds and Mr. Dutney, -as is his want, has very fairly 1 imi ted his argumE;nt to what he sees as the only ground of the defence open to his client. I have already ruled with respect to the second deed that the exemption to the prohibition contained in section 5.4 of th-e Companies Code applies to_ the investors with respect to that deed, namely the Bank of New Zealand Security Pacific and Eagle Star Trustees. The approach which a court must take with respect to sections such as 5.4B is one which in my view must allow 'a sensible and commonsense operation of the Companies Code. Was it the intention of the legislator in enacting 5.4B to protect financial institutions and trustee corporations who clearly,· during the normal course of their ac'tivities, or alternatively, as incidental to the normal course of their business activities, invested in shares or securitfes1 In fuy view that question must inevitably be answered in the negative, and accordingly, with respect to the se~ond 'deed, I ~,ill give·judgmerit for$15,600,000 together with inteiest pursriant to the deed totalling $2,156,830.32. With respect to the first and the third deed, it was conced~d by Mr. Lennon Q.C. that there is a serious question to be tried with respect to whether or not the investors or subscribers to those· notes fe-11 within 1 10 20 30 40 50 50 60 the exemptions contained in section 5.4 of the Code. However, he maintains that whether.or not such subscribers fell within . . ; ~ . . the exemption,_ there is still, as a point of construction of section 97_ pf t~e Cod~,. no seri~us question to be tried or case to be investigated; see Fancourt v. Mercantile Credits. -Govt. Printer, Old. 2 60 -- 2 of 7 -- 10 20 30 40 50 60 Section 97 provides as follows: "An invitation to the public to subscribe for or purchase debentures of a corporation or ~n offer to the public of debentures of a corporation for subscription or purchase, shall not be made by the corporation or by any other person unless - (a) a copy of a prospectus in relation to the invitation or offer has been registered by the Commission under this Act." It is common ground between the parties that no prospectus was registered. What, then, is the effect of this breach by the company, who, of course, is the defendant to the writ and the respondent to this application? Mr. Dutney submits, relying, as he must, on the authoritie contained in the New South Wales.Court of Appeal decision of Hurst v. Vestcorp (1988) 12 N.S.W.L.R. at 394, that the_ contract, as such, .was an illegal one and unenforceable.at the behest of either the wrongdoer (in terms of s.97 of the Code) or an innocent party. It is, of course, relevant to note that in HUrst's ~ase the New South Wales Court of Appeal was considering s.83 of the uniform legislation, which today is embodied substanti~lly in s.171 of the Code. It is· necessary to note furthe~ that. unlike s.83 of the uniform legislation or s.171 of the Code, s.97 has no corresponding saving provisions such as exist with respect to s .171 in the form of s .17 4 subs_. 2, which reads: "A persbn is not relieved from any liability to any hold of a prescribed interest by reason of any contravention or any failure to comply with, a provision of this division." I have been referred to the High Court decision of Yango Pastoral Co. Pty. Ltd. v. First Chicago Australia Limited reported in 139 C.L.R. 410, and a decision of Mr. Justice Young -{,ovt. Printer, Qld. 3 10 20 30 40 50 60 -- 3 of 7 -- 10 20 30 40 so 60 in the Corporate·Affairs·Commission (N.S.W.) v. Transphere Pty. Ltd. report~d in 13 A.C.L.R.· 187. t>,wt. Printer, Old. 4 10 20 30 40 so 60 -- 4 of 7 -- 10 20 30 40 50 60 It is clear in my view that each of the judges of the New South Wales Court of Appeal was extremely cautious to lay down, in holding in that case that the effect of a breach of s.83 of the uniform legislation by the company, led in that situation to a declaration of illegality and hence unenforceable· .only in the peculiar circumstances of that case. Mr. Justice McHugh, in particular, had this to say at p.442: "Unfortunately the text of the statute rarely provides direct assistance to the solution of the problem. Asa result the courts have invariably found the consequences of invalidating a contract to be the decisive consideration. If the purpose ·of the statutoryprohibition is the projection of a section of the public and the invalidation of a contract made in consequence of a breach of the prohibition will directly assist that purpose, the courts are more ready to conclude that the legislature intended that the contract should be unforceable. But if the consequences of invalidity will lead to injustice or absurdity or will penalise the innocent, the less likely it ~s that the courts will hold that the purpose of the legislation was to invalidate a contract made as a consequence of thebreach of the legislation. When one set of consequences points to the protection of the public or a section of the public and another set of consequences points to injustice or anomaly, the court must weigh the competing considerations and make a judgment as to what was the most likely purpose of the legislature. In Yango Pastoral Co. Pty. Ltd. v. First Chicago Australia Ltd, the High Court held that a breach of a section prohibiting a body corporate from carrying on any banking business without authority, did not invalidate a mortgage· and guarantees given to a company carrying on an unauthorised banking business even though the documents were executed to secure a loan made in the course of that business. The courts accepted that the section was designed for the protection of the public. But one consequence of invalidating all contracts of the . ,.: .banker would be to deny to innocent depositors the rightto reco~er moneys deposited." In other words, His Honour Mr. Justice McHugh, when construing the effects of s.83 of the uniform legislation had strong regard to the consequences of such a finding of illegality. This clearly follows the authority of the High Court in Yango's case and, indeed, His Honour cited, at p.442, 5 10 20 30 40 50 60 -- 5 of 7 -- 10 20 30 40 50 60 a passage from the decision of His Honour Mr. Justice Mason in Yango's case, whereupon the present Chief Justice had this to _say: " •.• the court will have regard not only to its language, which may or may not touch upon the question, but also to the scope and purpose of the statute from which inferences may be drawn as to the legislative intention regarding _the extent and the effect of the prohibition which the statute contains." In'Hurst's case His Honour Mr. Justice Mahoney, at p.429, clearly was influenced by the corresponding provision to s.174(2) of the Queensland Code, namely s.86(2). In my view, whilst construing s.83 of the uniform legislation to give both criminal and civil consequences to a breach thereof, the New South Wales court, independent of the operation of s.86 (2), clearly anticipated situations where a different construction might be led, where the initial construction would be such as to lead to substantial injustices between the parties as envisaged by the High Court in Yango Pastoral Co. Pty. Ltd. 10 20 30 Mr. Lennon of Queens Counsel, who appears for the plaintif, has also pointed out to me that here the issuing or offering of subscription by the company to members of the public outside the exemption contained in s.5(4) was not incidental to or an essential part of the contractual relationship as between the plaintiff and the defendant. In other wor.ds, to adopt Mr. Lennon's words, there is no section in the trust deed, or the trust deeds, on which the plaintiff presently sues which required, authorised or contemplated that in the issuing of the notes the company would breach the provisions of the Companies Code of Queensland. He has referred me to the decision of His Honour Mr. Justice Conriol ly, of this court-, -fn Lees and Flemming - -Govt. Printer ntd, 6 40 50 60 -- 6 of 7 -- ( _, 10 20 30 40 50 60 ,reported in (1980)· Qd.R.p.160, para. 5 of the headnote of which reads: " ... that the agreement between the plaintiff and the.· defendant being legal in its formation did not become illegal because, in the course of completion or performance, there was incidentally committed by one party a contravention of .the statute uncontemplated ±s involved when the agreement was made." Accordingly, therefore, I am satisfied that the deeds themselves did not contemplate, req~~re or envisa~e the commission of a breach of s.97 of the Companies Code and hence are enforceable at the suit 0£ the plaintiff, and further that even if an illegality is involved with respect to the first and third deed, this does not afford the defendant in this case a defence to the claim. Hence I am satisfied that there is no serious issue to be tried or investigated and that the matter is susceptible to a summary adjudication in Chambers. Having regard to the fact that I have indicated my intention to give judgment with respect to the claim brought under the second deed, I give judgment for the plaintiff against the.defendant in the sum of $100,460,000 together with interest calculated to today's date in the sum of $9,953,478.59, which sum of course includes the $15,600,000 and interest thereon which I have already alluded to, together with costs of and incidental to the action, including costs of this application and reserved costs, to be taxed. -<3ovt. Printer, Qld. 7 10 20 30 40 50 60 -- 7 of 7 --