Austral Mining Construction Pty Ltd, Re [1990] QSC 4 [1993] 1 Qd R 358

10 ) 30 IN THE SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION REVISED COPIES ISSUED l\ · Co'Jrt/Reporting Bureau i f)FJ'.~, ~ / .3 / O,o : ____________ _ 'SC-9 No. 1207 of 1989 BEFORE MR. JUSTICE MAC.KENZIE ,. BRISBANE, 1 FEBRUARY 1990 (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.) IN THE MATTER of The Rules of the Supreme Court 0.64 rrlB and lBE -and- IN THE MATTER of the Bills of Sale and Other Instruments Act1955-1987 -and- -IN THE MATTER of the Companies (Queensland) Code 1981 -and- IN THE MATTER of Bill of Sale No.86110 between Bauer Securities Pty. Ltd. and NZI CapitalCorporation Limited JUDGMENT (oo er- 10 20 30 40 40 50 60 HIS HONOUR: For reasons that I now publish, I think the applicant cqnnot succeed in this matter, and I dismiss the summons with costs. f\? -~ ·-Govt. Printer, Qld. 1 50 60 -- 1 of 17 -- ~ IN ()"1j OF THE SUPREME COURT QUEENSLAND O.S. No. 1207 of 1989 Before Mr Justice McPherson IN THE MATTER of The Rules of the Supreme Court 0.64 rr1B and 1BE - and - IN THE MATTER of the Bills of Sale and Other Instruments Act 1955-1987 - and - IN THE MATTER of the Companies (Queensland) Code 1981 - and - IN THE MATTER of Bill of Sale No. 86110 between BAUER SECURITIES PTY. LTD. and N.Z.I. CAPITAL CORPORATION LIMITED JUDGMENT - McPHERSON J. Delivered the First day of February 1990. CATCHWORDS: Companies - Debentures and Mortgages - Registration - Effect - Chattel bill of sale from company to single creditor - Registeredunder Division 9 of Code - Place of chattels not stated - Whether bill of sale a "debenture" - Companies (Queensland) Code, s. 211 ( 1), s. 211 ( 2) - Bills of Sale and Other Instruments Act 1955-1981, ss.6(1)(g), 19(1)(iii). Words and phrases - "Debenture" - meaning - whether security bill of sale a debenture. Counsel: Solicitors: Hearing dates: F.L. Harrison Q.C. with Mrs White for the Applicant R. Chesterman Q.C. with M. Eliadis for theRespondent Andersen & Co. for the Applicant Henderson Trout for the Respondent 14 December, 1989 -- 2 of 17 -- IN THE SUPREME COURT OF QUEENSLAND O.S. No. 1207 of 1989 IN THE MATTER of The Rules of the Supreme Court 0.64 rr1B and 1BE - and - IN THE MATTER of the Bills of Sale and Other Instruments Act 1955-1987 - and - IN THE MATTER of the Companies (Queensland) Code 1981 - and - IN THE MATTER of Bill of Sale No. 86110 between BAUER SECURITIES PTY. LTD. and N.Z.I. CAPITALCORPORATION LIMITED JUDGMENT - McPHERSON J. Delivered the First day of February 1990. In 1 986 Bauer Securities Pty. Ltd. ( "the company") as grantor executed a deed to which N. Z. I. Capital Corporation Limited as grantee was the only other party. The copy of the deed before me is undated but there is evidence that it was delivered on 6 May, 1986. rt records a request by the company to the grantee to provide to other named companies the finance referred to in a loan agreement dated 25 June, 1987 executed by those companies, which are described in the deed as "the loan debtor"; and it records the agreement of the grantee to provide it. After reciting a consideration comprising monies due or becoming due, owing, or payable by the gr an tor or the loan debtor, it proceeds to set out a series of covenants by the company. Clause 2 contains covenants to pay to the grantee the -- 3 of 17 -- 2 principal sum as defined and interest. As security therefor the company assigns to the grantee the items of plant and equipment described in the Schedule to the deed subject to the proviso for redemption contained in cl. 4 of the deed. The scheduled items include the two Nakayama cone crushers (items 5 and 6) that are the subject of these proceedings. In 1988 the company sold those two cone crushers to Austral Mining Corporation ("Austral"), which is the applicant here, for $170,000.00 each. After carrying out some work on them, they were sold to Sogelease Australia Ltd. for $190,000.00. The company and other companies in the group of which it is a member are now insolvent and in liquidation or receivership. If the security conferred by the deed in favour of the grantee is valid, Austral had no title in the crushers that it could pass to Sogelease, and will be liable to the latter in damages. The deed is in the form commonly adopted in the case of a conditional or "security" bill of sale, which means that it resembles an "old system" mortgage of land involving a transfer of the title to the crushers subject to a proviso for redemption. Searches show that it has not been registered under the provisions of the Bills of Sale and Other Instruments Act 1955-1981 ("the Act"). However, particulars of the charge conferred by the deed were lodged in the Townsville office of the Corporate Affairs Commissioner and entered on the register of company charges pursuant to s.203 of the Companies (Queensland) Code ("the Code"), and a certificate to that effect has issued from the Commission under s. 21 0. The bill of sale is thus registered under Division 9 of the Code. The question before me is whether the security conferred by the bill of sale constituted by the deed of 6 May 1986 is valid. -- 4 of 17 -- 3 The ground of invalidity advanced by Mr Harrison Q. C. , who appears for the applicant Austral, is that the bill of sale is within the meaning of the Act an "instrument" and that it does not contain the description required by s. 19 ( 1 ) (iii) of that Act; that is: "(iii) A description of the place, by such mode as to be reasonably sufficient of identification, where such chattels are situated or intended to be situated at the time of execution ... " The evidence is that on 6 May, 1986 the cone crushers were at the premises of Austral at Boundary Road, Archerfield; but that place, or a description of it, is not contained in the bill of sale. The question thus is whether, assuming the deed or bill of sale to be an "instrument" as defined in the Act, the foregoing omission has the consequence of invalidating the security conferred by it as against a person like Austral that is not a party to the deed. In ex parte Esanda Limited [1977] Qd.R. 162 E.S. Williams J. held that failure to comply with the requirements of s.19(1)(iii) invalidated a bill of sale notwithstanding its registration under the Act. To the contrary effect is the decision of Dunn J. in ex parte Citicorp Australia Limited [1983] 1 Qd.R. 509; but in Olsen v. General Credits Limited [1985] 2 Qd.R. 506 Moynihan J. preferred the earlier decision, as did I in ex parte Dalgety Farmers Limited [1987] 2 Qd.R. 481. My decision was approved, although on a different point by the Full Court in Re Mercantile Credits Limited [1989] 1 Qd. R. 305. On behalf of the respondent grantee before me, Mr Chesterman Q. C. did not challenge the correctness of this line of decisions. Instead, he submitted that the point relied -- 5 of 17 -- 4 on by Mr Harrison was taken care of by s.211(2) of the Code. So far as material, it provides that where: II (a) [an] assignment registrable as a bill the Bills of Sale and 1955; by a company is of sale under Part II of Other Instruments Act of (b) no provision of that Act relating to priorities applies to or in relation to the ... assignment (c) the ... assignment Division ... is registered under this the ... assignment is, subject to paragraph 1(b), as valid and effectual as if it had been duly registered as a bill of sale under The Bills of Sale and Other Instruments Act of 1955." There was some debate about the meaning of s.211(2)(a) of the word "registrable" in the context of the Act. The provisions of the Act that bear directly upon the matter of registration or registrability are contained in Part II of that Act. They are surprisingly reticent about what may be registered. Section 19, which is the provision that prescribes the required particulars or contents of the bill of sale or other instrument, is found in Part III and not Part II of the Act. This implies that satisfying the requirements of s. 19 is not a prerequisite to registration or registrabili ty under the Act. Even if those requirements are not complied with an instrument is capable of being a "bill of sale" within the terms of the Act. In this and the other cases to which I have referred, the bill of sale or other instrument has in fact been registered notwithstanding its shortcomings under s.19 of the Act. It does, I consider, remain "registrable" under Part II of the Act even if, because of its defects, it may be of limited effect or invalid as a security against persons who are not parties to it. -- 6 of 17 -- 5 For the respondent, Mr Chesterman Q.C. himself advanced this view of the matter. He, however, submitted that the concluding words of s.211(2) meant that, having been registered under Di vision 9 of the Code, the deed or the assignment it purported to effect was valid and effectual. But the consequence imparted by the final words of s. 211 ( 2) is not expressed in quite such broad and general terms. What those words say is that the assignment is as valid and effectual "as if it had been duly registered under" the Bills of Sale Act. That it does not contain the descriptive particulars of place in accordance with the requirements of s.19(1)(iii) has the consequence that the deed if registered under that Act as a bill of sale possesses as an assignment only the validity or effect ascribed to it by decisions such as ex parte Dalgety Farmers Limited [1987] 2 Qd.R. 481. According to those decisions it is valid as a security only inter partes and not as against a person like the applicant Austral. Registration of the deed under Di vision 9 does not add to or improve its validity or effect but gives it the same efficacy as an assignment, and no more than, it would have derived from registration under the Act. For my part I cannot see any escape from this reasoning. However, Mr Harrison Q.C. also referred me to the provisions of s. 21 ·1 ( 1 ) of the Code. provides as follows: Stripped of inessential matter, it "211 (1) Where a notice in relation to a charge was or is required to be lodged with the Commission under this Division (a) the charge is not required to be registered under the provisions of The Bills of Sale or Other Instruments Act of 1955 ... ; -- 7 of 17 -- 6 (b) no provision of that Act relating to priorities applies to or in relation to the charge; and (c) a failure to register the charge under that Act does not affect the validity, or limit the effect, of the charge." The expression "charge" is very broadly defined in s.5(1) of the Code to mean "a charge created in any way", and, specifically, to include a mortgage. The word mortgage is not defined but it plainly includes a conditional or "security" bill of sale or chattel mortgage like that given to the respondent grantee by the deed of 6 May, 1986. This is confirmed in s.200(1), which provides that the provisions of Division 9 of the Code requiring the giving of notice in relation to, the registration of, and the priorities of charges, apply to and in relation to certain specified charges on property of a company. Those charges by s. 2 0 0 ( 1 ) ( d) include II a charge on a personal chattel 11 , which, according to s.200(3) refers to a charge on "any article capable of complete transfer by delivery." That, of course, describes the cone crushers in this case. Being a charge on property of the company .in this case, s.201 required that notice of the charge created by the deed given on 6 May, 1986 be lodged with the Commission within 45 days, upon which event the Commission was required by s.203 to attend to its registration. This was, as I have said, carried out, and the charge has been duly registered. Section 211(1) states the effect of the requirement that notice in relation to the charge be lodged under Division 9. In that event: (a) the charge is not required to be registered under the provisions of the Bills of Sale Act; and (c) failure to register the charge under that Act does not affect the validity or limit the effect of the charge. Section 211(1)(b) -- 8 of 17 -- 7 is the remaining paragraph of the subsection and is the only provision of any relevance here. It says that no provision of the Bills of Sale Act "relating to priorities applies to or in relation to the charge." The provisions of that Act to which s. 211 ( 1) ( b) of the Code plainly intends to refer are those contained in s.7 of the Act and in particular s.7(2)(b). It provides that an instrument registered under the Act "shall in respect of the chattels comprised therein or subject thereto be entitled to priority as regards the title to or right to the possession of such chattels, according to the time of its registration." The operation of this provision is not confined to priority as between registered assignments by way of security of a chattel but has been held to extend to the matter of priority between such an assignment and an outright assignment or transfer of the same chattel. See Permanent Finance Corporation Limited v. Tornabene [1968] Qd.R. 236, 243. The effect of s.211(1)(b) of the Code therefore is to exclude the application of the priority provisions of s.7 of the Act in relation to a charge, like the bill of sale constituted by the deed given by the company here, of which notice was required to be lodged under Di vision 9 of the Code. The question is whether s.19 of the Act can also be characterised as a "provision of that Act relating to priorities", so that its application is excluded by s.211 (1)(b) of the Code. I am of the opinion that s.19 is not such a provision of the Act. Although, as was held in Olsen v. General Credits Limited [1985] 2 Qd.R. 509 and ex parte Dalgety Farmers Limited [1987] 2 Qd.R. 481, non-compliance with the requirements of s. 1 9 may have consequences for the efficacy of the instrument as a security, I do not consider that it can properly be said to be a -- 9 of 17 -- 8 "provision" of the Act "relating to priori ties. 11 It is a provision of the Act relating to form and contents of a bill of sale or other instrument. Its requirements must be satisfied if the bill of sale or instrument is, even if registered, to be valid or efficacious otherwise than merely between the parties to it. In my opinion that does not within the meaning of s.211 (1)(b) of the Code represent a provision of the Act "relating to priorities." I do not recall Mr Chesterman Q.C. in the course of his submissions contending to the contrary. He relied, as I have said, upon the provisions of s.211(2) of the Code, as to which I have already stated my conclusions. If matters rested there the result in my opinion would be that the security conferred by the deed of 6 May, 1986 would, notwithstanding its registration under Division 9 of the Code, be valid and effectual only inter partes and not against the applicant Austral. However, the whole of Mr Harrison's submission depends in the end upon whether the deed is within the terms of s. 1 9 of the Act at all. In prescribing the contents and matters to be stated s. 19 speaks only of an "instrument." That term is defined in s.6(1) to mean, among other matters, "bills of sale". The expression "bill of sale" is in turn defined to include both bills of sale and assignments of chattels. These and other expressions in that definition are certainly wide enough to encompass the deed in this case; but the definition then proceeds to say that the term "bill of sale" does not include a number of specific matters. One of them is: " ( g) Debentures and interest coupons issued by any Government, any Crown Corporation or instrumentality or corporation or instrumentality representing the Crown, or any Local Authority, or any company or other corporate body;" -- 10 of 17 -- 9 The problem that thus presents itself is whether the deed in this case is excluded by paragraph (g) from those definitions of "bill of sale" and "instrument" in s.6(1) of the Act by reason of its being a debenture issued by any company or corporate body. It raises the much vexed questions of what a debenture is, and whether a debenture can be constituted by a company in favour of a single person only. Mr Harrison helpfully took me to the many decisions in which the meaning of the word "debenture" has been considered, together with the relevant statutory provisions on which those decisions were based. I have also read the most informative section (chap. 17) in Mr W.J. Gough's treatise Company Charges, at 271-278, and have examined what was said and decided on the subject by the New Zealand Court of Appeal in Automobile Association (Canterbury) Inc. v. Australasian Secured Deposits Limited [1973] 1 N.Z.L.R. 417, to which Mr Gough refers. None of the decisions there referred to is precisely in point but they or several of them throw some light on the matter of what is debenture. The subject was recently considered by the High Court in Handevel Pty. Ltd. v. Comptroller of Stamps (Victoria) (1985) 157 C.L.R. 177. After acknowledging that the term "debenture" defies accurate description, Mason, Deane, Dawson and Wilson JJ referred to two characteristics of a debenture, namely, that it is issued by a company, and that it acknowledges or creates a debt. Their Honours considered that a security on the assets of the company is not an essential characteristic of a debenture, and that it has never been suggested that a specific mortgage of land to secure a future obligation to purchase property amounts to a debenture, citing Knightsbridge Estates -- 11 of 17 -- 1 0 Trust Ltd. v. Byrne [1940] A.C. 613, 620, 629. The deed in the present case possesses the characteristic that it was given by a company, and that it acknowledges an indebtedness. It confers or sets out to confer a security on company property; it is an "old system" form of chattel mortgage, and is not a specific mortgage of land to secure a future obligation to purchase property. It is therefore capable of amounting to a debenture. The question remains whether it is. In Edmonds v. Elaina Furnaces Company (1887) 36 Ch.D. 215, a memorandum of agreement made between the company, of the first part, two individuals, of the second part, and certain debenture holders, of the third part, authorised the company to mortgage as security for loans to be made to the company in a certain amount, all or any of the debentures of the company belonging to the debenture holders. The question was whether this instrument required registration under the Bills of Sale Act 1882, or was within the exception introduced by s. 1 7 of that Act, which provided: "Nothing in this Act shall apply to any debentures issued by any mortgage, loan, or other incorporated company, and secured upon the capital stock or goods, chattels and effects of such a company." After remarking that "debenture" had not received any precise legal definition but that the term imported an acknowledgement of a debt, Chitty J. went on to observe that the deed included a charge on property to secure a loan; that it acknowledged an indebtedness; and that it gave to the lenders pari passu a security not upon any particular part of the property of the company, but upon all its undertaking, etc., of every kind. He held that it was a debenture within the exemption in s.17 of the Act, being, according to the headnote to the report of that -- 12 of 17 -- 11 case, a debenture in the "ordinary acceptation" of that term. In a passage that appears in Edmonds v. Elaina Furnaces Company (1887) 26 Ch.D. 215, at 221, Chitty J. says this: "I have seen debentures of various kinds and classes, and it is a mistake to say that to be debentures the instruments must be issued and numbered seriatim. I have even seen a single debenture issued to one man. There is nothing in the section requiring that more than one instrument should be issued. In this case the security is given to each one so that each shares pari passu with the other. No doubt as a rule the instruments called debentures are issued so that each person gets his own document and can deal with it separately. He has greater facility of dealing with it in the market than is afforded by this instrument, but it would be unreasonable to hold that because the obligation to pay and the security in favour of several persons is contained in one single document, therefore the instrument is not within the protection of the section. There would not be any principle in doing that. I do not see why a single debenture should not be given to half-a-dozen persons and still be a good debenture within the Act. In my opinion, therefore, this is a valid instrument." His Lordship adhered to these views in a case he decided in the same year of Levy v. Abercorris Slate and Slab Company (1887) 37 Ch.D. 260, 264: "I have myself known an instance of a single debenture payable to one individual. In my opinion a debenture means a document which either creates a debt or acknowledges it, and any document which fulfils either of these conditions is a 'debenture.' I cannot find any precise legal definition of the term, it is not either in law or commerce a strictly technical term, or what is called a term of art. It must be 'issued,' but 'issued' is not a technical term, it is a mercantile term well understood; 'issue' here means the delivery over by the company to the person who has the charge; as to what 'company' means I have already said it must be by 'an incorporated company,' and it must be secured on 'the goods, chattels and effects' of the company. Having thus gone through the section once again, I find I cannot add anything further on this point to what I have already stated in the case of Edmonds v. Elaina Furnaces Company." There the instrument, which was held to be a "debenture" within s. 1 7 of the Act of 1882, was a written agreement between a company and the plaintiff, by which the company agreed to repay -- 13 of 17 -- 12 to the plaintiff a sum of money with interest, charged various specified hereditaments with repayment of the sum, and agreed when called upon to issue debentures to the extent of that sum secured over all the property of the company. Unlike the instrument in Edmonds v. Blaina Furnaces Company, the document in the later case did not describe itself as a debenture. These decisions were referred to by Richmond J. in giving the judgment of the Court of Appeal in Automobile Association (Canterbury) Inc. v. Australasian Secured Deposits Limited [1973] 1 N.Z.L.R. 417. The instruments there in question were contract notes signed by the company, certificates for Government or Local Authority stock, and unregistered transfers thereof, to secure repayment of deposits made by the Association to the company. The Court held that these documents did not amount to "debentures 11 within the terms of s.102(2) (a) of the Companies Act 1955 (N.Z.) requiring registration of a charge for the purpose of securing "any issue of debentures. 11 His Honour distinguished the two decisions of Chitty J. because of the particular provisions of s. 1 7 of the Bills of Sale Act 1 882 (Eng.), laying emphasis upon the use of the word "issue 11 of debentures in that context. He pointed out that, although when used as a verb, the word was capable as Chitty J. had said of meaning simply 11 deliver 11 , its use as a noun in s.102(2)(a) of the Companies Act made that meaning inappropriate. referred to in s.102(2)(a) was not given to secure The charge the act of issuing a debenture delivered or handed over but to secure the debenture itself. There were historical antecedents to the legislation in New Zealand that influenced Richmond J. in arriving at the conclusion he did. There is also a legislative history to the -- 14 of 17 -- 13 English decisions on the subject of whether or not a company debenture was registrable as a bill of sale. It is examined in detail by Lloyd J. in N.V. Slavenburg's Bank v. Intercontinental Resources Ltd. [1980] 1 W.L.R. 1076, 1094-1099, from which it is, as Mr Harrison submitted, right to say that some English decisions in the past have been influenced by circumstances that are not to be found in the current Bills of Sale legislation in Queensland. See particularly [1980] 1 W.L.R. 1076, 1095D-F. On the other hand, what I have quoted from the judgments of Chitty J. was spoken without reference to the particular terms of the English legislation but proceeded from the extensive experience of the subject which that learned judge possessed. In the end, I am disposed to the view that the deed of 6 May, 1986 is a debenture according to the ordinary acceptation of that term as explained by Chitty J. in the extracts from the two cases referred to. It is an acknowledgement of indebtedness delivered by a company. It is secured, although admittedly by an assignment subject to redemption, or "old system" mortgage, of a number of chattels. It contains covenants to pay or repay loans made under the loan agreement dated 25 June, 1987; it is more than a mere promissory note. It was "issued" in the sense of being delivered as a deed on 6 May, 1986. It is, I think, fairly capable of being described as a debenture even though it was delivered to a single person, meaning the respondent. I therefore hold that it is a debenture. That leaves for consideration the question whether it is a "debenture" within the meaning of the exemption or exception in para. ( g) of the definition of "bill of sale" in s. 6 ( 1 ) of the Act. It will be recalled that it speaks of "debentures and interest coupons issued by ... any company or other corporate -- 15 of 17 -- 14 body." The collocation is admittedly suggestive of something more like an "ordinary" debenture than of a mortgage of chattels. The draftsman of the Queensland Bills of Sale Act was, however, prone to adopting the plural form of nouns he used in the definitions in s.6(1) of that Act: see, for example the list of i terns in the definition of "bill of sale"; and also "book debts", "chattels", and so on, in that subsection. The use of the plural "debentures" in para. (g) is therefore of less moment here than it was in the context of the phrase considered in the New Zealand case (as to which see [1973] 1 N.Z.L.R. 417, 424. 40-45); and it is not an instance like that, in which the word "issued" cannot fairly be read to mean "delivered". In all the circumstances I am persuaded that the deed in question falls within para. (g) of the exemption or exceptions from the definition of "bill of sale" in s.6(1). It is consequently not within the definition in s. 6 ( 1 ) of "instruments". For that reason the requirements of s.19 of the Act which are imposed on "every instrument" have no application to the deed, and it is not infected with the form of invalidity exemplified in ex parte Dalgety Farmers Limited [1987] 2 Qd.R. 481, or by the statutory retention of that conception implicit in the final sentence of s.211 (2) of the Code. Indeed, although the point was not advanced by Mr Chesterman Q.C., it must be doubtful whether the assignment effected by the deeG is, as a "debenture" within para. (g) of the definition of bill of sale in s. 6 ( 1 ) of the Act, "registrable" under that Act so as to bring it within the terms of s.211(2)(a). Debentures are not "instruments" as defined and so do not appear to be registrable under Part II. -- 16 of 17 -- 15 It follows that the applicant is not entitled to the relief sought in the summons, which is that the title and the right to possession of Sogelease Australia Limited in respect of each of the two Nakayama cone crushers nos. 1058 and 1061 referred to in deed are not subject to the provisions of that deed or the security it creates. The summons should be dismissed with costs. -- 17 of 17 --