Senworth Capital Pty Ltd v Galleria SUV Pty Ltd

The plaintiff commenced these proceedings by filing in court in the duty list on 12 August 2022 a summons with an attached schedule of the descriptions, registration, plate numbers and VINs of six luxury vehicles. The plaintiff claims to be the mortgagee of those vehicles under a Facility Agreement dated 18 March 2000 and a General Security Agreement of the same date. The defendant is the borrower under the Facility Agreement and the grantor under the General Security Agreement. The relief claimed by the plaintiff as mortgagee is as follows:

The plaintiff has not served the defendant. It is purposefully seeking the relief set out above, and particularly order 5 permitting entry onto premises of third parties who may have possession of any of the vehicles, by way of an ex parte application. This is in order to avoid giving advance notice that steps are being taken to recover the vehicles. The plaintiff has had difficulty identifying the locations or possible locations of the vehicles and it is concerned that advance notice may cause those in possession to remove and secret them.

Between 4 March and 4 May 2020 the plaintiff advanced to the defendant a total of $2,058,000 under the Facility Agreement. The defendant applied the loan funds to the purchase of vehicles which it proposed to resell and/or to lease to third parties. The principal of the defendant is Simon Wakim. He and his wife and another company that is owned by them, W & W Investment Group Pty Limited, were also parties to the Facility Agreement but their role is not presently relevant.

The Facility Agreement identified seven motor vehicles that were required to be stored at all times at premises nominated by the plaintiff. The Agreement provided that other vehicles, in substitution for those listed in the schedule, could be substituted as security, provided that the plaintiff should accept the substitution. Only two of the vehicles on the original schedule are now claimed by the plaintiff. The other four vehicles now claimed are said to have been substituted, although no documentation of that has been tendered.

The Facility Agreement defined a Security Interest as, amongst other things, any such interest as defined in the Personal Property Securities Act 2009 (Cth) (the "PPS Act"). The General Security Agreement, to which I will refer shortly, is a Security Interest within the meaning of that Act. By cl 3 of the Facility Agreement, and item 10 of schedule 1 the purpose of the loan was stated to be to assist the defendant in the operation of its car dealership, which was conducted at 14 Commercial Road Kingsgrove. The term of the loan was four months from the date of the initial advance, subject to extension.

By cl 5.1 the defendant was required to apply the proceeds of sale of any vehicle in reduction of the debt unless the plaintiff elected in its absolute discretion to accept instead a substitute vehicle as security. The substitution of another vehicle as security would be in lieu of partial reduction of the loan amount.

By cl 9.4 of the Facility Agreement the following was provided,

The Facility Agreement specified many Events of Default. There is prima facie evidence before the Court that a number of such events have occurred, including non-payment of interest and principal and failure to keep the vehicles at the nominated premises. On 31 October 2020 written notice of default was given to the defendant and to W & W Investments Group Pty Ltd and to Mr and Mr Wakim as guarantors. The notices informed the recipients that the plaintiff would proceed to enforce its security over the vehicles.

The only parties to the Guarantee Security Agreement are the plaintiff as mortgagee and the defendant as mortgagor. The property over which the security is granted is the whole of the undertaking property and assets of the defendant, including, "present and after acquired property", and, "any serial numbered goods". The secured money is defined in a widely drafted term that is effective to encompass all money owed under the Facility Agreement. The Guarantee Security Agreement defines Transaction Documents as including the Facility Agreement. Clause 2.1 is in these terms,

This General Security Agreement has been registered under the provisions of the PPS Act. The dates of registration with respect to the six vehicles now in question are respectively 4 March, 7 July, 17 September, 21 September and 23 November 2020 and 12 March 2021. The plaintiff exercised a power conferred by the General Security Agreement on 3 June 2021 to appoint receivers to the secured property. Those receivers were not able to locate or recover the vehicles.

Subsequently the plaintiff's repossession agent has become aware of the physical locations where each of the vehicles can be found, being addresses of third parties who are using the vehicles. It has been ascertained by search of the records of Transport for NSW that all of the vehicles are registered and their current registration plate numbers are known. The plaintiff has commenced a separate proceeding for preliminary discovery against Transport for NSW to obtain the names and confirm the residential addresses of the persons to whom the vehicles are registered. The names of those persons are not presently known to the plaintiff. The preliminary discovery proceeding is next listed before the Court on 23 August 2022.

I digress to observe that there would be other more direct ways of identifying the present users or persons in possession of each of the vehicles. Means available would include observations by the plaintiff's inquiry agent of the premises where the vehicles are customarily parked, observations of occupants and drivers of the vehicles entering such premises, real property searches of those locations to identify the registered proprietors or lessees, discrete enquiries amongst neighbours to identify the persons concerned, and so on. All such enquiries could feasibly be undertaken without alerting the persons who are in possession of the vehicles.

The plaintiff's contractual rights under cl 9.4(b) of the Facility Agreement may be regarded as a licence to go upon the property of the defendant for the purpose of seizing the vehicles that are the subject to the General Security Agreement, so that the plaintiff's entry for that purpose would not be a trespass. In order to enter upon the lands of third parties and to seize the vehicles from their possession, the plaintiff relies upon ss 20 and 123 of the PPS Act. It seeks the orders that I have quoted above from the summons in order to ensure that it will not infringe the law by doing so. The relevant parts of ss 20 and 123 are as follows:

The plaintiff relies upon three judicial decisions that are said to support the making of orders 4 and 5 authorising the plaintiff as security holder to enter upon the property of presently unnamed third parties and take from them possession of the mortgaged goods – that is the "collateral", as such goods are known under the PPS Act. The decisions to which I have been referred are discussed below. I do not find in them authority for making orders that would empower the plaintiff to enter upon third parties’ land and seize vehicles in the circumstances of this case. Assuming that the Court has power to make orders of that nature, I would not exercise it ex parte in proceedings to which the third parties have not been joined as defendants and in circumstances where no contact has been made with them. No evidence has been adduced of the circumstances or transactions whereby those third parties obtained their possession. It is not known to the plaintiff or to the Court what degree of resistance those third parties may offer or on what grounds, if the plaintiff or its agents should seek to dispossess them of the vehicles.

In Bank of Queensland Limited v Star Trek [2019] NSWSC 1712 the defendant ("Star Trek") had granted to the bank a security interest over certain fixtures, fittings and equipment used in Star Trek's business. The security was registered under the PPS Act. It was granted to secure Star Trek's obligations under lease finance that the Bank had provided for the acquisition of the goods. Mr and Mrs Papadeas were guarantors. Star Trek defaulted on its financial obligations. Mr and Mrs Papadeas were made bankrupt and the secured goods remained on land that was occupied by them, the title to which became vested in their trustee in bankruptcy.

Pursuant to the security agreement to which Star Trek and Mr and Mrs Papadeas were parties, the Bank had a contractual right to enter on the subject land in order to effect repossession. For abundant caution the Bank sought an order empowering it to do so. Both Star Trek and the trustee in bankruptcy were defendants to the proceedings and were served but did not appear. Adamson J held as follows;

That decision supports of the existence of a power in the Court to make a declaration of entitlement to seize secured property thereby effectively replicating s 123 of the PPS Act. Adamson J made a declaration to that effect and a further declaration of entitlement to enter the property and to execute the power of seizure. The declarations were accompanied by the following orders:

Notably those orders were made against and directed to the defendants in the proceedings, requiring them to grant entry (order 3) and not to impede access (order 4). That is no precedent for the form of order that is sought by the plaintiff in the present case, which, if made, would take the form of a general authority granted to the plaintiff to enter unspecified premises owned and occupied by unspecified persons. Order 5 as sought by the plaintiff is not directed to named occupiers of any particular premises or to named possessors of the vehicles , to do or to refrain from doing any act.

Because the parties adversely affected by the orders made in Bank of Queensland Ltd v Star Trek Pty Limited were joined in the proceedings and had an opportunity to be heard, the decision did not deal with the discretionary considerations that are engaged in the present case, where orders are sought ex parte, and where those who may be affected by intrusion upon quiet possession of land and by dispossession of personal property are not named as parties to the proceedings.

The plaintiff cited Riseley v Toyota Finance Australia Pty Ltd [2021] FCA 1566 in which the respondent ("Toyota") loaned $57,000 to Mr and Mrs Riseley on security of a Hilux vehicle. That security was registered under the PPS Act. Mr and Mrs Riseley were guarantors of the loan. Their company defaulted and it was deregistered. Mr and Mrs Riseley retained possession of the Hilux vehicle. They were served with process issued out of the Federal Circuit Court in which Toyota sought orders as follows:

Orders were made as sought after a hearing at first instance at which Mr Riseley appeared and represented his wife also. On an application by which Mr and Mrs Riseley sought a stay of those orders pending the hearing of an appeal, Besanko J held as follows:

Like the decision in Bank of Queensland Ltd v Star Trek Pty Ltd, this case determined nothing about the existence of a power to make an ex parte order conferring upon a plaintiff the right to enter premises of third parties who are not defendants to the proceedings. Order 2(b) made in the Federal Circuit Court went beyond merely requiring Mr and Mrs Riseley, as the persons in possession of the Hilux vehicle, to permit Toyota to enter land under their control and to seize movable property. The order went beyond the form and substance of the ancillary orders that had been made in Bank of Queensland Ltd v Star Trek Pty Ltd. However, Besanko J founded his decision on the precedent of Adamson J's orders and his Honour's judgment does not support a wider power to grant a plaintiff authority to commit what would otherwise be a series of trespasses without the affected parties being joined as defendants and having an opportunity to be heard before the grant of such a general licence to trespass.

The third case relied upon the plaintiff is Re Empire Plant Hire Pty Ltd (in liq) [2021] VSC 549, a decision of Gardiner AsJ. A company referred to as CC Investments had taken security over vehicles, forklifts, office equipment, construction equipment and construction materials in connection with the provision of finance to Empire Plant Hire Pty Ltd. The security was registered under the PPS Act. The security goods were located on construction sites at 13 separate locations around the Melbourne metropolitan area.

CC Investments had approached the third parties who were in control of those sites and they had informed CC Investments that it would not be granted access to remove the items. The liquidator of Empire Plant Hire Pty Ltd had disclaimed the secured property as onerous, presumably because of its encumbrance by the security. Gardiner AsJ made an order vesting the secured property in CC Investments pursuant to s 568F of the Corporations Act 2001 (Cth). His Honour appointed a receiver to the property and made an order in the following terms,

I do not consider that this Court has power to order a unilateral licence to enter upon private lands such as that granted by Gardiner AsJ, as opposed to making an order directed to the occupier of specified land to permit and not to impede the entry of a plaintiff claiming and seeking to repossess secured goods. Even if the plaintiff in the present proceedings were to join as defendants the occupiers of the properties where the vehicles are now kept and the persons presently in possession of those vehicles, if they be different, I would not, on the material before me, make ex parte orders in the nature of a permission for the plaintiff to enter the lands and seize the property. I would consider an order of that type to carry with it a very high risk that a breach of the peace would result and an equally high risk that rights of position would be interfered with, where such possession may, after hearing, prove to be defensible on the part of the third parties concerned.

Not having heard any of those parties who presently hold the six vehicles in question, I do not know if any of them have good grounds for contesting that the vehicles have been properly substituted as security under the Facility Agreement and General Security Agreement. I do not know if any of those persons have any other ground upon which they may contest the efficacy of the plaintiff's security or the registration of the security.

To make orders of the type sought ex parte would potentially lead to a very aggravated contest over rights of quiet enjoyment of real property and physical possession of movable property, all of this on the basis of a hearing in which the affected parties are not joined, let alone given an opportunity to be heard.

In order to avert the risk perceived by the plaintiff that the vehicles may be relocated and disposed of if the plaintiff should signal in advance its attempt to recover them, it appears to me that the plaintiff could take the following steps:

I have outlined that alternative course because the availability of it to the plaintiff is another significant factor, in my view, against the Court exercising a discretion to make ex parte orders of the type sought in the summons. However, in my view, even before one comes to the question of discretion, on the authorities that have been cited it does not appear that there is power to make orders in the nature of a unilateral licence to the plaintiff, as opposed to orders against individual possessors of property directed to facilitating the implementation or execution of powers under s 123 of the PPS Act.

The authorities cited by Ms Keynes of counsel for the plaintiff appear to be all of the decisions in Australian jurisdictions that have considered these provisions of the PPS Act. Ms Keynes' researches have been thorough and I have found nothing further that would throw any light on the position. Everything that could be said in favour of the orders that the plaintiff seeks has been put before the Court on the application but I am not satisfied that relief of the type that is sought can properly be granted in the proceedings as presently constituted. For that reason the interlocutory application for orders 4-6 in the summons, as claimed ex parte, is dismissed.