Land and Enviro Corp v HHT Huntley Heritage Pty Ltd

MEAGHER JA: In this appeal proceeding Mr Mateljan, who describes himself as “controller” of the appellant, Land Enviro Corp Pty Ltd (in liq) (LEC) seeks for and on its behalf to set aside the Registrar’s order of 22 June 2015 that LEC’s appeal be dismissed under Uniform Civil Procedure Rules 2005 (UCPR) r 13.6. He also seeks further directions as to the conduct of LEC’s appeal. Mr Mateljan’s motion, as controller of LEC, was returnable on 29 August 2016. The Registrar declined to make the orders sought and referred the matter for the making of further directions, if considered necessary.

In the circumstances described below I make the following further directions with respect to the resolution of Mr Mateljan’s motion filed 23 August 2016:

The underlying equity proceedings, in which the orders sought to be appealed from were made, were brought by LEC, Mr & Mrs Zdrilic and Amy Holdings Pty Ltd. As is noted in this Court’s judgment in Mateljan v HTT Huntley Heritage Pty Ltd [2016] NSWCA 20 (Gleeson, Leeming JJA and Emmett AJA) at [6], Mr & Mrs Zdrilic are both now bankrupts and Amy Holdings and LEC are in liquidation. The appeal, insofar as Mr & Mrs Zdrilic are concerned, has been discontinued by their trustee, and on 15 June 2015 the appeal by Amy Holdings was dismissed by the Registrar under UCPR r 13.6.

Mr Zdrilic is Mr Mateljan’s brother-in-law. By its earlier judgment this Court dismissed Mr Mateljan’s claim to be substituted for LEC as appellant in the appeal proceedings on the basis that he had become entitled, by way of assignment from LEC, to the causes of action which were the subject of the underlying equity proceedings and the appeal.

The “mechanism” of that asserted assignment is described in that judgment at [7]-[11]. Mr & Mrs Zdrilic as chargees had the benefit of a fixed and floating charge granted by LEC by deed dated 19 June 1998. That charge secured advances made by Mr & Mrs Zdrilic to LEC in accordance with a deed of loan and guarantee and indemnity dated 19 June 1998. Mr & Mrs Zdrilic were made bankrupt on 27 May 2015, having committed an act of bankruptcy on 18 March 2014. On 25 May 2015 they purported to appoint a Mr Iannuzzi as receiver and manager of LEC pursuant to the charge. On the same day Mr Iannuzzi purported to assign on behalf of LEC the causes of action to Mr Mateljan. The causes of action assigned were defined as:

In response to Mr Mateljan’s application to be substituted as appellant, the respondent in the appeal HTT Huntley Heritage Pty Ltd (HTT), contended that Mr & Mrs Zdrilic did not have power to appoint a receiver of LEC because as at 25 May 2015 all of their assets, including any power to do so, were vested in their trustee in bankruptcy; that if the receiver was validly appointed, he lacked the power to cause LEC to make such an assignment; and that, in any event, the relevant causes of action were incapable of being assigned. This Court upheld the first of these contentions (at [28]-[31]), and did not decide the second ([32]-[34]) or the third ([35]-[43]).

Mr Mateljan’s current application is brought purportedly as “controller” of LEC. That description, when used “in relation to property of a corporation” is defined in s 9 of the Corporations Act 2001 (Cth), to mean:

Mr Mateljan does not contend that he is or has been appointed as a receiver, or receiver and manager, of LEC’s property. Nor could he have been so appointed. Section 418 of the Corporations Act provides that a person is not qualified to be appointed, and must not act as a receiver of property of a corporation if the person is a mortgagee of the property of the corporation; a director of the corporation; or is not a registered liquidator. Mr Mateljan does not answer this last description.

Accordingly Mr Mateljan must be taken to be maintaining that he is in “possession, or has control” of property of LEC for the purpose of enforcing the charge. That position is said to arise in the following circumstances.

On 26 July 2016 the trustee of the bankrupt estates of Mr & Mrs Zdrilic, Mr Leroy, purported to assign to Mr Mateljan:

The LEC Debt is defined as an amount of $2 million plus interest owed by LEC to Mr & Mrs Zdrilic. The Charge is the fixed and floating charge granted by LEC and dated 19 June 1998.

By a Deed of Appointment of Controller dated 12 August 2016, Mr Mateljan as assignee of the Charge and LEC Debt, purported to appoint himself as “controller” of the following property of LEC:

That deed of appointment purports to authorise Mr Mateljan in his capacity as controller “to exercise all the powers, authorities and discretions of a controller” of the Secured Party contained in the Charge (cl 1). The reference to “Secured Party” is to Mr Mateljan as assignee of the charge. It is also declared (cl 4) that “to the full extent permitted by law the Controller shall be and act as the agent of the Grantor and otherwise the Controller shall be the agent of Secured Party”. The “Grantor” referred to is LEC.

Assuming the trustee’s assignment of the Debt and Charge to Mr Mateljan is valid, difficulties arise in relation to his purported appointment as controller and, more relevantly, his authority to conduct and maintain the appeal proceedings for an on behalf of LEC. There are no powers, authorities or discretions of a controller described in the deed of charge. The definition of “controller” in the Corporations Act, excluding someone who is a receiver, or receiver and manager, of such property, describes “anyone else who … is in possession, or has control, of [property of the corporation] for the purpose of enforcing a charge”. Clause 4 purports to appoint Mr Mateljan as agent for himself, in his capacity as chargee. There are two difficulties at this point. The first is that agency describes a relationship between two persons. In other words, you cannot act as agent for yourself. The second is that the appointment of someone as an agent of the chargee for the purpose of exercising a power of the chargee would not of itself constitute that person as a controller.

The deed of charge provides that Mr & Mrs Zdrilic may enforce the charge by taking certain action as described in cl 19, or by appointing a receiver in accordance with cl 21. There is no reference in the deed to the appointment of any person as a controller. Nor is there any description of the powers of anyone given that title.

Clause 19 relevantly provides:

It may be that Mr Mateljan contends that by cl 1 of the deed of appointment he has purported to delegate his power as chargee under the charge to enter into or seize or take possession of property of LEC. However such a delegation to himself would be of no effect and he would continue to exercise any such power as chargee. If he took possession of some property of LEC such as a motor vehicle or other chattel for the purpose of enforcing the charge he may thereupon have become a “controller” of the property.

Here however Mr Mateljan on 12 August 2016 wrote to the liquidator of LEC, Mr Whitton, advising:

The property described in the schedule to that letter is:

Finally, in relation to the conduct of the appeal proceedings, Mr Mateljan says that he has been unable to obtain legal representation or funding on behalf of LEC and that he has no ability to conduct the proceedings on its behalf. Accordingly he states (in his affidavit of 22 August 2016) that he has “given authority” to Mr Zdrilic to conduct the appeal proceedings, and seeks the leave of the Court to have Mr Zdrilic conduct the appeal proceedings on behalf of LEC.

Relevantly to this application, UCPR r 7.1 provides in relation to proceedings commenced or carried on by a company:

Where a director of a corporation purports to commence or carry on proceedings for and in the name of a company, an affidavit must be filed as to his or her authority to act in that capacity. Mr Mateljan is not a party to the appeal proceedings. Nor is he a director of LEC.

The basis for Mr Mateljan’s asserted authority to carry on the proceedings in the name of and on behalf of LEC would appear to depend on his assertion that he is a “controller” of the relevant property of LEC (the causes of action and other rights described in [19] above), as distinct from a receiver, or receiver and manager of that property. To be a controller of that property he must be lawfully in possession of the property for the purpose of enforcing the charge.

The causes of action asserted in the equity proceedings were a claim in respect of misleading and deceptive conduct giving rise to loss, claims for rescission of two agreements and the setting aside of Court orders, and claims for fraudulent or neglect misstatement giving rise to loss. Each claim describes a right of LEC that may only be enforced by the taking of legal proceedings as distinct from the taking of physical possession. It is the very essence of those legal or equitable claims that they cannot be enforced by the taking of possession: see generally JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (5th ed 2014, LexisNexis Butterworths) at [6-005].

In these circumstances the matters which must be addressed in Mr Mateljan’s application to reinstate LEC’s appeal and to have Mr Zdrilic appear for LEC include those in paras (a) to (d) of direction 1 in [2] above.