If you have obtained a judgment in your favour in an ACT Court or Tribunal with respect to a money order, you as the enforcement creditor will have various options to enforce that judgment in order to get paid.
If the judgment obtained by you is in the ACT Civil & Administrative Tribunal, you will first need to register this judgment in the ACT Magistrates Court in order for it to be enforceable. Once you obtain a Certificate of Registration of Enforceable Order and the accompanying Form 2.49 Notice about Court Order and Enforcement Options, you will have to serve these documents on the enforcement debtor and wait for 7 clear days after service is effected prior to commencing enforcement proceedings.
The Court Procedure Rules 2006 (ACT) (Rules) provide the relevant rules and procedures associated with the various enforcement mechanisms available to an enforcement creditor to enforce a judgment debt. We provide a brief summary below.
Enforcement Hearing Subpoena
This is a way for you, as the enforcement creditor, to gather information about the financial affairs of the enforcement debtor in order to determine how to enforce the judgment debt against them. The enforcement hearing subpoena compels the enforcement debtor to file a statement of financial position with the ACT Magistrates Court, along with the accompanying evidence, relating to the enforcement debtor’s assets and liabilities, source of income, etc.
At the enforcement hearing, you are able to orally examine the enforcement debtor about their affairs and seek a particular type of enforcement order against them. Upon review of the materials produced by the enforcement debtor and the submissions made by you, the Registrar is able to make an instalment order, a seizure and sale order or a general redirection order to recover the judgment debt.
If the enforcement debtor fails to appear at the enforcement hearing, you are also able to seek a warrant for their arrest and force them to appear before the Registrar to provide information about their financial affairs.
Please note that there are strict timeframes and requirements to comply with under the Rules regarding service and conduct money, in order for the enforcement hearing to be successful.
Earnings Redirection Order
If you are aware about the enforcement debtor’s employment, you are able to seek a garnishee of their wages. This process compels the enforcement debtor’s employer to make regular deductions of the enforcement debtor’s wages (no more than 20% after tax) and transfer those payments to you once the Registrar awards this order in your favour.
Here, you are also entitled to claim the filing fee relevant to this order along with the prescribed costs contained in Schedule 3 of the Rules.
General Redirection Order
This type of order enables you to seek a garnishee of the enforcement debtor’s bank account. Once the order gets served on the enforcement debtor’s bank, the bank is compelled to regularly deduct money from the enforcement debtor’s account towards the satisfaction of the judgment debt. Here, the Court may also redirect debts owed by a third party to the debtor.
Seizure and Sale Order
Applying for this order means that you are requesting a Sheriff’s Officer to attend the property of the enforcement debtor (as nominated by you in the application) and seize goods that are owned by the enforcement debtor so that they can be auctioned to recover the sum of the judgment debt. Please note that this does not include goods that are owned by another person or those which are leased or encumbered. If the Sheriff’s Officer is having difficulty entering the nominated property, they may apply to the Court to obtain consent for entry.
Once served with the seizure and sale order, the enforcement debtor may also apply to the Court to have the judgment debt paid in instalments. In this event, the matter gets listed before a Registrar where a decision is made upon consideration of the financial position of the enforcement debtor.
Here, you are also entitled to claim the filing fee and sheriff’s fee relevant to this order along with the prescribed costs contained in Schedule 3 of the Rules.
If the seizure and sale for personal property of the enforcement debtor is unsuccessful, you may then proceed to the ACT Supreme Court to commence enforcement proceedings for seizure and sale of real property owned by the enforcement debtor.
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A creditor-defeating disposition occurs when a company, who is being wound up, transfers property or other high value assets for much less than the current market value of those assets. Typically, these actions intend to hinder, prevent or cause significant delay to the company’s assets becoming available to meet creditor demands.
Where there is an identified creditor-defeating disposition, it may well be part of a broader process of illegal phoenixing. Essentially, this is the process of “rebirthing” a company whereby the company is stripped of its assets and those assets are transferred into a new entity, which hinders the process of liquidation and creditor demands.
Introduction of creditor-defeating dispositions in Australian law
As part of a widespread attempt to crack down on illegal phoenixing activity across Australia, the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2019 (Cth) has been slightly reformed as of February 2020. The aim of these reforms are to give liquidators in their capacity another avenue in pursuing assets.
A phoenixing task force has also highlighted the need for reform in order to target illegal phoenixing. As part of a force consisting of multiple federal, state and territory government agencies, it was demonstrated that illegal phoenixing poses an extreme threat to revenue, employee entitlements and overall, the integrity of the Australian Corporate system.
Breakdown of the new provisions
The abovementioned Treasury Laws Amendment Act amended elements of the Corporations Act 2009 (Cth) in creating a refreshed definition of creditor-defeating dispositions, outlining duties to prevent these dispositions, as well as providing remedies and increasing ASIC’s powers.
Definition of creditor-defeating dispositions
Pursuant to section 588FDB of the Corporations Act, a disposition of property is a creditor-defeating disposition if:
Duties of company officers
The Corporations Act sets out the following new duties to prevent creditor-defeating dispositions:
Remedies and ASIC’s powers
Should it be deemed that a creditor-defeating disposition has occurred, as well as the court deeming the disposition voidable, a range of remedies will be available to liquidators and creditors including the recovery of property, damages in restitution and monetary compensation.
Additionally, the reforms have handed further powers to ASIC’s ability in combating illegal phoenixing, by allowing the Commission to enforce creditor-defeating disposition provisions. Pursuant to section 588FGAA of the Corporations Act, ASIC may make an order to request that property involved in a creditor-defeating disposition be returned/restored, at an amount that fairly represents the proceeds paid.
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This article continues our series on motor accident compensation in NSW. You can read about the motor accident compensation Medical Assessment Services in part 6 found here.
A particular difficulty in preparing civil cases for protected persons under management is that, quite often, they are incapable of giving evidence or, at the very least, are likely to be at a considerable disadvantage under cross-examination.
This is the same situation that is encountered when pleading a claim against the abuser of an elder person. Usually the case is framed in negligence, as little other relief is likely in Equity, due to the difficulties associated with proving fraud, undue influence or unconscionable behaviour, on the part of the abuser. This may be because the elder person is confused, or unable to provide any real instructions as to the manner and behaviour of the abuser.
I had a case a few years ago which involved a trip and fall on a footpath. The plaintiff s wife was being accompanied by her husband on their usual evening stroll. The wife tripped on a raised edge of the pavement. Her husband gave evidence about the circumstances of her fall which were thought to be uncontroversial. The husband was a meek and mild chap who we thought would make a good witness. Unbeknown to me and our barrister, the husband was a Vietnam war veteran who suffered Post Traumatic Stress Disorder. If put under pressure, he would go to pieces. That’s just what happened when he was subjected to cross examination by each of the barristers acting for the three defendants. We lost the case because the husband’s evidence was not convincing.
I learned from that experience that you should always enquire into the background of your star witness as part of the case preparation. Also, the most vigorous cross examination should be conducted by your own Counsel in Chambers, well before the hearing, so that the witness knows what’s coming and you can gauge their strengths and weaknesses. It is accepted that you should never engage in the coaching of a witness but there is sometimes a fine line.
In relation to motor accident claims, evidence about the circumstances of the accident usually is not so critical. Liability generally is admitted by the insurer when the circumstances clearly point to fault on the part of the insured driver. Where contributary negligence is alleged, the evidence of other witnesses and police records usually are sufficient to establish the degree of contributary negligence, if any. It is the same situation in respect of a Plaintiff who has no memory of the accident, as is often found in cases of traumatic brain injury.
There are cases involving children and protected persons, mainly suffering from some form of mental retardation, who suddenly dart across the road into traffic, often suffering catastrophic injuries. It has been recognised that such Plaintiffs do not have the same mental capacity as an ordinary adult and should not be held to adult standards when it comes to taking care for one’s safety. This recognition is reflected in the provisions of part 1.2 of the Motor Accidents Compensation Act 1999 (MAC Act) relating to No-fault claims, otherwise known as blameless motor accidents and in part 5 of the Motor Accidents Injuries Act 2017 (MAIA) relating to No-fault motor accidents.
The first thing to note about blameless motor accidents and no-fault motor accidents is that the onus of proof is reversed. See 7C of the MAC Act and s5.3 of the MAIA. That is, an allegation by the Plaintiff that the motor accident was a blameless or no-fault motor accident is evidence of that fact in the absence of evidence to the contrary. It is then for the insurer to prove fault.
The first and leading blameless accident decision from the Court of Appeal is Axiak v Ingram [2012] NSWCA 311. In that case, a 14-year-old child got off a school bus at Ebenezer and ran across the road towards her own home. A car has pulled up behind the bus and the plaintiff safely crossed in front of that car. However, a car coming in the opposite direction was found to have had no time or opportunity for the driver to avoid a collision with the child running across the road.
The plaintiff lost at first instance but succeeded in the Court of Appeal in demonstrating a blameless accident. The contributory negligence of the 14-year-old child in running out across the road was assessed at 50%.
In reaching that assessment the court made reference to the Second Reading Speech from the relevant Minister introducing the 2006 blameless accident amendments. It was noted that the amendments were designed to cater for the unsatisfactory situation “where children are penalised for behaving as children do”.
The second case to proceed to the Court of Appeal with a contributory negligence assessment of a blameless accident was Davis v Swift [2014] NSWCA 548. In that case, the plaintiff was crossing Vincent Street in Cessnock. There were four lanes, with the kerbside lanes occupied by parked cars. The plaintiff crossed to the middle of the road with no traffic coming from her right. Having reached the middle of the road and with concern about the amount of traffic coming from her left, the plaintiff stepped backwards into the traffic lane she had just crossed (to give oncoming traffic slightly more room).
Unfortunately, a driver had just pulled out from the kerb and ended up clipping the plaintiff who had effectively stepped back into the path of that vehicle. The plaintiff s right foot was caught under the front driver’s side wheel of the vehicle. The trial judge found 100% contributory negligence on the basis the accident was caused entirely by the plaintiff’s failure to take proper care for her own safety.
The majority in the Court of Appeal reduced this to 80%, although Justice Adamson maintained that 100% was the appropriate figure.
It is the plaintiff’s effective mental age that is likely to be the critical issue in determining the nature and extent of the contributory negligence. If the plaintiff had the same intellectual capacity as a 14-year-old, then there would likely be the 50% discount that was applied in Axiak. If the plaintiff had an intellectual capacity below that of an 8-year-old, then there would arguably be no contributory negligence at all.
When approaching settlement of a blameless accident claim involving a child, I usually apply a sliding scale, based on age – add ten percentage points for each year of age above 14 and take off ten percentage points for each year of age below 14. This is a rough reckoner that is entirely judicially untested, but I believe it fairly encapsulates the intent of the Court of Appeal in Axiak in not holding children to the same level of responsibility as is applied to adults.
I had a case for NSW Trustee and Guardian (NSWTG) recently in which an adult person under management with mental disability suddenly ran across the road and was struck by a motor vehicle. Miraculously, he did not suffer catastrophic injuries. Nevertheless, the case was settled for in excess of $100,000.00, notwithstanding that there was no component for noneconomic loss. This shows that there can be considerable award of damages even where there is no entitlement to non-economic loss. A good rule of thumb for cases under the MAIA is that a claim for damages should be filed in all cases where the Claimant has suffered more than a minor injury, regardless of the extent of permanent impairment, and is not wholly or mostly at fault.
Read more about Motor Accident Compensation in NSW in part 8 of the series, “Lifetime Care and Support Scheme“.
A recent decision handed down by the High Court of Australia has shed light on the scope of what constitutes the definition of an ‘Officer’ of a corporation.
In the matter of ASIC v King [2020] HCA 4, the High Court of Australia considered the question of whether a person who is not named as an officer, or is not in the position of an officer, can fall within the definition of an officer of a company for the purposes of the Corporations Act 2001 (Cth) (Act).
Background
The facts of the case revolve around a parent company, MFS Ltd (MFS), and one of its subsidiary companies, MFS Investment Management Pty Limited (MFSIM).
Several transactions were made by MFSIM for purposes that were unrelated to the intended use of the money. Mr King was an executive director and CEO of MFS, and he also assumed overall responsibility of MFSIM.
Mr King was not however, a named director or secretary of MFSIM however he approved and authorised the transactions in question, and the subsidiary company’s money would not have been transacted without Mr King’s approval.
Who Is an “Officer” of a Corporation?
Section 9(b) of the Act defines an Officer of a corporation as a person:
Decision
ASIC argued that Mr King had the capacity to significantly affect the corporation’s financial standing, satisfying section 9(b) of the Act, and therefore constituted an Officer of MFSIM.
The Queensland Court of Appeal disagreed, and held that Mr King was not an Officer of MFSIM because he did not hold “a recognised position with rights and duties attached to it” [16].
The High Court however, unanimously rejected the Court of Appeal’s argument and allowed ASIC’s appeal.
The High Court adopted a more literal reading of s 9(b)(ii), focusing on the fact and degree of the person’s relationship and involvement in the management of the corporation’s affairs or property to determine whether they are an Officer of the corporation.
The Court concluded that a person who does not have to occupy or hold a named office in the company can still be an Officer.
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This guide explains the basic steps involved when buying a property in the ACT. We’ve included the responsibilities of everyone involved so that you understand what you need to do. Also included are some notes on timing as well as some tips to ensure the purchase of your house runs as smoothly as possible. As always, if you have any questions along the way, just ask. We ‘re with you.
Your solicitor cannot control how long it takes for the Seller’s Solicitor to provide the Contract. Generally speaking however, this should not take longer than 1 week. Chamberlains will arrange to meet with you to review the Contract within 24 hours of receiving the Contract from the Seller’s solicitor. Exchange will generally occur 2 – 3 weeks after this, once you have arranged unconditional finance with your bank. This can happen a lot faster if your bank is ready to go or you are not borrowing to purchase. Unless anything unexpected occurs (e.g. Bank has not completed certification of the Mortgage documents), Settlement will occur on the date agreed in the Sale Contract. This date is usually 30, 60 or 90 days after exchange.
Tip 1 – Understand There May Be Hiccups Along The Way
Things do go wrong when purchasing property, the most common being:
1. The bank is unable to settle on time. If the loan cannot be processed by the date of settlement, you will be unable to meet your settlement obligations on time. This will cause you to be in breach of your Contract of Sale and you may incur penalty fees, interest, or termination of the contract in some cases. Be sure to keep your solicitor or conveyancer informed of your situation so that they can liaise with your bank to ensure your loan documents are be able to be processed in a timely manner. In some cases, you will also be able to apply for a settlement extension.
2. The property is not in the same condition as when you signed your Contract of Sale. If you notice flaws or maintenance issues when you conduct a final inspection of the property, you will need to discuss your rights with your conveyancer. You have certain rights under the Contract of Sale and you should be able to dispute the condition of the property. This is unfortunately a common issue, which your solicitor or conveyancer will be able to assist you with.
3. You or the seller can’t settle on time and you’ve booked your removalist and taken time off work? If settlement is cancelled for any reason by either the Seller or the Buyer, Chamberlains can discuss with the Seller’s solicitor if occupation would be available. The Seller is entitled to decline this request, however if they agree the solicitors will prepare an occupation agreement and negotiate a rental amount that can be adjusted on settlement. If the Buyer takes occupation prior to settlement the Buyer is expected to accept the property in its current state.
Tip 2 – Get your Financials (bank funds) Sorted First
It is extremely important to know your borrowing capacity when you are looking at purchasing a property so it is best to obtain a pre-approval from your bank/broker before the temptation of looking for your new home. Once you have decided on a property you must execute any loan documents with your bank as a matter of urgency to avoid any delays with Settlement.
Tip 3 – Get your Property Inspected
In the ACT it is a requirement for the Seller to provide a Building and Pest Report, and you are liable for the cost of these reports on settlement. If you have any concerns about the condition of the building you could have the property assessed by an independent building inspector who may disclose things that the Seller’s reports do not. You will still be responsible for the cost of the Seller’s report, along with your own independent inspections. If you have concerns with recent government developments of the Asbestos known as Mr Fluffy then you should consider an independent Asbestos Report for any home that was built over 40 years ago.
Tip 4 – Use an Experienced Conveyancer
This is important because they have likely seen it all before and know the best way to handle all kinds of situations involved in the process, they will have a high level of knowledge and relationships with other people in the industry.
If you are buying an investment property, most people buy this in their personal names in order to obtain the negative gearing tax deduction. If you are in a high risk profession or run your own business, you are putting your personal assets in the firing line of creditors in the event that you are successfully sued or you are made bankrupt.
An alternative strategy may be to purchase the investment property in the name of your spouse or partner or create an investment trust. You should also be careful not to purchase any property in the name of your trading company or your trading trust as this could expose those assets in the event of the business being sued or being put into liquidation.
This article continues our series on motor accident compensation in NSW. You can read about the motor accident compensation Dispute Resolution Services in part 5 found here.
Medical Assessment Service
The Medical Assessment Service (MAS) is a Division of the Dispute Resolution Service (DRS) of the State Insurance Regulatory Authority (SIRA). It comprises eminent medical practitioners across a broad range of medical specialties that are concerned with the treatment of motor accident victims. All of the Medical Assessors are appointed for a fixed term after a rigorous selection process. They undergo ongoing training. All of the Medical Assessors have experience of medico-legal work. There are some assessors who are occupational therapists rather than medical practitioners. Their role is in the assessment and quantification of attendant care claims.
The role of the Medical Assessors is to determine medical disputes arising from medical assessment matters, as defined by section 58 of the Motor Accidents Compensation Act 1999 (MAC Act) and schedule 2 of the Motor Accidents Injuries Act 2017 (MAIA). Under the MAC Act, medical assessment matters comprised the following:
Note that treatment is defined to include attendant care. Note also that findings by a Medical Assessor in relation to causation of permanent impairment is not binding on a Claims Assessor or the Court.
If the Certificate of a Medical Assessor is found by the Proper Officer of MAS to contain an obvious or a review-able error, the dispute is referred to a Medical Review Panel of three Assessors for determination. As with the Certificates of Claims Assessors, appeals can be taken to the Supreme Court Administrative Law Division for correction of jurisdictional error.
It is a feature of the determination of claims under the MAC Act that there is no statutory limit upon the number of times that matters can be referred to MAS subject only to there being a deterioration in the relevant medical condition and fresh evidence that is likely to cause a material change in a previous MAS determination. It is not uncommon for claims to be referred for assessment of whole person impairment numerous times and/or for such claims to bounce back and forth from the Supreme Court on more than one occasion.
We currently have a protected person under management who suffered brain damage when the car in which he was a passenger collided with a truck at speed. He was rendered unconscious for a period of time that is uncertain. He was evacuated by Air Ambulance to hospital. The extent of his brain damage, and other physical injuries is contested. He has been assessed at MAS nine times and may have to undergo further assessments. The most recent MAS assessment comprised 86 pages. We had to obtain an advice from Senior Counsel as to whether it contained any reviewable error.
I once assessed a claim that had been to MAS six times and to the Supreme Court three times including an appeal against one of my procedural decisions not to except the claim from assessment due to alleged complexity of the legal and factual issues. I ultimately regretted that decision the final assessment hearing occupied 3 days with Senior Counsel on both sides. That is not the sort of dispute for which CARS was designed.
The range of medical assessment matters has been expanded under the MAI Act to include the following:
An important change introduced by the MAI Act is that any medical assessment may be referred for further assessment only once (section 7.24(3) of the MAI Act)
In determining the degree of permanent impairment, Medical Assessors must apply the Motor Accident Guidelines which incorporate the AMA Guides to the Evaluation of Permanent Impairment 4th edition. It is a curiosity that permanent impairment in workers compensation claims is determined by Approved Medical Specialists using the 5th edition of the AMA Guides. Why there is a discrepancy I simply don’t know.
Of particular relevance to claims made by the protected persons under management, whose claims go directly to Court rather than through Claims Assessment and Resolution Service (CARS), it still is necessary to have medical disputes in such claims determined by the MAS. So that, where a claim is made for non-economic loss which the insurer disputes, MAS must determine whether the degree of permanent impairment exceeds the 10% threshold prescribed by section 131 of the MAC Act and section 4.11of the MAI Act. The degree of permanent impairment so certified is binding upon the Court.
Note that in any court proceedings, the court may reject a certificates to all or any of the matters certified in it, on the grounds of denial of procedural fairness to a party to the proceedings in connection with the issue of the certificate, but only if the court is satisfied that admission of the certificate would cause substantial injustice. In that situation the court is to refer the matter again for assessment and adjourn the proceedings until a further certificate is given and admitted in evidence in the proceedings. See s61(4) and (5) of the MAC Act and s7.23(3) and (4) of the MAIA.
Read more about Motor Accident Compensation in NSW in part 7 of the series, “Other Matters of Particular Relevance to NSWTG Clients“.
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If you are a secured creditor of a debtor, you may be able to lodge a caveat over the debtor’s property. There remains some uncertainty however who gets priority in terms of payment from the proceeds of the sale of the debtor’s property, when there are multiple registered interests on the title.
General Rule
The general rule is that if the equities are in all other respects equal, priority in time of creation is considered to give the better equity. This general rule may be displaced and priority accorded to the later interest if the merits of the equities are unequal (see for example Bunnings Group Ltd v Hanson Construction Materials Pty Ltd & Or [2017] WASC 132 (Bunnings)). The time a caveat is registered is only relevant if it is relevant to the merits of the equities, for example if the delay is relevant to disentitling conduct by the caveator.
The Court will also look at factors that are relevant to the particular facts of the case, such as the nature and condition of the parties’ equitable interests, the circumstances and manner of the acquisition of those equitable interests, and the conduct of the parties (see Rice v Rice (1854) 2 Drew 73).
In the case of Bunnings, there were two suppliers, being Hanson and Bunnings, who had charges included in their credit application agreements with Capital Works. The credit application agreement between Hanson and Capital Works was entered into prior to the credit application between Bunnings and Capital Works. Bunnings however lodged its caveat first. The Court found that, everything else being equal, Hanson had priority as its charge was first in time. The Court then looked at whether Hanson’s conduct would cause this priority to be defeated. The Court found that it was usual industry practice to only lodge a caveat when it appeared necessary, and so Hanson’s conduct in not lodging its caveat earlier would not affect the priorities. Hanson accordingly was able to rely on the general rule to maintain its priority.
Contentious Cases
In LTDC Pty Ltd v Cashflow Finance Australia Pty Ltd [2019] NSWSC 150, Cashflow entered into an agreement with Madebra and its directors as guarantors, which granted a charge. Cashflow considered that this was secondary security. Cashflow also was granted primary security in the debtors’ book, which it registered on the PPSR. Later, LTDC entered into an agreement with Madebra and its directors granting a mortgage. LTDC lodged a caveat on the same day as the executed loan documents were received. Cashflow had not yet lodged a caveat.
Cashflow adduced evidence that the usual practice in invoice financing was to only lodge a caveat upon default. LTDC adduced evidence that its usual practice as a lender was to lodge the caveat straight away. LTDC argued that it had conducted the relevant searches and had lent the money to Madebra on the basis that the only interest with priority was the first registered mortgagee and it would not have lent the money had it known about Cashflow’s interest.
LTDC’s position was that Cashflow’s conduct in delaying the lodgement of its caveat induced LTDC to acquire its interest. The Court found that Cashflow’s failure to lodge a caveat contributed to LTDC’s conduct in lending the money as it left the guarantors in a position to represent that the property was not subject to any charge by Cashflow. Cashflow only intended to rely on the charge as secondary security and knew that by not lodging a caveat, there was a risk that later interests would be created.
The Court held that considering all these circumstances, LTDC’s interest would therefore have higher priority despite Cashflow’s interest being first in time.
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Shingle Inn Franchisor Pty Ltd & Anor v Franchisee Coffee Pty Ltd & Anor [2020] NSWDC 142
The matter was heard before His Honour Judge J D Smith SC and the decision was handed down on 22 May 2020. The first plaintiff, Shingle Inn Franchising Pty Ltd ( the Franchisor) is the franchisor of a coffee shop. In 2016, the first defendant, Franchisee Coffee Pty Ltd (the Franchisee) entered into a franchise agreement with the Franchisor through which it was entitled to conduct a Shingle Inn business at a shopping centre in Rouse Hill, NSW (the Premises).
The business was unsuccessful and by late 2017, the Franchisee notified the Franchisor regarding the selling of the business and vacated the premises on 29 March 2018. On 12 April 2018, the Franchisor terminated the licence agreement. On 17 April 2018, the Franchisee offered to sell the business assets of the business to the Franchisor pursuant to the Franchisor’s right of first refusal under the Franchising Agreement. There was no reply to that offer. In the meantime, the Franchisor had taken over the operation of the business on the premises and eventually sold it and much of the business assets left on the premises to a third party.
The Franchisee claimed from the Franchisor, damages for conversion of the business assets left on the premises.
His Honour in considering conversion of the business assets, reflected on the essential elements of the tort of conversion as expressed in Bunnings Group Limited v CHEP Australia Limited (2011) 82 NSWLR 420; at [124] (Bunnings Group):
“The essential elements, or basic features, involve an intentional act or dealing with goods inconsistent with or repugnant to the rights of the owner, including possession and any right to possession. Such an act or dealing will amount to such an infringement of the possessory or proprietary rights of the owner if it is an intended act of dominion or assertion of rights over the goods”
His Honour considered there were two acts of conversion of the assets that were left on the Premises from 30 March 2018 and these were as follows:
In both point 1 and 2, the Franchisor exercised control over the assets belonging to the Franchisee that was inconsistent or repugnant to their rights to remove the assets and deal with them as they saw fit.
The Franchisor argued that there was no conversion on the basis that no demand was made for the assets. His Honour explained the statements of Allsop P in Bunnings Group was not that a demand was required but rather that mere unauthorised possession of another’s good did not amount to conversion. His Honour went on to distinguish the case before him as this was a not a mere unauthorised possession of goods. Here, the Franchisor not only had possession of the assets but was using them for their own benefit and selling them for a gain. This in turn denied the Franchisee’s right to sell and use the goods.
A more difficult issue before his Honour was damages that flow on from such conversion.
The general rule is that a plaintiff is entitled to recover the full value of the goods converted: Butler v Egg & Egg Pulp Marketing Board (1966) 114 CLR 185 at 191.
The difficulties in these circumstances was that that the Franchisee was not making any use of the goods and therefore was not entitled to anything. Further the argument was advanced that the goods were, for the most part, specially built for the purposes of the business and as they had no intention of running the business, the goods were to be of limited use.
His Honour noted that the value of any converted goods may be assessed in different ways and depends on the circumstances of each case.
The Franchisee relied on the expert opinion of a senior valuer (the expert) where the fit out was valued on the basis of the cost of manufacture less depreciation while a sales comparison approach was used for the plant and equipment. The converted assets were valued at the sum of $171,292.00 as at 12 April 2018. The Franchisor argued that this was not an appropriate measure of damages due to the fact that the Franchisee had done nothing to sell the assets other than offering them to the Franchisor. This argument was rejected on the basis that the Franchisee had been trying to sell the goods since November 2017 when it first offered to the Franchisor. More importantly, there was an identifiable buyer, for the goods at the time that the Franchisee abandoned the Premises. Although the valuation given by the expert was considerably higher than the price actually paid by the third party for the assets, his Honour considered that that valuation was an appropriate amount to properly compensate the Franchisee for the conversion of the assets by the Franchisor.
For the above reasons, judgment was entered in favour of the Franchisee with respect to the cross-claim in the amount of $171,292.00.
As we’re beginning to see the light at the end of the COVID-19 tunnel, many are asking themselves how to get back to business after the interruption. How will revenue streams be affected? What risks are posed to the employees and the customer base? Will new work strategies, including staff safety and productivity management, need to be formulated?
Join Chamberlains Law Firm and HIA as we provide guidance on the current and future problems most businesses face, with insights and predictions for the Building Industry.
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