FEDERAL COURT OF AUSTRALIA

Treasury Wine Estates Vintners Ltd v Garrett [2016] FCA 715

ORDERS

THE COURT DECLARES THAT:

1.    The purported appointment, on or about 1 May 2016, of the first defendant as “managing controller” of property of each of the plaintiffs is invalid.

AND THE COURT ORDERS THAT:

2.    Pursuant to section 182(4)(a) of the Personal Property Securities Act 2009 (Cth), the fourth defendant:

(a)    register a financing change statement removing the registration of a purported security interest with registration number 201604240003952 from the Personal Property Securities Register; and

(b)    register a financing change statement removing the registration of a purported security interest with registration number 201604260009756 from the Personal Property Securities Register.

3.    Subject to further order, the first, second and third defendants by themselves, their servants and agents each be restrained from registering or causing to be registered on the Personal Property Securities Register any further financing statement in respect of any security interest or purported security interest in personal property of the plaintiffs.

4.    If a registration is made on the Personal Property Securities Register in breach of order 3, the fourth defendant is to remove it forthwith.

5.    The first, second and third defendants by themselves, their servants and agents each be restrained from enforcing or taking any further steps to enforce the purported security interests registered on the Personal Property Securities Register with registration numbers 201604240003952 and 201604260009756.

6.    Subject to further order, the first, second and third defendants by themselves, their servants and agents each be restrained from:

(a)    lodging with the Australian Securities and Investments Commission any notice of the purported appointment of either of the first, second and third defendants as “managing controller” of the plaintiffs;

(b)    seeking to act as a “managing controller” of the plaintiffs or any of them or procuring further appointment as such.

7.    The first, second and third defendants pay the plaintiffs’ costs of the application including any reserved costs.

8.    Liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BEACH J:

1    The plaintiffs by an originating application filed on 11 May 2016 have sought the following orders:

(a)    A declaration that the purported appointment, on or about 1 May 2016, of the first defendant as “controller” of property of each of the plaintiffs was invalid.

(b)    A permanent and interlocutory injunction restraining the first, second and third defendants from lodging with the Australian Securities and Investments Commission any notice of the purported appointment of Andrew Morton Garrett as “controller” of the plaintiffs.

(c)    Interlocutory and permanent injunctions restraining the first, second and third defendants from enforcing or taking any further steps to enforce the security interests registered on the Personal Property Securities Register with registration numbers 201604240003952 and 201604260009756.

(d)    An order under s 182(4)(a) of the Personal Property Securities Act 2009 (Cth) (PPSA) that the fourth defendant:

(i)    register a financing change statement removing from the Personal Property Securities Register the purported security interest with registration number 201604240003952;

(ii)    register a financing change statement removing from the Personal Property Securities Register the purported security interest with registration number 201604260009756.

(e)    Orders that each of the first, second and third defendants be restrained from registering or applying to register on the Personal Property Securities Register any further financing statement in respect of any security interest in personal property of any of the plaintiffs.

(f)    An order that if a registration is made on the Personal Property Securities Register in breach of an order made under subparagraph (e), the fourth defendant remove it forthwith.

2    The first defendant, Mr Garrett, is an undischarged bankrupt and is presently the subject of various vexatious litigant orders made by other Justices of this Court. The plaintiffs have relied on an affidavit of Matthew Critchley, a partner of Corrs Chambers Westgarth, solicitors for the plaintiffs, an affidavit of Jason Ryan, deputy general counsel of the second plaintiff (on behalf of the first and second plaintiffs, the first plaintiff being a wholly owned subsidiary of the second plaintiff), and an affidavit of Jessica Lyons, general counsel and company secretary of the Carlton and United Breweries group of companies including the third and fourth plaintiffs. That evidence has not been the subject of any serious challenge.

3    In my view, and for the reasons which follow, the financing statements registered by the first to third defendants with respect to security interests over the plaintiffs’ assets cannot be sustained. The first to third defendants do not have any security interests over the plaintiffs’ property or any part thereof. Further, insofar as the asserted interests claimed by the first to third defendants can be discerned, they are not interests capable of being registered. Moreover, the purported appointment of Mr Garrett as the “managing controller” of the plaintiffs is not valid.

Procedural history

4    The present litigation was commenced on 4 May 2016 by an urgent application by the current plaintiffs before the start of a proceeding. The urgent application was made returnable on 5 May 2016 at which time I made orders, inter alia, restraining the first to third defendants from taking any steps to enforce their purported security interests.

5    The interim orders were made until 4.15pm on 17 May 2016. An undertaking was given by the then applicants to commence substantive proceedings, which were to be made returnable on 17 May 2016; this occurred.

6    On 17 May 2016, both this proceeding and proceeding VID 423 of 2016 came before me. I set both down for final hearing together on 14 June 2016, being a date that was convenient to Mr Garrett and to accommodate his unavailability at an earlier time due to his travel to Hong Kong. At no stage did he indicate any difficulty in personally appearing at the trial of these proceedings. The business day before the hearing he sought to appear by video link, but with the Court bearing the cost thereof. That service was not available to him. He ultimately chose to attend by telephone.

7    At this point it is appropriate to incorporate by reference the procedural history that I have set out in my reasons at [6] to [9] in proceeding VID 423 of 2016 (see [2016] FCA 714). As I have indicated in those reasons at [8(e)], in the present proceeding Mr Garrett has relied on two affidavits and two sets of written submissions. Mr Garrett has also sought to rely upon other material, but this has been rejected for the reasons given in the other proceeding. None of the material that has been rejected goes to the merits of the substantive issues in the present proceeding. That was apparent from my review of such material prior to its rejection. This was also confirmed by counsel for the plaintiffs, given that Mr Garrett had in any event served such material on the plaintiffs.

8    I also incorporate by reference my written reasons previously published only to the parties dealing with various rulings that I made on 17 May 2016, including on the question of actual or apparent bias.

the issues

9    The first to third defendants have registered two financing statements over the property of the plaintiffs:

(a)    The first statement with registration number 201604240003952 was registered on 24 April 2016 over the property of the first plaintiff and National Australia Bank Ltd.

(b)    The second statement with registration number 201604260009756 was registered on 26 April 2016 over the property of the second, third and fourth plaintiffs.

10    On 27 April 2016, Corrs Chambers Westgarth on behalf of the first and second plaintiffs wrote to Mr Garrett making an amendment demand under s 178(1) of the PPSA seeking in essence removal of the registration. This was not complied with. On 1 May 2016, the first defendant purported to appoint himself as the managing controller of each of the plaintiffs. On 2 May 2016, Corrs Chambers Westgarth on behalf of the third and fourth plaintiffs wrote to Mr Garrett making a similar amendment demand under s 178(1) of the PPSA. This was also not complied with.

11    To be capable of registration under the PPSA, a security interest must:

(a)    be an interest in personal property provided for by a transaction; and

(b)    secure payment or performance of an obligation.

12    The transaction that gives rise to the security interest must be consensual. Further, a right or interest that is created, arises or is provided for by operation of the general law is not capable of being registered. Further, a security interest will only exist where there is a current and active obligation extending from the grantor to the secured party. Usually the obligation will be an obligation to pay money.

13    I incorporate by reference the statement of principles that I have set out at [18] to [30] of my reasons in VID 423 of 2016 ([2016] FCA 714).

The defendants do not have any security interest

14    In summary, the first to third defendants do not have any security interest over any of the assets of the plaintiffs let alone one that is capable of registration. Neither of the requirements for registration has been satisfied.

15    What is the foundation for the asserted security interest(s)? In the present proceedings, Mr Garrett has filed two sets of submissions. There is a written submission headed “Outline of Submissions of Defendant re Bills of Exchange”. But its contents are misconceived and in any event do not go to or deny the claims advanced or remedies sought by the plaintiffs. The other set of submissions dated 13 June 2016 headed “Outline of Submissions of Defendant” does partly address the merits (see for example at sections 3 to 6). Most of the assertions are misconceived. But there is little doubt that the foundation for the asserted security interest(s) is said to be a Settlement Deed which I will describe in a moment. So, at [3.1] and [3.2] Mr Garrett asserts:

3.1.    The Right to register a security interest whether by charge or otherwise was consented to by the Plaintiff at paragraph 17.3 of the Deed of Settlement dated 26th July 2000 (“the Deed”) in which regard the Deed was executed by each of the parties confirming consent.

3.2.    The Right to Register the Security Interest came into existence before the passage of the Personal Property Security Act 2009 (Cth) …

16    This asserted foundation for the basis of the security interest(s) is the only foundation given. But no security interest arises per se from a mere contractual indemnity. Once that is appreciated, Mr Garrett’s assertions and the first to third defendants’ conduct whether it be the registration of a security interest or the purported appointment of a managing controller lack any proper foundation or merit.

17    At the hearing, I requested a copy of the Settlement Deed (dealing with the settlement of the South Australian Supreme Court proceeding No 2244 of 1996) to satisfy myself that it did not create any security interest. Surprisingly, the Settlement Deed had not been put into evidence by any party. Subsequent to the hearing, the plaintiffs filed what they said was the correct form of the Settlement Deed. I gave an opportunity to Mr Garrett to file what he said was the Settlement Deed; he put forward his version which he said I should act on. There appears to have been a debate between the parties as to which was the accurate version (cf Treasury Wine Estates Vintners Ltd v Garrett [2016] FCA 496 at [51]). I am prepared to receive into evidence and to act for present purposes on the version sent to me after the hearing by Mr Garrett. After reviewing the terms of his version of the Settlement Deed, I am satisfied that clause 17.3 only provided for a contractual indemnity and that neither that clause nor indeed any other provision in the Settlement Deed gave rise to a security interest in favour of any of the first to third defendants. Clause 17.3 provided:

MBL indemnifies the AMG Entities against all actions proceedings claims demands or prosecutions of any kind or nature and howsoever arising by whomsoever and whenever brought or commenced against or incurred by the AMG Entities (or their agents and employees) and also against all costs and damages and expenses which the AMG Entities may pay or be made liable to pay in defending or settling the same arising directly or indirectly out of the registration or use by MBL of the Andrew Garrett Trade Mark, the Garrett Trade Mark, the Garrett Family Trade Mark or the Stylised Script Trade Mark in the MBL Territory or arising directly or indirectly from any act or omission of MBL or any of its agents, representatives, employees or servants in relation thereto.

18    “MBL” is a reference to Mildara Blass Ltd. “AMG” is a reference to Andrew Morton Garrett and “AMG Entities” is a reference to Mr Garrett, his wife and related entities and trustees. There were also full releases given in clause 19 and an entire agreement provision in clause 29 of the Settlement Deed.

19    In summary, no part of the Settlement Deed supports the security interest asserted by the first to third defendants. It contained mere contractual indemnities and indeed given by Mildara Blass Ltd only (the first plaintiff under its former name).

20    In the present context, Mr Garrett’s “Notice of Crystallisation” has stated (emphasis added):

WHEREAS, the Second Chargor indemnified the costs loss and damage of the AMG Entities pursuant to cl17.3 of a Deed of Settlement executed on the 26th July 2000 (“the Deed”) between the parties to the Deed at a time when Fosters’ Brewing Group Pty Ltd (“FBG”) was the Controlling mind of the Second Chargor and was and remains liable for the actions of the Second Chargor as a wholly owned subsidiary from the date of execution of the Deed until the 11th December 2011, and

WHEREAS, on the 11th December 2011 the Second Chargor was demerged from FBG and Treasury Wine Estates Limited became the controlling mind of the Second Chargor as wholly owned subsidiary and is liable for the actions of the Second Chargor between the 11th December 2011 and today’s date, and

WHEREAS, The Liability of the controlling mind as the parent entity of the Second Chargor from time to time gives rise to a securable interest in favour of the Chargee over FBG and TWE as a matter of equity and law, and

WHEREAS, SAB Miller Beverage Investments Pty Ltd (“SAB Miller”) became the Parent to FBG on the 11th December 2011 …

21    But an indemnity is not a security interest for the purposes of the PPSA. An indemnity is contractual. It is a promise by one party that it will keep the other harmless against loss that may arise as a result of entering into a transaction. Moreover, the contractual promise was only made by the first plaintiff. Let me make six other points concerning the so-called security interest(s).

22    First, the fact that some of the plaintiffs are or once were parent companies of others is insufficient to create a security interest either. The doctrine of separate legal personality entails that a parent company is not without more liable for the obligations of its subsidiary.

23    Second, to the extent that the first to third defendants contend that the security interests arise “as a matter of equity and law”, any such interests cannot be registered (s 8(1)(c)).

24    Third, none of the plaintiffs are indebted to Mr Garrett in any of his capacities or to any company or entity associated with him. Thus, there is no payment or obligation of the plaintiffs to be secured.

25    Fourth, to the extent that the first to third defendants have sought to rely on any “Security Deed” unexecuted by the plaintiffs, the reliance is misconceived.

26    Fifth, if contrary to what I have said, Mr Garrett had a security interest, it would have vested in his trustee in bankruptcy.

27    Sixth, the affidavit evidence filed by the plaintiffs (see the Ryan affidavit at [13] to [15] and the Lyons affidavit at [11] to [13]) denying any security interest or indebtedness has not been the subject of any meaningful challenge by the first to third defendants.

28    Finally, Mr Garrett purports to have been appointed as “managing controller” of the plaintiffs. A managing controller, in relation to the property of a corporation, is either a receiver and manager of that property or some other controller who has functions or powers in connection with managing the corporation. His appointment is not valid for two reasons. First, there is no valid contractual or legislative foundation for that appointment. Second, he is an undischarged bankrupt and in my opinion cannot validly so act; I refer to what I have said in the other proceeding ([2016] FCA 714 at [51]).

Conclusion

29    I will grant the relief sought by the plaintiffs. I accept the prejudice deposed to by the plaintiffs flowing from the first to third defendants’ conduct and I also repeat my observations in [2016] FCA 714 at [50] which apply by analogy in the present context. Moreover, as the plaintiffs have been wholly successful, costs should follow the event.

Associate:

Dated:    16 June 2016