Federal Court of Australia

Ormsby (liquidator), in the matter of Rezatechnica Pty Ltd (in liquidation) v Michails [2023] FCA 972

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiffs are at liberty to make oral submissions with respect to:

(a)    the final form of declaratory relief;

(b)    any ancillary or consequential relief; and

(c)    the final disposition of the amended originating application.

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

REASONS FOR JUDGMENT

CHARLESWORTH J

1    The second plaintiff, Rezatechnica Pty Ltd (in liquidation) (ACN 625 668 771) (Company) went in to Liquidation on 28 April 2022 (Liquidation Date) by an order of this Court made under s 459A of the Corporations Act 2001 (Cth). The first named plaintiff includes the joint and several Liquidators of the Company.

2    Prior to the Liquidation Date the Company owned and operated an interstate transport business from premises in the Adelaide suburb of Kilburn. The business traded under the name Reza Transport Services and had the ABN 81 625 688 711. The business was also referred to as Reza Transport Services Adelaide or RTS Adelaide.

3    By their amended originating application dated 17 February 2023, the plaintiffs seek (relevantly) a declaration pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) that the Company is the legal and beneficial owner of three vehicles, namely:

(1)    2010 Grey Kenworth K108 Prime Mover with VIN No. 6F5000000AA443817 (2010 Kenworth);

(2)    2007 White Kenworth K104B Prime Mover with VIN No. 6F50000007A436072 (2007 Kenworth); and

(3)    2021 White Nissan Navara Warrior Pro4X utility with VIN No. MNTCBND23A0009061 (Nissan Navara).

4    Declaratory relief will be granted for the reasons that follow.

Legislation

5    Part 5.4B of the Corporations Act contains provisions with respect to the winding up of a company in insolvency or by the Court.

6    Subject to exceptions that do not presently apply, a liquidator of a company may (among other things) bring or defend any legal proceeding in the name of and on behalf of the company, and sell or otherwise dispose of, in any manner, all or any part of the “property of the company”:  Corporations Act, s 477(2)(a) and s 477(2)(c). As soon as practicable after the Court orders that a company be wound up, the liquidator must cause the company’s property to be collected and applied in discharging the company’s liabilities:  Corporations Act, s 478(1).

7    For these purposes, s 465 of the Corporations Act provides:

property of a company includes PPSA retention of title property, if the security interest in the property is vested in the company because of the operation of any of the following provisions:

(a)    section 267 or 267A of the Personal Property Securities Act 2009 (property subject to unperfected security interests);

…

8    Section 51F of the Corporations Act provides:

Definition

(1)    Property is PPSA retention of title property (short for Personal Property Securities Act retention of title property) of a corporation if:

(a)    the property is personal property; and

(b)    the property is used or occupied by, or is in the possession of, the corporation; and

(c)    the corporation does not have title to the property; and

(d)    a PPSA security interest is attached to the property, within the meaning of the Personal Property Securities Act 2009; and

(e)    the corporation is the grantor in relation to the PPSA security interest, within the meaning of that Act.

…

References to property of a corporation

(2)    A reference in this Act to the property of a corporation does not include a reference to any PPSA retention of title property of the corporation, unless provided otherwise expressly or by necessary implication.

9    The expression “security interest” is defined in s 51A to include a PPSA security interest. The expression “PPSA security interest” is defined in s 51 of the Corporations Act to mean a security interest within the meaning of the Personal Properties Security Act 2009 (Cth) (PPSA). For the purposes of the PPSA, a security interest includes an agreement to sell subject to a retention of title:  PPSA, s 12(2)(d). Such an interest is required to be registered on the Personal Properties Security Register in order for it to be perfected (assuming other means of perfection are not available):  PPSA, s 21.

10    Section 267 of the PPSA applies in the event that an order is made for the winding up of a company and if a security interest granted by a company is unperfected at (relevantly) the date that the winding up of the company is taken to have begun or commenced:  PPSA, s 267(1)(a)(i) and s 267(1)(b)(i). That date for present purposes is the Liquidation Date:  Corporations Act, s 513A(e).

11    Section 267(2) of the PPSA provides:

Security interest vested in grantor

(2)    The security interest held by the secured party vests in the grantor immediately before the event mentioned in paragraph (1)(a) occurs.

12    Section 468(1) of the Corporations Act provides:

Any disposition of property of the company, other than an exempt disposition, made after the commencement of the winding up by the Court is, unless the Court otherwise orders, void.

13    Exempt dispositions are defined exhaustively in s 468(2). For the purposes of the analysis that follows I am satisfied that transactions that relate or may relate to the vehicles following the Liquidation Date are not exempt dispositions as defined.

14    Section 468(4) of the Corporations Act provides that any “attachment, sequestration, distress or execution put in force against the property of the company after the commencement of the winding up by the Court is void”.

Background to the application

15    There are six named defendants. The first four were joined from the commencement of the proceeding. They are:

(1)    Mr Nikoloas Michails;

(2)    Mr Nickoloas Gramenos;

(3)    Ms Victoria Gramenos; and

(4)    RTS Transport Adelaide Pty Ltd (RTSTA).

16    Mr Michails is the sole director of the Company. Mr and Ms Gramenos have to varying degrees operated the Company.

17    RTSTA was incorporated after the Liquidation Date on 19 July 2022. It has Mr Gramenos as its sole director.

18    By an order made on 13 July 2023 two further defendants were joined, Mr Joe Orchard and Mr Albert Orchard.

19    At least three of the defendants participated in interlocutory processes and foreshadowed that they would participate in the trial.

20    At the commencement of the trial, each of the defendants notified the Court that they submitted to the outcome and did not seek to participate in the substantive proceeding. None has adduced evidence and no submissions are made by them or on their behalf with respect to the ownership of the vehicles. The evidence upon which the Liquidators rely nonetheless contains references to some of the defendants and they may be referred to in the course of describing the evidentiary material.

21    It is otherwise unnecessary to set out the history of the action or the other forms of substantive or interlocutory relief that have been sought and granted. It is sufficient to say that attempts by the Liquidators to locate and take possession of the vehicles in accordance with orders of the Court have been unsuccessful and, as at the date of this judgment, the whereabouts of the vehicles remain unknown.

Evidence

22    The facts and circumstances set out in these reasons should be understood to be based on the evidentiary material adduced by the plaintiffs, namely:

(1)    a tender book filed on 14 July 2023;

(2)    a supplementary tender book filed on 27 July 2023;

(3)    three affidavits of Mr Matthew Ormsby affirmed on 8 February 2023, 17 February 2023 and 27 June 2023; and

(4)    two affidavits of Mr James Philip Nunn affirmed on 27 June 2023 and 4 August 2023.

Findings

23    The plaintiffs submit (correctly) that the focus of the Court must be on the status of the vehicles as property of the Company as at the Liquidation Date. That is because s 468(1) of the Corporations Act operates to render void any disposition of property of the Company after the commencement of the winding up. That temporal focus means that it is unnecessary to set out in these reasons the various dealings or purported dealings of the vehicles following the Liquidation Date, except to the limited extent that those dealings assist in determining whether the vehicles were the property of the Company as at that date.

24    The plaintiffs draw the Court’s attention to authorities in which the question of the legal ownership of personal property in the nature of a vehicle was considered in different legal contexts:  Linfox Australia Pty Ltd v Transport Accident Commission [2016] VSC 592 (Keogh J); Campana v The State of Western Australia [2008] WASC 230 (Jenkins J). There is no general principle to be drawn from the authorities, other than the trite statement that evidence of a vehicle’s registered owner is relevant but not determinative of title.

The 2010 Kenworth

25    There are two tax invoices evidencing the sale of the 2010 Kenworth to the Company on 1 November 2021. The first (numbered 00003269) is on the letterhead for an entity trading as “North East Stairs” and includes the words “Bill to: Rezatechnia” [sic]. The second has the same invoice number. It appears on the letterhead of an entity trading as Wangaratta Coolroom Excavator Hire and includes the words “Bill to: Rezatechnia Pty Ltd” [sic]. The bank details for the seller on each invoice is different. The seller in each instance has a different Australian Business Number. However, the business name “Wangaratta Coolroom Excavator Hire” is owned by North East Stairs Pty Ltd. The details on the tax invoices are otherwise relevantly identical. The purchase prices is $84,100.00 including GST. There is an “amount applied” of $40,000.00, leaving a balance of $44,100.00. On each invoice there appears the following description of the item sold:

Sale of 2020 Kenworth K108 – XV08VC

** Note

Sale of truck takes place from the date of first pick up from Wangaratta.

Sale of truck is in the condition of the truck at the time of pick up from Wangaratta. With or Without any defects and as in as per condition.

*** The Truck remains the property of North East Stairs Pty Ltd until full payment is recieved [sic].

26    The business previously operated by the Company had a Facebook page titled “RTS Transport Services Adelaide” with the Uniform Resource Locator of https://facebook.com/rezatransportservices/ (RTS Facebook Page). A screen shot of the RTS Facebook Page shows a post bearing the date 4 July 2022 (after the Liquidation Date but before the incorporation of RTSTA). In the post, the 2010 Kenworth is shown in a photograph bearing the fancy logos “RTS”, “RTS Transport Services Adelaide” and “RTS Reza Transport Services”. Together with the other evidence described in these reasons, the post supports an inference that the vehicle was picked up from Wangaratta so completing the sale.

27    The continued operation of the RTS Facebook Page supports an inference that the business previously carried on by the Company was (rightly or wrongly) continued to be carried on following the Liquidation Date. It may be inferred (and I so find) that the 2010 Kenworth was used or in the possession of the Company within the meaning of s 51F(b) of the Corporations Act as at the Liquidation Date.

28    Also in evidence is a series of text messages between Mr Gramenos and a representative of the seller with respect to the payment of the balance of the purchase price. The exchange is further proof that the 2010 Kenworth had been picked up from Wangaratta such that the sale had taken place within the meaning of the invoices (irrespective of which invoice applies).

29    The records of the Company show that following 1 November 2022, it made payments totalling $40,000.00 to an account named “Wangaratta Coolroom Excavator Hire” recorded as follows:

(1)    $10,000.00 on 11 January 2022 titled “Kenworth truck paymnt install”;

(2)    $10,000.00 on 3 February 2022 titled “Truck part payment”;

(3)    $10,000.000 on 14 February 2022 titled “Truck purch pymnt”; and

(4)    $10,000.00 on 26 April 2022 titled “Truck pymnt”.

30    I am satisfied that the Company was the purchaser of the 2010 Kenworth, notwithstanding that the name of the purchaser on the face of the invoices does not exactly coincide with the legal name of the Company. It is unnecessary to determine conclusively which entity was the seller and which of the two invoices evidences the terms of the sale. The terms are relevantly the same, irrespective of which invoice applies.

31    On the basis of the instalment payments and the initial amount applied on the invoice as at 1 November 2022, it may be inferred that as at the Liquidation Date there remained an amount outstanding of $4,100.00. It may be that more than that is owing, depending on whether the “amount applied” referred to in the invoices are a reference to the payments later made. However, it is unnecessary to make a finding of the exact amount owing to the seller in accordance with the terms of the sale. It is sufficient to find that the Company has not paid the whole of the purchase price and that the seller therefore had a security interest by virtue of the retention of title clause appearing on the face of the invoice:  PPSA, s 12(2)(d).

32    However, for the purposes of s 21 of the PPSA, I am satisfied that the seller of the 2010 Kenworth did not have possession of it as at the Liquidation Date. The seller’s interest is not registered in accordance with the PPSA and accordingly it has not been perfected:  PPSA, s 21. Upon the liquidation of the Company, any such “security interest” vested in the Company by the operation of s 267 of the PPSA.

33    To the extent that the Company did not have title to the 2010 Kenworth by virtue of the retention of title clause, I am satisfied that the vehicle fulfils the definition of “PPSA retention of title property”. The conditions in s 465(a) and s 51F of the Corporations Act are fulfilled and, accordingly, I am satisfied that the 2010 Kenworth is the property of the Company.

34    Between 23 July 2021 and 23 April 2022 the 2010 Kenworth was registered to Mr Brendan Matthews, a director of North East Stairs Pty Ltd. That registration expired and on the evidence before me it is unclear when the vehicle was next registered and to whom.

35    I remain satisfied that as at the Liquidation Date the 2010 Kenworth was the property of the Company notwithstanding the evidence concerning its registration.

36    Any transactions or dealings purporting to affect the ownership of the 2010 Kenworth after the Liquidation Date are void:  Corporations Act, s 468(1).

37    The evidence before me is capable of supporting an inference that one or more of the defendants may have had dealings with the 2010 Kenworth after the Liquidation Date, but for present purposes it is neither necessary nor appropriate to make any findings with respect to them.

38    There does exist a registered security interest in favour of Capital Finance Australia Limited (CFAL) having a start date of 9 September 2020. The evidence shows that that interest was in respect of a loan that has been paid in full and that CFAL is in the process of discharging the security. That circumstance does not prevent the grant of declaratory relief in the terms sought.

39    At this juncture I should add that the submissions of the plaintiffs proceeded from an assumption that the Company was the legal and beneficial owner of the 2010 Kenworth because of the operation of s 267 of the PPSA. Section 465 of the Corporations Act draws a distinction between “PPSA retention of title property” (being the vehicle itself) and “security interest” (being the agreement for sale of the vehicle subject to the retention of title clause).

40    I would not make a declaration as to the ownership of the 2010 Kenworth if I were not also satisfied that the vehicle was the “property of the company” for the purposes of the Corporations Act. That is because the only present purpose of the declaratory relief is to facilitate the exercise of the Liquidators’ powers and duties in the liquidation. Whilst the plaintiffs did not expressly address this point, on the evidence before me, I am satisfied that the 2010 Kenworth is the property of the Company within the meaning of the Corporations Act and have therefore not raised this issue with the plaintiffs before proceeding to judgment.

41    These same considerations apply to the next vehicle.

The 2007 Kenworth

42    A contract dated 28 March 2022 shows that an entity trading as Daimler Trucks Milperra sold the 2007 Kenworth to a buyer described as “Reza Transport Services” for $77,000.00 (including GST). Also in evidence is a tax invoice from Velocity Truck Centres NSW Pty Ltd (formerly Stillwell Trucks Pty Ltd) trading as Daimler Trucks Milperra to “Reza Transport Services” dated 7 March 2022. I am satisfied that the invoice relates to the same transaction evidenced by the contract. The buyer named in the contract and in the invoice has the same address as the Company, that being the address in Kilburn. The contract and the invoice name the sales person respectively as “Trent Hutton” and “Trent H”.

43    The Company has made payments to an entity described in its records as Stillwell Trucks totalling $67,076.80 in the following instalments:

(1)    $5,000.00 on 2 March 2022;

(2)    $50,000.00 on 4 April 2022 in two instalments;

(3)    $12,076.80 on 5 April 2022.

44    The purchase of the 2007 Kenworth is listed in the Company’s cash flow manager Transaction Listing with the description “Motor Vehicle Expenses”.

45    All of that evidence supports a finding that the Company purchased the vehicle before the Liquidation Date.

46    Also in evidence is a statutory declaration made by Mr Trent Hutton on 9 June 2022. It declares that “Stillwell Trucks P/L sold vehicle XN.25.CU to Reza Transport Services of 7A/550 Church hill [sic] Rd Kilburn SA 5084 on 04/04/ 2022 @ 11.23am”. The purpose for which the statutory declaration was made is unclear. The view of the salesperson as to when the vehicle was sold and to whom may be relevant, but I do not consider it can reliably support an inference inconsistent with the documents that constitute the written contract for sale assuming that was the author’s intent. I afford the statutory declaration no weight.

47    The contract included a term that “Until the Dealer has received payment in full of the Purchase Price, title in the motor vehicle shall not pass to the Customer and the Customer shall hold possession of it as bailee only”.

48    In evidence is a post of 9 May 2022 on the RTS Facebook Page depicting a photograph of the 2007 Kenworth together with the words “RTS Adelaide Roadtrain heading west on a big project”. The photograph shows the 2007 Kenworth bearing the logos and words “RTS Reza Transport Services Adelaide” and “RTS Reza Transport Services”. On the basis of that post, I am satisfied that for the purposes of s 21 of the PPSA, the 2007 Kenworth was not in the possession of the seller as at the Liquidation Date. The Register records no security interest relating to the vehicle.

49    In the circumstances described, I do not consider that the retention of title clause in the contract for the sale of the 2007 Kenworth precludes a finding that it is the property of the Company. Any security interest that may have been created by that clause was unperfected as at the Liquidation Date. The provisions of the Corporations Act and the PPSA apply in the same manner discussed in relation to the 2010 Kenworth.

50    Between 23 December 2021 and 19 May 2022 (a period including the Liquidation Date) the 2007 Kenworth was registered to Velocity Truck. Between 15 July 2022 and 14 July 2023, Mr Gramenos is named as the registered owner. The 2007 Kenworth is currently registered to 14 October 2023, however the evidence does not disclose the identity of the registered owner.

51    The name of the registered owner as at the Liquidation Date is relevant, however, it does not preclude a finding that the 2007 Kenworth is the property of the Company in the circumstances I have described. It is unnecessary to make any finding about any transaction or purported transaction involving the 2007 Kenworth after the Liquidation Date other than to state that any such dispositions are void:  Corporations Act, s 468(1).

The Nissan Navara

52    The Company entered into a contract for the purchase of the Nissan Navara on 7 March 2022 for the price of $76,216.51. The seller was Sawicki Group Pty Ltd trading as Frankston Nissan. On 10 March 2022 the transaction was listed in the Company’s cash flow manager Transaction Listing, described as “Motor Vehicle Expenses”. Registration for the Nissan Navara was transferred to the Company on the same day. The Company remained the registered owner as at the Liquidation Date. The contract for sale contains no term providing for the retention of title.

53    The evidence just described is sufficient to support a finding that the Nissan Navara was the property of the Company as at the Liquidation Date.

54    In addition, a post on the RTS Facebook Page of 25 March 2022 (before the Liquidation Date) depicts the Nissan Navara bearing the logo “RTS Reza Transport Services Adelaide”. On the basis of that post I find that it came into the possession of the Company following its purchase on 7 March 2022.

55    On dates after the Liquidation Date the Nissan Navara has been registered in South Australia, Western Australia and Victoria under different names, including the names of Mr Gramenos and Ms Gramenos. There is other evidence of dealings involving the Nissan Navara following the Liquidation Date but it is unnecessary for present purposes to say anything about them. It is sufficient to say that the Nissan Navara is the property of the Company and any dealings or purported dealings with it following the Liquidation Date are void.

The form of relief

56    The Court has the power to make a declaration of right. The declarations sought by the plaintiffs are with respect to the status of property as defined in the Corporations Act. They are supported by the evidence.

57    The declaration sought by the plaintiffs is expressed as follows:

Declarations pursuant to Rule 21 of the Federal Court of Australia Act 1976 (Cth) that the company is the legal and beneficial owner of the motor vehicles listed in Annexure A to the Draft Orders (Motor Vehicles).

58    Two observations may be made.

59    First, the declaration should be in a form that does not require reference to any other document. That is easily done.

60    Second, the phrase “legal and beneficial owner” is language that is apt to describe forms of ownership under the general law. In the present case, the Liquidators have powers and duties with respect to things that meet the description of the Company’s “property”. The factual and legal circumstances in which a thing may meet that description are not necessarily the same as that arising under the general law.

61    The Liquidators should be heard on the question of whether the declarations should instead be expressed in terms that recognise that each of the vehicles are the property of the Company within the meaning and for the purposes of the Corporations Act. To my mind, and without expressing a concluded view, declarations in those alternate terms would more appropriately reflect the interests of the Liquidators in performing their duties and functions.

62    The plaintiffs should also be heard as to costs.

Associate:

Dated:    17 August 2023

SCHEDULE OF PARTIES