Pan Foods Company Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Limited [2000] HCA 20

HIGH COURT OF AUSTRALIA

GLEESON CJ,

McHUGH, KIRBY, HAYNE AND CALLINAN JJ

PAN FOODS COMPANY IMPORTERS

& DISTRIBUTORS PTY LTD & ORS APPELLANTS

AND

AUSTRALIA AND NEW ZEALAND BANKING

GROUP LIMITED & ORS RESPONDENTS

Pan Foods Company Importers & Distributors Pty Ltd v Australia and

New Zealand Banking Group Limited [2000] HCA 20

13 April 2000

M25/1999

ORDER

Appeal dismissed with costs.

On appeal from the Supreme Court of Victoria

Representation:

H C Berkeley QC with M J Colbran QC and K P Hanscombe for the appellants (instructed by GSM Lawyers)

J H Karkar QC and W A Harris for the respondents (instructed by Freehill Hollingdale & Page)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Pan Foods Company Importers & Distributors Pty Ltd v

Australia and New Zealand Banking Group Limited

Mortgage – Construction of terms – Mortgage agreement provided that event of default occurred if bank formed opinion that circumstances had arisen which had material adverse effect on business, assets and financial condition of borrower and ability of borrower to perform its obligations to the bank – Formation of requisite opinion – Declaration that moneys owing were immediately due and payable – Notice demanding payment – Validity of notice.

Mortgage – Debenture – Default – Power in mortgage to appoint receiver after moneys became payable – Validity of appointment – Mortgage and loan agreements each specifying circumstances in which moneys became payable – No inconsistency between mortgage and loan agreements.

1. GLEESON CJ, McHUGH AND HAYNE JJ. The central issue in this appeal is whether the respondent bank was entitled to appoint a receiver and manager to the assets and undertaking of the first appellant ("Pan Foods"). 2. The facts, including the relevant provisions of the General Conditions, and of the debenture, are set out in the judgment of Callinan J. 3. Although the arguments of the parties, in this Court and in the Supreme Court of Victoria, addressed numerous questions said to have been thrown up by the documents in force at various times, we agree with Callinan J that the appeal can be determined, relatively simply, upon the basis adopted by Winneke P in the Court of Appeal. 4. An Event of Default, within the meaning of 10.1(j) of the General Conditions, occurred. When Pan Foods' facilities came up for review in 1994, an investigating accountant was appointed to report to the bank. It became obvious that Pan Foods was incurring large losses. The bank officer in charge of the account told his superiors that the company was performing "disastrously". The accountant expressed the opinion that, if the bank enforced its security, there would be a substantial shortfall. The evidence makes it plain that circumstances had arisen which, in the opinion of the bank, had a material adverse effect on the business, assets, and financial condition of Pan Foods and on its ability to perform its obligations to the bank. It was submitted that there was no specific evidence of the formation of such an opinion. In truth, on the information before the bank, no other opinion was reasonably available, and what was said and done by the officers of the bank makes it clear that they held such an opinion. 5. That entitled the bank, under General Condition 11.1(e) to declare (ie to communicate to its customer an expression of its will) that the moneys owing by the customer were immediately due and payable. It did this by giving a notice demanding payment. 6. The notice was given under General Condition 15.3. The notice was in writing, and was delivered by Mr Bew, who was an Authorised Representative. Having regard to the terms of 15.3, the fact that it was signed by the bank's solicitor, rather than Mr Bew, was immaterial. 7. That having been done, the bank was entitled, by virtue of cl 19 of the debenture, to appoint a receiver. It did so. The language of cl 19 is clear. The power to appoint a receiver arose "[a]t any time after the moneys … secured (became) payable." No intermediate step was required. 8. Some confusion seems to have arisen in argument because there were other provisions pursuant to which the bank might also have been, or considered itself, entitled to act. This is not unusual. Lenders may wear both belt and braces. When the bank appointed a receiver, it was entitled to rely on all powers which enabled it to do so. The facts of the case, and the terms of the notice given, fitted within contractual provisions empowering the bank to appoint a receiver. The appointment was effective. 9. The appeal should be dismissed with costs. 10. KIRBY J. This appeal from orders of the Court of Appeal of Victoria[1] illustrates the principle to be applied in the construction of commercial documents comprising agreements for loan. As the reasons of the other members of this Court demonstrate, the documents in question in the appeal are those agreed to by a large banking corporation ("the Bank") in relation to the extension of substantial financial credit to the other party, a commercial corporation ("the company") engaged in business with a view to profit for its shareholders. Although the Bank took personal guarantees from, and mortgages over lands belonging to, the directors of the company, it is the loan documents that are in question in the appeal, not the personal guarantees.