District Court New South Wales Medium Neutral Citation: Versace Australia's Best Tyre and Automotive Services Pty Ltd v Gerald Gregory Robert Parry [2012] NSWDC 43 Hearing dates: 29 and 30 March 2012 Decision date: 20 April 2012 Jurisdiction: Civil Before: Mahony DCJ Decision: Claim by interpleader upheld and consequential orders pursuant to s 135 Civil Procedure Act 2005 Catchwords: Sheriff's interpleader Legislation Cited: Pawnbrokers and Second-Hand Dealers Act 1996 (NSW); Sale of Goods Act 1923 (NSW) Cases Cited: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; Maynegrain Pty Ltd v Compafina Bank 1982 2 NSWLR 414; Palgo Holdings Pty Ltd v Gowans (2005) 215 ALR 253; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Western Export Services Inc & ors v Jirieh International Pty Ltd 2011 [HCA 45] Texts Cited: Sykes & Anor, "The Law of Securities" 5th Edition Category: Principal judgment Parties: Versace Australia's Best Tyre and Automotive Services Pty Ltd - Plaintiff Gerald Gregory Robert Parry - Defendant Representation: M W Sneddon - Judgment Creditor D Anderson - Defendant R de Meyrick - Claimant Mark O'Callaghan, M G O'Callaghan & Associates - Interpleader D Anderson, ERA Legal - Defendant Robert J McLaughlin, McLaughlin & Riordan - Plaintiff File Number(s): 316858/2011 Judgment ON INTERPLEADER Nature of the proceedings 1On 21 November 2011 Versace Australia's Best Tyre and Automotive Services ("the judgment creditor") obtained judgment against Gerald Parry ("Parry") in the sum of $162,529.86. The judgment was a default judgment, and on 22 November 2011 the judgment creditor issued a Writ of execution against Parry for the judgment debt. The Writ for Levy of Property was levied by the Sheriff against a houseboat Cassa D (registration number AEH 719 N) moored at Hawkesbury River Marina, Dangar Road, McKell Park, Brooklyn NSW on 28 November 2011. 2On 22 December 2011 a third party claim was received by the Sheriff's Office from Zelma Lucas, claiming to be the owner of the houseboat. On 28 December 2011 a further claim was received by a corporation Hock My Ride Pty Ltd ("HMR"). The judgment creditor rejected both claims and the Sheriff's Office filed two Notices of Motion "Sheriff's Interpleader" pursuant to Part 43 Rule 6 of the Uniform Civil Procedure Rules on 7 February 2012. 3On 2 March 2012 the Judicial Registrar made orders that the motions be heard together and set a timetable for the filing and service of evidence and submissions in respect of each claim. 4The matter was set down for hearing before me on 29 March 2012, with counsel appearing for the judgment creditor and Mrs Lucas, and Mr Anderson, Solicitor, appearing for HMR. The competing claims 5The competing claims in respect of the seizure of the houseboat Cassa D are:- (i)the judgment creditor, who holds a default judgment against Parry; (ii)HMR, which lent Parry the sum of $25,000 pursuant to two pledge agreements issued by it in accordance with its business as a pawn broker, and; (iii)Mrs Zelma Lucas, who claims ownership of the houseboat Cassa D, notwithstanding that by an agreement dated 10 November 2011, prepared by Parry, Mrs Lucas purported to sell the houseboat to Parry. The issues 6The issues in the proceedings are as follows:- (1)Who owns the houseboat? In other words, at any time did property in the houseboat pass from Mrs Lucas to Parry. (2)Whether HMR has a valid claim to the extent of its pledges against the houseboat. (3)If property in the houseboat did pass to Parry, what is the priority of the various claims against the houseboat? The evidence 7The evidence comprised two affidavits. The first was an affidavit of Nekta Vamvoukakis, sworn on 21 March 2012. That affidavit set out the dealings of Mr Vamvoukakis as manager of the pawn-broking business of HMR and Parry from 11 November 2011 when Parry approached Mr Vamvoukakis asking to borrow $20,000 on security of the houseboat, which Parry asserted was personally owned by him and was also unencumbered. Parry provided to Mr Vamvoukakis a document headed "Transfer", "Vessel Registration Certificate", in his name (Annexure C). Parry then renewed the registration, at HMR's expense. Having given an assurance that the houseboat was insured, Parry then provided details of his driver's licence, debit card and insurance of the houseboat. A document evidencing the loan , known as a pledge, was computer generated by Mr Vamvoukakis on Wednesday 16 November 2011, but signed by Mr Vamvoukakis and Parry on counterpart documents the following day after inspection of the houseboat by Mr Vamvoukakis on behalf of HMR and the handing over of the houseboat keys by Parry (Annexure G). 8The houseboat was left at its location and the sum of $20,000 was paid to Parry. On 25 November 2011 Parry again approached Mr Vamvoukakis with a request for a further $5,000, which was itself the subject of another pledge generated on Saturday 26 November 2011 (Annexure K). Mr Vamvoukakis became aware of the judgment creditor's judgment around Christmas of 2011 and, after confirming the Writ for Levy of Property had been executed by the Sheriff, a claim on the houseboat was brought by HMR. 9Another affidavit was affirmed by Zelma May Lucas on 20 March 2012, in which she set out the history of her dealings with Parry. Mrs Lucas is aged 77 years, and does not enjoy good heath. At the time of the hearing she was awaiting a hip replacement, which prevented her travel to Sydney for the purpose of being cross-examined by the judgment creditor. Leave was given for her evidence to be taken by telephone. 10Mrs Lucas had been introduced to Parry in September 2011, when he began renting her houseboat. She had purchased Cassa D in April 2005 for the sum of $160,000 and had borrowed the sum of $175,000 to pay for the vessel and its transport from the Gold Coast Marina to Brooklyn. Mrs Lucas had resided on the Cassa D at the Hawkesbury River Marina until 2009, when she had, by virtue of the medical condition relating to her hips, been unable to get on and off the boat. She then moved to rented accommodation on the Central Coast, and in September 2011 rented the houseboat to Parry on the recommendation of a friend. The rent was $200 per week, with an agreement that he maintain the boat. Parry paid the rent for the first few weeks, but then stopped paying. In early October 2011 Mrs Lucas attended the houseboat to speak to Parry about the $1,600 owing by way of arrears of rent. Thereafter, Parry befriended Mrs Lucas and set about defrauding her, first by way of borrowing monies from her and then, in November 2011, suggesting to her that she sell the houseboat to him for the sum of $90,000. At the time Mrs Lucas' partner was in hospital due to major heart surgery, she was "under considerable strain" and required the money after having spent considerable funds on Parry during the preceding month. 11Parry orchestrated what could only be described as a fraudulent transaction by presenting Mrs Lucas with a document to sign. That document became Exhibit 1 in the proceedings and a copy of it is attached to this judgment. The Recital to the document recorded that "Zelma has agreed to sell houseboat (cassaD) to Parry and Parry has agreed to purchase and take an assignment of the houseboat from Zelma on the terms set forth in this agreement (sic)." 12Those terms appeared under the heading "Operative Provisions", which included the following:- "(1)Zelma agrees to sell to Parry and Parry agrees to purchase from Zelma the houseboat for the price of $90,000 which shall be payable as set out per below... (4)Payments to be made on the 15th of each month... (6)All mooring and associated costs are at parry's expense... (7)Monthly repayment figure of $2,000 per month including interest." 13Mrs Lucas received no monies from Parry. A short time following the transaction Parry effected a transfer of the registration of the houseboat into his name, notwithstanding that Mrs Lucas refused to provide him with a transfer of the registration. Further, Mrs Lucas paid the mooring fees on the vessel until December 2011, when she was advised that the Sheriff had executed a Writ on the vessel. 14The only evidence relied on by the Judgment creditor was a Process Record from the Court file, which included the Writ for Levy of Property issued on 22 November 2011 and various documents relating to the seizure of the vessel by the Sheriff's Officer at the receipt of the two claims in respect of the houseboat (Exhibit A). Ownership of the houseboat Cassa D 15The first question to be determined is whether Exhibit 1, being the Agreement dated 10 November 2011 between Parry and Mrs Lucas effected a sale of the Cassa D, so that property in the houseboat passed to Parry. The judgment creditor submitted that Exhibit 1 is in clear and unambiguous terms, that it effects a transfer of ownership to Parry and that no evidence is required to construe it, or to evince the parties' intentions at the time it was signed. 16I do not accept this submission, for these reasons. First, given the Recitals set out above and the terms referred to in the document itself, I find that the language of the document is quite ambiguous, and as a matter of construction the document is capable of more than one meaning. Thus, evidence of the circumstances surrounding the making of the document is admissible to assist in its interpretation. See Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 per Mason J. 17The evidence establishes the following :- (1)The transaction was a fraud perpetuated by Parry and designed to defraud Mrs Lucas of the houseboat without the payment of any money there for. (2)None of the terms creating obligations on Parry were met, namely none of the purchase price was paid, none of the monthly repayments were made, and furthermore, Mrs Lucas continued to pay all the mooring and associated costs. Thus, there was a total lack of consideration for the bargain. 18Secondly, as an overriding equitable principle, equity will not allow a contract to be an instrument of fraud - see Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 per Campbell JA [554]. The existence of fraud also justifies the admission of evidence to establish the fraudulent conduct of Parry. 19Thirdly, Mrs Lucas has relied on s 6 of the Sale of Goods Act 1923 ("SOGA") to submit that the document was in any event an agreement to sell, whereby the property in the goods was to transfer only when the conditions to it were fulfilled. Section 22 SOGA further provides that property in goods the subject of a contract for sale is transferred to the buyer only at such time as the parties to the contract intend it to be transferred. Pursuant to s 22(2) SOGA the intention of the parties may be ascertained by having regard to "the terms of the contract, the conduct of the parties, and the circumstances of the case." Here, at no time did Mrs Lucas intend property in the houseboat to be transferred. Not only did she not receive any payment of any money in respect of it, she continued to pay the mooring fees and refused to transfer the registration, which was only effected by the fraud of Parry. 20I find that Exhibit 1 did not constitute a contract of sale whereby property in the houseboat transferred from Mrs Lucas to Parry. Accordingly, I find that property in the houseboat did not pass at any time from Mrs Lucas to Parry, and that Mrs Lucas is the rightful owner of the houseboat. Does HMR have a legitimate claim? 21HMR submits the two pledges referred to above as security for the sum of $25,000 lent by it to Parry complied substantially with the Pawnbrokers and Second-Hand Dealers Act 1996. It relies on the fact that Parry handed over the keys to Mr Vamvoukakis to demonstrate that it was in possession of the houseboat at the time it was seized by the Sheriff. 22HMR submits that, although it was defrauded by Parry, it carried out relevant investigations, for example a REVS search, to determine that the houseboat was unencumbered. HMR has submitted, therefore, that the Sheriff was not entitled to levy the Writ on the houseboat because, at the time of execution of the Writ, Parry had not repaid monies owing pursuant to the pledges, and, accordingly the defendant had not redeemed those pledges. 23Whilst the pledge agreements themselves were attacked by the judgment creditor as not being in compliance with the Pawnbrokers and Second-Hand Dealers Act 1996, and in particular s 28 thereof, I accept the submission made by Mr Anderson on behalf of HMR that the object of the Act is to regulate licensing of Pawnbrokers, and that the Act itself does not constitute a code relating to pledges (see Palgo Holdings Pty Ltd v Gowans (2005) 215 ALR 253 at [21]). Further, the requirements of s 28 have been substantially met. However, a pledge is a "possessory security", which has the effect of transferring possession, but not ownership. The pledgee obtains what has been described as a "special property" in the goods the subject of the pledge, which merely consists of the power to sell on default of repayment (see Sykes & Walker, "The Law of Securities, 5th Ed, pp 732-735). It is, "in truth no property at all" (see Palgo Holdings, supra, at [17]. 24HMR was also defrauded by Parry; however, it did not avail itself of the opportunity to verify the transfer by Mrs Lucas to Parry when it had the opportunity to do so, it being provided with a transfer document by Parry (Annexure C to the affidavit of Mr Vamvoukakis). By failing to do so, it left itself open to the fraud by Parry. The risk of such a result was no doubt reflected in the interest rate charged by it (recorded as 300% per annum on the pledge itself). As Parry had no title to the property he had nothing to pledge, and HMR received no "special property" in the houseboat, giving it a power to sell on default. The question of whether delivery of the houseboat to HMR was actual or constructive delivery therefore does not arise. 25I find that the two pledges which purport to encumber the houseboat as security for the sum of $25,000 loaned by HMR to Parry do not constitute a legal encumbrance against the property of Mrs Lucas. I therefore find that the claim brought by HMR Pty Ltd by way of interpleader fails. The judgment creditor's claim 26The judgment creditor claims a prima facie right to execute as judgment creditor against the houseboat, and attacks both interpleaders' claims on the following bases. 27In respect of the claim made by Mrs Lucas, the judgment creditor submits that in light of the evidence of her paying Hawkesbury River Marina mooring fees for the houseboat up until December 2011, then prima facie a bailment relationship arises, which itself engages the principle cited in Maynegrain Pty Ltd v Compafina Bank (1982) 2 NSWLR 414 at 145 E-G. That submission is misconceived, as there is no evidence of a bailment arising by virtue of the payment by Mrs Lucas of the mooring fees. Rather, it is more probable that payment of such fees gave the owner of the houseboat a license to use the mooring space made available by the Marina. I am therefore not persuaded that the so-called principle in Maynegrain Pty Ltd, supra, is engaged. 28Secondly, the judgment creditor submits that the submission relied on by counsel for Mrs Lucas that regard could be had to the surrounding circumstances of the agreement dated 10 November 2011, between Mrs Lucas and Parry, relying on Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 was incorrect given the decision of the High Court in Western Export Services Inc & Ors v Jirieh International Pty Ltd 2011 [HCA 45] in which, notwithstanding that it was a decision refusing special leave to appeal, the Court confirmed what was said in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 per Mason J, that:- "The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract of the language is ambiguous or susceptible or more than one meaning. But it is not admissible to contradict the language of the contract when it has plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of then will be presumed. " 29It was submitted on that basis that regard should not be had to the surrounding circumstances of the making of the written agreement on 10 November 2011, and in light of that written contract regard should be had to sections 22, 23 and 24 of the Sale of Goods Act 1923. 30For the reasons outlined in paragraphs 16 to 20 above, I have found that evidence of the circumstances surrounding the making of the document dated 10 November 2011 were admissible on the basis of ambiguity and, further, to establish the fraudulent conduct of Parry. For those reasons I am not persuaded that rule 1 of section 23 of the Sale of Goods Act 1923 applies so as to give good title to a fraudulent purchaser when the evidence establishes no enforceable contract was made. 31Finally, the judgment creditor submits that Mrs Lucas expressly abandoned her claim under the Contracts Review Act 1980 (NSW). That was not the case; rather, Mrs Lucas did not rely on the Contracts Review Act part of her claim, but otherwise did not abandon it. At no time did Mrs Lucas submit that she was not bound by the agreement on the basis that she did not read its terms, and thus the submission made by the judgment creditor relying on Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 185 does not apply. 32As against the claim made by HMR, the judgment creditor relied on s 28(3) of the Pawnbrokers and Second-Hand Dealers Act 1996 (NSW) in asserting that the pledges made by Parry were invalid by virtue of non-compliance with various provisions of the Act and the Pawnbrokers and Second-Hand Dealers Regulation 2008 (NSW), as outlined above. I am not persuaded that there was substantial non-compliance with the computer-generated record to uphold such an attack, but rather, at no time did HMR obtain any enforceable right pursuant to the pledge over property which was clearly not owned by Parry. 33By virtue of the above findings, property in the houseboat belongs to Mrs Lucas, and at no time was the houseboat property that could be subject to a Writ for Levy of Property by the judgment creditor in respect of its default judgment against Parry. Therefore, there is no property against which to levy the Writ, and the judgment creditor's claim must fail. 34For the above reasons it is therefore unnecessary to determine whether there is any priority against the subject houseboat in respect of the various claims. Orders 35Pursuant to s 135 of the Civil Procedure Act 2005, I make the following orders:- (1)That the Sheriff is prohibited from taking any further action on the Writ for Levy of Property issued on 22 November 2011 in respect of the houseboat Cassa D. (2)That Versace Australia's Best Tyre and Automotive Ltd be prohibited from taking any further enforcement action in respect of the houseboat Cassa D, based on its default judgment against Parry obtained on 21 November 2011. (3)That the Sheriff return the keys to the houseboat Cassa D to Mrs Zelma Lucas of 19 Woy Woy Road Kariong New South Wales and assist in the return of the houseboat to a mooring of Mrs Lucas' choice and at her direction. (4)That Hock My Ride Pty Ltd be prohibited from exercising any power of sale it may have by way of pledge obtained from Parry of the houseboat Cassa D, and that it return any keys to the Cassa D to the Sheriff. (5)Given the fraudulent conduct of Parry, and the necessary involvement of all parties to this application, I order that each party bear its own costs of the interpleader proceedings. (6)I grant liberty to each party to apply on 7 days notice in respect of the orders made hereto. (7)The exhibits are to be returned. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 April 2012