Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Land and Enviro Corp v HHT Huntley Heritage Pty Ltd [2016] NSWCA 376 Hearing dates: On the papers Decision date: 21 December 2016 Before: Meagher JA Decision: 1. The applicant, Mr Mateljan as purported controller of LEC, to file and serve written submissions in support of the relief sought in paras 1, 2 and 4 of his notice of motion filed 23 August 2016. Those submissions are to be filed and served by 24 January 2017 and should address, in addition to any other matters considered relevant to the claim to that relief, the following – (a) the source of the applicant's authority to conduct and maintain the appeal proceedings in the name of and on behalf of LEC; (b) the basis on which it is said that the applicant has taken possession of the choses in action and any other rights which are the subject of or relied upon in LEC's appeal; (c) having regard to the provisions of UCPR r 7.1, the basis on which it is said that LEC may carry on the appeal proceedings other than by a solicitor; (d) the reasons why Mr Zdrilic should be permitted to appear for LEC in the prosecution of the appeal in circumstances where he was a director of the company and is a bankrupt. 2. The applicant to file and serve any further evidence relied on in support of the notice of motion by 24 January 2017. 3. The respondents to file and serve any evidence and written submissions in respect of the applicant's notice of motion by 7 February 2017. 4. The applicant to file and serve any written submissions in reply by 14 February 2017. 5. The respondents to file and serve any notice of motion for security for costs together with any supporting evidence by 24 January 2017. 6. The applicant to file and serve any evidence in response to the application for security for costs by 31 January 2017. 7. The respondents to file and serve any written submission in support of their application for security for costs by 7 February 2017. 8. The applicant to file and serve any written submissions in response to the application for security for costs by 14 February 2017. 9. The applicant's motion stood over for directions before the Registrar on 20 February 2017. Catchwords: PRACTICE AND PROCEDURE – case management – directions Legislation Cited: Corporations Act 2001 (Cth), ss 9, 418 Uniform Civil Procedure Rules 2005, rr 7.1, 13.6, 36.16 Cases Cited: Mateljan v HTT Huntley Heritage Pty Ltd [2016] NSWCA 20 Texts Cited: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) Category: Procedural and other rulings Parties: Land Enviro Corp Pty Ltd (Applicant) HTT Huntley Heritage Pty Ltd (in its own and as Trustee of the Huntley Trust) (First Respondent) Robert Michael Renshall (Second Respondent) Sentel Pty Ltd (Fourth Respondent) Devubo Pty Ltd (Fifth Respondent) Representation: John Mateljan (Applicant) K&L Gates (First Respondent) File Number(s): 2012/156726 Publication restriction: Nil Decision under appeal Court or tribunal: Court of Appeal Date of Decision: 22 June 2015 Before: Registrar Riznyczok File Number(s): 2012/156726 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. MEAGHER JA: In this appeal proceeding Mr Mateljan, who describes himself as "controller" of the appellant, Land Enviro Corp Pty Ltd (in liq) (LEC) seeks for and on its behalf to set aside the Registrar's order of 22 June 2015 that LEC's appeal be dismissed under Uniform Civil Procedure Rules 2005 (UCPR) r 13.6. He also seeks further directions as to the conduct of LEC's appeal. Mr Mateljan's motion, as controller of LEC, was returnable on 29 August 2016. The Registrar declined to make the orders sought and referred the matter for the making of further directions, if considered necessary. 2. In the circumstances described below I make the following further directions with respect to the resolution of Mr Mateljan's motion filed 23 August 2016: 1. The applicant, Mr Mateljan as purported controller of LEC, to file and serve written submissions in support of the relief sought in paras 1, 2 and 4 of his notice of motion filed 23 August 2016. Those submissions are to be filed and served by 24 January 2017 and should address, in addition to any other matters considered relevant to the claim to that relief, the following – (a) the source of the applicant's authority to conduct and maintain the appeal proceedings in the name of and on behalf of LEC; (b) the basis on which it is said that the applicant has taken possession of the choses in action and any other rights which are the subject of or relied upon in LEC's appeal; (c) having regard to the provisions of UCPR r 7.1, the basis on which it is said that LEC may carry on the appeal proceedings other than by a solicitor; (d) the reasons why Mr Zdrilic should be permitted to appear for LEC in the prosecution of the appeal in circumstances where he was a director of the company and is a bankrupt. 2. The applicant to file and serve any further evidence relied on in support of the notice of motion by 24 January 2017. 3. The respondents to file and serve any evidence and written submissions in respect of the applicant's notice of motion by 7 February 2017. 4. The applicant to file and serve any written submissions in reply by 14 February 2017. 5. The respondents to file and serve any notice of motion for security for costs together with any supporting evidence by 24 January 2017. 6. The applicant to file and serve any evidence in response to the application for security for costs by 31 January 2017. 7. The respondents to file and serve any written submission in support of their application for security for costs by 7 February 2017. 8. The applicant to file and serve any written submissions in response to the application for security for costs by 14 February 2017. 9. The applicant's motion stood over for directions before the Registrar on 20 February 2017. 1. The underlying equity proceedings, in which the orders sought to be appealed from were made, were brought by LEC, Mr & Mrs Zdrilic and Amy Holdings Pty Ltd. As is noted in this Court's judgment in Mateljan v HTT Huntley Heritage Pty Ltd [2016] NSWCA 20 (Gleeson, Leeming JJA and Emmett AJA) at [6], Mr & Mrs Zdrilic are both now bankrupts and Amy Holdings and LEC are in liquidation. The appeal, insofar as Mr & Mrs Zdrilic are concerned, has been discontinued by their trustee, and on 15 June 2015 the appeal by Amy Holdings was dismissed by the Registrar under UCPR r 13.6. 2. Mr Zdrilic is Mr Mateljan's brother-in-law. By its earlier judgment this Court dismissed Mr Mateljan's claim to be substituted for LEC as appellant in the appeal proceedings on the basis that he had become entitled, by way of assignment from LEC, to the causes of action which were the subject of the underlying equity proceedings and the appeal. 3. The "mechanism" of that asserted assignment is described in that judgment at [7]-[11]. Mr & Mrs Zdrilic as chargees had the benefit of a fixed and floating charge granted by LEC by deed dated 19 June 1998. That charge secured advances made by Mr & Mrs Zdrilic to LEC in accordance with a deed of loan and guarantee and indemnity dated 19 June 1998. Mr & Mrs Zdrilic were made bankrupt on 27 May 2015, having committed an act of bankruptcy on 18 March 2014. On 25 May 2015 they purported to appoint a Mr Iannuzzi as receiver and manager of LEC pursuant to the charge. On the same day Mr Iannuzzi purported to assign on behalf of LEC the causes of action to Mr Mateljan. The causes of action assigned were defined as: Any and all powers, legal or equitable rights or remedies, benefits, actions, suits, choses in action or causes of action that [LEC] has, or may have, in respect of the facts, matters or circumstances the subject of the amended notice of appeal [filed in the Appeal Proceedings], and/or the [Equity Proceedings and the Appeal Proceedings]. 1. In response to Mr Mateljan's application to be substituted as appellant, the respondent in the appeal HTT Huntley Heritage Pty Ltd (HTT), contended that Mr & Mrs Zdrilic did not have power to appoint a receiver of LEC because as at 25 May 2015 all of their assets, including any power to do so, were vested in their trustee in bankruptcy; that if the receiver was validly appointed, he lacked the power to cause LEC to make such an assignment; and that, in any event, the relevant causes of action were incapable of being assigned. This Court upheld the first of these contentions (at [28]-[31]), and did not decide the second ([32]-[34]) or the third ([35]-[43]). 2. Mr Mateljan's current application is brought purportedly as "controller" of LEC. That description, when used "in relation to property of a corporation" is defined in s 9 of the Corporations Act 2001 (Cth), to mean: (a) a receiver, or receiver and manager, of that property; or (b) anyone else who (whether or not as agent for the corporation) is in possession, or has control, of that property for the purpose of enforcing a charge; and has a meaning affected by paragraph 434F(b) (which deals with 2 or more persons appointed as controllers). 1. Mr Mateljan does not contend that he is or has been appointed as a receiver, or receiver and manager, of LEC's property. Nor could he have been so appointed. Section 418 of the Corporations Act provides that a person is not qualified to be appointed, and must not act as a receiver of property of a corporation if the person is a mortgagee of the property of the corporation; a director of the corporation; or is not a registered liquidator. Mr Mateljan does not answer this last description. 2. Accordingly Mr Mateljan must be taken to be maintaining that he is in "possession, or has control" of property of LEC for the purpose of enforcing the charge. That position is said to arise in the following circumstances. 3. On 26 July 2016 the trustee of the bankrupt estates of Mr & Mrs Zdrilic, Mr Leroy, purported to assign to Mr Mateljan: "all of the Assignor's right, title and interest in the LEC Debt and the Charge to the Assignee, and the Assignee agrees to accept the assignment of the LEC Debt and the Charge from the Assignor in consideration for payment of the Assignor Fee. 1. The LEC Debt is defined as an amount of $2 million plus interest owed by LEC to Mr & Mrs Zdrilic. The Charge is the fixed and floating charge granted by LEC and dated 19 June 1998. 2. By a Deed of Appointment of Controller dated 12 August 2016, Mr Mateljan as assignee of the Charge and LEC Debt, purported to appoint himself as "controller" of the following property of LEC: All present and after-acquired property, no exceptions including but not limited to all undertakings, property and assets of the Grantor, both present and future. 1. That deed of appointment purports to authorise Mr Mateljan in his capacity as controller "to exercise all the powers, authorities and discretions of a controller" of the Secured Party contained in the Charge (cl 1). The reference to "Secured Party" is to Mr Mateljan as assignee of the charge. It is also declared (cl 4) that "to the full extent permitted by law the Controller shall be and act as the agent of the Grantor and otherwise the Controller shall be the agent of Secured Party". The "Grantor" referred to is LEC. 2. Assuming the trustee's assignment of the Debt and Charge to Mr Mateljan is valid, difficulties arise in relation to his purported appointment as controller and, more relevantly, his authority to conduct and maintain the appeal proceedings for an on behalf of LEC. There are no powers, authorities or discretions of a controller described in the deed of charge. The definition of "controller" in the Corporations Act, excluding someone who is a receiver, or receiver and manager, of such property, describes "anyone else who … is in possession, or has control, of [property of the corporation] for the purpose of enforcing a charge". Clause 4 purports to appoint Mr Mateljan as agent for himself, in his capacity as chargee. There are two difficulties at this point. The first is that agency describes a relationship between two persons. In other words, you cannot act as agent for yourself. The second is that the appointment of someone as an agent of the chargee for the purpose of exercising a power of the chargee would not of itself constitute that person as a controller. 3. The deed of charge provides that Mr & Mrs Zdrilic may enforce the charge by taking certain action as described in cl 19, or by appointing a receiver in accordance with cl 21. There is no reference in the deed to the appointment of any person as a controller. Nor is there any description of the powers of anyone given that title. 4. Clause 19 relevantly provides: If an Event of Default happens Zdrilic may … enforce this Charge by doing any one or more of the following in any way it considers appropriate: (a) entering into, seizing, taking possession of, managing or using the Company Property; and (b) exercising any one or more of the powers that a receiver may exercise under s 420 of the Corporations Law. Zdrilic may take such other enforcement action as the general law allows. Zdrilic may delegate any of these powers. Zdrilic may engage agents, contractors, consultants, advisers, auctioneers and other persons in connection with these powers. 1. It may be that Mr Mateljan contends that by cl 1 of the deed of appointment he has purported to delegate his power as chargee under the charge to enter into or seize or take possession of property of LEC. However such a delegation to himself would be of no effect and he would continue to exercise any such power as chargee. If he took possession of some property of LEC such as a motor vehicle or other chattel for the purpose of enforcing the charge he may thereupon have become a "controller" of the property. 2. Here however Mr Mateljan on 12 August 2016 wrote to the liquidator of LEC, Mr Whitton, advising: I hereby give notice that in accordance with the rights granted by the charge, I have today entered into possession of that much of the Company Property which is secured by the charge as is described in the Schedule to this letter. I have been appointed as the controller on 12 August 2016. 1. The property described in the schedule to that letter is: 1. The causes of action asserted by the Company in the legal proceedings number 2007/254173 conducted before Justice Stevenson in the NSW Supreme Court. 2. All rights of appeal in respect of those proceedings including those asserted in the NSW Court of appeal proceedings number 2012/156726. 1. Finally, in relation to the conduct of the appeal proceedings, Mr Mateljan says that he has been unable to obtain legal representation or funding on behalf of LEC and that he has no ability to conduct the proceedings on its behalf. Accordingly he states (in his affidavit of 22 August 2016) that he has "given authority" to Mr Zdrilic to conduct the appeal proceedings, and seeks the leave of the Court to have Mr Zdrilic conduct the appeal proceedings on behalf of LEC. 2. Relevantly to this application, UCPR r 7.1 provides in relation to proceedings commenced or carried on by a company: (2) A company within the meaning of the Corporations Act 2001 of the Commonwealth: (a) may commence and carry on proceedings in any court by a solicitor or by a director of the company, and (b) … (3) In the case of proceedings in the Supreme Court, subrule (2)(a) authorises a company to commence proceedings by a director only if the director is also a plaintiff in the proceedings. 1. Where a director of a corporation purports to commence or carry on proceedings for and in the name of a company, an affidavit must be filed as to his or her authority to act in that capacity. Mr Mateljan is not a party to the appeal proceedings. Nor is he a director of LEC. 2. The basis for Mr Mateljan's asserted authority to carry on the proceedings in the name of and on behalf of LEC would appear to depend on his assertion that he is a "controller" of the relevant property of LEC (the causes of action and other rights described in [19] above), as distinct from a receiver, or receiver and manager of that property. To be a controller of that property he must be lawfully in possession of the property for the purpose of enforcing the charge. 3. The causes of action asserted in the equity proceedings were a claim in respect of misleading and deceptive conduct giving rise to loss, claims for rescission of two agreements and the setting aside of Court orders, and claims for fraudulent or neglect misstatement giving rise to loss. Each claim describes a right of LEC that may only be enforced by the taking of legal proceedings as distinct from the taking of physical possession. It is the very essence of those legal or equitable claims that they cannot be enforced by the taking of possession: see generally JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed 2014, LexisNexis Butterworths) at [6-005]. 4. In these circumstances the matters which must be addressed in Mr Mateljan's application to reinstate LEC's appeal and to have Mr Zdrilic appear for LEC include those in paras (a) to (d) of direction 1 in [2] above. ********** 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: 21 December 2016