Burns Philp Trustee Company Ltd v. Ironside Investments Pty Ltd

(1984) 2 Qd R 16
2 ACLC 332

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(Judgment by: Shepherdson J)

Between: Burns Philp Trustee Company Ltd
And: Ironside Investments Pty Ltd

Court:

Judge:
Shepherdson J

Subject References:
Companies
Winding up
Liquidator's power
Disclaimer of onerous covenants upon land
Covenant in bill of mortgage permitting receiver to carry on business previously carried on at or from the encumbered land
Whether onerous
Liquor
Licensed victualler's licence
Nature of Licence
Whether property
Mortgages
Receivers
Powers
Express covenant in bill of mortgage giving receivers power to carry on business formerly carried on at or from land the subject of the mortgage
Mortgage silent as to use of building on land as licensed tavern
Whether includes power to carry on licensed tavern

Legislative References:
Companies (Queensland) Code - s. 454(1)

Case References:
Jack v. Smail - (1905) 2 C.L.R. 684
The Queen v. Miller & Ors. - (1893) 5 Q.L.J. 40
The Queen v. Licensing Justices of North Brisbane - (1894) 6 Q.L.J. 95
Inglis Electrics Pty. Ltd. (Receiver Appointed) v. Healing Sales Pty Ltd - [1965] N.S.W.R. 1652
Codelfa Construction Pty. Ltd. v. State Rail Authority of New South Wales - (1982) 56 A.L.J.R. 459
B. P. Refinery (Westernport) Pty. Ltd. v. Hasting Shire Council - (1977) 52 A.L.J.R. 20
Anthoness v. Anderson - 14 V.L.R. 127

Hearing date:
Judgment date: 16 March 1984

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Judgment by:
Shepherdson J

On May 12, 1983 Ironside Investments Pty. Ltd. ("Ironside") executed in favour of Burns Philp Trustee Company Limited ("B.P.") a bill of mortgage over an estate in fee simple in certain land in the County of Ward, Parish of Boyd. The consideration expressed in the bill of mortgage was the sum of $2,280,000 "lent or agreed to be lent" to Ironside.

The bill of mortgage was registered in the Titles Office at Brisbane on May 19, 1983.

On December 22, 1983 K. F. Harris Pty. Ltd. (in provisional liquidation) presented to this Court a petition (No. 314 of 1983) seeking a winding up of Ironside.

On January 19, 1984 Desmond William Knight was appointed a provisional liquidator of Ironside. On February 15, 1984 this Court ordered that Ironside be wound up and that Knight and Ross Andrew Duus be appointed liquidators.

B. P. advanced to Ironside the loan which it had agreed to make under the mortgage. Ironside defaulted in a payment of interest due under the bill of mortgage and on November 14, 1983 B. P. served on Ironside notice of exercise of power of sale under the bill of mortgage. The amount owing by Ironside to B. P. under the bill of mortgage is $2,262,940.03.

Erected on the land which is the subject of the mortgage is a building in which from October 19, 1983 to February 20, 1984 Ironside carried on the business of a tavern. Ironside did so with the approval of the Licensing Commission although no licence had been issued to it under the Liquor Act 1912 - 1982. Material placed before me has satisfied me that at some stage Ironside had successfully tendered for a tavern licence for the premises the subject of the bill of mortgage. The tavern was and is known as the Twin Rivers Tavern, Eagleby. The liquidator of Ironside ceased to operate the premises as a tavern when on February 20, 1984 B.P. as mortgagee under the bill of mortgage took possession of the premises. Since then the premises have remained closed for business. The expected tavern licence has not yet issued because the Licensing Commission has advised that there is outstanding work in the premises namely "the kitchen has not been completed in accordance with the plans approved by the Commission and to the satisfaction of the Commission".

B. P. wishes to exercise its power of sale in respect of the mortgaged premises. For that purpose it desires first to reopen the tavern and carry on the tavern business. It can only do this if it has the requisite licence under the Liquor Act. B. P. is of the opinion that to carry on the tavern business will increase the sale value of the mortgaged premises and that the goodwill is rapidly deteriorating for so long as the business remains closed.

B. P. is prepared to inject funds into the business to enable it to recommence trading. It proposes to trade for only a short time (say three weeks) with a view to improving and facilitating the sale of the mortgaged premises. This proposal has met with the opposition of the liquidators of Ironside. According to affidavit evidence read before me, B. P., on March 6, 1984 appointed Messrs. W. J. Wilde and L. E. Force receivers under the bill of mortgage.

The bill of mortgage to which I have already referred does not mention that the building on the mortgaged land is to be used as a licensed tavern.

In the events which have happened B. P. has applied for the following relief:

"(a)

A declaration that upon a proper construction of clauses 30 and 31 of the bill of mortgage the receivers have power (inter alia) to carry on and manage the business of a tavern formerly carried on on the land described in the bill of mortgage.

(b)

Further or alternatively a declaration that upon a proper construction of the bill of mortgage and in the events which have happened the liquidators of Ironside are to do all things necessary to enable B. P. to have the benefit of the tavern licence when issued.

(c)

Further or alternatively a declaration that the liquidators of Ironside hold the tavern licence in trust for the receivers appointed pursuant to the bill of mortgage."

When the matter was called on for hearing I gave the liquidators of Ironside leave to file a summons in cross application. I shall refer to this summons later.

Before proceeding further, I should also say that affidavits from Messrs. Wilde and Force were filed by leave. Neither of these gentlemen deposed to their appointment as receivers under the bill of mortgage. Indeed, their affidavits which are each sworn on March 9, 1984 speak in terms of future appointment. Nevertheless, in view of the urgency of the matter it is best if I give my decision on the basis that by the date of this judgment they will have been appointed receivers under the mortgage.

As I have already mentioned the bill of mortgage does not mention the licence or indeed that a business which required to be licensed was proposed to be conducted on the mortgaged premises. From the way in which the matter has been argued before me I infer that the loan from B.P. to Ironside was for the purpose of erecting the buildings on the mortgaged land.

Before me the applicant relied on clauses 30 and 31 of the bill of mortgage and in particular clause 31(e) which reads:

"31. Every receiver or receiver and manager, in addition to the powers conferred on a receiver hereinbefore or by the Property Law Act 1974 or by law at the material time in force shall have power: -

. . .

(e)

To carry on and manage as he shall think fit any or all the business or businesses which may be or have been carried on at or from the said land with power to receive and pay debts."

It can be seen from the above quoted portion of clause 31 that even though Messrs. Wilde and Force are appointed receivers only they have certain powers of management.

The applicant B. P. submitted that:

(a)

The licence to conduct the hotel business related solely to the person holding it and to the premises to which it is attached and that once Ironside lost its right to possession it lost its right to the licence.

(b)

That the licence to be granted under the Liquor Acts (be it a tavern licence or otherwise pending the granting of the tavern licence) was not an item of personal property and that it attached to the mortgaged premises.

(c)

That because Ironside had already carried on a licensed hotel business at the premises the receivers were, on the proper construction of sub-clause 31(e), empowered to manage that business.

(d)

Alternatively, that although the licence was not mentioned in the bill of mortgage there should be implied in the bill of mortgage a term which recognized that the security of the bill of mortgage included the licence.

As to the first two of these submissions Mr. Callinan Q.C. who appeared for B. P. relied on dicta of Griffith C.J. in Jack v. Smail (1905) 2 C.L.R. 684 at pp. 704 - 705. The Chief Justice was there speaking of a grocer's licence which he pointed out was "analogous to a victualler's licence in that both are in respect of premises and have a qualified transferability from one person to another after giving full notice".

Griffith C.J. referred to a decision of the Supreme Court of Victoria, Anthoness v. Anderson 14 V.L.R. 127 a decision by which he thought the High Court was bound. He then proceeded to quote various extracts from a judgment of Higinbotham C.J. in that case. Higinbotham C.J. had said (14 V.L.R. at p.142) (and this was part of an extract quoted by Griffith C.J.):

"A licence of this kind - a publican's licence - is in our opinion a personal licence the exercise of which is limited to particular specified premises. Being a personal licence it is not at common law capable of assignment or transfer. It is a licence to an individual for particular premises till it is taken out of him by legal authority. The Act provides several ways in which the licence may be transferred from the licensee to another person and also for means by which the exercise of the authority given by the licence can be transferred from one house or premises to another house or premises. But, unless in the way provided by the Act, the right of property cannot be affected, nor can the licensee transfer his licence to another person except subject to the provisions of the Act. The transfer depends upon the authority given by the Licensing Court."

I pause to point out that that passage generally describes the situation that obtains under the Queensland Liquor Act when a licence is to be transferred.

At p. 705 Griffith C.J. after a short comment on the above extract from the judgment of Higinbotham C.J. went on to quote a further extract from the latter's judgment. At p. 705 he said (of the grocer's licence) - "It is not property; it is a personal right of the insolvent to carry on business in a particular place under conditions prescribed by law".

In my respectful view that statement aptly describes the licence which it is hoped will issue for the Twin Rivers Tavern. Before I leave this topic I should refer to two old decisions of the Queensland Full Court in which that Court referred to the nature of a licensed victualler's licence. In The Queen v. Miller and Ors. (1893) 5 Q.L.J. 40 Griffith C.J. who wrote the leading judgment said (at p. 42) in speaking of a licence under the Licensing Act of 1885 - "A licence under the Act is not in the nature of property. It is a personal right to carry on a certain business and incidently (sic) the right to property might be involved. A licence is granted on the personal fitness of the applicant and that is not a subject for transfer". In The Queen v. Licensing Justices of North Brisbane (1894) 6 Q.L.J. 95 Griffith C.J. said (at p. 96):

"This case raises the question of the rights of a person claiming to be a mortgage of a licensed victualler's licence, mortgaged to him in conjunction with a mortgage of the goodwill and lease and the property upon the premises.

The security contained an irrevocable power of attorney to the mortgagee to make all necessary applications on behalf of the mortgagor for the renewal and transfer of the licence. It was not seriously contended that the right of a licensee to a licence is not in the nature of property, or that the ordinary rules of property in regard to mortgage or assignment, except so far as excluded by some statutory provision apply to property of that kind."

These two passages are consistent with the view later expressed by Griffith C.J. in Jack v. Smail (supra) namely that the grocer's licence is not property and that it is a personal right of the holder of the licence to carry on the business in accordance with the licence in a particular place and under conditions prescribed by law. These three statements by Griffith C.J. make it quite clear that a licence of the type described before me is not property. As was pointed out during argument, ss. 126 and 129 of the Queensland Liquor Act expressly prohibit sales of liquor without the authority of a licence. It is of interest to note that so far as application for and granting of a tavern licence is concerned, the provisions of the Liquor Act apply as if the tavern licence were a licensed victualler's licence, the tavern keeper were the holder of a licensed victualler's licence and a tavern were licensed premises of a licensed victualler (s. 125HC.).

I should here say that Mr. Davies Q.C. who appeared for Ironside submitted that I should not follow Jack v. Smail (supra), that I should hold that the tavern licence is a creature of statute and a personal proprietary right and a valuable right in the nature of property. If I were to accept this submission then, because the subject bill of mortgage does not mention the licence and contains no charge or security over the licence and because it is not registered in accordance with Part IV Division 9 of the Companies (Queensland) Code it is void against the liquidator. The occurrence of the winding up of Ironside and crystallisation of rights between secured and unsecured creditors give these submissions even more importance.

However, I reject these submissions and propose to follow Griffith C.J.'s views which are binding on me. I hold that a tavern licence is not property and is a personal right to the holder of such a licence to carry on the business in accordance with the licence at particular premises and under conditions prescribed by law.

I turn now to Mr. Callinan's third submission.

There is no licence at present, Ironside is not in possession and B. P. is. It is in possession as mortgage who has ejected its defaulting mortgagor. Ironside's position is not unlike that described by

Higinbotham C.J. in Anthoness v. Anderson (supra) in the following passage which was cited with approval by Griffith C.J. in Jack v. Smail (supra) at p.705:

". . . when the landlord lawfully takes possession, the licensee has no right to carry on the business in these premises and the assignee cannot take the place of an evicted tenant. In that case the landlord is the only person entitled to ask the sanction of the Licensing Court to substitute one tenant for the other and transfer to him the licence that has not expired. The plaintiff's right to relief, therefore, in respect to the licence stands in the same position as his right to possession of the lease and of the premises. It ceases to exist in any form once the landlord has lawfully determined the lease."

Ironside has already carried on a hotel business at the Twin Rivers Tavern and there is in my opinion power under cl. 31(e) of the subject bill of mortgage for the receivers to carry on the same business. In Inglis Electrics Pty. Ltd. (receiver appointed) v. Healing (Sales) Pty. Ltd. [1965] N.S.W.R. 1652 Asprey J. in construing a deed under which a receiver of a company had been appointed said (at p. 1656):

"Where a person is given express authority to pursue a course of action, in this case to carry on a business, he has implied authority to do whatever is necessary for or incidental to the effect of execution of his express authority in the usual way."

In the view which I take of this matter B. P. as mortgage in exercising its power of sale has an obligation to obtain the best price it reasonably can. The premises without a licence will be worth less than with a licence.

The mortgage debt is very substantial. The liquidators of Ironside have a very real interest in what the sale price will be. The receivers, in my opinion, having power to manage the business must in the circumstances of this case take steps to see that that business is one on which a licensed tavern is conducted. B. P. is prepared to spend money in taking these steps.

Because I have acceded to Mr. Callinan's first three submissions, it is strictly unnecessary for me to consider whether the doctrine of the implied term as recently enunciated in Codelfa Construction Pty. Ltd. v. State Rail Authority of New South Wales (1982) 56 A.L.J.R. 459 should be applied to give business efficacy to this mortgage. However if it were necessary for me to do so I should have been prepared to imply such a term as the five conditions summarized in B. P. Refinery (Westernport) Pty. Ltd. v. Hastings Shire Council (1977) 52 A.L.J.R. 20 at p. 26 are met in this case. Thus, for reasons already given I will make a declaration in favour of B. P. as hereinafter set out.

I turn now to the summons which I gave the liquidators of Ironside leave to file. They seek directions pursuant to the Companies (Queensland) Code as to the following:

"1.

Whether such obligations as are imposed by the above clause 31(e) are capable of being disclaimed by the liquidators as onerous and whether in the circumstances those obligations should be disclaimed by the liquidators.

2.

Whether the said clause obliges the liquidators to do all such things as are necessary to permit B. P. to carry on Ironside's business as a tavern on the said land and whether in the circumstances the liquidators should do all such things including permitting B. P. to use the fittings and stock in trade of Ironside for that purpose.

3.

If it is the case as is deposed to in para. 11 of the affidavit of Remo Peter Anthony Barbaresco filed herein on behalf of B.P. and in para. 7 of the affidavit of Paul Levinson Bond also filed herein on behalf of B. P. that the closure of the business of the tavern caused the value of the goodwill of the said business and the value of the property the subject of the mortgage to diminish and that as is deposed to in para. 10 of the said affidavit of Barbaresco that B. P. caused the closure of the said business, whether in the circumstances the liquidator should institute proceedings against B. P. for damages for negligence."

The first head of relief is based on s. 454(1) of the Companies (Queensland) Code which provides:

"Subject to this section, where part of the property of a company consists of -

(a)

land burdened with onerous covenants;

. . .

the liquidator of the company may, on behalf of the company, subject to subsection (2) notwithstanding that he has endeavoured to sell or has taken possession of the property or exercised an act of ownership in relation to it, by writing signed by him disclaim the property."

In the view which I take of the matter it could not possibly be said that cl. 31(e) is an onerous covenant which burdens the land. The covenant seems to me to be one of a type which one could reasonably expect to find in a bill of mortgage over property on which a business is conducted. Certainly the drafting of the bill of mortgage could be validly criticized in other respects but it is not my place to make that criticism. Consequently I decline to give the direction sought by the liquidators of Ironside.

The second head of relief need not be considered for several reasons.

First B. P. conceded it does not claim the fittings and stock in trade of Ironside. Second, the declaration I am making in favour of B. P. coupled with expected co-operation from the Licensing Commission makes further consideration of cl. 31(e) by me unnecessary. I shall give liberty to apply if there is any difficulty in obtaining the licence.

As to the third head claimed, Mr. Callinan said that his client was quite happy to meet any claim for damages for negligence which may be brought. On the face of the material contained in the paragraphs of the affidavits already referred to it does seem that under s. 377 of the Companies (Queensland) Code I should direct that the liquidators have leave (if such leave be needed) to bring an action for negligence if they are so advised. I must not be taken as inferring that B. P. was negligent, and have merely given this direction now in order to save the parties the costs of a possible further application to this Court.

In summary then I make the following orders:

1.

I declare that upon a proper construction of clauses 30 and 31 of bill of mortgage G. 989273 made between Ironside Investments Pty. Ltd. as mortgagor and Burns Philp Trustee Company Limited as mortgagee and in the events which have happened the Receiver appointed by the mortgagee has power pursuant to clause 31(e) of the said bill of mortgage to carry on and manage the business of a licensed tavern formerly carried on on the land described in the bill of mortgage and that for the purpose of exercising such power it may apply for any necessary licence.

2.

I declare that the obligations imposed by the said clause 31(e) are not capable of being disclaimed by the liquidators of Ironside Investments Pty. Ltd. as onerous.

3.

I direct that the liquidators of Ironside Investments Pty. Ltd. have leave to institute proceedings against Burns Philp Trustee Company Limited for damages for negligence.