Case: Hanson Construction Materials v Vimwise Civil Engineering [2005] NSWSC 880
Outcome: cited
Hanson Construction Materials v Vimwise Civil Engineering [2005] NSWSC 880 , Campbell J said (at [22]): 'The fundamental exercise which the Court is engaged in in deciding whether a charge is a fixed charge or a floating charge is a matter of the ascertainment of the intention of the parties. That intention can be ascertained both from the words which they used, and from surrounding circumstances known to both parties. In substance, what Mahoney JA decided in Boambee Bay Pty Ltd v Equus Financial Services Ltd ... was that, even though the words creating the charge were ones which were well able to refer to a fixed charge, so far as concerned property already owned by the chargor at the date of the grant, the surrounding circumstances were such that that could not have been what the parties intended.' It is noteworthy that most of the cases concerning the characterisation of company charges are concerned with their effects upon book debts. The drafter of the ING Charge was plainly alert to the difficulties which that class of property could create in characterisation of the charge. In cl 4.1 of the ING Charge, paragraph (a)(xiii) subjects 'Charged Debt' to the fixed charge. The term 'Charged Debt' is defined in cl 1.1 of the ING Charge as: actual or contingent debt or other monetary obligation from time to time forming part of the Secured Property.' There is however a specific provision in cl 4.2 for the collection of Charged Debts. The lender is required to permit the chargor to collect the Charged Debts. This is a matter of some significance as indicative of an intention to provide specifically for that class of Westpoint Corporation's property which it necessarily had to be able to deal with on an ongoing basis. Clause 8 of the ING Charge prohibited Westpoint Corporation from transferring, leasing or otherwise disposing of or dealing with any part of the Secured Property for the time being subject to the fixed charge or to allow any person to acquire any interest, except a Permitted Encumbrance in any such secured property. The prohibition was subject to the qualification in cl 8.1(b) that: chargor, subject to clause 8.1(c) may in the ordinary course of its ordinary trading business dispose of any estate or interest in that part of the secured property which is for the time being subject to the floating charge.' The prohibition so far as it is applicable to the Option would prevent it from being transferred or otherwise disposed of or dealt with. It would not prevent its exercise. Such is not a dealing in the Option. It is the exercise of the rights conferred by it. So with land which is the subject of the charge, the development of the land itself would not be prohibited under cl 8. Its sale or further encumbering is a different matter. It follows, in my opinion, that the creation of a fixed charge over the Option was not inconsistent with the ordinary course of Westpoint's business. I do not accept Mr Carey's description that the procedure of finding a special purpose vehicle for land development in particular cases negatives that construction. That was not a necessary aspect of the conduct of its business. In order to raise very substantial funds late in 2005 when it faced a considerable need for refinancing, Westpoint Corporation chose to grant a fixed charge in terms which were distributed over specified classes of assets. An option to purchase land fell within those classes. The express provision in the charge for Charged Debts indicates an alertness on the part of the drafter to the difficulties associated with creating fixed charges over book debts. It indicates an intention, by way of contrast, that the charge in respect of interests in land was to be fixed. To the extent that external circumstances might have any bearing on the nature of the Option property and whether it falls within the class attracting a fixed charge, it is notable that there was an offer for $1 million to acquire the Option. The Option was assigned to Bowesco for $100. The Option is a valuable property. I do not accept that the parties to the ING Charge are to be taken as having contemplated that property in that class could be disposed of for what appears to have been a mere bagatelle 'in the course of business' within the Westpoint Property Group.