Australian Securities Commission v Zarro, P

[1991] FCA 819

No. 8\q... /g! ........ .

NOT FOR DISTRIBUTION J E D ~ ~ ~ ~ , E N T

JN THE FEDERAI; COURT	) )
9F AUS-	) No. QG 3018 of 1991
-LAND	DISTRICT REGISTRY)
DNERAI; DIVISION	1
BETWEEN:

AUSTRALIAN SECURITIES COMMISSION

Applicant

- and -

PASOUAL ZARRO AND O W

Respondents

. --

z!!xE:	Heerey J.
.Pu&Z:	Brisbane  1
DATE :	18 November 1991

2 X A L COURT OF

PRINCIPAL REGISTRY

$X TEMPORE REASONS FOR

On Friday afternoon, 15 November 1991, on the ex parte application of the Australian Securities Commission I made certain injunctive orders which were to have effect until 4:15pm tomorrow. I also made an order for the appointment of receivers and an order conferring certain powers on them.

decision the Full Court of the Supreme Court of Victoria said:

On reconsideration of this matter over the weekend I have come to the clear conclusion that I should rescind and vacate that part of the order which appointed the receivers. I have had the opportunity since then to reconsider the recent leading case on this subject, National Australia Bank Ltd v Bond Brewina Holdinas Lt$ [l9911 1 VR 386. At p.539 of that

The appointment of a receiver is one of the oldest remedres of the Court of Chancery, and a very useful remedy it is. But its very efficacy means that a corresponding caution must attend its employment. Where a receiver is sought to protect property of which no-one is in actual possession, no-one will be ousted by the appointment and probably no great h a m will be done. But where the subject matter is in the defendant's hands he may suffer an irreparable wrong by being dispossessed and of course this danger will weigh with a judge from whom the remedy is sought. The appointment of a recerver which is to be, so to speak, at the expense of the defendant's possession and without hrs consent is a step never to be taken without proper consideration of the defendant's positron.

Authority was cited. The Court continued:

Where a receiver is sought, not merely of a particular asset of the defendant, but of all his assets, particular caution is required and where, as in the present case, the receiver is to possess himself of and to manage the assets and undertaking of a collectron of companies which, whether they are solvent or not, are in a very large way of business, very great circumspection is required. Of course in a strong enough case the court might, without warnrng to a trading company, divest it of control of its undertaking and assets. But it must always be borne in mind that the appointment of a receiver in such a case authorises an irresistible invasion and that even if the army of occupation is withdrawn after only a short tune things may never be the same again. Rights of property and the company's privacy are violated. Only the most pressing need can warrant such an invasion without notice. Quite apart from the taking out of the companies' hands of control of their assets and the management of their busrnesses, there was in the present case the added conarderatron (which will not infrequently be present where a receiver is appointed to a company) that the making of the order might well have most serious legal consequences for the companies or for related companies having regard to the terms of securrties given by them. And in addition to the legal consequences there was the connnercial consideration that, ai ~icarda,- Receivere and Managers, p.4, has observed, the receiver is often seen not as the company doctor but	as the undertaker, so that a blow is struck to the standing and
credit of the defendants.
In the present case the order sought, although interim or interlocutory, was one wrth extremely grave consequences for the defendants. Putting to one side a winding up order, which will in the normal course ultimately result in a company's being given its
quietus, we cannot for the moment think of an order of greater
consequence to a company than one which, until further order, robs it of its control over its own aaeets and business.
No court will make such an order unless convinced of its
necessity. A case for aome kind and degree of interlocutory
relief may be made out which falls short of this extremely drastic remedy; for example, the court may not be satisfied, - and it is of course for the applicant to persuade the court that nothing less than what he seeks will do - that in all the circumstances it should do more than grant an injunction. At times the court will
be induced to refuse the remedy of a receiver by undertakings
offered by the defendant.

Returning to the present case, it seems clear enough that the mischief apprehended by the Commission was the removal of funds from various bank accounts, and it seems to me that such risk is quite adequately contained by the injunctions which I have granted which, as I have said, are to last until 4:15pm tomorrow when the Court will consider whether they should be renewed pending trial.

I might also add that a prominent feature of the Bond Brewinq

case was the lack of any undertaking as to damages on behalf of the plaintiff. I appreciate, of course, that in relation to the Commission the statute expressly absolves it from the normal obligation to give undertakings of damages when interlocutory relief is sought (see s.1324(8)). However, the drastic nature of the remedy of appointment of receivers and the injustice of it being granted without notice to the defendant are matters which the Full Court also emphasised and are still relevant in this case. I therefore will vacate paragraphs 3 and 4 of the order I made on 15 November.

I certify that this and the

preceding (2) pages are a true copy of the Reasons for Judgment of the

Honourable Mr Justice

Heerey

Bppearancea

Counsel for the Applicant:	Mr G Egan
Solicitors for the Applicant:	Australian Securities Commission
No appearance for the Respondents