Beach Petroleum NL v Johnson

Re: BEACH PETROLEUM NL and CLAREMONT PETROLEUM NL
And: MALCOLM KEITH JOHNSON; MICHAEL JOHN FULLER; CHRISTOPHER PAUL McDONALD
MAIN; JOSEPH PATRICK CUMMINGS; FIRSTWAY LIMITED; JINGELLIC MINERALS NL;
SPARGOS MINING NL; ENTERPRISE GOLD MINES NL; INDEPENDENT RESOURCES LIMITED and
INDEPENDENT RESOURCES (ASIA) GROUP PTY LTD
No. G53 of 1991
FED No. 868
Number of pages - 20
Corporations Law
(1992) 9 ACSR 404, (1992) 11 ACLC 58

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIAN DISTRICT REGISTRY
GENERAL DIVISION
Von Doussa J.(1)

CATCHWORDS

Corporations Law - applications for relief under s.1323 of the Corporations Law and for Mareva injunction to protect the assets of the respondent Jingellic Minerals NL until judgment - whether appropriate in the circumstances to appoint a receiver and manager - appointment ordered.

Corporations Law, s.1323

Patterson v BTR Engineering (Aust) Ltd and Others (1989) 18 NSWLR 319 applied

HEARING

ADELAIDE

#DATE 23:11:1992

ORDER

Upon the usual undertakings as to damages by the applicants and each of them and the applicants' further undertaking to hold the balance of costs payable to Beach Petroleum NL by Jingellic Minerals NL in the Supreme Court of South Australia Action No. 766 of 1991 in a separate interest bearing account charged with the due performance of the undertaking

The Court orders that:

1. Michael Jaunay Mount, a partner of Messrs Michael Mount PPB, Chartered Accountants of 80 King William Street, Adelaide in the State of South Australia, be appointed receiver and manager of the property of Jingellic Minerals NL ("Jingellic") for a period of six months from the date hereof such period of appointment to be reviewed before the expiration of the six month period by this Court.

2. The receiver and manager shall have the unfettered power to conduct the business and management of Jingellic in such manner as he thinks most beneficial to the interests of the members of Jingellic as a whole.

3. Without in any way limiting the powers, duties or rights conferred on the receiver and manager by Part 5.2 of the Corporations Law, the receiver and manager is hereby empowered and ordered to investigate or cause to be investigated:

3.1 the solvency of Jingellic;

3.2 the position Jingellic should take in these proceedings; and to comply with Notices pursuant to the ASC Law.

4. Within two months of the date of this order and on such other occasions as may be ordered the receiver and manager shall prepare a statement showing the assets and liabilities of Jingellic as at the last day of the period and a report containing such other information as he thinks necessary to enable the members of Jingellic to assess the financial position of Jingellic as at the last day of the period.

5. Save for the provisions of paragraph 6 hereof, the directors of Jingellic shall cease to hold office with effect from the date hereof. During the period of receivership and management:

5.1 the receiver and manager shall assume the management of Jingellic and shall perform the duties, and may perform any of the functions and exercise any of the powers, of the directors of Jingellic;

5.2 the provisions of the Corporations Law relating to the keeping of accounts, the appointment and re-appointment of auditors and the rights and duties of auditors shall continue to apply in relation to Jingellic, and in the application of those provisions to and in relation to Jingellic a reference to the directors of Jingellic shall be read as a reference to the receiver and manager of Jingellic; and

5.3 there shall be no stay of any action or other civil proceedings by or against Jingellic in any court or other tribunal nor shall there be any restraint upon the commencement or prosecution of any action or other civil proceedings by or against Jingellic in any court or other tribunal. In all or any of such actions or civil proceedings or otherwise the receiver and manager shall have authority to bring or defend such actions or civil proceedings in the name of Jingellic.

6. The power of the directors to appeal to the Full Court of the Federal Court of Australia in the name of Jingellic be preserved upon their agreeing to indemnify Jingellic for any costs which it may incur in respect of such proceedings and appropriately securing such costs.

7. Jingellic pay the applicants' costs of the applicants' notice of motion dated 16 November 1992 and this order.

8. The following additional orders shall apply in relation to the receiver and manager:

8.1 the receiver and manager shall be entitled to reasonable remuneration and reasonable costs and expenses properly incurred in the performance of his duties and the exercise of his powers as receiver and manager to be calculated on the basis of the time reasonably spent by the receiver and manager, his partners and staff in accordance with the Insolvency Practitioners Association scale of fees or such other scale as the Registrar may decide, such fees to be paid out of the assets of Jingellic as a first charge; 8.2 the receiver and manager shall deliver an account for all amounts drawn by him for his remuneration, costs and expenses to the Court every three months until the termination of the period of receivership and management or until further order and pay any balances as may be due to him or by him in such manner as the Court may direct.

9. The wholly owned subsidiary of Jingellic, namely Scanfire Exploration Pty Ltd and its present directors until further order be restrained from disposing of, charging or in any way dealing with its assets.

10. The parties hereto and the receiver and manager have liberty to apply.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

VON DOUSSA J. On 12 November 1992, oral application was made to the Court for a Mareva injunction restraining Jingellic Minerals NL ("Jingellic") and its directors from further dealing with the proceeds of the sale of a crushing plant. An interim order was made restraining the company, save for the use of a cheque of $15,000 payable to the solicitor on the record for Jingellic to enable Jingellic to continue to be represented in the trial of the principal proceedings. The application was adjourned for further consideration to 20 November 1992.

On the resumed hearing, the applicants proceeded against Jingellic on written notice of motion which primarily seeks an order under s.1323 of the Corporations Law. That section permits the Court, in certain circumstances, to exercise a wide range of powers to protect people who may have a claim against a company from the dissipation by the company of its assets pending judgment. However the way in which the notice of motion has been argued indicates that the applicants now pursue their claim for remedy on two bases. The first is the general power of the Court to grant a Mareva injunction. That power arises under s.23 of the Federal Court of Australia Act 1976, and, in my view, in an appropriate case extends to the appointment of a receiver and manager. The second is under s.1323 of the Corporations Law.
The Mareva injunction power was considered by the Court of Appeal of New South Wales in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319. At p 321-322, Gleeson C.J. said:

"The remedy is discretionary, but it has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant's absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied."

The requirement as to the need to establish the relevant danger was expressed by the Chief Justice in the terms used by Lord Denning M.R. in Rahman (Prince Abdul) v Abu-Taha (1980) 1 WLR 1268, at 1273, in a passage which was subsequently quoted with approval by Street C.J. in Ballabil Holdings Pty Ltd v Hospital Products Limited (1985) 1 NSWLR 155 at 160 and by Deane J. in the High Court in Jackson v Sterling Industries Limited (1987) 162 CLR 612 at 623.
I propose to apply the test formulated by Gleeson C.J.
It will be noted that it is not necessary for the applicants to show an active intent on the part of the respondent to defeat the applicants from recovering the judgment. It is enough if the applicants establish that, in the absence of relief, there is a danger that assets will be dealt with in a way which will prevent the applicants recovering the judgment.
The Mareva remedy is discretionary. So, too, is the remedy under s.1323 of the Corporations Law. Under the statute the discretion is to be exercised having regard to the need or the desirability of protecting the interests of people to whom the company may be or become liable to pay moneys. The discretion is a general one. In the exercise of the discretion the Court may have regard to all the circumstances of the case: see Corporate Affairs Commission v Lone Star Exploration NL (1988) 50 SASR 24.
The appointment of a receiver or receiver and manager, whether in aid of a Mareva injunction or under para.1323(1)(h), is a drastic step not lightly to be taken. The party seeking such a remedy must make out a clear case not only that the protection of the interests of people to whom the company may be or become liable require protection, but also that a lesser remedy which does not involve removing the administration of the company from the directors would fit the circumstances of the case.
In the present instance, I am satisfied that the prerequisites to the exercise of the discretions both under the general law and under s.1323 have been fulfilled.
The prerequisites to the exercise of the discretion under s.1323 include that an investigation is being carried out under the ASC Law in relation to an act or omission by the respondent company, being an act or omission that constitutes or may constitute a contravention of the Corporations Law. There are two relevant investigations on foot under the ASC Law. One is a longstanding investigation into the affairs of the IRL Group, which includes Jingellic. The second is a more recent specific investigation which has been instituted by the ASC into recent transactions by Jingellic.
As to the exercise of the discretion under the general law it would be sufficient to refer to the decision of the Full Court of South Australia in the winding-up proceedings which were heard last year in the Supreme Court of South Australia between Jingellic and Beach to demonstrate that there is a serious question between the parties to be tried. The test formulated by Gleeson C.J., however, speaks rather of a prima facie cause of action than a serious question to be tried. That formulation of the test seems to me to require that there be evidence adduced in support of the Mareva order to indicate that there are solid realistic grounds upon which it could be held that the applicants should succeed in their proceedings. In the principal proceedings I have now heard a lot of evidence advanced by the applicants. I am satisfied that evidence is sufficient to establish a prima facie cause of action against Jingellic.
It should be stressed that the conclusion just stated involves no pre-judgment of the outcome of the principal proceedings. At this stage I have only heard evidence from the applicants' witnesses, and not the whole of the applicants' case. All that is required for the purpose of the present application is to form the view that the evidence could be accepted as credible and reliable, and, if accepted, that there is a basis upon which the claim could succeed. I am so satisfied.
I am also satisfied that the applicants have established that if the present management of Jingellic, or at least the management that was in place at the time when these applications were made, continued unrestrained by order of the Court the prospect of the applicants recovering any judgment from the assets of the company would be doubtful by reason of the assets of the business being disposed of or otherwise dealt with between now and the entry of judgment.
The applications presently under consideration were precipitated by the sale by Jingellic and Southern Gold Fields Limited of substantially the whole of the assets comprising their interest in the Burbidge joint venture. The assets included a crushing plant and certain mining tenements. The joint venture partners sold those assets at the beginning of November 1992 for $800,000. After discharging a loan secured over the crushing plant to Esanda, the joint venture partners received $88,653.85. This sum was split as to $48,838.94 to Jingellic and the balance to South Gold Fields. The split involved a payment of 55 percent of the net proceeds to Jingellic, a division which I find somewhat odd as Jingellic had a 60 percent interest in the joint venture, but there may be some explanation which has not been disclosed by the evidence.
The evidence adduced by Jingellic seeks to explain the sale on the basis that the joint venture partners' need for the crushing plant in particular had come to an end, and the sale was a sensible disposal of an unwanted asset. The disposal of superfluous equipment by an ongoing business would not, in the ordinary case, be cause for attention, but the applicants' evidence satisfies me that there are features of this disposal which give cause for concern that the assets of Jingellic are being dealt with to the possible prejudice of the applicants. Several matters give rise to the concern. In the course of unrelated proceedings in the Supreme Court of South Australia in which Jingellic and others are plaintiffs and Enterprise Gold Mines NL and others are defendants, Jingellic gave an undertaking before Debelle J. on 3 January 1992 in these terms:

"That it will not transfer, charge or dispose in any way of any of the assets of the company except in the ordinary course of business."

I do not think the disposal of the Burbidge joint venture asset was a disposal within the contemplation of the undertaking to the Supreme Court of South Australia. The disposal was made in the face of repeated demands for payment by the secured creditor, Esanda, and after a final notice of demand amounting to a threat to exercise its powers of sale. Payments under the loan were many months in default. Jingellic had made statements of intention to pay which had led to Esanda granting time, but those statements had not been made good. Hence the final demand.
Moreover, the Burbidge joint venture assets were not mere items of equipment or minor tenement interests that would be bought or sold in the ordinary course of carrying on Jingellic's business without altering the character of its operations or the business itself. The annual report of Jingellic for the year ended 1992, which has just been or is about to be released, describes two main mining assets being firstly the joint venture interest in the Nevoria Gold Mine and secondly, the joint venture interest in Burbidge. There are interests in a number of other mining tenements but they are, or at least historically have been, of much lesser significance. The annual report shows the resources of the Burbidge joint venture to be a substantial proportion of the total mining resources under the ownership and control of Jingellic. In my opinion the disposal of the assets of the Burbidge joint venture was a disposal of a substantial and significant part of the business base of Jingellic.
It is surprising, therefore, that Jingellic made no announcement to the stock exchange about the sale of its interest in the joint venture when that sale occurred. News of the sale came to the attention of the applicants not from any announcement by Jingellic but by an announcement to the stock exchange by the purchasers of the assets, Orion Resources NL.
The dispersal of the proceeds of sale also gives cause for concern that the assets of Jingellic are being disposed of in a way that endangers the recovery of a judgment by the applicants. On the day that Jingellic received its share of the proceeds of sale, cheques totalling $45,611 were drawn including the cheque for $15,000, to which I have already made reference. The sum of $9,000 was paid to other solicitors, presumably in respect of unrelated proceedings, payments of $3,900 were made to each of Messrs Webb and Cummings, and $7,000 was paid to a service company of Mr Fuller. Messrs Fuller, Cummings and Webb were the three directors of the company.
When the present application came on for hearing on 12 November 1992 the Court was led to believe by statements made by counsel appearing for Jingellic in the presence of Mr Fuller that the only cheque drawn against the proceeds was that of $15,000, and a special order was made permitting that cheque to be cashed. It seems to me clear on the evidence that at the least Mr Fuller should have known, and indeed I think probably did know, that other cheques had been drawn. The Court to that extent was misled when the orders were made on 12 November 1992. Even if I am wrong in that impression, the fact remains, at least so far as the Court is aware, that nothing has been done by Messrs Fuller, Cummings and Webb to refund the cheques.
The next matter for concern that the assets are being dealt with to the potential prejudice of the applicants is the fact, which emerges from the affidavits, that other assets of Jingellic have been or are being sold off. In particular the affidavit and later evidence of Mr Webb shows that the South Mount Rankin tenement has recently been sold. The sum of $48,000 has just been received for that. Under serious contemplation is the sale of the Nevoria joint venture and the 35 percent shareholding interest held by Jingellic in Enterprise Gold Mines NL. The affidavit of Mr Griffin confirms that the sale of the Nevoria joint venture is under active consideration as that mining tenement may represent greater value to a third party who is able to fund development costs than it presently has to Jingellic.
The evidence heard this afternoon from Mr Webb, in my view, confirms the inference about disposal of assets which the applicants seek to draw from those aspects of the evidence that I have just mentioned, namely that longstanding assets of the company are being cashed in to meet day-to-day creditors. The end result of that course is likely to be that sooner or later there will be a lot of creditors left and no assets to share between them.
The 1992 annual report expresses hope that the British Hill joint venture in Western Australia will come into production in December 1992, and Mr Webb's cash flow predictions show optimistic revenue forecasts, but there are matters for concern even about that joint venture proposal. Those concerns have to some extent been alleviated by explanations which Mr Thomas and Mr Griffin have endeavoured to give today, but they have not been removed altogether. Mr Webb in paragraph 8 of his affidavit records that upon the payment to Esanda from the sale of the Burbidge joint venture assets a charge over the assets of the company was discharged. He goes on to say:

"Upon release of Esanda's charge consequent upon the Burbidge asset settlement on 9th November 1992 Tennant Trading Pty Ltd became entitled under the terms of the British Hill Joint Venture Agreement to a charge over Jingellic's interest in the balance of the British Hill Joint Venture tenements."

It seems, therefore, that upon the release of one charge another came into operation at least in respect of one asset of the company, namely its interests in that joint venture. The information given in Mr Webb's cash flows, and Mr Griffin's affidavit, would suggest that having regard to the present state of the Nevoria joint venture the British Hill joint venture may have become one of the significant assets of the company, but by reason of events which have recently happened that asset is now subject to a charge, the extent of which is not known.

Another matter of some concern about that joint venture arises from correspondence which took place in January 1992 between Jingellic and the stock exchange. The stock exchange at that time expressed concern that it was not, and the market was not, aware of the identity of the people involved with the other joint venture partner. That lack of information became one of the reasons for maintaining the suspension of Jingellic. The lack of information which then concerned the stock exchange has not been rectified during the present hearing.
The matters so far mentioned have to be considered against a background that under the stewardship of Messrs Fuller, Cummings and Webb as directors, the company has suffered substantial losses. In particular since 30 June 1988 Jingellic has accumulated losses of some $50 million, and a net asset position which stood at approximately $48 million on 30 June 1988 is now in deficit to the extent of $1.287 million. There is a picture of recurring losses. There is nothing in the evidence that has been adduced today to suggest that those recurring losses have been arrested or are likely to be arrested under the current operations of the company. I am, therefore, satisfied there is a danger, unless an order to protect the interests of the applicants is made, that by reason of disposal or other dealings with the assets of Jingellic the applicants, if they succeed, will be prejudiced in the recovery of the judgment.
The prerequisites for the exercise of the general discretion have been fulfilled. The real and most serious question that I must now address is whether in the exercise of that discretion it is appropriate to take the drastic step of appointing a receiver and manager thereby removing the directors from the control of the company.
I think it is important to have regard to a number of characteristics of the company.
Jingellic is a public listed company. The trading in the shares of the company have been suspended for some months, and it is, I gather, about two years since there has been a shareholders' meeting or an election of directors by the shareholders. I am informed that the annual general meeting at the end of 1991 was restrained by order of the Supreme Court of South Australia, and an order restraining the holding of a meeting of shareholders continues.
When these applications came on for hearing on 12 and 20 November, I expressed concern about what I saw to be an irreconcilable conflict between the interests of the directors and the interests of Jingellic. Messrs Fuller and Cummings are individually named as respondents in the principal proceedings in this Court. It is alleged that they were parties to a fraudulent scheme which led to the SCAF agreement, and in turn to a liability on the part of Beach to pay Jingellic, Enterprise and Spargos considerable sums of money. It is the applicants' case that Jingellic, Enterprise and Spargos each benefited by that scheme and are therefore to be visited with the fraud of their directors, including Messrs Fuller and Cummings.
As I understand the defences that are being presented by Spargos and Enterprise, one line of defence is that there was a much broader fraudulent scheme on foot than that alleged by the applicants in which not only Beach, or Beach and Claremont, were victims, but one in which Spargos and Enterprise were also victims. Therefore Spargos and Enterprise should not be visited with knowledge of the fraud on the part of their directors. On one view of the facts, if that defence is made out by Spargos and Enterprise, it would also be available to Jingellic. Yet at the moment that defence is not being presented by Jingellic.
Between last Friday and today, steps have been taken by Messrs Fuller and Cummings which seek to remove that conflict and in turn a ground which was likely to influence the Court's exercise of its discretion. The Court has been informed that Messrs Fuller and Cummings have resigned from the Jingellic board and that Messrs Thomas and Griffin are prepared to act as directors. They have signed consents to that end, and it is proposed, if it has not already happened, that Mr Webb as the remaining director will exercise a residual power under the articles to appoint them as directors to fill the casual vacancies caused by the retirement of Messrs Fuller and Cummings.
The type of conflict that I have mentioned could be removed by the appointment of an entirely independent board. However, I am not satisfied that the proposed appointments of Messrs Thomas and Griffin would introduce the necessary degree of independence on to the board. I am not satisfied that they would be able to stand off and make an objective assessment of the financial affairs of Jingellic, and of the course which it should now pursue in relation to the principal proceedings.
Mr Thomas is a solicitor who from time to time has acted for Jingellic. He has had some limited contact with Messrs Fuller and Cummings. He has appeared today by leave to address the Court on behalf of Jingellic because over the weekend Jingellic has terminated the instructions of counsel who has appeared for the company up to this time. Mr Thomas has very competently explained to me a number of matters about the company. I must say that he gives the impression that he is prepared to undertake the task of a director in an objective way, but I am concerned that he would find his proposed role a difficult one in the present circumstances. I am concerned that he has spontaneously taken on the offer of a directorship when it was offered to him without fully understanding the background of the commercial activities that are the subject of the principal proceedings. And he concedes that he knows virtually nothing about the present financial state of the company.
Bearing in mind his earlier association with Jingellic and Messrs Fuller and Cummings, Mr Thomas I think, would find it difficult to operate in an entirely independent manner as one of the directors of Jingellic when dealing with the other Nevoria joint venture partner, Southern Gold Fields Limited. Messrs Fuller, Cummings and Webb are directors of that company. Messrs Fuller and Cummings are also directors of at least one and perhaps more subsidiary companies of Jingellic and it would be necessary for steps to be taken in relation to their positions. It is not improbable that occasions would arise in the near future where it would be necessary for the new directors, if new directors were to take over, to make hard decisions which would impact in a financial way upon Messrs Fuller and Cummings. I think Mr Thomas would find that a difficult duty to discharge objectively.
Mr Griffin has a close understanding of the day-to-day mining affairs of Jingellic as he is a former employee of Jingellic, and is presently a mining consultant to the company. However, he too has had an association with Messrs Fuller and Cummings and at one time was a director with them of Pine Creek Goldfields Ltd. More particularly Mr Griffin apparently is owed some $250-300,000 by Jingellic, and the company is to some extent dependent on him not calling up that debt. The existence of that debt puts Mr Griffin in a position where he would find it extremely difficult to be objective.
The company is in a position where it needs somebody who can make an immediate, objective assessment of the role it should take in relation to its present financial affairs, the disposal of assets, and the conduct of these proceedings. It is important in the interests of the shareholders for that consideration to be borne in mind in the exercise of the discretion.
That consideration is not decisive, having regard to the purpose for which the discretion must be exercised, but it is in my view a significant one. There is also the consideration that there are now two inquiries by the ASC on foot that impact upon Jingellic. It is a matter of concern to the applicants, and no doubt to the other shareholders, that the company has continued to chalk up substantial losses over the last few years, and the evidence heard today about its present trading position does not give any real hope that the trading losses on a day-to-day basis have been or will be arrested in the near future if the company continues to operate as it has been operating.
There has been considerable debate today whether the company is solvent. Mr Webb concedes that the company is only able to pay its debts as and when they all due by selling assets. On one view of the balance sheet it would appear that the company has, or may have after the disposal of further assets, an excess of liabilities over assets. However, it is not possible for the Court to form any concluded view about the solvency of Jingellic on the present state of the evidence. On certain possibilities the company would be insolvent. On other possibilities the company may well be in a position where it can continue trading and achieve a measure of success including the favourable sale of certain of its mining tenements. Whilst it is not possible for the Court to form a view about solvency, that question is obviously one that must be addressed in the immediate future. I think it is clear that unless an objective assessment is made quickly, and a proper plan which has regard to the longer term interests of the applicants and other creditors and the shareholders is put in place, the company will continue to be operated on a day-to-day basis by selling assets to meet pressing debts.
Jingellic argues that the appointment of a receiver and manager is likely to devalue its assets, and for this reason alone a receiver and manager should not be appointed. Beach, in answer, says that the market must by now be fully aware of the problems that have beset Jingellic, and the nature of the allegations in these proceedings, so that the appointment of an independent receiver and manager might actually enable the assets to be sold at a better price than if they are sold under the present regime. I see considerable force in the argument of Beach. I do not think the risk that the appointment of a receiver and manager might devalue the assets is a sufficient reason for not making the appointment.
In all the circumstances I think the discretion should be exercised in favour of taking some step to arrest the present situation and to have an objective assessment of the financial position carried out. I have thought hard about other alternatives that might be available. I am unable to satisfy myself that any alternative short of appointing a receiver and manager would meet the circumstances.
The appointment of a receiver and manager has been opposed by Jingellic on grounds, among others, that Beach is in no position to give a valuable undertaking as to damages in the event that it ultimately loses the proceedings and it turns out that the order appointing the receiver and manager was not justified. It is customary to require an undertaking as to damages from an applicant for either a Mareva injunction or an order under s.1323. Such an undertaking has been offered by the applicants and will be noted. However, it is said that the financial position of Beach is such that if it loses these proceedings the undertaking would be valueless. Beach for its part says that security is not necessary because Jingellic has not established that it is likely to suffer any loss by reason of the appointment of a receiver and manager.
Again I see considerable force in the submission of the applicants. Jingellic presently owes Beach a substantial sum for costs which were awarded against Jingellic in the unsuccessful winding-up proceedings in the Supreme Court of South Australia. An amount has already been paid on account of those costs, but the affidavits show that somewhere between $80,000 and more than $200,000 remains payable, subject to the bill of costs being taxed. Until such time as those costs are paid, Jingellic has security to the extent of the costs. I think the situation will be adequately met by directing that if and when the remaining party and party costs are paid by Jingellic, they be paid into an account held by Beach and charged with the payment of damages under the undertaking. The money will remain frozen and subject to the charge until the main proceedings are resolved. That will be a sufficient measure of security for Jingellic.
I should add there is one other consideration that I have borne in mind in deciding whether or not to appoint a receiver and manager, and that is the cost to the company. The appointment of a receiver and manager is an expensive exercise. However, when one considers the information before the Court about the costs of the administration of the company under the former directors that, too, was a very expensive exercise. I am not persuaded that the appointment of a receiver and manager would be any more expensive. Indeed I think it may be less expensive.
In all the circumstances, I propose to appoint a receiver and manager to Jingellic.
It should be emphasised that this is not a receiver and manager appointed pursuant to a security deed. It is not an appointment that is made by reason of a default in a loan payment. It is not an appointment that is made by reason of the proved insolvency of Jingellic. Far from it. The appointment equates with the appointment of Mr Herbert as the receiver and manager of Enterprise, a step taken by the Full Court of Western Australia to put in place independent management apart from the then current directors to ensure that the affairs of the company were properly administered in the interests of all the shareholders and others whose interests were to be considered.
It is that course which I am following here. The primary purpose for the exercise is to give the applicants a measure of protection in the event that they succeed in the principal proceedings, but I have had regard to the wider interests.
There will be an order in terms of the minutes with liberty to speak to the minutes.

[1992] FCA 868

23 NOVEMBER 1992