Bennett and Co v CLC Corporation
[2001] WASCA 51
•2 MARCH 2001
BENNETT & CO -v- CLC CORPORATION & ORS [2001] WASCA 51
| (2001) 23 WAR 344 | |||
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASCA 51 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:91/2000 | 15 DECEMBER 2000 | |
| Coram: | PIDGEON J WALLWORK J MURRAY J | 2/03/01 | |
| 17 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed Appeal pursuant to s 1321 by first respondent dismissed | ||
| PDF Version |
| Parties: | BENNETT & CO CLC CORPORATION SIMON ANDREW READ JEFFREY LAWRENCE HERBERT |
Catchwords: | Liens Corporations Law, s 530B(1) Meaning of words "such a lien is not otherwise prejudiced" Solicitors had lien over certificates of title due to costs owing Whether possessory lien lost if documents released to liquidator pursuant to s 530B(1) Whether creditor of company in liquidation aggrieved by liquidator paying the costs owed in return for the certificates of title |
Legislation: | Corporations Law, s 530B(1), s 1321 |
Case References: | Barratt v Gough-Thomas [1951] 1 Ch 242 Bolster v McCallum [1966] 2 NSWR 660 Buddle Findlay v Isaac & Anor (1996) 7 NZCLC 26132 In re Aveling Bathwood Ltd [1989] 1 WLR 360 In re South Essex Estuary and Reclamation Co; ex parte Paine and Layton Vol 4 Ch App 215 In re Toleman v England; Ex parte Bramble [1879-80] 13 Ch 885 Albemarie Supply Company Ltd v Hind & Co [1928] 1 KB 307 Caldwell v Sumpters [1972] 1 Ch 479 Hall v Richards (1961) 108 CLR 84 Hughes v Hughes [1958] 2 All ER 366 Legg v Evans (1890) 6 M & W 36 Mercantile Credits Ltd v Jarden Morgan Australia Ltd [1991] 1 Qd R 407 Patrick Stevedores Operations No. 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 Re Electronic Learning Systems International Pty Ltd (In liq) [1998] 2 Qd R 144 Re Gleebs Pty Ltd [1993] VLR 293 Re Keever, A Bankrupt [1967] Ch 182 Re Partridge; Ex parte McDonald (1961) SR (NSW) 622 West Wake Price & Co v Ching [1957] 1 WLR 45 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : BENNETT & CO -v- CLC CORPORATION & ORS [2001] WASCA 51 CORAM : PIDGEON J
- WALLWORK J
MURRAY J
- Appellant
AND
CLC CORPORATION
First Respondent
SIMON ANDREW READ
JEFFREY LAWRENCE HERBERT
Second Respondents
Catchwords:
Liens - Corporations Law, s 530B(1) - Meaning of words "such a lien is not otherwise prejudiced" - Solicitors had lien over certificates of title due to costs owing - Whether possessory lien lost if documents released to liquidator pursuant to s 530B(1) - Whether creditor of company in liquidation aggrieved by liquidator paying the costs owed in return for the certificates of title
(Page 2)
Legislation:
Corporations Law, s 530B(1), s 1321
Result:
Appeal allowed
Appeal pursuant to s 1321 by first respondent dismissed
Representation:
Counsel:
Appellant : Mr K J Martin QC & Mr D B Shaw
First Respondent : Mr D M Stone
Second Respondents : Mr G A Flynn
Solicitors:
Appellant : Bennett & Co
First Respondent : Williams & Hughes
Second Respondents : Mallesons
Case(s) referred to in judgment(s):
Barratt v Gough-Thomas [1951] 1 Ch 242
Bolster v McCallum [1966] 2 NSWR 660
Buddle Findlay v Isaac & Anor (1996) 7 NZCLC 26132
In re Aveling Bathwood Ltd [1989] 1 WLR 360
In re South Essex Estuary and Reclamation Co; ex parte Paine and Layton Vol 4 Ch App 215
In re Toleman v England; Ex parte Bramble [1879-80] 13 Ch 885
Case(s) also cited:
Albemarie Supply Company Ltd v Hind & Co [1928] 1 KB 307
Caldwell v Sumpters [1972] 1 Ch 479
Hall v Richards (1961) 108 CLR 84
Hughes v Hughes [1958] 2 All ER 366
Legg v Evans (1890) 6 M & W 36
Mercantile Credits Ltd v Jarden Morgan Australia Ltd [1991] 1 Qd R 407
(Page 3)
Patrick Stevedores Operations No. 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1
Re Electronic Learning Systems International Pty Ltd (In liq) [1998] 2 Qd R 144
Re Gleebs Pty Ltd [1993] VLR 293
Re Keever, A Bankrupt [1967] Ch 182
Re Partridge; Ex parte McDonald (1961) SR (NSW) 622
West Wake Price & Co v Ching [1957] 1 WLR 45
(Page 4)
1 PIDGEON J: I have read the reasons to be published by Wallwork J. I agree with those reasons and for those reasons I would allow the appeal.
2 WALLWORK J: The appellant appeals against a decision of a Judge of the Supreme Court ordering it to repay to the second respondents, the liquidators of Penale Pty Ltd (In Liquidation) ("Penale"), the sum of $146,918.51 with interest of $16,181.16.
3 At the time administrators were appointed to Penale on 9 January 1998 the appellant was owed a sum of money by Penale for legal fees. The appellant then had in its possession various documents belonging to Penale including two certificates of title. One of those related to land in Melville. The other related to land in East Fremantle.
4 In mid-1998 after liquidators had been appointed to Penale, they entered into negotiations for the sale of the two properties the subject of the certificates of title. However, the appellant asserted a lien over the certificates. It would not release them until it was paid the money owing by Penale. The first respondent, which was a creditor of Penale, learned of this situation and instructed its solicitors to write to the liquidators asking them what they proposed to do. The solicitors for the liquidators advised that their clients had accepted the appellant's "proof of debt" in the amount initially claimed being $146,918.51. This they said represented a compromise because the appellant had miscalculated what was owing to it. What was in fact owed was $147,548.51. The liquidators had agreed to pay to the appellant the lesser sum on receipt of the two certificates of title at settlement on the sale of two properties.
5 In due course the appellant was paid the sum of $146,918.51 on the sale of one of the two properties. The certificates of title were both released by the appellant. The respondents then took action against the liquidators and the appellant, claiming that the payment to the appellant should be set aside.
6 Ultimately the first respondent appealed against the decision of the liquidator pursuant to the provisions of s 1321 of the Corporations Law. That section allows a party who is aggrieved by an act or omission or a decision of administrators or liquidators to appeal.
7 Section 1321 relevantly provides:
"A person aggrieved by any act, omission or decision of:
(a) …
(Page 5)
- (b) …
(c) …
(ca) …
(d) a liquidator or provisional liquidator of a company;
may appeal to the court in respect of the act, omission or decision and the court may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit."
8 On 5 May 2000, a Judge allowed the appeal and ordered the present appellant to pay to the liquidators the sum of $146,918.51 with interest assessed at $16,181.16. It is against that decision that this appeal is brought.
9 Counsel for the liquidators advised that they would abide the decision of the Court. They did not wish to be heard at the hearing of the appeal.
10 The outcome of the appeal primarily depends upon the interpretation of s 530B of the Corporations Law. That section provides:
"530B(1) A person is not entitled, as against the liquidator of a company:
(a) to retain possession of books of the company; or
(b) to claim or enforce a lien on such books;
- but such a lien is not otherwise prejudiced.
530B(2) Paragraph (1)(a) does not apply in relation to books of which a secured creditor of the company is entitled to possession otherwise than because of a lien, but the liquidator is entitled to inspect, and make copies of, such books at any reasonable time.
530B(3) …
530B(4) The liquidator of a company may give to a person a written notice requiring the person to deliver to the liquidator, as specified in the notice, books so specified that are in the person's possession.
(Page 6)
- 530B(5) A notice under subsection (4) must specify a period of at least three days as the period within which the notice must be complied with.
530B(6) A person must comply with a notice under subsection (4) except so far as the person is entitled, as against the company and the liquidator, to retain possession of the book.
530B(7) …."
11 Section 530B is contained in Division 3 of Part 5.6 of Chapter 5 of the Corporations Law which Part provides for winding up generally. Division 3 commences with s 530A which requires each officer of a company to deliver to the liquidator for the purposes of the winding-up, all books in the officer's possession which relate to the company other than books, the possession of which the officer is entitled as against the company and the liquidator, to retain. The section also requires each officer of a company to advise the liquidator where the company books are. The section, generally, requires officers of a company to assist the liquidator in the winding-up.
12 The next section is s 530B which requires persons to deliver the books of a company to the liquidator. Section 530C authorises the court to issue a warrant to search for and seize a company's property or books. Section 531 requires the liquidator to keep proper books and s 533 requires certain reports by a liquidator. Section 536 provides for the supervision of liquidators.
13 It is significant that s 530B appears in that part of the legislation which provides the powers of a liquidator to ascertain the true position of the company. It is not a section enabling the liquidator to sell property. Those powers are contained in s 477 of thelegislation. That section follows s 476 which deals with the preliminary report by the liquidator.
14 Section 477(2)(c) authorises the liquidator to sell or otherwise dispose of all or any part of the property of the company. Section 478 provides that the liquidator must as soon as practicable after the court orders that a company be wound up, cause the company's property to be collected and applied in discharging the company's liabilities and to consider the position of the contributories.
(Page 7)
15 There are no decided cases which directly decide the question which is now before this Court, although there are decisions on collateral questions which are a guide to the interpretation of s 530B.
16 It was common ground at the hearing of this appeal that the two relevant certificate of titles were "books" of Penale for the purposes of s 530B. Each is a "document" within the meaning of that word as defined in s 9 of the Corporations Law and hence within the definition of "books" as defined in s 9(d).
17 In Buddle Findlay v Isaac & Anor (1996) 7 NZCLC 26132 the judgment of the New Zealand Court of Appeal was delivered by Tenn J. At 261,135 of the report his Honour when discussing s 237(1) of the New Zealand Companies Act 1955, said that the statute intended that the liquidator should take possession of all relevant documents held by the company so as to enable him to make full inquiries in accordance with his statutory duties.
18 Section 237(1) provided:
"A person is not entitled as against the liquidator of a company to claim or enforce a lien over books, records or documents of the company."
19 That section is similar to our s 530B but it does not have a similar proviso to the proviso s 530B which is: "but such a lien is not otherwise prejudiced."
20 The New Zealand court held that in that case the appellant's solicitors were not entitled to claim or enforce a lien over the documents of the company and as a result had to give up possession of the certificates of title to the liquidator. In the reasons it is stated:
"That finding disposes of the appeal for all practical purposes because once the appellant gives up possession its lien no longer exists."
21 That lien as in this case was for legal fees owed to the solicitors.
22 In my view the proviso in our s 530B(1) results in a significant difference in operation between s 530B(1) of the Corporations Law and the New Zealand section. In s 530B(1), although it is provided that a person is not entitled as against the liquidator to retain possession of the books or to claim or enforce a lien on such books, the concluding words
(Page 8)
- "but such a lien is not otherwise prejudiced" must be given effect. The question is what do they mean.
23 In Bolster v McCallum [1966] 2 NSWR 660 at 665 which was a decision of the Court of Appeal of New South Wales in which Walsh JA agreed with the reasons of Jacobs JA and Asprey JA, Asprey JA discussed the lien which a solicitor has upon documents which come into his possession in the course of his employment in his capacity as a solicitor with the sanction of his clients and which are the property of his clients. At 665 his Honour, when discussing whether the solicitor had to produce documents over which he claimed a lien in answer to a subpoena requiring him to produce the documents, said:
"… my reading of a number of decisions which bear upon this type of problem leads me to believe that two principles can be extracted from them; first, that despite the existence of a lien, documents subject thereto, generally speaking, will be ordered to be produced to a court in the course of litigation whenever their production is necessary to do justice in the particular case; …."
24 His Honour said that the solicitor's claim of lien in that case could have been stated to the court but it would have been no ground for resisting their production to the court. He emphasised that the documents under the subpoena were to be produced to the court and not to the parties and that the right of an opponent to inspect the documents was quite a different matter. Importantly his Honour said:
"At the conclusion of the instant case, if a verdict were entered for the plaintiff against the defendant, the documents would be returned to the plaintiff, as his lien, despite the verdict, would be still operative - see O'Brien v Lewis (1863) 66 ER 761 affirmed 46 ER 772. If it were found that the company, and not the defendants, were the plaintiff's clients, then, although a verdict would be entered for the defendants in the action the documents would still be returned to the plaintiff so that he could retain his lien thereon against the company. In neither case is the lien of the solicitor destroyed by the procedure to which I have referred, as possession of the documents, which is essential to the retention of the lien, is not lost because, for the purposes of the litigation, the court has temporary custody of them."
(Page 9)
25 In my view the same reasoning should apply to the operation of s 530B(1) of the Corporations Law as it is made clear in the proviso to the section that upon the surrender of the documents to the liquidator "such a lien is not otherwise prejudiced".
26 If the certificates of title in a case such as this, were surrendered to the liquidator and the liquidator could dispose of them pursuant to a sale to a third party, the lien would obviously be completely prejudiced and lost altogether. Apart from that reasoning however, the section is within a part of the legislation which assists a liquidator to carry out his functions in connection with winding up the company by allowing the liquidator access to all the information in the books of the company.
27 In my view s 530B(1) is consistent with s 597(10) which is concerned with examining a person concerning a corporation's affairs. Section 597(10) provides:
"Where the court so directs a person to produce any books and the person has a lien on the books, the production of the books does not prejudice the lien."
28 Although the wording of s 597(10) is different to s 530B(1), in my opinion the intention is the same.
29 Further, the Corporations Law is not a confiscatory statute which takes away people's right without compensation. To do that the wording of the statute would have to be very clear. That proposition is basic to our law.
30 Additionally, a lienholder, whether the lien be a common law lien, an equitable or a statutory lien, is a secured creditor for the purposes of an insolvency administration - s 5 of the Bankruptcy Act (Cth) and s 553E of the Corporations legislation. To hold in this case that the effect of s 530B(1) (and necessarily s 438C(1)) would terminate the appellant's possessory lien over "books" as against the liquidators of Penale, would mean that the appellant would have lost its rights as a secured creditor of Penale upon the loss of its possessory solicitor's lien. The appellant would be left to prove in the winding up of Penale as an unsecured creditor. That would not seem to be consistent with the proviso of s 530B(1) which provides: "but such a lien is not otherwise prejudiced."
31 There is also the question of why it should be thought that s 530B(1) should destroy a lien over the books of a company whereas a lien over other articles such as a motor vehicle would not be destroyed. There does
(Page 10)
- not seem to be any reason to destroy a lien over books in order to assist the liquidator in the winding up of the company, particularly when the books as in this case are certificates of title which are very valuable items. In my view the words in the section are not clear enough to achieve such a result.
32 The above conclusions are consistent with the decision of Lord Hatherley LC in In re South Essex Estuary and Reclamation Co; ex parte Paine and Layton Vol 4 Ch App 215 . In that case Lord Hatherley, when commenting upon the Companies Act 1862 which replaced the old Winding-up Acts said at 217:
"The former Acts did not interfere directly with the rights of creditors, who were allowed to go on with their actions until they were stayed by the court. But by the last Act the rights of creditors were largely interfered with. They were prevented from suing and were compelled to come in under the winding-up. The Official Liquidator had therefore now to act for the benefit of the creditors as well as the shareholders, and therefore the legislature might well have considered it right to give him this power. His Lordship could not, in fact, read this section in any way except as saying that production might be ordered, but it must be without prejudice to any lien, although in many instances, of course, this would render the lien valueless. The solicitors in this case were persons capable of giving information … and production must be ordered, but the court would be very careful not to go beyond the powers conferred by the section."
33 Barratt v Gough-Thomas [1951] 1 Ch 242 was a decision where deeds had been retained by a solicitor on behalf of the mortgagee. The documents over which the lien was claimed, comprised not only the title deeds originally left by the plaintiff in the hands of the defendant as his solicitor on the occasion of the plaintiff's purchase of a property, but also a mortgage deed subsequently executed by the plaintiff and when executed, left in the hands of the defendant as solicitor to the mortgagee. The mortgage deed had come into the hands of the solicitor in his capacity as solicitor to the mortgagee. The mortgage was then transferred to the solicitor and a question arose as to the enforceability of the lien against the mortgagor. At 250 of the reasons for judgment, Evershed MR said:
"In my judgment, the capacity by reference to which the documents are held is essential. The absence at any time of any
(Page 11)
- right to or property in the documents on the part of the client seems, as a matter of principle, fatal to the continued existence of the lien. The fact that the mortgagee's solicitor is able to assert a lien against his client, the mortgagee, postulates a deposit of the deeds with the solicitor by the mortgagee, which appears necessarily inconsistent with the conception of a continuing deposit of the same deeds by the mortgagor."
34 Barratt was decided on the ground that the lien had ceased because the conditions necessary to support it had ceased, because the solicitor retained the documents:
"…referable to his agency of the mortgagee and the mortgagor has ceased to have any right or title to the documents from which any lien could be derived. The lien has ceased because the conditions necessary to support it have ceased to exist. On redemption of the mortgage, it is the mortgagee's duty to hand the deeds back to the mortgagor…That duty, the solicitor, as mortgagee's solicitor, is bound to perform. He cannot discharge the duty by handing the deeds to himself on the mortgagor's behalf unless he has the mortgagor's authority, as being still his client or otherwise by agreement, so to do" - p 255.
35 At 256 Lord Evershed said:
"If I am right in thinking that the capacity in which he holds the deed is of the essence of the matter and that a present right or title to the deeds on the client's part is necessary to support the lien, the solicitor's claim is gone, whichever of the two capacities, agent or principal, he assumes. If as solicitor to the mortgagee he seeks on redemption to retain the deeds against the mortgagor, he involves his client, the mortgagee, in a breach of his legal obligations, which the solicitor cannot, consistently with his duty as solicitor, do or be heard to suggest. On the other hand, if as mortgagee he seeks to retain the deeds on redemption, he is himself asserting a right inconsistent with his legal obligations."
36 In that decision, Asquith LJ agreed with Lord Evershed and also with the reasons of Jenkins LJ.
37 Lord Jenkins (at 258) said that the solicitors possession of the deed and the right to demand it from him:
(Page 12)
- "…which the plaintiff now has as a redeeming mortgagor, are referable solely to the relationship of mortgagee and mortgagor, and not to that of solicitor and client, which as between the defendant and the plaintiff never had any relevance to the receipt and retention of this deed by the defendant."
38 At 261 Lord Justice Jenkins said:
"No doubt he loses his lien if he parts with possession, but this is far from establishing the converse position that if he retains possession his lien is necessarily preserved."
39 Lord Jenkins said that the solicitor acting for the mortgagee was bound to deal with the deeds as the mortgagee might direct and could not set up against him or any person claiming through him, any lien he had against the mortgagor.
40 Lord Justice Jenkins said at 263:
"The lien being neither the result of contract, nor an equitable charge, nor an encumbrance on the estate, but merely a right for the solicitor 'to keep back from his client the deeds and papers, which he holds as solicitor, until his bill of costs is satisfied'…it is difficult to see how once the solicitor has ceased to hold the deeds for the mortgagor and then holds them for the mortgagee, whose right to possession completely ousts that of the mortgagor and is free from any lien the solicitor could previously have asserted against the latter, the lien against the mortgagor can fail to be completely distinguished, not merely as against the mortgagee but against the mortgagor also."
41 The first respondent in its submissions submits that there is no limitation imposed on the use which the liquidator may make of the books once he has possession of them, and that where the company is wound up the statute requires him to keep those which 'are relevant to the affairs of the company' for five years after deregistration: section 542(2) Corporations Law: McPherson: "The Law of Company Liquidation", 4th Ed 361."
42 In this case the company handed one of the certificates of title involved to a purchaser and therefore that submission in my respect does not advance the case of the respondent.
(Page 13)
43 The proposition advanced by the respondent that the liquidator must deal with the books in the way in which his duties require him and in particular he must use the books which are documents of title to realise the company's property, in my opinion overlooks the fact that the holder of the lien has a right to retain the documents of title and that the purpose of the liquidator obtaining possession of the books is to ascertain the affairs of the company, and not to physically realise its assets pursuant to that section. The section is not part of the asset gathering process under the legislation.
44 It is interesting that in In re Aveling Bathwood Ltd [1989] 1 WLR 360 at 363, Hoffman J when discussing s 115, which was the statutory ancestor of s 236 of the Insolvency Act 1986 (UK), said:
"Whether production under section 115 would render the lien valueless or not depended upon whether value attached to the instrument itself (as in the case of a title deed or a negotiable instrument) or merely to the information which it contained. In neither case would production destroy the lien in the sense of the right to possession of the document, but only in the former case would that right continue to have any value."
45 Reference was made by Hoffman J to the decision of In re Toleman v England; Ex parte Bramble [1879-80] 13 Ch 885 which was relied upon in that case by counsel for the receivers. Counsel had said that Ex parte Bramble was authority for the proposition that:
"Even without a special proviso, an order for production to the court would not affect the lien."
46 Hoffman J said that s 236 of the 1986 Act was concerned with obtaining information whilst s 246 of the Act dealt with the rights of property to documents.
47 At 365 his Honour said:
"A solicitor who has a lien over such a document cannot be required to deliver it up to a liquidator. If the solicitor will not disclose the document and the liquidator wants to know what it says, he will have to seek an order for production under section 236."
48 In my view the decision of Hoffman J does not have the effect of deciding that the lien in a case such as the present is destroyed. Also, in
(Page 14)
- this case the lienholder did not deliver the title documents to the liquidator prior to being paid. It still had its possession and its lien prior to receiving the funds from the purchaser.
49 The respondents reply that that was because the appellant had claimed a lien contrary to statute. However, as I understand it, the liquidators had acknowledged the validity of the appellant's lien. They wished to sell the property and not simply inspect the certificates of title. The validity of the lien was being asserted against the right of the liquidators to sell the property and not to inspect.
50 The sequence of events under which the lien was asserted, was that on 23 January 1998 the appellants were asked by the administrators of Penale for details:
"…of your claim/debt against Penale. In particular I would request you provide me details of the exact amount outstanding to Bennett and Co and how this relates to the properties at 30 Holtz Crescent, Palmyra and 70 Dalgety Street, East Fremantle."
51 In answer to that request, the appellant advised that:
"In respect of the total amount outstanding to this firm, this firm is entitled to a general possessory lien over the duplicates of two certificates of title ... Those documents were received by us from Penale whilst acting as solicitors for Penale."
52 The administrator was advised by its solicitors on 11 February 1998 that:
"Clearly the English administration regime has in mind maintenance of the lien. In our opinion the better view of the words '… is not otherwise prejudiced' is that the lienholder maintains all rights save for possession. This view fits in with the overall object of voluntary administration as set out in section 435A, that is the administrator is merely given the opportunity and ability to form a view as to whether an insolvent company can possibly continue in business by having access to all the company's records an documents. It is not intended to remove anybody's rights only to 'suspend' them for a limited period."
(Page 15)
53 Following that advice, on 16 March 1998 the administrator advised the appellants:
"I have now taken advice in relation to this matter and I now formally acknowledge that your lien is valid. As you are aware it is my intention to realise the properties promptly and I anticipate this should be completed within six weeks of the date of this letter. Obviously settlement will vary depending upon the terms of the purchase. Will you please advise me from a practical respect as to how we can go forward in this matter. It would simplify matters for me if you would provide the titles prior to the settlement."
54 On 9 April 1998 Penale was placed in liquidation. The administrators were appointed as liquidators on the same day.
55 On 23 June 1998 the solicitors for the liquidators advised the solicitors for the first respondent that:
"The liquidator when he was administrator made an arrangement with Bennett and Co whereby Bennett and Co will not seek to raise the lien in settlement of the properties, and will allow the CTs to be passed to the purchaser free of the lien, in exchange for its claim being met at settlement…."
56 In those circumstances in my view, it cannot be said that the appellant did anything illegal pursuant to s 530B. There was never any notice given pursuant to s 530B(4) by the liquidator requiring the appellants to deliver to the liquidator the relevant books.
57 In my view s 530B(2) of the Corporations Law does not detract from the interpretation of the section suggested above, because by entitling the liquidator to inspect and make copies of books in the possession of a person "otherwise than because of a lien" the subsection is protecting other rights of the holders of books. The sub section does not specifically deprive the holder of a lien of all rights under the lien.
58 In my opinion, ground 5 of the grounds of appeal is made out. That ground is:
"The learned Judge erred in by failing to conclude that the possessory lien held by Bennett and Co over two certificates of title ('the books') had remained intact at all times until
(Page 16)
- consensually released to the liquidators under a bona fide compromise for valid consideration."
59 I would allow the appeal and dismiss the appeal pursuant to s 1321 by the first respondent.
60 It is not necessary to deal with the other grounds of appeal
61 MURRAY J: I am grateful in this case to have had access to a draft of the reasons published by Wallwork J. I concur in his Honour's discussion of the general law and cited authorities and in his Honour's analysis of the relevant provisions of the Corporations Law.
62 By virtue of its possessory lienover the duplicate certificates of title to the two properties in question, the appellant was a secured creditor of the company in liquidation: Corporations Law, s 553E and Bankruptcy Act 1966 (Cth), s 5 and s 58(5). Having regard to the type of lien possessed by the appellant in this case, the effect was in no way to prevent the liquidators performing their statutory duty to get into their hands these two properties as realty owned by the company in liquidation. Unless there was some provision of the statute which had the contrary effect, however, they could not cause the company to sell the pieces of land in question and so reduce the assets to liquid funds for the general benefit of members of the company and creditors interested in its liquidation without honouring and discharging the security represented by the solicitors' lien. This occurred on settlement of the sale of the properties in the way described by Wallwork J.
63 In my opinion, to take that course involved the liquidators in no act, omission or decision which required to be reversed or remedied on appeal to the court under the Law, s 1321.
64 In my opinion s 530B, relied upon by the first respondent, does not have the effect for which it contends. So far as necessary, the terms of the section are set out by Wallwork J. Relative to this case, s 530B(1) has the effect in a case of a possessory lien such as was claimed in this case that the person claiming or seeking to enforce the lien may not do so as against the liquidator of a company by retaining possession of books of the company, which it was conceded the duplicate certificates of title were. But the effect of the subsection is to preserve the legal force and effect of the lien otherwise than in respect of the entitlement to possession of the documents in question. The subsection does this by providing that "such a lien is not otherwise prejudiced." As a security for the payment of a debt it remains fully effective in law, despite the fact that by force of the
(Page 17)
- Law, the possession upon which the lien ordinarily depends must be relinquished on demand to the liquidator. Its force and effect as against the company in liquidation is in no way diminished.
65 As the case of Buddle Findlay v Isaac discussed by Wallwork J may illustrate, the position may be different in New Zealand where the terms of the statute appear to be crucially different in that they lack the words which, in my opinion, have the legal effect to which I have referred.
66 In my view the correctness of that interpretation of s 530B is aided, not only by the considerations of principle discussed by Wallwork J, but by the fact that to so interpret s 530B in respect of the production of books to a liquidator for his purposes in the statutory administration of the company would have the same effect as the production of books to a court where it so directs under the Law, s 597(10). It is of no moment, I think, to consider whether the consequence of the conclusion to which I have come is that by the operation of s 530B the common law solicitor's lien, being entirely possessory in character, would, as I suspect is the case, be converted into a different statutory form of lien.
67 I also am of the opinion that this appeal should be allowed. The decision and orders of the court below should be set aside and in lieu thereof the appeal by the first respondent to that court should be dismissed.
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