C W CONSTRUCTION PTY LTD (in LIQUIDATION) No. SCGRG-85-473

[2000] SASC 376

C.W. CONSTRUCTION PTY LTD AND LOWAN TRANSPORT PTY LTD V ALAN SCOTT AND CITICORP AUSTRALIA LTD

Appeal From A Master (Ex Tempore)

1................ LANDER J....... This is an appeal from a decision of a Master dismissing an interlocutory application by a creditor of C.W. Construction Pty Ltd. (Receivers and Managers Appointed) (In Liquidation)(the Company).

As the company name and description shows, the company is both in receivership and liquidation. Mr Stephen Young and Mr John Heard are the receivers who were appointed at the instigation of Citicorp Australia Ltd. The present joint liquidators of the company are Mr Alan Geoffrey Scott and Mr Anthony Milton Sims.
There was a previous liquidator of the company, Mr Richard England. Mr England retired as Liquidator some years ago. On 17 September 1996 after Mr England’s retirement, a Master of this Court ordered the appointment of the joint liquidators:
“For the purposes of investigating a claim by Mr Vincenzo Cirillo, (the intervenor), that the company has maintainable causes of action against Citicorp Australia Ltd and/or Stephen Elliott Young, John Harold Heard or any of them and taking such action as they deem appropriate arising from such investigation.”
The appointment of the joint liquidators was made, curiously enough, on the application of Citicorp Australia Ltd, who was to be the subject matter of the investigation.
I think it is clear from the papers that Citicorp Australia Ltd made its application so as to prevent the intervenor, or anyone associated with the intervenor, from having the company bring proceedings against Citicorp Australia Ltd and or the receivers which it had appointed.
In any event, by 17 April 2000, nearly four years later, the liquidators have not reported in accordance with the Master’s order. On 17 April 2000, the appellant, Lowan Transport Pty Ltd, a creditor of the company in the sum of $5,220 applied by way of interlocutory application in these proceedings for the following orders:
“1..... That ALAN GEOFFREY SCOTT and ANTHONY MILTON SIMS of 12 Pirie Street, Adelaide, the joint appointed liquidators of C. W. Construction Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 007 942 935 be supervised by the Court.
2 That PETER IVAN MACKS Level 10, 26 Flinders Street, Adelaide be appointed as liquidator of C.W. Construction Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 007 942 935.
3...... In the alternate to paragraph 2 herein, that PETER IVAN MACKS of Level 10, 26 Flinders Street, Adelaide be appointed provisional liquidator to C.W. Construction Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 007 942 935.
4 That in addition to the order sought in paragraph 3 herein, that PETER IVAN MACKS of Level 10, 26 Flinders Street, Adelaide as provisional liquidator of C.W. Construction Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 007 942 935 exercise the powers prescribed by section 377 of the Companies (South Australia) Code.
5...... In the alternate to paragraph 1 herein, that ALAN GEOFFREY SCOTT and ANTHONY MILTON SIMS of 12 Pirie Street, Adelaide be removed by the Court as joint appointed liquidators of C W Construction Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 007 942 935.”
The application was accompanied by an affidavit of Mr Paul Smart, a director and shareholder of Lowan Transport Pty Ltd, who deposed to actions he had taken to obtain the liquidators’ report. He said that he had been told that the liquidators had published a first draft of their report and circulated it to both Mr Cirillo and Citicorp Australia Ltd in about 1998 and had prepared a second draft of the report which had not been circulated to either of those parties.
He said that he had been told by the liquidators that their report would be completed by late April 2000. He had also been told by the liquidators that they had performed approximately $130,000 of work in the conduct of their investigation and they had decided not to pursue any potential actions that may be available to the company against any of the corporations or persons, the subject of their inquiry.
Mr Smart expressed concerns about the length of time that the liquidators had taken to complete their investigations and that their delay might impede the prospect of the company recovering against any of the corporations or persons, the subject of the inquiry.
The application was also accompanied by a document evidencing Mr Macks’s consent to act as the liquidator of the company, if so appointed. Mr Macks is a liquidator commonly appointed by this Court to administer corporations.
The matter came on before Judge Burley on 17 May 2000. At that stage, the liquidators had not reported. The Judge adjourned the application for mention until 16 June 2000. During the period of the adjournment, the liquidators reported and the report was received by the Court on either the 5 or 6 June 2000.
The joint liquidators reported that, in their opinion:
“There are a number of areas of concern that may give rise to an action by the company against Citicorp Australia Ltd and or its solicitors.”
The joint liquidators further reported that they had not fully investigated the conduct of the receivers and managers because their former solicitor advised that he would not allow access to the receivers’ and managers’ files in relation to the receivership. However, on 31 May 2000, the joint liquidators were advised that they could have access to the files. Of course, that was only five or six days before the joint liquidators reported and more than three and a half years after they had been ordered to investigate those receivers.
The joint liquidators further reported that they had not examined or assessed the quantum of loss suffered by the company as a result of any of the issues identified during the course of the investigations. Finally they advised that further investigation and action was warranted.
On the second hearing before the Master, on 16 June 2000, the appellant sought an adjournment to consider the liquidators’ report and to seek further information from them. The appellant’s application for an adjournment was opposed by Citicorp Australia Ltd, which argued because of the report of the joint liquidators there was no longer any substance to the application. In particular it was argued that in so far as the application had relied upon the default of the liquidators providing a report, the provision of that report obviated the necessity for any order. In my opinion, that submission overlooked the liquidators’ own report. Whilst the liquidators had reported, their report was, in their own terms, incomplete. The report showed that the liquidators needed to carry out further investigations before they could say that they had discharged the order made by the Master in 1996.
In any event, the Master refused the application for an adjournment requiring the appellants to either proceed with the application or have it dismissed because it was unable to proceed with the application.
The Master said:
“The applicant must either proceed with this application, and ask for it to be listed, or have it dismissed because it is unable at the moment to do so. I accept the submission of Citicorp that because the plaintiff is not able to pursue the application in specific terms, and seeks an adjournment to enable it to clarify its position, the application itself should today suffer the fate of dismissal.
For these reasons the application filed on 17 April 2000 by Lowan Transport Pty Ltd will be dismissed.
In my view, the applicant should pay the costs of Citicorp Australia Ltd in relation to the application. Accordingly, I order that the applicant, Lowan Transport Pty Ltd, pay the costs of Citicorp Australia Ltd of and incidental to this application.”
This appeal is against the Master’s refusal to allow the appellant an adjournment and his consequential order dismissing the appellant’s application.
The application was not listed for hearing on 16 June 2000; it was only listed for mention. The matter could not have been heard even if the appellant had wished for the matter to be heard on that day.
The hearing on 16 June 2000 was only 10, or at the most 11, days after the liquidators had reported and was the first hearing in this Court of the application to remove those liquidators after the receipt of that report.
The joint liquidators did not object to the orders sought by the appellant. Indeed as I read the information, the joint liquidators were keen to be released from their obligations. Their keenness arises from the fact that their administration is unfunded.
The only party objecting to the orders was Citicorp Australia Ltd, which was the party which had instigated the appointment of the joint liquidators and was one of the parties which the joint liquidators concluded might be liable to the company. It was in Citicorp Australia Ltd’s interests to have the application dismissed, lest a newly appointed liquidator pursue the potential cause of action of against it.
The granting or refusing of an adjournment, of course, involves the exercise of judicial discretion. Except for the fact that the discretion must be exercised judicially, the discretion is unfettered. It must be difficult therefore in those circumstances for a party to persuade a court of appeal that an adjournment should or should not have been granted.
This, in my opinion, is one of those rare circumstances where it can be said that the exercise of the judicial discretion to grant or refuse and adjournment has miscarried. In my opinion, having regard to the fact that the matter was not listed for hearing on 16 June 2000 and, having regard to the fact that the applicant had only received the liquidators’ report some 10 or 11 days before the hearing, it was not unreasonable for the appellant to seek an adjournment for the purpose of making further inquiries with the liquidators and considering the liquidators’ report. It was not unreasonable in the circumstances where the appellant made it clear, in my opinion, to the Master that, having received the report, the appellant would only be pursuing paragraphs 2 and 5 of its application.
If the matter had been adjourned, no judicial time would have been lost by the matter being adjourned; there would have been no cost to the administration of justice. Indeed an adjournment would have preserved the parties’ positions in the meantime.
In my opinion, the Master was wrong to have refused the appellant’s application for an adjournment. In those circumstances the appeal must be allowed and the order dismissing the appellant’s application of 17 April 2000 should be set aside.
I should say before I conclude these reasons that the hearing of this appeal proceeded over two days. At the end of the respondent’s argument in opposition to the orders which I have just indicated I propose to make, the respondent’s counsel sought an adjournment for leave to file further evidentiary material showing the appellant’s solicitors’ state of knowledge in respect of the joint liquidators’ contentions between 6 and 16 June 2000. Against the opposition of appellant’s counsel I allowed that adjournment. I made directions as to the filing of an affidavit by the respondent which directions were complied with.
The respondent’s solicitor filed an affidavit indicating that the appellant must have been aware as early as 16 May 2000 that the joint liquidators were keen to be relieved of their responsibility as liquidators. I have taken that material into account, of course, in my reasons. Indeed, I think the evidence which was brought forward in the period of the adjournment by the respondent was consistent with the appellant’s evidence; that is that the appellant was aware that the joint liquidators wished to be relieved of their responsibilities if possible.
It is clear from the material that has been put before me that the joint liquidators have already spent $130,000 of their own money which cannot be recouped. Not unreasonably, they are not anxious to spend more in respect of this administration.
When the appeal resumed on the second day the respondent’s counsel tendered that affidavit and it was received.
The appellant’s counsel then sought to tender an answering affidavit. No leave had previously been given to the appellant to tender any answering affidavit but I indicated that I would receive part of that affidavit and its exhibits. I indicated to respondent’s counsel that if he wished a further adjournment in relation to the evidentiary material received in respect of the appellant’s further affidavit an adjournment would be available. No adjournment was sought, at least on that ground.
During argument on the second day of the appeal, and for the first time, the respondent’s counsel indicated that the respondent would wish to bring forward on any hearing of the appellant’s application of 17 April 2000, if I was to allow the appellant’s appeal, evidence to show that that application was an abuse of process.
At no time, before either hearing before the Master, or on the occasion of the first day of the appeal before me, was it suggested by the respondent that the appellant’s application of 17 April 2000 was an abuse of process.
The respondent did not seek to argue on the appeal, that the appeal was an abuse of process but indicated only that if the appeal was allowed it would argue that the application upon which the appeal was based was an abuse of process.
In any event I make the following orders.
(1)... The appeal be allowed.
(2) The Master’s order dismissing the appellant’s application of 17 April is set aside.
Having regard to the matters which have been explored before me in relation to the appeal and to the matters lately raised, it seems to me it would be appropriate if I heard the appellant’s application and I will reserve the hearing of that application to myself.

[2000] SASC 376

2 November 2000