Day, Kenneth Leonard v Mount, Michael Jaunay

[1984] FCA 88

Re: KENNETH LEONARD DAY
And: MICHAEL JAUNAY MOUNT
No. NTG 35 of 1983
(1984) 2 ACLC 319 / 53 ALR 468 / 2 FCR 237
Companies

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NORTHERN TERRITORY OF AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Toohey(1), McGregor(2), Fitzgerald(3) JJ.

CATCHWORDS

Companies - winding-up petition - appointment of provisional liquidator - petition subsequently dismissed - termination of appointment of provisional liquidator - summons by contributory of Company seeking order that provisional liquidator re-transfer to Company all moneys held by him arising from provisional liquidation - provisional liquidator's entitlement to remuneration and expenses - whether order appointing provisional liquidator rendered ineffective ab initio - power of Court to make order with respect to provisional liquidator's remuneration subsequent to petition being dismissed - provisional liquidator not disentitled to remuneration by reason only of dismissal of petition.

Companies Act (N.T.) sub-s. 232(2)

Rules of Court (Companies Act) 1965 (South Australia) sub-rule 52(8)

Companies - Winding-up petition - Appointment of provisional liquidator - Petition subsequently dismissed - Summons by contributory of company seeking order that provisional liquidator re-transfer to company all moneys held by him arising from provisional liquidation - Provisional liquidator's entitlement to remuneration - Whether order appointing provisional liquidator rendered ineffective ab initio - Power of court to make order with respect to provisional liquidator's remuneration subsequent to petition being dismissed - Companies Act 1962 (N.T.), s. 232(2) - Rules of Court (Companies Act) 1965 (S.A.), r. 52(8).

HEADNOTE

A petition was presented for the winding-up of a company and on the same day the respondent was appointed to be its provisional liquidator. The petition was subsequently dismissed. The respondent later applied for an order authorising payment out of the property of the company of his remuneration. The appellant, a contributory of the company, then applied for an order that the respondent forthwith transfer to the company all of its moneys held by him. The appellant's application was dismissed and he appealed.

Held: (1) The respondent validly held office as provisional liquidator until the dismissal of the petition.

(2) The respondent's entitlement to remuneration, whether under s. 232(2) of the Companies Act 1962 (N.T.) or under r. 52(8) of the Rules of Court (Companies Act) 1965 (S.A.), accrued to him while he validly held that office.

(3) There was no requirement that an application for an order to perfect such entitlement be made while the office was still held or while the order of appointment was still extant and operative.

Starr v. Trafalgar Financial Corporation Ltd (1983) 1 A.C.L.C. 1056; 8 A.C.L.R. 367, not followed.

(4) The respondent was not disentitled to remuneration by reason only of the dismissal of the petition.

(5) Subject to certain variations of the orders made by the primary judge, appeal dismissed.

HEARING

Darwin, 1984, April 4, 11. #DATE 11:4:1984

APPEAL.

Appeal from the decision of Forster C.J. of the Supreme Court of the Northern Territory (Re North Australian Properties Pty Ltd (1983) 8 ACLR 436) dismissing a summons by a contributory for an order that the former provisional liquidator of a company forthwith transfer to the company all of its moneys held by him.

The appellant in person.

T. F. Coulehan, for the respondent.

Cur. adv. vult.

Solicitor for the respondent: Peter Martin Barr.

P.F.A.

ORDER

THE COURT DECLARES THAT:

1. The provisional liquidator is not disentitled to remuneration by reason only of the dismissal of the petition.

THE COURT ORDERS THAT:

1. The appellant's summons dated 2 August 1983 is adjourned to a date to be fixed.

1. The order of the Supreme Court of the Northern Territory of Australia dated 28 October 1983 that the applicant pay the provisional liquidator's costs of and incidental to the application be set aside.

1. The costs below and the costs of the Appeal be reserved.

1. Subject to the above orders, the Appeal be dismissed.

JUDGE1

I have read the reasons for judgment of Fitzgerald J. I concur with them and with the orders he proposes. I have nothing to add.

JUDGE2

I agree with the reasons and conclusions of Fitzgerald J. and the Order he proposes.

JUDGE3

This is an appeal from an order of the Supreme Court of the Northern Territory made on 28 October 1983.

On 9 June 1978, a petition to wind-up North Australian Properties Pty Limited ("the company") was presented to the Supreme Court. It seems that the petition was intended to be based upon a debt allegedly owed by the company to Day and Dent Constructions Pty Ltd (in liquidation) ("Day and Dent") and was presented in the name of the liquidator of Day and Dent. Each of the company and Day and Dent is associated with Mr Kenneth Leonard Day, who claims that his present interest is as a contributory of the company. The petition made no reference to Day and Dent or the petitioning creditor's role as liquidator of Day and Dent. On the day on which the petition was presented, an order was made by Muirhead J. appointing Michael Jaunay Mount to be the provisional liquidator of the company. The company appeared by its legal representative and opposed the appointment of a provisional liquidator, arguing principally that the company was not proven to be insolvent. No suggestion was then made that the petition was in any respect deficient. The affidavits relied upon by the petitioning creditor at that time are not before this Court.

The subsequent history of the proceedings must be gleaned from transcripts of argument, some only of which are before us.

On 30 November 1978, Forster C.J. extended the powers of the provisional liquidator. On 1 February 1979 another order was made authorizing the provisional liquidator to defend proceedings brought against the company. On at least two occasions in about March and May 1979, Mr Day applied to have the provisional liquidation set aside. On 24 April 1980, Mr Day applied for dates to be fixed for the hearing of the petition. The application was opposed by the petitioning creditor on the footing that there was a dispute concerning whether or not Day and Dent was owed what it claimed, that it had been held by the Northern Territory Supreme Court in separate proceedings that the company had a set-off in respect of that debt (or most of it), but that an appeal had been instituted to this Court. (In fact the Full Court in a decision delivered on 18 February 1981 confirmed the decision which had been given in the Supreme Court of the Northern Territory and the Full Court's decision was subsequently confirmed by the High Court in a judgment delivered 30 April 1982 - Day and Dent Constructions Pty Ltd (in liquidation) v. North Australian Properties Pty Ltd (provisional liquidators appointed) (1982) 40 A.L.R. 399.) In the course of the argument on 24 April 1980 concerning whether or not a date should be fixed for the hearing of the petition, Mr Day's legal representative said, inter alia:

". . . the petition on its face, is obviously insufficient to found the winding-up order, and I would submit also, that that raises questions about the provisional liquidation, but that is a different matter."

Reference was also made both in an affidavit by Mr Day and in argument by his legal representative to the cost of the provisional liquidation to the company and thus indirectly to Mr Day. A request was made, with a suggestion that it would meet Mr Day's objections, for an order "that the petitioner be held accountable for any loss caused to the company by the fact of the company being put into provisional liquidation".

The application for hearing dates for the petition was adjourned to 19 June 1980 when it came on before Gallop J. On that day, Mr Day's legal representative submitted that a disputed debt could not be made the foundation of a winding-up petition, and that there was no allegation in the petition which would support a winding-up order. Reference was made to the possible invalidity of the petition and it was said that "strictly speaking" the provisional liquidator ought not to have been appointed. It was ordered that the petition be heard on 7 August 1980 and directions were given.

When the petition came on for hearing before Gallop J. on 7 August 1980, the legal representative for the petitioning creditor sought an adjournment. In the course of opposing the application for an adjournment, the legal representative for Mr Day referred to what he submitted were defects in the petition. It was also said that the petitioning creditor "had a little bit of luck in the early days". When that was elaborated on, it transpired that it was submitted that the petitioning creditor "was fortunate in the light of the facts pleaded in his petition" to have obtained the appointment of a provisional liquidator. The legal representative for the petitioning creditor asked leave to amend and an opportunity to draft the amendments. The application for adjournment was refused and the application for leave to amend was stood down to permit the proposed amendments to be formulated. The proposed amendments went to the defects to which reference had been made. Leave to amend was refused. The petition was then dismissed on the basis that it was "incompetent" which, in the context, plainly meant that it failed to contain what were considered to be essential allegations.

The legal representative for Mr Day then requested an order "terminating" the appointment of the provisional liquidator. Further debate ensued in the course of which his Honour questioned his power to make such an order and further indicated that he was unsure whether an order was needed or whether the appointment "automatically ceases upon the petition being dismissed. . . ".

The legal representative for the provisional liquidator then was asked whether he wished to address the Court. He referred to the issue of the provisional liquidator's remuneration and sought that an order be made extending the provisional liquidation for a period to "give the provisional liquidator time to assess his costs, and to have them approved by the Court in Chambers".

Further discussion then ensued and his Honour made reference to a possible argument that the provisional liquidator "should not have been appointed in the first place". Later, his Honour said:

"I think his position is preserved if I simply allow liberty to apply . . . or adjourn the further hearing of this matter, although I have dismissed the petition. I think I would have to give you liberty to apply."

After further discussion his Honour granted "liberty to anybody to apply" and adjourned the "further consideration of the matter" until 4 September as "that will enable the matter to be tidied up".

On 26 August 1980, the provisional liquidator applied for an order authorizing payment out of the property of the company of his remuneration as provisional liquidator of the company from 7 June 1978 to 7 August 1980. On 4 September 1980, Gallop J. ordered that Mr Day and the company be given leave to be heard on such application and directed that Mr Day "file a document particularising objections to payment of the provisional liquidator's account". The formal order recorded an undertaking by the company through its counsel (who also appeared for Mr Day) that the company would "within fourteen days of the final resolution of the provisional liquidator's said application pay to the provisional liquidator's solicitors such amount on account of his remuneration and disbursements as shall exceed the sum already held in trust by the provisional liquidator". The provisional liquidator's application was then adjourned to 18 September 1980. That application still had not been decided by September 1983. It does not seem necessary to deal further with the chronology of events save to say that no order has been made at any time concerning the provisional liquidator's entitlement to remuneration.

On 2 August 1983, Mr Day applied by summons for an order that the provisional liquidator forthwith transfer to the company "all monies of North Australian Properties Pty Ltd held by him".

On 12 September 1983, a document was filed headed "AMENDED OBJECTIONS FILED ON BEHALF OF KENNETH LEONARD DAY (A CONTRIBUTORY OF THE COMPANY) TO LIQUIDATOR'S ACCOUNT (PURSUANT TO THE ORDER OF MR JUSTICE GALLOP IN CHAMBERS THURSDAY 4 SEPTEMBER, 1980)".

Paragraph 1 of the "amended objections" was in the following terms:

"1. The order of this Honourable Court of 7 August 1980 dismissing the within petition thereby rescinded the provisional liquidator's appointment and terminated any right in the liquidator to receive remuneration because that would be to take further action on the rescinded order. (The petition was dismissed as incompetent)."

The remainder of the amended objections dealt with disputes concerning the quantum of the remuneration claimed by the provisional liquidator.

Mr Day's summons came on for hearing before Forster C.J. on 11 October 1983. On 28 October 1983 the learned Chief Justice of the Northern Territory made an order dismissing the summons and further ordered that Mr Day pay the provisional liquidator's costs. It is apparent from his Honour's reasons for judgment delivered that day that the matter with which he was concerned related only to questions raised by paragraph 1 of the amended objections of Mr Day filed on 12 September 1983.

Mr Day has appealed to this Court from the order of Forster C.J. The provisional liquidator does not oppose any variation to the learned Chief Justice's order which is though appropriate to make it clear that the only questions decided are the questions of law to which reference will hereafter be made.

Sub-section 232(2) of the Companies Act of the Northern Territory of Australia provides:

"A provisional liquidator is entitled to receive such salary or remuneration by way of percentage or otherwise as is determined by the Court."

It is not disputed that sub-rule 52(8) of the Rules of Court (Companies Act) 1965 of the State of South Australia is also applicable. That sub-rule provides:

"The provisional liquidator shall be entitled to be paid out of the property of the company all costs charges and expenses properly incurred by him and such remuneration as may be authorised by the order appointing him or any subsequent order and may retain out of such property the amount of such costs charges expenses and remuneration."

Mr Day appeared to argue the appeal on his own behalf. In effect, he submitted that the order appointing the provisional liquidator had no force or effect because it was made upon a petition which was later dismissed as "incompetent" and that, in any event, the Northern Territory Supreme Court's power to make an order in respect of the provisional liquidator's remuneration came to an end when the petition was dismissed.

Mr Day placed reliance on Ex parte Harding; in Re The Plumstead Woolwich and Charlton Water Company (1863) 32 L.J. (NS) 145 and Starr & Anor v. Trafalgar Financial Corporation Limited, an unreported judgment of Needham J. in the Supreme Court of New South Wales delivered on 25 July 1983.

In the former case, Kindersley V-C appointed Mr Harding official manager of the Plumstead Woolwich and Charlton Water Company, a limited liability company. At that time the Court of Chancery only had jurisdiction in winding-up in respect of unlimited companies, and the Court of Bankruptcy had jurisdiction in the case of limited companies. Mr Harding later exhibited his bill in the Court of the Master of the Rolls when objection was taken that the order of Vice-Chancellor Kindersley was null and void on the ground that the Court of Chancery had had no jurisdiction. The Master of the Rolls held the objection valid and dismissed the bill with costs. An appeal was also dismissed and the order of Vice-Chancellor Kindersley was discharged.

Later, an order to wind-up the company was made in bankruptcy and an official liquidator was appointed to whom Mr Harding handed over all the assets in his hands, making no deduction therefrom for the costs and expenses which he had incurred. He later presented a petition to the Court of Bankruptcy for payment out of the estate of the company (which was ample) of all his costs of the winding-up under the order of Vice-Chancellor Kindersley which had been discharged. It was held that such an order could not be made and an appeal was dismissed. It was held that because the Court of Chancery had had no jurisdiction, Mr Harding had never been an "official manager" at all.

In Starr v. Trafalgar Financial Corporation Limited, proceedings were brought in the Supreme Court of New South Wales on 15 March 1983 for the winding-up of Trafalgar Financial Corporation Limited and application was made for the appointment of a provisional liquidator. On the same day, Needham J. made an order ex parte for the appointment of a provisional liquidator. His order was entered the same day and the provisional liquidator was notified of his appointment and set about investigating the position of that company and protecting its assets. He employed a firm of solicitors to advise him.

On 18 March Counsel for the plaintiff notified Needham J. that the defendant company was incorporated in Victoria and suggested that the Supreme Court of New South Wales had no jurisdiction. Notice was directed to be given to the defendant company and to the provisional liquidator. All parties appeared before Needham J. on 21 March and on that day he ordered that the order which he had made on 15 March be rescinded and that the proceedings be dismissed because the Supreme Court had no jurisdiction. He then stood over for further consideration the question of payment of the provisional liquidator's remuneration. On 21 April 1983, a different provisional liquidator was appointed by the Supreme Court of Victoria.

Subsequently, on 28 April 1983, Needham J. heard argument concerning whether the provisional liquidator whom he had appointed on 15 March 1983 was entitled to remuneration. He held, correctly in my respectful opinion, that the order which he had made appointing the provisional liquidator was not void although made without jurisdiction and was not rendered ineffective ab initio by its discharge, but that the provisional liquidator's appointment ceased on the date of the order of rescission. His Honour referred to Wilde v. Australia Trade Equipment Co Pty Ltd (1981) 55 A.L.J.R. 280. If Re Harding, supra, is inconsistent with those views, it cannot be regarded as expressing the law in Australia. In any event, the position in the present case is if anything clearer since there is no doubt that the Northern Territory Supreme Court had jurisdiction to make the original appointment of Mr Mount as provisional liquidator of the company even if it was erroneous of it to do so.

In the matter before him, Needham J. went on to hold that the actions of the provisional liquidator between the order of appointment and the subsequent rescission of that order were justified by the authority of the order of appointment. Again, I respectfully agree. However, his Honour held that no further order was "appropriate or permissible". He said:

"It seems to me that to order one of the parties to pay Mr Grant's remuneration would be to take 'further action' on the rescinded order. What has been done has been validly done, but no further order based upon the validity of that order would be justified."

In the present case it was not disputed by counsel for the provisional liquidator that his appointment terminated when the petition was dismissed, although ultimately he sought to keep open the possibility that the provisional liquidator's remuneration was not necessarily restricted to costs and expenses in respect of steps taken prior to the dismissal of the petition. I will deal with the latter point separately at a later stage. For immediate purposes, it is sufficient to state that the absence of an order expressly setting aside the original appointment of the provisional liquidator in this case is of no consequence. Once the petition was dismissed, the position so far as is presently material was the same as if it had also been held that the order appointing the provisional liquidator had been made in error and the further order had been made setting aside the appointment.

Needham J. in the case before him relied for his final conclusion that no further order could be made for the payment of the provisional liquidator's remuneration upon a passage in Wilde's Case at p.285 from which the words "further action" which he quoted were taken. In my opinion, that passage does not support his conclusion.

In Wilde, an order was made ex parte under s.106 of the Companies Act 1961 (Queensland) extending the time for registration of a bill of sale which had been given by a company. The charge was registered in accordance with the order and a certificate of registration was obtained from the Commissioner of Corporate Affairs. A winding-up order was subsequently made. On the application of the liquidators an order was made setting aside the order which had granted an extension of time, which had been made erroneously although within jurisdiction. Later still, the liquidators unsuccessfully sought a declaration that the bill of sale was void against them.

It is necessary to put to one side a complication which was introduced into Wilde's Case by sub-s. 103(2) of the Queensland Companies Act which made the certificate of registration conclusive evidence that the requirement as to registration had been complied with.

The majority judgment was delivered by Stephen, Murphy and Wilson JJ with whom Aickin J. agreed. At p.285, first column E, the majority said that an order of the Supreme Court was lawful and supported what was done under it while it stood and no stay was operative. Gibbs J. (as the Chief Justice then was) agreed (p. 282 first column C), but disagreed with the further proposition of the majority at p.285 second column A, that the validity of the registration was not dependent on continued subsistence of the order extending time which had been set aside after registration. The critical sentence for present purposes appears in the majority judgment in the first column on p.285 after the passage at letter E already referred to. Their Honours said:

"It is true that from the moment it is set aside the order can no longer provide the lawful justification for further action . . . "

In my opinion, that sentence means no more than that an order which had been set aside thereafter has no further operation and that from that point no further step can be taken or order made which depends upon the continued force of the order which has been set aside. Accepting that to be so, I cannot see how it assists Mr Day in the present case.

Mr Mount's entitlements whether under sub-s. 232(2) of the Northern Territory Companies Act or under sub-rule 52(8) of the South Australian Companies legislation accrued to him in his capacity as provisional liquidator while he validly held that office, i.e. during the period from the presentation to the dismissal of the petition for the winding-up of the company. There is nothing in either provision which lends any support to a suggestion that an order to perfect such entitlement must be made whilst the appointment is current. Further, there is nothing there or elsewhere which indicates that it is necessary to prove as an essential element of an application for an order to perfect a provisional liquidator's entitlement to remuneration in respect of the period to which the entitlement relates that the order of appointment still be extant and operative. No more needs to be shown than that the order of appointment afforded the support for what was done when it was done.

That was also the opinion of the learned Northern Territory Chief Justice who said:

"I conclude . . . that the termination of his appointment by dismissal of the petition does not operate to prevent the fixing of . . . remuneration and his retention of funds in his hands to meet it. Whether his claim for remuneration and expenses is quantitatively proper is, of course, another matter about which I say nothing."

For the reasons which I have given, I consider that that conclusion was correct.

However, there are three further matters.

The learned Northern Territory Chief Justice also expressed the conclusion in the course of his reasons for decision "that the provisional liquidator is entitled to his proper costs and expenses of his work as provisional liquidator". However, the current dispute is concerned only with the negative proposition, namely Mr Day's contention that the provisional liquidator is not entitled to remuneration for the reasons which have been discussed and rejected. The rejection of those reasons as a basis for refusal of the provisional liquidator's remuneration does not mean that there may not be other reasons why the Court cannot or should not refuse to order that the provisional liquidator be remunerated by or out of the assets of the company. Nor does this decision affect claims which may be made by the provisional liquidator upon Day and Dent or the petitioning creditor, nor questions which may arise between the company and either or both Day and Dent and its liquidator. None of those issues have been touched upon to this point. I wish to make it clear that nothing said in the determination of this appeal is intended to have any bearing upon issues other than the particular questions argued.

Secondly, I mentioned earlier that counsel for the provisional liquidator sought to keep open the possibility that the provisional liquidator's remuneration was not restricted to costs and expenses in respect of steps taken prior to the dismissal of the petition. Reference was made in general terms to costs and expenses which might be incurred in the re-transfer of administration of the company from the provisional liquidator to the directors or otherwise in bringing the provisional liquidation to a conclusion. Reference was also made to the provisional liquidator's costs and expenses in respect of his application for remuneration but that seems to me to be a different question which is plainly within the power of the Court which deals with the application for remuneration. That aside, I do not find it easy to conceive of steps outside the period of the provisional liquidation which could be described in terms which would attract an entitlement to remuneration in accordance with the appropriate provisions. However, I consider it unsatisfactory to attempt to rule on such questions in advance and in the abstract, divorced from the facts of a particular case. The question does not presently arise and could not be properly raised consistently with the terms of the provisional liquidator's summons of 26 August 1980.

Thirdly, the outstanding issues left unanswered by the present decision make the order dismissing Mr Day's summons inappropriate. I would declare that the provisional liquidator is not disentitled to remuneration by reason only of the dismissal of the petition and otherwise adjourn Mr Day's summons to a date to be fixed.

I would also set aside the order for costs below. In view of the totally unsatisfactory nature of the whole proceedings, for which Mr Day and the company cannot by any means by wholly blamed, the appropriate order for costs is that the costs below and of the appeal be reserved to the Judge who deals with the provisional liquidator's summons of 26 August 1980 and Mr Day's summons of 2 August 1983.

Subject to those variations of the orders made by the primary judge, the appeal should be dismissed.