Editions Tom Thompson Pty Ltd v Pilley

[1997] FCA 882

EDITIONS TOM THOMPSON PTY LIMITED (subject to Deed of Company Arrangement) v. BRUCE PILLEY
No. NG 3628 of 1996
FED No. 882/97
Number of pages - 13
Corporations - Practice and Procedure
(1997) 148 ALR 146

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

LINDGREN J

Corporations - company subject to deed of company arrangement - dispute between company under administration and third party as to which owned certain goods - application under s 447D of the Corporations Law for directions as to whether administrators "entitled to sell" the goods - inappropriateness of procedure of application for directions to resolve substantive dispute between company and third party as to title.

Practice and Procedure - company subject to deed of company arrangement - dispute between company under administration and third party as to which owned certain goods - application under s 447D of the Corporations Law for directions as to whether administrators "entitled to sell" the goods - inappropriateness of procedure of application for directions to resolve substantive dispute between company and third party as to title.

Corporations Law ss 442C, 447D, 479(3)

Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 followed

Re Magic Aust Pty Ltd (in liq) (1992) 7 ACSR 742 followed

Re J W Murphy & P C Allen; Re BPTC Ltd (in liq) (1996) 19 ACSR 569 followed

Osborne Computer Corporation Pty Ltd v Riddell (1995) 13 ACLC 1210 distinguished

SYDNEY, 7 August 1997 (hearing and decision)

#DATE 7:8:1997

#ADD 9:9:1997

Solicitor for the Applicant: Mr J G Harrowell of Hunt & Hunt

Counsel for the Respondent: Mr David Collins

Solicitors for the Respondent: Lewis Hutchinson

THE COURT ORDERS THAT:

1. The applicant's motion for leave to amend brought by notice of motion filed on 7 August 1997 be dismissed.

   2. The applicant pay the respondent's cost of that motion.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

LINDGREN J

INTRODUCTION

There is before the Court an application which was filed on 26 August 1996 by Editions Tom Thompson Pty Limited (subject to Deed of Company Arrangement) (ACN 067 149 946) ("ETT"). On 5 May 1997, the application was fixed for hearing today and tomorrow.

APPLICATION AND MOTION FOR LEAVE TO AMEND APPLICATION

The application purports to be made under s 447D of the Corporations Law ("the Law"). That section states:

"447D(1) The administrator of a company under administration, or of a deed of company arrangement, may apply to the Court for directions about a matter arising in connection with the performance or exercise of any of the administrator's functions and powers.

(2) The administrator of a deed of company arrangement may apply to the Court for directions about a matter arising in connection with the operation, or giving effect to, the deed."

The application seeks the following direction:

"Messrs E G Chant & I L Struthers, the Administrators of Editions Tom Thompson Pty Limited ('ETT') are entitled to sell the assets referred to in paragraph 14 of the affidavit of Ronald Lester Cardwell sworn on 23 August 1996, as these assets comprise the assets of ETT."

Messrs Chant and Struthers ("the Administrators") are partners of Deloitte Touche Tohmatsu. Mr Cardwell is a chartered accountant employed by that firm. He assists the Administrators in their administration of ETT. The application also seeks an order that the respondent ("Mr Pilley") pay ETT's costs.

Paragraph 14 of Mr Cardwell's affidavit, referred to in the form of order set out above, refers to the following assets:

"(a) approximately 1,000 posters depicting Sir Ronald Bradman [sic] ('the Poster');

(b) approximately 500 copies of the book entitled, 'Farewell to Cricket' ('the Book'); and

(c) miniature cricket bats ('the Bats'), autographed by Bradman."

When the matter came on for hearing this morning, Mr Harrowell, solicitor, who appeared for ETT, sought leave to file in Court a notice of motion returnable instanter seeking leave to file in Court an amended application adding the Administrators as second applicants. The relief sought in the proposed amended application would remain in substance unaltered.

It is clear that it is the Administrators, and not ETT, who have standing to apply under s 447D. Mr Pilley contends, however, that an application for directions under the section is inappropriate in the circumstances of the present case, and that the kind of proceeding which is appropriate for resolution of the parties' dispute is one in which ETT seeks inter partes relief against Mr Pilley.

Mr Collins of counsel, who appeared for Mr Pilley, did not oppose the filing of the notice of motion but did oppose the granting of leave to amend. He did so on two grounds. The first is that in the circumstances of the case, the making of an application by the Administrators for directions under s 447D is an abuse of process. The second ground is that already referred to: what is in dispute is title to property, the claimant parties being ETT and Mr Pilley, and an application for directions under s 447D does not afford an appropriate procedure for the resolution of such a contest.

OUTLINE OF BACKGROUND FACTS

It is necessary to give only the briefest outline of the background facts. ETT is a publishing company. Its directors are Tom Thompson and Elizabeth Butel. Mr Thompson, on behalf of ETT, negotiated with Sir Donald Bradman with a view to republishing his book, "Farewell to Cricket". Part of the arrangement reached was that in conjunction with purchases of the book, buyers would acquire a poster depicting Sir Donald and a miniature cricket bat autographed by him.

ETT needed money. Mr Pilley and companies associated with him were a potential source of funds. Mr Thompson negotiated with Mr Pilley. Certain agreements were reached, although there is controversy as to what their terms were and whether they were breached. In any event, Mr Pilley claims that pursuant to the agreements, he, rather than ETT, became the owner of the copies of the posters and the miniature cricket bats that came into existence (I will use the expression "the goods" to refer to them but also, on occasions, to refer to the books as well, since nothing will turn on the distinction for present purposes).

REASONING

Abuse of process

Mr Collins submits that on the evidence, the Administrators are shown to have had no good reason for seeking directions because, so the submission goes, on the evidence there is simply nothing to be gained by their not accepting an offer, which has been made by Mr Pilley, for such interest as ETT may have in the goods. While maintaining his claim to be their owner, Mr Pilley has offered to buy all and any interest which ETT may have in them for a payment of $38000.00 coupled with a release by him of all and any claim which he has or might have as a creditor in the administration of ETT. Mr Collins submits that the only inference available is that the Administrators have an ulterior and impermissible purpose, perhaps that of selling the goods to a company associated with Mr Thompson.

There are certain other matters to which Mr Collins has referred in support of his abuse of process submission. For example, there is a letter dated 2 August 1996 from Mr Cardwell to Lewis Hutchinson, the solicitors for Mr Pilley, which was as follows:

"I refer to previous correspondence concerning the abovementioned matter and advise that the 'legal impediment' that was in my way pertaining to the Don Bradman bats has now been resolved.

Accordingly I propose to sell those bats and will be finalising the matter on Wednesday, 7 August 1996 at 4.00 pm.

Should you wish to make an offer for those bats on behalf of your client, Mr Bruce Pilley and/or companies connected with him I would be pleased if you could submit your offer by that time.

Should I receive no offer then I will proceed with the course that I deem appropriate." (emphasis supplied)

Mr Collins submits that the letter shows that at least as at its date, 2 August 1996, the Administrators had no doubt that they were entitled to sell, and, apparently, had a specific sale in contemplation. He points out that they have not led evidence of the details of the then proposed sale and that there is nothing to suggest that it was to be at a higher price than the amount offered by Mr Pilley. There were other matters in the evidence relied on by Mr Collins but it is not necessary for me to address them.

The Administrators, on the other hand, suggest that on the evidence there are at least suggestions that they may be able to obtain a higher price than that offered by Mr Pilley. They have referred to a letter dated 30 April 1996 from James R. Lawson Pty Limited to Deloitte Touche Tohmatsu, expressing the opinion that the books and the miniature bats, both autographed by Sir Donald Bradman, "would best sell as a 'package' and would, if offered at auction, realise a 'one off' price in the range of $120-$200 for the set". Although the evidence is not clear as to the number of sets in fact in existence, apparently there are not less than 500. Accordingly, at $120 per set, the effect of the advice was that $60000 (and possibly more) might be achieved for the autographed books and miniature bats.

Mr Collins has also referred to evidence of an advertisement which indicated that $795 would be accepted by ETT for a set of an autographed copy of the book, framed poster and autographed miniature bat. While this is not admissible evidence of value, it represents at least a further suggestion that the Administrators might be able to do better than to accept Mr Pilley's offer.

I am not persuaded on the evidence to make the finding that counsel for Mr Pilley seeks, that is, that it would be an abuse of process for the Administrators to apply for the direction sought.

Inappropriateness of procedure under s 447D of the Law

I turn to the second ground on which the filing of the amended application is opposed.

The Administrators were appointed to be administrators of ETT on 12 October 1995 by ETT's board of directors pursuant to s 436A(1) of the Law. Subsequently, a meeting of creditors of ETT was convened. Pursuant to a resolution of creditors dated 8 November 1995, on 24 November 1995 a deed of company arrangement was entered into between ETT, its directors, and the Administrators.

Clause 8 of the deed provided that the Administrators should have certain specified powers and duties in addition to the powers conferred by the Law. One of the specified powers was the power set out in clause 2 (s) of Schedule 8A to the Regulations to the Law. That power includes the capacity to sell the property of the company under administration. ETT, acting through the Administrators, entered into a contract on or about 14 March 1996 with Gumquest Pty Limited ("Gumquest") for the sale of certain rights, furniture and records of ETT. Apparently Gumquest is a company associated with Mr Thompson. The books, posters and miniature cricket bats were not included.

The Administrators obtained written advice of counsel dated 27 May 1996 to the effect that on the basis of the circumstances recounted in his brief, ETT owned the autographed miniature cricket bats. After the Administrators wrote their letter dated 2 August 1996 to the solicitors for Mr Pilley (giving notice of their intention to sell the bats on 7 August), Mr Pilley's solicitors, Lewis Hutchinson, replied on 6 August. Omitting formal parts, that letter was as follows:

"We note your intention to sell the Don Bradman bats.

We advise that our client, as owner, claims entitlement to possession of the Don Bradman bats together with the associated books and posters.

Unless you confirm by return that the said bats, books and posters will not be sold until this matter is resolved by a determination of a Court, we intend to issue legal proceedings and seek an injunction to prevent you from dealing with our client's property.

If you have engaged solicitors who can accept service on your behalf, please advise by return."

On 7 August, Mr Cardwell wrote to Lewis Hutchinson referring to discussions which had taken place regarding ETT and the claim made by Mr Pilley concerning "the Bradman bats". The letter included the following:

"As has previously been explained there has been a number of 'legal impediments' that have prevented the bats being disposed of and following discussions and correspondence with the Bradman Foundation as Trustee of the Bradman Museum Trust we have been given permission to dispose of the bats.

In part the letter from the Director of the Bradman Museum Trust says 'they and the Bradman Foundation are happy for the mini bats to be released as part of the promotion for the book ('The Art of Cricket'). I stipulated that under no circumstances are the bats to be sold separately. They must always be included as book/bat package.' The director goes on further to say that 'our contract with Dunlop Slazenger is not in jeopardy if the bats were to be used as part of the book promotion.'

Accordingly I advise that there is nothing further that can be done in relation to the bats apart from what has been stipulated above. You might pass this information on to your client and advise that with regret nothing further can be entered into."

On 8 August, Lewis Hutchinson replied, inter alia, as follows:

"We confirm your advice that you do not intend to take action to dispose of the bats without first consulting with our client.

Attached for your information is a copy of the draft Writ that has been prepared in relation to this matter.

We await your advice as to whether you will seek directions from the Court or any other intended course of action. We note that if you are prepared to wait for a determination of the matters outlined in the Writ, an Injunction will not need to be sought. Alternatively an Injunction will need to be sought to prevent you from disposing of goods of which our client is the legal owner.

We await your response by return."

The draft writ attached to the letter envisaged a proceeding in the Supreme Court of Victoria at Melbourne between Mr Pilley as plaintiff and "Editions Tom Thompson Pty Ltd (Administrators Appointed)" as defendant. The form of statement of claim annexed to the writ pleaded facts directed to the conclusion that Mr Pilley "is and has been since July 1995 the owner of and/or entitled to possession of" goods which were described as follows:

"CHATTELS

1. 600 miniature cricket bats ordered from Allround Cricket & Sports Centre and paid for by the plaintiff on or around 10 July 1995.

2. Promotional posters for the book "Farewell to Cricket" by Sir Donald Bradman."

The proposed statement of claim alleged that the Administrators had advised Mr Pilley that they intended to sell the bats on 7 August and that ETT had converted Mr Pilley's goods. The relief to be claimed was:

"1. Delivery up of the chattels.

2. Damages for detention.

3. Damages for conversion.

4. Specific performance by the defendant of its agreement to deliver the Books to the Plaintiff."

Events were overtaken by ETT's filing the application by which the present proceeding was commenced in this Court on 26 August 1996.

What emerges clearly from the correspondence referred to above is that the dispute between the parties is one between ETT and Mr Pilley as to ownership of goods. Substantial affidavits have been filed in support of those parties' respective claims on this issue; the facts relating to it are not simple; and the hearing and determination of it will involve significant time and cost.

The question before me is whether I should, in the exercise of my discretion, permit the filing of the proposed amended application. Counsel for Mr Pilley says that I should not do so because, so he submits, it is well established that an application for directions is not an appropriate vehicle for the determination of such a question of title.

In the course of discussion, Mr Harrowell said that he was not seeking protection against liability for the Administrators. But it became clear that what he meant was that the Administrators' objective was to be able, with protection against liability, to sell the goods and thereby convert them into cash, but not to enjoy further protection if they should dispose of the proceeds prior to an inter partes determination of the question of title as between ETT and Mr Pilley. The evidence does not, however, suggest any special reason to think that the goods must be sold urgently, and it was not submitted that they must be.

I was taken to many authorities dealing with applications by liquidators under the provision of the Law or its predecessor legislation comparable to s 447D. The current provision is subs 479(3) of the Law which provides:

"The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up."

The preponderance of authority is to the effect that on a liquidator's application for directions under that provision or its predecessors, the Court has no power to make orders binding upon, or affecting the rights of, third parties, and the view is also commonly taken that directions should not be given where the proposed acts of the liquidator which would be "sanctioned" by the directions would affect such rights: Re TTC (SA) Pty Ltd (in liq) (formerly Tom the Cheap (SA) Pty Ltd) (1983) 1 ACLC 914 (SA/White J); Re Security Provident Fund Ltd (in liq); Rodger v Gourlay (1984) 9 ACLR 56 (ACT/Blackburn CJ); Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 (NSW/Young J) esp at 118; Re Sportsman's Leisure and Hobby Warehouse Pty Ltd (in liq) [1990] 2 Qd R 93 (Cooper J) esp at 98; Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 (NSW/McLelland J) esp at 679-680; Re Magic Aust Pty Ltd (in liq) (1992) 7 ACSR 742 (NSW/McLelland J); Re J W Murphy & P C Allen; Re BPTC Ltd (in liq) (1996) 19 ACSR 569 (NSW/McLelland J); Re AMN Pty Ltd (in liq) (unreported, FCA/Cooper J, 20 January 1997); but cf Australian Securities Commission v Melbourne Asset ManagementNominees Pty Ltd (Receiver and Manager Appointed) (1994) 49 FCR 334 (Northrop J). On the hearing, but not in his prior written submissions, Mr Harrowell seemed not to challenge these propositions in relation to liquidators.

In Re G B Nathan & Co Pty Ltd (in liq), supra, McLelland J referred to the legislative pedigree of subs 479(3) of the Law and said (at 677 E-678E):

"Generally speaking, if the court gave a direction to an official administrator [his Honour used the expression 'official administrator' to refer to those entrusted by the Court of Chancery with the administration of property under the control of the court, principally, trustees of trust property or executors or administrators of a deceased estate, under administration by the court pursuant to a decree for general administration, and receivers (and managers) appointed by the court in respect of property the subject of litigation] who had made a full and fair disclosure to the court of the material facts, the official administrator might act in accordance with the direction without thereby incurring personal liability to any of the persons in whose interests the administration was being conducted, for example, creditors or beneficiaries of a deceased estate: ...

The protection of the official administrator, acting under a direction of the court, from personal liability would not however affect the rights of creditors and beneficiaries as between themselves: ...

The court had no jurisdiction under a decree for general administration to decide questions as against persons making proprietary claims adverse to the trust or estate in question ..."

His Honour went on to refer to the "significant similarities" between the winding up of a company under the control of the court and the administration of a deceased estate under the control of the court, and between the status of a court-appointed liquidator and that of a court-appointed receiver. After noting that the court had no jurisdiction under a decree for general administration to decide questions as against persons making proprietary claims adverse to the trust or estate in question, except possibly by consent, his Honour said (at 679-680):

"The historical antecedents of s 479(3), the terms of that subsection and the provisions of s 479 as a whole combine to lead to the conclusion that the only proper subject of a liquidator's application for directions is the manner in which the liquidator should act in carrying out his functions as such, and that the only binding effect of, or arising from, a direction given in pursuance of such an application (other than rendering the liquidator liable to appropriate sanctions if a direction in mandatory or prohibitory form is disobeyed) is that the liquidator, if he has made full and fair disclosure to the court of the material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him in accordance with the direction.

Modern Australian authority confirms the view that s 479(3) 'does not enable the court to make binding orders in the nature of judgments' and that the function of a liquidator's application for directions 'is to give him advice as to his proper course of action in the liquidation; it is not to determine the rights and liabilities arising from the company's transactions before the liquidation': see Re Security Provident Fund Ltd (In Liq) (1984) 73 FLR 264 at 265; 9 ACLR 56 at 57; 2 ACLC 594 at 595; Murdoch v Crawford [1986] VR 97 at 99; Re Sportsman's Leisure & Hobby Warehouse Pty Ltd (In Liq) [1990] 2 Qd R 93 at 96 and Re Byron Moore Journeaux Ltd (In Liq) [1990]VR 683 at 684; see also Re TTC (SA) Pty Ltd (In Liq) (1983) 32 SASR 532 at 535 and, in relation to a receiver's application for directions, Re Odessa Promotions Pty Ltd (1979) ACLR 40-523 at 32,105-32,106. Canadian authority is to similar effect. In Re Ward (1987) 66 CBR (NS) 165 at 171, Dickson J of the Supreme Court of New Brunswick said in relation to the equivalent provision under the (Canadian) Bankruptcy Act:

'It seems well settled in law that in an application under s 16 of the Act a court must confine itself, in giving directions, to matters concerning administration of the estate and has no authority to resolve substantive matters in dispute between a trustee and a third party.'

It should be observed that there are instances where a court has, in proceedings commenced as a liquidator's application for directions, gone on to make orders declaratory of substantive rights, clearly intended to be of binding effect on the parties to the proceedings, and where necessary has made representative orders for this purpose: see, eg, Re Staff Benefits Pty Ltd and the Companies Act [1979] 1 NSWLR 207 and cf Re Securitibank Ltd (In Liq) [1978] 1 NZLR 97; Re Securitibank Ltd [1978] 2 NZLR 133 and Re Securitibank Ltd (No 2) [1978] 2 NZLR 136. The procedures of the court are sufficiently flexible to enable proceedings commenced as an application for directions to be changed into proceedings for the determination of substantive rights, and this is sometimes a convenient course in order to avoid the need to commence further proceedings involving additional cost and delay: see, eg, Anmi Pty Ltd v Williams [1981] 2 NSWLR 138 at 156-157. However it is important that the distinction between the two kinds of proceedings be not lost sight of or blurred, and such a fundamental change should not be permitted unless the court is satisfied that those affected either consent to that course (see, eg, Re Standard Insurance Co Pty Ltd (1963) 5 FLR 292; 80 WN (NSW) 1355 and Murdoch (at 100-101)), or will not suffer injustice in consequence of the alteration to the status of the proceedings."

McLelland CJ in Eq had occasion to return to the present issue in Re Magic Aust Pty Ltd (in liq), supra, and in Re J W Murphy & P C Allen; Re BPTC Ltd (in liq), supra. In the former case, third parties had been made parties to a liquidator's application for directions. His Honour said (at 746):

"In a liquidator's application for directions the liquidator bears the responsibility of making a full and fair disclosure to the court of the material facts, and it is no part of the court's function on such an application to resolve factual conflicts."

In the BPTC case, the learned Chief Judge in Equity said (at 570):

"It is to be emphasized that an application for directions under s 379(3) of the Companies Code (or s 479(3) of the Corporations Law) is an administrative non-adversary proceeding, and a direction given pursuant to that section has no effect on the substantive rights of persons external to the winding up."

I see no distinction in the present respect between an application by administrators under s 447D and an application by a liquidator under subs 479(3). It is true that a liquidator is an officer of the court whereas an administrator under a deed of company arrangement is not. It is also true that the legislative antecedents of subs 479(3) were concerned with officers of the court - the trustees, executors, administrators, receivers and managers to whom McLelland J referred in the Re G B Nathan case. But I do not think that this distinction is material for present purposes. The procedure afforded by s 447D to administrators under a deed of company arrangement is clearly drawn from, and is in substance the same as, that afforded to liquidators by subs 479(3). Indeed, it is perhaps arguable that the court's jurisdiction is wider in the case of its officer, such as a liquidator; cf ASC v Melbourne Management Nominees Pty Ltd, supra, at 350G-351A, 352E-G. I proceed on the basis that the propositions mentioned above apply equally to applications by administrators under s 447D.

In the present case, what is sought is a direction that the Administrators are "entitled" as against Mr Pilley to sell the goods "as these assets comprise the assets of ETT". The terms of the direction import a conclusion as to ownership. The procedure of an application for directions is not one by which this question can be finally resolved. But even a modified form of direction, such as a direction that the Administrators are justified in selling, is apt to lead to a sale which would affect Mr Pilley's rights.

An application under s 477D is properly brought by the administrator alone. In so far as it is brought by ETT the application is incompetent. ETT's application named Mr Pilley as a respondent. Although Mr Pilley has not complained, in my view this course, as distinct from that of notifying Mr Pilley of the making of the application, was also strictly inappropriate, since the giving of directions to the Administrators is not the making of an order which could directly affect Mr Pilley's rights or liabilities (cf Re Trade Practices Commission v Milreis Pty Ltd (1978) 18 ALR 17 (FCA/Franki J)) or determine the dispute between him and ETT (cf O 6 subr 8(1)(b) of the Federal Court Rules). Conceptually, the application for directions is an ex parte one. No doubt, on an application for directions under subs 379(1) or 447D, the Court has power to grant leave to, inter alia, a "creditor" of the company to be heard on the question whether the directions sought should be made, without being made a party (FCR O 71 subr 10(1)), and it has been of assistance to hear Mr Pilley on that question in the present case. But whether or not advantage is taken of leave to be heard, directions given by the Court to a liquidator or administrator would not affect the creditor's rights and the creditor would not be "estopped" by the directions. Although O 71 subr 10(4) in terms empowers the Court to order that a creditor be added as a respondent in a proceeding under the Law, it follows from what I have said that in my respectful view it is difficult to understand on what basis it would be an appropriate exercise of discretion to do so, at least in the absence of consent, so long as the proceeding remained no more than an application for directions under the statutory provision.

I should not grant leave to amend the application if I would not proceed to hear and determine an application by the Administrators for the direction sought. I would not do so. Since it is not possible for the Court, within the framework of an application for directions, to resolve the parties' dispute, there is at least a real possibility of a second, but inter partes, proceeding relating to the same issue. It would be wasteful of the Court's and the parties' resources and could prove embarrassing for the Court to give a direction, even in a modified form (such as that the Administrators are "justified" in selling), in these circumstances. One can conceive of exceptional circumstances, such as a case involving an imminent auction (cf ReMagic Aust Pty Ltd (in liq) (unreported, Supreme Court of New South Wales, Powell J, 22 May 1992) and (1992) 7 ACSR 742 (NSW/McLelland J)) or a proposed sale of perishable goods, in which the giving of directions in a case of challenged title may be unavoidable notwithstanding such disadvantages. But the present case is not of such a kind.

Two further related questions can be dealt with together. What would the position be (a) if it were possible to give directions which would be binding upon Mr Pilley, or (b) if ETT were to apply to have the present proceeding reconstituted as an inter partes proceeding for the determination of substantive rights? Counsel for Mr Pilley submits that fairness to his client requires that the controversy between him and ETT should be determined with the benefit of pleadings and discovery. There is substance in this submission. As noted earlier, the facts are not simple, the affidavit material filed on behalf of ETT and Mr Pilley is substantial, and the hearing will involve considerable time and cost (it may not conclude within the remainder of the hearing time set aside). (It will be recalled that Mr Pilley had prepared to plead a case against ETT in the Supreme Court of Victoria.) It suffices to say that I am not satisfied, on the material presently before me, that Mr Pilley would not suffer injustice if there were to be a final determination of the issue of title on the affidavits filed on the present application for directions and without pleadings and discovery.

Mr Harrowell, for ETT and the Administrators, has referred to Osborne Computer Corporation Pty Ltd v Riddell (1995) 13 ACLC 1210 ("Osborne") in which Cohen J, in the Supreme Court of New South Wales, gave directions pursuant to s 447D to an administrator appointed under s 436A. Apparently counsel's researches have revealed no other reported case under s 447D, which forms part of Part 5.3A introduced into the Law by Act Number 210 of 1992.

In Osborne the business of the company in administration was the building and sale of personal computers which it sold to an associated company which, in turn, sold them to the public. The company used components bought from a large number of suppliers. Some of the suppliers claimed the benefit of reservation of title clauses in respect of the components supplied by them. Some components had already been incorporated into finished computers and others were still held as stock. In the case of some suppliers, the existence of the reservation of title provision had been accepted by the administrator, in other cases it had been rejected, and in yet further cases its status was in doubt.

The plaintiffs, who were the company and its administrators, sought orders under subs 447A(1) or, in the alternative, under subs 447D(1). Section 447A empowers the Court, on the application of certain specified classes of persons, to make such orders as it thinks appropriate as to how Part 5.3A of the Law is to operate in relation to a particular company. The plaintiffs sought orders or advice that the administrator was entitled to sell in the ordinary course of the company's business, and as part of completed computers, goods the subject of valid retention of title claims, and that upon a sale taking place, the administrator did not incur any liability to the person having the retention of title claim. Samsung Pty Ltd ("Samsung"), one of the suppliers, was joined as a respondent. It was accepted that Samsung had a valid and enforceable reservation of title clause. Although it was not accepted as representing all other suppliers, it was accepted that a decision in relation to Samsung:

"may be taken as a test case for, but not necessarily binding upon, other suppliers in a similar position and with valid retention of title conditions in their contracts." (at 1,211)

Importantly for present purposes, Samsung filed a cross-claim seeking an order pursuant to s 440C of the Law, permitting it to take possession of the components which it had supplied.

The plaintiffs' case relied on their construction of s 442C of the Law which is as follows:

"442C(1) The administrator of a company under administration or of a deed of company arrangement must not dispose of: (a) property of the company that is subject to a charge; or (b) property that is used or occupied by, or is in the possession of, the company but of which someone else is the owner or lessor.

(2) Subsection (1) does not prevent a disposal: (a) in the ordinary course of the company's business; or (b) with the written consent of the chargee, owner or lessor, as the case may be; or (c) with the leave of the Court.

(3)The Court may only give leave under paragraph (2)(c) if satisfied that arrangements have been made to protect adequately the interests of the chargee, owner or lessor, as the case may be."

Cohen J saw the application as raising questions as to "the effects of certain provisions of the Corporations Law in the particular circumstances of the administration" (his Honour referred to Brash Holdings Ltd v Katile Pty Ltd (1994) 12 ACLC 472) and therefore as one on which it was appropriate to give advice under subs 447D(1). His Honour gave the following directions:

"I direct the second plaintiff as administrator of the first plaintiff that pursuant to s 442C(2)(a) of Corporations Law he is entitled to sell in the ordinary course of the first plaintiff's business and as part of completed units goods the subject of valid retention of title claims, but that a sale in those circumstances will not be in the ordinary course of business if it is made after the owner of the goods has made a demand for their return in accordance with its contractual right to make that demand or if the sale is made contrary to the terms of the contract for the supply of goods by that owner to the first plaintiff.

I order that the second plaintiff as administrator of the first plaintiff have leave to sell goods the subject of valid retention of title claims as part of completed units, where that sale is not in the ordinary course of business, upon condition that the amount of the cost of those goods payable to the supplier of them is, upon their sale, paid to a separate account operated for that purpose and thereafter paid to that supplier as soon as the retention of title claim is accepted or established." (at 1,215)

In my view, Osborne is distinguishable from the present case. Samsung did not submit that the giving of directions was an inappropriate procedure. The existence of its cross-claim signified that there was a consensual joinder of issue between Samsung and the company in administration which, it will be recalled, was a plaintiff. What was in issue was the effect of the application of s 442C to a written contractual provision, the existence and validity of which were not in dispute.

Osborne is not persuasive on the question of the appropriate approach to be taken in the case of a conflict as to whether, on the application of general law principles to disputed facts, goods are the property of a company in administration or a third party.

Mr Harrowell has referred to s 442C of the Law which was set out above. I will not discuss the true scope and effect of s 442C because the matter has not been fully argued. It suffices to say that the differences to which I have referred between Osborne and the present case indicate why the possibility that that section also applies in the present case does not persuade me to make a different decision on the application for leave to amend.

CONCLUSION

It follows from what I have said that the motion for leave to amend should be dismissed with costs. That dismissal will leave the application itself on foot. While it is clear that ETT does not have standing to seek directions under s 447D, I will not dismiss the application now as it may well be that a further motion for leave to amend will be brought so as to re-constitute the application as a proceeding inter partes.

Before parting with the matter I should record that it is disappointing that virtually one day has had to be devoted to a procedural question and that the two days set aside for the hearing of the evidence relating to ownership have been lost. The procedural question should have been raised and resolved well before 5 May 1997, when the case was set down for hearing.