Hall v Poolman - [2009] NSWCA 64

No judgment structure available for this case.

Reported Decision: 254 ALR 333228 FLR16471 ACSR 13975 NSWLR 99

New South Wales

Court of Appeal

CITATION: Hall v Poolman [2009] NSWCA 64

HEARING DATE(S): 28 November 2008

JUDGMENT DATE:
31 March 2009

JUDGMENT OF: Spigelman CJ; Hodgson JA; Austin J

DECISION: 1. Leave to appeal granted.
2. Orders 1(a)-(d) made by his Honour Justice Palmer on 15 February 2008 set aside.

CATCHWORDS: APPEAL – appeal – general principles – interference with discretion of court below – re-exercise of discretion - CORPORATIONS – winding up – winding up voluntarily – liquidators – supervision of liquidators by the court – inquiry under s 536(1)(a) Corporations Act 2001 (Cth) – faithful performance of duties - CORPORATIONS – winding up – winding up voluntarily – liquidators – supervision of liquidators by the court – inquiry under s 536(1)(b) Corporations Act 2001 (Cth) – complaint – whether a complaint was made - CORPORATIONS – winding up winding up voluntarily – liquidators – supervision of liquidators by the court – inquiry under s 536(3) Corporations Act 2001 (Cth) – liquidators to answer an inquiry - CORPORATIONS – winding up – liquidators – duties and liabilities – in voluntary winding up – factors relevant to the discretion to ordering an inquiry under s 536 Corporations Act 2001 (Cth) – size of anticipated return to creditors – position of creditors – proportionality between cost and recovery – failure to apply for directions before commencement of the proceedings – litigation funding - STATUTORY INTERPRETATION – acts of parliament – interpretation – s 536(1)(a), s 536(1)(b), s 536(3) Corporations Act 2001 (Cth)

LEGISLATION CITED: Australian Securities and Investments Commission Act 2001 (Cth)
Bankruptcy Act 1914 (UK)
Bankruptcy Act 1966 (Cth)
Civil Procedure Act 2005
Companies Act 1896 (Vict)
Companies Act 1936
Companies Code
Companies (Winding Up) Act 1890 (UK)
Corporations Act 2001 (Cth)
Supreme Court (Corporations) Rules 1999
Uniform Civil Procedure Rules 2005
Uniform Companies Act 1961

CASES CITED: Andjelic v Marsland (1996) 186 CLR 20
Anstella Nominees Pty Ltd v St George Motor Finance Ltd [2003] FCA 466; (2003) 21 ACLC 1347
Arthur Yates & Co Pty Ltd v Vegetable Seeds Committee (1945) 72 CLR 37
Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2008] HCA 9; (2008) 232 CLR 314
Australian Coal & Shale Employees' Federation v Commonwealth (1953) 94 CLR 621
Australian Securities and Investments Commission v Edge [2007] VSC 170; (2007) 211 FLR 137
Australian Securities and Investments Commission v Forestview Nominees Pty Ltd (recrs & mgrs apptd) [2006] FCA 1530; (2006) 236 ALR 652
Australian Security Estates Pty Ltd v Bluecrest Holdings Pty Ltd (in liq) [2002] NSWSC 491; (2002) 169 FLR 111
Bacich v Australian Broadcasting Corporation (1992) 29 NSWLR 1
Belvista Pty Ltd v Murphy (1993) 11 ACSR 628
Buiscex Ltd v Panfida Foods Ltd (in liq) (1998) 28 ACSR 357
Burns Philp Investments Pty Ltd v Dickens (1993) 11 ACLC 272
Burns Philp Investments Pty Ltd v Dickens (No 2) (1993) 31 NSWLR 280
Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386
Clutha Ltd (in liq) v Millar (No 5) [2002] NSWSC 833; (2002) 43 ACSR 295
Duke of Portland v Topham (1864) 11 HL Cas 32; 11 ER 1242
Galloway v London Corporation (1866) LR 1 HL 34
General Assembly of the Free Church of Scotland v Lord Overtoun; Macalister v Young [1904] AC 515
Gray v Bridgestone Australia Ltd (1986) 10 ACLR 677
Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123
Hall v Poolman (No 2) [2007] NSWSC 1494
Hall v Poolman, Supreme Court of New South Wales, Palmer J, 15 February 2008, unreported
House v The King (1936) 55 CLR 499
IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in liq) [2009] FCAFC 9
Leigh, re King Bros [2006] NSWSC 315
Leslie v Hennessy [2001] FCA 371
Lovell v Lovell (1950) 81 CLR 513
Macchia v Nilant [2001] FCA 7; (2001) 110 FCR 101
Magarditch v Australia and New Zealand Banking Group Ltd [1999] FCA 35; (1999) 30 ACSR 265
Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd [2008] FCA 471; (2008) 245 ALR 726
Montreal Trust Co v Abitibi Power Co [1937] 4 DLR 369
Moore v Macks [2007] FCA 10
Naumoski v Parbery [2002] NSWSC 1097; (2002) 171 FLR 332
Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434
O’Toole v Mitcham (1977) 2 ACLR 471
Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651
PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service (1995) 184 CLR 301
Re ACN 076 673 875 Ltd (in liq) [2002] NSWSC 578; (2002) 42 ACSR 296
Re Ah Toy (1986) 10 FCR 356; 10 ACLR 630
Re Alafaci, Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262
Re Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 742
Re Day & Dent Constructions Pty Ltd (1984) 32 NTR 13; 9 ACLR 319
Re English Scottish & Australian Chartered Bank [1893] 3 Ch 385
Re Feasty’s Family Restaurant Pty Ltd (1996) 14 ACLC 1058
Re Fermoyle Pty Ltd (in liq); Commonwealth v Brown (1992) 6 ACLR 640
Re Fox Home Loans Pty Ltd (in liq) [2005] NSWSC 1050
Re Gault; Gault v Law (1981) 57 FLR 165
Re Glowbind Pty Ltd (in liq); Takchi v Parbery [2003] NSWSC 1190; (2003) 48 ACSR 456
Re Imobridge Pty Ltd (in liq) (No 2) [1999] QSC 342; [2000] 2 Qd R 280
Re Silver Valley Mines (1882) 21 Ch D 381
Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83
Re Tavistock Ironworks Co (1871) 24 LT 605
Re Timberland Ltd (in liq); Commissioner for Corporate Affairs v Harvey [1980] VR 669
Re Tosich Construction Pty Ltd (1997) 73 FCR 219; Re Addstone Pty Ltd (in liq) (1998) 83 FCR 583
Registrar in Bankruptcy v Bradley (1983) 72 FLR 231
Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115
Star v Silvia (1994) 12 ACLC 600
State Bank of New South Wales v Turner Corporation Ltd (1994) 14 ACSR 480
Stewart, re Newtronics Pty Ltd [2007] FCA 1375
The Queen v Toohey; ex parte Northern Land Council (1982) 151 CLR 170
Turner v Official Trustee in Bankruptcy (Federal Court of Australia, Burchett, Drummond and Sackville JJ, 27 November 1998, unreported)
UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (No 2) [1997] 1 VR 667; (1996) 21 ACSR 251
Vines v Australian Securities and Investments Commission [2007] NSWCA 126; (2007) 63 ACSR 505
Vink v Tuckwell [2008] VSC 100; (2008) 66 ACSR 30
Vink v Tuckwell [2008] VSCA 204; (2008) 68 ACSR 265
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285
Wilson v Commonwealth of Australia [1999] FCA 219
Wong v Silkfield Pty Ltd [1999] HCA 48; (1999) 199 CLR 255

PARTIES:
Gregory Winfield Hall (First Applicant)
Phillip Patrick Carter (Second Applicant)
Peter Renwick Poolman (First Respondent)
Malcolm Geoffrey Irving (Second Respondent)
Constance Helen Poolman (Third Respondent)
John Giske Martini (Fourth Respondent)
Sandra Lee Yates (Fifth Respondent)

FILE NUMBER(S): CA 40030/08

COUNSEL:
T F Bathurst QC, J Williams (Applicants)

SOLICITORS: Allens Arthur Robinson (Applicants)
CRS Warner Sanderson (First Respondent)
Addisons (Second Respondent)
SBA Lawyers (Fourth Respondent)
Deacons (Fifth Responent)

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 2032/04

LOWER COURT JUDICIAL OFFICER: Palmer J

LOWER COURT DATE OF DECISION: 23 November 2007
20 December 2007
15 February 2008

LOWER COURT MEDIUM NEUTRAL CITATION: Hall v Poolman [2007] NSWSC 1330
Hall v Poolman (No 2) [2007] NSWSC 1494
Hall v Poolman, Supreme Court of New South Wales, Palmer J, 15 February 2008

- 79 -

CA 40030/08

SPIGELMAN CJ
HODGSON JA
AUSTIN J
Tuesday 31 March 2009

Gregory Winfield Hall v Peter Renwick Poolman

FACTS
The liquidators of two companies in voluntary winding up sought to commence legal proceedings against two directors of the companies. The Committees of Inspection approved a litigation funding agreement between the liquidators and a litigation funder to pursue the proceedings. The liquidators disclosed to the Committees of Inspection that returns to creditors from the proceedings were likely to be very low.

The liquidators were successful in the proceedings and the costs of proceedings and liquidator’s fees were settled.

In the course of defending the claims against them, the directors argued under s 1317S and s 1318 of the Corporations Act 2001 (Cth) that they should not be held liable when the bulk of the proceeds of the litigation would go to the liquidators and litigation funders, with negligible return to the creditors. This argument was rejected by the trial judge. However the trial judge considered that, in the circumstances, the actions of the liquidators warranted further inquiry, and accordingly ordered an inquiry pursuant to ss 536(1)(a), 536(1)(b) and 536(3) of the Corporations Act.

The liquidators appeal from the decision to order an inquiry. The liquidators contend that the trial judge did not apply a proper construction of s 536, and did not properly exercise the discretion under s 536.

The appeal proceeded without a contradictor.

HELD
(The Court)

The interpretation of s 536

1 Section 536 does not require that there be a prima facie evidentiary case of lack of faithful performance or observance of requirements [56]–[60][79][84]
2 An applicant must demonstrate something about the liquidator’s performance of duties or observance of requirements that is a sufficient basis for making an order for inquiry. The court then has a discretion which it must exercise. [58]–[59]

Leslie v Hennessy [2001] FCA 371 followed.

Burns Philp Investments Pty Ltd v Dickens (1993) 11 ACLC 272; Re Glowbind Pty Ltd (in liq); Takchi v Parbery [2003] NSWSC 1190; (2003) 48 ACSR 456; Burns Philp Investments Pty Ltd v Dickens (No 2) (1993) 31 NSWLR 280 applied.

Re Timberland Ltd (in liq); Commissioner for Corporate Affairs v Harvey [1980] VR 669; Magarditch v Australia and New Zealand Banking Group Ltd [1999] FCA 35; (1999) 30 ACSR 265; Re Fox Home Loans Pty Ltd (in liq) [2005] NSWSC 1050; Vink v Tuckwell [2008] VSC 100; (2008) 66 ACSR 30 referred to.

3 Where there is a statutory authority extending to liquidators, there should be no lesser degree of supervision of liquidators by virtue of the fact that they are not court-appointed liquidators. [64]–[65]
4 The court’s supervisory role discussed. [66]–[68]

Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434; Re Glowbind Pty Ltd (in liq); Takchi v Parbery [2003] NSWSC 1190; (2003) 48 ACSR 456; Leslie v Hennessy [2001] FCA 371; Australian Securities and Investments Commission v Forestview Nominees Pty Ltd (recrs & mgrs apptd) [2006] FCA 1530; (2006) 236 ALR 652; Australian Securities and Investments Commission v Edge [2007] VSC 170; (2007) 211 FLR 137; Vink v Tuckwell [2008] VSC 100; (2008) 66 ACSR 30 referred to.

Jurisdiction under s 536(1)(a)

5 It was open to the trial judge to hold that there was sufficient basis to order an inquiry. [82] [87]

Interpretation of s 536(1)(b)
6 Having regard to the text, structure and history of the section, the range of complaints under s 536(1)(b) is not confined by s 536(1)(a). [89]–[90]

Vink v Tuckwell [2008] VSC 100; (2008) 66 ACSR 30 not followed.

(Per Hodgson JA and Austin J, Spigelman CJ dissenting)

7 A complaint had been made for purposes of s 536(1)(b). [93] [101] [106]

8 Section 536(1)(b) does not require that the complaint be a formal initiation of an inquiry under s 536. All that is needed is that there be criticism expressed to the court, in any context, with respect to the conduct of a liquidator connected to performance of the liquidator's duties. [94]–[97]

9 Rule 7.11(1) of the Supreme Court (Corporations) Rules 1999 does not dictate the form of complaint where the complainant is already before the court. [98]

(Per Spigelman CJ)

10 A complaint under s 536(1)(b) requires a formal request to the court to take steps to inquire into something done by a liquidator. [100]–[101]

11 Alternatively, r 7.11(1) of the Supreme Court (Corporations) Rules 1999 imposes a mandatory process for making a complaint under s 536(1)(b) by way of originating process. [102]

Interpretation of s 536(3)
12 The wording, structure and history of sections 536(1) and 536(3) indicate that they are separate sources of power and are not to be construed by reference to one another. [106]–[107]

O’Toole v Mitcham (1977) 2 ACLR 471; Re Fermoyle Pty Ltd (in liq); Commonwealth v Brown (1992) 6 ACLR 640; Australian Securities and Investments Commission v Edge [2007] VSC 170; (2007) 211 FLR 137 applied.

Trial judge’s exercise of the discretion to order an inquiry under s536
13 Factors relevant to the exercise of the discretion to order an inquiry under s 536(1)(a) or s 536(1)(b) or s 536(3) discussed. [117] [121] [128]–[129] [137] [140] [173]

Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386; Re Tosich Construction Pty Ltd (1997) 73 FCR 219; Re Addstone Pty Ltd (in liq) (1998) 83 FCR 583; Buiscex Ltd v Panfida Foods Ltd (in liq) (1998) 28 ACSR 357; Re Imobridge Pty Ltd (in liq) (No 2) [1999] QSC 342; [2000] 2 Qd R 280; Re ACN 076 673 875 Ltd (in liq) [2002] NSWSC 578; (2002) 42 ACSR 296; Anstella Nominees Pty Ltd v St George Motor Finance Ltd [2003] FCA 466; (2003) 21 ACLC 1347; Leigh, re King Bros [2006] NSWSC 315; Stewart, re Newtronics Pty Ltd [2007] FCA 1375; UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (No 2) [1997] 1 VR 667; (1996) 21 ACSR 251; Re Feasty’s Family Restaurant Pty Ltd (1996) 14 ACLC 1058; Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd [2008] FCA 471; (2008) 245 ALR 726; IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in liq) [2009] FCAFC 9 referred to.

14 A liquidator may legitimately and in accordance with his or her duties pursue litigation with the aid of a litigation funder even if there is little or no likelihood of recovery going beyond recovery of his or her own costs and expenses and the funder's fees, so long as certain provisos are met. [150]–[151]

Re Imobridge Pty Ltd (in liq) (No 2) [1999] QSC 342; [2000] 2 Qd R 280 ; Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651 referred to.

15 A prima facie view by the trial judge that the costs of the proceedings were disproportionate to the maximum possible recovery and that the proceedings could have been conducted for a significantly lower cost is an adequate foundation, along with other matters upon which his Honour relied, for ordering and inquiry on the ground that there is something warranting further investigation. [160]

The public interest as a relevant consideration
16 The public interest in the liquidators pursuing proceedings against the directors is a relevant factor in the exercise of the discretion. [128]–[129]

Buiscex Ltd v Panfida Foods Ltd (in liq) (1998) 28 ACSR 357; Re ACN 076 673 875 Ltd (in liq) [2002] NSWSC 578; (2002) 42 ACSR 296; Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651 referred to.

17 The trial judge did not give weight to this public interest consideration and, accordingly, the exercise of the discretion miscarried. [130]

Failure to apply to the court for approval of litigation funding agreement

18 The decision by a liquidator to enter a litigation funding agreement is not purely a commercial decision. When approached for directions, a court may be less likely to defer to a liquidator’s judgment. Whether to give directions or decline to give them will depend upon the nature of the directions sought and the facts of the instant case, and in particular the extent to which the particular litigation funding agreement that is before the court, and the circumstances in which recovery proceedings are contemplated, raise issues capable of affecting the administration of justice. [170] [172]

19 There is no obligation upon liquidators to apply to the court for directions as a matter of course before entering into a litigation funding agreement. The decision whether to do so is informed by the liquidator’s duties of skill, care and diligence. [175] [178]

20 The trial judge erred in suggesting that liquidators should routinely approach the courts before entering into a litigation funding agreement. This was a factor material to his decision to order an inquiry and, accordingly, the exercise of the discretion miscarried. [176] [179] [180]

Re-exercise of the discretion
21 There does not appear to be any utility in ordering the inquiry. The costs of the proceedings and liquidator’s fees have been settled, which removes the purpose of the inquiry as stated by the trial judge, namely making a costs limiting order under s98 of the Civil Procedure Act 2005. The refusal of the Australian Securities and Investments Commission to take up the invitation to appear in the proceedings indicates that no further regulatory purpose would be served by such an order. [195] [198] [199]

CA 40030/08

SPIGELMAN CJ
HODGSON JA
AUSTIN J
Tuesday 31 March 2009

Gregory Winfield Hall v Peter Renwick Poolman

Judgment

1 THE COURT: The Reynolds Wines Group went into voluntary administration in August 2003 and into liquidation in November 2003. The liquidators within that group, Reynolds Wines Ltd and Reynolds Vineyards Pty Ltd ("the companies") are Gregory Winfield Hall and Phillip Patrick Carter.

2 The liquidators seek leave to appeal from an order made by Palmer J on 15 February 2008, and if leave is granted, they seek on appeal to set aside Palmer J's order. By that order, his Honour directed that there be an inquiry by the Court into their conduct, pursuant to s 536 of the Corporations Act 2001 (Cth). The conduct related to legal proceedings commenced and prosecuted by the applicants with the assistance of a litigation funder.

The application for leave to appeal

3 The applicants contend that the facts and circumstances relied upon by Palmer J are not capable, as a matter of law, of providing a basis for ordering an inquiry under s 536(1)(a), s 536(1)(b) or s 536(3), which are the three provisions relied upon by his Honour. Their submissions raise important questions about the proper construction of s 536, and about whether his Honour properly invoked that provision in making his orders. They also raise important issues about the circumstances in which it may be proper for a liquidator to embark upon and prosecute recovery proceedings with the assistance of a litigation funder, if it is apparent that there is no prospect of any worthwhile recoupment for creditors and the only potential beneficiaries of the litigation are the funder, the liquidator and the lawyers.

4 If the applicants' arguments are correct, the foundation for the inquiry in the present case is misconceived as a matter of principle. An inquiry under s 536 is undertaken in circumstances where the liquidator's conduct may attract "sanctions or control for what might broadly be described as disciplinary reasons": Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 at 438, per McLelland J; Belvista Pty Ltd v Murphy (1993) 11 ACSR 628 at 630, per McLelland J. The applicants submitted that, bearing in mind this connection with disciplinary action, the very convening of an inquiry under the section is likely to have an adverse effect on their professional standing as liquidators. On the view we take, an order for an inquiry under s 536 does not involve any prima facie finding of failure to discharge duties or to comply with legal requirements, and the outcome of the inquiry may be that the liquidator is wholly exonerated. Accordingly, ordering an inquiry does not necessarily reflect adversely on the liquidator's professional standing. Nevertheless, there is a sufficient risk that in the present case the ordering of an inquiry on the grounds stated by Palmer J might have this consequence that this is a reason for granting leave to appeal before an inquiry is held.

5 The applicants also submitted that an inquiry is likely to involve a significant imposition on their time at the expense of other liquidations, and to expose them to substantial costs that will probably be unrecoverable. We accept those submissions; while they are not compelling in themselves they contribute to the overall case for granting leave.

6 For the reasons set out at [3]-[5], leave to appeal should be granted.

Constitution of the appeal

7 The parties to the proceedings below have been joined as respondents to the appeal and the application for leave, on the basis that they may have an interest in maintaining his Honour's decision, although none of them is directly affected by it. At a directions hearing on 10 April 2008, Mason P asked whether, in the absence of any appearance by the parties, a natural contradictor should be invited to appear, and he noted that the Australian Securities & Investments Commission was the most likely candidate for that role. Pursuant to his Honour's request, by letter dated 4 August 2008, the appellants' solicitors invited ASIC to intervene in the appeal. On 11 September 2008 ASIC replied, stating without reasons that it did not wish to intervene.

8 It is regrettable that ASIC has not been represented at the hearing of the appeal. Section 536 confers supervisory powers on both ASIC and the court which in our view are an important part of the regulatory system governing corporate liquidation, a matter of vital importance for the Australian economy. As we have said, this case raises important questions about the scope of s 536, and the use by liquidators of litigation funding to pursue litigation that will not produce any significant return for creditors. These are matters upon which the regulator can reasonably be expected to have an informed view. Indeed, with respect to two of the three bases upon which Palmer J ordered an inquiry, ASIC has the same statutory power as the court. In the absence of an appearance by ASIC, not only has the appeal proceeded without any contradictor, but the Court has not had the benefit of the regulator's view on some important matters.

The proceedings below

9 There were three proceedings below, only two of which are relevant now. In proceedings No 2032/04 ("the Main Proceedings") the present appellants were the active plaintiffs, in their capacity as liquidators of the companies. The defendants were two directors of the companies, Mr Poolman (now a bankrupt) and Mr Irving. The plaintiffs sought to recover from those directors damages of approximately $6 million for loss suffered by creditors as a result of the company's trading whilst insolvent, under s 588M of the Corporations Act. The plaintiffs also sought a declaration against Mr Poolman under s 37A of the Conveyancing Act 1919 in respect of a transfer by him of property to his wife. Mr Irving made cross-claims against other directors for equitable contribution, and one of the cross-defendants claimed contribution from another director. Mr Irving also claimed indemnity from Reynolds Wines Ltd pursuant to an indemnity and access deed, and sought to set off the amount to which he would be entitled by way of indemnity against any amount he might be ordered to pay to the liquidators in respect of the claim for insolvent trading.

10 In proceedings No 2685/04 ("the Unfair Preference Proceedings"), which were heard together with the Main Proceedings, the liquidators as plaintiffs claimed recovery, as unfair preferences, of payments made to the Commissioner of Taxation ("ATO"). The ATO claimed an indemnity from various directors for any amounts that it might be ordered to pay the liquidators, under s 588FGA(2). The amount claimed from Mr Irving was $537,100.

11 The hearing lasted for about four weeks, with subsequent written submissions, and Palmer J delivered his principal judgment on 23 November 2007 (Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123; "the Main Judgment"). He held that Mr Poolman and Mr Irving were liable to pay compensation under s 588M(2) with respect to debts incurred by the companies during stated periods and he upheld claims by Mr Irving and other directors for equitable contribution. He also upheld the claim under the Conveyancing Act and made orders accordingly. He directed that the amounts of damages and contribution for which the parties were liable were to be ascertained by reference under r 20.14 of the Uniform Civil Procedure Rules 2005, or by a court-appointed expert. He upheld the liquidators' unfair preference claim against the ATO but declared that Mr Irving and certain other directors were liable to indemnify the ATO. He upheld Mr Irving's claim to be indemnified by Reynolds Wines Ltd and ordered that the amount payable on the indemnity be set off against Mr Irving's liability to Reynolds Wines Ltd for insolvent trading (Main Judgment at [557]).

12 Appeals were lodged against his Honour's orders and, pending resolution of the appeals, no assessment of compensation or contribution was undertaken. At the hearing of the present appeal, the Court was informed that the Main Proceedings had been settled. The precise terms of settlement were not conveyed to the Court but, in broad terms, they involved the ATO paying to the liquidators the amount of the unfair preference and Mr Irving paying the ATO in respect of the indemnity under s 588FGA. Mr Irving also paid the liquidators what was described as "a small amount" that he was able to contribute in addition to his payment under the indemnity. There is no outstanding question of costs to be resolved by the Court.

Mr Irving's defence under s 1317S and s 1318

13 In his Main Judgment, Palmer J found (at [14]-[17]), under the heading "The beneficiaries of this litigation", that:

· the collapse of the Reynolds Group resulted in a shortfall of over $30 million to secured creditors;

· there were no assets available for unsecured creditors, whose claims amounted to just under $99 million, and insufficient funds even to pay the costs of the voluntary administration and winding up;

· the only potential assets to be realised were the recovery of voidable preference payments made to the ATO and the recovery against the directors for insolvent trading;

· the liquidators had no funds to pursue those claims and so in 2004 they entered into a funding agreement with a litigation funder;

· the total amount that the liquidators sought to recover from the directors and the ATO was approximately $9.6 million including interest and costs;

· even if the liquidators were to recover the full amount of their claims, including costs and interest, after payment of the litigation funder's costs and "success fee" and the costs of the liquidators and their solicitors, unsecured creditors would receive no more than a fraction of a cent in the dollar of their claims;

· the true beneficiaries of the litigation were the litigation funder, the liquidators and their lawyers, not the creditors.

14 These findings arose by reason of the way in which Mr Irving pursued a claim for relief under s 1317S(2) or s 1318 of the Corporations Act. Those provisions, broadly to similar effect, authorise the court to relieve a defendant director in civil proceedings, including (in the case of s 1317S(2) and perhaps also s 1318) insolvent trading proceedings, from liability where the defendant has acted honestly and having regard to all the circumstances of the case, ought fairly to be excused for the contravention. Mr Irving contended that he had acted honestly and that he ought fairly to be excused having regard to several matters, including the fact that creditors would not derive any significant benefit from the litigation.

15 Palmer J found that Mr Irving had acted honestly for the purposes of the defence (at [339]) but he declined to grant relief in respect of the period after 5 February 2003 because in his view, Mr Irving had not shown that in all the circumstances he ought fairly to be excused from liability. His Honour found that up to the time of a meeting on 5 February 2003, Mr Irving had acted as other reasonable, commercially experienced directors might have acted in the circumstances, and therefore he ought to be excused from any liability up to that time (at [339]). However, after the meeting on that day, he ought to have appreciated that there was no reasonable prospect of the companies being able to realise assets quickly enough to pay their debts as they fell due, and he ought to have immediately recommended to the boards of the companies that administrators be appointed (at [335], [337]). In his Honour's opinion, it could not be said, with respect to the period after 5 February 2003, that in all the circumstances of the case he ought fairly to be excused from contravention of the insolvent trading provisions.

16 Palmer J rejected Mr Irving's submission that the unlikelihood of any dividend to creditors was relevant to his defence under s 1317S and s 1318. His Honour said that the circumstances of the litigation funding in the case and what he called the "derisory return to creditors" afforded no right of complaint to Mr Irving, and that a nil or negligible return to creditors as a result of a successful prosecution of the claim under s 588M was not to be taken into consideration as affording a discretionary defence (at [379]). Palmer J's findings of fact relevant to this issue, and his Honour's reasoning, are considered in the next two sections of this judgment.

Relevant findings of fact by the trial judge

17 Palmer J made the following relevant findings of fact, which are not challenged in this Court. The minutes and report to which he referred are before the Court on the appeal.

18 The appellants became liquidators as a result of decisions taken at the second meetings of creditors of the companies in voluntary administration, held on 25 November 2003. It follows that the liquidations of the companies are creditors’ voluntary liquidations by virtue of s 446A. On the same day, Committees of Inspection were appointed comprising a total of five creditors, and the Committees, in a combined meeting, approved an agreement between the liquidators and Insolvency Litigation Fund Pty Ltd, a subsidiary of IMF (Australia) Ltd, to fund the cost of further investigations and public examinations (the litigation funder will be referred to here as "IMF").

19 In a further combined meeting on 11 March 2004 the Committees approved a funding agreement with IMF for insolvent trading and unfair preference proceedings. In February 2006 IMF offered to provide additional funding in relation to the insolvent trading litigation, and a draft agreement was provided to the Committees for their combined meeting on 23 February 2006. The draft had proposed that IMF would be entitled to a success fee of 60% post-trial or 50% if the proceedings were settled before trial, but the liquidators' staff and the Chairman of the Committees (Mr Hall, the first plaintiff) negotiated a reduction to a success fee of 45% both pre- and post-trial. The Chairman said that to date, the total outstanding costs of the liquidator and his solicitors were approximately $1 million, and that IMF had incurred costs of about $1 million and this was likely to reach about $2 million by the conclusion of the proceedings.

20 The liquidator explained to the meeting that total recoveries could be in the order of $5.9 million plus interest, as well as the unfair preference claim against the ATO. He said that the broad outcomes would be within the following range:

· $2 million recovery - IMF's costs covered;

· $3 million recovery - IMF's costs and a substantial portion of their success fee covered;

· $4 million recovery - IMF's costs and success fee covered, and approximately $400,000 of the liquidators' and their solicitors' costs covered;

· $5 million recovery - IMF's costs and success fee covered, and a substantial portion of the liquidators' and their solicitors' costs covered;

· $6 million recovery - IMF's costs and success fee covered, liquidators' and their solicitors' costs covered, plus approximately $500,000 available for creditors.

21 One of the creditor representatives at the meeting expressed the opinion that the assets of the directors were unlikely to exceed $2 million, that is, the lowest of the spectrum of outcomes. Another member of the Committees said he thought it was reasonable for the liquidators to continue their action to recover their and their solicitors' costs. The Committees voted to approve the amended litigation funding agreement under s 477(2B) of the Corporations Act.

22 During the cross-examination of Mr Hall at the trial, Palmer J asked some questions about the matters considered at the meeting of the Committees, and he reproduced those questions and Mr Hall's answers in his Main Judgment (at [348]). His Honour inquired as to how many cents in the dollar creditors would receive in the best scenario ($6 million recovery and $500,000 available for the creditors), and Mr Hall said it would be a very, very low dividend, less than one cent in the dollar. Then the following exchange occurred:

"Palmer J: Can you tell me what is the purpose of these proceedings?

Mr Hall: To recover costs incurred.

Palmer J: For what?

Mr Hall: Funding creditors in pursuing actions for example your Honour.

Palmer J: Costs in, explain that?

Mr Hall: A liquidator has incurred costs with a funder seeking recovery and a lot of the costs that have been incurred have been incurred in costs with these proceeding something in the order of $2 million. It is an extraordinary amount of costs. It does not make me feel particularly comfortable about it but that is the position we find ourselves in and I found myself in this position for the last year or so with a funder who is prepared to continue to fund the proceedings. So, those numbers are still fundamentally the same as they were twelve months ago or whenever that exit meeting was held."

23 His Honour established through further questioning that the liquidators had identified the prospect of bringing recovery proceedings for about $6 million soon after their appointment and they made an estimate of the cost of proceedings, which was a very considerable under-estimate as is always the case. And then:

"Palmer J: Did you do an exercise to work out what benefit to creditors that could possibly mean and whether it was worthwhile?

Mr Hall: Your Honour, we also considered at those early stages there were still potential claims against a variety of people and indeed that is still a possibility following the completion of these proceedings. For example, there are advisors and other parties that were involved in the past with Reynolds Wines where there is potentially good claims. That is complicated by the circumstances we also find ourselves in where there is a receiver. There was the first receiver and then a subsequent receiver who has a first claim to those claims and let's say these matters are dealt with and finalised successfully, IMF may be prepared to fund some other action and some of those things came out of the public examination that we did in '03, '04.

Palmer J: I am looking at this claim, insolvent trading claim, and I am wondering did you, at an early stage of the liquidation do an exercise to calculate whether the conduct of this litigation and the incurring of the costs necessarily involved would be worthwhile for the benefit of the creditors?

Mr Hall: In the early stages, yes.

Palmer J: What decision did you come to as to cents in the dollar that creditors may hope to receive from the successful conclusion of this action?

Mr Hall: Again it would be relatively small and if you like one of the early actions we took is to pursue the preference against the ATO and we took that without doing a lot of work on solvency reports and so forth because we thought that may be an early success and there is cash and other options to pursue a return to creditors and the same with the funder and that is what we are really looking into in the event there was a settlement.

The funder is prepared to keep funding this and I feel I have a duty on the funder's behalf to keep funding this to try and recover a return where I believe it is a good action. After all, there have been attempts with both the tax office and with the directors to seek some sort of settlement. This could have been settled, well, early. Indeed most of the time for all the reasons we are discussing we resolve those differences and it is very difficult once you start to back off. We either stop or you keep funding it because certainly, as Mr Jackman was raising, I owe the duty to my partner not to incur fees so the ongoing pursuit of this matter is funded by IMF so the exercise, as you are pointing out, clearly in terms of recovery is first for the benefit of the funding creditor."

24 Palmer J referred quite extensively to the liquidators' annual report to creditors and shareholders dated 22 February 2007 ("the Report"). By that time the trial had commenced but had not concluded, and Mr Hall had given evidence (including answering questions from Palmer J).

25 First, his Honour noted that in the Report the liquidators referred to the combined meeting of the Committees of Inspection on 11 March 2004 at which the funding agreement with IMF for insolvent trading and unfair preference proceedings was considered. The Report said:

"The likely return to creditors from such actions was discussed. Notwithstanding the prospect of a low or nil return, the Committees of Inspection approved the further funding agreement with IMF, it being recognised that any recovery actions would not require a funding commitment from creditors but that creditors had an opportunity to benefit from any successful outcome."

26 As his Honour observed (at [354]), the statement shows that as early as March 2004 the liquidators had recognised that the proceedings could result in a nil return to creditors, and that the liquidators and the Committees took the view that anything coming to creditors in the proceedings would be a windfall.

27 His Honour referred to the part of the Report that contains details of fees and expenses incurred in the litigation and in the liquidation. The components of fees and expenses according to the Report were:

(i) legal costs and expenses funded by IMF, which had projected that the total amount would be approximately $1.9 million by the time of completion of the trial, assuming there was no appeal;

(ii) additional costs incurred by the liquidators' solicitors outside the funding agreement (including costs of some other recovery actions and costs incurred in connection with the voluntary administration), not recoverable except if sufficient funds became available (the Report did not purport to quantify these costs);

28 In the course of argument on the appeal the Court invited the appellants to clarify the proportion of costs referable to compulsory examinations and other pre-commencement investigations. By supplementary submissions dated 19 November 2008, the appellants explained that the costs estimated by IMF to be $1.9 million included the cost of compulsory examinations conducted in late 2003 and in early 2004 prior to the commencement of the proceedings. They said the evidence before the trial judge did not disclose the breakdown of the figure of $1.9 million between pre-commencement investigatory costs and the costs of the conduct of the proceedings, but that breakdown was disclosed in a single page annexure to the amended IMF funding agreement entered into in February 2007. The appellants tendered that page, which has been received and marked Exhibit B. It appears from that document that the total amount of legal costs and expenses to be funded by IMF was $1,938,184.22 (including GST). Of that total amount:

· $448,571.84 was the amount of liquidators' fees relating to the public examinations and the proceedings that IMF agreed to fund, and $1,489,612.38 was the amount of legal costs of the proceedings that IMF agreed to fund; and

· $378,844.22 was the amount of all costs (liquidators' fees and legal costs) incurred prior to the commencement of the proceedings (principally relating to the public examinations) that IMF agreed to fund, and the total costs related to the proceedings (legal costs and liquidators fees) that IMF agreed to fund were $1,559,340.

29 Exhibit B does not tell the whole story because there were, according to the Report as summarised at [27](ii) and (iii) above, other fees incurred by the liquidators' solicitors, who under the funding agreement were reimbursed by IMF only for a portion of their costs of the proceedings. The amount of those additional solicitors' fees is not quantified in the Report but presumably at least part of them would be recoverable in a costs assessment. There were also liquidators' fees in addition to the amounts that IMF agreed to fund. The Report gives some figures concerning the liquidators' fees: the liquidators' time costs up to 31 December 2006 were a total amount of $1,364,596, of which $1,143,346 had been approved by creditors, $604,150 had been paid and $760,446 remained outstanding. According to the Report these figures included the liquidators' fees in relation to the proceedings covered by the funding agreement, and also fees in relation to matters outside the recovery proceedings (such as fees relating to the voluntary administration) and fees in relation to the proceedings but not covered by the funding agreement. It seems likely that the bulk of the fees incurred in 2005 and 2006 was related to the proceedings. Therefore in addition to the total costs funded by IMF in relation to the proceedings, $1,559,340, there was an additional unquantified sum for further solicitors' fees and an additional substantial sum for further liquidators' fees related to the proceedings. The total amount, including these additional fees, may well have been in the order of $2 million.

30 As set out above, in answer to a question by Palmer J, Mr Hall referred to costs "in the order of $2 million". In the Main Judgment, his Honour said that "the Liquidators' costs of the proceedings will be in the order of $2M", and on that basis he expressed concern that the costs were an excessive amount out of proportion to the maximum possible recovery (at [381], [384]). During the hearing of the appeal senior counsel for the appellants submitted that his Honour's criticism of the costs of the proceedings did not have a factual foundation. But the figure of $2 million was given in evidence by Mr Hall and the evidence comprising the Report and Exhibit B, taken together, does not disprove that figure. We therefore reject the submission that the evidence did not support the figure for costs used by Palmer J in his criticism of the costs of the proceedings.

31 The Report referred in some detail to amendments that had been made to the funding agreement. Palmer J extracted the following part of the Report in his Main Judgment (at [356]):

"It was intended that outstanding costs be recouped from any proceeds of recovery actions including the Proceedings, after making the payments required under the funding agreement, however any recoupment has now been capped pursuant to an amendment to the funding arrangements as discussed in (a) below.

(a) Amendment to Funding Agreement

In our previous report to creditors, we advised creditors that recoveries from the Proceedings alone would not be likely to result in any significant returns to creditors. However, it was recognised that such recoveries could fund further actions, the cumulative effect of which may be to the benefit of creditors. Such further actions are mentioned in Section I and VIII of this report.

In light of the increased complexity of the case, the longer than anticipated trial and, in particular, the inability to achieve a settlement prior to the significant costs of the trial being incurred, the Liquidators recently approached IMF to negotiate an amendment to the funding agreement regarding the distribution of any successful recovery from the Proceedings. In particular, the Liquidators wished to secure, if possible, a revised agreement which would have the potential to provide a greater return to the unsecured creditors of Wines and Vineyards than would otherwise occur under the pre-existing funding agreement.

The amendment which has now been agreed by the Liquidators with IMF reflects, in their view, a more appropriate funding agreement in the current climate of significantly increased costs, a 4-6-week trial and no prior settlement. The Liquidators and IMF have agreed a cascading arrangement whereby any proceeds recovered from the proceedings (Recovery Sum) are to be paid in a priority which differs to that set forth in Section 556 of the Act and elevates the entitlement of unsecured creditors to payment of a dividend of an agreed amount, dependent on the quantum of the Recovery Sum. The amendment which has been agreed is confidential and accordingly, summary details only are provided in this report to creditors, to advise the effect of the amendment and in particular, the manner in which the amendment may benefit creditors.

The amended agreement defers:

· payment of most of the legal costs and Liquidators' fees which have not been indemnified by IMF;

· IMF's entitlement to be paid its success fee and other fees due under the funding agreement.

IMF retains its priority entitlement to be reimbursed the costs it has actually paid in the proceedings.

Pursuant to the amendment:

· 50% of any return which exceeds IMF's costs (which are approximately $1.9 million subject to any appeal) will be set aside for the unsecured creditors of Wines and Vineyards, to be paid to them by way of a dividend, subject however to that pool of funds being at least $500,000;

· 50% of any return exceeding IMF's costs will be distributed in satisfaction of the [Liquidators' and the solicitors'] unpaid costs related directly to the Proceedings, capped at $80,000 each, and IMF's success and other fees to which it is entitled.

Practically, this arrangement requires a return of $2.9 million or greater for there to be a payment to creditors. The Liquidators note that this threshold is much improved on the pre-existing funding agreement. The threshold of $500,000 has been agreed because, given that the quantum of unsecured creditors in Wines and Vineyards is high (combined over $100 million), any return by way of a dividend distribution of an amount less than $500,000 will approximate zero rendering the distribution futile. The Liquidators' necessary fees and costs associated with dealing with proofs of debt and making payment of dividends will be deducted from the pool of funds available to creditors prior to distribution."

32 In a further passage under the heading "Likelihood of Return to Creditors" extracted by Palmer J, the Report said that if a favourable judgment were to be obtained and recovered in the insolvent trading proceedings, funds might become available for distribution to creditors but as an approximate indication, any dividend would not be likely to exceed three cents in the dollar. Under the heading "Likelihood of Return to Shareholders", the Report raised the possibility of an action against third parties for compensation in respect of losses by shareholders who had invested in the Reynolds Group in a capital raising in June 2002, but the Report said that although IMF had expressed interest in the matter, it had not been taken further.

33 Palmer J sought further clarification of the returns that might be available to creditors under the amended funding agreement, and was provided with a schedule, Appendix A to the Main Judgment, which he summarised and discussed at [357]-[364]. The schedule showed that on the highest return case, which assumed recovery of $5,562,751.17 on the insolvent trading claim and full recovery on the unfair preference claim, the liquidators would recover $9,653,689.28 (including interest and legal costs of the proceedings), and after deducting IMF's costs and success fee and the liquidators' costs, the amount available for distribution to creditors would be $3,726,844.64, giving them a distribution of 2.85 cents in the dollar. The comparable figures on the medium return case were $3,200,000 for recovery on the insolvent trading claim, total recovery of $6,468,475, net received by the liquidators for distribution to creditors of $2,134,237.50, and a distribution of 1.63 cents in the dollar. The comparable figures on the lowest return case were $825,000 for recovery on the insolvent trading claim, total recovery of $3,255,717.88, net received by the liquidators for distribution to creditors of $527,858.94, and a distribution of 0.4 cents in the dollar. Palmer J inferred that the liquidators could readily have calculated the information in the schedule before the proceedings were commenced (at [367]).

34 Although the Court was not supplied with figures for the settlement sum, we were informed at the hearing of the appeal that the amount recovered is insufficient for the payment of any dividend to creditors.

Palmer J's reasoning: (a) were litigation funding and lack of benefit to creditors relevant to Mr Irving's defence?

35 Palmer J considered the relevance of the unlikelihood of a dividend to creditors in his Main Judgment at [367]-[379]. An important question for his Honour was whether it was relevant under s 1317S and s 1318 that the proceedings were financed by a litigation funder who stood to benefit from the plaintiffs' success, in circumstances where those who really suffered loss (the creditors) would receive nothing or a derisory return. That led him to consider the judgment in the High Court in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386. In that case a litigation funder sought to encourage tobacco retailers to claim a refund of tobacco licence fees from wholesalers by persuading them to join in litigation controlled by the funder, and the funder instituted proceedings purportedly brought as a representative action under the Supreme CourtRules 1970. One of the issues raised by the appellants was whether, assuming that the proceedings had been properly constituted as a representative action, they were nevertheless contrary to public policy and an abuse of process because they were champertous and constituted maintenance. Gleeson CJ, Gummow, Kirby, Hayne and Crennan JJ found that the proceedings did not constitute an abuse of process by reason of the involvement of the litigation funder, and they were not contrary to public policy. Callinan and Heydon JJ dissented on that issue.

36 Palmer J quoted from the minority judgment and said (at [374]) that several factors indicated to the minority that the litigation in that case was an abuse of process:

· the funder's motive was to derive a profit from a speculative investment rather than to assist those who could not afford justice;

· the funder sought out the plaintiffs;

· but for the funder, the persons who suffered loss would not have thought it financially worthwhile to sue;

· on the other hand, the gain to the funder was potentially enormous and the funder had control of the proceedings.

37 His Honour observed that some of those factors (in fact, all but the second) were present in the case before him (at [375]):

· IMF's involvement in the proceedings was not due to altruistic concern to vindicate the rights of creditors of the companies but, rather, was an investment driven by a profit motive;

· if access to justice for the creditors were a justification for the proceedings, the justification failed in circumstances where the creditors would be lucky to get anything at all or the amounts they would receive would be derisory, and in those circumstances creditors would not think it financially worthwhile to sue;

· IMF would, if successful, profit "to the tune of millions of dollars".

38 He said that many judges had voiced strong objection to the notion of claims to justice being treated as investment opportunities (at [376]), and he deplored the prospect of trading in what he described as "litigation derivatives" (at [377]). He said the facts of the case were extreme "in showing how a mammoth piece of litigation can be instigated, perhaps to the ruin of a defendant, with negligible 'access to justice' for those who have suffered a wrong but with lucrative reward for those who make a business of investing in law suits" (at [378]).

39 These parts of the judgment suggest the view that litigation funding is incompatible with the demands of justice. On that view, the very fact that Mr Irving faced claims driven by litigation funding and motivated by profit and not on behalf of those who suffered loss would be a factor suggesting that he ought to be excused from liability. But Palmer J clearly and expressly did not subscribe to that view, however much he may have sympathised with it. He also quoted (at [371]) and summarised (at [372]) the reasoning of Gummow, Hayne and Crennan JJ, with whom Gleeson CJ agreed; acknowledged that their Honours' observations were considered observations that must be accorded obedience (at [372]); and applied their Honours' views (at [379]).

40 In his summary, his Honour derived the following propositions from the majority judgment:

· the justification for litigation funding is that it offers access to justice to those who could not otherwise afford to vindicate their legal rights;

· the fact that a litigation funder has sought out proceedings in which to invest for profit is not objectionable as a matter of public policy;

· the terms upon which litigation is funded may be so onerous and unreasonable as between the litigant and the funder as to be unenforceable between them, but that is no concern of other parties to litigation and does not of itself make the prosecution of the proceeding by the funder an abuse of process;

· if the funder, driven by the profit motive, attempts to interfere with or manipulate due process in the litigation, or if the funder's lawyers commit breaches of professional duties, the court has sufficient power to deal with those matters without staying the litigation.

41 His Honour’s conclusion was that Mr Irving could not say, merely because of the involvement of a litigation funder and the derisory return to creditors, that the proceedings were an abuse of process or frowned upon by the policy of the law, or that the law would pay any regard to the fact that the proceeds of the judgment against him would not go to those persons whom the legislature intended to be the beneficiaries of the suit (at [379]).

42 Senior counsel for the appellants placed some emphasis on what his Honour had said about the minority judgment in Campbells Cash & Carry at [374]-[378] of his judgment, for the purpose of developing his case that the Court's discretion to order an inquiry under s 536 had miscarried. In our view that involves a misreading of Palmer J's judgment. Palmer J did not adopt and apply that reasoning. Indeed, he expressly rejected it.

Palmer J's reasoning: (b) the liquidators' conduct and the grounds for an inquiry

43 In pars [380]-[397] of his Main Judgment, Palmer J made some critical observations about the conduct of the liquidators with respect to the proceedings. His Honour had received some relevant submissions from senior counsel for Mr Irving, who told the Court "these proceedings are a money making exercise for the litigation funder, the Liquidator and his lawyers, rather than seeking to compensate creditors in any meaningful way" (quoted at [368]). But the submissions were directed to Mr Irving's defence, whereas the issues to which Palmer J turned (at [380]) were whether there had been any abuse of process in fact, and whether the liquidators had failed to discharge their responsibilities, matters that it was open to the Court to consider, according to the majority in Campbells Cash & Carry.

44 Palmer J identified the following matters as considerations going to whether the liquidators had discharged their responsibilities:

(a) the extent and cost of the litigation, which were excessive (at [381]-[383]);

(b) the liquidators were seeking to throw the whole burden of those costs (including the liquidators' costs of the proceedings which, he said, were in the order of $2 million) on to the defendants (at [381];

(c) the liquidators' costs of $2 million were "quite out of proportion" given that the proceedings were brought to recover a possible maximum of $6 million (at [384]);

(d) the liquidators should have approached the Court for directions under s 511(1)(a) as to whether they were justified in commencing the litigation in view of the terms of the proposed funding agreement, the likely return to creditors, and the costs of the proceedings generally (at [385]);

(e) in circumstances where the liquidators' funding arrangements provided no more than a token benefit to the creditors, an issue arose as to whether they were in truth a means for the litigation funder and the liquidator to profit handsomely (at [388]);

(f) the absence of information before the Court as to whether ASIC was willing to prosecute breaches of the insolvent trading laws, information that would have been appropriate to give to the Court in an application for directions (at [390]);

(g) the position of liquidators appointed by the court as officers of the court, with the consequence that the court has the duty to see that all liquidators are performing their responsibilities in a prudent and proper manner (at [394]);

(h) the liquidators' duty to salvage as much is possible for the benefit of creditors, which has the consequence that if a proposed course of action is not likely to produce a worthwhile benefit for creditors, liquidators should not undertake it simply because it will generate enough to pay the liquidator's fees (at [395]);

45 His Honour said that the Court was not powerless to correct what had happened, if it formed the view that the liquidators had acted improperly. He drew attention to the Court's power under s 98(4) of the Civil Procedure Act 2005 to make an order limiting recoverable costs (at [391]). He also noted the Court's power to inquire into the liquidators’ conduct under s 536(1)(a), a power that the Court may exercise of its own motion (at [393], [394]). He said that when he came to deal with costs, he would wish to make some further inquiry from Mr Hall under s 536(1)(a), which would include inquiring as to why Mr Hall was uncomfortable about the costs expenditure, why he did not apply to the Court for directions, and why he thought it necessary to spend up to $2 million in costs when a quarter of that sum might well have been sufficient to prosecute the liquidators' case properly (at [396]). He said Mr Hall would be given the fullest opportunity to meet the concerns that he had expressed in his judgment, and he expressly contemplated that the answers he received might show the liquidators' costs to have been reasonable in view of the positions adopted by the defendants, but he warned that if he came to the conclusion that the liquidators' expenditure on costs was unjustified and improper, he would give consideration to whether a costs limiting order should be made under the Civil Procedure Act s 98(4) (at [397]).

46 Importantly, Palmer J envisaged that the inquiry he had in mind would be conducted by him during the costs hearing and would lead, if at all, to a costs limiting order. His Honour did not appear to have in mind any general disciplinary investigation. At the end of the Main Judgment he said:

"[560] Pursuant to CA s 536(1)(a), I will enquire into the conduct of the Liquidators in:

- entering into a funding agreement and commencing these proceedings when they were aware that there was a substantial risk that the creditors would receive no, or very little, dividend;

- permitting costs to amount to approximately $2M;

- failing to obtain the directions of the Court before proceeding.

[561] I will formulate questions for the Liquidators after submissions from the parties and I will give directions as to how the enquiry is to proceed.

[562] Questions of costs will be reserved until my enquiry into the Liquidators' conduct is concluded and the amounts payable as between the parties are ascertained."

The Second Judgment and the order for an inquiry

47 The observations at the end of the Main Judgment were a statement of intention, and no order for an inquiry was made at that stage. Senior counsel and solicitors were instructed to appear for the liquidators solely with respect to the proposed inquiry under s 536. Submissions were received, and his Honour delivered a further judgment that addressed, amongst other things, the issue under s 536 (Hall v Poolman (No 2) [2007] NSWSC 1494, 20 December 2007; "the Second Judgment"). There was a further hearing at the request of the liquidators for the purpose of settling the orders, which were made on 15 February 2008 (Hall v Poolman, Supreme Court of New South Wales, Palmer J, 15 February 2008, unreported; "the Third Judgment").

48 In the Second Judgment Palmer J dealt with s 536 as follows:

"[12] The Liquidators submit that I should not order any further investigation into their conduct, as foreshadowed in paragraph 396 of my judgment. Mr Bathurst QC, who appears for the Liquidators on this issue alone, submits that there is no foundation for an enquiry under CA s 536(1)(a) because I cannot yet be satisfied that the Liquidators have not faithfully performed, or are not faithfully performing, their duties.

before

appears

[14] In the present case, I have indicated at some length in the judgment the factual basis which suggests improper conduct by the Liquidators. As I have said in the judgment, the enquiry may dispel the appearance of improper conduct. However, as matters presently stand, I would not be prepared to ignore what has happened. As I have noted in the judgment, it seems to me that the Court should know more about how the Liquidators could have let costs of the proceedings run up to some $2M, although feeling some disquiet about it and not seeking directions. In my view, a sufficient basis is made out for an enquiry under CA s 536(1)(a).

[15] The Court is not circumscribed in its supervisory power over liquidators. An inquiry under CA s 536(1)(b) could be conducted where a complaint has been made. A complaint is not required to be in any particular format. In my opinion, the submissions of Mr Irving as to the Liquidators' conduct, as I have summarised in my reasons for judgment, amount to a complaint for the purposes of s 536(1)(b).

[16] I should add that the Court has a general power to require answers by a liquidator under s 536(3) and that power does not depend upon the existence of circumstances falling within s 536(1) or (2). I would exercise the power under s 536(3) in the present case.

[17] I have made it clear to the parties that I do not propose myself to conduct the inquiry under s 536. In view of the comments which I have made in the judgment, I think it is wiser that the enquiry proceed before another Judge, and that I consider that Judge's report when making final costs orders in these proceedings."

49 Palmer J's principal order was as follows:

Liquidators

Wines

Vineyards

Insolvent Trading Proceedings

(c) Commencing the Insolvent Trading Proceedings without first seeking directions from the Court that they were justified in doing so; and

(d) Incurring costs in the Insolvent Trading Proceedings and related proceedings (No 2685 of 2004 and No 4870 of 2005) in the amounts incurred in prosecuting those proceedings."

50 There was no order specifying with more particularity the issues or questions to which the inquiry would be directed, or the procedure for conducting it. These matters were left for determination by the judge who would conduct the inquiry. His Honour stayed the operation of his order pending the plaintiffs' foreshadowed application for leave to appeal, with liberty to apply following judgment in the appeal.

51 At the hearing of the appeal it was submitted that subpar (d) of the order was limited to legal costs and disbursements and did not encompass the liquidators' own fees. Palmer J's central concern was about the lack of any significant return to creditors from the proceedings. The liquidators' fees, as well as legal costs and disbursements, would reduce the amount of any verdict available for distribution to creditors. Moreover, as we have explained, a component of the "Liquidators' costs of the proceedings … in the order of $2 million" (Main Judgment at [381]) was the liquidators' own fees. Nevertheless, it appears to us that the order for an inquiry, on its proper construction, was limited to costs of the proceedings and did not include the liquidators' own fees. This is because in the Main Judgment, Palmer J made it plain that he would deal with the question of ordering an inquiry when dealing with the question of costs of the proceedings. The outcome that he envisaged in the event that further inquiry showed that the liquidators' expenditure on costs was unjustified and improper was the making of a limiting order on the costs of the proceedings under s 98(4) of the Civil Procedure Act, not an order about the liquidators' own fees (Main Judgment at [391], [397]).

The interpretation of 536

52 Section 536 of the Corporations Act is in the following terms:

Supervision of liquidators

536 (1A) In this section:

liquidator

(1) Where:

(a) it appears to the Court or to ASIC that a liquidator has not faithfully performed or is not faithfully performing his or her duties or has not observed or is not observing:

(i) a requirement of the Court; or

(ii) a requirement of this Act, or the regulations or of the rules; or

(b) a complaint is made to the Court or to ASIC by any person with respect to the conduct of a liquidator in connection with the performance of his or her duties;

the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit.

(2) ASIC may report to the Court any matter that in its opinion is a misfeasance, neglect or omission on the part of the liquidator and the Court may order the liquidator to make good any loss that the estate of the company has sustained thereby and may make such other order or orders as it thinks fit.

(3) The Court may at any time require a liquidator to answer any inquiry in relation to the winding up and may examine the liquidator or any other person on oath concerning the winding up and may direct an investigation to be made of the books of the liquidator."

53 The court must bear in mind the place of s 536 in the regulatory system established under Australia's corporations legislation when construing the section. It must be recognised that this section, together with the virtually identical provision applicable to controllers of the property of a corporation in s 423, is a broadly expressed supervisory jurisdiction over the conduct of persons in control of the affairs of a corporation, in circumstances where normal market forces and the exercise by shareholders of their rights to control are attenuated or non-existent. These powers are one part of a range of regulatory powers conferred on the court and/or ASIC to ensure the lawful, orderly and efficient conduct of the affairs of corporations during such a period. The detailed regulatory scheme found in the Corporations Act manifests in this, as in so many other respects, the central significance of corporate conduct for the economic and social life of the nation.

54 Powers that can be characterised in this way are not to be narrowly construed, nor confined by fine distinctions. Where a statute grants a power to a superior court to deploy as the circumstances of the case necessitate, it is a basic rule of statutory interpretation that the grant should not be narrowly construed or cut back unless there are very clear reasons for doing so: PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service (1995) 184 CLR 301 at 313 per Brennan CJ, Gaudron and McHugh JJ, 316 per Toohey and Gummow JJ; Andjelic v Marsland (1996) 186 CLR 20 at 39 per McHugh and Gummow JJ; Wong v Silkfield Pty Ltd [1999] HCA 48; (1999) 199 CLR 255 at [11] per Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ; Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2008] HCA 9; (2008) 232 CLR 314 at [41], per Kirby J. A fortiori, where the powers in question are an important component of a regulatory scheme of fundamental economic and social significance.

55 Notwithstanding the plenary nature of the powers conferred by s 536, the case law has developed a number of principles bearing on the exercise of the court's discretion to order an inquiry. It is pertinent to mention four matters in the present context, which we shall address under the headings:

· the "prima facie case" submission;

· the court's supervisory role over the conduct of liquidators;

· the relevance of alternative remedies;

· the analogy with inquiries into the conduct of trustees in bankruptcy.

The "prima facie case" submission

56 In Burns Philp Investments Pty Ltd v Dickens (1993) 11 ACLC 272, upon which the appellants relied in their written submissions, Young J said (at 273) that "the court must be given some material to suggest that it would be in the public interest to conduct an inquiry", and this meant that the party seeking an inquiry "must put forward material which prima facie satisfies the court of that matter". These observations were applied by Burchett AJ in Re Glowbind Pty Ltd (in liq); Takchi v Parbery [2003] NSWSC 1190; (2003) 48 ACSR 456, the other case relied upon by the appellants. The appellants contended that the precondition is not met unless the court is satisfied that there is a prima facie case of failure to perform duties or observe requirements, suggesting some relatively onerous evidentiary burden for the person seeking an inquiry under subpar (1)(a).

57 However, Young J did not say that there must be a case of failure faithfully to perform duties or observe requirements proven to a prima facie evidentiary standard. That is plain from Burns Philp Investments Pty Ltd v Dickens (No 2) (1993) 31 NSWLR 280, where his Honour accepted a submission to the effect that the barrier over which the plaintiffs would have to pass to have an inquiry mounted was not a very high one, and that "all that was necessary for his clients to show was that there was a prima facie case that something needed to be investigated" (at 287).

58 The Full Court of the Federal Court dealt with a similar submission in Leslie v Hennessy [2001] FCA 371 at [6]. In a joint judgment, on appeal from Drummond J, Ryan, Dowsett and Hely JJ said:

Burns Philp Investments

(No 2)

prima facie

an applicant must show a sufficient basis for making an order, that there is something which requires inquiry

Magarditch v Australia and New Zealand Banking Group Ltd

Re Fox Home Loans Pty Ltd (in liq)

Vink v Tuckwell

59 We agree with these observations, subject to a qualification that we take to be implied in their Honours' remarks, namely that the "sufficient basis" for making the order must relate to the matters concerning faithful performance of duties or observance of requirements that are stated in subpar (1)(a). Of course, the list of relevant factors set out in this passage does not purport to be comprehensive.

60 In Re Timberland Ltd (in liq);Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 683, Marks J expressed concern that if subsection (1)(a) were construed to mean that the court only had jurisdiction if the matters stated in the subparagraph were first shown to exist, such a construction would "produce the curious result that the subject of the inquiry would be something that has happened rather than whether and to what extent it has happened". The answer to that conundrum is that under subpar (1)(a) the court is empowered to inquire as to whether and to what extent something has happened or is happening of the kind described in the subparagraph, provided only that there is a sufficient basis for ordering an inquiry in the sense articulated by the Full Federal Court in Leslie v Hennessy.

The court's supervisory role over the conduct of liquidators

61 The powers conferred by s 536 have a common element, namely that they are powers of a regulatory nature concerned with the supervision of liquidators of all kinds. The court has a long-established role in the supervision of court-appointed liquidators, and s 536 confers a statutory supervisory jurisdiction in respect of liquidators of all kinds.

62 In a compulsory winding up by the court, the liquidator's office stems from the appointment by the court. The winding up is conducted by the court and the decisions the liquidator makes from time to time are in effect made under the authority of the court by the liquidator as an officer of the court: Re Timberland Ltd (in liq); Commissioner for Corporate Affairs v Harvey, supra at 696 per Marks J. On the other hand, voluntary winding up is a statutory process and the liquidator is not an officer of the court carrying out tasks on the court's behalf: Clutha Ltd (in liq) v Millar (No 5) [2002] NSWSC 833; (2002) 43 ACSR 295 at [13]-[18], per Austin J; Australian Security Estates Pty Ltd v Bluecrest Holdings Pty Ltd (in liq) [2002] NSWSC 491; (2002) 169 FLR 111 at [60] per Bergin J. The distinction is reflected in r 42.3(2)(g) of the Uniform Civil Procedure Rules, which permits the court to make an order for costs in the exercise of its supervisory jurisdiction over its own officers, including court-appointed liquidators but not liquidators appointed in a voluntary winding up.

63 The liquidators in the present case hold office under a deemed creditors' voluntary winding up, consequent upon termination of the administration of the companies: s 446A. They are not liquidators in a compulsory winding up. They are therefore not officers of the court. Nevertheless they are subject to the applicable provisions of the Corporations Act, which include not only the statutory duties of officers of corporations (liquidators of all kinds being within the definition of "officer" in s 9; see also s 179(2)), but also statutory provisions of a supervisory kind where those provisions extend to liquidators generally. Importantly, s 536 is one of those provisions.

64 Although in some respects the court has a greater supervisory role over the conduct of a court-appointed liquidator, in our view there is no proper basis for exercising a lesser degree of supervision over liquidators in a creditors' voluntary winding up under a statutory authority that extends to those liquidators. As Palmer J remarked (Main Judgment at [394]), "all liquidators act in the public interest; accordingly the court has not only the power, but also the duty, to see that liquidators are performing their duties in a prudent and proper manner".

65 Nowadays liquidation preceded by a voluntary administration is the most common form of liquidation, and it is treated under the Act as a creditors' voluntary winding up, as in the present case. If the court were to adopt a less active approach to its statutory supervisory role in the case of a creditors' voluntary winding up than in the case of a compulsory winding up, it would be stepping back from the role in the most common case, notwithstanding the legislature's conferral of the supervisory role on the court for all liquidations. Therefore, when it comes to exercising powers under s 536, our view is that there should be no reduction of supervision by virtue of the fact that the appellants are not court-appointed liquidators; conversely, if an inquiry under the section would have been appropriate had the appellants been court-appointed liquidators, such an inquiry is likely to be appropriate to them in their current status.

66 It is pertinent to recognise that the powers conferred by s 536(1) are vested in both the court and the regulator, and therefore that the court is performing a regulatory role, in the sense that its function under s 536, like the function of ASIC under the section, is supervisory. Although the power conferred by s 536(3) is conferred on the court alone, it is of the same supervisory nature. As predecessors to s 536(1) said expressly, the court is to "take cognizance of the conduct of liquidators …": Companies Act 1896 (Vict) (60 Vict No 1482), s 146; Companies Act 1936 (NSW), s 235; Uniform Companies Act 1961, s 278; see O’Toole v Mitcham (1977) 2 ACLR 471 at 473, per Young CJ (Gillard and McGarvie JJ agreeing); nothing in the explanatory memorandum to the Companies Bill 1981 suggests that the change of wording introduced in the Companies Code was intended to alter the court's role.

67 The court's supervisory role is recognised in the frequently cited observations of McLelland J in Northbourne Developments (supra, at 438), where his Honour said of the predecessor to s 536 that it:

“ … is concerned with aspects of the conduct of liquidators which are liable to attract sanctions or control for what might broadly be described as disciplinary reasons.”

Re Glowbind

Australian Securities and Investments Commission v Forestview Nominees Pty Ltd (recrs & mgrs apptd)

Leslie v Hennessy

Australian Securities and Investments Commission v Edge

Vink v Tuckwell,

150 However, if:

· liquidators have incurred costs in preliminary investigations and in creditors' meetings, and

· they consider that the prospective benefits to creditors justify further investigation in which they will incur more costs and expenses, and

· there are then no assets, in the absence of litigation, to pay the costs already incurred;

151 There are some provisos to this proposition:

· the pre-litigation costs must have been either necessary or reasonably considered to be justified because of the prospective benefits to creditors;

· the litigation costs themselves must have been reasonably incurred and proportionate to the prospective benefits (including not only possible direct benefits to creditors but also the benefits derived through the reimbursement of the liquidator's fees and expenses); and

· the litigation funding agreement must not be on manifestly unreasonable terms.

152 Issues of fact and degree, and issues of timing, clearly arise. Nevertheless, we adopt this proposition, subject to these provisos, because in our opinion there is a public interest in liquidators making preliminary investigations into matters that appear to them to warrant investigation, even when there are no assets available to fund their doing so. Liquidators may be discouraged if it were held to be improper per se for liquidators to try to recover the costs of their investigations by legal proceedings that would not directly benefit creditors.

153 Our approach is consistent with the decision of Doyle CJ in the Pegulan Floor Covering case, supra. It is also consistent with the Imobridge case, supra. There, in an application for approval to enter into a funding agreement under s 477(2B) of the Corporations Law, the most likely outcome of litigation was that it would benefit only the professionals involved in the winding up. Fryberg J (at 296-7) observed that this was not necessarily a reason to stifle the litigation, and he continued:

"If costs have been properly incurred in the winding up and a preference is available to be recovered, it is not unreasonable that proceedings should be brought to recover it and so fund those costs. That there is also some chance of a benefit for the unsecured creditors without any detriment to them to some degree reinforces the case for bringing the proceedings."

154 On the other hand, one can readily envisage cases where the conditions we have articulated are not met and consequently a question arises as to whether the pursuit of litigation is in proper discharge of the liquidators' duty, or represents a bona fide exercise of the liquidators' powers for the purpose of which they were conferred. An extreme case would be where the liquidators have embarked upon "churn and burn" tactics, to use Palmer J's language. A complete assessment of the propriety of the liquidators' conduct will often depend on matters going beyond the simple fact that the litigation, if successful, will recoup the liquidators' costs and expenses already incurred.

155 In the present case Palmer J took the view, having regard to a variety of circumstances and in particular matters listed at [44] above, that it was appropriate to conduct an inquiry. That did not imply that in his Honour's view the appellants had failed to perform their duty, but only that there was a sufficient basis for making an order for an inquiry; that is, there was something about the matter requiring further investigation. In our view, to the extent that it reflected the matters we have identified at [82] above, this aspect of Palmer J's reasoning did not disclose any error warranting appellate intervention.

156 In his Main Judgment at [395] Palmer J said:

"If a proposed course of action - whether it be a legal proceeding or a commercial transaction - is not likely to produce a worthwhile benefit for creditors, the liquidator should not undertake it simply because it will generate enough to pay the liquidator's fees in undertaking that very transaction or litigation - a practice which is familiarly known in the market place as 'churning and burning'."

157 While it is plain that liquidators should not "churn and burn", in the sense of pursuing litigation simply in order to generate fees without any view to the interests of creditors or the public interest, we disagree with this passage if and to the extent that it is intended to convey that liquidators are never entitled to bring proceedings where the only prospect of recovery is reimbursement of the liquidators' own fees and expenses. The position, as we understand it, is set out above. However, on balance we think it would be wrong to read Palmer J's observations as conveying this incorrect proposition, having regard to his Honour's general approach to the factors relevant to his decision. His quoted observation appears to be directed to a case of "churning and burning" and his Honour made no finding, even at the level of "appearance", that that may have occurred in the present case.

(e) The possibility of further claims

158 Fifthly, the appellants contended that the proceedings had the potential to identify further claims against third parties that might benefit creditors, as identified by Mr Hall in his evidence (Main Judgment at [348]). There is only limited evidence before the Court on the appeal as to the prospect of identifying further claims, and it may well have been that no better evidence was available to Palmer J. This is just the kind of issue that can be clarified by the conduct of an inquiry under s 536. The mere suggestion that there could be potential further claims was not enough to prevent Palmer J from exercising the Court's jurisdiction under the section to order that any inquiry take place.

(f) The extent and costs of the proceedings

159 Sixthly, the appellants submitted that Palmer J had made a material error of fact in regarding the liquidators' costs of the proceedings as in the order of $2 million when in truth part of that figure included pre-commencement examinations and the correct cost of the proceedings was $1,559,340. We have concluded that the appellants' submission is not supported by the facts (see [27]-[30] above).

160 The appellants objected to Palmer J's "general concerns" about the cost of the proceedings and his view that they could have been conducted for significantly lower cost. They said that such general concerns could not provide a foundation for the view that the appellants had not faithfully performed their duties. That may be so, but a prima facie view by an experienced judge that the costs of the proceedings were disproportionate to the maximum possible recovery and that the proceedings could have been conducted for a significantly lower cost is, in our opinion, an adequate foundation, along with other matters upon which his Honour relied, for ordering and inquiry on the ground that there is something warranting further investigation.

161 The appellants complained that no particular conduct on their part had been identified that unreasonably contributed to the length or cost of the proceedings, and they said there are many reasons why litigation can end up costing more than one might expect, not the least of which is the attitude of one's opponents. They contended that the proceedings were conducted on their behalf by reputable solicitors and experienced and highly regarded counsel, and they noted that his Honour thanked counsel at the conclusion of the hearing for the efficient conduct of the proceedings (on 28 February 2007).

162 We do not regard his Honour's expression of appreciation to be a matter of significance to the threshold issue of whether an inquiry should be ordered: the fact that the proceedings were conducted efficiently by counsel and solicitors for the liquidators in court is not incompatible with the proposition that the case was unduly lengthy and costly. His Honour's lack of specificity about any particular conduct on the part of the appellants does not remove the foundation for an inquiry, an exercise that can fairly be expected to determine whether there was any conduct of which criticism could be made.

163 Additionally, the appellants contended that the question whether costs were reasonably incurred is a question for a costs assessor, and in the absence of a prima facie case of misconduct, the Court should not embark on what is effectively a costs assessment. But the issue that Palmer J thought worthy of investigation, in his Main Judgment, was an issue about the faithful discharge of the liquidators' duties. That is not the same as the question whether the costs that were incurred were fair and reasonable and is not a matter for a costs assessor.

164 This submission misapprehends the test to be applied in determining whether an inquiry should be ordered. An inquiry might reveal that the appellants had done nothing unreasonable to contribute to the length or cost of the proceedings, but the facts found by his Honour entitled him to form the view that there was enough to warrant further investigation.

Failure to apply for directions before commencement of the proceedings

165 In their written submissions the appellants criticised Palmer J for taking the view that they should have applied to the court for directions as to whether they were justified in commencing the proceedings (Main Judgment at [385], [388]). They submitted that:

"Entry into a funding agreement without first seeking the direction of the court could only constitute a lack of faithful performance of a liquidator's duties if a liquidator is under an obligation in all cases to make such an application."

166 On the construction of s 536 we have taken, it was not necessary for Palmer J to identify a prima facie case of lack of faithful performance of duties. The question to be addressed is whether there was a basis for ordering an inquiry; that is something requiring further investigation. In any event, the reference to "lack of faithful performance of a liquidator's duties" refers only to s 536(1)(a), not to s 536(1)(b) or s 536(3).

167 The appellants further submitted that the right to seek directions is a right to be availed of as the liquidator sees fit, and that a failure to do so cannot constitute a prima facie case of misconduct (a submission which, on the view we take of the appropriate test, should be understood as a submission that the failure was not a relevant consideration, or not a consideration entitled to weight, when determining whether there was a basis for ordering an inquiry). They further submitted that it is not obvious that any such application would have been granted, because of the policy of the court not to make a liquidator’s commercial decisions where the liquidator has full power to act. Reference was made to Re Spedley Securities Ltd (in liq), supra at 85, per Giles J.

168 There is a well-established proposition that courts will not generally interfere with the bona fide exercise of powers by a liquidator, including those involving commercial decisions. It reflects a similar principle of restraint applied by courts with respect to trustees in bankruptcy. The approach is evident in numerous judgments.

169 It is sufficient for present purposes to refer to the analysis by McLelland J in Northbourne Developments supra at 439-440 and specifically his Honour’s citation with approval of the judgment of Young J in Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 at 117 where his Honour said:

“ … [T]hough there is wide jurisdiction given to the court under s 379(3) of the Code [a predecessor of s 479(3)], it is usually only proper to exercise that power where the matter involves guidance to the liquidator on matters of law or principle or to protect him against accusations of acting unreasonably. The court does not usually consider it proper to intervene and make the liquidator’s commercial decision for him.”

Naumoski v Parbery

Star v Silvia

170 The question in the present case is whether a proposal to enter into a litigation funding agreement should be treated as a commercial proposal of a kind with respect to which the liquidators would usually be left to exercise their own judgment without judicial interference, or as a matter raising other considerations rendering the court less reluctant to give directions.

171 There is an analogy with an application to the court for the approval of an agreement of more than three months' duration under s 477(2B)/506(1A). In that context, if the subject matter of the agreement is purely commercial, the court will usually respect the liquidators' commercial judgment in favour of the proposal, and will generally not interfere (and therefore will grant approval) in the absence of evidence of bad faith, error of law or principle, or some real or substantive ground for doubting the prudence of the proposal: State Bank of New South Wales v Turner Corporation Ltd (1994) 14 ACSR 480 at 483 per Tamberlin J; Re Spedley Securities Ltd (in liq), at 85 per Giles J. Where, however, the proposed agreement is a litigation funding agreement, the decision to enter into it is not treated as a purely commercial decision because it affects the administration of justice and the efficient winding up of companies, and so the court may be less likely to defer to the liquidators' judgment. The factors that may influence the court's decision on an application for approval of a litigation funding agreement under s 477(2B)/506(1A) or in an application for directions under s 479(3)/511 can be seen in the cases listed at [146] above.

172 The matters taken into account in an application for approval of a funding agreement under s 477(2B)/506(1A) and in an application for judicial directions under s 479(3)/511 are essentially the same, although additional questions will arise in an application for judicial directions concerning the appropriateness of the court acceding to the application (a question comprehensively explored by the High Court in the Macedonian Church case supra). The common criteria were set out by Palmer J (Main Judgment at [386]), and in the Buiscex case and Re ACN 076 673 875. We agree with that reasoning.

173 That being so, we do not agree with the proposition that the court would be likely to decline to give directions to liquidators concerning a litigation funding agreement on the ground that it is not appropriate for the court to make a liquidator's commercial decisions for him or her. The question whether to give directions or decline to give them will depend upon the nature of the directions sought and the facts of the instant case, and in particular the extent to which the funding agreement and the contemplated recovery proceedings raise issues capable of affecting the administration of justice.

174 In our view there were some matters of fact in this case upon which his Honour could form the conclusion that further inquiry by the Court was appropriate and, therefore, that there was a basis for making an order under s 536. Those matters are listed at [82] above. It is relevant to the exercise of the discretion that the liquidators did not obtain or seek the Court's directions. If they had done so and had acted in accordance with those directions it is difficult to conceive that the Court would have seen any reason to order an inquiry. To the extent that Palmer J merely took into account the absence of an application for directions as a factor to be weighed in the exercise of the judicial discretion conferred by s 536, we do not detect any error justifying intervention on appeal.

175 However, Palmer J attributed significance to the lack of an application for directions that we regard as undue. He said that a liquidator proposing to enter into a litigation funding agreement should apply to the court for directions "as a matter of course" (Main Judgment at [388]). The appellants submitted that this statement is incorrect. As we have said, they contended that the right of liquidators to seek directions is one to be availed of as they see fit.

176 In our opinion, there is no obligation upon liquidators to apply to the court for directions as a matter of course before entering into a litigation funding agreement. The decision to do so is not, however, solely a matter for the liquidators' discretion, because they have a duty of skill, care and diligence and on some occasions (identified in the cases cited by Palmer J at [385]-[386]) and in these reasons for judgment at [146], obtaining the court's directions will be a prudent course.

177 As the appellants emphasised, this is not a case where the liquidators were required to obtain the court's approval under s 477(2B)/506(1A), because here the approval requirement was satisfied by the alternative means of creditor approval. A duty to approach the court "as a matter of course" cannot be derived from or by analogy with that section. His Honour's reasoning suggests that liquidators should routinely approach the court for directions under s 479(3)/511 before entering into a litigation funding agreement that has been already approved by creditors. In our opinion, his Honour erred in this regard.

178 When considering the duty of liquidators to collect the company's assets we referred to Bacich v Australian Broadcasting Commission, supra at 11, where Brownie J, citing Gray v Bridgestone Australia Ltd, supra, said that liquidators are not obliged to seek the authority of the court or creditors before instituting proceedings on behalf of the company, even if the proceedings will be at the creditors' expense. Numerous analogous authorities could be referred to.

179 By parity of reasoning, a liquidator is not obliged on every occasion to seek the court's directions before entering into a litigation funding agreement that will lead to the institution of proceedings without expense to the company or the creditors. But as Brownie J observed, the liquidator is obliged to make the relevant decisions with the skill, care and diligence appropriate to his or her office. In some but not all circumstances the proper discharge of the liquidators' duty may involve an application to the court for directions. It is likely to be prudent to seek the court's directions in a case where, if the court's approval were required under s 477(2B)/506(1A), there would be substantial uncertainty as to whether approval would be granted.

180 It does appear that his Honour, taking the general view that an application for directions should be made as a matter of course, approached the exercise of the Court's discretion under s 536 on the basis that the liquidator ought to have approached the Court for directions with respect to the proposed funding agreement prior to the institution and/or the further conduct of the proceedings. The matter that he took into account was not the mere absence of an application for directions but a perceived duty to seek directions as a matter of course. In this regard, in our opinion, his Honour took into account a factor that was extraneous to the exercise of the discretion to order the inquiry. That leads to the question whether the erroneous matter was material to his Honour's decision.

181 Arguably the central issue in the present case was not that there was a litigation funder, but that the proceedings continued at a time when the prospect of any return to creditors was regarded as low and, perhaps, non-existent. The material before the Court does not enable a judgment to be made as to the point of time that the disproportionate nature of the cost of the litigation, against the possible return, could or should have become apparent. There does not appear to be any basis for stating that it should have been apparent at the commencement of the proceedings. Indeed it is this difficulty that led his Honour to prefer that an inquiry be held, rather than an immediate further hearing on the issue of costs. Nevertheless an inquiry would need to investigate the whole process of engaging a litigation funder and commencing and then continuing the proceedings. It seems to us that his Honour's reference to the absence of judicial directions was material to the making of an order for inquiry into all of those matters. That is sufficient for this Court to uphold the challenge by the appellants and re-exercise each of the three discretions that his Honour did exercise.

Litigation funding

182 There are some other aspects of the submissions on the subject of litigation funding, which the Court should consider.

183 In their written submissions, the appellants challenged the opinion expressed by Palmer J that the law only countenances litigation funding because it provides access to justice (Main Judgment at [388]). They submitted that this proposition imports a restriction on litigation funding which is not consistent with the reasoning of the High Court in Campbells Cash & Carry, supra (citing the judgment of Gummow, Hayne and Crennan JJ at [91]).

184 Palmer J's statement does appear to be an unnecessarily restrictive approach in one respect. In the Campbells Cash & Carry case Gummow, Hayne and Crennan JJ referred to two kinds of consideration that had been proffered as founding a rule of public policy, namely fears about adverse effects on the processes of litigation and fears about the "fairness" of the bargain struck between the funder and the intended litigant (at 434 [90]). Their Honours continued (at 434 [91]):

"Neither of these considerations, whatever may be their specific application in a particular case, warrants formulation of an overarching rule of public policy that either would, in effect, bar the prosecution of an action where any agreement has been made to provide money to a party to institute or prosecute the litigation in return for a share of the proceeds of the litigation, or would bar the prosecution of some actions according to whether the funding agreement met some standards fixing the nature or degree of control or reward the funder may have under the agreement. To meet these fears by adopting a rule in either form would take too broad an axe to the problems that may be seen to lie behind the fears."

185 Palmer J did not assert a proposition of the kind identified and rejected in this passage. His proposition was that litigation funding is permitted because it facilitates access to justice (see Main Judgment at [372], as well as [388]). That proposition does not emerge from the passage just cited but it was identified by their Honours at 425 [65], evidently with support, and seems to underlie their observations at 435 [95]. But for the use of the word "only", his Honour's interpretation of the joint judgment would be open on a fair reading of the joint judgment. It is not, however, apparent that the word "only", which is too restrictive, provides a basis for intervention on the principles in House v The King, supra.

186 The appellants were critical of Palmer J's statement (at [388]) that if the liquidators' funding arrangements provide no more than a token benefit to the creditors and are in truth a means for the litigation funder and the liquidator to profit handsomely, the liquidator should be directed not to proceed. We do not detect error in that proposition, since his Honour seems to have in mind a case where the purpose of the liquidator and litigation funder is to generate profit for themselves without any substantial benefit to creditors. That should be distinguished from a case where, though creditors are unlikely to obtain any substantial benefit from the litigation, a successful outcome will recoup properly and reasonably incurred costs and expenses of the liquidator (see at [150]-[151]). The statement by his Honour to which objection was taken did not purport to be a finding of fact in the case before the Court. There is no basis for interfering with the exercise of the discretion in this respect.

Conclusions

187 We have concluded that, while many of the challenges to Palmer J's order under s 536 are unsuccessful, the appellants' submissions identified two grounds for appellate intervention. His Honour failed to take into account or give sufficient weight to a material matter, namely the public interest in the bringing and prosecution of recovery proceedings, and he took into account an extraneous matter that he regarded as material, namely his view that the liquidators should have sought judicial directions as a matter of course before entering into the litigation funding agreement. In our view, these grounds constitute a sufficient basis for this Court to set aside Palmer J's order and re-exercise the discretion under s 536.

188 The matters relied upon by Palmer J as justifying an order for an inquiry were, on the whole, concerns that should support an order for further investigation. We have found that his Honour erred in two respects but he may well have reached the same conclusion had those matters been correctly addressed. Our findings on appeal have not undermined the major part of his Honour's reasoning.

189 This Court is not in a position to determine that the precondition to the exercise of the power in s 536(1)(a) is made out: i.e. that "it appears to the that a liquidator has not faithfully performed … his or her duties …". We have not been addressed on this issue. In this respect, the refusal of ASIC to intervene makes any further analysis problematic, given the Court's obligation to accord procedural fairness to the appellants.

190 We note that in his judgment, Palmer J did not identify with precision the duty or duties that appeared to him not to have been performed. There was no suggestion that the second limb of s 536(1)(a), namely failure to observe a pertinent requirement, was engaged. It may be that what his Honour had in mind was the liquidator’s duty of skill, care and diligence, reflected in part in s 180, in the latter case requiring attention to the business judgment rule. It may be that he had in mind the liquidator's duty to the court only to instigate or continue proceedings for proper purposes. It may be that he had in mind the liquidator's general law duty to exercise a power for the purpose for which it was conferred, reflected in s 181(1)(b). It may be that he had in mind the general law duty of a liquidator as fiduciary not to improperly use his or her position to gain advantage, reflected in s 182.

191 His Honour's failure to identify the duty or duties involved was not one of the grounds of appeal. Nevertheless, as a general rule, some specification of the jurisdictional precondition to the exercise of the power in s 536(1)(a) appears to us to be necessary and, in any event, desirable. Absent any submissions on the matter, in a hearing at which only the applicants/appellants appeared, this Court could not exercise the discretion and would be obliged to remit.

192 With respect to s 536(1)(b), Hodgson JA and Austin J, as noted, are of the view that this power is available. There does not appear to be the same difficulty of identifying the relevant "conduct of the liquidator" with respect to this power.

193 With respect to s 536(3), the power is not relevantly confined. However, the power is not expressed in the same way as the power in s 536(1). It is not a power to "inquire". It is a power to "require" an "answer" to "any inquiry". Although this is not a ground of appeal, it may well be that s 536(3) requires a degree of specificity in the formulation of issues and/or questions in the order itself. It is not necessary or appropriate to decide this issue in the present case.

194 The inquiry that Palmer J had in mind responded to what he called the "fait accompli" of the liquidators' expenditure in the proceedings (Main Judgment at [391]). He said that the Court was not powerless to correct what had happened, because s 98 of the Civil Procedure Act 2005 (NSW) gave it a wide discretion with respect to the costs of proceedings (Main Judgment at [391]; see [45] above). He warned that if he came to the conclusion that the liquidators' expenditure on costs was unjustified and improper, he would give consideration to whether a costs limiting order should be made under s 98(4) (at [397]). Nothing in his Honour's reasons for judgment suggests that he contemplated the possibility of some other remedy such as a remedy for breach of any statutory duty under the Corporations Act or a disciplinary proceeding.

195 In those circumstances this Court should not, in deciding whether to re-exercise the discretion under s 536, or to remit the matter, do so with a view to an outcome of a different kind, except to the extent that such a different outcome was contemplated in submissions. Procedural fairness requires no less. There were no such written submissions, although as noted below, the oral submissions made on behalf of the appellants adverted to some other possible outcomes.

196 The proceedings that were before Palmer J were settled after he made an order under s 536 and before the hearing of the appeal against that order. The appellants did not provide this Court with the full terms of settlement but we were informed, relevantly to the present question, that under the terms of settlement payments have been made in settlement of the costs of proceedings and the liquidators' own fees. Senior counsel for the appellants told the Court that in light of the terms of settlement there were no longer any outstanding costs orders to be made by the Court and therefore no prospect of the Court making a costs limiting order under the Civil Procedure Act. We accept that submission, which has the consequence that the purpose of the inquiry envisaged by Palmer J has gone.

197 In oral submissions there was some discussion contemplating the possibility of an inquiry directed to reviewing the liquidators' own fees. As we have said at [51] above, on its proper construction Palmer J's order for an inquiry did not extend to the liquidators' own fees, but only to costs of the proceedings. While it is conceivable that upon the re-exercise of discretion under s 536 the Court could order an inquiry directed towards reviewing the amount of the liquidators' fees recovered under the terms of settlement, that is not a course we would favour, for several reasons.

198 First, review of the liquidators' fees was not an outcome envisaged by Palmer J when he made the order for an inquiry and the order did not cover the liquidators' fees, as we have noted. Secondly, the possibility of such an inquiry was not fully addressed in submissions. Thirdly, the Corporations Act contains statutory provisions for the fixing and review of the remuneration of a liquidator in a creditors' voluntary winding up. The fixing of the remuneration is a matter for the creditors or the committee of inspection (s 499). While the Court has the power to review the amount of the remuneration (s 504), and may do so even after the remuneration has been paid to the liquidators, the exercise of that power depends upon an application by a member or creditor or the liquidator, and there is no such application here. Assuming (without deciding) that the Court has some residual power of review, it is unlikely that such a power would be exercised in view of the availability of review under the statutory scheme.

199 Senior counsel for the appellants conceded that, notwithstanding the settlement, an inquiry could possibly lead to a reference of some matter to the regulator, ASIC. But there is nothing to indicate any interest in this matter on the part of ASIC, which (as we noted at [7]-[8] above) has chosen not to appear on the appeal. In the absence of any appearance or other interest on the part of ASIC, the Court is entitled to infer that ASIC would not participate actively in any inquiry ordered for the purpose of considering whether to refer any matter to it. There is no basis for this Court to conclude that it is at all likely that ASIC would take up any reference to it in consequence of an inquiry.

200 In these circumstances there does not appear to be any utility in ordering an inquiry.

201 The consequence is that we shall make orders setting aside the order for an inquiry made on 15 February 2008 by Palmer J under ss 536(1)(a), 536(1)(b) and 536(3) of the Corporations Act, and upon our re-exercise of the Court's discretion under those provisions no order will be made.

Orders

202 The orders of the Court are:

1 Leave to appeal granted.

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Citations

Hall v Poolman [2009] NSWCA 64

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Cited Sections

CITATION:	Hall v Poolman [2009] NSWCA 64
HEARING DATE(S):	28 November 2008
JUDGMENT DATE:	31 March 2009
JUDGMENT OF:	Spigelman CJ; Hodgson JA; Austin J
DECISION:	1. Leave to appeal granted. 2. Orders 1(a)-(d) made by his Honour Justice Palmer on 15 February 2008 set aside.
CATCHWORDS:	APPEAL – appeal – general principles – interference with discretion of court below – re-exercise of discretion - CORPORATIONS – winding up – winding up voluntarily – liquidators – supervision of liquidators by the court – inquiry under s 536(1)(a) Corporations Act 2001 (Cth) – faithful performance of duties - CORPORATIONS – winding up – winding up voluntarily – liquidators – supervision of liquidators by the court – inquiry under s 536(1)(b) Corporations Act 2001 (Cth) – complaint – whether a complaint was made - CORPORATIONS – winding up winding up voluntarily – liquidators – supervision of liquidators by the court – inquiry under s 536(3) Corporations Act 2001 (Cth) – liquidators to answer an inquiry - CORPORATIONS – winding up – liquidators – duties and liabilities – in voluntary winding up – factors relevant to the discretion to ordering an inquiry under s 536 Corporations Act 2001 (Cth) – size of anticipated return to creditors – position of creditors – proportionality between cost and recovery – failure to apply for directions before commencement of the proceedings – litigation funding - STATUTORY INTERPRETATION – acts of parliament – interpretation – s 536(1)(a), s 536(1)(b), s 536(3) Corporations Act 2001 (Cth)
LEGISLATION CITED:	Australian Securities and Investments Commission Act 2001 (Cth) Bankruptcy Act 1914 (UK) Bankruptcy Act 1966 (Cth) Civil Procedure Act 2005 Companies Act 1896 (Vict) Companies Act 1936 Companies Code Companies (Winding Up) Act 1890 (UK) Corporations Act 2001 (Cth) Supreme Court (Corporations) Rules 1999 Uniform Civil Procedure Rules 2005 Uniform Companies Act 1961
CASES CITED:	Andjelic v Marsland (1996) 186 CLR 20 Anstella Nominees Pty Ltd v St George Motor Finance Ltd [2003] FCA 466; (2003) 21 ACLC 1347 Arthur Yates & Co Pty Ltd v Vegetable Seeds Committee (1945) 72 CLR 37 Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2008] HCA 9; (2008) 232 CLR 314 Australian Coal & Shale Employees' Federation v Commonwealth (1953) 94 CLR 621 Australian Securities and Investments Commission v Edge [2007] VSC 170; (2007) 211 FLR 137 Australian Securities and Investments Commission v Forestview Nominees Pty Ltd (recrs & mgrs apptd) [2006] FCA 1530; (2006) 236 ALR 652 Australian Security Estates Pty Ltd v Bluecrest Holdings Pty Ltd (in liq) [2002] NSWSC 491; (2002) 169 FLR 111 Bacich v Australian Broadcasting Corporation (1992) 29 NSWLR 1 Belvista Pty Ltd v Murphy (1993) 11 ACSR 628 Buiscex Ltd v Panfida Foods Ltd (in liq) (1998) 28 ACSR 357 Burns Philp Investments Pty Ltd v Dickens (1993) 11 ACLC 272 Burns Philp Investments Pty Ltd v Dickens (No 2) (1993) 31 NSWLR 280 Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386 Clutha Ltd (in liq) v Millar (No 5) [2002] NSWSC 833; (2002) 43 ACSR 295 Duke of Portland v Topham (1864) 11 HL Cas 32; 11 ER 1242 Galloway v London Corporation (1866) LR 1 HL 34 General Assembly of the Free Church of Scotland v Lord Overtoun; Macalister v Young [1904] AC 515 Gray v Bridgestone Australia Ltd (1986) 10 ACLR 677 Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123 Hall v Poolman (No 2) [2007] NSWSC 1494 Hall v Poolman, Supreme Court of New South Wales, Palmer J, 15 February 2008, unreported House v The King (1936) 55 CLR 499 IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in liq) [2009] FCAFC 9 Leigh, re King Bros [2006] NSWSC 315 Leslie v Hennessy [2001] FCA 371 Lovell v Lovell (1950) 81 CLR 513 Macchia v Nilant [2001] FCA 7; (2001) 110 FCR 101 Magarditch v Australia and New Zealand Banking Group Ltd [1999] FCA 35; (1999) 30 ACSR 265 Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd [2008] FCA 471; (2008) 245 ALR 726 Montreal Trust Co v Abitibi Power Co [1937] 4 DLR 369 Moore v Macks [2007] FCA 10 Naumoski v Parbery [2002] NSWSC 1097; (2002) 171 FLR 332 Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 O’Toole v Mitcham (1977) 2 ACLR 471 Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651 PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service (1995) 184 CLR 301 Re ACN 076 673 875 Ltd (in liq) [2002] NSWSC 578; (2002) 42 ACSR 296 Re Ah Toy (1986) 10 FCR 356; 10 ACLR 630 Re Alafaci, Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 Re Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 742 Re Day & Dent Constructions Pty Ltd (1984) 32 NTR 13; 9 ACLR 319 Re English Scottish & Australian Chartered Bank [1893] 3 Ch 385 Re Feasty’s Family Restaurant Pty Ltd (1996) 14 ACLC 1058 Re Fermoyle Pty Ltd (in liq); Commonwealth v Brown (1992) 6 ACLR 640 Re Fox Home Loans Pty Ltd (in liq) [2005] NSWSC 1050 Re Gault; Gault v Law (1981) 57 FLR 165 Re Glowbind Pty Ltd (in liq); Takchi v Parbery [2003] NSWSC 1190; (2003) 48 ACSR 456 Re Imobridge Pty Ltd (in liq) (No 2) [1999] QSC 342; [2000] 2 Qd R 280 Re Silver Valley Mines (1882) 21 Ch D 381 Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 Re Tavistock Ironworks Co (1871) 24 LT 605 Re Timberland Ltd (in liq); Commissioner for Corporate Affairs v Harvey [1980] VR 669 Re Tosich Construction Pty Ltd (1997) 73 FCR 219; Re Addstone Pty Ltd (in liq) (1998) 83 FCR 583 Registrar in Bankruptcy v Bradley (1983) 72 FLR 231 Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 Star v Silvia (1994) 12 ACLC 600 State Bank of New South Wales v Turner Corporation Ltd (1994) 14 ACSR 480 Stewart, re Newtronics Pty Ltd [2007] FCA 1375 The Queen v Toohey; ex parte Northern Land Council (1982) 151 CLR 170 Turner v Official Trustee in Bankruptcy (Federal Court of Australia, Burchett, Drummond and Sackville JJ, 27 November 1998, unreported) UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (No 2) [1997] 1 VR 667; (1996) 21 ACSR 251 Vines v Australian Securities and Investments Commission [2007] NSWCA 126; (2007) 63 ACSR 505 Vink v Tuckwell [2008] VSC 100; (2008) 66 ACSR 30 Vink v Tuckwell [2008] VSCA 204; (2008) 68 ACSR 265 Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 Wilson v Commonwealth of Australia [1999] FCA 219 Wong v Silkfield Pty Ltd [1999] HCA 48; (1999) 199 CLR 255
PARTIES:	Gregory Winfield Hall (First Applicant) Phillip Patrick Carter (Second Applicant) Peter Renwick Poolman (First Respondent) Malcolm Geoffrey Irving (Second Respondent) Constance Helen Poolman (Third Respondent) John Giske Martini (Fourth Respondent) Sandra Lee Yates (Fifth Respondent)
FILE NUMBER(S):	CA 40030/08
COUNSEL:	T F Bathurst QC, J Williams (Applicants)
SOLICITORS:	Allens Arthur Robinson (Applicants) CRS Warner Sanderson (First Respondent) Addisons (Second Respondent) SBA Lawyers (Fourth Respondent) Deacons (Fifth Responent)

LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 2032/04
LOWER COURT JUDICIAL OFFICER:	Palmer J
LOWER COURT DATE OF DECISION:	23 November 2007 20 December 2007 15 February 2008
LOWER COURT MEDIUM NEUTRAL CITATION:	Hall v Poolman [2007] NSWSC 1330 Hall v Poolman (No 2) [2007] NSWSC 1494 Hall v Poolman, Supreme Court of New South Wales, Palmer J, 15 February 2008