Handberg v MIG Property Services Pty Ltd
[2010] VSC 336
•13 August 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7807 of 2008
| GEOFFREY NIELS HANDBERG (IN HIS CAPACITY AS LIQUIDATOR OF S & D INTERNATIONAL PTY LTD (IN LIQUIDATION) (ACN 075 030 447) | First Plaintiff |
| and | |
| S & D INTERNATIONAL PTY LTD (IN LIQUIDATION) (ACN 075 030 447) | Second Plaintiff |
| v | |
| MIG PROPERTY SERVICES PTY LTD (ACN 006 657 174) | First Defendant |
| and | |
| PAUL VARTELAS | Second Defendant |
| and | |
| DINESH MAHOLTRA | Third Defendant |
| and | |
| BILL VELOS | Fourth Defendant |
| and | |
| PRADEEP TIWARI | Fifth Defendant |
| and | |
| STIRLING HORNE | Sixth Defendant |
| and | |
| PETER VINCE | Seventh Defendant |
JUDGE: | WARREN CJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 May 2010 | |
DATE OF JUDGMENT: | 13 August 2010 | |
CASE MAY BE CITED AS: | S & D International & Anor v MIG Property Services & Ors | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 336 | |
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LIQUIDATORS – Application to court for approval to compromise claim – Corporations Act 2001, s 511 – Jurisdiction of court to direct voluntary liquidator – Corporations Act 2001, ss 479(3), 511 - Acrimonious and litigious parties – Multiple competing claims – Unusual personal risk to liquidator – Settlement funds necessary to effectively perform functions as liquidator - Application granted.
CORPORATIONS LAW - Jurisdiction of court to direct voluntary liquidator – Corporations Act 2001, ss 479(3), 511.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr M J Galvin | Mills Oakley Lawyers |
| For the First Defendant | Mr M V McInnis | Mason Black Lawyers |
| For the Second Defendant | Irlicht and Broberg | |
| For the Third Defendant | No appearance | |
| For the Fourth Defendant | No appearance | |
| For the Fifth Defendant | No appearance | |
| For the Sixth Defendant | No appearance | |
| For the Seventh Defendant | No appearance | |
HER HONOUR:
Background
The factual background of the dispute out of which this application arises is summarised in the related decision of Robson J in Re S&D International Pty Ltd (in liquidation)(receiver and manager appointed) as follows:
Each of the plaintiffs and the defendants to this proceeding claim an interest over property held on trust for the S&D International Unit Trust. The Trust assets included a property at 580 Barkly Street, Footscray which has now been sold by the first mortgagee, MIG Property Services Pty Ltd (MIG), the first defendant, and another property at 45 Boronia Drive, Hillside which is in the possession of the receiver, Mr Vartelas, the second defendant, who was appointed by the registered first mortgagee and mortgage debenture holder MIG.
Previously the trustee of the unit trust, S & D International Pty Ltd (S&D), the second plaintiff, carried on an Indian wholesale grocery business at the Footscray property known as Bharat Traders International. The business was initially established as a partnership in 1991 by Dinesh Malhotra, the third defendant, his brother Vinod Malhotra, and Markandey Tiwari. In 1992, Markandey Tiwari divorced his wife Sheela who then married Dinesh Malhotra. Also in 1992, Markandey and Vinod left the partnership and Dinesh Malhotra was registered as sole proprietor of the business name. The business was thereafter built up and conducted by Sheela Tiwari and Dinesh Malhotra. In 1996, the unit trust was established and S&D appointed the trustee. S&D took over the business and acquired the Footscray property in 1996. Subsequently, in 2000, S&D as trustee purchased the Hillside property. These properties were mortgaged to the CBA Bank along with a mortgage debenture over the assets and undertaking of S&D. These securities are now held by MIG.
The two units in the unit trust were held by Sheela Tiwari. Dinesh Malhotra resigned as a director in 1999; although he claimed that at all times he was the beneficial owner of half the units in the trust and half the shares in the trustee. In April 2002, for reasons it is not necessary to canvass, Dinesh Malhotra was locked out of the Footscray property by Sheela Tiwari where they also resided. He soon thereafter lodged a caveat over both properties claiming to have an estate in fee simple.
After Dinesh was excluded from the Footscray property, Sheela Tiwari and her son Pradeep Tiwari caused S&D to grant an unregistered mortgage to the ANZ Bank and a registered mortgage debenture in exchange for a business loan and a home loan which were used by Sheela Tiwari to buy a home at Point Cook. The ANZ Bank lodged a caveat giving notice of its unregistered second mortgage.
In August 2002, Dinesh Malhotra instituted legal proceedings in the Supreme Court of Victoria to establish his half interest in the properties and the business. Thus began a long series of court cases which have led to the current proceedings. Sufficient to say, Dinesh Malhotra succeeded in his initial proceedings in establishing that he was beneficially entitled to a half interest in the unit trust and its assets.
Sheela Tiwari retained the firm of Velos and Davis to act for her and S&D in the proceedings instituted by Dinesh. She also caused S&D to give an equitable charge over the Footscray property and the Hillside property to secure legal fees incurred on her behalf and S&D’s behalf in the Supreme Court proceedings. Mr Bill Velos of the firm of Velos and Davis is the fourth defendant. On 6 August 2007, Mr Velos and his partner Peter Davis obtained judgment against Sheela Tiwari for $190,708.52 plus costs in respect of fees and charges incurred in acting for her and S&D in the Supreme Court proceedings. This debt has not been paid and Mr Velos and Peter Davis claim to be entitled to the moneys in Court as a matter of priority by virtue of the equitable charges.
Sheela Tiwari appealed the Supreme Court decision and while the matter was pending in the Court of Appeal, Sheela Tiwari and Dinesh Malhotra agreed to appoint an administrator to run the business until their dispute could be resolved. They appointed Stirling Horne and Peter Vince, the sixth and seventh defendants, as administrators. Despite the business being previously profitable, they, as Dinesh Malhotra alleges, with the connivance of Sheela Tiwari and her son Pradeep Tiwari, recommended that the trustee be wound up. At that stage, the trustee owed CBA as a secured creditor approximately $240,000. In June 2005, the creditors of S&D resolved to wind up the company and appointed Messrs Horne and Vince as liquidators.
Dinesh Malhotra then instituted further proceedings in the Supreme Court to terminate the winding up and to remove Messrs Horne and Vince as liquidators. At first instance, he failed to have the winding up terminated and Messrs Horne and Vince removed as liquidators. He successfully appealed the decision of the Court not to remove Messrs Horne and Vince. In June 2007, Mr Handberg, the first plaintiff, was appointed as the liquidator of S&D in their stead. In November 2004, Messrs Horne and Vince lodged a caveat against the properties notifying their claim to a lien over the assets for their unpaid fees and expenses.
Previously, Messrs Horne and Vince had sought to have Dinesh Malhotra’s caveats removed. In July 2006, the Supreme Court refused their application.
As mentioned above, the CBA bank held securities over S & D and the properties and at about the time S & D was placed in administration, the CBA Bank called up its loan owed by S & D. In June 2005, Dinesh Malhotra was able to arrange for the CBA to be paid out by Colonel Naresh Malhotra who took over the securities but assigned them to MIG on 11 September 2006.
On 25 October 2006, Mr Vartelas was appointed receiver and manager of the assets and undertaking of S&D under the mortgage debenture held by MIG. In August 2007, Mr Vartelas was appointed the agent of MIG and entered into possession of the two properties. At that time, the principal debt secured by the mortgages was $242,540.38.
On or about 19 September 2007, MIG, through its agent Mr Vartelas, sold to Tiwari Enterprises Pty Ltd, a company associated with Sheela Tiwari, the Footscray property at public auction for the total sum of $1,360,000. Settlement of the sale occurred on 18 October 2007. On 19 October 2007, the estate agents accounted to MIG for the deposit. At settlement, withdrawals were provided for the Dinesh Malhotra caveat, the ANZ Bank caveat and the Horne and Vince caveat. Mr Dinesh Malhotra agreed with MIG to provide his withdrawal on the basis that MIG would pay the surplus (if any) into Court. MIG did not pay the surplus into Court nor had it done so by the time this proceeding commenced. At or after settlement, MIG did not account to the mortgagor or the subsequent interest holders for the moneys it was retaining in satisfaction of its secured debt. It did not treat its mortgage and other securities as satisfied in full. On the contrary, it retained the proceeds of sale and failed to calculate what it was owed.
In September 2008, on the application of the liquidator of S&D, MIG and Mr Vartelas were ordered to pay the balance of the moneys which they still retained from the sale of the Footscray property and the receivership of S&D into Court. MIG has still not finally accounted to the liquidator or the other encumbrancers.[1]
[1] [2009] VSC 225 (Unreported, Robson J, 9 June 2009) [1]-[13].
The complex and acrimonious nature of the matter, as well as the number of competing claims advanced by each of the parties to it, caused his Honour to conduct the trial in stages. The first stage required resolving the claims of the plaintiffs against the first and second defendants. His Honour delivered his reasons in respect of those claims on 9 July 2009. As a result of this, orders were made for an enquiry into the amounts for which the first and second defendants should account to the plaintiff. Consent orders were made to the effect that the second defendant ought to pay the first plaintiff $120,000. Costs as between the second defendant and the plaintiffs were reserved.
Both the first and second defendants made separate appeals from the decision of Robson J. They were referred to a mediation by Lansdowne AsJ at which all the parties involved in the dispute were represented. The plaintiffs and the second defendant settled both the issues raised in the second defendant’s appeal and the outstanding costs of the first instance hearing in a deed (the ‘settlement deed’) drawn up at that mediation.
A copy of the settlement deed was before the Court. Under the terms of this deed the second defendant is to pay the first plaintiff $125,000, discontinue its appeal, and release the plaintiffs from any claims they may have against them arising out of the trial before Robson J, their appeal or the instant proceeding. In exchange, the plaintiffs will provide the second defendant with a release on the same terms, as well as a full release from any costs orders arising out of the trial. Execution of the settlement deed is conditional upon the first plaintiff receiving a direction from the court pursuant to s 511 of the Corporations Act 2001 (Cth) (the ‘Act’) that it is justified in settling the appeal proceedings on the terms set out therein.
The first defendant’s appeal remains on foot.
The application
The plaintiffs have applied for an order that the first plaintiff is justified in compromising with the second defendant the unresolved matters in the proceeding currently before Robson J, and the matters raised in the appeal of that defendant on the terms set out in the settlement deed.
The legal position
The liquidation of the second plaintiff is voluntary. A liquidator may apply to the court for directions in a voluntary liquidation pursuant to s 511 of the Act, in much the same way that a liquidator may make such applications in a compulsory winding up pursuant to s 479(3). If the court is satisfied that the giving of such an order would be ‘just and beneficial’ it may accede to that request and make the desired order on such terms and conditions as it thinks fit.[2] Such an order will be just and beneficial where it ‘will be of advantage in the liquidation.’[3] The effect of such an order is not to determine rights and liabilities arising out of particular transactions, but to protect the liquidator from claims that they have acted unreasonably or inappropriately. [4]
A determination under s 511 cannot, of itself, bind anyone except the liquidator and the persons entitled to participate under the winding up. Its effect within that group is merely to sanction a course of conduct on the part of the liquidator so that he or she may adopt that course free from the risk of personal liability for breach of duty.[5]
[2] Corporations Act 2001 (Cth) s 511(3).
[3] Dean-Willocks v Soluble Solution Hydroponics Pty Ltd & Anor (1997) NSW LR 209, 212 (‘Dean-Willocks’).
[4]Re Ansett Australia Ltd v Korda (2002) 40 ACSR 433, 444 (Goldberg J) (‘Korda’). See also Re Timbercorp Securities Ltd (in liq) & Ors [2009] VSC 597 (Unreported, Pagone J, 30 September 2009) [3] (‘Timbercorp’).
[5] Anglican Insurance Ltd [2008] NSWSC 41 (Unreported, Barrett J, 6 February 2008) [38].
Such protection is conditional upon the liquidator making ‘full and fair disclosure of all relevant facts and circumstances before the court’[6] at the time the order is made.
[6] Korda 444. See also Timbercorp [3].
It has not been uncommon when discussing ss 479(3) and 511 to draw a distinction between liquidators in compulsory and voluntary windings up for the purposes of these sections because the former are officers or agents of the court whilst the latter are agents of the company. The principle modern authority for this position is the following statement of Young J, as he then was, in Dean-Willocks:
There is a real difference between a court appointed liquidator and a liquidator appointed in a voluntary winding up. In the former case the liquidator is an officer of the court and the court is at liberty to give him directions accordingly or may utilise the statutory power under s 479. With a voluntary winding up, the liquidator is not an officer of the court but is the agent of the company. Thus, in Re Reid Murray Holdings Ltd [1969] VR 315 at 318, Adam J pointed out that the court has an inherent or implied jurisdiction on an application by its own officer to assist him. This does not apply to a voluntary liquidator.
However, I need not stay on this point as it is clear that although a voluntary liquidator does not have access to the court through s 479, he has access through s 511 and the authorities tend to suggest that the court has the same jurisdiction under both sections, see Re County Marine Insurance Co; Rance’s case (1870) LR 6 Ch app 104, 114-5.
I note that Rance’s case tends to say that the jurisdiction under s 479 and s 511 is much the same, but this cannot be completely true. Although the court may under s 479 direct its officer to commit a breach of trust or to do something which it is arguable he has not power to do, under s 511 the court is only given power to avoid expensive procedures but must act according to law and not authorise the liquidator to do anything which is ultra vires the company.[7]
[7] Dean Willocks 212.
For my part, although it is really an academic point, a review of the wording of the section and its legislative history suggest a different approach for a number of reasons.
First, the wording of the section provides the liquidator or any contributory or creditor the opportunity to apply to the court:
to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court.[8]
[8] Corporations Act 2001 (Cth) s 511(1)(b).
The qualification on those powers is one of purpose, it must be ‘just and beneficial’, not one of scope. As such, it cannot be characterised as more or less limited than the powers the court is able to exercise with respect to a liquidator in a compulsory winding up.
Secondly, the legislative history of the section indicates that no essential distinction was intended to be made between compulsory and voluntary windings up when the court was directing liquidators as to what actions they should take. Section 511 of the Act may be traced back through various pieces of Australian and United Kingdom legislation[9] to s 14 of The Joint Stock Companies Amendment Act 1858[10] which amended and extended the Joint Stock Companies Act 1857.[11] The intention of this act was to further develop the court supervised, voluntary winding up procedure that had recently been established, whilst ensuring that adequate safeguards were in place to protect creditors, liquidators and contributories. It allowed the court to take advantage of voluntary windings up, whilst ensuring that they were conducted equitably:
In the Act of 1857 it was provided that where a company is in the process of winding-up voluntarily and proceedings are taken for a winding-up by the Court, the Court may direct that the voluntary winding-up shall continue under its supervision.
This voluntary winding-up under supervision of the Court was thus an alternative to an order for compulsory winding-up, if the company could begin a voluntary winding-up before an application was made to the Court. And since the Court was empowered to specify conditions governing the winding-up and was open to applications by creditors and contributories, the mechanism was both convenient in operation and equitable in results. It was this procedure that the Joint Stock Companies Amendment Act, 1858, endeavoured to develop still further.[12]
[9]See, for example, Uniform Companies Act 1961 (Vic) s 274, The Companies Statute 1864 (Vic) s 138, Companies Act 1862, 25 & 26 Vict 1 c 89, s 138 (‘Companies Act, 1862’).
[10] 21 & 22 Vict 1.
[11]20 & 21 Vict 1. Cf. Dean Willocks, 212. His Honour traces the section back to the Companies Act, 1862.
[12] C. A. Cooke, Corporation, Trust and Company: An Essay in Legal History (1st ed, 1950) 170-1.
Although the wording of this section, which has changed remarkably little in one hundred and fifty years,[13] is somewhat oblique, I consider its intention to be quite clear. It was part of a legislative scheme put in place to ensure that applications were not made to the court to transform voluntary windings up into compulsory windings up simply so as to be able to have access to the advantages and protection thus conferred. The policy behind such an intention being the sensible one of reducing the work of the court in voluntary windings up to the minimum supervision necessary to ensure that such windings up were conducted properly and fairly, or in the words of the section ‘justly and beneficially’; as if they had been conducted by the court. The observations of James LJ and Mellish LJ in Re County Marine Insurance Co; Rance’s case[14] on the slightly later incarnation of the section as s 138 of the Companies Act 1862 make this quite explicit.[15] As James LJ stated:
...the object of the Act was that a company and its creditors should be left, if possible, to settle their affairs without coming to the Court at all, either for a compulsory winding up or for a winding up under supervision, but to provide them, under the 138th section, with the means of access to this Court whenever any question arose, in the course of the voluntary winding up, just in the same way as when any question arose in the case of a compulsory winding-up or under supervision.[16]
[13]‘Where a company is being wound up altogether voluntarily, the Liquidators may apply to the Court, or to the Lord Ordinary on the Bills in Scotland in Time of Vacation, by Petition, Motion, the Presentation of a Special Case, or in such other Manner as the Court may direct, to determine any Question arising in the Matter of such Winding-up, or to exercise, as respects the enforcing of any Calls, or in respect of any other particular Matter, all or any of the Powers which the Court might exercise if the Company were being wound up compulsorily; and the Court, or Lord Ordinary in the Case aforesaid, if satisfied that the Determination of such Question or the required Exercise of Power will be just and beneficial, may accede, wholly or partially, to such Application, upon such Terms and subject to such Conditions as the Court thinks fit, or it may make such other Order, Interlocutor, or Decree on such Applications as the Court thinks just.’
[14] (1870) LR 6 Ch App 104.
[15]Ibid 115 and 121 respectively. See also Black & Co’s Case (1872) LR 8 Ch 263; Re Bank of Gibraltar & Matla (1865) LR 1 Ch 69; and Re Beaujolais Wine Co (1867) LR 3 Ch 15, 25.
[16] Ibid 115.
The same purpose is attributed to s 511 (in one of its earlier incarnations) by the commentary in Young and Wallace’s Australian Company Law and Practice:
The effect of this section (which the Court has interpreted to give it wide powers - see Re Union Bank of Kingston-upon-Hull (1880) 13 Ch. D. 808) – is to lessen the distinctions between a voluntary and compulsory winding up : see Black & Co.’s Case (1872) L.R. 8 Ch., at p. 263 ; Re Bank of Gibraltar & Malta (1865) L.R. 1 Ch. 69 ; Re Beaujolais Wine Co. (1867) L.R. 3 Ch. 15, at p. 25[17]
[17]The Honourable Mr Justice Wallace and J McI Young, Australian Company Law and Practice (1st ed, 1965) 759 (Uniform Companies Act 1961 (Vic) s 274).
All windings up and liquidators are supervised by the court to the necessary extent.
Section 511 and compromising legal claims
I have been much assisted in this matter by the decision of Bergin J, as she then was, in Bauhaus Pyrmont Pty Ltd (in liq) in the matter of Wily as Liquidator.[18] That decision, like this one, also dealt with the risk attendant upon a conscientious liquidator in an acrimonious liquidation environment, and the utility of s 511 orders to protect them in circumstances where such protection would be just and beneficial to advancing the liquidation process as a whole. Two statements cited by her Honour in that case are also relevant to my conclusion. First, the observation of Giles J in Re Spedley Securities Ltd that:
The same restraint must apply when the question is whether the liquidator should be authorised to enter into a particular transaction the benefits and burdens of which require assessment on a commercial basis. Of course, the compromise of claims will involve assessment on a legal basis, and a liquidator will be expected … to obtain advice and, as a prudent person would in the conduct of his own affairs, advice from practitioners appropriate to the nature and value of the claims. But in all but the simplest case, and demonstrably in the present case, commercial considerations play a significant part in whether a compromise will be for the benefit of creditors.[19]
[18] [2007] NSWSC 936 (Unreported, Bergin J, 22 August 2007).
[19] (1992) ACSR 83, 86.
Secondly, the observation of Mansfield J in Re Addstone Pty Ltd that:
While the court may be reluctant to give directions when purely commercial considerations are relevant to the liquidator’s decision, even in relation to the conduct of litigation, there will be circumstances where it is or may be appropriate to do so. One of those circumstances may be where the liquidator’s proposed decision is the subject of criticism by a particular creditor or creditors as being unreasonable or mala fides.[20]
[20] (1997) 25 ACSR 357, 363.
Therefore, in my view, it is fair to say that the courts are restrained when approving the compromise of litigation pursuant to s 511, and that such approval will not be given absent a degree of personal risk attached to a particular liquidator that could negatively affect the winding up process. It is not the role of the court to make what are regarded as commercial decisions for liquidators absent special circumstances:
It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance. There must be some issue which arises in relation to the decision. A court should not give its imprimatur to a business decision simply to alleviate a liquidator’s or administrator’s unease. There must be an issue calling for the exercise of legal judgment.[21]
The orders sought
[21]Ansett Australia Ltd v Korda, Re; sub nom Ansett Australia Ltd (No 3) (FCR) (2002) 40 ACSR 433, 451 (Goldberg J). See also, Sanderson v Classic Car Insurance Pty Ltd (1985) 10 ACLR 115, 117 (Young J).
To turn first to the position of the plaintiffs, it is clear to me that they are engaged in a piece of multi-stage litigation involving a large number of acrimonious and competing claims. It is also pertinent that the first plaintiff is the second liquidator engaged to wind-up the company and that the actions of the original administrators of the company, Messrs Horne and Vince, were successfully challenged in a previous set of proceedings by the third defendant. They are now the sixth and seventh defendants in this matter. Two observations may be made. First, the sensitivity of the first plaintiff to further disputes arising out of each step taken to resolve the claims in issue appears well founded in light of the history of the matter. Secondly, his decision to settle with the second defendant appears to be a prudent step towards untangling this litigation, resolving the disputes out of which it arises, and progressing to his administrative duties. Only the first stage of what is expected to be a multi-stage litigation process has been completed. The conclusion of that stage has already generated two appeals. The capacity for ongoing cycles of litigation and the cost component consequent upon them appears to be a not unlikely result of the winding up of the second plaintiff. Thirdly, the first plaintiff has made it plain that his continued ability to litigate on behalf of the creditors of the second plaintiff is contingent upon receiving a settlement sum from the second defendant pursuant to the settlement deed. The execution of that deed is itself conditional upon the direction sought from this court. In truth, it is the liquidator who has included the condition in the settlement deed which has now been brought before the court, so this is, in effect a secondary consideration. He would be at liberty to enter the deed and receive the funds without the orders he seeks. However, insofar as the willingness of the liquidator to settle the claim in the circumstances pertaining to the winding up is an important precondition to receipt of these funds, it is, in circumstances of unusual personal risk, relevant to the decision before me.
Finally, I am satisfied, on the basis that the first plaintiff has not informed the court of any matter that should be known, that he has made full and fair disclosure of all relevant matters when making this application.
In contrast, the position of the first defendant is more opaque. It was urged upon me that such a settlement was premature. It was also urged upon me that the decision to settle with the second defendant was a commercial decision for the first plaintiff, and that it was inappropriate for the court to make a determination in respect of it. As I have observed, and as the authorities I have cited indicate, that fact is not necessarily determinative of the granting of an application pursuant to s 511. Furthermore, I consider that, on the facts before me, the first plaintiff is not seeking commercial advice from the court. He has already made what he regards as the appropriate and reasonable commercial decision. It is contained in the settlement deed. Having made that decision, he now asks the court to protect him from the potentially unreasonable behaviour of other parties involved in these proceedings. He is seeking the protection which the court is able to provide him in light of the difficult and litigious circumstances in which he finds himself, and the risk that they pose to his continuing ability to effectively and equitably wind up the second plaintiff.
In deciding whether to provide the plaintiffs with the direction sought, I must have regard to the liquidation process as a whole, not to the interests of any one particular party. The liquidator’s decision to enter into the settlement deed appears prudent. The interests of the liquidation are best served by resolving each stage of the litigation as it is decided so that the next stage may proceed unencumbered. Furthermore, the outcome of the second defendant’s appeal, as in all litigation, is uncertain. The interests of the liquidation are also best served by the first plaintiff having sufficient funds available to advance the interests of the creditors of the second plaintiff. I am satisfied, in the circumstances, that the liquidator has made a reasonable commercial decision in good faith when entering the settlement deed on the facts before me.
However, something more is needed to justify an order pursuant to s 511. The first plaintiff’s concern that he might himself be subject to claims in respect of that decision in light of the history of the dispute appears, on the balance of probabilities, to be well-founded, and that well founded fear may preclude such money being received to the detriment of the second plaintiff’s creditors. The first plaintiff is not seeking the court’s advice, he is seeking its protection. The circumstances are unusual enough to warrant that protection being granted. Therefore, I am persuaded that the making of the orders sought, and the consequent protection of the first plaintiff, will be just and beneficial insofar as it is of advantage to the liquidation and to the creditors of the second plaintiff.
Form of the orders
I am content, with one reservation, to make the orders sought. I have already noted that s 511(3) empowers the court ‘to accede wholly or partially to any such application on such terms and conditions as it thinks just’. I further note the observation of McClelland CJ at CL who stated with respect to such orders that:
Frequently … it is convenient for the liquidator … first to … cause the company to enter into … a transaction in respect of which the court’s sanction is desired, which is expressed to be conditional upon the court making an order or direction of some kind, and then to apply to the court for the requisite order or direction in order to satisfy the condition. In such a case it is important that the order contemplated in the contractual condition is expressed in terms which the court can properly make in the particular circumstances. For example, the court could not properly make an order that an applicant is or would be justified in entering into a specified contract if that contract has already been entered into, albeit subject to the condition in question. In a case of that kind it is, in my view, preferable for the contract to be expressed to be conditional on the approval of the court and for application to be made to the court for an order approving the contract.[22]
Orders
[22] Re J W Murphy & P C Allen; Re BPTC (in liq) (1996) 19 ASCR 569, 570.
Therefore, I will order that the court approves the first plaintiff compromising:
a. the unresolved matters in Supreme Court of Victoria proceeding number 7807 of 2008 as between the plaintiffs and the second defendant; and
b. the matters raised in the proceeding commenced in the Court of Appeal, Supreme Court of Victoria proceeding number 3797 of 2009 between the appellant and the first and second respondents in the Appeal Proceeding.
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