Hypec v Mead - [2004] NSWCA 221

No judgment structure available for this case.

CITATION: Hypec v Mead [2004] NSWCA 221 revised - 07/07/2004

HEARING DATE(S): 9.6.04, 10.6.04

JUDGMENT DATE:
6 July 2004

JUDGMENT OF: Sheller JA at 1; Ipp JA at 2; Tobias JA at 3

DECISION: In matter CA 41163 of 2003; (a) Appeal dismissed; (b) Reserve liberty to apply with respect to the costs of the appeal; In matter CA 40390 of 2004; (a) Summons for an extension of time and for leave to appeal dismissed; (b) Reserve liberty to apply with respect to the costs of the summons

CATCHWORDS: CORPORATIONS - Liquidation - Estoppel - Rule in Ex parte James - Corporations Act s 477(6) - Property purchased with company funds - Property sold to fund director's legal costs - Liquidator knows of sale - Director defending company - Proceeds of sale - Liquidator attempts to recover - Whether benefit to company - Whether inducement by liquidator - Whether rule extends beyond money paid under mistake of law. - ESTOPPEL - Whether party needs to be 'innocent' - PRACTICE & PROCEDURE - Argument on appeal not run at trial - Prejudice

LEGISLATION CITED: Corporations Act 2001 (Cth)

CASES CITED: Colton v Holcombe (1986) 162 CLR 1;
Cummings v Lewis (1993) 41 FCR 559;
Ex parte James; In re Condon (1874) LR 9 Ch App 609;
Gordon v James (1885) 30 Ch D 249 ;
Hartogen Energy Ltd (In liquidation) v The Australian Gaslight Co (1992) 36 FCR 557;
In re Associated Dominions Assurance Society Pty Limited and the Life Assurance Act (1962) 109 CLR 516;
In re Clark (a bankrupt); Ex parte the Trustee of the property of the bankrupt v Texaco Limited [1975] 1 WLR 559;
Multicon Engineering Pty Limited v Federal Airports Corporations (2000) 47 NSWLR 631;
Re Ebner; Ebner v The Official Trustee in Bankruptcy (2003) 196 ALR 533;
Re Redmond; Ex parte Official Receiver (1948) 16 ABC 90;
Star v Silvia (No. 1) (1994) 12 ACLC 600;
Suttor v Gundowda Pty Limited (1950) 81 CLR 418;
Thompson v Palmer (1933) 49 CLR 407;
Tobin v Broadbent (1947) 75 CLR 378;
University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481;
Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387;
Water Board v Moustakas (1988) 180 CLR 491.

PARTIES :
Hypec Electronics Pty Limited (In Liquidation)
Colin Anthony Mead

FILE NUMBER(S): CA 41163/03; 40390/04

COUNSEL: A: B Rayment QC, T J Morahan, N Gye
R: D Fagan SC / V Bedrossian

SOLICITORS: A: A R Connolly & Co, Sydney
R: Etheringtons, North Sydney

LOWER COURTJURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): ED 1268/02
ED 1933/01

LOWER COURT
JUDICIAL OFFICER : Campbell J

CA 41163/03
ED 1268/02

CA 40390/04
ED 1933/01

SHELLER JA
IPP JA
TOBIAS JA
Tuesday 6 July 2004

HYPEC ELECTRONICS PTY LIMITED (IN LIQUIDATION) v COLIN ANTHONY MEAD

HYPEC ELECTRONICS PTY LIMITED (IN LIQUIDATION) V COLIN ANTHONY MEAD & ANOR

Mr and Mrs Mead, the sole directors and shareholders of Hypec, separated and a Family Court order was made to prevent dealings with their jointly owned property. This property had been purchased with Hypec’s funds.

Mrs Mead then fabricated a $7.6 million dollar debt owed by Hypec to BL, a company she controlled. A judgment debt was obtained (the BL proceedings), winding up proceedings were commenced and a liquidator was appointed to Hypec.

Mr Mead, who subsequently became aware of the fabrication and default judgment, requested that the liquidator seek to set the judgment aside and defend the BL proceedings. Mr Mead undertook to indemnify both Hypec and the liquidator against any liability for costs arising out of the proceedings. The liquidator was informed that Mr Mead would apply to the Family Court for orders allowing him to sell some of the property to fund the legal costs, this being his only means of funding the litigation.

Mr Mead then himself applied to have the default judgment set aside so that he could defend the BL proceedings on behalf of Hypec. The liquidator unsuccessfully objected to this on the basis that the indemnity promise was worthless since the property that would be sold to fund the proceedings had been purchased with Hypec’s funds. The liquidator made no attempt to appeal this decision.

The Family Court then allowed Mr Mead to sell four properties (the four properties) to fund the litigation. The liquidator did not attempt to intervene in these proceedings.

Mr Mead, with the liquidator looking on, successfully undertook Hypec’s defence in the BL proceedings. Even though BL and another were ordered to pay indemnity costs, which were significant, there remained a question as to their ability to do so.

The liquidator then placed caveats over the four properties and commenced proceedings to stop Mr Mead from selling the properties to finance the significant legal bills incurred inter alia in defending the BL proceedings. The liquidator argued that Hypec, and not Mr Mead, was entitled to the proceeds of sale of the four properties since they had been purchased with Hypec funds and were therefore held on trust by Mr Mead.

Mr Mead successfully defended these proceedings by establishing that the liquidator was estopped from asserting Hypec’s entitlement to the properties as Mr Mead had relied to his detriment upon the induced assumption that the liquidator would not oppose the selling of the properties to fund the legal costs. Alternatively, and based upon the same conduct, Mr Mead argued that the liquidator ought to be precluded from recovering the assets by s 477(6) Corporations Act 2001 and/or the principle in Ex parte James.

Hypec appealed this decision on five grounds:

a. That the terms of Mr Mead’s indemnity were that he conduct the proceedings against BL at his own expense. Thus, if he used the proceeds of sale of the four properties this was not ‘his own expense’ since the properties were essentially Hypec’s (this was not argued before the primary judge);

b. That since Mr Mead had acquired the properties with Hypec funds he could not claim to be ‘innocent’ and as such could not assert an estoppel;

c. That there was no inducement by the liquidator to the effect that he would not attempt to prevent Mr Mead’s access to the four properties;

d. That Ex parte James (or s 477(6)) failed to apply because either the rule only applies where money is paid to a liquidator under a mistake of law, or, that the assets of Hypec were not enriched by Mr Mead’s successful defence of the BL proceedings so as to attract the rule;

e. That the primary judge’s orders failed to properly protect the liquidator.

Held

:

1. An appellant cannot raise a new argument on appeal not run at trial where the other side claims to be prejudiced and where the appellant cannot clearly indicate that there is, in fact, no prejudice. [75]

2. There was no merit in the liquidator’s argument that Mr Mead was in breach of his indemnity undertaking when he silently stood by and watched Mr Mead successfully defend BL’s proceedings at significant cost to himself and for the benefit of Hypec. [79]

3. Lickbarrow v Mason and Thompson v Palmer do not stand as authority for the general proposition that a party who has acted to their detriment in reliance upon an assumption engendered by the conduct of another (the liquidator) must be ‘innocent’ and that a party will not be innocent where they have utilised company funds, in breach of their director’s duties, by acquiring the properties in respect of which they seek to estop the liquidator from claiming. Such conduct, if it has any place at all, may be relevant to the discretionary defence of ‘clean hands’. However, that defence was not made out in the present case. [84]

4. There was ample evidence to support the finding that the liquidator had induced Mr Mead to adopt the assumption that the liquidator would raise no opposition to Mr Mead seeking the Family Court orders, and further that the liquidator would not stand in the way of those orders being implemented, especially not by attempting to recover the four properties on the basis that they were held by the Meads on trust for Hypec. [90]

5. Given that the estoppel against the liquidator was made out there was no need to express a concluded view as to whether the rule in Ex parte James has a broader operation than simply applying in circumstances where a liquidator seeks to retain money paid under a mistake of law. [98]

6. The assets of the company were enriched by successfully defending the BL proceedings since, were this not done, the company assets would have been either eliminated or diminished. [99]

7. The orders of the primary judge appropriately protected the liquidator. [101]

CA 41163/03
ED 1268/02

CA 40390/04
ED 1933/01

SHELLER JA
IPP JA
TOBIAS JA
Tuesday 6 July 2004

HYPEC ELECTRONICS PTY LIMITED (IN LIQUIDATION) v COLIN ANTHONY MEAD

HYPEC ELECTRONICS PTY LIMITED (IN LIQUIDATION) V COLIN ANTHONY MEAD & ANOR

Judgment

1 SHELLER JA: I agree with Tobias JA.

2 IPP JA: I agree with Tobias JA.

3 TOBIAS JA: Hypec Electronics Pty Limited (in Liquidation) (Hypec) carried on the business of importing computers and computer components from Taiwan, which it then sold in Australia. Its sole shareholders and directors were Mr Colin Mead and his wife, Mrs Lucy Mead. The affairs of Hypec were so organised that Mr Mead was responsible for sales and marketing whereas Mrs Mead was responsible for all financial matters.

4 Mr and Mrs Mead separated in 1996. Hypec thereupon ceased trading. On the petition of BL & GY International Co Limited (BL), a Taiwanese company in which Mrs Mead was a 44% shareholder and the sole effective decision maker and controller of its affairs (the other shareholders being her parents and sisters) an order for the winding up of Hypec was made on 7 May 2001 in proceedings No. 1933 of 2001 in the Equity Division of the Supreme Court (the winding up proceedings). Mr David Watson was appointed as the company's liquidator.

5 Between 1989 and 1997 various assets including some 11 parcels of real estate (the assets) were acquired in the name of Mr and Mrs Mead with funds belonging to Hypec. The liquidator asserted that the assets belonged to Hypec and on 4 December 2001, he caused caveats to be lodged against the titles to the various parcels of real estate. For reasons that will become apparent, Mr Mead filed an application in the winding up proceedings seeking the removal of those caveats from the titles to four of those properties so that they could be sold. Hamilton J made interlocutory orders on 14 December 2001 removing the caveats from two properties on terms that the net proceeds of their sale be paid into court.

6 On 25 January 2002, the liquidator commenced proceedings No. 1268 of 2002 in the Equity Division of the Supreme Court to recover the assets (the liquidator's proceedings). He asserted that the assets and, in the case of the two properties which had been sold, the net proceeds of their sale, were held by Mr and Mrs Mead upon trust for Hypec. So far as Mr Mead was concerned, he acknowledged that the assets had been acquired with the benefit of funds belonging to Hypec but until the commencement of the hearing before Campbell J, the primary judge, he maintained that those funds were the subject of loans by Hypec to himself and his wife. However, at or about the commencement of the hearing, Mr Mead conceded that, apart from four properties, the assets belonged to Hypec and were held by himself and his wife in trust for the company.

7 Both Mr Mead's application in the winding up proceedings and the liquidator's claims in the liquidator's proceedings were heard together. Relevantly for present purposes, the only live issue in those proceedings concerned the four properties referred to above or, in the case of two of them, their proceeds of sale (the four properties). Mr Mead contended that by reason of his conduct between July and December 2001, the liquidator was estopped from asserting that Hypec was entitled to those properties. Alternatively, in reliance upon the principle in Ex parte James; In re Condon (1874) LR 9 Ch App 609 and s 477(6) of the Corporations Act 2001, he contended that as a consequence of the same conduct, the liquidator was precluded from recovering those assets.

8 On 3 November 2003, the primary judge published his reasons in which he upheld Mr Mead's contentions. On 25 November 2003 his Honour ordered in the winding up proceedings that the proceeds of sale of two of the four properties be paid to Mr Mead's solicitors and that the liquidator cause the caveats on the other two properties to be removed. It is from those orders that the liquidator now appeals to this Court.

The relevant facts as found by the primary judge

9 In March 1997, Mr Mead instituted proceedings in the Family Court of Australia for the division of matrimonial property (the Family Court proceedings). The latter include the 11 properties that formed part of the assets. Those proceedings have not yet concluded. However, as the primary judge noted ([6]), their initiation marked the commencement of a complex series of litigious battles and legal manoeuvres between Mr Mead on the one hand and BL, Mrs Mead, and members of her family on the other.

10 On 17 September 1997, BL instituted proceedings in the Common Law Division of the Supreme Court (the common law proceedings). One defendant was Hypec in respect of which BL sought payment of $4,844,466 together with interest in respect of loans allegedly made by it to Hypec between 30 June 1992 and 30 June 1996. Mr and Mrs Mead were also joined as defendants on a number of alternative bases including negligence and breach of s 232 of the Corporations Law.

11 On 1 December 1997, Mr Mead filed a defence in the common law proceedings relating to the claim against him personally. By this time Mr Mead had been completely excluded from participation in the affairs of Hypec, de facto control of which was now exclusively in the hands of Mrs Mead. She did not file a defence in the common law proceedings either on her own behalf or on behalf of Hypec. Consequently, BL signed default judgment against Hypec in the sum of $7,666,998.67 on 4 December 1997 (the default judgment), and against Mrs Mead on 6 January 1998.

12 On 30 August 1999, a Judicial Registrar of the Family Court made an interim order in the Family Court proceedings on Mrs Mead's application prohibiting her and Mr Mead from selling, transferring, encumbering or otherwise dealing with any real property in which they currently had an interest. On 7 September 1999, Rose J of the Family Court extended those orders until further order.

13 On 13 February 2001, Mr Mead filed an application for an interim distribution of property in the Family Court proceedings by way of a variation of the orders of Rose J to the extent necessary to enable some of the real estate which he and his wife jointly owned to be sold to enable him to utilise the funds so generated to defray his costs in the common law proceedings and Family Court proceedings. Six days later, on 19 February 2001, BL served a statutory demand on Hypec requiring payment of the judgment debt the subject of the default judgment. That statutory demand never came to the attention of Mr Mead; Mrs Mead did nothing about it.

14 Accordingly, on 26 March 2001 BL instituted the winding up proceedings that resulted in the company being wound up by order made on 7 May 2001 and Mr Watson being appointed liquidator. By 6 June 2001 Mr Watson was aware of the common law proceedings. By 12 June 2001 he had been made aware by Mr Mead's solicitors that it was alleged that the default judgment had been based on a fraud by BL and Mrs Mead upon Hypec as a consequence whereof Hypec did not owe BL any money and was not, in fact, insolvent. Furthermore, it was asserted that BL was indebted to Hypec.

15 The basis for the foregoing allegation was that Mr Mead had embarked upon an exercise of comparing what was shown in the books and records of Hypec concerning the state of accounts between it and BL with information that he had been able to gather from documents obtained from the Customs Department relating to importations made by Hypec from BL. This exercise, although incomplete, led him to the view that the true state of accounts between BL and Hypec was that the former owed money to the latter rather than the converse.

16 On 2 July 2001, Mr Mead's solicitors wrote to the liquidator requesting him to cause Hypec to apply to set aside the default judgment, for leave to defend the common law proceedings and to issue a cross-claim against BL. Draft documents in respect of that proposed application were enclosed. The letter contained an offer by Mr Mead to indemnify Hypec and the liquidator with respect to the costs of the application to set aside the default judgment and for leave to prosecute Hypec's proposed defence and cross-claim.

17 It is appropriate to record at this point of the narrative that in his First and Interim Report to Creditors of 2 July 2001, the liquidator noted that

(a) the only asset of Hypec then identified was a loan to directors in the sum of $2,861.844 as at 30 June 1996 which had been used by them to acquire numerous properties in their own names;

(b) further enquiries had revealed that additional funds had been utilised by the directors that had not been reflected in the directors' loan account;

(c) the liabilities of the company amounted to $7,667,198 of which $7,666,998 related to debts incurred by it to BL and $200 was unpaid company tax.

18 Accordingly, by letter dated 3 July 2001 the liquidator wrote to Mr Mead noting that Hypec's records revealed a directors' loan account in the amount of $2,861,844 due to the company. He further noted that additional funds had been identified as having been utilised by the directors but which appeared not to have been allocated correctly to that account. The letter requested Mr Mead to make arrangements to repay the debt as then recorded in the loan account as it was due and payable and foreshadowed that a request for the payment of additional amounts would be made in due course.

19 On 5 July 2001, Mr Mead's solicitor, Mr Dominello, spoke to the liquidator's solicitor, Mr Conolly, informing him that an application had been instituted by Mr Mead in the Family Court proceedings seeking to vary the orders of Rose J restraining any dealing with the matrimonial properties to enable the sale of some of them to enable Mr Mead to fund the common law proceedings. On 12 July 2001, Mr Dominello informed Mr Conolly that the Family Court application had been listed for hearing on 23 and 24 July 2001.

20 On 19 July 2001, Mr Mead filed a notice of motion in the winding up proceedings. At the same time as the liquidator's solicitor was served with the Notice of Motion, he was provided with a copy of an affidavit (of some 133 pages) sworn by Mr Mead on 12 February 2001 in the Family Court proceedings and which set out at length the history of the relationship between Mr and Mrs Mead referrable to the business of Hypec and included the factual basis upon which Mr Mead alleged that the default judgment had been entered as a result of the fraudulent conduct of BL and Mrs Mead.

21 Relevantly, Mr Mead sought the court's leave on behalf of Hypec that he be permitted in the common law proceedings to apply to set aside the default judgment, file a defence to BL's claim, file a cross-claim against BL, Mrs Mead and her older sister, Ms Yang, and if leave be granted, that he be given further leave to prosecute the defence and cross-claim to judgment.

22 On 20 July 2001, the liquidator again wrote to Mr Mead requesting repayment of the directors' loan account. On the same day, Mr Mead amended his February 2001 application to the Family Court. He now sought orders that he and Mrs Mead do everything necessary to sell the four properties, that the proceeds of sale be paid into a controlled money account of Mr Mead's solicitor, and that no more than 50% of the proceeds be drawn upon for the purpose of paying Mr Mead's legal costs in the Family Court proceedings, the winding up proceedings and the common law proceedings. That application was eventually listed for hearing on 25 and 26 October 2001, a fact the liquidator's solicitor had been made aware of on or about 7 August 2001.

23 It is appropriate to interpose here that before the primary judge the liquidator swore an affidavit in which he deposed that he had not been served with copies of the Family Court documentation relating to Mr Mead's February 2001 application to that court to vary the injunction of Rose J to permit the sale of some of the properties forming part of the assets. He also professed ignorance of Mr Mead's intention to pursue that application and, until December 2001, ignorance of the orders made by Cohen J as a consequence of the hearing on 25 and 26 October 2003. However, as the primary judge observed at [89]

"[c]ross examination of the liquidator … caused a different picture to emerge to that presented in his affidavit."

24 On 27 July 2001 the liquidator swore an affidavit in the winding up proceedings in which he stated that he had identified funds in the sum of $4,907,725 belonging to Hypec that had been used by Mr and Mrs Mead for their own personal use. That sum included $2,861,844 owed to Hypec in respect of the directors' loan account as recorded in the company's records. Annexure "B" to that affidavit was a document headed "Reconstruction of Directors' Loan Account" which identified various transfers of money from Hypec totalling $4,907,725.64 together with details of the date, amount and payee of each transfer. The primary judge considered (at [64]) that a

"reader would infer that what the liquidator was setting out was particularisation of assets of Mr and Mrs Mead whose acquisition had been financed by the money of [Hypec], in consequence of which Mr and Mrs Mead owed [Hypec] the total amount that had been spent in this way."

25 On 2 August 2001 Mr Mead instituted proceedings No. 3832 of 2001 in the Equity Division of the Supreme Court (the leave proceedings). He sought in substance the same relief he had claimed in the notice of motion referred to in [20] above.

26 Einstein J heard the leave proceedings on 17 August 2001 and delivered judgment on 21 August 2001 in which, over the opposition of the liquidator, he granted Mr Mead the leave that he had sought: BL & GY International Co Ltd v Hypec Electronics Pty Ltd; Colin Anthony Mead v David Patrick Watson & Ors (2001) 164 FLR 268. By that time, the common law proceedings had, to the liquidator's knowledge, been fixed for hearing to commence on 5 November 2001 for an estimated 5 days. The liquidator did not appeal Einstein J's orders.

27 It is convenient to now deal with the issue of Mr Mead's proffered indemnity for costs which arose as a consequence of the leave proceedings and upon which the liquidator relied in Ground 9 of his Further Amended Notice of Appeal. As I noted in [16] above, by letter dated 2 July 2001 Mr Mead's solicitor had written to the liquidator stating that Mr Mead would undertake to indemnify the liquidator and Hypec against any liability for costs arising out of his proposed application to set aside the default judgment and to prosecute the defence and cross-claim that he wished to pursue in Hypec's name. In a further letter dated 12 July 2001 Mr Mead's solicitor referred to Mr Mead's application in the Family Court proceedings to set aside the injunction of Rose J as he wished to sell some of the matrimonial property to fund his and Hypec's defence and Hypec's cross-claim in the common law proceedings.

28 In an affidavit sworn 13 August 2001 filed in the leave proceedings, the liquidator deposed that Mr Mead's proposed provision of an indemnity for costs in respect of the common law proceedings contained in the letter of 2 July 2001 was unsatisfactory in light of the fact that he wished to sell some of the matrimonial property for the purpose of funding that litigation. After referring to his affidavit of 27 July 2001 filed in the winding up proceedings but read in the leave proceedings in which he said that he had identified funds in the sum of $4,907,725 which properly belonging to Hypec but which had been used by its directors for their own personal use, the liquidator deposed as follows:

"…I have an apprehension that the matrimonial property, which Mr Mead is said in Annexure B to be wishing to sell for the purpose of funding the Common Law Proceedings may, in whole or in part, comprise assets properly belonging to Hypec. Upon this basis, Mr Mead will be offering to indemnify Hypec with its own monies. In any event, my current view is that I cannot accept the likelihood that the Family Court will order the sale of assets to permit Mr Mead to conduct the Common Law Proceedings."

29 The liquidator then stated that he would not be prepared to take responsibility for the common law proceedings on behalf of Hypec without a satisfactory indemnity for costs from Mr Mead supported by some appropriate form of security. However, Mr Mead's financial position as found by Einstein J was such that, as the primary judge found, he was unable to provide the liquidator with a satisfactory secured indemnity for the costs which the liquidator would incur if he (rather than Mr Mead) was to prosecute the common law proceedings for Hypec. Accordingly, the primary judge found (at [70]) that

"as the liquidator was not prepared to run those proceedings for Hypec without a satisfactory indemnity, the likelihood was that the liquidator would not run that litigation"

30 However, Einstein J did not consider that the indemnity offered by Mr Mead in the event that he was granted leave to conduct the common law proceedings on behalf of Hypec, was necessarily worthless. He regarded Mr Mead's personal financial position as so tied up with the prospects of success by Hypec in the common law proceedings and/or by the net result in the Family Court proceedings (i.e. in the event that Mr Mead was successful in obtaining the matrimonial property as against his wife) that the court ought not to infer that the indemnity

"is writ in water or worthless".

31 The primary judge noted that Einstein J had cited a passage from a judgment of Austin J in Cadima Express Pty Limited (In liquidation) v DCT (1999) 157 FLR 424 to the effect that with the possible exception where a liquidator has been guilty of misconduct, there is no legitimate basis upon which a costs order could be made against a liquidator personally in proceedings between the company and a third party but to which the liquidator is not a party, where the use of the company's name in those proceedings by that third party is authorised by the court. His Honour observed (at [73])

"In other words, Einstein J was permitting Mr Mead to have the standing to run the Common Law Proceedings in the name of HE, knowing that any indemnity for costs which Mr Mead could offer the liquidator was of questionable value (though not necessarily worthless), but also knowing that permitting Mr Mead to bring the action in the name of the company would not result in the liquidator personally being liable for any costs if Mr Mead were to lose. His Honour also made the decision in circumstances where the evidence was that Mr Mead could proceed with the Common Law Proceedings, only if his application to the Family Court for access to some of the matrimonial assets succeeded."

32 The precise form of the indemnity given by Mr Mead and noted by Einstein J in his orders of 21 August 2001, was as follows:

"Colin Anthony Mead, by his counsel, undertakes to the Liquidator of Hypec Electronics Pty Ltd, David Patrick Watson, that he will indemnify the said Liquidator and Hypec Electronics Pty Limited, itself, in respect of any costs incurred, including costs orders that may be made against Colin Anthony Mead and/or Hypec Electronics Pty Ltd, in the course of Colin Anthony Mead exercising the leave given to him by Order 1 above."

33 I return to the chronological narrative. On 17 September 2001 Mr Mead, pursuant to the leave that had been granted to him by Einstein J to act on behalf of Hypec, applied in the common law proceedings to Sully J to set aside the default judgment and for leave to file a defence and cross-claims. On the same day, the liquidator wrote to Mr Dominello indicating that further investigations of the state of accounts between Hypec and BL supported Mrs Mead's contentions so that if he was now asked to determine whether Hypec should apply to set aside the default judgment, he "would firmly say 'no' ". The following day, the liquidator swore and filed an affidavit in the common law proceedings in which, in effect, he requested the court to defer Mr Mead's application on behalf of Hypec to set aside the default judgment. On 19 September 2001, counsel for the liquidator sought leave to appear before Sully J to support that request. Senior counsel for Mr Mead opposed it. Sully J refused leave.

34 In reasons for judgment delivered on 25 September 2001, Sully J granted the orders Mr Mead had sought: BL & GY International Co Limited v Hypec Electronics Pty Ltd (in liq) & Ors [2001] NSWSC 841.

35 On 25 and 26 October 2001, Cohen J of the Family Court heard Mr Mead's application referred to in [13] and [22] above. According to the primary judge, Mr Mead sought the right to sell sufficient of the matrimonial property to enable him to pay $537,000 for past legal costs incurred by him in the common law and Family Court proceedings and to fund future costs in those proceedings. So far as the common law proceedings were concerned, a total of approximately $343,000 had already been expended and future costs were then estimated at a little under $84,000.

36 In a judgment delivered on 2 November 2001, Cohen J refused to provide Mr Mead access to any property for the purpose of securing future estimated Family Court costs. His Honour decided that funding should only be provided for approximately one half of the legal costs already accrued and quantified in respect of both the Family Court proceedings and the common law proceedings together with the whole of the estimated future costs of the common law proceedings. He then arrived at a figure of $375,000. His Honour therefore ordered that the injunctions continued by Rose J should be discharged to the extent necessary to permit the sale of such of the four properties as was necessary to raise a net amount of $375,000 which sum was to be paid to Mr Dominello to be held by him on trust in a controlled monies account firstly, to meet Mr Mead's future costs in the common law proceedings and, secondly, to apply the balance to Mr Mead's indebtedness for past costs incurred in both the Family Court proceedings and the common law proceedings.

37 On 5 November 2001, the hearing of the common law proceedings commenced before Mathews AJ. Although the matter had been set down for five days, the hearing in fact extended over 15 days, the last of which was 26 November 2001. Because of this extended hearing time, Mr Mead's costs of that hearing significantly exceeded the amount of $84,000 estimated before Cohen J. The total costs had not been assessed at the time of the hearing before the primary judge but there was evidence of an estimate of approximately $900,000. Mr Dominello estimated the costs would exceed those which had been assumed by Cohen J in his judgment by $650,000-$700,000. Although the primary judge considered that a more correct figure would be approximately $557,000, it was still well in excess of the $84,000 estimated before Cohen J as required to meet Mr Mead's future costs of the common law proceedings and on the basis of which that judge had fixed the figure of $375,000.

38 On 4 December 2001, the liquidator lodged caveats against the title to seven parcels of real estate held in the joint names of Mr and Mrs Mead and which included three of the four properties. On 11 February 2002, he lodged a caveat against the title of the fourth property. However, as a consequence of an agreement between the liquidator and Mr Mead, two of the four properties were sold. Those sales were completed in January and February 2002 and the net proceeds paid into court in accordance with the orders of Hamilton J: see [5] above. At the time of the hearing before the primary judge, the other two properties remained unsold although one was, by agreement with the liquidator, sold prior to the hearing of the appeal and the net proceeds paid into court. A total of $332,980.98 had been paid into court in respect of the sale of two of the four properties. This left a shortfall of $42,019.02 in respect of which the third property was sold to enable, I assume, the $375,000 the subject of Cohen J's orders to be satisfied. We were informed during the course of the hearing that given the costs actually incurred by Mr Mead as a consequence of the unanticipated extended hearing of the common law proceedings, an application had been made to the Family Court to vary the orders of Cohen J to permit the sale of the third and fourth properties and the use of the whole of the net proceeds thereof by Mr Mead for the purpose of meeting the costs incurred by him in the common law proceedings. That application has been adjourned pending the outcome of this appeal. It should, however, be noted that prior to the hearing of the common law proceedings commencing, BL paid into court the sum of $115,000 as security for the costs of Hypec and Mr Mead.

39 On 14 February 2002, Mathews AJ delivered her judgment in the common law proceedings: BL & GY International Co Limited v Hypec Electronics Pty Limited [2002] NSWSC 38. She dismissed BL's claim against Hypec and Mr Mead, set aside the default judgment which BL had obtained against Mrs Mead and in lieu entered judgment for Mrs Mead on BL's claim. However, she dismissed Hypec's cross-claims against BL, Mrs Mead and Ms Yang.

40 The essential basis upon which Mathews AJ rejected BL's claim against Hypec was that she found that Mrs Mead and her sisters, and particularly Ms Yang, had falsified BL's records to support that claim. She dismissed the cross claim because she was not persuaded that Mr Mead's attempt to recreate the accounts between BL and Hypec from customs and shipping documents was either accurate or complete.

41 Although not directly interested in the common law proceedings in that they were being conducted on behalf of Hypec by Mr Mead, nevertheless an employee of the liquidator and Mr Conolly, his solicitor, were present throughout the hearing. Further, Mr Hodgson, an employee of the liquidator, was called by BL as a witness in the proceedings. According to the primary judge, he gave evidence of finding directors' loans of $2.861 million recorded in a trial balance of 30 June 1998 and of seeking to determine the true state of the directors' loan account in Hypec's books. He explained how further work had led him to the conclusion that the true state of that account should have shown it as being $4,907,725.64. The following exchange then took place:

"Q. Now at this stage, are you satisfied that that is the balance of the indebtedness or is it your opinion that further investigation may reveal further amounts which need to be added to the directors' loan account as monies owing to the company?

A. Yeah, further investigation may well do that, yes."

42 On 30 May 2002, the Commissioner of Taxation issued amended assessments of income tax to Hypec relating to the financial years ending 30 June 1989 to 30 June 1994 inclusive. Those amended assessments created a tax debt in the order of $1.4 million. It was common ground that, given the dismissal by Mathews AJ of BL's claim against Hypec, the Commissioner of Taxation is Hypec's only creditor of any substance. It is thus apparent that if sufficient of the assets were sold to enable the directors' loan account to be repaid to Hypec, the taxation debt would be repaid and the company would be solvent. It would also follow that as contributories, Mr and Mrs Mead would be entitled to share equally the surplus assets or funds of the company on any final distribution in the liquidation.

43 On 28 June 2002, Mathews AJ delivered judgment on an application by Mr Mead for indemnity costs in the common law proceedings: BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2002] NSWSC 575. Her Honour ordered BL and Ms Yang to pay the costs of Mr Mead on an indemnity basis being the costs incurred for himself and for his conduct of the proceedings in the name of Hypec in respect of the entire proceedings including reserved costs. Ms Yang unsuccessfully appealed against this decision. The primary judge considered (at [101]) that there could be no assurance that Mr Mead will be able to recover those costs. He found that BL and Ms Yang could not be "a sure and readily available source of funds from which to pay the costs" of the common law proceedings.

Mr Mead establishes that the liquidator is precluded from claiming the four properties

44 Mr Mead's resistance to the liquidator's claim to the four properties was founded principally on the principles of estoppel and, alternatively, on the so-called rule in Ex parte James. Before the primary judge there was no dispute that firstly, the liquidator could be bound by an estoppel and secondly, that the appropriate statement of the relevant principles was that of Brennan J in Waltons Stores (Interstate)Limited v Maher (1988) 164 CLR 387 at 428-9 where his Honour said:

"It is necessary for a plaintiff to prove that (1) the plaintiff assumed or expected that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs."

45 The primary judge then applied the facts as found to each of the six elements referred to in the above passage. He found each was satisfied. His reasons are summarised below.

46 The First Element: The primary judge found that Mr Mead and his solicitor Mr Dominello assumed that the liquidator raised no opposition to Mr Mead's application to the Family Court for orders permitting him access to the four properties and expected that, if the Family Court saw fit to grant the application, the liquidator would not stand in the way of the orders being implemented. Further, his Honour found that Mr Mead and Mr Dominello expected that when the liquidator allowed any orders of Cohen J to be implemented by Mr Mead, he would not be free to withdraw from that position. In this respect and after 7 August 2001 the liquidator was aware that Mr Mead would be proceeding with his application before the Family Court on 25 October 2001 in respect of the four properties and that the purpose of the application was to enable him to access funds, which he otherwise did not have, to defend the common law proceedings on behalf of Hypec. The liquidator does not challenge these findings on the appeal.

47 The Second Element: The primary judge found that the liquidator induced Mr Mead and Mr Dominello to adopt the assumption and expectations to which he had referred in his findings with respect to the first element. As the liquidator challenges his Honour's finding with respect to this element, it is appropriate to set out, verbatim, what his Honour said (at [97]):

In the hearing before Einstein J, the liquidator did not take the position that a reason why Einstein J ought not grant Mr Mead the leave he was seeking, was that Mr Mead could only run the Common Law Proceedings if he sold the properties, and the liquidator wanted to preserve the position so that he could recover the properties if his investigations showed that there was a constructive trust or resulting trust in favour of HE

The way in which the liquidator had framed the claim which he had made, up to that date, against Mr Mead was that it was a claim for repayment of a directors' loan account

48 The Third Element: The primary judge found that Mr Mead and Mr Dominello relied on the assumption and expectations as Mr Mead could not have afforded to prosecute the common law proceedings without access to the funds generated by the sale of sufficient of the four properties to raise the $375,000 referred to in the orders of Cohen J. He further found that Mr Dominello would not have been prepared to extend credit to Mr Mead if he had not believed that the four properties would be available to fund the legal costs of the common law proceedings. The liquidator does not challenge those findings.

49 The Fourth Element: The primary judge found that as a consequence of the liquidator's admission in cross-examination that he understood that Mr Mead could only proceed with the prosecution of the common law proceedings if he obtained an order from the Family Court permitting him to sell sufficient of the four properties to enable him to fund that litigation, his Honour inferred that the liquidator knew, as the trial of those proceedings before Matthews AJ proceeded, that Mr Mead and Mr Dominello were acting on that assumption and those expectations. The liquidator does not challenge this finding.

50 The Fifth Element: His Honour found that the failure of the liquidator to make clear, prior to the hearing before Mathews AJ concluding, that he was at least reserving the right to claim that the four properties were assets of Hypec, caused Mr Mead and Mr Dominello to continue to prosecute the common law proceedings to judgment and to incur very large expenses which otherwise they would not have incurred. Accordingly, if the liquidator were now permitted to depart from the assumption and expectations that he engendered in Mr Mead and Mr Dominello, they would clearly suffer a detriment. Again, the liquidator does not challenge this finding.

51 The Sixth Element: The primary judge found this element was made out as a consequence of the liquidator instituting the liquidation proceedings to recover the four properties and thereby seeking to deprive Mr Mead and Mr Dominello of the continuation of their assumption and expectations that those properties would, to the extent permitted by the Family Court, be available to fund the costs of the common law proceedings. There is no challenge to this finding.

52 The liquidator raised a number of defences to Mr Mead's claims based on estoppel, all of which the primary judge rejected. One of those defences was the allegation that Mr Mead lacked "clean hands" in that while a director of Hypec, he committed continuous and serious breaches of his duties as a director by leaving the financial affairs of the company exclusively to Mrs Mead and that it was his dereliction of that duty which led to the situation where assets which belonged beneficially to the company were acquired by himself and his wife. It was further submitted on behalf of the liquidator that Mr Mead had failed to make full and frank disclosure to the Family Court of the liquidator's position concerning the four properties at the time of the hearing before Cohen J in October 2001.

53 In particular, and relevantly for present purposes, the primary judge rejected the liquidator's allegation that Mr Mead had failed to make proper disclosure to the Family Court. His Honour found that the fact that the four properties had been purchased with funds obtained from Hypec was clearly placed before Cohen J. He also found that Cohen J was well aware that Hypec was in liquidation and, further, that he had before him the judgment of Einstein J in the leave proceedings although the paragraphs of that judgment which recorded the liquidator's "apprehension" that the four properties might belong to Hypec (see [28] above) was not specifically drawn to Cohen J's attention. I mention these matters only because they are relevant to an application by the liquidator for leave to appeal against an order made by the primary judge on 10 December 2003 to which I shall refer later in these reasons.

54 The primary judge also found that the liquidator was precluded from claiming the four properties, applying the so-called rule in Ex parte James. His Honour undertook (at [119]-[188]) a detailed and comprehensive review and analysis of the many authorities in which Ex parte James had been considered. In particular, he expressed the view that s 477(6) of the Corporations Act is the means by which Ex parte James now operates. Furthermore, although the rule in Ex parte James has been applied many times to allow recovery from a liquidator or trustee in bankruptcy of money paid under a mistake of law, his Honour noted that the rule had also been applied in many circumstances outside the recovery of monies paid under such a mistake.

55 In applying the rule of Ex parte James to the facts as found, the primary judge noted (at [189]) that although not relevant to the factors which led to an estoppel, an important fact in the application to the facts of Ex parte James was that by accepting responsibility for the costs and expenses of prosecuting the common law proceedings, Mr Mead had conferred a very substantial benefit upon Hypec in that he had successfully established that it was not indebted to BL. As a consequence the latter was not a creditor in the liquidation. In this respect, his Honour observed that by the time of the hearing of the common law proceedings before Mathews AJ, the claim made by BL against Hypec (inclusive of interest) had increased to the sum of approximately $11 million. Accordingly, if BL's claim had not been rejected, the liquidation of Hypec would have resulted in a nil return to the shareholders. He thus concluded (at [189]):

"It is, it seems to me, not a proper exercise of the liquidator's discretion to accept the benefit of the judgment which Mr Mead has obtained in HE's name, while not accepting the burden of that part of the costs which Mr Mead claims in these proceedings. His attempt to do so, in the present proceedings, is, in my view, a clear case of pressing a claim which has no merit."

56 It was submitted to the primary judge that the incurring of expenses in the common law proceedings by Mr Mead was unnecessary for Hypec to become free of BL's claim. While it was accepted that the liquidator would have needed to take action to set aside the default judgment, once that had been achieved it would have been open to the liquidator to call for proofs of debt and then to reject BL's proof when lodged. His Honour rejected this argument upon the basis that there was no real likelihood of that course being followed. Furthermore, there could be no doubt that had the liquidator rejected BL's proof of debt, the latter would have sought to establish its claim in the common law proceedings which, if defended by the liquidator, would have involved him incurring the same costs and expenses as those incurred by Mr Mead. Accordingly, his Honour rejected the argument. There was some attempt to resurrect this argument on the appeal but it is without substance.

57 During the course of his review of the relevant authorities, the primary judge referred to the decision of Walton J in In re Clark (a bankrupt); Ex parte the Trustee of the property of the bankrupt v Texaco Limited [1975] 1 WLR 559 at 563-4 where his Lordship identified four conditions for the rule in Ex parte James to operate. Those conditions were referred to, and slightly modified, by Gummow J in Hartogen Energy Ltd (In liquidation) v The Australian Gaslight Co (1992) 36 FCR 557 at 574-5 where his Honour restated them in the following terms:

"(1) There must be some form of enrichment of the assets of the bankrupt by the person relying upon the application of the rule, this being 'a universal feature of all the cases in which the rule has been applied'.

(2) The claimant must not be in a position to submit an ordinary proof of debt, the rule existing not merely to confer a preference on an otherwise unsecured creditor, but to provide relief to a claimant that would otherwise be without relief.

(3) The rule applies so as to nullify the claim the liquidator or trustee otherwise would have if in all the circumstances of the case, as an honest man he would nevertheless be bound to admit that it would not be fair 'that I should keep the money; my claim has no merits'.

(4) The rule by no means necessarily restores the claimant to the status quo ante and it applies only to the extent necessary to nullify the enrichment of the estate."

58 The primary judge considered that upon the facts all four conditions were satisfied. In the present appeal, the liquidator only challenges his Honour's finding with respect to the first condition. As to its satisfaction, his Honour said (at [195]):

"There has been a form of enrichment of the assets of the company by Mr Mead. It has happened by Mr Mead being incidental in freeing the company from an enormous liability."

The relief granted

59 The primary judge (at [199]) recognised that the relief appropriate to give effect to an estoppel is the minimum relief that would prevent the injustice arising by the person estopped departing from the assumption or expectation that he had induced. His Honour observed that the detriment on which Mr Mead relied to found his estoppel was the incurring by him of the costs of the common law proceedings. It was possible, he said, that the injustice arising from the liquidator disputing that the order of Cohen J entitled Mr Mead to the four properties, would cease in the event that Mr Mead was to recover the indemnity costs from BL and Ms Yang that Mathews AJ had awarded in his favour. However, apart from the $115,000 paid into court by BL as security for costs, his Honour recognised that the likelihood of Mr Mead effecting full recovery could not at present be predicated with any accuracy.

60 The primary judge then concluded in these terms (at [199]):

"This is one of the situations where the Court is not able, at present, to make an order which will finally dispose of the rights of the parties. The estoppel which has been established entitles Mr Mead, in the first instance, to carry out the orders of Cohen J, by selling the Four Properties, and applying the proceeds of sale in payment of the costs of the Common Law Proceedings. I would grant that relief conditionally upon Mr Mead undertaking to the Court to inform the liquidator from time to time of the steps he is taking to enforce the costs order in the Common Law Proceedings, and the results of those steps, and undertaking to abide by any further order of the Court concerning refund of all or part of the proceeds of sale of the Four Properties."

61 His Honour then made the orders referred to in [8] above, noting the undertakings by Mr Mead referred to in the preceding paragraph and reserving liberty to either party to apply to the Court on 14 days notice in writing with further consideration reserved as to the orders respecting any refund to Hypec of any part of the proceeds of sale of the four properties.

The liquidator's intervention in the Family Court proceedings

62 On 28 November 2003, the Family Court proceedings were re-listed before Cohen J. On that occasion the liquidator, by his then senior counsel, sought leave to appear. He contended that Mr Mead had presented the matter before Cohen J in October 2001 as if all four properties belonged to him and his wife whereas, so it was asserted, they in fact belonged to Hypec. Cohen J was informed that Mr and Mrs Mead held all the properties on trust for Hypec at that time and that his Honour should have been so informed of that fact as well as of the fact that the Australian Taxation Office (the ATO) was entitled to a very significant amount of money, this being a reference to the Commissioner's amended assessment of Hypec's income tax in the sum of $1.4 million. It was submitted that although the information referred to should have been placed before Cohen J originally, he should now consider what effect the information should have upon the orders he had made on 2 November 2001. As the primary judge noted, this appearance by the liquidator before Cohen J occurred without any advice or direction from the Supreme Court.

63 Cohen J granted the liquidator leave to appear on that day and gave some directions for advancing any application to vary the orders that he had made in November 2001.

64 This intervention by the liquidator prompted an urgent application by Mr Mead in the winding up proceedings to the primary judge pursuant to the liberty to apply that he had reserved when making his orders on 25 November 2003. Mr Mead sought, inter alia, a direction pursuant to s 477(6) of the Corporations Act that the liquidator was to make no further intervention or application in the Family Court proceedings. After hearing argument, his Honour on 10 December 2003 gave that direction until further order. In so doing he recognised the prospect of an appeal against the substantive orders made by him in the winding up proceedings but considered that it was appropriate to give effect to those orders ignoring that prospect until such time as any appeal had been heard and determined.

65 By summons filed on 20 May 2004 (but not supported by any affidavit explaining the delay of some five months) the liquidator seeks from this Court an order for an extension of time for the filing and serving of the summons to 4 June 2004 and for an order granting leave to appeal from the order made by the primary judge on 10 December 2003. He also seeks an order that that appeal be heard concurrently with the application for leave to appeal and that his Honour's direction of 10 December 2003 be vacated.

The liquidator's grounds of appeal

66 By its Further Amended Notice of Appeal the liquidator sought to advance ten grounds of appeal. However, in oral argument those grounds were distilled into five issues. They were as follows:

(a) That the primary judge erred in failing to hold that in consequence of the terms of the undertaking noted by Einstein J on 27 August 2001, it was not open to Mr Mead to assert an estoppel against the liquidator or to seek the application of the principle in Ex parte James ;

(b) That the primary judge ought to have held that by reason of the fact that Mr Mead acquired the four properties using funds belonging to Hypec, he was not entitled to assert an estoppel against the liquidator;

(c) That the primary judge erred in holding that the second element of an estoppel had been satisfied, namely, that the liquidator had induced Mr Mead to adopt the assumption that he raised no opposition to Mr Mead applying for orders from the Family Court to access the four properties and that, if that court saw to fit to grant that application, he would not stand in the way of the orders being implemented;

Ex parte James

Hartogen

In re Clark

(e) That the orders made by the primary judge on 25 November 2003 were too wide: this was later modified to assert that his Honour should have reserved liberty to the liquidator to apply to the Equity Division of the Supreme Court for further or other order relating to the property known as Lot 29, Quion Island, Queensland (being the remaining property of the four properties left unsold).

The first issue

67 This issue is encompassed in Ground 9 of the Further Amended Notice of Appeal. The essence of the liquidator's submissions with respect to the issue was as follows:

(a) In the leave proceedings before Einstein J, Mr Mead sought the court's indulgence upon the clear basis that he would conduct the common law proceedings entirely at his own expense and at no cost to Hypec;

(b) Einstein J made his orders on 21 August 2001 conditional upon Mr Mead giving the undertaking which I have recorded in [32] above; that undertaking required Mr Mead to indemnify Hypec and the liquidator in respect of any costs incurred in the common law proceedings including any costs orders made against Hypec;

(c) The four properties, which Mr Mead sought to sell in order to fund his costs of the common law proceedings, were properties held by he and his wife in trust for Hypec because they were acquired with Hypec's money;

(d) To now preclude the liquidator on behalf of Hypec from claiming those properties would enable Mr Mead to use the proceeds of sale of the four properties, which were assets of Hypec, to pay the costs of the common law proceedings that he had undertaken to pay himself and at no cost to the company;

68 It was further submitted that, in effect, it would be unconscionable for Mr Mead to obtain the relief he sought from Einstein J upon the basis of his undertaking to the effect that the common law proceedings would be conducted at no cost to Hypec and then, when the liquidator claimed the four properties, to submit in the liquidator's proceedings that the liquidator was estopped from claiming those properties in circumstances where he wished to use the proceeds of sale of the properties, which belonged to Hypec, for the very purpose of meeting the costs of the common law proceedings which he had undertaken would be at no cost to Hypec. In effect, it was submitted that Mr Mead should not be permitted to resile from the position that he had taken before Einstein J: a form of reverse estoppel.

69 Senior counsel for the liquidator frankly acknowledged that his predecessor before the primary judge did not rely upon the foregoing defence to Mr Mead's reliance upon the principles of estoppel. Not surprisingly, senior counsel for Mr Mead objected to this ground being raised for the first time on the appeal. He submitted that had this issue been raised at trial, it would have been the subject of evidence. In particular, the full transcript of the proceedings before Einstein J in August 2001 would have been tendered including those parts concerned with the settling of the undertaking. Furthermore, evidence would have been led from Mr Mead and Mr Dominello to explain the context in which the undertaking was offered and which would have established, so it was asserted, that it was not intended (and could not have been understood by the liquidator) as a promise that he would not pursue his application in the Family Court proceedings for orders that the four properties be released for sale to enable him to meet the costs of the common law proceedings given that he had no other funds, apart from the proceeds of sale of those properties, to meet those costs.

70 It was also submitted that had the point been taken at trial, the liquidator would have been cross-examined to establish that it was not his understanding of the undertaking that Mr Mead was saying that he would not seek to pursue his application to gain access to the four properties in the Family Court proceedings and that he would still proceed with the common law proceedings and take the risk of the liquidator claiming the four properties at a later date and that if he did so he, Mr Mead, would not oppose the liquidator's right to do so.

71 The principles applicable to an attempt to take a point on appeal that was not taken in the court below are well established. The classic statement is that of Latham CJ, Williams and Fullegar JJ in Suttor v Gundowda Pty Limited (1950) 81 CLR 418 at 438 where their Honours said:

"Where a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards."

72 Again, in University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481 at 483 the High Court said:

"It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so."

Colton v Holcombe

Water Board v Moustakas

73 Finally, in Multicon Engineering Pty Limited v Federal Airports Corporations (2000) 47 NSWLR 631 at 645, Mason P, with whom Gleeson CJ and Priestley JA agreed, stated the principle in the following terms:

"A party seeking to advance for the first time on appeal a new ground not taken at trial will be precluded from doing so if the new ground could possibly have been met by calling evidence at the hearing or if, had the ground been raised below, the respondent might have conducted the case differently at trial."

74 It is apparent from Mr Mead's submissions on this point that his case would have been conducted differently before the primary judge had the point now in issue been taken. The weight to be attached to such submissions was referred to by Sheppard and Neaves JJ of the Federal Court in Cummings v Lewis (1993) 41 FCR 559 at 567 in these terms:

"If the case now made had been the one made at trial, [counsel] may have cross-examined quite differently, other witnesses may have been called or witnesses who were called may have been asked questions about this aspect of the matter. Naturally counsel could not identify precisely the extent of the prejudice which each claimed was involved. This is understandable. It is very difficult for counsel, having conducted a case on one basis, to say precisely how the case would have been conducted if it had been put in a different way. Courts do not accept as of course statements made by counsel as to possible prejudice to their clients in circumstances such as this. Courts, however, recognise that counsel are placed in a substantial difficulty when asked to specify a claim of prejudice with any precision. If prejudice is claimed, a court is likely to give effect to that claim unless the circumstances clearly point to there being in fact no prejudice."

75 In the present case, senior counsel for Mr Mead has been able with a fair degree of precision to indicate the manner in which he would have conducted his client's case if the issue now raised had been raised at trial. Certainly, it was not contended by the liquidator that the circumstances clearly pointed to there in fact being no prejudice. In my opinion, there was. In these circumstances, it cannot properly be found that permitting the liquidator to rely on Ground 9 of the Further Amended Notice of Appeal would not prejudice Mr Mead. In my opinion, he should not be so permitted. In any event, in my view the ground has no substance.

76 As found by the primary judge, the liquidator was aware before or at the time of the hearing of the leave proceedings that:

(a) Mr Mead was adamant that BL's claim against Hypec was fraudulent;

(b) Mr Mead had no assets or income of his own with which to fund the common law proceedings and, in particular, to meet the obligations contained in his undertaking to Einstein J unless he obtained access to part of the matrimonial property, the sale of which had been injuncted by the Family Court;

(c) Mr Mead had made application in the Family Court proceedings to sell the four properties for the purpose of funding the common law proceedings;

(d) Mr Mead was therefore dependant upon obtaining access to the four properties to enable him to implement any leave that Einstein J might grant;

(e) Mr Mead could not offer security to support his proposed undertaking to indemnify Hypec or the liquidator against any order for costs made against either of them in the common law proceedings;

77 Furthermore, it is apparent, as the primary judge found, that the liquidator had no reason to believe that if Mr Mead obtained the leave he sought from Einstein J, he would not proceed with his application in the Family Court proceedings. In his affidavit sworn 13 August 2001 filed in the leave proceedings, the liquidator deposed that he had an "apprehension" that the matrimonial property Mr Mead wished to sell for the purpose of funding the common law proceedings may, in whole or in part, comprise assets properly belonging to Hypec and that upon that basis Mr Mead was offering to indemnify Hypec with its own monies. However, leave was granted and no appeal against Einstein J's orders was instituted by the liquidator to suggest that, on the basis of that "apprehension", the application by Mr Mead to the Family Court would be in breach of, or at least inconsistent with, the undertaking he had given to Einstein J.

78 In his judgment Einstein J expressly recognised the liquidator's ”apprehension" and that Mr Mead's application to the Family Court was listed for hearing on 25 October 2001. The primary judge accurately summarised the position before Einstein J in [73] of his judgment, which I have set out in [31] above.

79 In the foregoing circumstances it lies ill in the mouth of the liquidator, having stood by whilst to his knowledge Mr Mead prosecuted the common law proceedings to a successful conclusion at what was obviously significant cost, to assert that Mr Mead was, by resisting the liquidator's claim to the four properties, conducting himself in a manner which was either inconsistent with his stance before Einstein J or in breach of the undertaking which he had given in the leave proceedings. In my opinion the opposite of these contentions is the truth of the matter. The liquidator's submissions are, with respect, devoid of merit and should be rejected.

The second issue

80 The liquidator submitted that as Mr Mead and Hypec were not equally innocent, the latter could not invoke the doctrine of estoppel where he was seeking to preclude the company from claiming the four properties that had been acquired by Mr and Mrs Mead from funds belonging to Hypec and to which Mr Mead was not entitled. With respect, this submission was difficult to understand in terms of principle but was said to be supported by the following statement of Dixon J in Tobin v Broadbent (1947) 75 CLR 378 at 407:

Thompson v Palmer

Newbon v City Mutual Life Assurance Society Limited

Grundt v Great Boulder Goldmines Pty Limited

In the end an assumption on the one side must be induced or assisted and on the other side the conduct of the party to be precluded must be such that he ought not to be permitted to depart from that assumption."

81 In my opinion, the argument is misconceived. In Thompson v Palmer at 545, Dixon J referred to a passage in the judgment of Lindley LJ in Gordon v James (1885) 30 Ch D 249 at 258 where his Lordship

Story

Agency

Lickbarrow v Mason

82 Dixon J then proceeded (at [547]) to state the principles of estoppel in language which is well known and which is reflected in the passage from the judgment of Brennan J in Walton Stores upon which the primary judge relied (at [95]).

83 In the joint judgment of Rich, Dixon and Evatt JJ in Newbon at 734-735, the relevant elements to make out an estoppel are also set forth in conventional and well understood terms. Their Honours did not refer to some doctrine of innocence as being some type of condition precedent to the invocation of the principles of estoppel. The same comment applies to the passages from Dixon J's judgment in Grundt referred to by him in the passage from Tobin v Broadbent that I have set out above. Dixon J set out the rules governing estoppel that did not include that for which the liquidator now contends.

84 In my opinion, the liquidator's submission has taken the statement of Dixon J in Tobin v Broadbent out of context and sought to apply it in circumstances to which it is quite foreign. The present is not a case for the application of any principle to the effect that wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such a third person to occasion the loss must sustain it. That "broad general principle" as it was described by Ashurst J in the passage from Lickbarrow v Mason cited by Dixon J in Thompson v Palmer at 546, is no authority for the proposition for which the liquidator contends, namely, that a party who has acted to his detriment in reliance upon an assumption or expectation engendered by the conduct of another person must be "innocent" in the sense that Mr Mead's conduct could not be so described because he had utilised the funds of Hypec in breach of his duties as a director to acquire the properties in respect of which he seeks to estop the liquidator from claiming. Such conduct, if it has any place at all, may be relevant to the discretionary defence of "clean hands" although, as the primary judge rightly held (at [110]), that defence was not made out in the present case. Accordingly, this ground of challenge should be rejected.

The third issue

85 When dealing with the necessity to prove the second element of the statement of principle by Brennan J in Walton Stores, the primary judge found (at [97]) that before Einstein J in the leave proceedings, the liquidator did not take the position that a reason why Einstein J ought not to grant Mr Mead the leave he was seeking, was that Mr Mead could only run the common law proceedings if he sold the four properties and the liquidator wanted to preserve his position so that he could recover the properties if his investigations revealed that they were held on trust by Mr and Mrs Mead for Hypec. It was submitted that this finding of fact was wrong in that the liquidator made it clear to Einstein J that he was, indeed, seeking to preserve his position with respect to the proprietorship of the four properties held in the joint names of Mr and Mrs Mead.

86 It was further submitted that the primary judge's finding, that as at the date of hearing of the leave proceedings the liquidator had only framed his claim against Mr Mead as one for repayment of his director's loan account was in error.

87 The primary judge (at [92]) had found that Mr Dominello's understanding at the conclusion of the hearing before Einstein J was that the claim which the liquidator was making was

"that the diversion of the company's money to purchase assets in the name of Mr and Mrs Mead resulted in Mr and Mrs Mead having an obligation to repay the money, not in the liquidator having a proprietary right to assets."

88 Mr Dominello's evidence, as accepted by his Honour, was that he never understood that the liquidator would make a claim in relation to any of the matrimonial properties which would prevent or impede their sale or the application of the proceeds thereof to legal costs until the liquidator's caveat were served upon Mr Mead on or about 12 December 2001. Similarly, his Honour (at [94]) accepted Mr Mead's evidence that at no time prior to December 2001 did he understand that the liquidator intended to make any claim upon the four properties that would prevent him from selling them for the purpose of paying his costs of the common law proceedings.

89 There is no doubt, as Einstein J recognised in his judgment in the leave proceedings, that the liquidator had the "apprehension" to which he deposed in his affidavit of 13 August 2001 and which I have extracted in [28] above. Nevertheless, it is readily apparent from the liquidator's affidavit of 27 July 2001 filed in the winding up proceedings but also read in the leave proceedings, that he was asserting a reconstruction of the directors' loan account in the sum of $4,907,725. As late as the hearing of the common law proceedings in November 2001, evidence was given by Mr Hodgson, an employee of the liquidator, which asserted an indebtedness of Mr and Mrs Mead to Hypec in that amount: see [41] above.

90 In my opinion there was ample evidence to support the finding of the primary judge in [97] in respect of which complaint is now made. Notwithstanding the "apprehension" to which the liquidator deposed in his affidavit of 13 August 2001, it is more than apparent that, in the hearing before Einstein J, the liquidator neither expressly nor impliedly purported to preserve a position which made it clear that if warranted by further investigations, he intended to recover all of the matrimonial real estate upon the basis that it belonged to Hypec rather than recover the amount standing to the reconstructed directors' loan account. I would therefore reject the liquidator's submissions on this issue.

The fourth issue

91 The primary judge dealt in considerable detail with Mr Mead's alternative claim to the four properties based upon the so-called rule in Ex parte James and s 447(6) of the Corporations Act. His Honour ultimately found that the application of that rule led to the same result that he had arrived at with respect to the application of the principles of estoppel that, in his view, precluded the liquidator from laying claim to the four properties.

92 The challenge by the liquidator to his Honour's findings on the present issue was, as I have described, limited. Two submissions were made. The first was that this Court should apply the decision of Gummow J in Hartogen to the effect that the true basis of Ex parte James was such that its operation should be confined to a situation where a trustee in bankruptcy or a liquidator sought to retain money that had been paid to him purely under a mistake of law. The second was that the first of the conditions adumbrated by Walton J in Re Clark, to the effect that there must be some form of enrichment of the assets of the bankrupt or company in liquidation by the person relying upon the application of the rule, had not been satisfied.

93 As Gummow J acknowledged in Hartogen, the English authorities that have applied Ex parte James have treated the principle as not being limited to cases where money has been paid under a mistake of law. On the other hand, the United States authorities to which he referred had so confined the principle. Gummow J considered that the United States approach was to be preferred. Nevertheless, like the primary judge, he considered (at 574) that

Ex parte James

[Companies( New South Wales) Code]

94 The reference by Gummow J to s 377(2) of the Code is, in my respectful opinion, in error: the correct provision was s 377(5) which now finds its equivalent in s 477(6) of the Corporations Act.

95 The primary judge (at [177]) noted that the rule in Ex parte James had been applied in many circumstances outside the recovery of monies paid under a mistake of law. Apart from cases in England, he instanced Re Redmond; Ex parte Official Receiver (1948) 16 ABC 90, a decision of Paine J; In re Associated Dominions Assurance Society Pty Limited and the Life Assurance Act (1962) 109 CLR 516, a decision of Taylor J sitting at first instance, and Re Ebner; Ebner v The Official Trustee in Bankruptcy (2003) 196 ALR 533, a decision of Finkelstein J.

96 In Star v Silvia (No. 1) (1994) 12 ACLC 600, Young J agreed with Gummow J in Hartogen that the rule, or principle, in Ex parte James was better understood as outlining the manner in which the court controls the exercise by liquidators of the powers conferred on them by the relevant legislation. Young J considered that the principle exists but recognised that its exact content and scope had been the subject of both judicial and academic debate. He then observed (at 603):

"The core of the principle is that if the court's officer is under an obligation of conscience or equity to a person, the court will direct the liquidator to carry out that obligation."

"The principle should be applied to ensure that the liquidator does not hold property where there are claims of conscience against the property, without recognising those claims of conscience."

97 These statements seem to acknowledge that the principle has a wider and more flexible operation than that which Gummow J in Hartogen was prepared to recognise. However, at least in Australia, there does not appear to be any appellate authority as to the correctness or otherwise of Gummow J's view that the operation of the rule should be confined to monies retained by a trustee in bankruptcy or liquidator which have been paid to him purely under a mistake of law.

98 Given my view that the liquidator's challenges to the primary judge's finding that the liquidator was estopped from claiming the four properties should be rejected, it is unnecessary to determine the issues raised by the liquidator's submissions. Without finally expressing a concluded view on the matter, my own opinion is that the principle ought to have a wider operation than that which Gummow J preferred in Hartogen and that there is no reason in principle to confine it to money which has been paid under a mistake of law. This is especially so where it is common ground that the principle is better understood as outlining the manner in which the court has a wide discretion to control the exercise by liquidators of their statutory powers pursuant to s 477(6) of the Corporations Act. I would therefore prefer what I regard as the broader operation of the principle articulated by Young J in Star v Sylvia. However, I repeat that this is not a concluded view.

99 The second submission of the liquidator was that, in any event, the first condition adumbrated by Walton J in Re Clark that there must be some form of enrichment of the assets of the company in liquidation by the person relying upon the application of the rule, was not satisfied. In this respect, the primary judge held that this condition was satisfied in that Mr Mead enriched Hypec's assets by his success in freeing the company from its potential liability to BL. In my opinion, the liquidator's contention should be rejected. Were it not for Mr Mead's conduct in having the default judgment set aside and prosecuting the common law proceedings to a successful judgment, the assets of Hypec would have been diminished, if not eliminated, by the debt claimed by BL. The actions of Mr Mead have preserved those assets and freed them from having to meet that liability. In my view that is a "form of enrichment" of Hypec's assets.

The fifth issue

100 The liquidator submitted that the orders made by the primary judge in the winding up proceedings on 25 November 2003 were defective in so far as he should have reserved liberty to the liquidator to apply to the Equity Division for further or other orders relating to the last of the four properties that remains unsold. The primary judge, however, did reserve liberty to both Mr Mead and the liquidator to apply to the Equity Division for further consideration of orders regarding the refund to Hypec of any part of the proceeds of sale of the four properties.

101 Whether or not the property, the subject of the reservation of liberty to apply for which the liquidator contends, is ultimately sold will depend upon the outcome of any further application by Mr Mead in the Family Court proceedings for a variation of the orders of Cohen J of 2 November 2001 to increase the amount of $375,000 which was the cap that that judge applied to the sale of the properties for the purpose of meeting Mr Mead's past and future legal costs. In my opinion, the fate of the four properties should be left in the hands of the Family Court. Given the undertakings of Mr Mead noted by the primary judge in [3] of his orders of 25 November 2003, I consider that the liquidator is appropriately protected by the liberty to apply in respect of the proceeds of sale of the properties contained in [4] of those orders. I would therefore reject the further liberty to apply for which the liquidator contends.

Conclusion on the appeal

102 It follows from the foregoing that in my opinion, the liquidator's challenges to the primary judge's decision fail as a consequence whereof the appeal should be dismissed.

The Liquidator's Summons for leave to Appeal

103 The circumstances which prompted the application to the primary judge by Mr Mead on 10 December 2003 were, to say the least, questionable. Senior counsel for the liquidator (who appeared before the primary judge but not on the hearing of the appeal) informed Cohen J on 28 November 2003 that he wished to seek leave to appear and that he was present "almost as an amicus-type role". He submitted to Cohen J that Mr Mead's application for the release of the four properties from the Court's injunction had been presented to him in October 2001 as if the properties belonged to Mr and Mrs Mead whereas, so he asserted, they in fact belonged to Hypec. He said that Cohen J was not informed "that the husband and wife held all these properties that your Honour dealt with on trust for the company at the time. And that as a result of the way in which the husband and wife conducted themselves, the Tax Office was entitled a very significant amount of money…your Honour dealt with them on the basis that the only people interested in these properties that were seemingly unencumbered, were the husband and wife".

"to apply to, as it were, correct the Court record".

104 At the outset, two observations need to be made. The first is that a reading of the transcript of the hearing before Cohen J on 28 November 2003, gives the impression that senior counsel for the liquidator was asserting that, at the time of the original hearing before Cohen J on 25 and 26 October 2001, Mr and Mrs Mead were aware and acknowledged that they held the four properties on trust for Hypec. This was not the case. The evidence accepted by the primary judge was that, as far as Mr Mead was concerned, he and his wife owned the properties albeit that they were indebted to Hypec in respect of the amount of the directors' loan account, being the company funds used to acquire the properties. Mr Mead only acknowledged Hypec's proprietary interest in the matrimonial property at or just before the commencement of the hearing before the primary judge on 16 September 2003.

105 The second is that the impression is given that, in October 2001, Mr and Mrs Mead were aware that the ATO was entitled to a very significant amount of money. Again, this was not the case. As at October 2001 not only Mr Mead but also the liquidator understood that the company owed the Tax Office approximately $200. It was not until the ATO lodged a proof of debt in January 2002 that Mr Mead became aware that the company's indebtedness to the Tax Office was significantly greater.

106 Of greater significance is the fact that the primary judge, in his judgment of 3 November 2003, had held that the liquidator was estopped from claiming the four properties meaning thereby that he was precluded from asserting that they were held by Mr and Mrs Mead in trust for Hypec. On 25 November 2003, his Honour made orders for the proceeds of sale of two of the properties to be paid to Mr Mead's solicitor and requiring the liquidator to remove the caveats on the other two properties.

107 Why, in these circumstances, senior counsel for the liquidator considered that it was necessary to "correct the Court record" is mystifying. So far as the four properties were concerned, the findings and orders of the primary judge made it clear that, subject to the outcome of any appeal, the liquidator had no claim to them. It is true that Cohen J was informed of the decision of the primary judge and that he had held that the liquidator was estopped from claiming the properties. However, it is clear from the transcript of the proceedings on 28 November 2003 that Cohen J thought that, in the light of what he had been told by senior counsel for the liquidator and which I have recorded in [103] above, he had in effect been misled. He said:

"I certainly wouldn't have made an order that the parties sell a property owned by a company in circumstances where the parties didn't have complete control of the company and the property."

108 It was submitted to the primary judge that it was difficult to see what point there was in the liquidator intervening in the Family Court proceedings if it was not to attempt, perhaps by the backdoor, to bring the four properties or the net proceeds of their sale into the liquidation. Mr Mead submitted that a liquidator, as an officer of the court, should be directed not to proceed in a way which he asserted was vexatious in seeking to undermine a final judgment of the court which had been given contrary to his interests.

109 On the other hand, it was submitted by senior counsel for the liquidator that it was appropriate for him to inform the Family Court of matters that were relevant to any application to set aside Cohen J's orders of 2 November 2001.

110 The primary judge found that there was no legitimate basis, as at present advised, for the liquidator to spend the money of the creditors and the contributories by appearing in the Family Court proceedings. Mr Mead proffered an undertaking, which the primary judge accepted, that in the event of an application to Cohen J to modify his orders of 2 November 2001, he would ensure that the judgments of Einstein J of 21 August 2001 and the primary judge of 3 November 2003, were put before Cohen J, that the liquidator was provided with a copy of any application to vary Cohen J's orders and that in relation to any such application, Mr Mead would ensure that it was not determined within 28 days of the liquidator being notified thereof.

111 In my opinion, the provisions of s 477(6) of the Corporations Act by which the exercise by the liquidator of the powers conferred upon him by s 477 were made subject to the control of the Court, extended to the making of an order that, until further order, the liquidator make no further intervention or application in the Family Court proceedings. This question of jurisdiction was not really in contest. Furthermore, the making of that order was, in the circumstances, entirely appropriate. For the liquidator to succeed in his application for leave to appeal against the primary judge's order of 10 December 2003, he would need to demonstrate that in determining to make that order, his Honour's discretion had miscarried in accordance with the well-known principles stated in House v The King (1936) 55 CLR 499 at 505. In my opinion, no such miscarriage has been demonstrated.

Conclusion on the summons for leave to appeal

112 I would therefore refuse an extension of time to file and serve the summons (as the delay in filing it was not explained) and, in any event, I would also refuse leave to appeal.

Proposed orders and directions

113 For the foregoing reasons I would propose the following orders:

In matter CA 41163 of 2003

(a) Appeal dismissed.
(b) Reserve liberty to apply with respect to the costs of the appeal.

In matter CA 40390 of 2004

114 The parties were informed at the end of the hearing of the appeal that we would not deal with the question of the costs of the appeal, if allowed, as we considered it inappropriate to do so until the primary judge had delivered his decision with respect to the costs of the proceedings before him. Given that the Court is of the opinion that the appeal from his Honour's orders should be dismissed, his decision on the question of costs becomes of greater relevance to the determination of the costs of the appeal.

115 As a guide to the parties, I would indicate that there are some aspects of this matter which, at least prima facie, I find to be disturbing and which may well bear on the question of the costs of the appeal and the summons for leave to appeal. I mention them now not because I have made up my mind with respect to them, but so that the parties may address them in their submissions on costs.

116 The matters to which I refer are as follows:

(a) By February 2002, as a consequence of the orders of Mathews AJ in the common law proceedings, Hypec was no longer indebted to BL.

(b) Accordingly, as and from that time and subject to the costs and expenses of the liquidation, the only creditor of the company was the ATO to whom approximately $1.4 million was owed.

(c) The only dispute before the primary judge was with respect to the four properties that were the subject of the orders made by his Honour on 25 November 2003 in the winding up proceedings; it is only from those orders that the liquidator appealed.

(d) The orders made by the primary judge in the liquidator's proceedings were all in his favour and there has been no appeal from them; the effect of those orders is that the assets, apart from the four properties, were to be transferred to Hypec which would result in the company having assets which, I assume, will well exceed in value the amount owing to the ATO and the costs and expenses of the liquidation.

(e) Any surplus after the payment of the ATO and the costs and expenses of the liquidation will belong to Mr and Mrs Mead equally as contributories.

(f) Accordingly, had the liquidator succeeded in the appeal and the four properties or the proceeds of their sale been transferred to the company, Mr and Mrs Mead would each be entitled to one half thereof upon a final distribution in the winding up.

(g) On the other hand, if the appeal is dismissed, then subject to Mr Mead obtaining a variation of the orders of Cohen J of 2 November 2001 in the Family Court proceedings, he will be able to utilise the proceeds of sale from the four properties for the purpose of paying his and Hypec's costs of the common law proceedings (assuming that he is unsuccessful in enforcing the costs order made by Mathews AJ against BL and Ms Yang).

(h) The effect of the foregoing, it would appear, is that the prosecution of the appeal by the liquidator, if successful, would in all probability only have benefited Mrs Mead in that upon a final distribution in the winding up and subject to any final orders of the Family Court with respect to the division of the matrimonial property (being the four properties or the proceeds of their sale), she would be entitled to one half of the proceeds of sale of the four properties. On the other hand, if the appeal is unsuccessful, Mr Mead will have the opportunity of obtaining the whole of those proceeds for the purpose of meeting his significant legal and other costs of the common law proceedings.

(i) Thus it appears on the face of it that the only practical purpose of the liquidator successfully prosecuting the appeal was to benefit Mrs Mead to the detriment of Mr Mead.

(j) It is true that pursuant to s 478(1)(a) of the Corporations Act , the liquidator is obliged to cause the company's property to be collected and applied in discharging the company's liabilities. Furthermore, pursuant to s 477(2)(m), he is empowered to do all necessary things for winding up the affairs of the company and distributing its property. The latter power is subject to the control of the Court pursuant to s 477(6). The liquidator is required to make commercial decisions, particularly with respect to the outcome of litigation, as Young J observed in Star v Sylvia (No. 1) at 604.

(k) However, the foregoing duties and powers notwithstanding, it does not seem to me, at least prima facie, that the liquidator was obliged to appeal the orders of the primary judge and he could not have been criticised if he had declined to do so.

117 I reiterate that I raise the foregoing so that the parties can be appraised of what I consider to be relevant matters to be addressed in any submissions with respect to the costs of the appeal. The same comments apply to the costs of the summons for leave to appeal. I have already indicated in [107] above that I have some difficulty in understanding the motivation of the liquidator in attempting to intervene in the Family Court proceedings in the manner in which he did on 28 November 2003 and which precipitated the orders made by the primary judge on 10 December 2003.

118 As I have noted, it seems to the Court that it would be inappropriate for it to deal with the costs of the appeal until the primary judge has determined the costs at first instance. There could be little doubt that his Honour's decision in that regard will be relevant to, and may well inform, our decision on the costs of the appeal. Accordingly, I propose that the following directions be given:

(a) Mr Mead to file and serve any submissions on the question of the costs of the appeal and the summons for leave to appeal within 14 days of the publication by the primary judge of his judgment with respect to the costs of the proceedings at first instance;

(b) The liquidator to file and serve any submissions in reply within 14 days of being served with Mr Mead's submissions;

(c) Mr Mead to file and serve any submissions in reply within 7 days of receipt of the liquidator's submissions;

**********

Last Modified: 07/08/2004

Citations

Hypec v Mead [2004] NSWCA 221

Most Recent Citation

Cases Citing This Decision

23

Jovic v Lamont [2007] NSWCA 47

Charbel CJ Pty Limited v Owners Corporation Strata Plan 69470 [2005] NSWCA 241

Mead v Watson [2005] NSWCA 133

Cases Cited

19

Statutory Material Cited

1

BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2001] NSWSC 705

Cadima Express Pty Ltd (in liq) v Deputy Commissioner of Taxation [1999] NSWSC 1143

BL and GY International Co. Limited v Hypec Electronics Pty Ltd (in liquidation) and ors. [2001] NSWSC 841

Actions

Download as PDF Download as Word Document

CITATION:	Hypec v Mead [2004] NSWCA 221 revised - 07/07/2004
HEARING DATE(S):	9.6.04, 10.6.04
JUDGMENT DATE:	6 July 2004
JUDGMENT OF:	Sheller JA at 1; Ipp JA at 2; Tobias JA at 3
DECISION:	In matter CA 41163 of 2003; (a) Appeal dismissed; (b) Reserve liberty to apply with respect to the costs of the appeal; In matter CA 40390 of 2004; (a) Summons for an extension of time and for leave to appeal dismissed; (b) Reserve liberty to apply with respect to the costs of the summons
CATCHWORDS:	CORPORATIONS - Liquidation - Estoppel - Rule in Ex parte James - Corporations Act s 477(6) - Property purchased with company funds - Property sold to fund director's legal costs - Liquidator knows of sale - Director defending company - Proceeds of sale - Liquidator attempts to recover - Whether benefit to company - Whether inducement by liquidator - Whether rule extends beyond money paid under mistake of law. - ESTOPPEL - Whether party needs to be 'innocent' - PRACTICE & PROCEDURE - Argument on appeal not run at trial - Prejudice
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CASES CITED:	Colton v Holcombe (1986) 162 CLR 1; Cummings v Lewis (1993) 41 FCR 559; Ex parte James; In re Condon (1874) LR 9 Ch App 609; Gordon v James (1885) 30 Ch D 249 ; Hartogen Energy Ltd (In liquidation) v The Australian Gaslight Co (1992) 36 FCR 557; In re Associated Dominions Assurance Society Pty Limited and the Life Assurance Act (1962) 109 CLR 516; In re Clark (a bankrupt); Ex parte the Trustee of the property of the bankrupt v Texaco Limited [1975] 1 WLR 559; Multicon Engineering Pty Limited v Federal Airports Corporations (2000) 47 NSWLR 631; Re Ebner; Ebner v The Official Trustee in Bankruptcy (2003) 196 ALR 533; Re Redmond; Ex parte Official Receiver (1948) 16 ABC 90; Star v Silvia (No. 1) (1994) 12 ACLC 600; Suttor v Gundowda Pty Limited (1950) 81 CLR 418; Thompson v Palmer (1933) 49 CLR 407; Tobin v Broadbent (1947) 75 CLR 378; University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481; Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387; Water Board v Moustakas (1988) 180 CLR 491.
PARTIES :	Hypec Electronics Pty Limited (In Liquidation) Colin Anthony Mead
FILE NUMBER(S):	CA 41163/03; 40390/04
COUNSEL:	A: B Rayment QC, T J Morahan, N Gye R: D Fagan SC / V Bedrossian
SOLICITORS:	A: A R Connolly & Co, Sydney R: Etheringtons, North Sydney

LOWER COURTJURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	ED 1268/02 ED 1933/01
LOWER COURT JUDICIAL OFFICER :	Campbell J