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IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Melbourne No MS of 1990
B e t w e e n -
NATIONAL AUSTRALIA BANK LIMITED,
THE HONG KONG AND SHANGHAI BANKING
CORPORATION LIMITED, STANDARD
CHARTERED BANK, STATE BANK OF NEWSOUTH WALES, THE FIRST NATIONAL BANK
OF BOSTON, SOCIETE GENERALE, SOCIETE GENERALE AUSTRALIA LIMITED,
THE TORONTO DOMINION BANK, TORONTO-
DOMINION AUSTRALIA LIMITED,
PITTSBURGH NATIONAL BANK, HONGKONG
BANK OF AUSTRALIA LIMITED, PNC
INTERNATIONAL FINANCE LIMITED,
MITSUBISHI TRUST AUSTRALIA LIMITED,
MITSUBISHI TRUST AND BANKINGCORPORATION, SUMITOMO TRUST AND
BANKING COMPANY LIMITED, SUMITOMO
TRUST FINANCE (AUSTRALIA) LIMITED,
NATIONAL NOMINEES LIMITED
Applicants/Plaintiffs
and
BOND BREWING HOLDINGS LIMITED,
CASTLEMAINE PERKINS LIMITED,
TOOHEYS LIMITED, THE SWAN BREWERY
COMPANY LIMITED, BOND BREWING
Bond INVESTMENTS PTY LTD and BBH
SECURITIES PTY LTD
Respondents/Defendants
Application for special leave to
appeal
MASON CJ
BRENNAN JDEANE J
C2T2/l/JH 1 28/3/90 TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON WEDNESDAY, 28 MARCH 1990, AT 10.18 AM
Copyright in the High Court of Australia
MR D.F. JACKSON, QC: May it please the Court, I appear with my learned friend, MR J.H. KARKAR, QC, and
MR R.M. GARRATT, for the applicants. (instructed by
Mallesons Stephen Jacques)
MR A.J. MYERS, QC: May it please the Court, I appear with MR N.J. YOUNG, for the respondents. (instructed
by Phillips Fox)
MASON CJ: Mr Jackson? MR JACKSON:
Your Honours, this is a case where, in our submission, special leave to appeal should be given
for reasons which fall into two distinct areas. Your Honours, the first area is that the
judgment of the Full Court gives rise to three issues
of public importance to which I shall advert in a
moment. The second area is, because of the manner in which the appeal was dealt with in the Full Court
and we would say in relation to that, that that is
such that in the interests of the administration of
justice, special leave to appeal should be given.
Your Honours, may I hand to Your Honours an
outline of submissions which sets out the four issues
to which I advert?
MASON CJ: Yes.
MR JACKSON:
Now, Your Honours, I propose to come to those issues in a little more detail, of course.
May I
say something before doing so and it is just this:
that is, that the proceedings came before the
Full Court by way of an appeal from two orders of
Mr Justice Beach appointing receivers and managers
in respect of the respondents. The first order was made on 29 December; it was an ex parte order and
Your Honours, I will refer to it as the ex parte order,
it is variously referred to in the reasons for
judgment.
C2T 2/2/ JH 2 28/3190 Bond The second order was made on 9 February this
year and it was made after a contested hearing which
lasted some 19 days. The contested hearing came
about because the respondents had applied to set
aside the primary judge's ex parte order a few days
after the order was made and the hearing of that
application corrnnenced on that day which was
2 January. Now, Your Honours, in the contested
hearing there was evidence - - -
MASON CJ: Was that the only application before Mr Justice Beach in February?
(Continued on page 4)
C2T2/3/JH 3 28/3/90 Bond
MR JACKSON: Yes, Your Honour, to set aside his earlier order, and there was a cognate application, if I can
call it that, which was to substitute other persons
as receivers, or that the persons appointed as
receivers should not, in the event, be receivers.
MASON CJ: Yes. MR JACKSON: Your Honours, the primary judge at the second hearing heard evidence from both sides and he made
various findings, both as to the credibility ofwitnesses, and to the extent appropriate for an
interlocutory application as to facts, and he refused
the application to set aside his earlier order, although
he made some variations to it. Your Honours, the Full Court allowed the appeal and set aside His Honour's
order~
Now, Your Honours, in our submission, in doing so,
the Full Court erred in principle in three important
respects. Your Honours, the first is that the Full Court treated it as settled practice that a party obtaining,
after contested interlocutory proceedings, the
appointment of a receiver pending trial ·was required
to give an undertaking as to damages. tour Honours,there is, in our submission, no such practice; there
never has been. It is inconsistent with the notion that the receiver is the agent of the court, not the
parties, and the view adopted by the Full Court in
that respect was one which was not orthodox as their
references would suggest, but one which was heterodox.
BRENNAN J: Mr Jackson, what was the trial that was pending? MR JACKSON: The trial that was pending, Your Honour, was a trial of an action brought by our clients for a number of
things resulting in the end in a claim for payment of
moneys - I say a number of things, the number of
things included, for example, a declaration that the
moneys had become due.
BRENNAN J: Was it anything other than a claim for a debt? MR JACKSON: Your Honour, it was a claim for money, which in the end was a debt, yes.
BRENNAN J: Payable under a contract?
MR JACKSON: Yes, Your Honour.
BRENNAN J: Is there a writ?
MR JACKSON: Yes, Your Honour. BRENNAN J: Do we have a copy of it? MR JACKSON: Well, Your Honour, the terms of the statement of claim, as well - the statement of claim is in the reasons for
judgment of Mr Justice Beach. I do intend to go to it, Your Honour, and to indicate what it is.
C2T3/l/FK 4 28/3/90 Bond
MR JACKSON (continuing): Your Honours, fundamentally the case was one to recover a sum of money which it was
said had become due because events which entitled the applicants to call up the money which otherwise
would have been payable at dates in the future
had occurred and they had done so. That was the
action. Your Honours, I will come back to that
issue, of course.
The second issue, Your Honours, relates to the approach taken by the Full Court to section 37(1)
of the.SUPREME COURT ACT 1986. Your Honours, that provision provides, as the derivatives of the
JUDICATURE ACT commonly do, that:
The Court may ..... grant an injunction
or appoint a receiver if it is just and
convenient to do so.
Your Honours, the relevant provision appears at
page 107 and I will not take Your Honours to it,
but it is perhaps a convenient reference because
Your Honours will see also there the relevant
rules of the Supreme Court of Victoria in relationto the appointment of receivers. That is page 107.
Your Honours, the approach taken by the Full Court was not to treat the powers to grant
an injunction on the one hand and to appoint a
receiver on the other as in effect two distinct
powers, each to be used when the circumstances made
it appropriate to do so. Rather, they treated the
power to appoint a receiver as being, in effect,
a weapon of a similar type but larger calibre, if
I could put it that way, to an injunction, and the receiver could only be appointed if the smaller weapon, the injunction, was insufficient to do the job.
Your Honours, we submit that the true test is
as, indeed, Lord Chancellor Truro had said in
1950 in a decision to which I will come, that the
rights to the different remedies are essentially distinct and depend upon totally different grounds
and circumstances. They may be overlapping, of course. Your Honours, the third matter with which
we wish to deal is that we would submit that the
Full Court's judgment imposed a limitation upon the ambit of the power conferred by section 37(1) to
appoint a receiver, and the limitation was that thepower to appoint a receiver to a financially
embarrassed company - Your Honours, may I flag
the expression and return to it - at the instance of
a hostile creditor, existed but would not be exercised.
The references, Your Honours, are 340 and 344, and
I shall return to it.
C2T4/l/LR 5 28/3/90 Bond MASON CJ: Three hundred-
MR JACKSON: Pages 340 and 344, Your Honour. Now, Your Honours, that approach, in our submission, resulted in there
being a restriction upon the ambit of the power to
appoint a receiver not before seen in Australian law. Your Honours, may I proceed to develop those
three submissions first. Could I come first to the question of the undertaking as to damages. The judgment in the Full Court placed great reliance
upon the absence of any undertaking as to damages
having been required by the primary judge or given
by the applicants as a condition of the making of
the orders, either on 29 December, the ex parte
order, or on 9 February, the contested hearing.
I will give Your Honours the references in just a
moment but before doing so may I say this, that the
reliance placed upon that aspect by the Full Court extended to a number of matters affecting the whole of the case.
In the first place, the reliance extended to
Their Honours' reasons for setting aside the ex parte order; secondly, to Their Honours' reasons for setting _ aside the order made after the contested hearing, and thirdly, extended to the Full Court's own determination
on whether Their Honours would, themselves, have
made an order appointing receivers, having set aside
the primary judge's exercise of discretion. And,
Your Honours, the view that the giving of such an
undertaking was a usual or a settled practice is made
clear in the reasons of the Full Court and I will
come to that now, but the point of doing so is to
demonstrate the part which it played and the fact
that the court spoke of it as if it were the norm.
Your Honours, may I go first to page 350 which
is in volume 2 of the application book. Your Honours will see, commencing at line 17, that - and I should
say the court is there speaking of the ex parte order - Their Honours say:
A most striking omission is the failure
to discuss whether the usual undertaking as
to damages should be exacted. We would infer that no consideration was given to this
question and this reinforces our view that
possible detriment to the defendants was not
taken into account. Moreover we would go so
far as to say that the only proper exercise
of discretion was to require the usual
undertaking.
Could I ask Your Honours, to save going back to it,
to refer also to the next paragraph where it is also said that:
C2T5/l/RB 6 29/3/90
Bond
No undertaking to file a writ was
required -
Now, Your Honours, that, in fact, is incorrect as
the material will later show. There was such an
undertaking given. Could I move from page 350 to page 358 and Their Honours, still speaking about
the ex parte order, say at about line 21:
No usual undertaking as to damages was
given or even offered, although the banks
had authorised the giving of it.
Their Honours go on then to say, if Your Honours were to proceed through page 358 to page 359,
line 13:
The order appointing the receivers
operated as an injunction: ..... The usual
undertaking as to damages is the price that
must be paid by almost every applicant for
an interim or interlocutory injunction.
Then, Your Honours, at page 360 Their Honours say,
at about line - perhaps I should say, if one looks
at page 359 and then goes through to page 360
Their Honours refer to some examples of undertaking
as to damages on the interim appointment of a
receiver.
(Continued on page 8)
C2T5/2/RB 7 29/3/90 Bond
MR JACKSON (continuing): Now, Your Honours, there are some cases where an undertaking as to damages has been
required on the interim appointment of an exparte appointment of a receiver; there are many
where it has not.
MASON CJ: Are those two cases, TAYLOR V ECKERSLEY and
EVANS V LLOYD, cases of ex parte appointments of
receiver?
MR JACKSON: Yes, Your Honour. Their Honours go on to say, about line 19:
This case can be disposed of without
considering whether any general assertions
can safely be made about the circumstances
in which an interim or interlocutory order
appointing a receiver should be supported
by the usual undertaking in damages.
But, Your Honours, it is apparent that notwithstanding
that, the court expressed the view that there shouldbe an undertaking as to damages in, for practical
purposes, every case of the appointment of a
receiver.
Your Honours, if one goes from page 360
then to page 364 - or I should say at the bottom of
page 363, Their Honours say:
The original order operated so unfairly
by reason of the absence of the undertaking
that it should not have been allowed to
stand, even if modified in other respects,
unless the banks would remove the unfairness
by giving the usual undertaking in Januaryin respect of the original order.
Their Honours there have been so far speaking about
the ex parte order and are moving on to the
contested order. Then, Your Honours, at page 365 about line 21:
The usual undertaking as to damages was
not given on the making of either of
His Honour's orders, nor is the matter
adverted to in eith~ set of reasons for
decision.
Your Honours, if one goes then to about line 28:
In other words, if the orders are viewed as
an interlocutory order granted in aid of the
plaintiffs' claim as made in the litigation,
then the need to require, or at least the
C2T6/l/JH 28/3/90 Bond need to consider most seriously whether to
require, the usual undertaking is a matter
that can scarcely have escaped
His Honour's attention.
We would submit in passing this, Your Honours,
if there is no usual undertaking as to damages in
the case of the appointment of a receiver at least
after a contested hearing, then there is no error inlaw in the primary judge having not dealt with the
matter and, Your Honours, at page 366 at about
line 21 in the passage which goes to the bottom of
the page, the third last line:
We think His Honour's failure to require
the usual undertaking supports the view that
at the time of the first and even at the
time of the second order His Honour
considered that he was not grant:ing something
akin to an interlocutory injunction butordering the administration of the
companies' affairs.
Your Honours, at page 367 in the next paragraph:
Features of the order made on 29 December
support this view. For in a number of
respects, additional to the absence of the
usual undertaking -
and, Your Honours, if one goes then to page 380,
Their Honours say in the first new paragraph on
that page, dealing with the situation which would
obtain if they themselves were to make an order:
(Continued on page 10)
C2T6/2/JH 9 28/3/90 Bond MR JACKSON (continuing):
In any event, if any case for the interim
or interlocutory appointment of receivers and
managers of the undertakings and assets was made
out, the usual undertaking would have to be
exacted -
and, Your Honours, at about line 25:
To preserve the receivership without a
satisfactory undertaking as to damages
is unthinkable.
Well, Your Honours, we would submit that far from
being unthinkable, it is a view which has not in
the past been thought to command a great deal of
respect and, in that regard, Your Honours, we
wouid submit that the true position is that an
undertaking as to damages is not required as a
condition of the appointment of a receiver aftera contested hearing. There are a few cases in
which, as a condition of an immediate ex parte
appointment of a receiver, a plaintiff has been
required to give an undertaking as to damages but
the practice is by no means universal.
M.ASON CJ: I do not quite, at the moment, grasu the ambit of your submission. Are you saying that an undertaking
as to damages is not required?
MR JACKSON: Yes, Your Honour. MASON CJ: As a condition of appointing a receiver after a
contested hearing?-·
MR JACKSON: Yes, Your Honour. That is what I am submitting.
I am submitting - - - ·
MASON CJ: You are not going further than that and saying it is never required? You concede, do you, that the
court has a discretion to require such an undertaking?
MR JACKSON: Your Honour, I would accept that the court has a discretion to attach conditions to orders which
are interlocutory orders. Your Honour, what I
would proceed then to submit is that it is not
an appropriate exercise of that discretion in the
case of the appointment of a receiver to require that,
after a contested hearing, there be an undertaking
as to damages. Your Honours, one can put it in a number of ways. We would submit that the undertaking as to damages is inappropriate to the appointment of a
receiver, the receiver being a person who is the
officer of the court apnointed to perform variousfunctions. Your Honour·, I wanted to develon that
aspect of it in just a moment, if I may.
MASON CJ: Yes. C2T7/l/LR Bond 10 28/3/90
BRENNAN J: Can you make that - - - MR JACKSON: Your Honour, may I say one further thing? It is perhaps incorrect to describe it as an
exercise of discretion. It would be an inappropriate
condition to attach to the appointment of a receiver
after a contested hearing. Your Honours, we would challenge, indeed, if the matter goes to an appeal,
the rationale underlying the undertaking as to
damages which has, in some cases, been in factexacted in respect of an ex parte hearing.
MASON CJ: You are talking about the undertaking as to damages generally now, not merely as confined to the
appointment of receivers?
MR JACKSON:
No, Your Honour, I am simply speaking about confined to the appointment of receivers.
What I
am simply saying about it is this: in respect of an
ex parte receivership, Your Honour, one notes that
in fact on some occasions an undertaking as to
damages has been required from a person seeking an
ex parte appointment of a receiver. Whether it is
right or wrong may be another question. It has never, so far as we have been able to perceive, been
required, or really dealt with, indeed, as a matter
apposite to the appointment of a receiver after acontested interlocutory hearing.
MASON CJ: Yes, I would have thought that if, as it were,
the reason that you assign for exacting an
undertaking as to damages in the case of an
interlocutory appointment after a contested hearing
were right, then it would also apply to the
appointment of a receiver ex parte.
MR JACKSON: Yes, Your Honour. Your Honour, we really do not shirk from that.- there seems to be an essential
logicality about it - but we do observe that in
fact in the case of some ex parte receivershins in
the past there has been an undertaking required.
MASON CJ: Conversely, I suppose, if it be right to appoint a receiver and manager ex parte and exact the usual
undertaking as to damages, notwithstanding that
basic consideration to which you refer, it seemsdifficult to distinguish the case of interlocutory
appointment after a contested hearing.
(Continued on page 12)
C2T7/2/LR 11 28/3/90 Bond
MR JACKSON: Yes, Your Honour, but one would then go to a second position, and that would be that whilst an
undertaking as to damages might be required on that
assumption after a contested hearing, it would be more
apposite to describe it as the unusual undertaking as
to damages, rather than the usual one. It would be an
abnormal thing to do rather than a normal one, and the
judgment of the Full Court really treats it as
axiomatic that there should be such an undertaking
in every case, or in almost every case, and the
situation, in our submission, is really the reverse,to put our case at its lowest.
BRENNAN J: Mr Jackson, I can well understand the argument that you would put if the kind of receiver we are considering
here was a receiver, for example, of trust property,
but does your submission cover all appointments ofreceivers?
MR JACKSON: Yes, Your Honour. BRENNAN J: It makes no distinction as to the purpose for which the receiver is appointed, or the basis on which the
ourt exercises its powers?
MR JACKSON. Yes. I am speaking about interlocutory appointments,
Your Honour. The question would not arise, one would think, in the case of final appointments, which would tend to be in a~d of execution but, yes, Your Honour.
BRENNAN J: Well then, if that be right - if your submission
be right, does that say anything about the bases which
are available to the court for appointing receivers?
MR JACKSON: Well, Your Honour, perhaps it does, perhaps it does
not, in a sense. What I mean by that is that the court has a wide power, we would submit, to appoint a
receiver on an interlocutory basis. In doing so the
court has to give consideration to a number of factors
including, in particular cases, questions of jeopardy
to assets and so on. Now, one of the features that the court takes into account, no doubt, is the nature of
the interlocutory remedy which is sought, that being a receivership. Now, Your Honour, if it be the fact that receivership does not carry with it an obligation
to give an undertaking as to damages as the price
of getting someone independent to run things, then that
is a factor which the court is entitled to take intoaccount inc:etermining whether to appoint a receiver.
C2T8/l/FK 12 28/3/90 Bond MR JACKSON (continuing): It does not follow, with respect,
Your Honours, that the occasion on which the
receiver might be appointed should be circumscribedby the fact that it is not the practice, to put it
neutrally, to require an undertaking as to damages
but it no doubt does mean that it is a factor which
is to be weighed, I suppose, in determining whether
or not to adopt that remedy. I do not want to descend into the facts, but the primary judge was
conscious of the fact that he was appointing
receivers in the present case. I will come, in dealing with the last submission, to that in some,
but not great, detail.
Your Honours, what I was submitting was this,
that there are a few cases in which, as a condition
of an ex parte appointment of a receiver, a plaintiff
has been required to give an undertaking as to
damages but the practice is by no means universal
and we have not been able to find - I do not mean by
that they do not exist - but we have not been able to
find any case, until the decision of the Full Court,
which suggests that an undertaking as to damages
has been before contemplated as a condition of the
appointment of a receiver after a contested
interlocutory hearing.
Could I go, without seeking to develop the
point fully, but I wondered if I might take
Your Honours as quickly as possible to a number of
texts and a number of cases indicating the categories
into which they fall. Fortunately they are all
relatively short. If I could take Your Honours
first to 39 Halsbury, 4th edition, paragraph 867,
Your Honours will see - I should perhaps add
receivers, of course, you have to give security.Now, the security I do not wish to suggest covers
ever possible damage that might be occasioned. I
do not wish to suggest the security given by
receivers necessarily covers every item of damage
that a person might conceive he has suffered by
virtue of the appointment of a receiver, but receivers do, and that sets the background to
paragraph 867 and Your Honours will see, in particular,
in the last four or five lines:
Under similar circumstances, the plaintiff
himself may be appointed interim receiver
without security on his undertaking notto deal with the property except under the
direction of the court. Where the application is made ex parte, an undertaking in damages
may also be required, but this is not usual.
One may roam through Halsbury but there is nothing about contested hearings at all and the observation there made does not continue on to them.
C2T9/l/RB 13 28/3/90 Bond MASON CJ: What does RE PATRICK say? That seems to be the
authority- - -
MR JACKSON: Yes, indeed, Your Honour. What RE PATRICK says, and if I may come to that in just a moment, it is a
case where there had, first of all, been an
ex parte appointment and then there was a contested
appointment. Now, in respect of the contested appointment, there was no undertaking as to damages
required. May I come to that case in a moment because it shows the possibilities.
Your Honours, Kerr on Receivers is silent on
the issue. Some of our authorities have been put in a book, I think. That is in tab 51. Kerr on
Receivers is silent on the issue. The page that
Your Honours have there is the closest in area but
it does not touch it. O'Donovan, Company
Receivers & Managers, 1981, at page 292-294, tab 52,
I think, in the document Your Honours have, at
page 294, in the first new paragraph:
In cases of urgency where there is a clear
danger that the property to be covered by
the appointment will be disposed of, the court may appoint a receiver and manager with immediate authority to act either for
a certain limited period or until a final appointment can be made on a reference to
chambers.
The reference to "reference to chambers", Your Honours,
derives from a practice of the order being made for
the appointment of a receiver, the receiver being
actually appointed, for example, by a master or a
particular person being so appointed.
Such an interim appointment is usually made without security. Instead the court requires the appointee to deal with the property only
under the direction of the court, and to abide by any order which might be made as to damages or otherwise. Now, Your Honours, that is of course speaking of an ex parte application.
In Lightman & Moss, the Law of Receivers of
Companies 1986, Your Honours will see at tab 53,
at page 241, at the bottom of the page, the last line:
It may be noted that a cross-undertaking in
damages may equally be required on an ex parte
application for the appointment of a receiveror of a provisional liquidator but will not be
required on an appointment made at an inter
partes hearing -
C2T9/2/RB 14 28/3/90 Bond the reference being again to RE PATRICK and also
to some observations of Vice Chancellor Megarry inIN RE HIGHFIELD COMMODITIES to which I will come.
(Continued on page 16)
C2T9/3/RB 15 28/3/90 Bond
:MR JACKSON (continuing): Your Honours, finally in relation to the text in Picardo, The Law Relating to
Receivers, Managers and Administrators, 2nd edition 1990,
Your Honours will find at tab 54. Your Honours will see towards the top of the page at about the
sixth line, page 335:
There are, however, frequently cases of
alleged jeopardy where the court finds the
interlocutory position to be too
indeterminate to impose what may be the
drastic solution of appointing a receiver
and manager.
Your Honours, if I could pause there, one might at
first sight think that the observation is being made
generally but, if one reads on:
In such cases the court may consider it sufficient to grant an injunction for the price of an undertaking in damages by the
plaintiff. But receivership may be appropriate on terms. 'Any ex parte order appointing a receiver, operating in effect
as an injunction should contain an
undertaking as to damages'.
The reference being to CHAPMAN V ROSE-SCHNEIDER FUR CO,
a Canadian case which, in fact, says no more than
the passage quoted there.
Your Honours, if I could turn from that to the
cases, there is, as I submitted before, a group of
cases in some of which, and in some of which
arguably, the court has required an undertaking asto damages as the price of an ex parte order
for receivership. Could I go first, Your Honours, to
RAWSON V RAWSON, (1865) 11 LT 595, tab 10 in the
volume Your Honours have. Your Honours, it is perhaps unnecessary to go to more than the last two
paragraphs of the case. Your Honours will see that
counsel for the plaintiff: moved ex parte for the appointment of a
receiver and injunction as prayed.
The Vice-Chancellor, on being informed
that the plaintiff ..... was in court and
was willing to act as receiver without
salary, and enter into the proper
recognisances and undertake for any
damages that might be recovered, appointed
her instanter receiver, and granted the
injunction.
C2Tl0/l/JH 16 28/3/90 Bond Your Honours, it is possible to say that the
undertaking as to damages applied to both the
receivership and the injunction, perhaps it did,
perhaps it did not. It is a case which is
arguable, I suppose, both ways.
DEANE J: But, Mr Jackson, it is one thing to look at the situation when a receiver is appointed of alleged
trust property or under a security which is
alleged to have attached to the property or, in
the case of a petition for winding up, when it is
more likely to be a provisional liquidator. But,
your proposition has to be that when an unsecured
creditor succeeds in persuading the court to appoint
a receiver of a solvent company,or of a company
which is not shown to be insolvent, he has no
obligation or it is not usual to require him to give
an undertaking for damages if, for example, it
turns out he had no debt and the damages being not
misconduct of the receivers but the damages being
the damage sustained by the very appointment of a
receiver. Have you any case that says that?
MR JACKSON: Your Honour, could I put it round the other way, if I may, Your Honour. There is, with respect,
no case in relation to receivers, in our submission,
which suggests that an undertaking as to damageswould be required on, leaving aside the instances
to which I have and I am just about to refer, any
appointment of a receiver because any appointment
of a receiver, be it interlocutory or otherwise.
DEANE J:
Well, is there any case in which a receiver has been appointed on the ex parte application of an
unsecured creditor a receiver of a solvent company?
(Continued on page 18)
C2Tl0/2/JH 17 28/3/90 Bond
MR JACKSON: Your Honour, I think the answer - I will have to check the cases in just a moment - I think the
answer is no, that if one is talking about, if one
puts it on the basis of being a company that is
demonstrably solvent I think the answer is urobably
no, but if I could say this - - -
DEANE J: No, I was putting it on the basis of a company which the applicant for a receiver had not shown to be insolvent. MR JACKSON: Well, to answer Your Honour directly I think the
answer is no, but could I qualify that in this way:
the present case, if I could return to it for a moment,
it is.true to say - if I could pare it down, first
of all - is not a case of a secured creditor. Nor is it a case of an unsecured creditor whose only right is
to sue the company for something from its funds
generally. The present case is one of a creditor which has a right to have the company's moneys dealt with
in particular ways, in the event it being paid.
What was demonstrated before the primary judge - - -
DEANE J: Is that true of all the companies in resuect of which a receiver was appointed? MR JACKSON: Yes, Your Honour. DEANE J: It is, is it?
MR JACKSON: Yes. DEANE J: I had read things differently. MR JACKSON: Well, Your Honour, perhaps there may be some
dispute about it but the plaintiffs were entitled
to have the money from the brewing companies go in
particular directions and not in others, and the
money also from the investment company. They had various other rights in relation to the way in which
the moneys were dealt with.
DEANE J: Well, they either had security over the moneys
or they did not. What is the answer? Did they or did they not?
MR JACKSON: No, they did not, Your Honour. DEANE J: Which means that they had rights which, if breached, gave them rights of action which would make them unsecured creditors. MR JACKSON: Your Honour, I do not cavil with that for a moment, with respect.
DEANE J: I am just trying to identify the area, and all I am trying to convey to you is that it seems to me that I would be much more helped by cases dealing with
a receiverbeing apuointed to a not insolvent company
C2Tll/1/LR 18 28/3/90 Bond at the suit of an unsecured creditor, if there
were such cases, than cases of trust funds or
winding-up or security, which are governed by
different principles.
MR JACKSON: Your Honour, I cannot point to a case that deals directly with the point.
DEANE J: Well, that answers my query.
MR JACKSON: May I just say - I was seeking to add another one or two things in relation to what I was saying before in relation to the particular case, and may
I just say this, because I will come back to it
in dealing with the fourth point. h7hat I am trying to say, Your Honour, is simply this, that although
the rights of the applicants were those of unsecured
creditors, if one draws a line between secured and unsecured and parties have to fall one side of the
line or the other, it was not a case in which their
only rights were rights to sue and be paid from the
general funds of the borrowers. They had also rights in relation to the funds of the companies so that the
funds could only be applied in particular ways, or
there were limitations upon which the moneys might be
applied and the primary judge made findings adverse to
the companies in relation to the way in which the
funds haa been applied as compared to their contractualobligations and he found that the companies' funds
were in jeopardy. Your Honour, I will come to the
particular passages shortly.
Your Honours, I have referred Your Honours
to RAWSON V RAWSON. I was about to refer to TAYLOR V ECKERSLEY (1876) 2 Ch D 302.
Your Honours, that is at tab 13.
(Continued on page 20)
C2Tll/2/LR 19 28/3/90 Bond
BRENNAN J: Which one - what tab? MR JACKSON: TAYLOR V ECKERSLEY, Your Honour, 13. That was a case, Your Honour, where the Vice-Chancellor had, as
Your Honours will see, in about the middle of 303:
The Vice-Chancellor granted an injunction
on the usual undertaking as to damages, but
refused to make any order for a receiver,except the corrnnon reference to Chambers to
appoint one.
And, Your Honours will see from the judgment of
Lord Justice James, at the bottom of the page,
in the particular circumstances, the plaintiff was
appointed interim receiver for 14 days:
the Plaintiff, through his counsel,
undertaking not to deal with the property
except under the direction of the Court, and
to abide by any order which the Court may
think fit to make as to damages or otherwise.
And the other members of the Court of Appeal concurred.
Now, Your Honours, that is a case in which an undertaking
as to damages was required as a condition of the
appointment ex parte of a receiver.
Your Honours, there are only two others to which
I wish to refer in this connection, EVANS V LLOYD
(1889) WN 171, tab 17 - Your Honours, that was a case
in which Your Honours will see from the top of the
right column - there was a submission:
that the case was one in which a receiver
ought to be appointed -
ex parte, and the order was made, as Your Honours
will see:
on the applicant's undertaking in
damages.
And, lastly, Your Honours, I do not think I need to
take Your Honours to it: CHAPMAN V ROSE-SCHNEIDER
FUR CO, (1922) 69 DLR 639, at tab 26, was a case of
an undertaking, and, Your Honours, the relevant
passage has already been quoted in one of the texts
to which I referred.
DEANE J: EVANS V LLOYD does seem to be a case of a receiver appointed on the application of an unsecured creditor.
MR JACKSON: Yes, Your Honour. Your Honour was asking about
companies before. Now, Your Honours, could I say that there is a large number of cases of ex parte orders
in which no such undertaking has been given.
Your Honours, I will give references to some of them and
C2Tl2/l/FK 20 28/3/90 Bond may I come to others. The first is RE PATRICK, BII.LS V TATHAM,
(1888) 32 Solicitors Journal 798, tab 16, and
Your Honours will see, at the bottom right corner of
the page - Your Honours, what appears from it is this,
that it was an application to continue the appointmentof a receiver which had been obtained ex parte. of the first paragraph, what was urged against the continuation of the appointment was, that:
no undertaking had been given as to
damages:
And the judge discusse<l whether a receiver should or
should not be appointed. He was of the view that a receiver should not have been appointed ex parte, and
then, in about the middle of that part of the case,
which is on page 799, said:
It was necessary that a receiver should
be appointed, but he left it open as to
who should be appointed.
And, Your Honours, at the bottom of the case:
He made an order appointing a receiver,
with the usual reference to chambers.
And there was no undertaking as to damages.
Your Honours, could I give a reference to
ANGLISS V ANGLISS,(1893) 29 LT (NS) 462, no
undertaking as to damages. Your Honours, that is at tab 55.
(Continued on page 22)
C2Tl2/2/FK 21 28/3/90 Bond
MR JACKSON (continuing): Tab 56, BlACKEIT V BIACKE'IT, (1871) 24 LT 276.Again, no undertaking as to damages.
DICKINS V HARRIS, (1866) 14 LT (NS) 98, tab 57,
the same situation obtains.
RE H's ESTATE, (1875) 1 Ch D 276, which is tab 12.
RE FOUNTAIN, (1888) 37 Ch D 609, that was a
decision of the Court of Appeal. A receiv·!t" ,,;;as appointed on an ex parte application in respect
of the estate cf a - as it was put in those days -
supposed lunatic.
BRENNAN J: Which number is that, Mr Jackson? MR JACKSON: I am sorry, Your Honour, tab 58, Your Honour. Your Honours, a case dealing with a case of debt by
an unsecured creditor, McLELLAN V HALSEY, (1955) QWN 61,
tab 59.
MASON CJ: It does not seem to be tab 59. BRENNAN J: What year is this? MR JACKSON: (1955}'- QwN· 61, Your Honour. MASON CJ: Yes, mine has NEWPORT CONSTRUCTION under that tab. MR JACKSON: That is the next, Your Honour, and final under this heading.
MASON CJ: Yes, I have it. It just follows tab 58 without an intervening tab.
MR JACKSON: I am sorry, Your Honour. BRENNAN J: Is this by way of ..... execution?
MR JACKSON: No, Your Honour. If Your Honour looks at the
headnote, the writ had not yet been served and
it was thought that the defendant had absconded -
I should not say absconded - had left the country.
Your Honours, finally under this heading, in RE NEWPORT CONSTRUCTION COMPANY LIMITED, (1948) 1 Ch 217,
which should be at tab 60, that was a case,
Your Honours, in which a bank was a debenture holder
but the moneys payable under the debenture were not
due and what had happened was that the two directors
of a company, which was the subject of the order,
were killed in an accident and in the event a receiver
was appointed of the undertaking and, Your Honours,
there was no undertaking as to damages given, the
receiver being appointed ex parte.
Your Honours, turning from those cases, all
of which are cases of the ex parte appointment of
receivers without any undertaking as to damages,
Your Honours, if I could turn to another category.
C2Tl3/l/JH 22 28/3/90 Bond There are many cases where no undertaking as to
damages has been required where a receiver has been appointed after a contested hearing. Your Honours,
RE PATRICK, BILLS V TATHAM, to which I referred
earlier, tab 16, is one of those cases. May I
take Your Honours very briefly to some others?
(Continued on page 24)
C2T13/2/JH 23 28/3/90 Bond
MR JACKSON (continuing): One is a Victorian case, EDGAR V MUSCOVITCH, (1915) 36 ALT 162, which is
tab 61. This was a case of a partnership action
and Your Honours will see, in the right colurrm. on
page 162 about half-way down, there was a claim. ....
a declaration the partnership had been dissolved and
various other things. Your Honours will see, in the last paragraph on that page, that an ex parte
appointment had been made of a receiver. Then, Your Honours, at page 163, the middle of the page
in the right colurrm., both sides were represented, and
then if one comes down to the bottom of the page,
one sees the judgment commence and then, Your Honours,
I do not need to go into the detail of it but at page 164, the first new paragraph in the right
colurrm., the order that was proposed by the judge
was that:The injunction against dealing with the assets to apply to plaintiff as well as
defendant; that ..... the receiver appointed
be removed;
that another person be appointed as receiver, and
so on. And, ·Your Honours, there is no reference
at all to any undertaking as to damages.
Your Honours, in JOHN V JOHN, (1898) 2 Ch 575,
tab 62, this again was a case of an interlocutory
order and Your Honours will see, in the left colurrm.of page 576, the judgment of the primary judge
concluding at the top of page 577, that it was:
a case where it was just and convenient
that a receiver should be appointed.
Then, Your Honours, in the Court of Appeal, at
page 578, Lindley, Master of the Rolls, said,
about half-way through his judgment on that page:
That enactment -
referring to section 25(8) of the JUDICATURE ACT -
evidently applies to what are called
ejectment actions; and we therefore have
to consider in each particular case whether
it is just or convenient that a receiver
should be appointed.
Then Lord Justice Chitty, on page 579, at about
the eighth line of his judgment, said he thought:
it just and convenient in the circumstances
of this case that a receiver should be
appointed.
C2Tl4/l/LR 24 28/3/90 Bond Then, Your Honours, Lord Justice Collins, in
about the tenth line of his judgment on
page 580, said:
It is now, however, the law that the Court
has a discretion to appoint a receiver in
such cases, and it seems to me I cannot work
those two principles together without the
one infringing upon the other, and the result
of that discretion conferred on the Court
is to some extent to interfere with thesacrosanct position which heretofore the
defendant in an ejectment action has
occupied. Now we have to exercise a
discretion, and that discretion must be
exercised upon the facts.
And, Your Honours, the case is bereft of any
reference to any undertaking as to damages.
Your Honours, GIBBS V DAVID, (1875)
LR 20 Eq 373,tab 63, was a case where the
purchaser of a coal mine was seeking to rescind thecontract on the ground of fraudulent misrepresentation
and it was essential that the mine be kept going
and the court, on the application of the purchaser,
appointed a receiver and manager until the hearing.
(Continued on page 26)
C2Tl4/2/LR 25 28/3/90 Bond
MR JACKSON (continuing): The hearing was a hearing upon notice, it would seem, but the defendant was not represented.
At the bottom of page 377 to the top of page 378the Vice-Chancellor set out what he proposed to do,
that was to appoint a receiver, and the appointment
was not subject to any condition as to undertaking
as to damages.
Finally, Your Honours, in LAMEROND V LAMEROND(NO 1),
(1962) NSWR 246, Mr Justice Jacobs in appointing an
interim receiver set out his order at page 247,
commencing about line 25 and the order follows and
there was no requirement of an undertaking as to
damages.
An analogous issue was discussed by
Vice-Chancellor Megarry in RE HIGHFIELD COMMODITIES
LTD,(1985) 1 WLR 149 at page 155, tab 6 in the book.
His Lordship is there speaking about - not about
receivers but is speaking about the appointment of
provisional liquidators. Your Honours may recall
this was a case referred to in the passage I gave
Your Honours from Lightman & Moss, the Law of
Receivers of Companies, and His Lordship says,
between letters Band C:
First, the general practice is to require
an undertaking in damages if a provisional
liquidator is appointed ex parte. Second,
the general practice is not to require an undertaking in damages if the appointment
is made inter partes. The distinction, I
think, or a distinction - - -
BRENNAN J: Mine stops short at page 154 and leaps to 162, which might be the relevant pages, Mr Jackson.
MR JACKSON: Your Honour, I am sorry. MASON CJ: Yes, so does mine, Mr Jackson. MR JACKSON: Your Honours, the passage I want to refer to was
brief and may I say what it is?
MASON CJ: Yes.
MR JACKSON: His Honour is dealing with, on the one hand,
interlocutory injunction; on the other hand,
appointment of a provisional liquidator, the
significance of it being, of course, that theprovisional liquidator is an appointee of the court.
His Honour says then, between letters Band C:
First, the general practice is to require
an undertaking in damages if a provisional
liquidator is appointed ex parte. Second,
C2Tl5/l/RB 26 28/3/90 Bond the general practice is not to require an
undertaking in damages if the appointment
is made inter partes. The distinction, I think,
or a distinction, must be that the protection
of the undertaking will be given where thecompany has had no opportunity of providing
any answer or explanation to contentions
which may prove to be wholly unfounded,
whereas if the company has at least had the
opportunity of being heard, the court will
be making the appointment after considering what the company has said, if it has chosen
to speak, and so can better assess the
propriety of making the appointment.
(Continued on page 28)
C2Tl5/2/RB 27 28/3/90 Bond
MR JACKSON (continuing): Your Honours, that goes back a little to something I said in response to
Your Honour Justice Brennan a while ago, that one
of the things that the court does, of course, is
bear in mind that what is being done is the
appointment of a receiver, which is a narticular
species of remedy carrying with it its own accidents,
as it were, accidents and incidents.
Your Honours, without attempting to go to
the particular provisions, so far as England and
Australia are concerned the current statutory
- there are various statutory provisions~ following
a more or less common form, conferring jurisdiction
on the courts to appoint receivers and, Your Honours,
the rules of court require the provision by a
receiver of security, unless dispensed with, to
account for what he receives, but they do not require
the provision of any undertaking as to damages,
nor do the notes to the rules in the practice texts
suggest that there is any such requirement exceptto the extent to which it may be done in the case of an ex parte appointment, the references, such
as they are, being to the cases to which I referred
first.
Your Honours, I will come back, if I may,
in just a moment, to the question of the difference between the appointment of a receiver and the grant of an injunction, because I want to deal with it in relation to the second point and in dealing with that
point may I refer also to the role of the receiver
as an officer of the court, which is germane to the
question of the undertaking as to damages.
Your Honours, if I could move on, for the
moment, to the second point to which we have referred
in the outline of submissions. We would submit that the appointment of a receiver is not something
which should only be done in circumstances where the
consideration is first given to the question whether an injunction is appropriate. The appointment of a receiver, in our submission, is a remedy which may
be cumulative upon or alternative to the grant of an
injunction, and we would submit in particular that
it is not the law that a receiver may be appointed
only if it is first considered that an injunction
cannot go.
Now, Your Honours, could I take Your Honours to
a number of cases, one to which I have gone to
already, recognizing two things; ~irst, that the
question whether a receiver should be appointed in
an interlocutory application is itself a matter which
must be decided on the basis of the material before
the court in that application, but secondly, also,
stating specifically that a court does not necessarily
act upon the same principles in granting or refusing
an order for a receiver as it acts upon when granting
or refusing an order for an injunction.
C2Tl6/l/LR 28 28/3/90 Bond
DEANE J: Mr Jackson, to go back to your earlier submissions,
do you submit that the learned judge at firstinstance was correct in appointing a receiver
ex parte without requiring an undertaking as tothe damages that might be caused from that appointment?
1:1R JACKSON: Yes, Your Honour. It was within his discretion so to do.
DEANE J: Well, I am not asking you that. I am asking you: do you submit he was correct?
1:1R JACKSON: Yes, Your Honour. I, with respect, was going to expand upon what I had said in accenting the
proposition. We would submit he was correct, and I was going to indicate the reasons for saying that.
First, Your Honour, it was a matter within his
discretion and, in the circumstances as they
appeared before him, he was entitled to take that
view and correctly did so. The correctness
of it -
DEANE J: Was the matter raised before him? I mean, one gets the very clear impression that the lawyers
for the applicant were conscious of the question
of an undertaking but on what I have read it would
seem that the matter was never adverted to. Is there anything contrary to that?
1:1R JACKSON: No, Your Honour. I think the question was not, in the ex parte hearing,raised, as I understand
the position, before the primary judge.
DEANE J: Should it not have been?
1:1R JACKSON: Well, in our submission, no, Your Honour,
though - - -
DEANE J : What, you disagree 'With ~ Sir• Robert Megarry said even about the appointment of a provisional liquidator
which, of cour$e, is a much different case to the ex parte appointment of a receiver to a company
which is not shown to be insolvent by an unsecured
creditor?
(Continued on page 30)
C2T16/2/LR 29 28/3/90 Bond MR JACKSON: Your Honour, could I say this? We would submit that it would have been, if one assumes the correctness
of those cases -and that is a matter which we would
seek to agitate, if the matter goes on appeal -
then it was something that might or might not have
been done by the primary judge. It would have been
within the primary judge's discretion to require it
on that assumption, equally within his discretion not
to do so.
DEANE J: But in the context of statements such as that of the
Vice-Chancellor in HIGHFIELD, was it not incumbentupon those appearing for your client who had obviously paid regard to the question of an undertaking, to have drawn it to His Honour's attention in a case such as this? MR JACKSON: Well, Your Honour, in our submission, the answer
is, no. We would submit there wasno obligation to do so and, Your Honour, what I am endeavouring to say,
with respect, is this: that the evidence that appeared
in the contested hearing before His Honour demonstrated,
in our submission, that it was a correct exercise of
discretion for him not to have made such a requirement.
DEANE J: What if at the end of the day one were of the view that it is unthinkable that an ex parte order appointing a receiver of a solvent company should be made at the suit of an unsecured creditor . without any undertaking as to damages being required? -Would you still say that it was not incumbent upon those appearing for the
applicant having directed their attention to the point
to at least raise it before a judge dealing with thissort of application ex parte? MR JACKSON: Well, Your Honour, if one went to that level, I
suppose the answer - but it does involve a number of
assumptions, of course.
DEANE J: I am not suggesting it is right, I am just trying to
investigate where this leads. MR JACKSON: Well, Your Honour, I suppose,if one gets to that
point, one would think the next step is not too hard to take. It would be - to say that it was incumbent however, to raise the point, does not make it follow
that the point having been raised, such an undertaking
should have been required.
DEANE J: But if one reached that stage, would not the next
stage be that any equity court would refuse to
maintain the receiver appointed in those circumstances
unless a retrospective undertaking were given, orrefuse to even entertain the application, or the
resistance to the removal?
C2Tl7/l/FK 30 28/3/90 Bond
MR JACKSON: No. In our submission, no, Your Honour. One has to bear in mind that what was being dealt with in
this case, and what would be dealt with in a case of
the nature to which Your Honour is referring, is somethingthat is, of course, something that has happened in
the past and to some extent - and I will deal with
the extent in a moment - has been overtaken by events.
DEANE J: But, no, assume that what I put to you is based on
sound assumptions, you then have a receiver
appointed in circumstances where the judges attention
should have been brought to the need for an undertaking
and where it is to be assumed that if it were drawn
to the need for an undertaking, he would have extracted
it. Well now, that being so, why should the party who
did not draw His Honour's attention to that be permitted
to retain the unfair advantage by not giving a
retrospective undertaking? It seems to me to be quite contrary to all equitable principle that that party can
come along and say,''We want to retain our receiver but
we will not make good what we should have done right at
the beginning!'
MR JACKSON: Your Honour, if one makes those assumptions, one could accept that would be a factor or it may well
be a factor to be taken into account. With respect,
we would differ from the proposition that it would
inevitably follow that the order made in the first
instance should be not continued without any furtherconsideration, because whilst on the one hand that
would be to express the court's disapproval of what had
gone on,, it might well be the situation that it would
be to disregard altogether the remainder of the case.
DEANE J: But the question at that stage is whether the original
order should stand. To dissolve the original orderdoes not foreclose other applications being made. MR JACKSON: Oh,no, Your Honour, I accept that but at that point one perhaps does get to a stage where one is
looking at a question of form rather than substance
and the question of form being that if you start other proceedings you will not have the same
difficulty, or you may not have the same difficulty;
if you continue this one you will.
DEANE J: Yes.
MR JACKSON: And, Your Honour, that in our submission would not be the correct position but, Your Honour, could I
just say that what Your Honour has been putting to
me does involve a number of assumptions - - -
DEANE J: I am fully conscious of that.
C2Tl7/2/FK 31 28/3/90 Bond
MR JACKSON: - - - and, if I may say so, with respect, rather the tone of the Full Court's approach to
undertakings as to damages. Your Honour, an approach
which, we would submit, really was itself created by
the Full Court.
Your Honours, where I was about to go was to
cases dealing with two aspects. The first was the fact that the discretion as to the appointment of a
receiver is one which is not expressed in terms of
requiring first that it be a case where aninjunction would be inappropriate or inadequate, and
Your Honours, may I deal with this aspect of it
very briefly. The first case to which I wish torefer is OWEN AND GUTCH V HOMAN, (1853) IV HLC 997,
at 1032, 10 ER 752, at page 766, tab 47, Your Honours.
Now, Your Honours, in that case the
Lord Chancellor, at page 766 in the second new
paragraph on that page, said - it is the paragraph
commencing:
The receiver, if appointed in this case, must
be appointed on the principle on which the
Court of Chancery acts, of preserving property pending the litigation which is to decide the
right of the litigant parties. In such cases
the Court must of necessity exercise a discretion as to whether it will or will not take possession
of the property by its officer. No positive unvarying rule can be laid down as to whether the
Court will or will not interfere by this kind of
interim protection of the property.
(Continued on page 33)
C2T17/3/FK 32 28/3/90 Bond MR JACKSON (continuing): Your Honours, the House of Lords, of
course, is simply saying that the question is very
wide but you cannot lay down a rule about it.
His Lordship refers to the fact that:
It is the common interest of all parties
that the Court should prevent a scramble.
Such is the case when a receiver of a
property of a deceased person is appointed -
and so on. His Lordship recognizes, if one goes
two-thirds of the way through that paragraph that:
The Court by taking possession at the
instance of the Plaintiff may be doing a
wrong to the Defendant; in some cases an
irreparable wrong. If the Plaintiff should
eventually fail in establishing his right
against the Defendant, the Court may by its
interim interference have caused mischiefto the Defendant for which the subsequent
restoration of the property may afford no
adequate compensation. In all cases,
therefore, where the Court interferes by
appointing a receiver of property in the
possession of the Defendant before the
title of the Defendant is established by
decree, it exercises a discretion to be
governed by all the circumstances of the case.
DEANE J: That should be the plaintiff, should it not?
MR JACKSON: I think it should, Your Honour, yes. That was the only judgment in the case, although it appears to
have been a multiple House of Lords.
BRENNAN J: That was the case where there was a contest as to
the beneficial interests in the property.
MR JACKSON: Yes, Your Honour, but the point I make about it is that His Lordship is not speaking so much about
the nature of the property but about the circumstances to be taken into account when granting
interim relief pending the determination of the
ultimate question and is saying, of course, that it
depends on the particular circumstances of the caseand the power should not be treated as circumscribed.
I have referred also to JOHN V JOHN, (1898)
2 Ch 573. The references, Your Honours, are at pages 578, 579 and 580. That is at tab 62. Again,
Your Honours, the ambit of the power is spoken about.
The third case to which I wish to go is a more
recent one, PARKER V LONDON BOROUGH OF CAMDEN,
(1986) Ch 162, at page 172 to 173, tab 39. The Master of the Rolls, at the bottom of page 172,
after referring to section 37 of the SUPREME COURT ACT
C2T18/l/RB 33 28/3/90 Bond 1981, and referring to a reference to HARRIS V
BEAUCHAMP BROTHERS, said at the top of the next page:
For my part I do not accept that the pre-
JUDICATURE ACT practices of the Court of
Chancery or any other court still rule us from their graves. In any event, that
decision relates to equitable execution of a
judgment and is not a matter with which we
are concerned.
As I see the matter the jurisdiction,
as a jurisdiction, is quite general and, in
terms, unlimited. Nevertheless it has to be
exercised judically and with due regard to
authorities which are binding upon this court.
At page 179 Lord Justice Mustill, in the second and
third lines on that page, said:
the discretion to appoint a receiver and
manager is unlimited -
and finally, Your Honours, in DERBY V WELDON,
(1989) 2 WLR 412, at page 436 - that is tab 42 -Lord Justice Neill said, under the heading, "The appointment of a receiver":
Section 37(1) of the Act of 1981 gives
the High Court a similar jurisdiction to
appoint a receiver to that conferred for the
grant of an injunction. The remedies are of
course separate remedies and in some cases
it may be appropriate to grant only one of
these remedies rather than both.
At page 438 Lord Justice Butler-Sloss said, in the
second new paragraph on the page, about letter D:
To assist the effectiveness of the pre-
judgment MA.REVA an order for disclosure of assets may within the ambit of the injunction
be granted. An order for a receiver may eitherbe made independently under section 37(1) or in support of the MAREVA. At the last paragraph of that judgment at page 439,
about letter D, there is something which, in truth,
I think goes to the exercise of the power rather
than its nature.
BRENNAN J: Is it relevant,if one is considering the question
as to an injunction or a receiver,that one carries
an undertaking as to damages, the other does not?
MR JACKSON: Your Honour, yes, I think that is - what one does, if I can put it this way, is to recognize that there
C2Tl8/2/RB 34 28/3/90 Bond are two forms of remedy. Ordinarily speaking, an
injunction will carry an undertaking as to damages
and in our submission an interim receivership will
not. What one is looking at really is the question of appropriateness, in a sense, and in that sense
it may be appropriate in a particular case to
determine whether an undertaking as to damages -
I am sorry, whether an injunction supported by
an undertaking as to damages is appropriate. Equally,
one considers whether a receiver is appropriate, but
bearing in mind in each case the nature and incidenceof the remedy.
(Continued on page 36)
C2Tl8/3/RB 35 28/3/90 Bond
BRENNAN J:
Yes, my question was, assuming the correctness of your first argument that the undertaking is
not an appropriate incident of the remedy of the
appointment of a receiver, it seems to me to sayquite a lot about the suitability of the remedy of a receiver in a case where the application is made by an unsecured creditor against a company does not sound to be insolvent. MR JACKSON: Yes, Your Honour, if it be that one is really speaking about a choice between remedies, then it
may well be that in deciding which way the coin
should fall, then the way in which it should fall
is to be determined by the incidence of them including~the undertaking as to damages. but,
Your Honour, that works on the assumption that both
are otherwise appropriate for it. If one has a case
that is appropriate for the appointment of a
receiver, we would submit, one does not necessarily
have to go back and say, "Well, is this case also
one that's appropriate for the grant of an
injunction?".
BRENNAN J:
Is it right to aay that the negative covenants, as I think they have been called in this case, lead
to the direction in which the funds flow to the debtor company? MR JACKSON: Yes, Your Honour. BRENNAN J:
And, having reached the debtor company they simply form part of the mass of the assets of that
company not subject to a charge?
MR JACKSON: That is so, Your Honour, yes. We have no charge over them.
BRENNAN J:
Yes. Well then, if the receiver were to be appointed in aid, as it were, of those negative
covenants, is the receivership to be distinguished
in substance from an injunction? MR JACKSON: It is, Your Honour, yes. BRENNAN J: In what way?
MR JACKSON: In a number of ways, Your Honour. Your Honour, I do intend to come to the appropriateness of the two and I ~der, perhaps, if I could deal with that
in just a moment - - -
BRENNAN J: Of course. MR JACKSON: - - - because there is a number of features and perhaps I can deal with them better by trying to
categorize them under a number of heads· than
answering Your Honour on the run, as it were?
C2Tl9/l/JH 36 28/3/90 Bond
BRENNAN J: Yes. MR JACKSON: Your Honours, what I was going to say before I come on to that was just one other heading and
that is that the court does not necessarily in
granting or refusing an order for a receiver
act upon the same principles as when it grants or
refuses an order for aninjunction. I have given Your Honours some references, generally speaking, already. Could I refer Your Honours to a
statement - - -
DEANE J: Mr Jackson, before you go away from DERBY V WELDON, looking at it, is it an example of a case that I
asked you about and you said you were not aware of
one, and that is where the receiver has been
appointed of the assets of a company which was not
positively shown to be insolvent at the suitof an unsecured creditor without an undertaking?
MR JACKSON: Your Honour, may I have that checked and answer Your Honour in a moment?
DEANE J: It may not be, it is just that I cannot see anything that indicates that it is not.
MR JACKSON: Your Honours,no, it seems· to have b.een a case of
an enlargement or a MA.REVA :injunction but I must say I had not turned my mind particularly to the question Your Honour was asking me in relation to it but perhaps I might ask if that can be done and say
something about it in a moment.Your Honours, I was about to refer to
HALL V HALL - perhaps I could just give the
English Reports reference for it - 42 ER 191, which
is tab 9. At page 193, Lord Chancellor Truro,
in the paragraph finishing about the middle of the
page in the last sentence said:
The rights to those different remedies are
essentially distinct, and depend upon totally different grounds and
circumstances.
There, he is speaking about the two remedies of
injunction and the appointment of a receiver. The previous sentence relates to the particular facts
of the case where someone had a right:
to ask for a commitment for a breach of
an injunction -
but then tried to get a receiver and manager appointed.
Your Honours, I have referred to that only for the
general observation there referred to which is picked
C2Tl9/2/JH 37 28/3/90 Bond up in Lindley on the Law of Partnership, 15th edition, 1984,
tab 48,at page 661 under the heading:
Difference between granting an injunction
and appointing a receiver.
It has been already remarked that in
granting or refusing an order for a
receiver the court does not act on the
same principles as when it grants or
refuses an order for an injunction; it
being one thing to manage the affairs ofa partnership oneself and another to prevent
a person who has already misconducted
himself from interfering further with the
partnership concerned.
And then, another reason for doing so is mentioned
and then in the last sentence:
It, therefore, does not follow that because
the court will grant an injunction it
will also appoint a receiver; nor that
because it refuses to appoint a receiver
it will also decline to interfere by
injunction.
Your Honours, could I move from that then to the
extent to which there are some similarities between
and differences between the appointment of areceiver and the grant of an injunction and as I am
doing so I will endeavour to tie them to what
Your Honour Justice Brennan asked me?
Your Honours, first, an injunction compels adefendant to do or not to do an act under pain
otherwise of cormnitting a conten::pt of court, that is,
it compels the defendant by himself or those acting
for himi and although the appointment of a receiver
is simi ar to an injunction in its operation to the
extent that the defendant may not interfere with
compel a defendant to do or not to do an act under the receiver's possession, it does not otherwise pain of punishment for contempt.
(Continued on page 39)
C2Tl9/3/JH 38 28/3/90 Bond
MR JACKSON (continuing): Your Honours, the second feature of it is that the appointment of a receiver is
a more flexible remedy than the grant of the
injunction. An injunction has to be expressed in clear language, ordinarily speaking, so that the
court and the defendant may know what is commanded
and whether there has been compliance with it, and
because the penalty for disobedience is punishment
for contempt.
Your Honours, cormnands which are drafted in
advance are not apt substitutes for the flexibility
afforded by the appointment of a receiver wherethe asset to be protected is, in effect, an ongoing
business. Now, Your Honours, that is one factor which, in our submission, is material to what
Your Honour Justice Brennan put to me, and that is
that one has to look to a business, one has to look to a
number of things which may occur, and one has to look
at arrangements which may or may not be complied with.
Your Honour, I ~m sorry to sound a bit Delphic in
saying that. What I am trying to say is that if one looks, for example, at the question whether moneys
are being expended for a permitted or non-permitted
purpose in terms of the arrangements under the loan
and credit agreement, that is something on which
perhaps views may differ in particular cases, andit may be difficult t~-express an injunction
otherwise than by saying, in effect, perform the
contract.
MASON CJ: But are any of those differences material to the question whether there should be some mechanism
that provides for compensation?
MR JACKSON: I am sorry, is Your Honour talking about the mechanism of the contract or the mechanisms of
the injunction receiver?
MASON CJ: The mechanism of the injunction, ie, whether or not ~here ought to be an undertaking as to damages?
MR JACKSON: Well, Your Honour, in our submission,no. What one is doing by appointing a receiver is
appointing - without labouring the expression - an
independent person or an officer of the court whosefunction it will be to, in effect,conduct the affairs
of the business in accordance with its agreements and
its other obligations. One is not really in the position where one is saying, "Appoint a receiver
to break all the contracts"; one is saying, "Appoint
a receiver so that the company, in effect, in the
particular case, does perform". One would think, Your Honours, that that is a matter which might, if
one looks at the function of a receiver, be something
which militates against the notion that there is
likely to be an award of damages if the receiver is
not properly appointed.
C2T20/1/LR 39 28/3/90 Bond
BRENNAN J: Does that not rather highlight the problem of
the relief of receivership overreaching the rights
of the applicants? In other words, if the contractualrights are limited to the negative covenants, a receiver, who is not only bound to observe the negative covenants but who is empowered to conduct
the whole of the business, is to the extent of that
excess being put in on the applicant's application,
though the applicant has no right to it.:MR. JACKSON: Well, Your Honour, if one speaks about it -
perhaps I have been putting it unclearlv. The present case is not one where the receiver is
appointed just to perform the negative covenants.
The plaintiffs' case, which the primary judge
thought was one that was of sufficient probability
of success as to merit the appointment of the interim
receiver, was not just that. It was a case where
the covenants had been breached, as His Honour found,
to a sufficient degree of probability and where the
money had been called up. So the receiver is not just being appointed to ensure that for the future
the negative covenants are performed. He is operating in a situation where, as well as the negative
covenants being ones that no doubt should not, in the
future, be breached, the money has become payable.
BRENNAN J: That, perhaps, is a two-edged sword. Because of the proposition that the receiver is to do more
than observe the negative covenants, the Banks
were requiring a greater measure of protection than
their contract entitled them to.
:MR. JACKSON: Well, Your Honour, one could understand that,
with respect, in a sense, as a submission, but one
has to - I do not mean that in the slightest
way offensively, Your Honour, but what one has to bear
in mind also is that at the time when the receiver
was appointed the judge also found that those
covenants and others were covenants which had been
breached and that the assets of the companies to satisfy their obligations were put in jeopardy and
that the persons who were controlling the companies
were, in some respects, persons in whose management
of the companies he had no confidence.
So that, Your Honour, if one says what else
might have been done, we would really say that what the primary judge did was something that,
in the particular circumstances, was open to him
and, it being open to him, it was then a question
whether it was appropriate,in the light of the
findings which me made, to do it. Your Honour, it is with that background that one really is saying
what was the right thing to do in the light of
the evidence before him and the findings which he
made and it was, we would submit, something within
discretion and His Honour exercised the discretion
to do it.
C2T20/2/LR 40 28/3/90 Bond Your Honour, perhaps I should also say
that the mere fact that one person might have
done that and another person might not have, of course,
does not mean that the first one was wrong.
(Continued on page 42)
C2T20/3/LR 41 28/3/90 Bond
MR JACKSON (continuing): Your Honours, the next feature to which I wish to refer is that a court can only
really be confident that injunctive relief will
protect the status quo where the defendant's
honesty or trustworthiness is not in question or
where the court form the view that if there has been
some questioning of it, that that will be taken away
by reason of the coercive force of the injunction.
The protection of assets afforded by the appointment of a receiver does not require one to make any such
assumption, as it were. That, I should say, is a
matter apposite to the present case.
The next matter is that the grant of injunctive
relief to protect a business involves corrn:nanding
some change in the conduct of the business, namely
preventing or compelling the performance of acts
which have been performed or which is proposed to
perform in the business but it involves the court saying, you cannot do this or you cannot do that,
and a party to the action cannot.
Although the appointment of a receiver subjects
those in a business to a new authority, the appointment
does not, itself, prevent the performance or proposed
performance by the company of its activities. Itsubstitutes, in the case of a company, new persons to
exercise the company's will. Your Honours, in the case of an injunction, the applicant for an injunction
seeks a determination, albeit prirna facie in most
cases, in execution of private rights before their
adjudication and whilst not every interlocutory
injunction involves something which directly affects
the right claimed substantively, many cases do.The applicant for a receiver is seeking the preservation of assets pending the adjudication of
rights. The receiver appointed by the court is the officer of the court. The receiver is not appointed
for the benefit of the plaintiff but is appointed for the benefit of all parties to the action - I will come to the cases on that in a moment, Your Honours - and the receiver is in no sense the agent of the
person or persons on whose behalf the receiver is appointed. Now, Your Honours, in relation to the proposition
that the receiver is an officer of the court, is
appointed for the benefit of all parties to the
action and is not the agent of the person or personson whose behalf he is appointed, could I give
Your Honours a number of authorities, not going, I
hasten to say, to them all. One is the decision of the Judicial Corrn:nittee in PARSONS V SOVEREIGN BANK
OF CANADA, (1913) AC 160, tab 25. At the bottom of page 166 Their Lordships say:
C2T21/l/RB 42 28/3/90 Bond In order to answer this question it
will be convenient in the first place to
look at the position in point of law of the
receivers and managers. A receiver and manager appointed, as were those in the
present case, is the agent neither of the
debenture-holders, whose credit he cannot
pledge, nor of the company, which cannot
control him. He is an officer of the Court put in to discharge certain duties prescribed
by the order appointing him; duties which in
the present case extended to the continuation
and management of the business.
Could I refer Your Honours to a Victorian case, McMECKAN V AITKEN, tab 20, (1895) 21 VLR 65, at
page 69, where Mr Justice Holroyd, commencing in
the seventh line on the page and going down to the
bottom of the page, deals with - the sentence
commencing "Unquestionably", then going down to the
bottom of the page, and I wanted to refer Your Honours
particularly - immediately after the reference to
HARRISON V DUIGNAN and then to the end of the
paragraph on the top of page 70.
In DAVY V SCARTH, (1906) 1 Ch 55, at 57, tab 23, Mr Justice Farwell referred to a receiver
as being:
an officer of the Court appointed for
the convenience of both parties -
Tab 24, VIOLA V ANGLO-AMERICAN COLD STORAGE COMPANY,
(1912) 2 Ch 305, at 310 to 311 - I do not think I
need take Your Honours to that. Then tab 18,
BACUP CORPORATION V SMITH, (1890) 44 Ch D 395, at
page 398 where Mr Justice Chitty said, two-thirds
of the way down the page:
(Continued on page 4~)
C2T21/2/RB 43 28/3/90 Bond MR JACKSON (continuing): The notice was served upon a receiver
appointed in an action by the Court.
A receiver is not an agent for any other
person, and a receiver is not a trustee.
The receiver is appointed by the order of the Court and is responsible to the Court,
and cannot obey the directions of the parties
in the action, and in no sense does he stand
in the position of agent to the parties who
are interested at the suit of whom or oneof whom he has been appointed.
And, Your Honours, a summary of the position may be
seen in a decision in New South Wales in
BUCKLEY V BENNELL DESIGN & CONSTRUCTIONS PTY
LIMITED, (1977) 1 NSWLR 110 at page 123 in the
judgment of Mr Justice Hutley. Your Honours, the case really had nothing to do with receivers but
the position of officers of the court was being
discussed and the analogy of receivers was sought to be dealt with. Your Honours, at page 123, tab 49, could I ask Your Honours to commence in
the fourth line and then to the end of the
paragraph between letters E and F.
Your Honours, could I also perhaps give
Your Honours the reference - I am afraid it is not
in that book - to Story's Commentaries on Equity
Jurisprudence, 3rd edition, at page 351, where
Story observes that:
The appointment of a receiver, when
direr.ted, is made for the benefit and
on behalf of all the parties in interest,
whether parties to the suit or not, and notfor the benefit of the plaintiff or of one
defendant only.
Your Honours, perhaps I could hand copies of that
to the Court. It is page 351.
BRENNAN J: Thank you. Mr Jackson, if it is not for the benefit of the parties then it is on behalf of the
court, in this proceeding, if one looks forward
to the time when the action passes into judgment,
what order is made with respect to the receivership?
MR JACKSON: Well, Your Honour, unless some order was made
the receivership would come to an end.
BRENNAN J: And? Andwhat'WOuld the receivers do?
MR JACKSON: Well, Your Honour, at that stage the receivers
first give up their possession, as it were, and
having given up their possession they have at the
same time to produce to the court whatever accounts
are appropriate to the particular activity they
C2T22/l/LR
Bond 44 28/3/90 have been engaged in and, Your Honour, unless some
other order is made, that is it.
BRENNAN J: What about the money in their hands? MR JACKSON: Your Honour, the money in their hands then is the property of the companies over which they
have been receivers and, if we were to seek to
get that money, then we would have to take some
further proceedings.
BRENNAN J: Do you have some foundation for a submission that you would be entitled to get those moneys?
MR JACKSON: Well, Your Honour, we would be entitled as
unsecured creditors having, in effect, no greater
rights than other unsecured creditors, but the
purpose of the receivership would hav~ been to keep
up, as it were, the funds of the companies.
It was put, in a sense attractively,
someone said, in the judgment in the Full Court,
saying, "You can't fatten up your creditor". We would
rather than not get thin, in that sense, Your Honour.
But the position would simply be,as I submitted
before, that at the end of the time, when the judgment
was given, then unless some further order was
made in the circumstances then appearing, the
receivership would come to an end.
DEANE J: You would equate it really with the position of a MAREVA injunction? MR JACKSON: It is very similar, Your Honour, yes.
DEANE J: Where the assets are just kept so they can be executed upon?
MR JACKSON: Yes. Your Honour, in one of the cases to which I have referred, which I think may be JOHN V JOHN
but I am really not sure at the moment, there is a
reference in fact to what happens at the end of
the receivership where the receivership is an interim receivership, and then the property follows the
law, as it were. The interim receivership would simply come to an end.
MASON CJ: Just stopping there for a moment, Mr Jackson,
there appear to be a number of references in the
judgment of the Full Court which indicate that your
clients disavowed any claim for a MAREVA injunction.
MR JACKSON: Yes. MASON CJ:
How does that stand with the submissions that you are now making, particularly to the response that you gave to Justice Deane?
C2T22/2/LR 45 28/3/90 Bond MR JACKSON: Yes, Your Honour. Your Honour, the Full Court, in our submission, was not correct in stating
that view. What I mean by that I do intend to
come to in just a moment, if I may, but what we
were doing was to say that this was a case where
a receiver should be appointed because, amongst
other things, of the danger of the - because
the assets were in jeopardy, to put it shortly,
Your Honour.
Now, Your Honour, it is probably right to
say that what we were seeking was not something that
was exactly capable of characterisation as a MAREVA
injunction or the appointment of a MA.REVA receiver,
Your Honour. Views may differ about whether that is right or wrong but if what the Full Court is
saying was that we were somehow basing our claim
on circumstances which did not include the fact
that the assets were assets of the company that
were in jeopardy, that is quite wrong, and I intend
to come to that, Your Honour.
Your Honour, it is probably right to say,
if one were to characterize it, it is not quite a
MA.REVA receivership. I am not entirely sure why it is not, but it was simply a case where,
to prevent the assets being in jeopardy, call it
dissipation if one likes, we were seeking to have
a receiver appointed.
MASON CJ: The Full Court seems partly to have understood
the application as an application which would
have the effect, if successful, of preventing
upstreaming and sidestreaming of assets, and to
that extent protecting your clients pending
final judgment.
MR JACKSON: Yes, Your Honour. MASON CJ:
And drawing a distinction between that and a (Continued on page 47) typical 'MA.REVA injunction case.
C2T22/3/LR 46 28/3/90 Bond MR JACKSON: Well, Your Honour, the appointment of a receiver
would do more than a MAREVA injunction would do, one
would think -
MASON CJ: Yes.
MR JACKSON: - - - and it performed a number of functions. One was that it replaced the persons controlling the
company subject to the order by receivers, and the
receivers then conducted the affairs of the company
without, of course, there having to be for example, sums
of money put aside to defend the action, As one might
have in the case of a receiver, a MA.REVA injunction
might require that particular sums of money be dealtwith by being placed in particular places or not
dealt with in particular ways. There are various
ways of doing it. But, Your Honours, having said
that, the order for receivership did not require those
things to happen, it substituted other persons to,
in effect, perform the obligations of the companies,bearing in mind the fact that there was litigation
afoot to recover a large sum of money which it was
said was due.
Your Honours, could I go then to the third
point referred to in the outline of submissions and
Your Honours, it really raises a somewhat different
point from that to which I have just been referring.
It does not really turn on the question -·the
extent to which one has to look at whether an injunctionmight or might not be granted before one gets to
appointing a receiver, but looks at rather a different
question, namely the circumstances in which a receiver
can be apointed and, Your Honours, I referred
earlier to the terms of section 37(1) which are in
terms unlimited, Your Honours, and I referred also to
cases in which the terms of provisions such as
section 37(1). are said not themselves to be limitedotherwisethan by the circumstances of a particular case.
Your Honours, the approach taken by the Full
Court, however, in our submission, places a limitation upon the circumstances in which a receiver may be
appointed. Now, Your Honours, the nature of the limitation is not, with respect to Their Honours,
always entirely clearly expressed, but it may be seen,
in our submission, in two passages in their reasons for
judgment. The first is at page 340, volume 2, Your Honours. Your Honours, if one looks at about
line 30, what Their Honours say is that:
These authorities support the view that,
at all events in the absence of consent or at
least the absence of opposition from the
company for whom a receiver is sought, ordersare not to be made by way of the appointment of
a receiver for the administration of the affairs
of companies in financial difficulties.
C2T23/l/FK 47 28/3/90 Bond Now, Your Honours, if I could just pause there for
a moment. Your Honour Justice Deane has, on a couple of occasions, asked me questions about the
ambit of powers in relation to the question of
solvent companies. The approach taken by the Full Court really seems not to be speaking so much
about solvent companies, but regarding - it appeared
not to be an issue really -on the basis that the
companies at the time were companies which were
in financial difficulties an~ Your Honours, it is
referred to - and I will give Your Honours a
reference in just a moment - in the Full Court's judgment
as being notorious at the time that the respondents
were in some financial difficulties.
Your Honours, at page 45, I have given
Your Honours that - - -
DEANE J: Mr Jackson, was there in the statement of claim an allegation of insolvency? 1:1R JACKSON: No, Your Honour, no. DEANE J: There was not.
MR JACKSON: There was,however, a claim for the appointment of a receiver, both interlocutory and final. That
simply is part of the prayer for relief. Your Honours, at the top of page 341, commencing at the bottom of
the previous page - - -
DEANE J: Well then, I probably put that wrongly. Was there
in the documents in support of the application for a
receiver, an allegation of insolvency?
1:1R JACKSON: No, Your Honour. Well, I am sorry, perhaps I misunderstood Your Honour. Is Your Honour talking
about the ex parte application or the - - -?
DEANE J: Well, either.
MR JACKSON: Either. Well, Your Honour, if one says was there
an allegation of insolvency as an allegation of insolvency, the answer is, no. Was there material from which that inference might be drawn, the answer is, yes.
DEANE J: No. I was concerned with whether there was an allegation of insolvency.
1:1R JACKSON: Your Honour, I said there was material - I will be
coming to thatin dealing with the fourth point. Now, Your Honour, I was referring to the bottom of page 340. Their Honours say:
C2T23/2/FK 48 28/3/90 Bond In our opinion, Courts of F.quity IDuld not, and whatever
view may be taken of the effect of the -Judicature Acts -
and so on -
the Supreme court will not appoint a receiver
and manager of the undertaking of a company by
way of establishing a regime to administer the
affairs of a company in financial difficulties
somewhat akin (the analogy must not be taken toofar) to official management, where the company
opposes that course.
And then, Your Honours, at page 345, about line 7,
Their Honours say:
We think that the same approach should be taken
in this State and that where the company itself
applies, or where a friendly creditor applies,
a receiver should not be appointed, or at all
events should not be appointed -
I am sorry, Your Honours, I really have started a
little late. I should have gone to the bottom of
page 344, or perhaps the paragraph commencing on
page 344:
We have spoken of the appointment of a
receiver and manager as administrator of a
financially embarrassed company on the application
of a hostile creditor. We think that there is and before the JUDICATURE ACT was jurisdiction or
power to make such an appointment, but that
the power would not be exercised. As we have a good deal earlier said, the actual jurisdiction
and so on. And then, Your Honours, at the fifth-last line on the page:
The power or jurisdiction exists. If a simply contract creditor applies and the point is taken that the remedies at law are adequate,
point is not taken the Court may, in some cases, this defence will be given effect to; but if the where both the company and the creditors desire it, stretch a point so to speak and exercise its jurisdiction even though the exercise might have been objected to as contrary to principle.
C2T23/3/FK 49 28/3/90 Bond
MR JACKSON (continuing): And then speaking about the Supreme Court of the United States, Their Honours say:
But the Supreme court goes on to give
clear warnings of the need for caution -
and then, the sentence commencing about line 7:
We think that the same approach should be taken in this State and that where the
company itself applies, or where a
friendly creditor applies, a receiver should
not be appointed, or at all events shouldnot be appointed unless the court is
satisfied that the creditors, or at least
a very substantial body of them, support
the application.
Your Honours, at the bottom of page 345,
Their Honours say:
The reason why both before and after the
JUDICATURE ACT it was and is not a
correct exercise of the power to appoint a
receiver to commit the management of a
company's undertaking to a receiver and
manager on the ground simply that the
company is the applicant's debtor is
that the making of such an administration order is not necessary for the protection or enforcement of the applicant's rights
as an unsecured creditor. Whatever viewis taken of the effect of the JUDICATURE ACT
..... the court still acts on the principle
that equitable relief should not be grantedunless there is no adequate legal, or for
that matter no adequate and less drastic
equitable remedy.
Now, Your Honours, those reasons do not take into
account or do not sufficiently take into account the fact that companies and their directors nowadays
do have some responsibilities to their unsecured
creditors and companies and their directors cannot
now say, "We can carry on as we choose, sue us and
you may or may not get some money". Your Honours,
that approach is dealt with first in some
observations of Your Honour the Chief Justice in
WALKER V WIMBORNE - - -
MASON CJ: Just before you come to that, it seemed to me that the last sentence ending on page 346 perhaps
summed up the Full Court's opposition and the reason
why the Full Court opposed the application for a
receiver on the basis on which you now put it to this
Court.
C2T24/l/JH 50 28/3/90 Bond
:MR JACKSON: Yes, Your Honour, that is probably right but I have a slight qualification to that brought
about by the way in which the earlier part of the the observations about the Supreme Court having
jurisdiction but not exercising the power and,
Your Honours, that appears to be, the way in
which it is put, a limitation which if applied to
every case would effectively mean that there was
no power in those cases.
MASON CJ: Yes. :MR JACKSON: Your Honours, the view expressed in the last paragraph of that passage on page 346 is probably
the approach taken by the Full Court in the end but,
Your Honours, it is difficult quite to see how it
ties in with the limitation which was placed
earlier. But, Your Honour, the view adopted there
by the Full Court in its application to a case
such as the present and in its application to theappointment of receivers seems to be based on the
assumption that if there is a remedy available to
an unsecured creditor, such as suing for the debt,
then in those circumstances there is no particular
reason why such a creditor would be entitled to
obtain the appointment of a receiver,
Your Honours, no matter what the circumstances
really and, if that is the view taken by the
Full Court then that, in our submission, is a view
which places an undue limitation upon the ambit
of the powers of the court under section 37(1)
and it also is a view which is inconsistent with
the more modern approach to the relationship
between a debtor company and its unsecured
creditors. And, Your Honours, that more modern
approach can be seen in two cases. The first of them in WALKER V WIMBORNE, (1976) 137 CLR 1, tab 65,
Your Honours, and the observations of
Your Honour the Chief Justice at page 7.
Your Honours, at the top of the page, the fourth line,
Your Honour said:
In this respect it should be emphasized that the directors of a company in discharging
their duty to the company must take account
of the interest of its shareholders and its
creditors. Any failure by the directors to
take into account the interests of creditors
will have adverse consequences for the
company as well as for them. The creditor of a company, whether it be a member of a
"group" of companies in the accepted sense
of that term or not, must look to that
company for payment. His interests may be
prejudiced by the m:,vement of funds between companies in
the event that the companies become insolvent.
C2T24/2/JH 51 28/3/90 Bond Your Honours, those observations preceded by some
years the similar view adopted by the House of Lords
in WINKWORTH V EDWARD BARON DEVELOPMENT COMPANY LIMITED,
(1987) 1 All ER 114, tab 66, at page 118, where
Lord Templeman delivered the judgment in which other
members of the House of Lords agreed and
His Lordship said at page 118 just before letter d:
But a company owes a duty to its creditors,
present and future. The company is not bound to pay off every debt as soon as it is
incurred and the company is not obliged to
avoid all ventures which involve an element
of risk, but the company owes a duty to its
creditors to keep its property inviolate and
available for the repayment of its debts.
The consicence of the company, as well as its
management, is confided to its directors.
A duty is owed by the directors to the company and to the creditors of the company
to ensure that the affairs of the company
are properly administered and that its
property is not dissipated or exploited for
the benefit of the directors themselves tothe prejudice of the creditors.
There is a reference to the particular case and then
at letter f:
These breaches of duty would not have mattered
if Mr and Mrs Wing had been able to maintain
the solvency of the company and to see that
all its creditors were paid in full.
And then, there is some further reference to the facts
of the particular case and then, Your Honours, I would
refer also to the remainder of that paragraph.
MASON CJ: But, that is a little different, is it not? There, there is an assertion that there is a duty owed
directly to the creditors of the company.
MR JACKSON: Yes, and, Your Honour, in support of the view that that is so, one sees also some observations in
Western Australia in the Supreme Court in
JEFFREE V NATIONAL COMPANIES AND SECURITIES COMMISSION,
(1989) 7 ACLC 556 at tab 67.
C2T24/3/JH 52 28/3/90 Bond
MR JACKSON (continuing): Now, if Your Honours will see at page 560 what was said by Mr Justice Wallace
in the left colunm on the page, at the bottom of
the page:
What really is in issue is as to whether
a company owes a duty to its creditors,
present and future. That, I think, is
answered by what fell from Lord Templeman -
and then His Honour goes on to say, in the right
colunm:
In KINSELA & ANOR V RUSSELL KINSELA PTY LTD
..... Street CJ dealt at some length with
the relevant authorities.
Then the passage quoted refers to the situation, first, of a solvent and then of a company that is
becoming insolvent.
"In a solvent company the proprietary
interests of the shareholders entitle them
as a general body to be regarded as the
company when questions of the duty of
directors arise. If, as a general body, they
authorise or ratify a particular action of
the directors, there can be no challenge to the
validity of what the directors have done. But where a company is insolvent the interests of
the creditors intrude. They become prospectively entitled, through the mechanism of liquidation
to displace the power of the shareholders and
directors to deal with the company's assets.
It is in a practical sense their assets and
not the shareholders assets that, through the
medium of the company, are under the managementof the directors -
and so on. Now, Your Honours, the passage continues through to page 561, left colunm and about two-thirds
of the way down. In the judgment of
Mr Justice Brinsden, at page 565, the third new colunm half-way down the page, he speaks of the duty
of directors in a passage which goes on to the right
colunm two-thirds of the way down the page.
MASON CJ: Mr Jackson, can you throw any more light on the statements made in the judgment of the Full Court of which the second paragraph on page 348 is an
example, namely:that there was no attempt at any stage in
the present case to make a Mareve-type case ofapprehended danger of dissipation of assets.
Now, I know you say that the case presented before
C2T25/l/RB 53 28/3/90 Bond the Full Court, and presumably before
Mr Justice Beach, was a case that was not perhaps
precisely a MAREVA-type case but was in substance
and in principle very close to it. Now, if that is so, I find it very hard to understand why the Full Court would make a statement of the kind that
you see on page 348 and repeat it from time to time.
MR JACKSON: Your Honour, may I say two things about that: the first is that - personally I was not there -
all I can suggest is that it may have been that
counsel were asked, "Is this a case of a MAREVA
injunction?" and perhaps the answer was "No". But,
Your Honour, if one looks at the case, there is no
question but that the nature of the case had
considerable similarities to MAREVA-type cases and,Your Honour, it is absolutely apparent from the judgment of the primary judge where he says, at the time when I granted the ex parte injunction, I
was of the view that the assets were in jeopardy,
I am even more satisfied now.
MASON CJ: But if you go back to pages 344 to 346 the Full Court is drawing attention to what .it-conceives to be a difference between the two classes of case, that is what might be described as the orderly administration of a company that is in financial difficulties and ar case where a receiver is being appointed in order to protect an unsecured creditor who is the plaintiff. Now, the attention given to the two different classes of case can only be explicable on the footing that the Full Court
understood that there was a real difference between
a MAREVA-type protection and the protection which
your clients were seeking in the present case. I mention that for this reason: it would be very unsatisfactory for us to grant special leave to appeal in this case if, on the hearing of the appeal, we were to be met with the situation in which the respondent was constantly asserting to us that having regard to
the way in which the case was conducted the Court should not now give effect to the submissions that you are making. MR JACKSON:
Your Honour, as a general proposition I agree, of course, with what Your Honour put to me.
What I
would say about it consists of a number of things. The first is that in a sense the particular passages to which Your Honour referred are part of the complaint which we make about the approach taken by the Full Court in the sense that it was, we will submit, entirely apparent from the reasons for judgment of the primary judge, that the case with which he was dealing was a case in which interim relief pending
trial was sought. Now, Your Honours, I will say something about that and then come back to it, if I
may. What I want to say about it is this, the nature
C2T25/2/RB 54 28/3/90 Bond of the relief has similarities to MA.REVA-type
relief. It was perfectly apparent from him reasons
for judgment - and I come to the passages dealing
wibh the fourth point - the Full Court reallydisregarded what His Honour said in relation to
that and treated it as though His Honour had in
mind that he was setting up some kind of administration by the court in insolvency, as it
were, of the company, for the benefit of all the
creditors as if he were almost a provisional
liquidator or someone like that.
Now, Your Honours, having directed themselves -
having taken that view of it, they then proceed to say
in effect, you cannot do that. Your Honours, the problems arises, really, in the sense, in the fact
that the Full Court took a view of what was done
that we would submit was just not correct, and having
taken that view, then proceeded to arive at a
conclusion as to jurisdiction which was unduly
limiting, we would submit.
(Continued on page 56)
C2T25/3/RB 55 28/3/90 Bond
MR JACKSON (continuing): Now, Your Honour, I quite appreciate the difficulties for the Court in dealing with
special leave in cases where new points are taken
but what I will seek to demonstrate is that what
we are simply saying is that this is a case of aparticular kind - it probably does not matter
whether one classifies it as MAREVA or not - but it
is a case where we sought relief of a particular
kind and the judge thought we were entitled to it
and the Full Court then, really, adopted an
approach to what we wanted which was different from that which we had wanted. I do not know that I can take that any further.
BRENNAN J: So that I would not be under any misapprehension, is your case based upon an assertion of a risk of
dissipation of assets?
MR JACKSON: Yes, Your Honour. Now, Your Honours, what I was going to say is this, that the Full Court took the view that - the Full Court's view on
jurisdiction - Your Honours perhaps I might be able
to deal with this part of it quickly - was one which
they seemed to have taken by reference to decisionsin the United States and, Your Honours, the decisions
in the - - -
DEANE J: Mr Jackson, could I ask you this, in view of the answer you gave to Justice Brennan: the Full Court has never dealt with a case based on the apprehended danger of dissipation of assets. What, if leave were
granted, would you be asking this Court to do?MR JACKSON: Your Honour, could I say two things in relation to that. The first is that - Your Honour says the
Full Court has not dealt with a case based on
dissipation of assets. Now - - -
DEANE J: Well, it said it was not dealing with that.
MR JACKSON: Your Honour, I am conscious of that but when I
say "dissipation of assets", what I mean is dissipation of assets in the sense of the case which
we made before Mr Justice Beach. Now, His Honour
found there was jeopardy to the assets in the
companies. Now, that is the dissipation of assets to which I referred. Now, the Full Court had to deal with that, with - - -
BRENNAN J: Excuse me, Mr Jackson, for interrupting you but
dissipation otherwise than by breach of the negative
covenants?
MR JACKSON: Your Honour, I think the answer to that is, no .. May I perhaps - I suspect I will be here after a
quarter to one. May I just check that because I
would not like to answer that just at the moment,
if I may. I am sorry, Your Honour, I think Mr Justice Deane was asking me a question.
C2T26/l/PLC 56 .28/3/90 Bond
BRENNAN J: I am sorry, I did not mean to interruot you. MR JACKSON: Your Honour, I was not inviting - - - DEANE J: All I was implying was whether, if you were granted
leave and succeeded in showing that there was a case of an apprehended danger of dissipation of
assets, should we send it back to the Full Court
to deal with that case or would you be asking thisCourt to embark on all the transcriot in order to
reach a decision for itself? ·
MR JACKSON: No, Your Honour. What I would be doing would
be two things. The first would be that we would be submitting that the prima facie result
should be that the judgment of the primary judge
would be restored. Where any need to look at the circumstances would occur; and that is something which,
in our submission, could then be referred back to
the Full Court, it would not be the question of
dissipation of assets, as it were, but the attemot
made by the respondent in the Full Court, the
present respondent in the Full Court, to have someof the findings of the primary judge set aside.
I am not sure I am making myself 100 per cent
clear, but that is the issue which, in a sense, seems really not to have been resolved by the Full Court. Our case is one which, subject to that question,
would result in the primary judge's judgment being
restored. Their case then seeks to erode away
that judgment, and that is something that, in our
submission, could be referred to the Full Court.
DEANE J: That being so, putting aside questions of legal
costs - and that is obviously no small question
in this case - and corrrrnercial reputations and the like,
if you have a case of apprehended danger of
dissipation of assets which would warrant the extreme
sense of appointment of a receiver, would not the
straightforward method be to launch such a case now,
because it is obvious this judgment does not
represent any estoppel against you in that regard?
MR JACKSON: Well, Your Honour, it may in some respects. DEANE J: Well, not on the case that the Full Court has spelled
out was never made. Even if they be mistaken in that, their judgment would not constitute an
estoppel.
MR JACKSON: Well, Your Honour, if I can put it this way. It
would be possible, no doubt, to start proceedings
in which we sought the appointment of a receiver.
DEANE J: Or a provisional liquidator if insolvency - - - MR JACKSON: Your Honour, as matters stand with the judgment of the Full Court we would, for example, be
required to give an undertaking as to damages.
Now, if the true -
C2T26/2/LR 57 28/3/90 Bond
DEANE J: Not for a provisional liquidator. MR JACKSON: No, Your Honour, but we may not be in a position to petition for that.
DEANE J: I see the force of that. MR JACKSON: And so, Your Honour, we are also left with a situation where the judgment of the Full Court
has put us in the position of it being determined
that the receiver should not have been appointed
in the first or second places, and are subject to claims for damages by reason of that. Now, whether the claims be good or bad is another
question, no doubt, but the issue is one which
we would submit should merit the attention of the
Court because the points are important. We would
submit there is no question about that. And, Your Honour, it is possible, of course, in a sense,
to make any case messy but we would submit that the
issues which arise which should merit the attention
of the Court do not fall within that category and
can be dealt with by the Court.
BRENNAN J: If the appeal were to succeed, the order which
you seek from this Court is an order which restores
the order of Justice Beach?
MR JACKSON: Yes, that is so, Your Honour. BRENNAN J:
And therefore I take it pursuant to that order the receivers would go into possession once more?
MR JACKSON: Yes. BRENNAN J: And would remain there pursuant to an interlocutory order until the trial of the action?
MR JACKSON: Yes, or until further order.
BRENNAN J: Or until further order. At a practical level, would it not be right to say that an order for
an appointment of receivers is something which must
be determined in the light of the circumstances
appearing and apprehended at the time of the
application?
(Continued on page 59)
C2T26/3/LR 58 28/3/90 Bond
MR JACKSON: Your Honour, of course, indeed, yes. BRENNAN J: And, we know that the receivers are not now in
possession, would not the order which you are
seeking, in effect, if not in form, be an order
for the appointment of receivers at this stage..... this Court cannot be aware of what may have transpired between the order of the Full Court and
the present time?MR JACKSON: Yes well, Your Honour, no doubt if there were some matter which was material to the exercise
and material to the making of an order by the Court
- I am sorry, if there were some matter which in
the end was material to the question of the order
which the Court would make if it were to allow the
appeal, then that is a matter that the Court might
wish to consider at that time but, in our submission,
the mere possibility that there has been some
change is not sufficient, we would submit, for the
Court to say, "We won't grant special leave" because things may have changed.
BRENNAN J: I understand the force of the proposition but it seems to me that it perhaps illustrates the
difficulty of this Court entertaining an appeal from
an order of this kind which is interlocutory in
nature and of necessity designed to protect, as it is
said, the assets of the companies whose undertakings
are the subject of the receivership because this
Court can decide nothing but whether or not the
order below was right and yet, in practical terms,
it ought to be made aware - if it is going to make
such an order for the restoration of the original
order of Justice Beach - it ought to be aware of the
situation now. So, the jurisdiction seems to be at contest with the substance of the case.
MR JACKSON: Your Honour, could I say two things in relation
to that. The first, in relation to the question that the fact the order is interlocturory,
inevitably that is so, Your Honour. If it were the case that the Court did not ever entertain appeals
in interlocturory matters, well that would be the
end of it. No doubt, the Court gives anxious consideration to the question whether it will deal
with interlocutory matters but this is a question which is inherently interlocutory. It is one of
importance and it is sufficiently important to the
Court to entertain it notwithstanding that fact.
Your Honour, so far as the result of the appeal
if admitted is concerned, well then the Court~s
order would be to restore the receivers appointed by
Mr Justice Beach as Your Honour has observed but,
Your Honour, it is always possible if that be correct
C2T27/l/JH 59 28/3/90 Bond for an application to be made for the receivers to
be removed. Now, Your Honours, if I can just put it this way: the suggestion Your Honour was putting
to me was really on the basis that we should apply
if we wanted to for the appointment of another
receiver at first instance. Now, that is something that, no doubt, we could do but if one were to
arrive at a situation - I am sorry, I should add one
other thing. We, of course, are in a position of not having succeeded now in the court below and, no
doubt, as matters stand the onus is on us to do
something but if we were to succeed in the appeal,
then the position, we would submit, would be that
the onus would be reversed. We have the benefit of the judgment taken from us and it would be then,
we would submit, for the party that wished the
receiver to cease to be the receiver to demonstrate
in the supreme court that that should not be the case,to bring an application to bring the receivers'
management of the company to an end. Your Honours, would this be a convenient time?
MASON CJ: It may be convenient now to adjourn, Mr Jackson. We will resume at 2.15 pm.
AT 12.47 PM LUNCHEON ADJOURNMENT
C2T27/l/JH 60 28/3/90 Bond UPON RESUMING AT 2.23 PM: MASON CJ: Yes, Mr Jackson.
MR JACKSON: Your Honours,:may I deal with a couple of matters that were raised this morning. First, in answer to
Your Honour Justice Deane I said there was no
allegation of insolvency in the statement of claim,
and that is literally true. However, Your Honour,
if one goes to the statement of claim which appears
in volume 4 at page 660, there is an allegation in
paragraph 39, which is introductory to what I am
about to say, that:
On 23 December 1989 the Security Trustee ....
gave a Payment Stoppage Notice to the Trustee
and to BBH.
Now, one goes on from there to paragraphs 40 and 41
and paragraph 40 alleges that:
BBH and the subsidiaries of BBH informed
the Participants that the non-withdrawal of the
Payment Stoppage Notice by 9 a.m. on 28 December would cause the liquidation of BCH and most if
not all of its subsidiaries.
Then, Your Honours, paragraph 41, that was said
again on the 28th, and the two letters to which
reference is made may be seen recited in thejudgment of the primary judge, and if I could take
Your Honours to volume 1 at page 70. The first of
those letters - perhaps I should go to page 69,
about line 35, the second paragraph of the letter
recites the giving of the payment stoppage notice
and then page 70, line 13, it was said that:
Unless you withdraw the Payment Stoppage Notice
by 9 00am (Melbourne time) on 28 December 1989 you will cause the liquidation of BCH and the
majority of, if not all, its subsidiaries,
possibly including Bell Resources Limited -
and so on, and that it was said, would cause defaults. and about line 46:
One of the results of the failure of
your client to withdraw the Payment Stoppage
Notice will be the demise of our clients.
So that whilst it is right to say that the statement
of claim does not allege insolvency eo nomine,
as it were, the proceedings before the primary judge
C2T28/1/RB 61 28/3/90
Bond (Continued on page 61A) were taking place in circumstances where it
had been said by the solicitors for the
respondents to the application that unless
an event had occurred, of· course, it
a time prior to the making of the application was
altered, then the result would be that the companies
would go into liquidation as it were, or be the end
of the companies, whatever the particular phrase, and
that, of its nature, in the circumstances, seems to
have been related to the financial condition of the
companies.
(Continued on page 62)
C2T28/2/RB 61A 28/3/90 Bond MR JACKSON (cont:inuing) : Your Honours, the second point with which I wish
to deal is that - and, Your Honours, I should also
have said, in that connection, I am sorry, that at
page 305 in volume 2, the Full Court, at about
line 25, said that:
To say that by the end of 1989 the
B.C.H. group had for some time had
financial problems is to do no more
than state a notorious fact.
And, Your Honours, one assumes that Their Honours were
speaking of that as being a matter on which they
might take judicial notice by the use of that expression.
BRENNAN J: Could they have taken judicial notice of that?
MR JACKSON: Well, Your Honour, we would submit they could.
But, in any event - they could; Your Honour, without
going back to the matter now, there had been,one might think, considerable newspaper discussion of the
matter, together with - they could take into account
what was in the material before them and perhaps
statements that had been made publicly, some of whichwere in evidence - publicly on behalf of the companies,
I mean.
BRENNAN J: Well, if it is in evidence that is one question,
but to take judicial notice of something because it is
in newspapers is - - -
MR JACKSON: Yes. ··Your Honour, I do not want to take up the charge, if I may, for the Full Court on the particular point,
because we would have preferred to rely on the
evidence, but one does end up with a curious situation
where the Full Court says, in effect, that is a
notorious fact, saying it rightly or wrongly. There isthen evidence of statements made on behalf of the
respondent companies by their solicitors saying if some
earlier event is not reversed, the companies will be in
very serious financial trouble, but yet the Full Court
proceeds to discuss the case as if one were talking about companies that were not in such difficulties. Your Honour, in answer to Your Honour
Mr Justice Deane, in relation to cases in which an
unsecured creditor has obtained the appointment of a
receiver in circumstances where there does not appear
to have been any proof of insolvency on the part of
the creditor, Your Honour, I wonder if I could perhaps
just give Your Honour a list of the cases, some, I think - perhaps all of which have been referred to
this morning.
C2T29/l/FK 62 28/3/90 Bond
MR JACKSON ( continuing) : One that may not have been was AUSTRALIAN INDUSTRY DEVELOPMENT CORPORATION V
CO-OPERATIVE FARMERS AND GRAZIERS ASSOCIATION LIMITED,
(1978) VR 633. There is DARBY AND COMPANY V WELDON,
(1988) 2 WLR 412, TAYLOR V ECKERSLEY, 2 Ch D 302,may I say in relation to OWEN V HOMAN, that
itself, ANGLISS V ANGLISS, 29 LT (NS) 462, and
although the court in that case did not appoint a
receiver in the end and regarded the jurisdiction
as one that might be exercised rarely, the
existence of the jurisdiction was recognized.
Your Honours, the next matter to which I wish to
turn is in relation to the question of"MAREVA
injunction'.' Now, Your Honours, could I just say in
relation to that, that whilst I will come, dealing
to
with the fourth question, the evidence about what the court referred to the case as not being a
took place, I simply want to try to work out what
the meani~g of the expression used by the members
of the Full Court on the two occasions on whichMAREVA-type case of dissipation of assets and that
is at pages 348 and 379.
Your Honours, what seems to have been the case -
and I will indicate the reason for it in just a
moment - is that when the court was speaking of
"MAREVA-type dissipation of assets'\ what it was
talking about was a dissipation of assets in order
to avoid paying a judgment, if I could put it that
way, as distinct from a dissipation of assets having
the result that when the judgment came there might
be nothing there. Your Honours, why we say that is
that one of the submissions that was made to the
Full Court on behalf of the respondents - and I
should say the submissions were both in writing which
were then spoken to, as it were, by counsel - one
of the submission was in relation to a MAREVA-type
injunction using that expression to mean what I have
just indicated. Your Honours, I wonder if I might hand to the
Court copies of what are the relevant parts of the surmnary of submission on behalf of the present
respondents to the Full Court in that regard?
C2T30/l/JH 63 28/3/90 Bond
MASON CJ: Thank you. :MR JACKSON: Now, Your Honours, the particular parts that have been extracted are simply the introductory
page and then pages 6 and 7 and, if Your Honours
look at paragraph 11 at the bottom of page 6,
paragraph 11 in its second part says:
The MAR.EVA injunction cases draw upon a
different principle, namely that the
Court will protect its own processes from
abuse by a defendant, where there is clear
evidence that the defendant has taken steps in
relation to his property in order to frustrate
any judgment against him.
Now, Your Honours, as best we are able to construct
or reconstruct, it must have been that that the Full Court was talking about in saying the caRe was not one of di3sipation of assets in the MAREVA
sense of the term and, Your Honours, I will
come to - - -
BRENNAN J: In other words, not with the purnose of
frustrating a· judgment but with .. the effect of frustrating a judgment.
MR JACKSON: Yes, Your Honour, that is so. The effect would be that the money would not be there if
a judgment were given. It would not be there to pay, whether by judgment or otherwise.
BRENNAN J: And, of course, the object then of the appointment of a receiver is to ensure that it
is there to pay.
:MR JACKSON: Well, to ensure that it does not go somewhere
else, Your Honour, yes, and is there, in the end,
to pay.
BRENNAN J: That sounds very much like a security.
:MR JACKSON: Put it is not, Your Honour, with resuect. It is there so that the company has more funds
than it otherwise would have, if I could Put
it simply, for the moment, but it does not makeus a secured creditor in resuect of those funds,
any more than is the case by·· obtaining a M.AREVA
injunction. In JACKSON V STERLING INDUSTRIES
the Court took that view, that the MAREVA injunction
did not give a right to make one a secured creditor,
and nor does the appointment of a receiver.
Your Honour, if I could just say one more thing
about that. If one had a situation where a receiver
is appointed before trial, the situation which obtains
is that the receiver receives and pays out various
..... moneys, let us assume. The result of his payments is, in effect, a sum of money, and again, I am putting it in the simplest form.
C2T31/l/LR 64 28/3/90 Bond MR JACKSON (continuing): But that sum of money does not
become, for example, a security for the benefit
of whichever party happened to seek his appointment.
Your Honours, if one took, for example, the
appointment of the receiver which was later set
aside, not because of anything wrong with the
appointment in the first place but simply because of
a change of circumstances, the money that the receiver
had acquired during that period on behalf of the
person in question would not be money that was
secured and then later ceased to be secured - or
ceased to be the subject of a security, I mean.
We would submit simply that the receiver really has
nothing to do with security. Often receivers are
appointed by or on behalf of secured creditors but it is
a different thing, of course.
I had been dealing with the third submission,
the third area in respect of which we wished to make
submssions, and may I conclude what I wanted to say
in that regard rather more quickly than I would
otherwise have done because the Full Court - and I
simply wanted to say this about the Full Court's
reliance upon the American cases. The Full Court appears to have placed some reliance upon the
decisions in the Supreme Court of the United Statesin relation to the appointment of receivers at the
instance of unsecured creditors and, Your Honours, it
appears in the United States to be settled law that
in the absence of statute a simple contract creditor
could not obtain the appointment of a receiver, and
that was decided in HOLLINS V BRIERFIELD COAL AND IRON COMPANY, 150 US 379. Your Honours, the case
is at tab, 19. I do not think I need go to it. But there had grown up in the United States what came to
be called "conservation'' or friendly receiverships
in which there was consent by the corporation to the appointment of a receiver or when there was. :admitted
indebtedness or the lack of jurisdiction had been
waived and Your Honours will see that in PUSEY AND
by the courts with jealous eyes and that appears, JONES CO V HANSSEN, 261 US 491 at page 500, whichis tab 27, but the friendly receiverships were watched Your Honours, in SHAPIRO V WILGUS, (1932) 287 US 348 at page 355 to 356. (Continued on page 66)
C2T32/l/RB 65 MR.JACKSON, QC 28/3/90 Bond
MR JACKSON (continuing): Your Honours, that passage, which really sunnnarizes the position, is referred
to by the Full Court at page 338. Your Honours,
receivers will not be appointed at the suit of
the starting point of the position in the United
unsecured creditors except in the rare, friendly
cases and even in the friendly cases the
Supreme Court has said there should not be friendly
receiverships because the receiver is an officer
of the court. That is HARKIN V BRUNDAGE, 276 USR 36,
at tab 29.
Your Honours, the English and Australian cases
really start from an entirely different base, in our
submission, where it is possible to obtain the
appointment of an unsecured creditor in appropriatecircumstances and the second point, Your Honours,
is that if the receiver is appointed, not as a result
of a friendly application but at the end of a
contested hearing, any other objection to it would
also disappear. Your Honours, in relation to the - - -
BRENNAN J: What about the interests of other parties, for
example, a chargee under a floating security?
MR JACKSON: Your Honour, the chargee's rights are not affected.
BRENNAN J: Even though the value of the undertaking is
affected by the appointment of the receiver?
MR JACKSON: Well, to answer Your Honour directly, no, it would not make any difference in terms of the effect
of the appointment - I am sorry, perhaps I will start
again, Your Honour. The rights of the chargee remain rights of the chargee. Now, commonly, there may be something which makes the charge become a fixed
charge because of the appointment of a receiver.
Maybe there is, maybe there is not. But, Your Honour,
the appointment by the court of a receiver would not affect the rights of the secured creditor, or
potentially secured creditor, under that charge. He could come in an exercise those rights.
BRENNAN J:
It will not affect the rights; it may affect the value of his security.
MR JACKSON: But, Your Honour, that is always the case with
any form of security. It can be affected by a large number of matters including, Your Honour, to take the
simplest example, the economic times.
BRENNAN J: Of course, but those are ca.secs where.the.Court ._is not asked to exercise its powers in denegration of the
interests., of a person who is not represented.
C2T33/l/JH 66 28/3/90 Bond
MR JACKSON: Yes, well, Your Honour, that may well be the case but, could I say, that is not really this
case. The only other relevant creditors were ones who are relatively insignificant, if I can
put it that way. I cannot give Your Honour the passage just immediately, but the question
was dealt with.
BRENNAN J: Yes, these were the trade creditors.
MR JACKSON:
And there was one other transaction, I think, in relation to the Swan Brewery.
BRENNAN J: That is right, yes.
MR JACKSON: And the decision - Your Honour will see in, I think, DUFFY V SUPER CENTRE DEVELOPMENT
CORPORATION LTD, which is a decision of Chief
Justice Street which is referred to in
BENNELL's case in the Court of Appeal - and I will
give you the reference in just a moment.
I think it was in that case that His Honour referred
to the fact that persons other than the parties
to the action had an interest in relation to the
activities of a receiver and might well come to
court to obtain directions from the court in relation
to the conduct of the receiver, although they arenot parties to the proceedings.
So, Your Honour, the appointment of a receiver
does recognise that there are other parties and
other parties have a right in an appropriate case
to come to the court to have their rights dealt
with. Your Honours, the next point with which I wish to deal was simply this, and still in relation
to the question of jurisdiction, that it is not
at all clear whether the Full Court intended
whatever limitation on jurisdiction it believed
existed to apply only to insolvent companies or
companies which could pay their debts as they fell
due but had some financial difficulties, because it
used variously the terms "financial difficulties",
"financial embarrassment", "financial problems", and "insolvent", and it is not very clear whether
they are intended to have the same meaning.
Your Honours, could I also add that it has
been held that, in an appropriate case, the
court may appoint receivers to take over the
management of the company from delinquent or
supine directors and could I give Your Honours a
reference in that regard to an unreported decision
of Mr Justice Templeman, which is referred to
in O'Donovan, Company Receivers & Managers, 1981,
at page 229. It is tab 52. I have a suspicion that it may not be the right page that Your Honours
have in tab 52.
C2T34/l/LR 67 28/3/90 Bond
BRENNAN J: I can offer you page 292. MR JACKSON: Your Honour, may I regretfully say that Your Honour has been given the wrong one.
If I could just refer to it, it is pages 228 and
229. Your Honour, I will endeavour to have
these photocopied as soon as I have referred to
them. The author says: In a recent English decision Templeman J
MASON CJ: I have it, at any rate, and Mr Justice Brennan can follow my copy.
MR JACKSON: Thank you, Your Honour. I was referring to the passage in the third paragraph on page 229.
The author says:
In a recent English decision Templeman J
granted an ex parte interlocutory application
by a shareholder for the appointment of a
receiver because the applicant had
established a prima facie case that the directors
were mismanaging the company's affairs ..... in
DUFFY V SUPER CENTRE DEVELOPMENT CORPORATION
LTD the Supreme Court of New South Wales
appointed a receiver and manager of the assets
and undertaking of a company pending the
hearing of proceedings by minorityshareholders against the majority shareholders -
and, Your Honours, I would refer to the rest of
that paragraph.
Your Honours, the case which is there referred to, DUFFY V SUPER CENTRE DEVELOPMENT CORPORATION LTD
is at tab 36, (196 7) 1 NSWR 382.
(Continued on page 69)
C2T34/2/LR 68 28/3/90 Bond MR JACKSON (continuing): Your Honours will see at page 383,
commencing at about line 16, reference to a review
of the functions of the receiver. There is, I think,
in that paragraph - although I cannot immediately
find it - the particular passage to which I was
referring Your Homur Justice Brennan a little while
ago ooncerning the ability of third parties to come
to the court concerning the receiver's activities.
So far as shareholders are concerned, other
examples are RE A COMPANY, (1987) BCLC 133, that is
tab 40; FEATHERSTONE V COOKE, (1873) 16 LR Eq 298,
tab 11 and a Canadian case, BAKAL V PETURSSON, (1953)
4 DLR 449, tab 33. Your Honours, we would submit
that in relation to the question of jurisdiction to
appoint receivers, that is a question of importance
and one sufficient to merit the grant of special leave.
Your Honours, could I move from that to the
last ground on which we would submit special leave
should be granted and that, of course, relates to the
particular case and we submit that it is a case where
the interests of the administration of justice merit
that. We would ask the Court, in support of that, to take into account the matters I have already dealt with
to the extent - in this way. If the Court is of the
view that none of them, by itself, would merit the
grant of special leave, or perhaps collectively, we
would simply ask the Court to take them into account as in effect background, added to the other matters.
Your Honours, we wish to draw attention to a number of features which constitute, in our
submission, errors appearing for the first time in
the Full Court and which worked, in our submission,
considerable injustice:--by taking away from us the
benefit of the discretionary judgment, a discretionary
judgment, of course, made after making findings about
credibility and the evidence.
Your Honours, the first of them, something which in Could I come then to a number of points: isolation appears minor, but in fact it is a matter which played a large part in the Full Court's approach, and that is that the Full Court said in its reasons for judgment that no undertaking had been given to the primary judge that we would institute the substantive proceedings at the time when
His Honour made the ex parte order. I will come to the references in the Full Court's judgment in a moment, but the significance of the point is that the absence of the undertaking was treated by the Full Court as showing that the primary judge was regarding the appointement of receivers as a kind of
judicial administration in insolvency rather than as an interim measure pending trial.
C2T35/l/RB 69 28/3/90 Bond Your Honours, the Full Court's observations on
the point are at page 350 in volume 2 where, about
line 26, is the first of two references. Their Honours
say:
No undertaking to file a writ was
required and the receivers were appointed
until further order.
And then, Your Honours, at page 366, Their Honours
say at the bottom of the page, in the last three
lines, speaking there about the undertaking as to
damages first, they say:
We think his Honour's failure to require the
usual undertaking supports the view that at
the time of the first and even at the timeof the second order his Honour considered that
he was not granting something akin to an
interlocutory injunction but ordering the
administration of the companies' affairs.
Features of the order made on 29 December
support this view. For in a number of respects,
additional to the absence of the usual
undertaking, this order suggests that it is
to operate not for a short time for the purposesof an action to be instituted, but indefinitely
and for a wider purpose.
(Continued on page 71)
C2T35/2/RB 70 28/3/90 Bond
MR JACKSON (continuing): Then, Your Honours, if Your Honours go down to line 16, they say:
There is no reference to an undertaking
by the plaintiffs to file a writ or make
an application for an interlocutory
order.
If Your Honours go to page 409, the affidavit in
support of the application for special leave, in
paragraph 29 that aspect is referred to and,
if Your Honours go then to page 505, which is in
volume 3 in the affidavit which has been filed on
behalf of the respondents, paragraph 142, that
appears to be not an issue.Your Honours, I have said the point was minor
by itself but it leads on to the second point which
is the fact that the Full Court was of the view that
the primary judge had regarded his order as being one
for the administration of assets in insolvency rather
than as for interim relief pending trial. I have given Your Honours pages 366 and 367 where the
Full Court says that but, Your Honours, one only has
to go the primary judge's reasons for judgment to
see that he was perfectly aware that he was dealing
with a case seeking interlocutory relief and he
says so on a number of occasions. Your Honours, page 66, volume 1, is where His Honour was dealing
with the chronology of events leading up to the
making of the ex parte order and he said, about line 37,
that he thought it was:
fair to say that by 23 December NAB had
determined that the defaults of BBH and its
subsidiaries were of such magnitude and their
financial situation so precarious that the
only satisfactory course available to it was
to terminate the facility, institute
appropriate proceedings to recover the sumoutstanding under the facility and in the
meantime have receivers and managers appointed to ensure that the assets of BBH
and its subsidiaries would be preserved
pending the determination of the proceedings.
Now, Your Honours, that is speaking of 23 December, then.
Then, Your Honours, at page 67 and again in the last
paragraph, he says he was:
satisfied that ..... before Christmas Day
NAB had made no decision to make an ex parte
application seeking the appointment of
receivers and managers, its intention and that
of its legal advisers. Still being -
what had been on the preceding page. Your Honours,
C2T36/l/JH 71 28/3/90 Bond at page 98, His Honour refers at about line 15,
to the fact that on the 29th:
the hearing of the application seeking the
appointment of receivers and managers
commenced.
And then, at page 100, he goes on to say, then dealing with the application before him, at line 12:
It is convenient to deal first with the
application that my order of 29 December
be vacated or rescinded. That application
is made on the following grounds:
(1) NAB cannot succeed in the proceeding brought against the Bond companies and in that
situation is not entitled to have receivers
and managers appointed of the assets of those
companies.
Your Honours, in the context in which His Honour
is speaking it is manifest, one would think, that he
is aware of the nature of the proceeding with which
he is dealing. And, he goes on to say at page 101, about line 20: I propose to deal first with the contention
that NAB cannot succeed in the proceeding.
In the writ issued on its behalf, NAB
seeks the following relief.
And, amongst that relief, as Your Honours will see, about line 18 on page 102, there is a reference to
a receiver, both interlocutory and final, being
claimed for that.
Your Honours, at page 106, line 28,
His Honour says:
Upon the hearing of an interlocutory
application such as the present, it is
unnecessary for me to arrive at anything like a concluded view in relation to the
matter. Indeed it would be quite wrong for me to do so. That must await the trial of
the action. If in a given case it was clearhowever, that a plaintiff had no real prospect of success -
and if Your Honours go on then to read the whole
of that paragraph. His Honour then says at page 107,
line 4, that he thought it was:
strongly arguable that NAB has a cause of
action against the Bond companies and that in
due course it will be entitled to judgment
in its favour.
C2T36/2/JH 72 28/3/90 Bond None of that paragraph, Your Honours, is redolant
of someone dealing with an application other than an
interlocutory application.
Your Honours, page 125 at the bottom of the
page, line 44, His Honour sets out his conclusion
after questionsof jurisdiction have been argued and
at the top of the next page says in the second line:
Further, the JUDICATURE ACT, and now
section 37(1) ...... did not alter the substantive principle which required
interlocutory equitable relief to be given
only in aid of a legal or equitable right.
Well, His Honour, no doubt, is directing his attention
to the matter before him.
(Continued on page 74)
C2T36/3/JH 73 28/3/90 Bond
MR JACKSON (continuing): Your Honours, at page 133, His Honour says, the last two lines on the page that he has
referred to section 37(1). Then at the top ofthe next page speaks of -
the inherent power of the Court to
preserve property that is in jeopardy -
and one would think he is saying preserve for some
ultimate purpose, then he refers to TAIT V THE QUEEN
and Your Honours will see that the quotation from
that makes it clear, by the use of the words "pending
a decision" that interlocutory relief is being
spoken of, and then, Your Honours, in the paragraph·
innnediately following that so, too, again it is made
clear and, Your Honours, there is a slight cri de couer
by His Honour on the point at page 178, line 20,
where he says:
Happily, as I have already been at pains
to point out, this is only an interlocutory
application. It is unnecessary for me,
therefore, to arrive at any concluded view
of the matter.
Your Honours, we would submit if one looks at
His Honour's judgment, it is really impossible to
come to the view that he believed he was doing other
than making an order which was an interlocutory order
pending the determination of the proceedings.
The third feature to which I wish to refer is
that the Full Court tteated the case as one not
amounting to apprehended danger of dissipation of
assets, Your Honours, I suppose I should say, in
terms of our correspondence as it were, but in the
sense referred to earlier. Those are the two
passages, at page 348 and 379, and Your Honours will
note, of course, that the court in those two
passages is not saying quite, that is what we said;
it is saying, that is what the court's view of the Your Honours, that really is to under describe, proceedings.
if I can put it that way, the nature of the case and to treat it as not containing one of its most
significant points, namely that the assets were in
jeopardy. In that regard, could I take Your Honours
to Mr Justice Beach's judgment again at page 229.
Perhaps if I could just interpolate, Your Honour, I
have not yet answered a question Your Honour
Justice Brennan asked me before lunch and that was,
which of the breaches were ones that - were there any
breaches that did not amount to - that were not
breaches of the negative covenants. I will come to
that in the passages I am about to come to shortly.
The answer is yes, there were, but I will mention those.
C2T37/l/RB 74 28/3/90 Bond Could I go first to page 229 in the judgment
of Mr Justice Beach. His Honour says, about line 14:
I was fully aware of the consequences of any
order I made in the matter, just as I was
fully aware of the consequences of N.A.B. 's
action as spelt out in the two letters from
Parker & Parker. As to the final complaint
that I was misled by Counsel for N.A.B. when
I was informed that the assets of the B.B.H.
Group were in jeopardy, I simply say that the
material before me then and now satisfies me that
they were. They were as much in jeopardy as the sum of $1,200,000,000. supposedly lent by
B.R.L. to B.C.H., a loan Which I have little
doubt will be the subject of further investigation
by this or some other court.
And His Honour said at the bottom of the page:
I made orders appointing receivers and
managers because the evidence placed before me
satisfied me that that was the appropriate course
to adopt. And nothing that has occurred since 29th December has caused me to change
my view in the matter.
His Honour goes on to say that the matters in the
course of the hearing have simply served to
reinforce those views and could I ask Your Honours
to read the remainder of that paragraph.
Your Honours, at page 233 His Honour, commencing
at about line 11, expressed the view that the
respondents had deliberately kept from the court
persons with direct knowledge of the issues he was
asked to consider and goes on to express a viewabout the way in which the case was conducted and
then goes on to emphasize at the top of the next
page, 234, but goes on to say more particularly,
about line 10 on the page:
What has occurred since that time -
that is since the making of the ex parte order -
has only served to reinforce in my mind the
fact that that was the appropriate course totake.
Now, Your Honours, so far those matters have been
dealt with generally but the particular breaches to
which His Honour was referring commence at page -
His Honour's discussion of them as a matter of conclusions appears at page 214 and following and
I wonder if I could take Your Honours to that. As I do so I will indicate those which are and those
C2T37 / 2/RB 75 28/3/90 Bond which are not part of the breaches of the negative
covenants, Your Honours. Pages215 and 216 contains
a discussion concerning the issue of $1.2 billion
redeemable preference shares. Your Honours, that
is a breach of the negative covenants. Then, at
line 18, His Honour went on to say, this is on
page 216, that:
In my opinion the issue of 1,200,000,000
preference shares without the consent of N.A.B.
was a serious breach of the ..... agreement andproperly regarded as such by N.A.B.
The next breach was a failure to give certificates
of non-default. That is not a breach of the
negative covenants, it is a breach of a positive
obligation.
BRENNAN J: These were all breaches of contractual obligations?
MR JACKSON: Yes, Your Honour.
(Continued on page 77)
C2T37/3/RB 76 28/3/90 Bond
BRENNAN J: And if it were possible to frame an injunctive order, whether negative or mandatory, to compel
adherence to the contractual terms, then wouldthere have been anything beyond that which would
have justified the making of some further order?
MR JACKSON: Yes, Your Honour. What there was was the view, established to the satisfaction of the judge,
that the assets of the companies were in jeopardy
and that the management of the company - well,
Your Honour, perhaps I will not attempt to paraphrase
it except to say that the conduct of those in command
of the company did not lead to any confidence that
that situation would not obtain.
Now, Your Honour, once one describes it as a
breach of contract, so it is. Every provision,
every breach will be a breach of contract, but
there was a question of the weight to be given to
them and the judge - Your Honour, I do not want
to emphasise the point unduly, but the judge saw
witnesses and saw what happened and took a very
serious view of it, and he thought that it was a
case where he should appoint a receiver.
Your Honour, the second breach, that is the
one at the bottom of 216, top of 217, is not a
breach of a negative covenant. Nor is the third one, which is the failure to furnish audited
consolidated accounts for the last financial year
and Your Honours will see in the last paragraph
on page 217 that the primary judge accepted a
contention that the failure to do so:
assumed a sinister aspect and was
clearly a substantial breach when it is
considered that the net worth test called
for under the Loan and Credit Agreement
is done by reference to the latest
audited consolidated balance sheet and
would require that the value of any assets
which have been qualified by the auditors
be disregarded.
And His Honour said that that submission was not
overstating the situation.
Your Honours, item 4 was a negative covenant.
So too was item 5 on page 218, and His Honour
said, in relation to item 5, which involved a sumof $40_million that - and I am speaking about
line 27:
According to the auditor's report the
total price to the B.C.H. Group will
actually be $200m whilst the true value
of the land may only be in the range of
$80m to $120m. Clearly there is much
more to this transaction than has been
C2T38/l/LR 77 28/3/90 Bond revealed to the court .. Be that as it
may, it is a transaction which would
justifiably cause N.A.B. the utmost
concern.
Your Honours, item 6 was a negative covenant.
Item 7 was a negative covenant, and I would ask
Your Honours to look at lines 15 to 18. Item
8 a negative covenant and item 9, and in respect
of item 9 I would refer Your Honours to page 219
at lines 30 to 32. The judge took the view that: The making of unauthorised restricted
payments constituted fundamental breaches
of the heart of the security structure
of the ..... Agreement.
And, at the top of page 220, he said:
If it is correct that unauthorised
restricted payments have been made
totalling hundreds of millions of dollars
that is a breach of the utmost gravity.
In my opinion it is strongly arguable that
such a breach has occurred.
So Your Honours will see that the case, in our
submission, was clearly being made that there
was a case of jeopardy of assets as His Honour found
in the passages to which I first referred.
Now, Your Honours, in relation to that - I am
sorry, Your Honours. I should also have said that His Honour also found that the conduct of those in control of the respondent companies was, in
relevant senses,unsatisfactory. Could I take
Your Honours to page 208. Your Honours, I will really do this very shortly, if I may. Page 208, lines 10 to 17, he thought there was an invention
in respect of sum of $21. million, the recording of a sun. of $21. million whtch might otherwise have had to be put
back in the fund.
At page 209, His Honour said, about line 39,
that it was highly likely that that entry was a
fiction and had:
been entered in the ledger to help disguise
the restricted payments which B.B.H. made
to B.C.H ...... says little for the credibilityof those involved in the financial management
of B.B.H.
At page 178, at the bottom of the page, the company - it was not unusual for inter-company transactions not
to be documented and then, Your Honours, at page 194,
at the bottom of the page, he refers to evidence that
C2T38/2/LR 78 28/3/90 Bond the assignment of a debt of $101 million was not
documented over a period of four months. He said it was extraordinary and it gave him little
faith in the business practices of the company and
led him to doubt the authenticity of the
transactions. Th!tt is at the top of page 195. And, Your Honours, finally, page 197, at the
bottom of the page, he said:
(Continued on page 80)
C2T38/3/LR 79 28/3/90 Bond
MR JACKSON (con~inuing): Page 197: I do not find it necessary to go further in
relation to the Ong transaction save to say
that if counsel for NAB's submissions are
soundly based, and my view of the matter is
that they are, then it is strongly arguable
that the Ong transaction was -
and then, if I go to the last three lines:
Rather it was a desperate attempt by
BBH in October 1989, by which time its
affairs were under investigation by NAB,
to camouflage the extent of unauthorized
restricted payments debited to BCH in its
loan account with BBH.
Your Honours, Your Honour Justice Brennan asked me
would it be satisfactory if you could work out
possible breaches and then grant an injunction to
cover each one of those but the judge is entitled to take the view, having expressed chose views,
that the case was one where the receiver was the
appropriate course to take.
BRENNAN J: It seems to be the view which he expressed at that
part of page 126 below that which you
previously read on to page 127 and it may be thatthe observations which were made by the Full Court with reference to interlocutory proceedings would be
unsupported by the passage at the top of page 126to which you have drawn our attention or it may be that their view about the way in which His Honour was approaching it is to be accounted for by the
passage at the bottom of page 126 going on to
page 127 and the following pages. In other words,that the administration of this group of companies was thoroughly unsatisfactory and it was necessary to appoint a receiver in order to preserve their assets. MR JACKSON: disagree in the sense that His Honour is saying the
Yes, Your Honour, .I agree and, perh~ps, case is quite different from a case of an tmSecured creditor
seeking to have a receiver appointed simply and so on.
What he is saying is, it is a worst case but at the
same time he is saying it is a worst case but
recognizing that it is still a case of interlocutory
relief and it would be -
BRENNAN J: He is also saying, is he not, that there is a flavour of security about this because it is out of
the funds properly administered that the creditor
seeks to be paid and, therefore, it is appropriate
to appoint a receiver in order to ensure that those
funds are available.
C2T39/l/JH 80 28/3/90 Bond MR JACKSON: That is correct, Your Honour, yes. As I answered before in answer to Your Honour Justice Deane,
if one says the line is security or no security,
we are on the no security side but it is not right
to describe us as being the simplest kind of
unsecured creditor.
BRENNAN J: Well, that is assuming that there are various kinds of unsecured creditors.
MR JACKSON: Well, Your Honour, assuming that the simplest kind is one whose primary remedy is an
action to recover a sum of money.
DEANE J: Mr Jackson, at the end of the day, on the leave application, does it not really turn. on the question
of the undertakings in the sense that if the ex parte
order without an undertaking should never have been
made and if it should never have been continued
without an undertaking, that is one aspect of the
matter which is emphasized by the Full Court and
it seems to me it is difficult to see how the appeal
would really succeed. On the other hand, if the absence of an undertaking should not have prevented
the ex parte order being made and continued, one
passes into the area that you would contend for and
it is difficult to see how one could say that that
was a matter lacking in importance or that the
Full Court's judgment would have been the same but
for the error you say they made. I have trouble seeing really how on the leave application one
goes much beyond that primary question.
I can understand your saying, "Oh, even if the first
injunction should never have been given ex parte
and without undertakings and even if it should never have been continued without undertakings and even if
the Court of Appeal or the Full-Court was ri2'ht in
reaching that decision, they should have the~ set
out to decide whether or not, on the facts, a
receiver should have been appointed", but, if wewere to reach that stage, I have difficulty in seeing
why this Court should intervene instead of leaving matters to take their course if your clients see fit
to apply ag;ain.
(Continued on page 82)
2T39/2/JH 81 28/3/90 Bond MR JACKSON: Yes. Your Honour, could I say a couple of things in response to that? One is that in the
way in which the Full Court judgment finds itself,
as it were, in the way in which the Full Court
has approached it, it is clear that the question of
the undertaking as to damages goes to the heart of
the beast, as it were, in the sense that it -
DEANE J: Without being critical, there is a degree of
repetition of the absence of an undertaking.
MR JACKSON: Your Honour, if I might adopt that without saying it, perhaps, that is so and, Your Honour, so
it certainly goes to the heart of all aspects of
the case even to the question of the Full Court's
own exercise of discretion so that it is a very
important thing. But, Your Honour, the view that
Your Honour puts to me does really involve an
assumption, with respect, about the actual
approach to the undertaking as to damages and that
is, with respect, that the giving or nob giving
of the undertaking as to damages in the first place
was critical to everything else which followed.
Now, Your Honour, that is a possible result and if
that is the right result then, no doubt, the
conclusions that Your Honour put to me earlier would
follow. However, it is not the only possible result. One possible result, Your Honour, is that the Court could take the view that the question
whether there should have been an undertaking as to
damages in the first place was really not so much
a matter of law but a matter of discretion for the
primary judge and that the question of discretion
was affected by a number of factors. Now, Your Honour, I do not want to labour the factors.
Could I just say one to which I have not previously
adverted?
Your Honour will have seen from the two
Pa-rker &--Parker letters to which I referred
earlier, what was said in those letters was that
unless the payment stoppage notices,which are
matters entirely anterior to the application of the receiver,were withdrawn as it were, that the
companies would suffer severe consequences. Now, His Honour might well have thought that once that
view had been expressed, assuming its correctness,
that there would be little to be gained by seeking an
undertaking as to damages because the damages would
be likely to be slight. Your Honour, the point I am trying to make, in a rather laboured way, I know,
is that it might not have been the case that in the
circumstances before His Honour, the need to givean undertaking as to damages in the particular
circumstances loomed large. Your Honour, the point
of all that really is, that whilst the undertaking
C2T40/l/JH 82 28/3/90 Bond as to damages issue is critically important, at
the same time there are more solutions to it than
one or two and if one accepts that proposition, then
the question of the other issues does arise.
Your Honour, those are our submissions.
MASON CJ: Thank you, Mr Jackson. The Court will take a brief adjournment in order to determine the course
that it will take in this matter.
AT 3.24 PM SHORT ADJOURNMENT
UPON RESUMING AT 3.47 PM:
MASON CJ: The Court need not trouble you, Mr Myers. This is an application for special leave to
appeal from a judgment of the Full Court of the
Supreme Court of Victoria setting aside orders
made by Mr Justice Beach on 29 December 1989 and
9 February 1990.
On 29 December 1989 Mr Justice Beach, on the
ex parte application of the applicants, appointed
receivers and managers of the respondent companies
until further order. On 2 January 1990, the respondents moved to vacate or rescind those orders.
After a lengthy hearing, Mr Justice Beach refused that
application, along with another application to remove
the receivers on the ground of unsuitability.
His Honour made ancillary orders requiring the receivers to give security and varying their powers
and directed that the receivership continue pending
the trial of the action or further order.
The applicants had by then commenced an action
in which they seek a declaration that the first
respondent is indebted to the applicants in the sums
of money stated in schedule 2 to the applicants'statement of claim and judgment for those amounts.
The applicants concede that the action is in essence
a claim for money due by an unsecured creditor and
for recovery of the debt.
In allowing the respondents' appeal from the
orders made by Mr Justice Beach, the Full Court
pointed to a number of undesirably features of the
ex parte application, including the circumstance that
it was made ex parte when notice could have been
C2T40/2/JH 83 28/3/90 Bond given. A principal factor which induced
their Honours to set that order aside was that it
operated unfairly by reason of the primary judge
having failed to require the applicants to give an
undertaking as to damages. The applicants did not
offer such an undertaking before the primary judge,
either on the ex parte application or on the
subsequent contested hearing. Nor did they offer such an undertaking before the Full Court.
Their Honours expressed the view that there were
limitations on the exercise of the power of the court
to appoint receivers which, having regard to the way
in which the applicants' case had been presented,would inhibit the appointment of receivers to a
company at the suit of an unsecured creditor.
None the less, the court posed for itself as the
critical and primary question for determination:
whether, on the findings of fact except insofar
as: these have been successfully assailed, there
is such a danger of future breaches of covenant
proved as made it appropriate in all the
circumstances to appoint receivers and managers.
The court went on to say:
We find it unnecessary to determine whether
his Honour was wrong in concluding that it
was strongly arguable that sidestreaming and
upstreaming had continued since 15 November 1989,
for even on his Honour's finding here we would
not ourselves be satisfied that an injunction
| T41 | would not meet the case. | We say this despite the |
highly unfavourable view formed by the learned
Judge of the behaviour of some at least of those
who controlled the Bond group. We would regard the danger of the carrying into effect of the
agreement for the sale of the Australian
brewing assets as not sufficient in all the
circumstances, including the undertakings, to
warrant even an injunction, but if any relief
was to be given an interlocutory injunction was
sufficient. The right conferred on the banks in November 1989 to have Peat Marwick
Hungerfords monitor and review the day to day
activities and affairs of the B.B.H. group is
important here.
As has been indicated, their Honours attached
great importance to the absence of an undertaking as
to damages which they described as the nusual
undertaking" to be required, clearly having in mind
contested applications as well as ex parte applications
for the appointment of receivers and managers. Thisled their Honours to conclude that the primary judge
C2T42/l/PLC 84 28/3/90 Bond was incorrect in refusing on 9 February to set
aside his earlier order. The Full Court's conclusion in this respect is expressed in these
terms:
In any event, if any case for the interim or interlocutory appointment of receivers and
managers of the undertakings and assets was
made out, the usual undertaking would have to
be exacted, and justice would require that the
undertaking attach to the original appointment
as well as to any order modifying the original
order. The argument on the appeal has proceeded on the basis that the respondents are not willing,
in order to keep the receivers in possession,to give an undertaking as to damages which
will protect the appellants against the
consequences of the orders of 29 December and
9 February. To preserve the receivership
without a satisfactory undertaking as to
damages is unthinkable.
The applicants seek special leave to appeal on
four grounds, namely:
1. That the Full Court erred in principle
in treating as settled law or practice
that a party obtaining the appointment
of a receiver pending trial, after a
contested hearing, is required to give
an undertaking as to damages;
2. That the Full Court erred in saying that
a receiver could only be appointed if an
injunction would not afford sufficient
protection;3. That the Full Court was wrong in concluding
that there was power to appoint a receiver
to a financially embarrassed company at the
instance of a hostile creditor, but the
power would not be exercised; and 4. That, in addition to the matters already mentioned, the Full Court misapprehended the nature of the applicants' case, the
way in which the primary judge had treated
the case and the fact that an undertaking
to commence proceedings had been givento the primary judge.
As will appear, it is unnecessary for us to deal
| T42 | with these grounds seriatim. We are prepared to assume, for the purposes of this application, that |
| circumstances could arise in which the appointment | |
| of a receiver of the assets of a company which is |
C2T43/l/LR 85 28/3/90 Bond not expressly alleged to be insolvent would be
justified even on the application of a plaintiff
who claims to be an unsecured creditor, cf eg.,
DERBY & CO LTD V WELDON, (1988) 2 WLR 412.
Even on that assumption, however, we do not think that the proposed appeal in the present case
would enjoy sufficient prospect of achieving a
restoration of the primary judge's orders. For one
thing, it is clear that a contrary view to that
involved in such an assumption was not part of the ratio decidendi of the decision of the Full Court.
To the contrary, the members of the Full Court expressly emphasised, "that there was no attempt
at any stage in the present case to make a Mareva-
type case of apprehended danger of dissipation of
assets". We would not that we do not read their Honours' reference to a Mareva-type case as
involving a mistaken view that a Mareva injunction
cannot be obtained in the absence of a positive
intention to frustrate any judgment (see JACKSON V
STERLING INDUSTRIES, (1987) 162 CLR 612 at page 623).
Further, and more importantly, the primary
issue on the appeal to the Full Court was whether
the primary judge had been in error in refusing
to vacate or rescind the orders of 29 December 1989appointing receivers. Those orders had been made
ex parte and without any undertaking as to damages
being proffered or required. It is clear that
they should not have been made in those circumstances.
The orders should have been rescinded or vacated
when the matter came again before the learned primary
judge, in the continued absence of any proffered
undertaking as to damages even at that stage.
The damage to be apprehended by the making of
an order for the appointment of a receiver and
manager is not so much that the receive~ and manager
may so exercise his powers as to occasion loss in
the business to which he has been appointed. It consists of the consequences flowing from the fact
of appointment and of the defendants' loss of "its
title to control its assets and affairs", the
phrase of Viscount Haldane in WILLIAM H. PARSONS V
SOVEREIGN BANK OF CANADA, (1913) AC 160 at page 167.
Where damage of those kinds is to be
apprehended as flowing from the appointment of a
receiver by interlocutory order, consideration
must be given to requiring from the party seeking
the order at least some appropriate undertaking as
to damages in the event that the appointment is
| T43 | ultimately shown to be unjustified. |
C2T43/2/LR 86 28/3/90 Bond In the present case, where the judge
at first instance was prepared to appoint receivers
and managers over the whole of the assets and
undertakings of the respondent companies on the
application of unsecured creditors, it was clear
that some such undertaking was an essential
condition to the making or the continuation of
an order.
In the result, the application for special
leave to appeal is refused.
(Continued on page 88)
C2T44/l/LR 87 28/3/90 Bond
MR. MYERS: With costs; if Your Honours please. BRENNAN J: If you seek costs, why should you have the costs
of that quite remarkable affidavit that was filed
containing, as it does for the most part,
tendentious material repetitious of the material
that was found in the appeal books?
MR. MYERS: If Your Honour pleases, that affidavit was in reply to the affidavit that was Mr Hammond's
affidavit, to deal with issues or to draw to the
Court's attention issues that were in contest
between the parties.
BRENNAN J: It may have been in response to Mr Hammond's affidavit, but we are not dealing with the costs
of that, and the drawing to the Court's attention
could have been effected, one would have thought,
by way of argument.
MR. MYERS: There was a great deal of material, if Your Honour pleases, before Mr Justice Beach and before the
Full Court. There were 15 volumes of appeal papers
before the Full Court. To undertake the task of reproducing further copies of those and to take the considerable!' and- time· consuming task.
BRENNAN J: That might have been so but the affidavit for
the most part seems to join issue with the
construction that Mr Hammond placed upon the judgments in the court below.
MASON CJ: Mr Myers, for my part I do not see that there is anything wrong in a respondent filing appropriate
material which, in advance of the hearing, gives
an indication to the Court of the boundaries of
the contest on a special leave application. I would think it quite proper for a respondent to file a
document in advance of the hearing which draws
attention to the submissions that it Proposes to make.
But there seems to be something strange and curious
part, involves contentions and submissions about tr.e about filing a lengthy affidavit which, for the most law and about what the Full Court did and about what the primary judge did. For instance, in one
instance the affidavit says:Under the influence of Mr Hulme's
orderly government submission the
Full Court -
went on to do something. It does not seem to me
that a solicitor should file an affidavit in those
terms making that kind of connnent about what theFull Court did.
C2T44/2/LR 88 28/3/90 Bond MR MYERS: That, I believe, Your Honour, was a reproduction
of some words that the Full Court used. In any event, the purpose of the affidavit was to draw the boundaries of the dispute and to provide a
convenient point of reference from the material
contained in the 14 or 15 volumes that were before
the Full Court and to draw together the variousthreads that were discerned in the two or three
judgments - three, in fact: Mr Justice Beach's
judgment of 5 January - for the purposes of
assisting the Court.
DEANE J: But a 97-page affidavit filed by one side as part of the material of a special leave application
indicates to my mind a fundamental misapprehension
of the appropriate procedure on applications for
special leave. I mean, we might as well have been required to read the whole of the transcript. MR MYERS: With respect, no, Your Honour. The transcript
and the appeal papers, I can only say it again,
before the Full Court constituted - I said 14 volumes,
before. I believe it was 15 by the end of the hearing and there were 5000, or 6000 or 7000 pages of material before the Full .Court and that did not
even include the six volumes of material that was
put before Mr Justice Beach on 29 January. There
was a very large and wide-ranging 'Series of factual
disputes.
DEANE J: That seems to indicate that somehow legal proceedings
have got out of control in terms of matters such as appointment of receivers which should be dealt with
quickly and succinctly, one ~uld, have thought.
MR MYERS: With respect, I do not dissent from what Your Honour
says.
DEANE J: Just looking at it, it all seems to be somewhat
mad ..
MR MYERS: With respect, I do not dissent from what Your Honour
says. If the Court pleases.
MASON CJ: Do you wish to say anything?
MR JACKSON:
Your Honour, we cannot resist costs generally, of course.
We would submit that it is inappropriate
for the respondents to have the costs of that
affidavit and, Your Honours, the costs occasionedby it. It is one which, in our submission, both
as to content and, with respect, tone, should not
be condoned by the Court.
MASON CJ: I suppose the costs of this affidavit are but a drop in a veritable ocean compared with the overall
costs but it is interesting to note that you feel
so strongly about it, Mr Jackson.
C2T45/l/PLC 89 28/3/90 Bond Do you want to respond, Mr Myers, in answer
to what Mr Jackson has said?
MR MYERS: No, no, Your Honour. MASON CJ: The application will be dismissed with costs other
than the costs of the respondents' affidavit. There
is only one affidavit that has been filed by the
respondents, is there not?
MR MYERS: Yes, there is. MASON CJ: Very well, the Court will now adjourn sine die.
AT 4.03 PM THE MATTER WAS ADJOURNED SINE DIE
C2T45/2/PLC 90 28/3/90 Bond
- AGLC
- National Australia Bank Limited & Ors v Bond Brewing Holdings Limited [1990] HCATrans 53
- Case
- [1990] HCATrans 53
- Decision Date
CaseChat Overview and Summary
The legal issues before the High Court involved three matters of public importance arising from the Full Court's judgment, as well as concerns regarding the manner in which the appeal was conducted in the Full Court, which the applicants argued warranted special leave in the interests of the administration of justice. The proceedings in the Full Court were an appeal from two orders of Mr Justice Beach appointing receivers and managers. The first order was made ex parte on 29 December, and the second was made on 9 February after a contested hearing.
The contested hearing in the Full Court arose from the respondents' application to set aside the primary judge's ex parte order. At this hearing, evidence was presented by both parties. The primary judge also considered a related application concerning the substitution of receivers or whether the appointed individuals should indeed serve as receivers. The Full Court's judgment, which the applicants sought special leave to appeal, addressed these matters.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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