SA Asset Management Corp v Sheahan - [1995] SASC 5182

COURT IN THE IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA DOYLE CJ(1), DUGGAN(2) and NYLAND(3) JJ

CWDS Corporations - receivers and managers - other matters - right of receiver to custody and control of assets - leave of Court required - no general discretion in Court to refuse leave - leave correctly granted. Re Landmark Corporation (1968) 1 NSWR 705; in re Potters Oils Ltd (1986) 1 WLR 201, applied.

HRNG ADELAIDE, 13 June 1994 #DATE 1:8:1995 #ADD 27:11:1995

Counsel for appellants: Mr W J Wells QC with him
Ms R Pak-Poy

Solicitors for appellants: Minter Ellison Baker O'Loughlin

Counsel for respondents: Mr M L Abbott QC with him
Mr G Grieves

Solicitors for respondents: Piper Alderman

ORDER
Appeal dismissed.

JUDGE1 DOYLE CJ This is an appeal from a decision of a Judge of this Court. The Judge declared that the chose in action the subject of Action No. 289 of 1993 in the Supreme Court between Health and Life Care Limited (In Liquidation) ("HLC") as plaintiff and Price Waterhouse (a firm) as defendant was an asset of HLC which was subject to a mortgage debenture given by HLC in favour of South Australian Asset Management Corporation ("SAAMC"). His Honour held that SAAMC was entitled to possession of the chose in action, which for practical purposes meant entitled to take control of the conduct of the action. The defendants in the action heard by His Honour were Mr Sheahan and Mr Sims, the Liquidators of HLC. I will refer to them hereafter simply as "the liquidators".

2. In this appeal His Honour's decision is challenged by the liquidators. SAAMC and the liquidators each challenge the order which His Honour made as to costs.

3. To explain the issue which was presented to the Court on appeal it is necessary to summarise the facts. I will do so as briefly as I can. In doing so I will omit altogether reference to a number of details which, to my mind, are irrelevant to the outcome of the appeal. The facts are taken from His Honour's judgment.

FACTS
4. SAAMC is a secured creditor of HLC by virtue of a mortgage debenture granted by HLC. This debenture gave SAAMC a fixed and floating charge over the undertaking and assets of HLC. On 22 February 1993 SAAMC appointed a receiver and manager of HLC. The appointment was made in exercise of its powers under the mortgage debenture.

5. On 23 February 1993 HLC instituted proceedings in the Supreme Court against Price Waterhouse, a firm of Chartered Accountants. That is Action No. 289 of 1993. In that action HLC claimed damages for breach of contract and for negligence in relation to accounting advice given by Price Waterhouse to HLC.

6. Acting on the view that the cause of action was an asset or property of HLC and subject to the charge given by the debenture, the receiver and manager took over the conduct of action. Just how this…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1995] SASC 5182
Decision Date: 1 August 1995

CaseChat Overview and Summary

This case involved an appeal from a decision of a Judge of the Supreme Court of South Australia. The appeal was brought by the South Australian Asset Management Corporation (SAAMC) against the liquidators of Health and Life Care Limited (HLC). The issue at hand was whether SAAMC was entitled to take control of a legal action that HLC had initiated against Price Waterhouse, a firm of Chartered Accountants, and whether the Court should grant leave for SAAMC to resume control of the action. The appeal also involved a challenge to the order regarding the costs of the action. The Full Court of the Supreme Court of South Australia dismissed the appeal and cross-appeal, finding that the trial judge's decision was correct. The Court held that once the applicability of the charge was established, leave would be granted to the secured creditor to take control of the asset subject to orders necessary to deal with any matters affecting the orderly administration of the liquidation and subject to any orders required to protect the proper interests of the liquidator. The Court also found that the liquidators were not entitled to recover their costs from SAAMC, as they were the unsuccessful parties in the litigation.

Orders