Van Reesema, E. v Australia Growth Resources Corporation Pty Ltd

C A T C H W O R D S

BANKRUPTCY - Bankruptcy Notices - application to set aside -

counter-claim in conversion against Receivers and Managers

creditor company - counter-claim not 'mutual and due in the same

right' - whether counter-claim could not have been set up in the

action in which the judgments were obtained - whether a bona fide

clalm -

liability of Receivers and Managers appointed

by the

Court discussed.

Bankruutc-

1966 (Cth) ss.4O(l)(g) and 41(7).

ERNST ABRAHAM SIEWERTSZ

VAN REESEMA

Judgment Debtor

AUSTRALIAN GROWTH RESOURCES CORPORATION	PTY. LTD.
(Receivers and Managers Appointed)

Judgment Creditor

Fisher 3.

Adelaide

27 March 1987

IN THE FEDERAL COURX EF &USTEALEA_

) )

SOUTH AUSTRALIA DISTRICT REGISTRY

)

DIVISION

GENERAL

)	No.1167 of 1986

) No.1168 of 1986

BANKRUPTCY DISTRICT	OF THE STATE	) No.1169 of 1986
) No.1170 of 1986

OF SOUTH

AUS RALIA

)

No.1171 of 1986

Re :

ERNST

ABRAHAM

SIEIERTSZ

VAN REESEMA

Judgment Debtor

Ex Parte: AUSTRALIAN GROWTH

RESOURCES CORPORATION PTY.

- --

(Receivers and Managers

Appointed)

Judgment Creditor

MINUTES OF ORDER

JUDGE MAKING ORDER	FISHER J.
WHERE MADE	ADELAIDE
DATE OF ORDER	27 MARCH 1987
THE COURT ORDERS THAT:

1.	The applications	to set aside	the	bankruptcy	notices	be
dismissed.

2. Pursuant to sub.s.41(7) of the Bankruptcy Act 1966 (Cth) time for compliance with the bankruptcy notices be extended to and including 27 March 1987.

2 .

3 .	The debtor do pay to the creditor its costs	of the
proceedings, the same to be taxed if not agreed.

Note: Settlement and entry	of order is dealt with in Bankruptcy
Rule 124.

IN THE FEDERAL COURT OF AUSTRALIA )

)

SOUTH AUSTRALIA DISTRICT REGISTRY 1

)

GENERAL DIVISION

No.1167 of 1986

) No.1168 of 1986

BANKRUPTCY DIST-OF	THE STATE	)	No.1169 of 1986
)	No.1170 of 1986
OF SOUTH AUSTRALIA	)	No.1171 of 1986

Re :

ERNST

ABRAHAM

SIEWERTSZ

VAN REESEMA

Judgment Debtor

Ex Parte:

AUSTRALIAN GROWTH RESOURCES CORPORATION PTY.

UUU .

(Receivers

and

Manaaers

Appointed)

Judgment Creditor

REASONS FOR JUDGMENT

FISHER J. :

27 MARCH 1987

This matter concerns 5 bankruptcy notices issued on the application o€ Australian Growth Resources Pty. Ltd.

(Receivers

and Managers appointed) ("the company") directed to Ernst Abraham

Siewertsz Van Reesema

("the debtor").

Each of the bankruptcy

notices was based on a separate certificate of judgment of the Supreme Court of South Australia for costs which the debtor was ordered in Action No.1504 of 1985 to pay to the company. Time for

compliance wlth the

bankruptcy notices was fixed for 14 days from

the date of set-vice.

On 13 November 1986, within the said period

14 days, the debtor filed with the Registrar in respect

each bankruptcy notice an application to

set aside such

notice

and an affidavit

support. It was

contended

that

this

affidavit

satisfied

the

requirements

sub.s.41(7)

the

Bankruptcy Act 1966 (Cmwlth)

("the Act") which subsection can

provide an extension of the time for compliance

by a debtor wlth

the bankruptcy notice.	The debtor sought the following orders in
the application:

"1. To set aside the Bankruptcy Notice herein,

or in

the alternative,

2. To extend the

time

for

compliance

with

the

Bankruptcy Notice until proceedings

to set aside

the judgment or order in respect

of which the

Bankruptcy

Notice

was

issued

which

have

been

instituted by

the Judgment Debtor in the Supreme

Court of South Australia in Action	No. 2944 of 1986
are finally determined."

In the penultimate paragraph

of his affidavit the debtor

asked

"that any hearing in this matter be heard in the flrst week of December 1986 or in the first week of February 1987 as I shall be unavailable on any other date prior to Monday March the 30th,

1987". When the matters

first

came

before

the court

on 24

November

1986 they

were fixed for hearing as requested in the

first

week

of February 1987. These

considerations

became

relevant when the debtor made

a number of applications to adjourn

the

hearing beyond

the

first

week in February

1987

which

applications were refused. The hearing commenced on Wednesday 4

February

1987

after a number of further

interlocutory

applications and the debtor was in fact available up

to and

including l8 February 1987 when the hearing

concluded.

The amounts

claimed

under

the 5 bankruptcy

notices

totalled $22,663.40,

in each instance for orders for costs

proceedings No.1504 of 1985

the

Supreme

Court

of South

Australia.

This amount of $22,663.40 was made up as follows:

"Bankruptcy Notice 1167186

$6,604.23 pursuant to

the

order of White J. of 5/7/85.

1168/86

$12,182.69 pursuant to the

order of White J. of 5/7/05.

1169186

$1,247.09 pursuant to

the

order of O'Loughlin J. of

5/9/85.

1170/86

$1,730.63 pursuant to the

order of the Full Court of

1/4/86.

1171/86

$898.76 pursuant to the order

of O'Loughlin J. of 26/9/85.

The parties agreed that the applications in relation to each of the bankruptcy notices should be heard concurrently and it was

seldom necessary to

differentiate between the various notices.

The hearing was generally complex and confused, to a considerable extent in consequence of the fact that on many occasions both in the Supreme Court and this Court the debtor was, except on the

hearing before me, unrepresented. He drafted his own documents. There were numerous proceedings and applications in the Supreme

Court and also in the District Court of Adelaide.

The debtor is,

to say the least, a very experienced litigant and took every

point which could possibly

be open to him under para.40(l)(g).

It is also quite apparent that

I was not made aware

of all

aspects of the proceedings and applications in the Supreme Court

doubtless because of their irrelevance to the matters before me.

The litigation in which the orders for costs were

made

was initiated

the

Corporate

Affairs

Commission

("the

Commission"). Application was made to the Supreme Court of South

Australia on 3 May 1985 pursuant to 5.573 of the Companies (South relevant:

"573(1) Where

(a) an investigation 1s being carried out under this Code in relation to any act or omission by a person, being an act or omission that constitutes or may constitute an offence against this Code;

(b)

a prosecution has been instituted against a

person for an offence against this

Code; or

(c)

a civil proceeding has been instituted against a person under this Code,

and the Court considers

it necessary or

desirable

to	do so for the purpose of protecting the

interests of any

persons to whom

the

person

referred to in paragraph (a),

(b) or (c), as the

case may

be (in this section referred

to as the

'relevent person'), is liable or may be or become liable to pay any moneys, whether in respect of a

debt, by way of damages

compensation

otherwise, or to account for any securities

other property, the Court may, on application by the Commission, make one or more of the following orders :

...

an order prohibiting, either absolutely or subject to conditions, a person holding money, or securities or other property, on behalf of the relevant person or on behalf of any person

associated

with

the

relevant

person

from

paying

all

or any of the

money,

transferring, or otherwise parting with possession of, the securities or other property, to, or to another person at the

direction or request

of, the person on whose

behalf the money, or the securities or other

property, is or are held;

...

an order appointing -

(i) ...

(ii) where

the

relevant

person

a body

corporate - a receiver or receiver and

5 .

manager, having such powers as the Court orders, of the property or of part of the property of that person;

subsequent

provision

(6.573

(1A))

some

relevance-

"573(1A). Where

an application is made

to the Court for

an order under sub-section (l), the Court may, if in the opinion of the Court it is desirable to do so, before considering the application, grant an interim

order, being an order

of the kind applied for that

expressed to have effect pending the determination	of
the application."

The

Supreme

Court

exercised

jurisdiction

under

sub.s.573(1) upon

being

advised

of an

investigation by the

Commission of a possible breach

of Part IV Division

6 of the Code

by the Company.

This Part

relates to the issue by a company to

the public of "prescribed interests".

At all relevant

times

the debtor, his son and his

daughter were directors of the company.

The management of the

company was however

exercised exclusively by the debtor. The

application by the Commission named the company, the debtor and

his son and daughter as respondents and sought the following

orders -

"1.

An order prohibiting Ernst Abraham

Siewertsz Van

Reesema, Martine Ludowici Siewertsz

Van Reesema and

Nicholas

Anthony

Siewertsz

Van

Reesema

holding

money, or securities or other property on behalf

Australian	Growth	Resources	Corporation	Pty.
Limlted.

2. The appointment of a receiver and manager over all of the property of Australian Growth Resources Corporation Pty. Limited with power to:-

(a)

Enter upon or take possession of or receive

the said

property

Australian

Growth

Resources Corporation Pty. Limited.

(b) Carry on the business

Australian Growth

Resources Corporation Pty. Limited or any part

thereof wlth all the	power of	an absolute
owner.

(c)

Do any such acts, assurances and things as, in

the opinion of

the receiver and manager, are

necessary or incidental to

proper

performance of his duties pursuant

to this

order.

3. Such further or other order which the Court may

deem fit and

proper."

On Tuesday

7 May

1985 White

S . in the Supreme Court, in the

absence of the debtor and his

son and daughter who had

not been

served, made the following interim orders pending determination

of the application on 10 May

1985 -

"1.

That upon service of this order upon Ernst Abraham

Siewertz Van Reesema, Martine Ludowici Siewertsz

Van Reesema and Nicholas Anthony Siewertsz Van

Reesema, the

said

Ernst

Abraham

Siewertsz

Van

Reesema, Martine Ludowici Siewertsz Van Reesema and

Nicholas

Anthony

Siewertsz

Van

Reesema

cease

holding money, or securities or any other property on behalf of Australian Growth Resources Corporation Pty. Limited.

2. That

Michael

Jaunay

Mount and

Fredrick Charles

Perkins

appointed

jointly and severally as

receivers and managers over all of the property

Australian Growth Corporation	Pty.	Limited with
power to:-

(a) Enter upon or take possession

of or receive

the said

property

Australian

Growth

Resources Corporation Pty. Limited.

(b) Carry on

the business of Australian Growth

Resources Corporation Pty. Limited or any part

thereof with all	he powers of an absolute
owner.

as, in

the

opinion

of the

said

receivers

and

managers, are necessary or incidental to the proper performance of their duties pursuant to this order. "

l .

Thereafter a very considerable volume

of litigation was

conducted and still

is being conducted in the Supreme Court, both

in Action No. 1504 of 1985 and in separate actions.

In many

instances the debtor was ordered

to pay to the company its costs,

and in particular was ordered to pay the costs of the company

various applications in Action No. 1504 of 1985. It

is the costs

of these applications which are the subject

the

various

bankruptcy notices before

me.

In the affidavit which initiated the

proceedings in this

Court

the debtor,

unrepresented

the

time, sought

orders

setting aside the bankruptcy notices on

a number of grounds.

the hearing, however evidence

and argument were only directed to

the debtor's contention

that, in accordance with para.40(l)(g),

he had a

counter-claim, set-off or cross demand (hereinafter

called a "counter-claim") exceeding the amounts claimed

the

company, which counter-claim he could not have set up in the

proceedings in which judgments were obtained against him.

Other

contentions were made in his affidavit, namely

(i)

that the

orders for costs were

no force or

effect because they were

made consequent upon orders of White J. which were obtained by fraudulent misrepresentation or surprise or miskake, (ii) that the amounts specified in the bankruptcy notices exceeded the amounts in fact due and (iii) that the orders were not final

judgments or orders.

These latter. grounds F o r setLing aside

the

bankruptcy

notices

were

abandoned

prior

to trial,

and

consequence a number of paragraphs in the initial affidavit and a

subsequent affidavit of the debtor were struck out upon objection

by counsel for the company. I was also asked on a number of

occasions to go

behlnd the

certificates of judgment of the

Supreme Court.

However no evidence was produced to support such

a submission and I refrained from doing

so except to the extent

referred to hereafter,

namely

to compare the orders

of the

Supreme Court judges with the certificates	of judgment upon which
the bankruptcy notices were based.

Two provisions of the Act

fall for consideration in

these proceedings.	Paragraph 4O(l)(g), to the extent relevant
provides as follows:

"40(1) A debtor commits an act of bankruptcy in each of

the following cases:-

(g) if a creditor who

has obtained against the debtor

final judgment or final order, being a judgment

order the execution of

which has not been

stayed,

has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under

this Act and the

debtor does not -

(i)

where the notice was served

in Australia

within the time fixed

by the Registrar

whom the notice was

issued; or

(ii) ...

comply with the requirements

of the notice

satisfy the Court that

he has a counter-claim,

set-off or cross demand equal to

or exceeding the

amount of the judgment debt

or sum payable under

the

final

order,

as the

case may be, being

counter-claim,

set-off or cross

demand

that

could not have set up in the action or proceeding

in which the judgment or order was obtained;"

Subsection 41(7) is in the following terms:

"41(7) Where, before the expiration

of the time fixed

for

compliance

with

r quirements

of a

bankruptcy

notice,

the debtor has filed with the

Registrar an affidavit

to the

effect that he

has

such a counter-claim, set-off or cross demand as is referred to in paragraph 40(l)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand,

that time shall be deemed

to have been

extended,

immediately

before

Its

expiration,

until

and

including the day on whlch the Court determines

whether it is so satisfied."

In a

complex matter

such as this, and in particular

because I am troubled by much of the evidence given by the

debtor, it is

pertinent to note the

extent to which the debtor

must fulfil1 the obligations imposed on him by para.40(l)(g).

is specifically required to "satisfy the Court that

he has" such

a counter-claim as is therein referred to. In Ebert v The Union Trustee Co. f Australia Ltd. (1960) 104 C.L.R. 346 the High

Court cited on page 350

the dicta of Street J. in Re Duncan,

parte Modlin (1917) 17 S.R.

(N.S.W.)

152, namely that the

debtor

need only satisfy

the Court that he has a bona fide c l a m which

he is fairly entitled to litigate.	The High Court said of	this
dicta on the same page:

"This perhaps is expressed too favourably

to the debtor.

In Re A Debtor (C19581 1 Ch.81 at p.99) Roxburgh J. said:

'But not every demand

will suffice.

A demand made in

bad faith would not be good

enough.

The debtor

must

satisfy the court

that he has a genuine demand...

But in my

opinion the demand must

more than bona

fide:

the

court

must

satisfied

that

it has

reasonable probability of success.'

Perhaps the standard may be expressed

by saying that

the debtor must

show that he has a prima facie

case,

even if then

and

there

does

not

adduce

the

admissible evidence which would make

out a prima facie

case before a Court trying

the issues that are involved

in his counter-claim set-off

or cross demand."

It is in my

view necessary that the debtor satisfy the

Court to this extent in respect of all of the requirements of para.40 (l)(g). In particular he must show a prima facie case

10.

that he has a counter-claim against the company

in the same right

as its judgment against him.

Likewise he must show that he could

not have set

up the counter-claim in Action

1504 Of 1985 being

the action in	which the orders	for costs were obtained agalnSt	,
him.

I consider first the nature of the debtor's counter-

claim.

It is to

be exclusively found,

as his counsel conceded,

in paragraph 4(a) of the debtor's statement

of claim in action

No.149 of 1987. This statement of claim was filed on 27 January 1987 and accompanied the writ which on that day initiated the proceedings. The company was the defendant and the debtor after

relating the appointment of the receivers stated

his claim in

paragraph 4(a) as

follows:

"4.

After the

7th day of

May 1985 the said receivers

and

managers

purported

take

possession

of the

property of the said company and purported

to take

control of the said company and proceeded

to conduct

the

said

company

breach of its agreements

and

obligations to the plaintiff in that

(a) The

Receivers and Managers

the said company

unlawfully and improperly

took possession

of the

Plaintiff's property to the value

of $30,000 and

failed and refused to	return the said property	to
the Plaintiff;

5. &&	the	Plaintiff	claims	from	the Defendant as
follows :	-

Pursuant to paragraph 4(a)	$30,000.
...

It was accepted that, at best for the debtor, his claim

was in conversion for

@30,000 being the value

of his

property

allegedly converted by the receivers and managers.

11.

The facts upon which

the debtor relied to establish the

conversion can at this stage be briefly

stated.

Prior to 30 Aprll 1985 the company had been carrying on business under the name, inter alia, "Australian Home Nurseries". It acquired from the debtor on 30 June 1984 the right to use this name "for such period as permitted by Ernst Van Reesema". The

nature of the business was described as a "home nursery program" pursuant to which the company sold to growers as recited in a standard form of agreement certain plant and goods and agreed to supply certain horticultural services. Little turns on these

agreements except to note that

appears that the possibility

that they were covered

by the expression "prescribed interests"

prompted the investigation

by the Commission.

The debtor told the Court that he became aware of

this

investigation during 1985 and the possibility that the company

alternatively would be prosecuted.

He said that this possibility

prompted him for whatever reason to acquire from the company the business conducted under the name "Australian Home Nurseries". A meeting of directors of the company was held on 30 April 1985

commencing at 11.45

p.m.

and

concluding

12.45 a.m. the

following day. The unconfirmed and unsigned Minutes of the meeting indicate that it was attended by the debtor, his son and daughter as directors and Heather Reynolds as secretary. The relevant Minutes were as follows:

"AUSTRALIAN HOME	Ernst van Reeoema advised the meeting
NURSERIES:	that he had received advice from five
and	Homegrowers from time to time from
HOMEGRO :	the middle of February 1985 that they had been contacted by a Mr. Mark Wheaton aI vestigator of the

12.

Corporate

Affairs

Commission

and

requested to

cooperate and

lodge

complaints

and

or produce

thelr

Grower

agreement

and

S ign

affidavlts and DK appear in Court to

give evidence.

The order in

whlch the Homegrowers

had contacted Ernst van Reesema

were:

Anna Ocalewicz

Peter Barnfield

Hope Whiff in

Frank Tynski

Marilyn Evans

Mr. Peter

Barnfield

had

further

advised that he had been contacted

several

times

and

Mr. Wheaton

had

confirmed

that

prosecution

was

take place.

All five Homegrowers had confirmed

that they advised

Mr. Wheaton that

they had no complaint. Mr. Ernst van

Reesema advised the meeting that in

the

circumstances

'Australian

Home

Nurseries' and 'Homegro'

transferred to him, and

he tabled a

draft

agreement

setting

out

the

terms.

Resolved: That the	Agreement	be
entered into.

CLOSURE

The

transferring

Agreement

'Australian Home Nurseries' and

Homegro to Ernst

van

Reesema

was

executed and

the relevant Form 6

Notices to be

lodged at the Corporate

Affairs Commission by Mr. E m s t van Reesema as Transferree were executed and there being no further business

the

meeting

was

closed

off

12.45am. "

The agreement which was executed at the meeting on

1 May

was almost certainly drafted by

the debtor and provided that the

business names, the plant and equipment and the rights to occupy

premises of the company be sold to the debtor for three sums each

of $1. It

is unnecessary to set out the terms of this agreement.

13.

Six days after the execution

this agreement the

Supreme Court made the order of 7 May 1985 Inter alia appointing Receivers and Managers. They acted immediately upon this order

and changed

the locks

on the business premises in the Toorak

Village Arcade at

375 Greenhill Road, Toorak Gardens in which the

bulk of the company's stock was held. The debtor reacted vigorously, claiming that the stock was his as a result of the sale to him by the agreement of 1 May 1985. He arranged for the

landlord, Je Maintaindrai, to change again the locks and to

levy

distress for arrears of rent on certain chattels on the

premises.

Further he claimed

that various items

of office furniture were

and had always been his

property.

The matter came before the

Supreme

Court

again

May

1985

when

orders

were

made

restraining the debtor and the other directors from dealing with

or disposing of the property of the company and requiring

them to

deliver up such

property to the receivers.

The debtor and the

other directors were also directed

to deliver up to the

receivers

whatever property and goods were the subject of the agreement

1 May. It

would appear

from the somewhat sketchy evidence that

in a number

of respects the debtor failed

to comply with this

order and also

another order made

on 31 May

1985.

On 25 June

1985 a writ

attachment was issued against

the debtor and

was apparently executed.

The debtor spent

a number of days in

gaol having on

5 July 1985 been found guilty

of contempt of Court

on a number

of occasions and

in a number of ways all of which

were specified in the order of

that date.

21 June 1985 the

receivers removed from

the premises at 375 Greenhill Road, Toorak

Gardens the stock, plant

and furniture in the shops and offices

14.

in those premises.

The above

only

a short and doubtless inadequate

recitation of the frenetic activity which appears to have

taken

place both within

the Supreme Court and on

the premises during

this time. The crucial fact is that it was activity of this

nature which produced the orders	for	costs made in the Supreme
Court in favour of the company.

The debtor relied upon the locking of the shop premises,

the ultimate removal

of the stock in trade from these premises

and from the dwelling house

occupied by him at College Park and

also certain furniture

and books from Suites

10 and 11, 375

Greenhill

Road,

the

basis

of his cause of action

conversion.

He placed a total value of approximately $27,000

these assets and contended that I should be satisfied that

he has

a counter-claim for this amount,

which amount exceeds the sum of

the judgment debts.

Further he contended he could not have

set

up the claim

for conversion in Action

No.1504 of 1985 in the

Supreme Court in which the judgments were obtained.

There are a

number of grounds upon which I conclude that

I am not sufficiently satisfied.

the first

instance

there

authority

for

the

proposition that the debtor's

counter-claim "must be mutual and

due in the same

right e.g.,

in answer to a judgment obtained

against him by executors

the debtor cannot

set up a claim against

their testator's estate" (per Long Innes

J. in Re Anderson (1927)

15.

27 S.R.

N.S.W. 296 at p.298).

This principle was referred to by Starke J. in

Vowel1 v

Vowel1 (1939) 11 A . B . C .

83 at p.89

as follows:

"Further I think

it would be found upon examination

that

the counter-claim which the appellant puts forward is

against her brother as

an executor whilst his claim is

upon a judgment debt due to him in his own right. In

order that debts or claims may be set-off they must be

due respectively in the same right."

I gave more detailed consideration to this proposition

in James v Abrahams (1981)

34 A.L.R.

657 at pages 666 et seq. It

is also referred to in Ebert

v Union Trustee supra.

In the present matter the debtor contends that

he is

entitled to counter-claim in respect of the alleged conversion of

his goods and chattels, which assets he maintains he acquired

from the company by virtue of the agreement of 1 May 1985.

says he is entitled to damages arising out of the tortious acts

of the receivers and managers

of the company which claim can be

set-off against the judgment debts by him due to the company.

In my opinion there is not in this matter the mutuality

of debts which is

an essential prerequisite of a counter-claim as

required by para.40(l)(g) of the Act.

The debtor's claim must

fail because the rcccivers

a r e potentially liable only in Lheir

personal capacity. They

are personally liable and no

llabllity

can attach to the company

rls judgment creditor.

In this instance the receivers have been appointed by

the Supreme Court and as such they are officers of the Court and

16.

not the agents of the company.

The author of Kerr on Receivers

16th Edit. p.219

states the position as follows:

"Receivers and Managers appointed

by the Court (except

the so-called recelvers appointed

by the Court of

Protection, and probably receivers

and

managers of

statutory undertakings) are personally liable to persons dealing with them in respect of liabilities

incurred...

but subject

to a

correlative right to be

indemnified out of the assets in respect of liabilities

properly incurred; for receivers are not agents for any

person but principals, ..."

At page 305 the author deals particularly	with tortious liability
when he says:

"If the receiver interferes with the rights

third

parties, however innocently, he is personally liable as

a trespasser.

The same comment was made by Phillimore J. in Re Goldburq (No.2)

C19121 1 K.B. 606 at p.611 -

"That which the receiver takes possession

of,

trespasser, he must account for, and he cannot

set

any claim for anything that

he has usefully

done."

The position of a receiver and manager appointed by

the

Court is aptly stated by Lord Esher

M.R.

in Burt Boulton

Havward v

C18951 1 Q.B. 276

at p.279 when

speaking of a

receiver

and

manager

appointed

by the

Court to manage

the

business of a company. He said:

"What is the position

of such

a receiver and manager?

He is not the agent of the company. They do not appoint him; he is not bound to obey their directions; and they cannot dismiss him, however much they may disapprove of the mode in which he is carrying on the business. Only the Court can dismiss him, or give him directions as to the mode of carrying on the business, or interfere with him, if he is not carrying on the business properly. The incidents of his relation to the Court are such as would, if they existed as between him and an ordinary person, constitute him an agent for

such person; but it is of course impossible to suppose

that the relation of agent and princlpal exists between

him

and the Court.

m a t is the

inference

that

necessarily arises?

It must be that the intention

that he shall

act in pursuance

of his appointment on

17.

his own responsibility and not as an agent, because

otherwise nobody will

be responsible for his

acts.

The company cannot

be liable, for he is not their

agent,

and

the

Court

clearly

cannot

liable.

Therefore any orders which he

may give under such

circumstances as manager must

prima facie be taken

be orders given on

his own responslbility and

credit.

How far he may be bound

to give such orders it is

not

now necessary to determine.

It may be that, if his

relation to the Court implies that he must within	the
bounds of reason carry on the business, as between	hlm

and

the Court it would be

his

duty

give

the

necessary orders; but I apprehend that,

if he finds

himself

thereby

placed

difficulty,

and

unwilling to give orders,

he may apply to the

Court and

the Court would protect him."

It seems

fairly

plain

that

the

debtor's claim in

conversion against the receivers

1s a claim against them in their

personal capacity and in respect

of which they are,

if at all,

personally liable.

It is not a claim against the company which

it would or could otherwise be

if they were acting on behalf of

the company as its agent.

There was no argument to the contrary

advanced on behalf of the debtor.

In these circumstances

it is

necessary to see whether

the company's judgment against the debtor is in the same right,

namely a judgment

in favour of

the receivers in their personal

capacity.

On the face

of it, the

judgments are not in any way

judgments in favour of

or for the receivers, they are

judgments

favour of the

company,

albeit

"Receivers

and

Managers

appointed". The only argument advanced by counsel €or the debtor was that, if one looked behind the certiflcdtro

of judgment to

the orders actually

made, these

orclern W E L ~ in some instances

orders in favour of the receivers and not the company.

this

point I

was prepared to admit into evidence the applications

16.

which preceded the orders for costs and these orders

themselves.

It is

desirable to consider these applications and orders in

respect of each bankruptcy notice.

The certificate of judgment in respect

of Bankruptcy

Notice No. 1167/1986 is based on an order made

by White J.

5/7/85.

In this Instance the company applied for leave to

issue

a Writ of Attachment against

the debtor.

The application was

made in matter No. 1504 of 1985, in which proceedings the company

was a party but

not the receivers and

managers.

The order for

costs was on that date made in the following

terms:

"That the respondent (the debtor) do pay to Kelly & CO

(the solicitors for the company) of 55 Waymouth Street, Adelaide within 3 calendar months of service of the relevant allocator the taxed costs of the receiver as

between

solicitor

and

client

relation

the

contempt proceedings, including in

such costs

disbursement to be taxed the costs and expenses of	the
Receiver and the Receiver's staff.''

Bankruptcy notice 116711986 is based on a certificate

of judgment

in respect of

the taxed costs

of "the receiver'' and bankruptcy

notice 1166/66 is

based on the taxed costs and expenses

the

receiver and receiver's staff.

In each instance the costs were

taxed pursuant to the aforementioned

order.

Bankruptcy

notice

No. 1169/86

arose

out of an

application by the debtor on the hearing of which the company was

represented.

On 5

September 1965 the application was dismissed

and an order for costs made against

the debtor in favour of

the

company. The certificate of judgment

named the company as

judgment creditor, as in fact does every certificate of	ludgment
relevant to this matter.

19.

Bankruptcy notice No. 1170/86 arose out of an appeal

the Full Court

of the Supreme Court

by the debtor which appeal

was dismissed. The order for costs of the appeal provided that the debtor pay to the receiver and managers of the company their

costs of the appeal although

by name they were n c ~ t

hefore the

Court.

The recital to the order specified that counsel appeared

on the

hearing

for

the

company

(Receivers

and

Managers

appointed).

The final bankruptcy notice 1171/86, arose out of an application by the debtor and

the order for costs provided that

"two-thirds of their

costs

and

incidental

tohis

applicatiion. .. be paid by

the said Ernst Abraham Siewertfiz

Van

Reesema to the Receivers and Managers	of	Australian Growth
Resources Corporation Pty. Ltd."

It is my opinion, notwithstanding the variations

terminology, that each of the orders for costs was made for

the

benefit of the company.

The receivers were before the

Court only

as the persons appointed by the Court to take charge, as against

the directors, of the assets of the company.

They were not

before the Court in their personal capacity, the capacity in

which they are allegedly liable to the debtor in conversion.

each instance

the receivers were not named as parties to the

proceedings

and

were

not

represented

the

application

separately from the company.

addition

establishing

the

r quirement

mutuality, in

the

sense discussed, the debtor is obliged

20.

para.40)(l)(g) to prove

that

could not have set his

counter-claim in matter 1504 of 1985.

(See per Judge Lukin in

Stokvig (1933-34) 7 A.B.C.

53 at p.57).

In this respect also

am not

satisfied that

the debtor can succeed on the evidence

before me to date.

The debtor argued that

he could not as a

matter of law have taken proceedings

in conversion or in detinue

against the receivers

matter

No.1504.

Alternatively

contended that he was	expressly denied this right by	O'Loughlin
J. on 26 September 1985.

The author of B r L on Receivers- supra at page 147 states

the position:

"Nobody can bring an action against

a receiver in his

capacity as such without the leave

of the court and if

such an action

is brought without leave its further

prosecution will be restrained.

In general, a party to

an action in which the receiver was appointed may (like

any other injured party) obtaln any relief to which he

is entitled against

the receiver by applying in the

action,but there may be cases where on such application

being made the court decides

that the best course for

disposing of the issue is for a11 action to be brought

against the receiver."

On page 136 the author makes the following comments	in rpspect of
a receiver appointed by the Court:

"A man who thinks he has a

right paramount to that

the receiver must, before he presumes to take any steps of his own motion, apply to the Court for leave to

assert his right.

If the receiver has done anything

wrong, the party who has suffered the wrong must

apply

to the court whlch appointed the receiver, and he will

get full justice done.

But where a claim cannot be

made in the original action,

or in any other case where

it is convenient to bring a separate action against he receiver, leave to bring an artion must f i r s t he

obta

inwl

F ~ O I I I !.h=,

. "

In ~ollnuw v

Gdrrlerl Mew:,

S t .

L P C X I . ~ K ~ ' s

P L Y .

LLd.

C19841 2 A.C.L.C.

511, McLelland J. stated at p.515;

21.

"Normally however any alleged liability

of a receiver

for

default of any kind would

pursued

the

proceedings in which he was appointed, but there also

appears to be

authority

for

the

view

that

independent

action may be

brought

against

such

receiver, provlded however, at least if his appointment stlll subsists, the leave of the Court which appointed him is first obtained..."

Searle

(1884) 25 Ch.D 723 Cotton L.J. said

on page 726:

"The second queastion is, whether the conduct

of the

Plaintiff in bringing a separate action is the right way of prosecuting his remedy. As I read the judgment of the Vice-Chancellor he proceeded on the ground that

the

Plaintiff

was

wrong

making

the

application

before him. The question

is whether the Plaintiff was

right in bringing this action against the

receiver

without the leave of the Court which appointed him.

my opinion whether he would have been wrong

or not

before the passing of Judicature Acts, he

is clearly

wrong now. Under the

present

practice,

if he had

applied to the Judge who appointed

the

receiver

would have obtained all that he is entitled to; the Judge would have directed the receiver either to withdraw or to rectify his notice, so as not to

interfere with the first

incumbrancer.

That was the

proper course for the Plaintiff to

adopt.

I give no

opinion as to what would have been the proper course before the Judicature Acts, but I think that the Court of Chancery would have obliged the person aggrieved to

come to

the Court

for

leave

before

taking any

proceedings. But it is not necessary to go into that, because the whole tenor of the Judicature Acts is to require all proceedings as far as possible to be taken

in one action, and I

am of opinion in the prencnt case

that as there was a pending action in the Queen's Bench

Division the proper course for the Plaintiff would have

been to make his application

i that action."

These authorities establish that not only was

it permissible for

the debtor to bring his complaint against

the receiver before the

Court in matter

1504 of 1985 but so to proceed was his

proper

course.

least in the first instance the debtor should have

applied in

convenience he was in these proceedings directed and granted

leave to initiate fresh proceedings.

the

latter

proceedings

even

if for

reasons of

2 2 .

The debtor's contention was

however

that it was

appropriate for him to proceed by way of fresh action , he being the person entitled to paramount possession. In this regard he

relied upon the following passage in Kerr on Receivers	at	page
133:

"If persons with paramount rights,

who are not parties

to the action, are actually in possession

those

rights,

the

appointment

of a

receiver

does

not

preludice them in the enjoyment of those rights.

But

if they are

not actually in

possession, then after a

receiver has been appointed, they must come

to Court

for leave to exercise those

rights, in which case their

application can not be

refused."

This passage hardly assists the debtor, in that he was a

party to matter 1504

of 1985 and the very question in issue

whether he has

paramount rights.

Likewise the fact that the

debtor

claimed

to be in possession

of the chattels in the

business premises with rights paramount to those of the receivers does not avail him, against the receiver here appointed by the

Court.

The above passage from Kerr and another passage cited

the debtor's

counsel being paragraph

685 in Halsburys Laws of

England 3rd edit.

vo1.32

not

indicate

grounds

for

distinguishing the principles in Searle

Choat supra.

In the

alternative he submitted that

he had made application

in matter

1504 of

1985 which application had been refused and he was

directed to commence fresh proceedings.	This it was said was the
consequence of the order of O'Loughlin	J. made on 26 September

1985.

This order was made on an application

by the debtor

summons dated 5 September 1985, in which he sought, inter alia,

the following two

orders:

"4.	A declaration that the agreement between the first

23.

named (the company) and the second named

(the debtor)

respondents dated the 1st May 1985

is and has always

been a valid

and subsisting agreement.

An order directing the recelvers and

managers to

deliver up to the second named respondent all

the

assets the subject of the said agreement dated the	1st
May 1985."

In his

order made on

26 September 1985 O'Loughlin

dismlssed the application for a declaration in paragraph

and

for an order under paragraph	5.	That Judge said in making the
orders :

"I have a number of alternatives open to me, which are

to make orders in these procedings that a claim be

filed within a certain number

of days, followed by

points of defence within a certain number

of days. The

other alternative I have is to stand your application dismlssed on the premise that you will institute fresh

originating

proceedings

and

writ

of summons

and

statement of claim.

It's a question 01 balancing the

convenience or those two competing policies. Normally one would go for the first - thay is the points OF

claim,

followed

by points of defence in

these

particular proceedings.

I'm

going to opt for the

second course for a practical reason - and that is that

action No. 1504 of 1985 is now measured in feet rather

than in inches, let alone documents. And if these

proceedings which

are

separate,

distinct

and

self-contained were added

to the existing file,

every

time something occured

in the separate and distinct

procecdings, you and counsel for the other parties and

the court officials would

have to be going through this

mammoth file.

I think as a matter of practicality,

it's better

to stand this

particular

application

dismissed upon the premise that you institute fresh and

separate

proceedings

terms

consistent

with

paragraphs 4 and

It was contended by the debtmr that It was not open to him to

bring his claim which he

seeks to set up under para.40(l)(g)

before the Court

in proceedings

1504/85 because he had been

denied that entitlement

by O'Loughlin J.

However in my opinion the claim which the debtor sought

24.

to set up before O’Loughlin

J. and which was In the circumstances

abovementioned

dismissed is not

the

counter-claim

which

contends for under para.40(l)(g).

The former claims were

claims

for a declaration in respect

of the

agreement and an order for

the

receivers

deliver

the

assets

the

subject

of the

agreement. The latter claim, specified in paragraph 4(a) of the statement OF claim in action No.149 of 1987, was a claim for

damages for conversion.

It is not correct to say that he was

denied the right to bring that latter claim in matter No. 1504 of

1985 even though

of course affirmative orders in his favour on

paragraphs 4 and 5

of his summons dated 5 September 1985 would

have greatly advanced a successful claim in conversion.

I am not satisfied that

the claim in conversion could

not have been set up in matter 1504 of 1985. In my opinion it could have been so set up and properly should have been brought,

at least in the first

instance, in these proceedings.

The final ground which

I should consider is whether the

debtor has

satisfied

me that

he has a bona fide claim for

conversion which has a reasonable probability of success.

On the

question of bona fides I was far from

satisfied with the evidence

given by the debtor.

His version of the circumstances in which

the agreement of 1 May 1985 came

about seemed to raise more

questions than it answered. However in this regard I do not propose to say more, as I am informed that the validity of the

agreement and the conduct

the dlrectors will be considered

shortly in	action No.3988 of	1985 in the District Court	of
Adelaide.

25.

However

there

are

two

matters

which

I regard as

significantly militating against

a successful claim by the debtor

in conversion .

The first 1 s that the receivers purported to act

in locking the shop premises

at 375 Greenhill Road pursuant to he

first

order of White J. of 7 May 1985. In

that order the

receivers were not only given wide powers as officers

of the

Court to take possession of the property of the company and

carry on its

business.

They were also given

power to "do any

such acts, assurances and things as, in the opinion of the

said

receivers and managers, are necessary

or incidental to the proper

performance of their

duties

pursuant

to this order". In my

opinion it was reasonably open to the receivers to form the view that it was necessary tu preserve intact the assets in the shops at least until the true ownership was ascertained or until further order of the Court.

Subsequently a further and more specific order was made

by the Supreme Court

prior to the receivers removing the assets

from the shops.	On 17 May 1985 White J. made the following
orders:

"1.

That until further order the said Ernst Abraham

Sewertsz Van Reesema, Martine Ludowici Sewertsz Van

Reesema, Nicholas Anthony Sewertsz Van Reesema and

each of them be restrained and an injunction is

hereby

granted

restraining

them

whether

themselves,

their

agents,

servants,

workmen

otherwise

from

dealing

with,

disposing of or

encumbering any property goods

securities

Australlan Growth Resources Corporation Pty Limited

(receivers and managers appointed).

2. That

upon

service

of this

order

the

said

Ernst

Abraham

Sewertsz

Van

Reesema,

Martine

Ludowici

Sewertsz Van Reesema, Nicholas Anthony Sewertsz Van

Reesema and each of them cease holding moneys or

securities or any property on behalf of Australian

Growth Resources Corporation Pty Limited (receivers

and

managers appointed)

and

deliver

up to the

26.

recelvers

and

managers

Australian

Growth

Resources Corporatlons Pty

Lmited (receivers and

managers appointed), any such moneys, securltles

property, by 5	pm on Frlday the 24th day of May
1985.

3. That the said Ernst Abraham Sewfrtsz Van Recsema, Martine Ludowlcz Sewertsz Van Reesema, Nicholas

Anthony Sewertsz Van Reesema do

by 5pm on Friday

the 24th day of Play 1985 deliver up to the oiflce of the recelvers and managers of Australian Growth

Resources

Corporation

Pty

Limited

80 King

William Street, Adelaide, or any other place

nominated in writing by the receivers and managers

of Aust-ralian

Growth

Resources

Corporation

Pty

Limlted

(receivers

and

managers

appointed)

the

property and goods the sublect of

an agreement

attached hereto and dated the 1st day

of Play 1985."

At the time the goods were removed by the receivers the debtor

had failed to comply with any of these orders, and in particular

the obligation imposed on him under order 3 .

It is my opinion

that

these

circumstances

the

debtor

has no reasonable

prospects of successfully claiming damages for conversion.

Each	of the debtor's applications to set aside the

bankruptcy notlces must be dismissed with costs. I am

prepared

to flnd that the debtor's affidavlt of

13 November 1986 complied

with the requirements of sub.s.41(7)

of the Act and thus the time

for compliance with each of the bankruptcy notices is extended

until this

day.

The order of the Court

1 s that the debtor's applications

are dismissed and the debtor must pay the costs of the company,

the same to be taxed if not agreed.

I certify that this and

the2Spreceding

pages are a true copy of the Reasons

for Judgment of

Mr Justice Fisher.

Associate

M-

S .

Dated

27 March 1987

27 .

Counsel for the Judgment Debtor

Mr. R.W.

Evans

Solicitors for the

Judgment Debtor

Fardone & Co.

Counsel for the Judgment Creditor	Mr. M.L. Robertson 0.C
with Mr. M. Barrett &
Mr. D. Jenkin

Solicltors for the Judgment Creditor Kelly	& Co.
,.

. .

[1987] FCA 129

27 Mar 1987