Westpac Baking Corporation v The Official Liquidator of the Bell Group Ltd (in Liq) [No 5]
[2017] WASC 77
•17 MARCH 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WESTPAC BAKING CORPORATION & ORS -v- THE OFFICIAL LIQUIDATOR OF THE BELL GROUP LTD (IN LIQ) & ANOR [No 5] [2017] WASC 77
CORAM: PRITCHARD J
HEARD: 17 MARCH 2017
DELIVERED : 17 MARCH 2017
FILE NO/S: COR 108 of 1991
BETWEEN: INSURANCE COMMISSION OF WESTERN AUSTRALIA
Applicant
AND
THE OFFICIAL LIQUIDATOR OF THE BELL GROUP LTD (IN LIQ)
Respondent
Catchwords:
Practice and procedure - Interlocutory injunctions - Whether order for liquidator to give notice of decision to revoke proof of debt would be in the nature of injunctive relief - Whether Corporations Regulations 2001 (Cth) reg 5.6.55 imposes requirement on liquidator to give notice of intention to revoke admission of proof of debt - Requirement for an undertaking as to damages
Legislation:
Corporations Regulations 2001 (Cth), reg 5.6.53, reg 5.6.54, reg 5.6.55
Result:
Application dismissed
Category: B
Representation:
Counsel:
Applicant: Mr S Finch SC & Mr I Ahmed
Respondent: Mr J C Vaughan SC & Mr P A Walker
Applicant: Mr M Hoffman QC
Respondent: Mr J C Vaughan SC & Mr P A Walker
Solicitors:
Applicant: State Solicitor for Western Australia
Respondent: Ashurst Australia
Applicant: Jones Day
Respondent: Ashurst Australia
Cases referred to in judgment:
Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249
Howard v Press Printers Ltd (1904) 74 LJ Ch 100
PRITCHARD J:
(These reasons were delivered orally and have been edited from the transcript.)
The proceedings in COR 108 of 1991 arise from the liquidation of The Bell Group Ltd (In Liq) (TBGL).
The Proceedings
In the proceedings with which I am presently dealing (the Proceedings), the Insurance Commission of Western Australia (ICWA) has filed an Interlocutory Process seeking a variety of forms of relief, all of which are directed to preventing the liquidator of TBGL, Mr Woodings, from re‑adjudicating a proof of debt by the liquidator of J N Taylor Holdings Ltd (In Liq) (JNTH) which was admitted in the TBGL liquidation in March 1996 (the JNTH Proof), and from rejecting a proof of debt submitted by the liquidator for JNTH dated 6 May 2015, for interest on the sum claimed in the JNTH Proof (the Supplementary Proof). (The Supplementary Proof has not yet been adjudicated at all.)
JNTH has also filed an Interlocutory Process seeking relief of a similar nature.
For convenience, I will focus in these reasons on Mr Woodings' proposed course of conduct in relation to the JNTH Proof, rather than in relation to the Supplementary Proof. However, it will be apparent that in so far as the Supplementary Proof involves a claim to interest on the amount the subject of the JNTH Proof, revocation of the decision to admit the JNTH Proof would be fatal to the prospects of admission of the Supplementary Proof in the liquidation of TBGL.
ICWA's Interlocutory Process was filed in response to advice given by Mr Woodings, in correspondence dated 9 December 2016, to the liquidator of JNTH, and to ICWA's solicitors. I will refer to that correspondence in more detail in a moment. However, in summary, the letter of 9 December 2016 advised that Mr Woodings had 'determined to reconsider all proofs' ‑ including the JNTH Proof ‑ and that he had formed the view that he was 'minded to reject the JNTH Proof'.
I should mention that ICWA says it has an interest in the JNTH Proof because it entered into arrangements with JNTH pursuant to which it says it obtained a beneficial interest in the proceeds of the JNTH Proof.
ICWA's Interlocutory Process was filed in January 2017, and preparation of the matter for hearing is in its early stages. However, it appears that ICWA is concerned that Mr Woodings may proceed to make a decision to revoke the JNTH Proof of Debt (a revocation decision) without notice to ICWA. It would be surprising, to say the least, if Mr Woodings concluded that it was appropriate to make a revocation decision, without any notice to ICWA or JNTH, in circumstances where ICWA and JNTH have commenced proceedings in this Court which are directed to restraining Mr Woodings from making such a decision.
Nevertheless, the fact that the present application has been made demonstrates that Mr Woodings has been unwilling to voluntarily agree to provide the notice requested by ICWA of any intention on his part to make a revocation decision.
The Application
In the application which is the subject of these reasons (the Application), ICWA initially sought an order that Mr Woodings provide ICWA with 28 days' written notice before making any decision in relation to the JNTH Proof and the Supplementary Proof.
In seeking that order ICWA did not proffer an undertaking as to damages in the usual form which is required when an injunction is sought.
Mr Woodings' position was that he was prepared to proffer an undertaking to the Court that pending the determination of the applications filed by ICWA and JNTH (by the Interlocutory Process they have filed) he would not, without first providing 28 days' written notice in writing to the solicitors for ICWA and for JNTH:
(a)Revoke the decision by Mr Totterdell in his capacity as then sole liquidator of TBGL made on or about 12 March 1996 to admit the JNTH Proof in the liquidation of TBGL, or otherwise amend that decision by reducing the amount admitted on account of the proof; or
(b)Make any decision to reject the Supplementary Proof submitted on about 6 May 2015.
However, Mr Woodings was only willing to give that undertaking if ICWA gave the Court a cross‑undertaking as to damages, in the usual terms required in the case of an application for an injunction.
In the course of the hearing of the Application, counsel for ICWA accepted that the order sought by ICWA in the Application was too widely drawn, and indicated that he would be content with an order in a form reflecting the substantive terms of the undertaking offered by Mr Woodings. By that, I understood that the order ICWA now sought was an order in the following, or similar, terms:
The Respondent provide the Applicant with 28 days' written notice before making any decision to:
(a)Revoke the decision by Mr Totterdell in his capacity as then sole liquidator of TBGL made on or about 12 March 1996 to admit the JNTH Proof in the liquidation of TBGL, or otherwise amend that decision by reducing the amount admitted on account of the proof; or
(b)Make any decision to reject the Supplementary Proof submitted on about 6 May 2015.
Furthermore, counsel for ICWA made plain that his client was not wedded to a period of 28 days' notice, and that a far shorter period ‑ of as little as 7 days ‑ would suffice. I have proceeded on the basis that that is the period of notice ICWA now seeks.
The dispute on the Application
The result of those modifications of the orders sought is that the dispute on the Application is confined to whether ICWA should be required to provide the usual undertaking as to damages as a prerequisite for Mr Woodings being subject to a requirement to give 7 days' notice before making a revocation decision, or a decision to reject the Supplementary Proof.
For the reasons which follow, I am not persuaded that it is appropriate to make an order requiring Mr Woodings to give that notice before making his decision without also requiring ICWA to give an undertaking as to damages in the usual form. The Application should therefore be dismissed.
In these reasons, I deal with the following matters:
1.The decision made by Mr Woodings and the power currently being exercised by him;
2.Whether the order sought by ICWA in the Application is in the nature of injunctive relief;
3.Whether there is any reason why an undertaking as to damages in the usual form ought not be required in a case of this kind;
4.Whether an order to restrain Mr Woodings from making a revocation decision without notice should be made; and
5.Some closing observations.
The decision made by Mr Woodings and the power currently being exercised by him
Counsel for ICWA submitted that the orders ICWA sought did not restrain Mr Woodings in any way, and were not in the nature of an injunction against him. In order to assess whether the order sought against Mr Woodings is in the nature of an injunction, it is necessary to consider what power it is that Mr Woodings is presently exercising.
The Proceedings, to the extent that they focus on the JNTH Proof, are in the nature of an application to review or challenge what is described as a decision by Mr Woodings to 're-adjudicate the JNTH Proof'. Counsel for ICWA submitted that what ICWA sought was to be notified that Mr Woodings intended to make a decision in respect of the JNTH Proof (in reality, ICWA seeks notice if Mr Woodings intends to make a decision to revoke the JNTH Proof) so that ICWA could then apply to restrain Mr Woodings from making that decision, pending the review of his decision to re-adjudicate the JNTH Proof.
ICWA's position was that it did not anticipate that Mr Woodings would act so as to undermine the substance of the review which is sought in the Proceedings, but nevertheless sought that Mr Woodings be compelled to give notice of a proposed revocation, no doubt to ensure that the status quo was preserved, pending the determination of the Proceedings.
Counsel for Mr Woodings submitted that ICWA and JNTH were under a fundamental misapprehension as to where Mr Woodings stands. He submitted that no decision had been made by Mr Woodings to re‑adjudicate the JNTH Proof. At first blush, that submission appeared to be at odds with the terms of the letter of 9 December 2016 (which I have already mentioned), in which Mr Woodings indicated:
Following the settlement of the proceedings brought by TBGL and other Bell group companies against Westpac and other banks (the main proceedings) I determined that it was appropriate to reconsider all proofs of debt including in the light of developments since they were initially admitted or rejected.
I write to inform you that I am minded to reject the JNTH proof in its entirety. I summarise the reasons why I am minded to take that decision below. I will adjudicate on the Supplementary Proof when I have finalised my consideration of the JNTH proof.
I will consider any comments you have or further information that you provide prior to taking my final decision. I consider that it is appropriate to complete my re-adjudication promptly in the new year and envisage that any comments from you would be submitted by 6 February 2017.
It seems to me that what is in dispute here is the characterisation of what Mr Woodings is presently doing, what the parties understand by the phrase 're‑adjudicate the JNTH Proof' as used by Mr Woodings in his letter of 9 December 2016, and where the power contained in reg 5.6.55 of the Corporations Regulations 2001 (Cth) (the Regulations)[1] begins and ends. Regulation 5.6.55(1) provides:
If the liquidator considers that a proof of debt or claim has been wrongly admitted, the liquidator may:
(a)Revoke the decision to admit the proof and reject all of it; or
(b)Amend the decision to admit the proof by increasing or reducing the amount of the admitted debt or claim.
[1] Corporations Regulations 2001 (Cth) reg 5.6.55(1). The Corporations Regulations is in the same terms as reg 5.6.55(1) made under the Corporations Law.
Counsel for Mr Woodings submitted that Mr Woodings had not actually made a decision to re-adjudicate the JNTH Proof. As I understood his submission it was that a liquidator's ability to re-adjudicate a proof of debt could only be exercised on the formation by the liquidator of the opinion referred to in reg 5.6.55(1), namely that the proof of debt has been wrongly admitted. It thus appears that when Mr Woodings uses the term 're-adjudication of a proof of debt' he has in mind only the decision which involves the formation of an opinion that a proof of debt or claim has been wrongly admitted, and which then gives the liquidator a discretion as to what should be done (that is, whether to revoke or amend the decision to admit the proof).
Counsel for Mr Woodings submitted[2] that Mr Woodings' present course of conduct simply involved the performance of Mr Woodings' ongoing duty, as the liquidator, to determine the true liability of TBGL.
[2] ts 21 (16 March 2017).
In contrast, it appears that ICWA (and JNTH) have understood Mr Woodings' letter of 9 December 2016 as indicating that Mr Woodings has commenced to exercise the power in reg 5.6.55 of the Regulations.
The proper construction, and operation, of reg 5.6.55 of the Regulations will no doubt be a focus of the substantive hearing in the Proceedings. However, what is significant for present purposes ‑ having regard to the terms of the order which ICWA now seeks ‑ is that if Mr Woodings ultimately decides to make a decision to revoke the JNTH Proof, reg 5.6.55 imposes no requirement on him to provide prior notice to JNTH or ICWA of his intention to make that decision and then to wait for the expiry of that notice period before proceeding to actually make the decision.
Similarly, in so far as the Supplementary Proof is concerned, reg 5.6.53(1)[3] does not impose any requirement for a liquidator to provide a creditor with prior notice of the liquidator's intention to reject a proof of debt, and then to await the expiry of that notice period before actually making the decision. Notice to the creditor is only required to be provided after the liquidator has rejected all or part of the proof of debt.[4]
[3] Corporations Regulations 2001 (Cth) reg 5.6.53(1) is in the same terms as reg 5.6.53(1) made pursuant to the Corporations Law.
[4] Corporations Regulations 2001 (Cth) reg 5.6.54(1).
Whether the order sought by ICWA in the Application is in the nature of injunctive relief
Counsel for ICWA submitted that the orders he sought did not restrain Mr Woodings in any way, and were not in the nature of an injunction against him. I am unable to accept that submission, for the reasons already outlined at [26] ‑ [27]. In respect of both the JNTH Proof and the Supplementary Proof, the order sought by ICWA would impose a restraint on Mr Woodings, in the form of a requirement to give notice to JNTH and ICWA of his intention to make a revocation decision and to reject the Supplementary Proof, and then to wait for the expiry of the 7‑day notice period before proceeding to actually make the decision in each case. Put differently, Mr Woodings would be injuncted from proceeding to make a decision under reg 5.6.55(1) to revoke the JNTH Proof, or to reject the Supplementary Proof under reg 5.6.54(1) of the Regulations, for 7 days after he had formed the view that that was how he should exercise his discretion under those regulations and advised ICWA and JNTH of that intention.
Whether an order to restrain Mr Woodings from making a revocation decision without notice should be made
I do not propose to consider the question whether an injunction of the kind sought by ICWA should be made (or in lieu thereof whether Mr Woodings' undertaking should be accepted by the Court). That is because counsel for ICWA indicated that if an undertaking as to damages were to be required, even for a notice period as brief as 7 days, ICWA would not give that undertaking. Given the focus on the parties' diametrically opposed views about the nature of the order sought by ICWA, neither counsel addressed the question whether the material before the Court made out a basis for the grant of an interlocutory injunction (although Mr Woodings' willingness to proffer an undertaking is indicative that there is no dispute about that issue). In those circumstances, and in case the matter arises again at some future stage, it is not appropriate that I express any view on that question.
Whether there is any reason why an undertaking as to damages in the usual form ought not be required
The usual rule (which is a requirement under the Court's practice directions)[5] is that an undertaking as to damages will be required from a plaintiff who seeks an interlocutory injunction. Such an undertaking is an attempt to ensure that a defendant will receive compensation for any loss which he suffers by reason of the grant of the injunction if it appears in the event that the plaintiff was not entitled to obtain it.[6]
[5] The Supreme Court of Western Australia Consolidated Practice Directions 2009 (as updated on 9 January 2017) 4.3.4; Rules of the Supreme Court 1971 (WA) O 52 r 9.
[6] Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249, 311.
Similarly, if the Court accepts a defendant's undertaking, the plaintiff will generally be required to give a cross undertaking as to damages.[7]
[7] Howard v Press Printers Ltd (1904) 74 LJ Ch 100, 101.
Counsel for ICWA did not advance any alternative argument (apart from that with which I have already dealt) as to why an undertaking as to damages should not be required of ICWA as a condition of the order it sought, or of the undertaking proffered by Mr Woodings.
One issue not addressed, for example, was why there exists any prospect that Mr Woodings would suffer any loss as a result of an order to provide 7 days' notice to ICWA and JNTH of an intended revocation decision. (Similarly, it was far from apparent why the provision of an undertaking as to damages in this case would be likely to carry with it any real risk of an adverse financial consequence for ICWA.) Any conclusion by the Court in relation to such matters would constitute no more than speculation on its part.
Absent any basis being shown for departing from the ordinary rule, I do not see why ICWA should be excused from the requirement to provide an undertaking as to damages in this case.
Some closing observations
The fact that I have concluded that no order should be made, or undertaking from Mr Woodings accepted, without the provision by ICWA of an undertaking as to damages, should not be seen in any way as precluding Mr Woodings from choosing to provide notice to ICWA and JNTH of his intention (should he ever form one) to make a revocation decision or to reject the Supplementary Proof.
Counsel for JNTH expressly indicated that his client did not seek an order that Mr Woodings provide that notice because it was unnecessary. He expected that as a liquidator appointed by the Court, Mr Woodings would not make a decision which would render the Proceedings entirely otiose, without giving notice of that decision to ICWA and JNTH. Nothing in the submissions by counsel for Mr Woodings suggested in any way that that expectation would not be met.
I have no reason to doubt that if Mr Woodings reaches the point that he considers a revocation decision should be made or that the Supplementary Proof should be rejected, and if the present proceedings have not been resolved at that stage, that he would give ICWA and JNTH notice of that intended decision, so that they might consider their options in relation to the Proceedings. The provision of such notice would arise not from Mr Woodings' obligations under the Regulations, but rather because giving such notice is the proper course of conduct by a party in litigation of this kind.
Having said all of that, I would add that it is extremely disappointing that the Application brought by ICWA was considered necessary, and that the parties' dispute about notice was not able to be resolved through conferral. The Court does not know the reasons why the Application was not able to be resolved in that fashion, nor is it aware what considerations may be informing the parties' decisions about the conduct of the litigation. Whatever be the reason, the Court is entitled to expect that the parties to litigation before it conduct themselves in a matter which facilitates the expeditious, and cost‑effective, resolution of their disputes, and which bears in mind the Court's case management principles.[8] That is particularly so in the context of a very long running liquidation such as this, which has been, and continues to be, responsible for numerous satellite actions, involving Mr Woodings and one or more of the creditors of TBGL.
[8] Rules of the Supreme Court 1971 (WA) O 1 r 4A and r 4B.
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