Australian Executor Trustees Ltd v Provident Capital Ltd

Judgment

1. On 14 September 2015 I delivered an ex tempore judgment ([2015] NSWSC 1378) in which I indicated that I would be prepared to make several orders sought by The Trust Company (Nominees) Limited ("TCL") in respect of the appointment of the liquidators ("Liquidators") presently appointed to Banksia Securities Limited (receivers and managers appointed) (in liquidation) ("BSL") as joint and several receivers over specified property of BSL. The property is comprises the rights and entitlements of BSL that are the subject of proceedings currently brought by Messrs McGrath and others as receivers ("Current Receivers") and other proceedings brought by Mr Bolitho in the Supreme Court of Victoria. The need for such an appointment arose from what may be described as a "commercial conflict", or a potential conflict of interest, or a threat to independence, so far as the Current Receivers are concerned, arising from the fact that they were appointed as receivers of BSL by TCL.
2. I indicated that I was also prepared to make the second and third orders sought by TCL, which clarified the scope of the appointment of the Liquidators as, in effect, special purpose receivers of that property; that I was satisfied that leave could properly be granted to the liquidators under s 532(2) of the Corporations Act 2001 (Cth) to continue to act as liquidators of BSL, notwithstanding their appointment by the Court as special purpose receivers of that property; and that I would also be prepared to make an order that the Liquidators, in their capacity as special purpose receivers, be allowed such remuneration and expenses as may be fixed by this Court or the Supreme Court of Victoria.
3. I deferred making orders on that date for two reasons. The first was that I reserved liberty to Mr Bolitho to bring any application, in respect of the matters dealt with in my judgment, within seven days. Mr Bolitho's solicitors subsequently sent a letter to the Court expressing his views as to various matters, and my Associate advised them, at my request, that any matter arising from those views would need to be dealt with by his restoring the matter to the Court pursuant to that liberty. Mr Bolitho did not subsequently seek to exercise that liberty and there is no reason to further defer making the orders on that basis.
4. The second reason that I deferred making orders was that TCL had raised the possibility that s 418(1)(f) of the Corporations Act, which restricts the circumstances in which, inter alia, a senior manager of a corporation may be appointed as receiver might apply, and sought an order under s 418A of the Corporations Act that the appointment of the liquidators as receivers would be valid not withstanding that section. I observed (Judgment [17]) that s 418A of the Act was directed to a declaration as to a particular position and did not confer a discretionary dispensation power on the Court, although s 418(1)(f) permitted the Australian Securities and Investments Commission ("ASIC") to direct in writing that that paragraph did not apply. The liquidators then indicated that they proposed to approach ASIC in respect of that question, and the making of orders was deferred until that matter was clarified.
5. The liquidators' solicitors then approached ASIC which, by email dated 21 September 2015, advised them that, in ASIC's view, and having regard to the relevant legislative history, a liquidator is not a "senior manager" for the purposes of s 418 of the Corporations Act and that it followed that the liquidators were not disqualified from acting as special receivers as is envisaged, and that no direction from ASIC under s 418(1)(f) was required. That view was not inconsistent with any view that I expressed in the Judgment, which merely noted the issue raised by TCL without expressing any view as to the scope of operation of s 418(1)(f) of the Corporations Act.
6. The parties have now submitted consent orders, which do not include an order under s 418A of the Corporations Act in respect of that matter. The liquidators have also provided submissions to the Court as to the scope of s 418 of the Corporations Act. I should briefly refer to the matters raised in those submissions, although it is not necessary for me to express any view as to them for the reasons noted below. Mr Scerri, who appears for the Liquidators, submits that s 418 of the Corporations Act does not operate so as to disqualify the Liquidators from being appointed or acting as special purpose receivers of the property of BSL, and records that the Liquidators will accept their appointment as special purpose receivers of the specified property of BSL on the terms of the agreed consent orders provided to the Court. The Liquidators note ASIC's position that s 418 of the Corporations Act does not prevent them from being appointed or acting as special purpose receivers of the specified property, on the basis that the liquidators are not "senior managers" for the purposes of the section. Mr Scerri points to the definition of "senior manager" in s 9 of the Corporations Act as a person, other than a director or secretary of a corporation, who "makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation" or "has the capacity to affect significantly the corporation's financial standing". Mr Scerri notes that, out of an abundance of caution, the earlier hearing before me proceeded on the basis that that section may have applied.
7. Mr Scerri submits that, if s 418 was intended to disqualify a liquidator of a corporation from also acting as receiver of a corporation's property, the section would have expressly included a liquidator as a person disqualified from so acting. There seems to me to be force in that submission where, as Mr Scerri points out, that view of s 418 would have involved a significant change in the law, where the Courts had historically made such appointments: for example, Re Joshua Stubbs Ltd; Barney v Joshua Stubbs Ltd [1891] 1 Ch 475. The corresponding provision in the Uniform Companies Act 1961, s 187, did not disqualify a person who was, relevantly, a senior manager of the corporation or a related body corporate within the previous 12 months from acting as a receiver of the property of the company. Section 190 of the Uniform Companies Act, to which Mr Scerri referred, also expressly provided that a liquidator may be appointed as receiver, where an application is made to the Court to appoint such a receiver on behalf of the debenture holders or other creditors of a company, consistent with the approach taken in Re Joshua Stubbs Ltd above. Mr Scerri also points out that liquidators have recently been appointed as receivers in somewhat similar circumstances in Australian Executor Trustees Ltd v Provident Capital Ltd (recs and mgrs apptd) (in liq) [2013] FCA 1461, although he rightly recognises that the question of the operation of s 418 of the Act may not have been raised in that case.
8. The Liquidators' submissions did not refer to the consideration of s 418 of the Corporations Act, in its then form, in Low v Performance Finance Ltd & Ors [2004] WASC 80, where Simmonds J had to address the question whether persons who had been appointed as receivers and managers of two companies and were then appointed as a provisional liquidator of a related company and a liquidator of another related company were thereafter disqualified from acting as receivers. However, the then section disqualified a person from acting as receiver of property of a corporation if he or she was an "officer" of a body corporate related to the corporation, in circumstances that a liquidator was within the definition of "officer" in relation to a body corporate. That case is distinguishable, since the present form of the section does not disqualify a person from appointment, or from acting, as receiver of a property of a corporation if he or she is an "officer" (as defined), but only if he or she falls within the more specific categories stated in the section. I infer that ASIC had that change in the language of the section in mind in referring to the relevant legislative history in expressing its view to which I have referred above.
9. Second, Mr Scerri points out that the definition of "officer" in s 9 of the Corporations Act includes both a "senior manager" and, separately, a liquidator and the latter inclusion would not be necessary if a liquidator fell within the definition of "senior manager". Again, it seems to me that that submission has some force, so far as the consistent construction of the definitions in the Act is concerned. Third, Mr Scerri points out that the legislature could have included a reference to "liquidator" within the definition of "senior manager" if it had intended a liquidator to fall within that definition. A possible response to that proposition is that the legislature might equally have intended a liquidator only to fall within that definition if he or she had the characteristics attributed to a "senior manager" as defined in that section.
10. With no disrespect to the Liquidators' submissions, it does not seem to me that I should determine any question as to the scope of s 418 of the Corporations Act. First, as I noted above, the parties have submitted consent orders providing for the Liquidators' appointment as special purpose receivers which do not address the question of s 418 of the Corporations Act, and do not raise any issue as to the scope of that section. Second, there appears to be no dispute between the parties as to the operation of that section, and it now appears to be common ground between the Liquidators and ASIC that the section does not apply, and no party in this application contends to the contrary. It follows that there is also no contradictor who is putting any contrary view to that adopted by the Liquidators before the Court. Third, to the extent that there is a question whether a liquidator could properly be characterised as falling within the definition of "senior manager" in s 9 of the Corporations Act, as a person who makes or participates in making decisions that affect the whole or a substantial part of the business of the corporation, or has the capacity to affect significantly its financial standing, that question must be at least partly a factual question, depending upon the scope of the liquidator's activities in the particular case, and the factual basis for any determination of that question has not been addressed in any detail before me.
11. As a result of the matters noted above, absent a real dispute as to the issue, a contradictor, or a factual basis for any declaration or direction which the Court might give, that declaration or direction would amount to no more than the Court providing legal advice to the Liquidators. It is not necessary or appropriate that the Court do so, since the Liquidators may properly rely on the advice which they have no doubt taken from their experienced senior counsel and experienced solicitors. In these circumstances, I do not express any view as to the operation of s 418 of the Corporations Act in the relevant circumstances, other than to note I see no reason not to make the consent orders in the form submitted by the parties.
12. I have therefore made the consent orders in the form submitted by the parties.