Australian Securities and Investments Commission v ActiveSuper Pty Ltd

Supreme Court of NSW|2021-10-01|Before: Williams J, Mr J, Black J, Health Care P

(Solicitor) (First Defendant) Mr A F Fernon SC with Mr E A Walker (Second Defendant) Mr A Cornish (Fifth Defendant)

Solicitors: Watson Mangioni Lawyers Pty Ltd (Plaintiff) Nelson McKinnon Lawyers (First Defendant) Yates Beaggi Lawyers (Second Defendant) Carmody Lawyers (Fifth Defendant) File Number(s): 2021/210960 Publication restriction: N/A

Background to the commencement of these proceedings and factual matters relevant to the determination of the plaintiff's application for the appointment of a receiver

The following description of the circumstances leading to the commencement of the present proceedings is drawn from the affidavits referred to above and the documents exhibited to them and from the parties' submissions.
The 2017 proceedings were primarily a derivative action prosecuted by Mr Harris' siblings on behalf of Sirrah for alleged breaches of directors duties by Mr Harris. It is unnecessary for present purposes to describe these claims, and the other claims in the 2017 proceedings, in any greater detail.
During the course of the 2017 proceedings, the Court made an order appointing Mr Alan Hayes as provisional liquidator of Sirrah on 14 October 2019.
Mr Harris gave evidence during an examination conducted by Mr Hayes in the Federal Court of Australia in February 2021 to the effect that a leasehold interest in certain property located in Bali, Indonesia (the Bali property) in Mr Harris' name (as sub-lessee) was held by him on trust for Sirrah.
However, Mr Harris gave different evidence during the final hearing of the 2017 proceedings before Black J on 30 March 2021. On that occasion, Mr Harris gave evidence to the effect that he had considered acquiring the leasehold interest in the Bali property on behalf of Sirrah but had not proceeded with that plan and so the interest is his property: In the matter of Sirrah Pty Ltd (in prov liq) [2021] NSWSC 413 at [68].
On 31 March 2021, on the undertaking as to damages given by the plaintiffs in the 2017 proceedings, the Court accepted a written undertaking by Mr Harris in the following terms: "On 31 March 2021, William Francis Harris undertakes to the Court by his counsel that: 1. Until further order, he, by himself, his servants and agents, will not transfer, dispose of, further encumber or otherwise deal with his interest in the real property located in Bali and recorded in Sub-lease Agreement for Land and Building Deed No. 33 dated 25 January 2019 (Court Book Ref. 6761 and described as Freehold Certificate Number 04112 / Sanur Kauh Village, registered in the name of Engineer I NYOMAN KARYANA or IR. NYOMAN KARYANA, located in Bali Province, Denpasar City, South Denpasar District, Sanur Kauh Village, Jalan Sudamala) without first giving 14 days' written notice of his intended dealing with such property to the Plaintiffs' solicitor, Patrick See of Lloyd and Lloyd Solicitors and to the Provisional Liquidator of Sirrah Pty Ltd's solicitor, Steven Mattiussi of Watson Mangioni."
As I have mentioned, YBL were acting as the solicitors for Mr Harris at that time.
A legal services agreement and costs disclosure dated 2 June 2020 between YBL, HHC, Mr Harris and Ms Michelle Harris (who was the third defendant in the 2017 proceedings but is not a party to these proceedings), contained the following provision: "Security You hereby grant an equitable charge and security interest in favour of YBL in respect of all your present and after acquired property (with no exceptions or exclusions) and any real property owed by you, to secure payment of any amount that remains unpaid on any tax invoice(s) issued by YBL to you. You furthermore consent to us registering said interests on the Personal Property Securities Register and to us lodging caveat/s over your real property at any time. You further more acknowledge an agree that the non-payment of our invoices as and when they all due shall be a payment default which will entitle us to exercise a right of enforcement against any security we have obtained from you and such enforcement may include without limitation the appointment of an external controller to realise the security and pay from the proceeds our invoices and all related enforcement costs and expenses on an indemnity basis."
As at 31 March 2021, a tax invoice issued by YBL to HHC, Mr Harris and Ms Harris on 3 March 2021 and due for payment on 10 March 2021 remained unpaid. That tax invoice remains unpaid. A further tax invoice issued by YBL on 6 April 2021 after the conclusion of the hearing of the 2017 proceedings also remains unpaid.
On 7 April 2021, YBL appointed Mr Calabretta as receiver of Mr Harris' property, including any real property owned by him. Clause 2.1 of the Deed of Appointment and Indemnity provides: "2.1 Appointment (1) Upon the execution of this deed, the Secured Party appoints the Receiver, pursuant to the LSA, as receiver and manager of the Security Property, and the Receiver hereby accepts the appointment. (2) The appointment hereby made by conferring of all powers which are identified on page 7 of the LSA."
The appointment was made pursuant to the document to which I have referred at [14] above - defined in the deed as the "LSA" - and not pursuant to s 109 of the Conveyancing Act 1919 (NSW). The powers on page 7 of the LSA referred to in clause 2.1(2) of the deed are the powers that I have set out at [14] above, namely the power to realise the security and pay from the proceeds YBL's invoices and all related enforcement costs and expenses on an indemnity basis.
YBL filed a notice of intention of ceasing to act for Mr Harris on 13 April 2021 and filed a notice of ceasing to act on 20 April 2021.
Black J published reasons for judgment on 23 April 2021: In the matter of Sirrah Pty Ltd (in prov liq) [2021] NSWSC 413. The judgment and orders of Black J made on 7 May 2021 give effect to those reasons.
There is no evidence that Sirrah has taken any steps under Part 8 of the Civil Procedure Act 2005 (NSW) or otherwise to enforce the judgments in its favour since 7 May 2021, save to the extent that the commencement and prosecution of the present proceedings might be considered as a step towards ultimately recovering the judgment debt or part thereof.
YBL appointed Mr Calabretta as receiver of HHC on 26 May 2021. The Deed of Appointment and Retirement contains provisions to the same effect as those set out in the earlier deed relating to Mr Harris. The Security Property is defined by reference to property owned by Mr Harris rather than HHC, but that is an obvious error and the definition should be construed as if the reference to Mr Harris was a reference to HHC: Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd [2019] NSWCA 11 at [6]-[10] (Leeming JA) and the authorities there referred to; HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296 at [61]-[65] (Meagher JA and Ball J).
YBL contends, and Sirrah does not dispute, that the leasehold interest in the Bali property is Mr Harris' property. For reasons that are not apparent from the evidence, Mr Behnia does not presently consider that the leasehold interest is property of Mr Harris.
It is convenient to record at this point that Sirrah does not claim to have any proprietary or security interest in Mr Harris' interest in the Bali property. As I have already mentioned, Sirrah acknowledges that it is an unsecured judgment creditor of Mr Harris (and HHC). A person claiming to represent Mr Behnia has previously claimed in correspondence with Mr Calabretta's office that Mr Behnia's loan to Mr Harris is secured against the Bali property. It is in those circumstances that the plaintiff joined Mr Behnia to these proceedings to ensure that he had an opportunity to be heard. Counsel for Mr Behnia informed the Court that the person who has previously communicated with Mr Calabretta's office does not in fact represent Mr Behnia and that Mr Behnia does not presently claim to have a security interest in the leasehold interest in the Bali property. As I understand the position, Mr Behnia reserves his right to claim such a security interest.
It is also convenient to note that the Bali property is a luxury residential property that is not used as a permanent residence but is available for short-term rental. International visitors to Bali have traditionally been the primary market for such rentals.
When I refer to the Bali property, I am referring to Mr Harris' leasehold interest in the property as sublessee unless otherwise stated.
During May, June and July 2021, the receiver obtained various appraisals as to the value of the Bali property, continued the listing of the property for sale through an agent (the listing had been made prior to his appointment) and considered various offers for the property.
The appraisals were obtained from the agent who has been managing the letting of the Bali property for some time (prior to the receiver's appointment) and from one other agent, who is independent of the letting agent. The letting agent initially gave an appraisal of between USD$680,000 and USD$695,000, but reduced this to between USD$400,000 and USD$450,000 a short time later. The receiver sought an independent appraisal because he was concerned about the letting agent's apparently inconsistent advice. That independent appraisal came in at between USD$409,000 and USD$526,000.
There is no evidence of the methodology underlying these appraisals. Mr Calabretta gave evidence to the effect that he had not proceeded with plans to obtain a formal valuation of the Bali property because he understood from the letting agent that there was some difficulty in doing so because the leasehold property market in Bali is a distinct market for foreigners to hold interests in property without having freehold title and it is agents who specialise in the sale of leasehold interests and leasing of such properties to foreign visitors who understand the market. Property valuers are unlikely to understand the market.
Four offers received for the Bali property between November 2020 and May 2021 ranged between USD$270,000 and USD$450,000. The USD$270,000 received in February 2021 appears to be an outlier, with the other three offers falling within the range of USD$400,000 to USD$450,000.
On 20 May 2021, the receiver's office requested the letting agent to negotiate an increase to USD$550,000 with the interested party who had made the USD$450,000 offer. On 21 May 2021, the letting agent replied: "As I explained multiple times in the email the pandemic situation really effecting [sic] the market in Bali. At the moment is very limited Buyer. So depending now how quick you want the villa will sold, we can start from beginning again to open price higher, I can't guarantee it will sold in 6 months, when the Indonesian border no sign to be open for foreigner without stay permit."
On 14 June 2021, the letting agent confirmed that the interested party would not increase their offer above USD$450,000. At the same time, the letting agent indicated that the Indonesian government anticipated opening up to tourists in July 2021.
The most recent offer received for the Bali property on 4 September 2021 has a price of USD$500,000 and is subject to conditions that it is not necessary to set out here. That offer has not been accepted and the Bali property remains listed for sale.
It is an agreed fact in these proceedings that the amount paid for the leasehold interest in the Bali property when it was acquired in Mr Harris' name in January 2019 was approximately AUD$1,800,000. The offer of USD$500,000 is considerably less than the AUD$1,800,000 acquisition cost. However, there is no evidence as to whether the acquisition cost reflected the fair market value of the leasehold interest at the time. Nor is there any evidence that the acquisition cost provides any indication of the present market value. On the contrary, the letting agent's description of the effect of the COVID-19 pandemic suggests that the January 2019 acquisition cost (even assuming it represented market value at the time) would not provide any basis for drawing any conclusion about the present market value.
Mr Calabretta gave evidence in cross-examination that he had not conducted a public auction campaign for the Bali property because he considered that its listing for sale through the current arrangements targeted at buyers in the foreign market was the most effective and appropriate means of marketing the property.
On 18 July 2021, Mr Harris sent an email to Sirrah's solicitors stating: "I give notice that I am required by request made by a receiver to execute documentation for transfer of the lease of the Bali property."
That notice, and subsequent inquiries made by Sirrah's solicitors concerning the appointment of receivers, resulted in the commencement of the present proceedings by Sirrah.

Interim orders and undertakings

Section 1323(1) relevantly provides: "(1) Where: (a) an investigation is being carried out under the ASIC Act or this Act in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Act; or (b) a prosecution has been begun against a person for a contravention of this Act; or (c) a civil proceeding has been begun against a person under this Act; and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called an aggrieved person) to whom the person referred to in paragraph (a), (b) or (c), as the case may be, (in this section called the relevant person), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for financial products or other property, the Court may, on application by ASIC or by an aggrieved person, make one or more of the following orders: (a) an order prohibiting a person who is indebted to the relevant person or to an associate of the relevant person from making a payment in total or partial discharge of the debt to, or to another person at the direction or request of, the person to whom the debt is owed; (b) an order prohibiting a person holding money, financial products or other property, on behalf of the relevant person, or on behalf of an associate of the relevant person, from paying all or any of the money, or transferring, or otherwise parting with possession of, the financial products or other property, to, or to another person at the direction or request of, the person on whose behalf the money, financial products or other property, is or are held; … (h) an order appointing: (i) if the relevant person is a natural person - a receiver or trustee, having such powers as the Court orders, of the property or of part of the property of that person; or (ii) if the relevant person is a body corporate - a receiver or receiver and manager, having such powers as the Court orders, of the property or of part of the property of that person; …"
Section 1323(3) provides that, on an application for an order under sub-section (1), the Court may grant interim orders pending the determination of the application if it is desirable in the opinion of the Court to do so before considering the application.
On 27 July 2021, the Court made an interim order pursuant to s 1323(3) restraining Mr Calabretta from paying any money or transferring or parting with possession of any property of Mr Harris to any other person at the direction or request of the person on whose behalf Mr Calabretta holds assets of Mr Harris. The order was expressed to apply until final determination of Sirrah's application.
On 30 July 2021, the Court made an interim order pursuant to s 1323(3) restraining Mr Harris from paying any money or transferring or otherwise parting with possession of the Bali property until final determination of Sirrah's application. The Court also noted: 1. YBL's undertaking to the Court not to pay any money or transfer or otherwise part with possession of the property of Mr Harris to any other person until final determination of Sirrah's application; 2. Mr Behnia's undertaking to the Court (without admissions and without prejudice) that he would not transfer, dispose of, encumber or otherwise deal with his claimed interest in the Bali property until further order. I note that the terms of that undertaking are inconsistent with Mr Behnia's statement to the Court on 1 October 2021 (through his counsel) that he does not claim to have any interest in the Bali property.

Application for appointment of receiver by the Court

The orders now sought by Sirrah are: 1. declarations that Mr Calabretta's appointments as receiver of Mr Harris' assets and as receiver of HHC's assets are void; 2. orders for the appointment of a receiver to the assets of Mr Harris and HHC in place of Mr Calabretta, with powers that include a specific power to sell the Bali property; 3. an order that the proceedings be re-listed following completion of the sale of the Bali property (and any other assets of Mr Harris and HHC) by the proposed court-appointed receiver "for the purpose of determining the proper distribution of sale proceeds"; and 4. various ancillary orders, including as to the proposed court-appointed receiver's remuneration.
Sirrah's application for declarations that Mr Calabretta's appointments were void is based solely on the contention that the appointments were made in breach of the undertaking given to the Court by Mr Harris on 31 March 2021.
As I have already mentioned, Sirrah's application for the Court to appoint a receiver relies on s 1323(1)(h) of the Corporations Act, s 67 of the Supreme Court Act and the Court's inherent jurisdiction to appoint a receiver by way of equitable execution. Sirrah contends that the Court should exercise any one of these powers to appoint a receiver because: 1. Mr Calabretta's appointment as receiver of Mr Harris' assets was made in breach of the undertaking given to the Court by Mr Harris on 31 March 2021, and was therefore contrary to public policy and void; 2. Mr Calabretta's activities in marketing the Bali property for sale are in breach of Mr Harris' undertaking; and 3. Mr Calabretta has failed to follow what counsel for Sirrah described as "due process" in his efforts to sell the Bali property.
The parties' submissions also raise a question about whether s 1323 applies in the circumstances of this case where the 2017 proceedings are civil proceedings under the Corporations Act that have "been begun" against Mr Harris (to use the phrase in s 1323(1)(c)) and have been concluded, but for the plaintiffs' enforcement of the judgment in their favour and any continued operation of Mr Harris' undertaking given to the Court in those proceedings on 31 March 2021.

The appointments of the receiver are not void

The basis of Sirrah's submission that YBL's appointment of Mr Calabretta as receiver of Mr Harris' assets was void is that YBL made the appointment as agent for Mr Harris, the appointment was therefore in breach of Mr Harris' undertaking given to the Court on 31 March 2021 because it was made without prior notice to the plaintiffs' solicitors in the 2017 proceedings, and that the appointment was therefore void because it is a contract made against public policy.
Sirrah's submissions did not identify any basis in principle or authority for the proposition that YBL was the agent of Mr Harris in appointing Mr Calabretta as receiver.
Counsel for Sirrah referred to well-known authorities and texts concerning the "tripartite relationship" between receiver, chargee and chargor involving a "special and limited" agency between the receiver and the chargor at the same time as the receiver has a duty to the charge to get in the moneys for which the security was given. However, those authorities and texts speak to the position after the appointment of the receiver is made and do not support the proposition that a chargee with a contractual right to appoint a receiver to the chargor's assets to realise its security interest is acting as agent for the chargor in making that appointment. Nor do they support the proposition that the chargee is the agent of the chargor, even after the appointment of the receiver: see G E Dal Pont, Law of Agency (4th ed, 2020) at paragraphs 1.43-1.45 and the cases there referred to.
Counsel for Sirrah also referred to the appointment of the receiver as resulting in Mr Harris being "dispossessed of" his interest in the Bali property. As I understood the submission, this was a further basis on which it was said that either YBL or the receiver was the agent of Mr Harris because, immediately on the appointment, YBL (through the receiver) was stepping into Mr Harris' shoes in taking his interest in the property.
I reject that submission. As YBL and Mr Calabretta submitted, the appointment was merely a step in the enforcement of a security interest that had existed prior to Mr Harris giving his undertaking to the Court.
In my opinion, YBL was plainly acting in its own interests in appointing Mr Calabretta as receiver to realise its security interest. It follows that the appointment of the receiver was not an act of an agent of Mr Harris and so is not capable of breaching Mr Harris' undertaking to the Court. I therefore reject the contention that the appointment is contrary to public policy and void.
Sirrah's submissions did not articulate the basis on which it contended that Mr Calabretta's appointment as receiver of the assets of HHC was void. If and to the extent that it is submitted that the appointment was in breach of Mr Harris' undertaking and therefore void as contrary to public policy, I reject that submission for reasons explained above and for the more fundamental reason that the undertaking related to the Bali property and there was no evidence in the present proceedings that the Bali property is an asset of HHC. The proceedings were conducted by Sirrah (and also by YBL and Mr Calabretta) on the basis that the Bali property is an asset of Mr Harris. As I have said at [21] above, the reference to Mr Harris' real property in the definition of "Security Property" in the deed appointing Mr Calabretta as receiver of HHC is plainly an error.

The marketing of the Bali property for sale is not a breach of Mr Harris' undertaking

Assuming (without deciding) that, from the time his appointment took effect, Mr Calabretta was the agent of Mr Harris in addition to owing a duty to YBL as chargee, I reject Sirrah's submission that the marketing of the Bali property for sale was a breach of Mr Harris' undertaking given to the Court on 31 March 2021. The marketing of the property for sale is not an activity falling within the scope of the things that Mr Harris undertook not to do without prior notice to the solicitors for the plaintiffs in the 2017 proceedings.
I reject Sirrah's submission that the marketing activities constitute a "dealing with" the Bali property within the meaning of the undertaking. Read in context, the words "dealing with" refer to an action that would either dispose of or alter Mr Harris' interest in the Bali property that is not otherwise covered by the specific actions expressly caught by the undertaking (such as a declaration of trust in respect of his interest, or a surrender of the sublease interest). The words "dealing with" do not capture marketing activities or other actions that may be directed towards a transaction or dealing that is restrained by the undertaking. The point of the undertaking is that Mr Harris is required to give 14 days' prior notice before entering into any such transaction or dealing. That notice was given on 18 July 2021, as referred to at [35] above.
That conclusion renders it unnecessary to determine whether the receiver in this case is the agent of Mr Harris, despite the absence of any express provision to that effect in the legal services agreement between YBL and Mr Harris or in the deed of appointment between YBL and Mr Calabretta: see Fisher & Lightwood's Law of Mortgage (3rd Australian edition, 2013), paragraph 18.5.

The "due process" complaints

There were three elements to this aspect of Sirrah's submissions.
First, Sirrah submitted that YBL has no ability to sell the Bali property without applying to the Court for an order for judicial sale. No such application has been made.
In support of this submission, Sirrah relied on the following passage from the judgment of Campbell J (as the later Judge of Appeal then was) in King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076 at [51]: "Where there is a charge simpliciter, and not a mortgage, or an agreement for a mortgage, the right of the party having such a charge is a sale, and not foreclosure: Tennant v Trenchard (1869) LR 4 Ch App 537 at 542 per Lord Hatherly LC; In re Owen [1894] 2 Ch 220. Under the general law a charge can be enforced only by application to the Court for an order for the sale of the charged property, not by the charge taking unilateral action out of court: Melbourne Tramways Trust v Melbourne Tramway & Omnibus Co Ltd (1887) 13 VLR 487 at 490."
That passage appears in the context of a learned and detailed analysis undertaken by Campbell J of the principles relevant to determining whether an unregistered second mortgagee of Torrens land has a power of sale absent an order for judicial sale, and the basis of the Court's power to make such an order. The passage addresses only the general law position concerning equitable charges. At general law, it is the availability of the remedies of an order for judicial sale or for the appointment of a receiver that mean that an equitable chargee has a proprietary right in the charged property, as opposed to mere a contractual right in relation to that property. However, the contract between the parties pursuant to which the charge is created may give the chargee additional remedies that are not dependent on a court order: see Roberts v Investwell [2012] NSWCA 134 at [26]; Mathieson Nominees Pty Ltd v Aero Developments Pty Ltd [2016] VSC 131 at [75]-[81]; G E Dal Pont, Equity and Trusts in Australia (7th ed, 2019) at paragraphs 1.150-1.155 and the authorities there referred to; Fisher & Lightwood's Law of Mortgage (3rd Australian edition, 2013), paragraph 18.2; E Sykes and S Walker, Law of Securities (5th ed, 1993), p 198.
In this case, the legal services agreement conferred on YBL the right to appoint a receiver to realise the security and pay from the proceeds of sale of the charged property YBL's invoices and all related enforcement costs and expenses on an indemnity basis. YBL is entitled to exercise that right without applying to the Court for an order for judicial sale. There is no evidence of other security interests in the Bali property that may impede the receiver's ability to convey good title to any purchaser of Mr Harris' sublease interest.
For those reasons, I reject the first element of Sirrah's submissions in relation to "due process".
Second, Sirrah submitted that the receiver's efforts to sell the Bali property were not adequate to achieve fair market value for the property.
I have referred to the receiver's efforts at [26]-[33] above. The Bali property is an asset of an usual nature for which the evidence suggests there is a limited or bespoke market, and the receiver has been advised that the relevant market has been adversely affected by the COVID-19 pandemic. Sirrah made criticisms of the receiver's efforts from the Bar table during the cross-examination of Mr Calabretta, but did not put to him any alternative course that he should pursue in marketing the Bali property for sale. Nor did Sirrah adduce evidence from any experienced liquidator or receiver (including Mr Hayes) as to any such alternative course.
Sirrah's submissions also raised questions about the enforceability of the Bali sublease interest and the nature of the sublessee's rights under it, and suggested that those questions should be investigated by the receiver before proceeding to sell the Bali property as they may impact on the value of the property "upwards or downwards". However, despite Sirrah's solicitor deposing in his 23 July 2021 affidavit that he was obtaining specialist advice and assistance from Indonesian-based lawyers about the Bali sublease, Sirrah did not adduce any evidence at the hearing to the effect that the sublease or the headlease from which the sublessor derives title are, or may be, not recognised, unenforceable, or not transferable under Indonesian law. Thus, this aspect of Sirrah's submissions was based on mere speculation in circumstances where Sirrah has had an adequate opportunity to adduce evidence of any risks (if any) giving rise to a need for the investigations that it contends should be undertaken before marketing the Bali property for sale.
For those reasons, I reject the second element of Sirrah's submissions concerning "due process".
Third, in a very vague submission, Sirrah contended that documents produced to the Court by Mr Behnia "reveal issues with" loan agreements between Mr Harris and Mr Behnia and with YBL's security and that those (unspecified) issues "require ventilation before the Court" because the receiver is "apparently acknowledging the priority rights of [Mr] Behnia over YBL to the Bali Sublease Interest which impacts the legitimacy of the Calabretta appointment over the Bali Sublease Interest with apparent private (undisclosed) arrangements being made to prefer the Behnia security to the YBL claimed security".
I reject those submissions. Sirrah did not identify the issues, much less take the opportunity to "ventilate" them in the hearing of its application. The "legitimacy" of the appointment of a receiver by a secured creditor is not undermined merely because there may be another secured creditor with a higher priority interest who has not taken steps to enforce their security interest. That circumstance may, of course, impact on whether the receiver appointed can convey clear title to any purchaser of the charged asset, or how the proceeds of any sale of the asset must be distributed. There is evidence of email correspondence between Mr Calabretta's office and a person claiming to represent Mr Behnia in which the receiver's office indicated that, based on their inquiries at that time, they acknowledged that a security interest claimed by Mr Behnia in the Bali property had a higher priority than YBL's security interest. Mr Behnia has subsequently disclaimed the claims made by the person purporting to represent him, as I have referred to in [23] above. There is nothing improper in the correspondence, and counsel for Sirrah did not put any proposition to the contrary to Mr Calabretta in cross-examination. As an unsecured creditor, Sirrah has no interest in any questions of priority between YBL and any other secured creditor.

Lack of action by Sirrah to enforce the judgment debt

Counsel for Sirrah acknowledged that all of the processes under Part 8 of the Civil Procedure Act 2005 (NSW) (and other processes, such as issuing a bankruptcy notice to Mr Harris) were available to Sirrah to enforce the judgment in the 2017 proceedings. There was no evidence that Sirrah has taken steps to date to avail itself of any of those processes and there was no evidence of any reason for its failure to do so. It was not submitted that those processes are inadequate in the circumstances of this case. That is sufficient reason to dismiss Sirrah's application for the appointment of a receiver insofar as it relied on the Court's inherent jurisdiction to appoint a receiver by way of equitable execution: Hall v Foster [2012] NSWSC 974 at [19].

Jurisdiction

The parties' submissions did not address in the level of detail appropriate for a question of statutory construction the issue referred to at [44] above as to whether s 1323 applies in circumstances where the 2017 proceedings are civil proceedings under the Corporations Act that have "been begun" against Mr Harris but have also been determined by the judgment and orders of Black J on 7 May 2021.
Sirrah's submissions focussed on the ordinary or grammatical meaning of the words "a civil proceeding has been begun" in s 1323(1)(c). However, Sirrah did not articulate why the ordinary, grammatical meaning of those words is apt to capture circumstances in which a civil proceeding has been commenced in the past, but that event has been overtaken or superseded by the event of final judgment having been given in those proceedings. Nor did Sirrah's submissions address in any meaningful way whether the legal meaning of the words "a civil proceeding has been begun" in the context of s 1323 extends to a civil proceeding in which final judgment has been delivered. No attention was given to the surrounding statutory provisions, what may be drawn from other aspects of the Act, the relevant legislative history, the mischief that s 1323 is intended to remedy and other matters that may be relevant to the construction of s 1323(1)(c).
Counsel for Sirrah referred to Corporation Affairs Commission v Lone Star Exploration NL (1988) 50 SASR 24, in which the Full Court of the Supreme Court of South Australia considered the construction of s 573 of the Companies (SA) Code 1982. Section 573 empowered the Court to make orders set out in subsections (1)(d) - (1)(k) on the application of the Corporate Affairs Commission in circumstances where (relevantly): "(a) an investigation is being carried out under 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 'relevant person') is or may become liable …"
The respondent company contended that the power under s 573(1) could only be exercised in circumstances where the actual or potential liability of the relevant person was a liability that arose from the Code (as opposed to under the general law) and where the potential liability of the relevant person flowed from the investigation, prosecution or civil proceedings (or there was at least a nexus between the two). The Full Court rejected that contention. King CJ and Jacobs J agreed with von Doussa J, who stated (at 28, my emphasis): "… there is nothing in the text of s 573(1) which expressly limits the power of the Court in the way contended for by the company. On an ordinary reading of the subsection, the power to make one or more of the orders specified in pars (d)-(k) is invoked where one or more of the events described in pars (a), (b) or (c) is happening, or has happened. Then the Court is vested with a discretion to make the specified orders if it is necessary or desirable to do so for the stated purpose. …"
Sirrah seized on the words emphasised above as supporting its contention that, once a civil proceeding has been commenced against a person under the Corporations Act, the power to make orders under s 1323(1) continues even after the claims for relief in that civil proceeding have been finally determined.
However, I do not consider that that those emphasised words, in a passage which was directed to the express words of s 573(1) rather than the legal meaning of the words, support Sirrah's submission. In relation to the construction of s 573(1), von Doussa J went on to express the opinion that (at 29, my emphasis): "… a limitation on the scope of the power in s 573(1) arises from the description of the events in pars (a), (b) and (c) which invoke it. The investigation, prosecution or civil proceeding must be one which concerns a possible contravention of the Code by the relevant person. I think this is so even in the case of par (c). A civil proceeding 'instituted … under this Code' will be one that seeks to enforce a right or obligation created by or incorporated in the Code. A civil proceeding to enforce a right or obligation dehors the Code cannot, in my view, be a proceeding 'instituted … under this Code.' The wide powers of the subsection are not, therefore, generally available unless a contravention of the Code is suspected or alleged. … But once the Court is satisfied that one of the events in pars (a), (b) or (c) has arisen, that event provides the occasion for the exercise of the discretionary power given by the subsection. I do not consider the language of s 573(1) requires any further limitation on its scope to be implied. In particular I can detect no warrant for the very restricted construction for which the company contends."
In my opinion, it is plain from the words emphasised in the passage immediately above that that the earlier passage relied on by Sirrah sheds no light on whether or not the requirement in s 1323(1)(c) is satisfied in circumstances where a civil proceeding under the Act has been commenced and determined. The Full Court was not addressing that question.
YBL's submissions (adopted by Mr Calabretta) focussed on statements in many authorities to the effect that the purpose of s 1323 is to preserve the status quo and the assets of the person against whom proceedings under the Corporations Act have been commenced pending the outcome of those proceedings so that the person's assets will be available to meet any judgment in favour of the aggrieved person: see, for example, Australian Securities and Investments Commission v Carey (No.3) (2006) 57 ACSR 307; [2006] FCA 433 at [21]-[29]; Australian Securities and Investments Commission v Carey (No.5) (2006) 58 ACSR 6; [2006] FCA 684 especially at [15], [18]; Australian Securities and Investments Commission v Oliver Banovec (No. 2) [2007] NSWSC 961 at [5]-[6].
Those cases did not involve civil proceedings in which judgment had already been given and orders made in respect of all claims for relief. The statements of purpose, expressed in general terms, were made in a context where it was not necessary to determine whether s 1323 applied in those circumstances. YBL's submissions did not address why those statements of purpose favour a construction of s 1323 that render the section inapplicable in those circumstances, notwithstanding that the assets of the relevant person (the judgment debtor) may otherwise be unavailable to meet any judgment in favour of the aggrieved person (the judgment creditor).
YBL acknowledged that an order made under s 1323 in circumstances where a civil proceeding under the Act has been commenced and is pending can be continued after final judgment has been given in that proceeding: Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (No. 2) (2015) 106 ACSR 302; [2015] FCA 527 at [62]. YBL's submissions did not grapple with the question why, if the power under s 1323 extends to making an order when a civil proceeding is pending that will continue beyond the determination of the claims for final relief in that proceeding, it does not extend to the making an order after determination of those claims for final relief if it is necessary to desirable to do so for the purpose stipulated in s 1323(1).
I prefer not to determine the s 1323 jurisdictional question in the absence of appropriately detailed submissions from the parties and in circumstances where, assuming that the Court has power under s 1323(1)(h) to appoint a receiver in this case, Sirrah failed to establish that it was necessary or desirable to do so for the reasons explained above.
I note that there is also a question (not identified by the parties) as to whether the Court's power under s 67 of the Supreme Court Act to "at any stage of proceedings, on terms, appoint a receiver by interlocutory order" applies where judgment has already been given and orders made in respect of all claims for final relief. I respectfully agree with Ball J's observation in Hall v Foster [2012] NSWSC 974 at [19]: "the wording of s 67 suggests that it is concerned with interim preservation of the subject matter of the litigation pending final resolution of the proceedings, not with the appointment of a receiver as a final order to give effect to a judgment that has been delivered."
There is no question about the Court's inherent jurisdiction to appoint a receiver by way of equitable execution in this case, but this is not an appropriate case for the appointment of a receiver in the exercise of that jurisdiction for the reasons already explained.
For completeness, I note that Sirrah did not make any alternative application for a freezing order: see Uniform Civil Procedure Rules 2005 (NSW), r 25.14. Had such an application been made, I would have refused it in circumstances where it would have interfered with a secured creditor's realisation of its security interest through a validly appointed receiver whose conduct in marketing the secured property for sale has not been shown by the evidence to be inconsistent with a receiver's duties.

Conclusion and orders

For all of the reasons above, the proceedings are dismissed. Sirrah has not established that it is "necessary or desirable" for the purpose identified in s 1323(1), or alternatively "just or convenient" (s 67), for the Court to appoint a receiver to the assets of Mr Harris and HHC. The application for the appointment of a receiver under those statutory provisions is dismissed for that reason, assuming (in Sirrah's favour) that the Court has power to appoint a receiver under one or both of those provisions in this case. Insofar as the application for the appointment of a receiver relied on the Court's inherent jurisdiction, Sirrah has not demonstrated that the processes available to it to enforce the judgment and orders in its favour in the 2017 proceedings are inadequate.
As a consequence of the dismissal of the proceedings, the interim orders made under s 1323 of the Corporations Act are discharged and the parties who given undertakings in these proceedings are to be released from those undertakings.
I am not aware of any reason why costs should not follow the event, so that Sirrah would pay the defendants' costs of the proceedings on the ordinary basis as agreed or assessed. However, counsel for Sirrah indicated that Sirrah would wish to be heard on costs and directions will be made to facilitate that on the papers.
I make the following orders: 1. Order that the proceedings are dismissed. 2. Note that the interim orders made by the Court on 27 July 2021 in respect of the first defendant and on 30 July 2021 in respect of the third defendant are discharged by the dismissal of the proceedings. 3. Note that the undertaking given to the Court by the second defendant on 30 July 2021 is discharged by the dismissal of the proceedings. 4. Order that the fifth defendant is released from his undertaking given by the Court on 30 July 2021. 5. Direct that, if any party contends for a costs order other than an order that the plaintiff pay the defendants' costs of the proceedings as agreed or assessed, that party is to file and serve written submissions of no more than two pages in length by 14 October 2021. 6. Reserve the question of costs for determination on the papers after receipt of any submissions referred to in order 5 above.

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