Australian Securities & Investments Commission v Forestview Nominees Pty Ltd

REASONS FOR JUDGMENT IN RELATION TO APPLICATION FOR RECEIVERS TO MAKE PROVISION FOR FUNDING OF OPPOSITION TO WINDING UP APPLICATION Introduction 1 On 30 March 2006 Oren Zohar, Mark Anthony Korda and David John Winterbottom were appointed as receivers and managers of Forestview Nominees Pty Ltd (Forestview) under a charge created on 8 December 1998. On 28 June 2006 the Australian Securities and Investments Commission (ASIC) commenced winding up proceedings against Forestview. A director of Forestview, Mr Norman Phillip Carey, obtained leave to defend the proceedings in the name of the company. He applied to the receivers and managers for funding of $20,000 for legal representation for that purpose. The receivers and managers refused to make such funds available on the basis that there was no cash surplus. 2 The company, through Mr Carey, has appealed against the decision of the receivers and managers. It has done so pursuant to liberty to apply given in these proceedings. For the reasons that follow, I do not consider that I should interfere with the decision of the receivers and managers and the "appeal" will be dismissed. Factual and procedural background 3 Forestview was incorporated in February 1994. Its current directors are Norman Phillip Carey, who has been a director since its incorporation, and his sister, Karen Sandra Carey-Hazell, who has been a director since 19 January 1996. 4 On 8 December 1998 the company granted a fixed and floating charge to Sandhurst Trustees Ltd (Sandhurst). The charge was assigned to Perpetual Nominees Ltd as custodian of the ING Mortgage Pool for ING Funds Management Ltd as the responsible entity of The ING Mortgage Pool (ING) (ING Charge) on 28 June 2000. 5 Clause 2 of the ING Charge recited that Sandhurst had agreed to provide or continue providing credit or financial accommodation from time to time to, or at the request of, Forestview upon the condition that Forestview entered into the mortgage. 6 The money secured by the ING Charge was defined expansively in cl 4.1.15 and included: 4.1.15.1 any money which at any time the Borrower in any capacity and whether alone or with others:- 4.1.15.1.1 is actually or contingently liable to pay to the Mortgagee; or 4.1.15.1.2 may become actually or contingently liable to pay to the Mortgagee in the future pursuant to any transaction or arrangement at any time entered into or made by the Mortgagee with any person;' Subclauses 4.1.15.2 and 4.1.15.3 are not material for present purposes. The definition was extended in 4.1.15.4 to: 'all moneys expended by the Mortgagee to make good any breach or non-compliance by the Mortgagor of any term, covenant, condition, or agreement on the part of the Mortgagor to be observed or performed under this document and all moneys incurred or spent by the Mortgagee in exercising or attempting to exercise any of the powers under this document together with interest on those moneys from the date of expenditure until repayment at the rate specified in this document and if more than one rate is specified then at the higher rate or if no rate is specified then at the Applicable Rate, and where the context permits means any part of that money;.' 7 The property the subject of the charge was designed the 'Mortgaged Property' defined in cl 4.1.13 as follows: '"Mortgaged Property" means all the property, undertaking and rights presently or in the future held by the Mortgagor including (without limitation): 4.1.13.1 rights to receive capital and other money from shareholders or, where the Mortgagor is a trustee, beneficiaries of a Trust; 4.1.13.2 the goodwill attaching to any Business; 4.1.13.3 any property, undertaking or rights held as trustee; and 4.1.13.4 any lease, Licence or franchise held or owned by the Mortgagor in relation to a Business;' 8 The powers of the mortgagee under the Charge are extensive. They are set out in cl 16. They include powers to "enter, seize, take possession of, manage and use the Mortgaged Property" (cl 16.2.1) and to "deal in any way with the Mortgaged Property, any estate or interest in it, any right attaching to it or any encumbrance affecting it" (cl 16.2.12). 9 Clause 11 of the Charge prohibits any dealing including encumbering the Mortgaged Property without the mortgagee's consent. It appears that on 23 January 2006 Forestview granted an Equitable Mortgage in favour of Bowesco Pty Ltd (Bowesco). This grant was made without the consent of ING. It was treated as an Event of Default under the Charge by ING and a notice of breach sent to Forestview on 7 March 2006 by Corrs Chambers Westgarth (Corrs) acting for ING. Mr Norman Carey wrote to Corrs on 9 March 2006 stating that the security had been lodged so that Bowesco could "assist Forestview in its funding requirements for the expansion of the Forresfield Shopping Centre, Stage 2" having regard to a recent commitment for expansion by Kmart. He said that Bowesco had not lent any money to Forestview and that the security therefore had no impact on ING's interest under its security. He further stated that funding would be required for predevelopment costs and that it was in Forestview's interests and ING's to move forward with the Kmart proposal given the significant increase in value this would bring to the shopping centre property. He concluded his letter by saying: 'If this is not acceptable could you explain why and if you require it we will immediately rectify the alleged breach by removing the security.' According to Mr Carey's affidavit of 18 August 2006, sworn in these proceedings, he did not receive a reply from Corrs. It is evident also that he took no steps to remove the mortgage. 10 On 30 March 2006 Oren Zohar, Mark Anthony Korda and David John Winterbottom, all partners of KordaMentha, were jointly and severally appointed receivers and managers of Forestview for the purpose of enforcing the charge. The receivers and managers entered into possession of and assumed control of Forestview's property on the date of their appointment. That appointment was effected by a deed between them and Perpetual Nominees as custodian of The ING Mortgage Pool for ING Funds Management Ltd as the responsible entity of the ING Mortgage Pool. 11 On 28 June 2006 ASIC filed an application in this Court for the winding up of Forestview on the ground of its insolvency. The application relied upon the presumption of insolvency, flowing from s 459C(2)(c) of Corporations Act 2001 (Cth) (the Act) by virtue of the appointment of the receivers and managers. ASIC also sought leave to make the application under subs 459P(2) of the Act. 12 On 11 August 2006 orders were made requiring Forestview to file and serve any affidavit in opposition to the grant of leave to ASIC to bring the application by 18 August 2006. ASIC was to file and serve any affidavit in reply by 25 August 2006. The following order was then made: 'The application so far as it relates to leave to proceed be set down for 31 August 2006 at 2:15pm WST, and if leave to proceed is then granted consideration will be given as to whether to proceed immediately with the substantive application.' An affidavit was filed on 18 August 2006 sworn by Mr Norman Carey in opposition to the application. His affidavit essentially went to the solvency of Forestview. He stated in it his belief that the appointment of the receivers was not indicative of any inability of Forestview to pay its debts when they became due and payable. 13 On 31 August 2006 orders were made declaring that Mr Carey, as a director, was entitled to defend the application in the name of Forestview. The company was given liberty to apply on the question whether any of its assets might be used to meet the costs of defending the application. Other orders relating to discovery of documents were made and the application listed for further directions on 29 September 2006. Further orders were made on that day for the filing of affidavits and amendment of the originating process. The application was listed for hearing on 23 October 2006. 14 On 23 October 2006 the company applied to adjourn the application. The hearing and the adjournment application were adjourned to 25 October 2006. At that time the company sought directions allowing for the programming of an application for funding, presumably pursuant to the liberty granted in the earlier orders. On 25 October 2006 the application was further adjourned to 30 October 2006. On that date, after hearing argument in related matters concerning Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed) and Bowesco Pty Ltd (Receivers and Managers Appointed) and by counsel for Forestview, judgment on the question whether funding for legal representation should be made available by the receivers and managers out of the assets of the company was reserved. As the Forestview receivers and managers had not been represented at the hearing on 30 October 2006, Forestview was directed to file a minute of its proposed orders for the release of funds for legal representation and to serve on them a copy of that minute together with its supporting affidavits, the written submissions and the transcript of the proceedings on that day. The receivers and managers filed, in response, affidavits sworn by Mr Zohar on 8 November 2006 and by another KordaMentha director, Mr Norman, on 14 November 2006. They also filed submissions opposing the Forestview application. The scope and basis of the Forestview application 15 Forestview has applied for funding for its legal representation in the winding up proceedings on the basis that it requested funding from the receivers and managers and was refused by them. It relies upon ss 423 and 1321 of the Act as the sources of the Court's power to review that refusal and make an order that funding be provided. As in the like case of Australian Securities and Investments Commission v Bowesco Pty Ltd (Receiver and Manager Appointed) (No 2) [2006] FCA 1493, I do not consider that any inquiry pursuant to s 423 of the Act is warranted nor is it an appropriate vehicle for dealing with the question which arises pursuant to the liberty to apply given on 31 August 2006. In Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 at 438, McLelland J said of the former s 420 of the Companies (New South Wales) Code, which provided for inquiries into complaints relating to liquidators in terms relevantly identical to s 423 of the Act: 'Section 420 is concerned with aspects of the conduct of liquidators which are liable to attract sanctions or control for what might broadly be described as disciplinary reasons. Although the section applies to any liquidator it has particular significance in the case of a liquidator appointed by the court who is, in that sense, an officer of the court, and to a liquidator whose qualification for office is that he is a registered official liquidator or a registered liquidator with the public accreditation that such registration involves and who is in that sense a public officer.' In Belvista Pty Ltd v Murphy (1993) 11 ACSR 628, his Honour revisited the point in relation to the like provision in s 536 of the former Corporations Law and said (at 630): 'In conclusion, I wish to add that where, as here, a creditor or other interested party wishes to challenge the decision of a person in the position of a scheme administrator, or a liquidator, apparently arrived at in good faith, it is generally inappropriate to utilise the "complaint" provisions of s 536 of the Corporations Law rather than the "appeal" provisions of s 1321. As I observed in Northbourne Developments v Reiby Chambers Pty Ltd [(1989) 18 NSWLR 434 at 438] in relation to the predecessor of s 536, that section is concerned with aspects of the conduct of liquidators and others which are liable to attract sanctions or control for what might be broadly described as disciplinary reasons.' I respectfully agree with and adopt what McLelland J said in those two cases in its application to s 423 of the Act. 16 I consider this application on the basis that it is an appeal against the refusal of funding brought pursuant to s 1321 of the Act. I note the point taken by the receivers that an appeal under s 1321 should be lodged by way of an originating process within 21 days of the decision appealed against in accordance with the Federal Court (Corporations) Rules 2000, r 14.1. The decision complained of was made on 15 September 2006. However, given that the application was made pursuant to liberty to apply given on 31 August 2006, I am prepared to waive the requirement for a separate originating process and the relevant time limit in this case. There is no prejudice to the receivers and managers in proceeding in that way. Given that it has arisen as an incident of orders made in the winding up proceedings, I will waive the requirement for filing of a separate originating provision and allow any necessary extension of time. 17 I note that Forestview's minute seeks extensive orders going beyond a challenge to the refusal by the receivers and managers to make funding available. I propose to deal with the company's application solely on the basis that it is an application for provision of funding for legal representation in the winding up proceedings pursuant to the liberty to apply given on 31 August 2006. Any other orders must be sought pursuant to a separate and properly constituted application. I therefore refer only to so much of the evidence relied upon by Forestview as is relevant to the funding of its legal representation in the winding up proceedings. The evidence and findings 18 In an affidavit sworn on 24 October 2006 Mr Carey said that as a director of Forestview he has made numerous attempts to secure funding to allow the company to engage legal representation to defend the winding up proceedings. He has sought funding for the purpose of raising questions about the validity of the appointment of the receivers and managers and to inquire into their costs and conduct. He has also sought a statement of the current financial position of Forestview. 19 Mr Carey wrote to the receivers and managers on 10 September 2006 on behalf of Forestview seeking funding in the sum of $20,000 for the purpose of meeting legal costs in defending the winding up application. A similar letter was sent on 11 September 2006 by Ms Coulson, a barrister instructed to represent Forestview. 20 Mr Carey's request was refused by a letter dated 15 September 2006. In that letter Mr Zohar wrote: 'I refer to your letter of 10 September 2006. As receiver and manager of Forestview Nominees Pty Ltd I am not in a position to place you in funds as requested in your letter. I should also take this opportunity of pointing out that I am not in possession of any surplus funds.' Ms Coulson made a further request by letter of 18 September 2006 seeking a statement of the financial position of Forestview by 20 September 2006. Whilst there was other correspondence, there was no reply received to that letter. 21 Mr Carey wrote again to the receivers on 20 October 2006 reiterating his previous requests for funding and asserting that at the time of his earlier request there was a sum of $459,691.48 in the bank account of the joint owners of the Forrestfield Shopping Centre, of which Forestview is a 25% owner. He attached to his affidavit what he said was a true copy of the front pages of various business cheque account statements for Forestview as trustee for the Matheson Unit Trust and First United Developments Pte Ltd, being the joint owners of the bank account. He set out the closing balances of the bank statements over a period from 26 May 2006 to 13 October 2006. 22 In his affidavit Mr Carey asserted that Forestview generates substantial income from the management of the Forrestfield Shopping Centre. He exhibited copies of cash flow forecasts for the Forrestfield Market Place and the Forrestfield Forum, both of which form part of the shopping centre. These cash flows were said to show a surplus from which interest payments on the relevant loan are to be deducted. He said the total interest payable was in the order of $1.2 million per annum, leaving a free cash flow of approximately $1.1 million to which Forestview had a 25% entitlement. In a second affidavit sworn on 29 October 2006 he stated his belief that the Forrestfield Shopping Centre's current market value would be in the order of $45 million. He based this upon the recent sale of the Warnbro Fair Shopping Centre for approximately $55 million. That centre, he said, is a convenience level shopping centre. Major tenants are Coles and Woolworths and approximately 30 specialty shops. The Forrestfield Shopping Centre, incorporating Forrestfield Market Place and Forrestfield Forum, has the same major tenants and approximately 35 specialty shops with a commitment for expansion from "Kmart". Mr Carey said that the net income of the Warnbro Centre was very similar to that of the Forrestfield Centre. He set out a financial analysis dated 2 February 2006 produced by Mr Brian Letts, the former general manager of Westpoint Realty whose responsibility involved the management of both the Warnbro Centre and the Forrestfield Centre. He argued in his affidavit that, assuming a valuation of $45 million, less borrowings of $15.62 million, the resultant position would be: (a) the net tangible asset of the property is $29.38 million; (b) Forestview's 25% interest is $7.435 million plus the value of the adjoining development land which is 100% owned by Forestview. He estimated the Forestview adjoining land to have a value of approximately $5 million. On this basis he claimed that the total value of Forestview's interest in the Forrestfield property is in the order of $12.345 million. He claimed to know, as a director of Westpoint Realty, that the property continued to generate an increasingly positive net income and to make regular repayments on the loan as it had since the loan came into existence. 23 Mr Carey claimed that the current loan could be refinanced on a non-recourse basis which would automatically terminate the current receivership. This and subsequent evidence relating to the position of Forestview was evidently intended to indicate that Forestview was solvent with net assets in the order of $3,923,564. 24 In his affidavit sworn on 8 November 2006 Mr Zohar disputed wide ranging allegations made by Mr Carey about the appointment of the receivers and their conduct. He confined his substantive responses, however, to the question of the scope of the receivers' appointment and the non-existence of any surplus cash assets. As to the scope of the appointment he exhibited a copy of the ING Charge and of the notice of appointment, noting that the secured property under the charge included Forestview's share in the Forrestfield Shopping Centres and any cash at bank. 25 Mr Zohar acknowledged that Forestview has a 25% interest in funds held in a joint venture bank account with Westpac entitled "Forestview Nominees Pty Ltd ATF Matheson Unit Trust & First United Development PTE Ltd". He said that as at 31 August 2006, just prior to Forestview's request for funding, the company had cash assets totalling $230,677.32 as follows: '(a) $92,407.87, being Forestview's interest in the Joint Bank Account; (b) $33,818.58, being Forestview's share of funds currently held on trust by Westpoint Realty Pty Ltd for the benefit of the joint venture (Realty Trust Account); (c) $104,450.87 in ANZ bank account….' As at 10 September 2006, according to Mr Zohar, Forestview had estimated outstanding current liabilities including receivership costs, bank fees and expenses totalling $320,361.32. On this basis he said there were no surplus funds. 26 As at 31 October 2006, according to Mr Zohar, Forestview had an entitlement to cash assets totalling $80,936.62 as follows: '(a) $47,432.93, being Forestview's interest in the Joint Bank Account; (b) $29,572.69, being Forestview's share of funds currently held in the Realty Trust Account; (c) $3,930.70 in the ANZ Bank Account.' Its outstanding current liabilities including receivership costs, bank fees and expenses were $251,151.67. On that basis, there were no surplus funds. Mr Zohar exhibited to his affidavit a copy of the "Receivers' Presentation of Accounts and Statements" to ASIC for the period 30 March 2006 to 29 September 2006. The amount of the principal debt to ING, according to Mr Zohar, is $15,620,000. 27 Mr Carey filed a responding affidavit, sworn 13 November 2006. He said that, to the best of his knowledge and belief, there were no outstanding current liabilities in Forestview at the date of the appointment of the receivers and managers and there was a surplus of cash. He referred to his earlier affidavit of 24 October 2006 and to a meeting on or about 17 August 2006 with Mr Heydon White, an employee of KordaMentha, to whom he had made a verbal request for funding. The day following the request there were two withdrawals from the joint venture account of $100,030 and $300,030. The latter was a payment to the joint owner, First United Development Pte Ltd. The sum of $100,030 he said related to Forestview and was shown in the receivers' and managers' accounts of receipts and payments for the period 30 March 2006 to 29 September 2006 as a "Joint Venture Distribution - Trading Surplus". The payments for the period did not show any major fees or expenses accruing until 15 September 2006, five days after the first written request for funding was made. 28 Mr Carey referred to a debt of $154,701 owed to Westpoint Realty by Forestview. He is a director of Westpoint Realty. He said that the Westpoint Realty loan is not due and payable and is a non-current asset. He also said that Westpoint Realty has a Property Management Agreement with Forestview for a period in excess of 10 years. Its current annual management fee is $170,243. Because Westpoint Realty is directly affected by the proceedings to wind up Forestview, Mr Carey said he has resolved, in his capacity as a director of Westpoint Realty, to forego its interest in the income it has derived under the management agreement. Moreover, it would refund $20,000 to Forestview so that those moneys could be applied to the defence of the winding up application. He acknowledges the above would require the approval of the Court. Westpoint Realty is subject to the control of receivers appointed by the Court under s 1323 of the Act on 20 April 2006. I observe that this is not a matter relevant to the question whether the Court should interfere with the decision of the receivers and managers. The possible availability of funding from an external source is outside the scope of this appeal. 29 Mr Carey expressed his astonishment at the costs incurred by the receivers and managers of Forestview. He argued, in his affidavit, that the receivership is "over the Respondent's 25% passive interest in the Forrestfield Shopping Centre". This, he said, has been "successfully managed by Realty for in excess of 10 years, during which time the net income and value of the centre has significantly improved". Total receivership costs for a six month period of $150,729.84 were shown. This projected to a figure in excess of $300,000 per annum which was said to exceed Forestview's 25% free cash flow of $275,000. Mr Carey argued that the costs which he seeks to fund Forestview's opposition to the winding up application is dwarfed by the costs incurred in the receivership. 30 A further affidavit in response to that of Mr Carey was sworn by Mr Bradley Dean Norman, a director of KordaMentha, on 14 November 2006. Some of its content went to the information sought by Mr Carey and is not directly relevant to the funding question. The affidavit was sworn on behalf of Mr Zohar, who was unwell and unable to swear an affidavit on 14 November 2006. It also referred to other liabilities that may be current liabilities. Schedule H of the "Report as to Affairs" prepared by the receivers and managers and lodged with ASIC on 30 May 2006 identified unsecured creditors of $9,163,017.63. This figure was made up of $154,701 said to be owed to the Westgem Unit Trust; $722,788.13 to the Forrestfield Joint Venture and $8,285,528.50 to Mathesons Holding Pty Ltd. In addition, Mr Norman said that from a review of the books and records of Forestview and the affidavit of Mr David McEvoy sworn 5 October 2006 and filed in the winding up proceedings, he believed Forestview has received demands from Geoffrey Totterdell, as the liquidator of various of the Westpoint Mezzanine companies, demanding payment under various guarantees totalling approximately $330 million. 31 Mr Norman observed that under s 429 of the Act Mr Carey and Ms Carey-Hazell, as directors of Forestview, were obliged, within 14 days, to submit a report as to the affairs of Forestview as at the date of the receivers' appointment. The relevant form had been sent to them on 30 March 2006 by Mr Zohar. Despite requests by the receivers, they have not provided a directors' report as to the affairs and that matter has been referred to ASIC. 32 I accept the evidence of Mr Carey and the receivers and managers so far as it relates to the undisputed sequence of correspondence and responses relating to funding to which both depose. 33 All the assets, including cash assets of Forestview, are subject to the control of the receivers and managers under the ING Charge. That would be so whether or not there exists a "cash surplus" in the sense in which they have used that term. I accept also that the receivers and managers hold the view, reflected in their report to ASIC lodged on 30 May 2006, that there may be unsecured creditors with claims in excess of $9 million and demands in relation to guarantees to other members of the Westpoint Finance and Property Group in excess of $330 million. It is not necessary for present purposes to decide whether such claims or demands could be made good. It is sufficient for present purposes to say that the receivers and managers face a task of some complexity having regard to the nature of the property under their control and the potential interests of other creditors. 34 Mr Carey's astonishment at the level of their costs and expenses is no measure of its excess. In any event, this is not a case in which the costs and expenses of the receivers and managers is under review. 35 There is no reason emerging from the materials to support an inference that the refusal by the receivers and managers to make available the funds sought by Mr Carey for the purpose of defending the winding up proceedings was made other than in good faith and having regard to their obligations under the ING Charge. The principles applicable to an appeal against the decision of a receiver under s 1321 36 Section 1321(b) of the Act provides for an "appeal" in respect of an "act, omission or decision" of a receiver or a receiver and manager of property of a corporation. Such an "appeal" is not an exercise of the appellate jurisdiction of this Court. It is an exercise of its original jurisdiction. 37 An appeal can only be brought by a "person aggrieved" by the "relevant act, omission or decision". The term "person aggrieved" was discussed by Gummow J in the context of an application for an order of review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act) in Australian Institute of Marine and Power Engineers v Secretary, Department of Transport (1986) 13 FCR 124 at 130-133. His Honour observed that the term "aggrieved" has long appeared in statutes as a way of identifying persons who have standing to utilise a procedure established by the statute (131). He said: 'In each instance the content of the expression is to be seen in the light of the scope and purpose of the statute in issue…' 38 What emerges from his Honour's judgment, by reference to common law standing requirements for the issue of certiorari is that (at 132): '… it was by no means apparent that "grievance" necessarily involved injury to property or present legal interests or "special damage" in any technical sense.' His Honour acknowledged the force of the observation by Ellicott J in Tooheys Ltd v Minister for Business and Consumer Affairs (1982) 54 FLR 421 at 437-438 that the meaning of a "person aggrieved" is "… not encased in any technical rules and that much depends upon the nature of the particular decision and the extent to which the interest of the applicant rises above that of an ordinary member of the public". Gummow J was considering the term in the context of standing to bring an application under the ADJR Act which has specified grounds for judicial review. The scope of review under s 1321 is not confined by specified grounds. 39 McLelland J discussed the term "person aggrieved" in s 538 of the Companies (New South Wales) Code in Northbourne Developments. He referred to the observations of James LJ in Ex parte Sidebotham; Re Sidebotham (1880) 14 Ch D 458 concerning s 71 of the Bankruptcy Act 1869 (UK) (at 465): '… but the words "person aggrieved" do not really mean a man who is disappointed of a benefit which he might have received if some other order had been made. A "person aggrieved" must be a person who has suffered a legal grievance, a man against whom a decision has been pronounced which has wrongfully deprived him of something, or wrongfully refused him something, or wrongfully affected his title to something.' McLelland J, correctly in my respectful opinion, said that the remarks of James LJ should not be treated as an exhaustive definition. But the concept encapsulated in the phrase "legal grievance" was, he thought, "sound in principle". He made the important point that "… the wider the class of persons entitled to appeal to the court in respect of an act, omission or decision of a liquidator (or provisional liquidator) the greater the scope for potential disruption of an orderly administration" (438). 40 It is not necessary for present purposes to essay an exhaustive definition of the limits of the class of persons "aggrieved" who may have standing to bring an appeal under s 1321. It is sufficient, in my opinion, to say that Mr Carey, having been given leave to defend the winding up proceedings on behalf of the company has standing to appeal against the refusal by the receivers and managers to release funds for the purpose of defending those proceedings. 41 There is no limiting principle expressly stated in s 1321 which confines the Court's discretion on an "appeal" against a receiver's decision. The discretion is nevertheless confined, as are all statutory discretions, by the scope and purpose of the section and the statutory context in which it appears. 42 The appeal process has been described in an analogous but not identical context as "originating proceedings which the Court hears de novo" - Tanning Research Industries Inc v O'Brien (1990) 169 CLR 332 at 339 (Brennan and Dawson JJ). The context in that case was an appeal against rejection by a liquidator of a proof of debt. It was applied to the characterisation of the proceedings in that case and has been applied to like proceedings under s 1321 involving an appeal against an administrator's rejection of a proof of debt: In The Matter of Federation Health Ltd (Administrator Appointed) [2006] FCA 314 at [32] - [36] (Young J), citing also Re North Sydney District Rugby League Football Club (2000) 34 ACSR 630 at 631 [3] (Bryson J) and Brodyn Pty Ltd v Dasein Constructions Pty Ltd [2004] NSWSC 1230 at [29] - [33] (Young CJ). See also Westpac Banking Corporation v Totterdell (1997) 25 ACSR 769 in which Templeman J said (at 772): 'I understand a hearing de novo in this context to be one in which the parties are not bound by the evidence at the previous hearing, but may supplement it as they think fit … But despite the admission of further evidence, the onus remains with the party who challenges the decision.' 43 Where an appeal is brought against a discretionary or evaluative decision of receivers and managers, and particular decisions involving qualitative judgment, the scope for curial intervention is necessarily confined. In the case of a court appointed receiver and manager, Street J in Duffy v Super Centre Development Corporation Ltd [1967] 1 NSWR 382 said (at 383): 'The receiver and manager is appointed as an officer of the Court to undertake in that capacity the management of the business of the company as well, of course, as undertaking the care of the company's assets. To the extent to which he makes decisions from time to time, they are in effect made under the authority of the Court itself, and they are subject to review and control by the Court should a proper case be made out requiring such intervention. Whilst this Court does, therefore, have an ultimate control over the day-to-day actions of a receiver and manager, it is a control which is not in my view to be too freely exercised. If, of course, there can be shown to be some defect in the manner in which the receiver and manager is conducting his duties - a defect arising out of some want of good faith or out of some erroneous approach in law or in principle - then that is clearly a ground on which the Court would entertain an application by one of the interested parties for appropriate directions or some other form of remedial order. Where, however, the challenge made is that there has been an absence of prudence and wisdom in the receiver's decisions, a far heavier onus rests upon the party who seeks to challenge the decision in question. The Court will not concern itself with minor and ordinary decisions that he may have made: it must be shown that there is a decision of real significance in the affairs of the company and as to which there are real and substantial grounds for questioning its correctness before the Court will embark upon an investigation of what, if any, directions ought to be given.' Those observations were repeated by his Honour in Re Mineral Securities Australia Ltd (In Liq) [1973] 2 NSWLR 207 at 231, a case involving a challenge to a decision of a liquidator. To the extent that those observations related to court appointed receivers and managers, they apply with greater force to receivers and manages privately appointed with extensive powers under a company charge. 44 In Re JAY-O-BEES Pty Ltd (in liq) (2004) 50 ACSR 565 Campbell J said (at [46]): 'The appeal to the court from a liquidator's rejection of a proof of debt arises under s 1321 Corporations Act 2001 (Cth). That section is one which enables appeals to the court to be made in relation to manner of acts, omissions or decisions of a liquidator. The role which the court takes on the appeal is affected significantly by the nature of the act, omission or decision which is being appealed against. Where the appeal is against a discretionary decision by a liquidator, or against a decision involving matters of business judgment, the court will reverse the liquidator's decision only when it is satisfied that he was acting unreasonably or in bad faith.' His Honour went on at [47] to distinguish the approach taken on an appeal from a liquidator's rejection of a proof of debt, a distinction which I respectfully accept. 45 I would not set the threshold required under s 1321 in respect of the discretionary decisions of private receivers and managers so high that it is necessary to show that there has been something akin to unreasonableness in the sense necessary to vitiate the exercise of a statutory power under administrative law. It is sufficient to say that at the very least the person bringing an appeal under s 1321 in these circumstances must demonstrate that the decision is informed by some error of law or significant factual error or is otherwise so unreasonable, in the circumstances, that it should not be allowed to stand. The content of those somewhat ambulatory considerations will be informed by the significance of the decision to the affairs of the company. Whether the receivers and managers' decision to refuse funding should be set aside 46 In the present case, having regard to the obligations of the receivers and managers under the Charge, the limited cash, in their judgment, available to the company, its liability to the mortgagee and the potential claims of other creditors, I see no basis upon which the receivers and managers' refusal to make available funding for the purpose of defending winding up proceedings should be interfered with. The company has charged all of its assets in favour of the mortgagee. In so doing it has disabled itself, following the appointment of the receivers and managers, from having access to those assets for other purposes. Mr Carey's arguments about the financial position of the company do not establish a basis for gainsaying the judgment of the receivers and managers. 47 Whether or not after protracted proceedings it might be shown that the receivers and managers' evaluation was erroneous and that of Mr Carey correct, is not a possibility that can form a basis for interfering with the decision. 48 The amount required is small. It may be that if Mr Carey wishes to defend the proceedings in the name of the company it can be obtained from some other source. I decline to interfere with the decision of the receivers and managers in this case. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.