The competence of the application pursuant to s 477(2A)
86 Mr Nettle submitted that the application under s 477(2A) of the Corporations Law is incompetent, and should therefore be dismissed.
87 In Re Luxtrend Pty Ltd (in liq) [1997] 2 Qd R 86 Moynihan J dealt with the construction of s 477(2A) of the Corporations Law. The application before his Honour raised the question whether a proposed settlement of proceedings commenced under s 565 of the Corporations Law claiming more than $20,000 required the sanction of the Court by reason of the operation of s 477(2A).
88 Proceedings had been commenced to recover $65,462.25 as a preference. The proceedings were being defended. Counsel's advice had been obtained by the liquidator to the effect that the liquidator's prospects were no better than even. The parties were prepared to compromise on the basis that the respondent pay the applicant $10,000.
89 After setting out ss 477(1) and 477(2A) of the Corporations Law, and comparing those provisions with ss 377(1) and (2) of the Companies Code Moynihan J observed at 87-9:
"The power contained in s. 477(1)(d) of the Law is sufficiently widely expressed to encompass settlement of a preference claim. The question which then arises is whether such a claim is a debt in terms of subsection (2A).
Generally speaking, a debt is a chose in action founding an action for debt; Ogdens Ltd v. Weinberg (1906) 95 L.T. 567 (H.L.) (H). The characteristic of a debt is that it is a sum of money which is immediately payable or which, by reason of a present obligation, will become payable in the future; Webb v Stenton (1883) 11 Q.B.D. 518 at 526; Re ANZ Savings Bank [1972] V.R. 690 at 692. In the latter case it was held there was no debt because there was no present obligation to pay; for that to arise required performance of a condition precedent - presentation of a passbook and a completed withdrawal slip. It may be doubted that a preference payment constitutes a debt in the sense referred to in this case.
A preference action is characteristically an action for monies had and received … An action for moneys had and received was traditionally brought on an indebitatus count rather than in debt …
A payment said to constitute a preference is, at the time at which it is made, a valid discharge of the debt. Whether a liquidator is entitled to avoid a payment as a preference is subsequently determined by the court.
The considerations being those adverted to, I am of the view that a preference payment is not a debt in the sense I have been discussing.
The question then is whether "debt" has any wider or different meaning in the context of the Law when it is used in s. 477(2A).
In the context of s. 556 of the Code (now s. 592 of the Law) the New South Wales Court of Appeal has held that "debt" included an undertaking to pay a sum of money at a future time even though the undertaking was conditional and the amount uncertain. It thus covered obligations under a guarantee - Hawkins v. Bank of China (1992) 26 N.S.W.L.R. 562, 570-572, 576-578 (CA) …This was explained in Re Beckwith (1993) 43 F.C.R. 256, 271 as being limited to a conditional but unavoidable obligation to pay a sum of money (as on a guarantee).
In Hawkins it was said to the effect that "debt" must be construed wherever it appears in the Corporations Law "in a practical and commonsense fashion, consistent with the context and with the statutory purpose." Even so, it was difficult to conclude that an amount recovered in the preference action is a conditional but unavoidable obligation in the sense used in Hawkins.
It may be argued that the statutory purpose of s. 477(2A) is to restrict the power of compromise so that the company does not forgo large sums which might otherwise be available for the benefit of creditors: State Bank of New South Wales v. Turner Corporation Ltd (1994) 14 A.C.S.R. 480 at 483. That case was not however concerned with the meaning of debt in s. 477(2A). Cases under the Code appear to be of little relevance because of the difference between s. 477(2A) of the Law and s. 377(2) of the Code referred to earlier.
Finally it may be noted that s. 477(2A) of the Law refers only to "debt", whereas s. 477(1)(d) refers to debt and other forms of liability. This arguably suggests that "debt" in s. 477 is restricted to its more traditional meaning; there would otherwise be no reason to refer in s. 477(1)(d) to "calls". …
While regard can be had to the purpose of a statutory provision to gauge the meaning of a word or phrase, the construction of a provision turns primarily on the words used. I am of the view that a preference action is not a debt in terms of s. 477(2A) so as to require an approval as contemplated by the section."
90 Various causes of action have been identified by Mr Lombe as being available to TI against the Moses interests. They are essentially actions seeking equitable damages based upon accessorial liability by Newlite, Camcor and Mr Moses for breaches of trust said to have been committed by the partners of Tietyens Solicitors. The primary cause of action so identified is, in substance, what is known as a Barnes v Addy claim - see Barnes v Addy (supra).
91 The principles enunciated in that case have been considered often in recent years, and, it has been suggested, modified to some degree - see Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378. See also Humphris & Anor v Jenshol & Anor (1997) 25 ACSR 212; International Alpaca Management Pty Ltd v Ensor (1995) 133 ALR 561; News Limited v Australian Rugby Football League Ltd (1996) 58 FCR 447; Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188; and Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) (1997) 26 ACSR 544. The general principle underlying these authorities is that a third party will be liable for the breach of trust of another if he assists or procures that breach of trust in circumstances where his conduct, given his actual circumstances and state of mind, is seen to be objectively dishonest.
92 Whether or not Mr Moses, or any of his corporate entities, can be fixed with the requisite state of mind to enable Mr Lombe to make good his Barnes v Addy cause of action is, of course, a matter which will have to be determined if he proceeds with the litigation which he has foreshadowed. However, even unassisted by the authority of Re Luxtrend Pty Ltd (in liq) (supra), the claims which the liquidator has identified do not seem to me to be claims for "debt" within the ordinary and natural meaning of that term in s 477(2A) of the Corporations Law. I can see no reason why any other meaning should be ascribed to that term.
93 In my opinion the principles set out by Moynihan J in Re Luxtrend Pty Ltd (supra) correctly state the scope and operation of s 477(2A). Those principles accord broadly with the approach taken by Hansen J in Farrow Finance Co Ltd (in liquidation) v A.N.Z. Executors and Trustees Co Ltd [1998] 1 VR 50 at 74. There his Honour dealt with the question whether claims of breaches of fiduciary duty by a trustee and company auditor, and allegations of conduct which was misleading or deceptive were to be regarded as tantamount to claims in debt. The measure of damages which would flow from establishment of liability equated to the losses sustained by the plaintiff company's noteholders. His Honour held that no relevant common debt existed. The claims against the defendants were not, in any relevant sense, grounded in debt.
94 Mr Nettle's submission that the compromise agreement presently before the Court does not involve the compromise of a "debt" within the meaning of s 477(2A) of the Corporations Law should be accepted. It follows that the application under that subsection is incompetent, and should be dismissed.
What directions, if any, should be given pursuant to s 479(3) of the Corporations Law?
95 In Re Geelong Building Society (in liq) (supra) Senior Master Mahoney observed at 338-9:
"In the case of any company being wound-up on the ground that it cannot pay its debts (or, under the Corporations Law as amended in 1993, being wound-up in insolvency) the paramount consideration for the court in determining whether the liquidator should be authorised to compromise its claim against a debtor is whether the compromise is in the interest of the creditors; Spedley (supra) 9 ACSR at p 85; State Bank v Turner Corporation (supra) 14 ACSR at p 483."
96 He continued:
"Save in an unusual case, however, the best informed with respect to the commercial interests of the creditors of an insolvent company is the liquidator. In that unusual case, there may be a conflict between the liquidator and some of the creditors; and the latter may make it appear to the court that there has been "some lack of good faith, error in law or principle, or some real or substantial ground for doubting the prudence of the liquidator's proposal"; State Bank v Turner Corporation 14 ACSR at p 483 per Tamberlin J citing Spedley 9 ACSR at 85-86. The onus of establishing such a proposition, however, is not light; cf Re Mineral Securities Australia Ltd (In Liq) and the Companies Act (1973) 2 NSWLR 207 at 230-232.
Generally, as I have mentioned, it is the liquidator who is best placed to assess a compromise proposal with regard to the interests of the creditors, just as it is the liquidator who is entitled to determine whether, as an alternative to a proposed compromise, litigation should be commenced or continued; see Scarel v City Loan & Credit Corporation Pty Ltd (No 2) (1988) 12 ACLR 730 at p 736; 6 ACLC 219.
In the usual case, then, while the court certainly does not "rubber stamp" whatever is put forward by a liquidator, it is necessarily "confined" in the task of "second guessing" him …
It follows that unless the debtors are able to intervene to save the liquidator's application, it must be dismissed simply because the liquidator is in the best position to assess the interests of the creditors of GBS and he has concluded that he cannot recommend the compromise as in their interest."
97 As indicated earlier these observations were made in the context of an application under s 377(1)(d) of the Companies Code for authority to compromise a debt claimed by the liquidator to be owing to GBS by Tagni, and to be guaranteed by individual guarantors. I have already indicated that I do not regard the claims foreshadowed by Mr Lombe against Newlite, Camcor and Mr Moses as involving the compromise of a "debt" to TI within the meaning of that term in s 477(2A) of the Corporations Law. It was not disputed before me, however, that the liquidator could apply to the Court pursuant to s 479(3) of the Corporations Law for directions in relation to the proposed compromise. That compromise plainly arises "under the winding-up" of TI. The principles to which Senior Master Mahony referred in Re Geelong Building Society (in liq) (supra) are relevant to the determination whether the Court should give directions concerning the compromise agreement, and if so, what form those directions should take.
98 In Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 Giles J in the Equity Division of the Supreme Court of New South Wales dealt with applications by the liquidators of several companies who moved the Court for:
(a) authority to compromise claims by and against those companies in proceedings in the Court, and
(b) directions that they were justified in entering on behalf of the companies into the transactions recorded in the deeds which set out the compromises.
99 The applications were made pursuant to s 377(1) and s 379(3) of the Companies (NSW) Code.
100 The liquidators' opinion was that the compromises were the best available bearing in mind the forecast prospects of success in the various claims by and against the companies, the delay and expense of resolving the claims by litigation, including the likelihood of appeal, and the extent of recovery available from those against whom the companies had claims, or their insurers. Opinions of counsel and solicitors put before the Court broadly confirmed the prospects of success which the liquidators forecast in relation to the major claims.
101 Unlike the present case, the liquidators who appeared before Giles J supported the compromise agreements which had been reached. The proceedings before his Honour were far greater in number, complexity, length and attendant expense than those presently before this Court. Hundreds of millions of dollars were in issue.
102 Giles J considered the relevant provisions governing the applications before the Court, and stated at 85:
"The powers given to a liquidator, either directly by s 377(2) or upon authorisation pursuant to s 377(1), are directed to achieving the efficient winding up of the company, that is, the collection and distribution of its assets for the general benefit of its creditors (Re Walker Hare Pty Ltd [1968] VR 447). (I put aside the question of contributories because in the present case the evidence demonstrates that there is no realistic prospect of a surplus for contributories). In controlling the exercise of the liquidator's powers … the court looks to the interests of creditors (Scarel Pty Ltd v City Loan and Credit Corporation Pty Ltd (1988) 12 ACLR 730; 6 ACLC 213), and where a compromise is in question it must be asked whether it is in the interests of those concerned in the winding up - here the creditors … The same question must be asked when deciding whether to confer authority to enter into the compromise. While the court will seek to ensure that a minority of creditors who do not agree with the compromise will not be treated unfairly … even if some creditors have not assented it may be found that the compromise is for the benefit of all concerned …
Directions given to a liquidator pursuant to s 379(3) fulfil a different function from authorisation pursuant to s 377(1). Authorisation empowers the liquidator to do what he would otherwise not have power to do, or at least, would not have power to do beyond s 377(2) or authority given by the Committee of Inspection or a resolution of creditors. The nature and scope of an application for directions is fully expounded in Re G B Nathan & Co Pty Ltd (1991) 5 ACSR 673, such an application being essentially a means whereby the liquidator may be guided in the conduct of the liquidation and protected against allegations of breach of his duty. It is generally not appropriate in an application for directions to make the liquidator's commercial decisions for him where he has full power to act (Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115), and the liquidator should not seek directions as a kind of insurance that he has made the right commercial decision. It is nonetheless common for a liquidator to seek directions as to whether he is justified in entering into a particular compromise, but in the present case I doubt that there is really any separate issue in relation to directions pursuant to s 379(3). If the liquidators are given the authority for which they ask it will follow that they are justified in exercising the power they will then have."
His Honour then went on to say:
"In any application pursuant to s 377(1) the court pays regard to the commercial judgment of the liquidator (Re Chase Corporation (Australia) Equities Ltd (1990) 8 ACLR 1118). That is not to say that it rubber stamps whatever is put forward by the liquidator but, as is made clear in Re Mineral Securities Australia Ltd [1973] 2 NSWLR 207 at 231-2 the court is necessarily confined in attempting to second guess the liquidator in the exercise of his powers, and generally will not interfere unless there can be seen to be some lack of good faith, some error in law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct. The same restraint must apply when the question is whether the liquidator should be authorised to enter into a particular transactions the benefits and burdens of which require assessment on a commercial basis. Of course, the compromise of claims will involve assessment on a legal basis, and a liquidator will be expected (as was made plain in Re Chase Corporation (Australia) Equities Ltd) to obtain advice and, as a prudent person would in the conduct of his own affairs, advice from practitioners appropriate to the nature and value of the claims. But in all but the simplest case, and demonstrably in the present case, commercial considerations play a significant part in whether a compromise will be for the benefit of creditors."
103 In Re Spedley the compromises had been put before meetings of creditors of the companies. Motions authorising the liquidators to make the compromises, and to give effect to the transactions recorded in the deeds, had been passed, without dissent. That fact persuaded Giles J that he could approach the applications with some confidence in the liquidators' judgment.
104 His Honour was also fortified in arriving at that conclusion by the fact that the evidence showed that the compromises had been negotiated over a period of months in the course of a mediation conducted by Sir Laurence Street, a former Chief Justice of New South Wales. His Honour concluded that it was reasonable to expect that the compromises were the result of a process in which full regard was had to the competing legal and commercial considerations.
105 Giles J went on to state at 87:
"Opinions of counsel and solicitors put before me broadly confirm the prospects of success which the liquidators forecast in relation to the major claims, it being remembered that there were a great many different claims in question with a whole spectrum of prospects and inevitable uncertainty. The time and expense can readily be accepted, and actual recovery, as distinct from theoretical entitlement, must always be considered. I see no reason to doubt the liquidator's assessment."
106 Mr Garratt submitted that, if it be relevant, there was nothing to suggest that Mr Lombe was acting other than in good faith in no longer supporting the compromise agreement. His present view was based upon the advice which he had received, and he had no ulterior purpose in mind. I did not really understand Mr Nettle to contend otherwise. Mr Garratt submitted that the principles enunciated by Giles J in Re Spedley Securities Ltd (in liq) (supra), were, in general terms, applicable to the present case. He submitted that the Court should not second guess the liquidator's commercial judgment that the compromise agreement was not in the best interests of the TI investors.
107 Mr Garratt contended that the claim by the Moses interests to the amount of approximately $1.94 million under the December 1995 agreement was plainly untenable. It was highly unlikely that equity would lend its assistance to that claim. There were any number of defences available to the liquidator should Camcor be minded to pursue it against TI.
108 In relation to the causes of action which the liquidator had available against each of Newlite, Camcor and Mr Moses, Mr Lombe gave the following evidence:
MR NETTLE: In the affidavit, in the advice which Mr Garratt gave you in final form on 4 September 1998, did he detail each of the claims which would be open to you to make against the Moses interests? - He did, yes.
He explained that and described the nature of each of those claims? - Yes.
Including claims for receipt of monies as constructive trustee? - He certainly dealt with claims against Newlite as breaches of trust, yes.
Barnes v Addyclaims? - Yes, as I recall.
Claims of the kind about which Mr Moses was cross-examined for some days during the course of the public examination? - The Barnes v Addy issue was certainly raised at the public examination, yes.
Did Mr Garratt express to you any opinion or a view as to the chances of success in each of those pieces of litigation which he proposed? - Yes, he did.
In terms of a probability of success? - Not in terms of one out of ten or nine out of ten, but certainly in terms of a strong case.
A strong case in each case against each of the Moses interests? - Yes I believe so.
So a strong case against Newlite? - Yes.
(Transcript of 27 November 1998 at p 20)
109 Later in the course of Mr Nettle's cross-examination, Mr Lombe gave the following evidence:
"MR NETTLE: Do you contend that you have any other claims against Newlite or other entities within the Moses interests? - Subsequent to that period I've received general advice that Newlite may be responsible for the total losses that have been incurred.
Newlite is responsible for which total losses that have been incurred? - The fact that there are disappointed creditors in the order of 33, 34 million.
Newlite is responsible for the 33 or 34 million which Tietyens lost? - Yes because of breaches of trust and Newlite was on notice that Tietyens themselves, the partners of Tietyens, were breaching their duties to the contributors ….
And the advice you've received is that you have a strong chance of success to recover from Newlite $34 million for the knowing participation in breach of trust, is it? - My recall, yes.
It remains your view, does it, that you have a strong chance of recovering from Newlite not only the $5 million to which you've referred but also the additional 34 to which you now refer? - Based on my legal advice, that is my view.
…
If follows that your reason for preferring to pursue claims rather than giving effect to the compromise is because of your belief in a strong claim against Newlite for $39 million? - It is solely based on the counsel's advice that I have received subsequent to that agreement.
No, whatever the reason, your state of mind is that it's better for creditors to pursue this advisedly strong claim for $39 million than it is to have the $2 million certain from the fund? - It is my view, yes, based on legal advice." (Transcript p 24-6)
110 It will be recalled that Mr Lombe conceded that there was little likelihood that either Camcor or Mr Moses had any assets which might be available to satisfy a judgment against them if TI were successful in the contemplated litigation. The cross-examination upon this subject is illuminating:
"MR NETTLE: It remains your view that it would be very, very difficult to recover any substantial money from Camcor? - It's gone into voluntary liquidation but my view is that, yes, it would be.
Similarly, although as you rightly pointed out, Mr Moses is not technically insolvent, you believe, based upon your investigations, that he has no significant assets, do you not? - That's my understanding, yes.
And thus that it would be very, very difficult, if not impossible, to recover any substantial amount of money from him? - I suspect that would be the position, yes.
That leaves Newlite? - That's correct.
You've undertaken a detailed investigation into the assets of Newlite, have you? - I have made enquiries, yes.
Have you ascertained the assets which it holds? - I've ascertained some assets.
Formed the view that it has millions of dollars of assets which might be available for execution? - Yes, I have.
When were those enquiries undertaken? - Those enquiries were undertaken probably three or four months ago."
111 When pressed further about the matter of Newlite's assets, Mr Lombe indicated that he did not believe that he could take his enquiries much further. However, it was clear that Newlite owned two significant properties.
112 Mr Lombe testified that he had considered the likely costs of including the Moses interests in any proceedings which might be brought against the partners of Tietyens Solicitors, having received advice about this matter from Cornwall Stodart. He had also undertaken a consideration of the likely costs of executing against the assets of the Moses interests if TI were successful in obtaining a judgment against those interests. He stated that he had worked out how he proposed to fund the litigation which he believed would cost something of the order of $200,000 or $300,000 insofar as the Moses interests were concerned. He claimed that he had undertaken an analysis of the costs of pursuing the litigation. He had compared that with the potential benefits thereof. Though there was no single document which took the form of a cost benefit analysis, there were documents that, when put together, gave a view as to whether or not the litigation should be pursued. In the end, the liquidator's commercial judgment was strongly based on Mr Garratt's advice. There were commercial issues present, but the paramount issues, so far as he was concerned, were of a legal nature.
113 It should be noted that Mr Lombe testified that he is an experienced liquidator. He is also an experienced litigator used to prosecuting Supreme Court actions of great complexity. He bluntly disagreed with the view of Mr Stout, who represented the Moses interests, that it was in the interests of the TI investors that the compromise be approved.
114 Mr Nettle submitted that the material placed before the Court on behalf of the liquidator in seeking directions under s 479(3) of the Corporations Law was deficient in several critical respects. He submitted that there should be, at the very least, a cost benefit analysis prepared in relation to the litigation. Moreover, the liquidator had no business commencing what were likely to be complex and hard fought proceedings without having thoroughly investigated the asset position of Newlite. Mr Nettle obtained instructions from his clients that Newlite would be prepared to disclose to the liquidator its complete asset holdings. Mr Nettle noted that this was an invitation which Mr Garratt was not inclined, at this stage, to accept. Mr Nettle also noted that to the extent that Mr Garratt's advice was predicated upon a concern that a failure to include Newlite, Camcor and Mr Moses as defendants in the proceedings contemplated against the partners of Tietyens Solicitors might be detrimental, or even fatal, to any such proceedings, such a concern was misconceived, as a matter of law.
115 Mr Nettle relied upon certain observations of Young J of the Supreme Court of New South Wales in Re Lemon Tree Passage & Districts RSL & Citizens Club Co-operative Ltd (1988) 6 ACLC 24. There a liquidator sought directions from the Court as to whether to commence proceedings. The application was made under s 379(3) of the Companies Code. The liquidator provided to the Court a draft statement of claim and a substantial body of other relevant documents.
116 The questions before the Court were:
· Was the Court bound to give advice?
· If the Court was so bound, was it obliged to determine the chances of success of the proposed proceedings?
· Should the Court comment on the draft statement of claim before it?
117 Young J stood the matter over in order to enable the liquidator, if he wished to continue with the proceedings, to obtain the requisite material which should have been placed before the Court in the first place. His Honour noted that he had been handed by the solicitor who appeared for the liquidator a bundle of documents about one metre high. On even the most cursory reading of that material his Honour could perceive difficulties associated with the manner in which it was proposed to conduct the case.
118 Young J stated at 26:
"What should the Court do when asked to give advice under s 379 of the Code as to whether the liquidator should commence proceedings?"
119 His Honour observed that the Court had a discretion as to whether or not it would determine a question on directions if that be hypothetical. The status of a liquidator in a winding up by the Court was very special. To a great extent the liquidator was delegated with the authority of the Court to determine, at first instance, questions which arose in the winding up, subject to the supervision of the Court. The liquidator did administratively, what in earlier ages, was done by officers of the Court within the Court system. His Honour concluded, that apart from very rare cases, such as those involving purely hypothetical questions, the Court should not leave one of its officers floundering when its assistance was sought. If the liquidator asked for advice, then advice and directions should ordinarily be given.
120 His Honour continued at 27:
"Ordinarily … a question as to whether a liquidator should commence proceedings or settle proceedings which involve questions of law and procedure, are proper cases for the court to consider under s 379(3) of the Code."
121 His Honour then referred to Re Atkinson (deceased) [1971] VR 612 at 615-616 per Gillard J and then continued:
"On the material that I have adverted to so far, it would seem to me that the liquidator has, against someone, an arguable case, so that the matter is certainly not in the class of fruitless cases that the liquidator should be advised not to take. That being so, the question is whether the chances of success and the expense involved make it a worthwhile course for the liquidator to pursue the litigation?
There is insufficient material before the Court to enable this question to be answered, despite the meter high pile of material. Although the Court has, I believe, an obligation to answer the liquidator's questions, those representing the liquidator have an obligation to place before the Court the necessary materials for the Court to be able to fulfil its function. In cases of this nature, it is not of great assistance to supply the Judge with the evidence that the liquidator has unless it can be set out within a small compass. What is required is that the court have material to enable it to assess (a) the reasonable chances of the liquidator succeeding; (b) the estimated cost of the litigation; and (c) how the litigation is to be funded in the first instance. The first requirement will usually be satisfied by the court being given an opinion from senior counsel, or at least very experienced counsel who has reviewed the evidentiary material and who has researched the legal points involved, and who can give some indication as to the prospects of success."
122 No such material had been placed before Young J in Re Lemon Tree Passage. That is manifestly not the case in the liquidator's applications before me.
123 A comprehensive written opinion from senior counsel, who is very experienced in this area, and who has been involved for a considerable time in considering the various matters associated with Tietyens Solicitors, and in the liquidation of TI, has been placed before the Court. The liquidator has formed the view, as he seems to me to be entitled to do, that the advice provided to him by Mr Garratt is competent, and advice upon which he may properly act. He has considered the prospects of success. He has been advised by Mr Garratt that those prospects are strong. He has considered the strength of the claims made against TI by the Moses interests, and he has concluded that those claims are likely to be defeated. There are assets available which the liquidator believes may be worth millions of dollars to satisfy, in part at least, any judgment which TI obtains against Newlite.
124 The liquidator's decision to decline to support the compromise agreement because he does not, in the exercise of his commercial judgment, regard it as being in the best interests of the TI investors, is a decision which, in my opinion, is properly open to the liquidator to make. I cannot see why the Court should not, having so determined, provide to the liquidator such protection as may be afforded by directions being given pursuant to s 479(3) of the Corporations Law.
125 I cannot accept Mr Nettle's submission that there is, in effect, a fixed minimum standard, or threshold, which an application for directions under that section must meet in every case, including the preparation of a properly prepared cost-benefit analysis. I do not consider that any of the authorities to which I have been referred requires me to approach the matter in that rigid way.
126 Nothing in Re Lemon Tree Passage (supra), or in Re Chase Corporation (Australia) Equities Pty Ltd (1990) 8 ACLC 1118 (upon which Mr Nettle also relied) indicates that the liquidator's applications in the present case are insufficiently supported by such material as is necessary to enable me to give such directions as I regard appropriate in accordance with the requirements of the Act. I do not believe that it would be productive to give directions requiring the liquidator to provide to the Court a single document containing a cost benefit analysis of the proposed litigation. Nor do I think that it is necessary to give directions requiring the liquidator to carry out further investigations into the financial affairs of Newlite. That is a task which, as Mr Garratt contends, might be both extremely difficult, and very time consuming, having regard to the apparent complexity of Newlite's financial affairs. It is sufficient that Mr Lombe has established, to his satisfaction, and it seems upon reasonable grounds, that Newlite has substantial assets worth, he believes, "millions".
127 Finally, I reject Mr Nettle's submission that I should direct the liquidator to obtain the advice of some other senior counsel, entirely independent of the parties, because of the possibility that Mr Garratt may have permitted his judgment to become clouded by his close involvement with this case over a long period of time. There is nothing in any of the material which I have seen, or in the manner in which Mr Garratt has conducted the present proceedings, which causes me to have any concerns at all about his professional judgment, or his objectivity. The principles discussed by Mandie J in Grimwade v Meagher [1995] 1 VR 446 patently have no application to this case.
128 The orders of the Court in proceedings No VG 3352 of 1997 and No VG 3353 of 1997 are as follows:
1. Each application brought pursuant to s 477(2A) of the Corporations Law seeking approval of the compromise of a debt be dismissed.
2. The Court directs, pursuant to s 479(3) of the Corporations Law, that Mr David Lombe, as liquidator of Tietyens Investments Pty Ltd (In Liq), being satisfied in reliance upon the advice of Mr RM Garratt QC that it would not be in the best interests of the Tietyens investors to implement the settlement agreement arrived at on 26 May 1998, may act upon that advice and not implement that agreement.
129 I will hear the parties in relation to the costs of those proceedings.
130 As regards proceeding No VG 3383 of 1998, it follows from my conclusions in the liquidator's applications, and from the evidence of Mr Lombe concerning the need to obtain the advice of Mr Garratt before seeking Court approval of the compromise, that I do not regard either version of the agreement reached between the applicants and the respondents, whether on 26 May 1998, or alternatively 29 June 1998, as constituting a binding agreement to settle all of the claims between the parties on the terms set out in that agreement. Moreover, even assuming that the liquidator was subject to an implied obligation under the settlement agreement of 26 May 1998 to do all that was reasonably necessary to obtain the Court's approval of the compromise reached on that date, that obligation does not extend to seeking the implementation of an agreement which the liquidator does not now regard as being in the interests of the Tietyens investors. I would refuse the declaratory and injunctive relief sought, and dismiss that application with costs.
I certify that the preceding one hundred and thirty (130) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.