BL & GY International Co Pty Ltd v Hypec Electronics Pty Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

1933/01 BL & GY INTERNATIONAL COMPANY LIMITED v HYPEC ELECTRONICS PTY LTD (IN LIQUIDATION) JUDGMENT 1 HIS HONOUR: I gave judgment in this matter on 3 November 2003 (Hypec Electronics Pty Ltd (in liquidation) v Mead [2003] NSWSC 934). Orders were made on 25 November 2003. The judgment which I gave on 3 November 2003 related to two separate proceedings, namely, proceedings 1268/02 and 1933/01. Proceedings 1933/01 are the winding up proceedings concerning Hypec Electronics Pty Ltd (In Liquidation). The orders which I made on 25 November 2003 granted to the parties liberty to apply on fourteen day's notice in writing. 2 The matter has been brought back before me with some urgency today, and with less than fourteen day's notice. The shortness of notice is not a matter about which any party complains, however. The application which is made is an application which is made by Mr Mead, in proceedings 1933/01. 3 The orders which he seeks today is an order set out in paragraph 1 of short minutes of order which I will initial and date today and place with the papers. 4 The application is for an order or direction under section 477(6), Corporations Act 2001, directing the liquidator of Hypec to: "1.1 Make no further intervention in or application in Family Court proceedings No. SY3359 of 1997 (Mead v Mead) and 1.2 Make no further representation or submission to the Family Court to the effect that in connection with Mr Mead's application heard in that Court on 25 and 26 October 2001 he failed to disclose to the Family Court material facts relating to any claim of Hypec Electronics Pty Ltd (in liq) to the Four Properties the subject of the orders of the Family Court made 2 November 2001. 5 Section 477(6), Corporations Act 2001 provides: "The exercise by the liquidator of the powers conferred by this section is subject to the control of the Court, and any creditor or contributory, or ASIC, may apply to the Court with respect to any exercise or proposed exercise of any of those powers."

Mr Mead is a contributory of Hypec Electronics Pty Ltd (in liquidation). 6 The circumstance which has led to the application being made is that on 28 November 2003 the matter of Mead v Mead was listed before Cohen J in the Family Court. On that occasion the liquidator sought leave to appear. The liquidator was represented by Mr Greenwood SC. He stated that the matter was presented before his Honour in October 2001 as if all the Four Properties belonged to the husband and the wife. Mr Greenwood said that in fact they belonged to the company. Mr Greenwood informed his Honour that the husband and wife held all the properties that Cohen J had dealt with on trust for the company at that time, that as a result of the way in which the husband and wife conducted themselves, the Tax Office was entitled to a very significant amount of money, and that those were things which should have been before his Honour at the relevant time. Mr Greenwood submitted that that information should have been placed or should be placed before Cohen J for his Honour to consider as to what effect that had on the order that was made. This appearance by the liquidator occurred without any advice or direction from this Court. 7 Cohen J granted the liquidator leave to appear on that day. His Honour gave some directions for advancing applications to vary the orders which he had earlier made. 8 Mr Mead seeks the orders which are sought today on several bases. One of them is that the question of whether there had been adequate disclosure to Cohen J was dealt with at paragraphs 112 to 117 of my judgment of 3 November 2003. Those paragraphs were paragraphs in which I was considering the availability of a defence of unclean hands, to an estoppel. I held that there had not been a failure to make disclosure to Cohen J which amounted to a defence of unclean hands. 9 Another basis upon which Mr Fagan SC seeks the orders is that it is difficult to see what point there is in the liquidator intervening in the proceedings at all, if it is not to try to bring the Four Properties into the liquidation. That is a matter which has already been decided in the decision which I have given - the Four Properties stand outside the liquidation, to the extent necessary to give effect to the orders resulting from my judgment. Mr Fagan submits that a liquidator, as an officer of this Court, should be directed not to proceed in a way which is, he submits, vexatious, in seeking to undermine a judgment which has been given. Mr Greenwood submits that it is appropriate for the liquidator, as an officer of the court, to inform the Family Court of matters which are relevant to the application to set aside the orders of Cohen J. 10 The fundamental responsibility of a liquidator is to identify and get in the assets of the company, to identify the liabilities, and then to distribute whatever assets are available in accordance with the legally prescribed order of priorities. The liquidator also has certain statutory obligations to make reports, imposed under the Corporations Act, which are directed to honesty in running of corporations. The liquidator does not have a general responsibility, or ability, to intervene in other people's litigation, when it is not for the purpose of advancing the legitimate purposes of the liquidation. 11 Mr Greenwood submits that the liquidator can have no confidence that an application will actually be brought, either by Mr Mead or Mrs Mead, to vary the orders of Cohen J. His submits that the Family Court ought to be made aware of the circumstances which, it has now emerged, relate to the title of the Four Properties. 12 The situation is complicated, to some extent, by the fact that the liquidator has made a decision to appeal against the orders which I have made. No appeal has yet been instituted, however. 13 It seems to me that the appropriate way to proceed is to first consider what order should be made if there were to be no appeal. On that assumption, I can see no legitimate basis, at present, for the liquidator to spend the money of the creditors and the contributories by appearing in litigation in the Family Court. Mr Fagan QC proffers an undertaking to the court that if any application to vary the orders of Cohen J were to be made, he would place before Cohen J the reasons for judgment of Einstein J, and my reasons for judgment. He also proffers an undertaking that in any application which is made by Mr Mead, a copy of the proposed application would be supplied to the liquidator, and that the application would not be decided without 28 days prior notice being given to the liquidator. 14 I can, on the evidence at present before me, see no legitimate purpose for the liquidator intervening in the Family Court. The material which the liquidator says should be placed before the Family Court is material which Mr and Mrs Mead are perfectly capable of placing before that court. I see no reason why the liquidator ought spend the money of the creditors and contributories by intervening in that particular matrimonial dispute. 15 Of course, circumstances might change. It may be that circumstances arise which would justify the liquidator in making an application to the Family Court, or intervening in an application already on foot. In such a case, the liquidator always has open to him the capacity to approach this Court for directions about whether he ought participate in such litigation. It is a commonplace occurrence for a liquidator who is considering whether to undertake litigation to seek advice as to whether that would be an appropriate course. In my view the appropriate step to take at this stage is to accept the undertakings proffered by Mr Fagan, and to make the order sought down to the end of paragraph 1.1 of the short minutes of order, on the basis that that order is made only until further order. Thus, if the liquidator were to receive the advice of the court that it was appropriate to intervene or take proceedings in the Family Court in any way, such advice would constitute a further order which would, by its terms, modify the order which I am now proposing to take. 16 I, therefore, note the undertaking of Mr Mead by his counsel that if any application is made to Cohen J to modify the order of Cohen J made on 2 November 2001, whether by Mr Mead or Mrs Mead, counsel for Mr Mead will (1) ensure that Cohen J has placed before him the judgment of Einstein J given on 21 August 2001 (BL & GY International Company Limited v Hypec Electronics Pty Limited; Colin Anthony Mead v David Patrick Watson (as liquidator of Hypec Electronics Pty Ltd in liquidation) & Ors [2000] NSWSC 705, and my judgment given on 3 November 2003 (Hypec Electronics Pty Limited (in liquidation) v Mead & Ors [2003] NSWSC 934; (2) provide to the liquidator a copy of any application made to vary the order of Cohen J, and in relation to any such application made by Mr Mead, to ensure that any such application is not determined without 28 days notice to the liquidator. 17 I make order 1 down to the end of para 1.1 of the short minutes of order until further order. That order was one which I made on the basis that it was appropriate to give effect to the judgment which I have made, and ignoring the prospect of any appeal. Any alternation of that order to take account of the prospect of an appeal should be decided in accordance with the principles governing stays pending appeal. There is presently on foot a stay of the orders which I had made in the principal proceedings, which lasts until 5 pm Tuesday, 16 December 2003. I propose to grant a stay of the order just pronounced until 5 pm Tuesday 16 December 2003. I so order. 18 I reserve the costs of today's proceedings but not to any particular date. If any party wants to argue about those costs on some particular date, they should give the other parties adequate notice. **********

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