The present case
59 The first question to consider is whether there is an arguable case or solid foundation for the company to obtain the relief which would be sought in the proposed proceedings. In my opinion, the applicant has not established that there is any arguable case or solid foundation to support the causes of action pleaded in the proposed Second Cross-claim.
60 The applicant says that Mr Beilby's letter of 5 November 1996 was an offer to compromise the terms of payment of the debt claimed by the Commissioner. In its terms that letter merely gives Mr Beilby's assessment of Cadima's ability to pay the debt by instalments of $50,000 per month. However, in my opinion the letter either communicated or confirmed an implied offer to compromise the terms of payment by instalments of $50,000 per month.
61 That implied offer was not accepted, but instead, the Commissioner's letter of 6 November 1996 makes a counter-offer, since it sets out terms which were not part of Cadima's implied offer. Cadima accepted the counter-offer by its conduct in providing a bank cheque for $100,000 in favour of the Commissioner. Assuming for present purposes that valuable consideration was supplied, there was therefore a contract between the parties with respect to payment of the debt, the terms of which were recorded in the Commissioner's letter of 6 November 1996. The Commissioner's express obligations under his letter were that:
· if the bank cheque for $100,000 was received as arranged, he would seek a six week adjournment at the hearing of 7 November 1996; and
· if the terms for repayment were strictly complied with, he would not seek summary judgment against Mr and Mrs Dickerson in the District Court proceedings, reserving the right to file a notice of motion for summary judgment without further notice should there be default in the arrangements.
62 The applicant says that the Commissioner agreed to compromise the terms of payment of Cadima's debt. In my view that submission overstates the effect of the 6 November letter. I accept that an implied term of the agreement was that the Commissioner would not seek to recover the full amount of the debt or to proceed with the winding up of Cadima during the six week period beginning on 7 November 1996. But the terms of the letter left the Commissioner free to take proceedings for recovery or to wind the company up after the expiration of the six week period, and I see no basis for implying a term which would limit the Commissioner over a longer period. However, whether the Commissioner's obligation not to proceed with recovery or winding up was for a six week period or for indefinite period, it was clearly a highly conditional commitment on his part. The letter of 6 November set out five matters which it described as 'your client's repayment proposal', and stated that the Commissioner would not seek summary judgment 'on condition that the terms for repayment are strictly complied with'. While that sentence appears in the paragraph dealing with the District Court proceedings, in my opinion the proper construction of the letter as a whole is that strict compliance by Cadima with the terms set out in the letter was intended to be of the essence, so that the Commissioner would be free of the obligation not to take further steps towards recovery or winding up as soon as Cadima failed to comply strictly with any of the terms. That intention is clearly implied from the letter and Cadima must have understood it when it accepted the Commissioner's offer by making payment of the $100,000.
63 The affidavit evidence referred to in paragraph 9 of these reasons for judgment shows that Cadima did not strictly comply with the terms of the letter of 6 November 1996. The first breach alleged by Mr Barclay is that the payment of $50,000 due on or before 7 December 1996 was made at the cashier's desk rather than being sent directly to him and marked to his attention as required by the terms of the arrangement; and further, the amount was paid without any direction being made by the company as to which debt it was to be appropriated against, and no file number was quoted at the time of payment. Consequently, he says, the amount was allocated towards payment of the company's income tax account rather than against the Group or PPS accounts. Further, though Mr Barclay does not complain of this, payment was due on 7 December but was made on 9 December 1996. Mr Barclay's evidence is consistent with the payment receipt which is part of Exhibit J in the present application, except that the receipt contains a reference to a file number. Except in that respect, his account is not contradicted by any of Mr Dickerson's affidavit evidence. The evidence is consistent only with a finding that payment was not made by 7 December as required, and when it was made on 9 December it was not made in the manner required by paragraph 5 of the letter of 6 November. There was therefore a breach of the requirements of the letter of 6 November in that respect.
64 Secondly, Mr Barclay says that the payments for October and November Group tax, due on 7 November and 7 December 1996 respectively, and the payments for October and November PPS tax, due respectively on 14 November and 14 December 1996, were not paid on time. In his affidavit of 20 December 1996 Mr Dickerson says that he forwarded the October payments to Mr Barclay under cover of a letter dated 7 November 1996, a copy of which he annexes. But the annexed letter only supplies information about PPS and group tax and does not purport to enclose cheques. Mr Dickerson's affidavit annexes remittance advices which, he says, are the only evidence of drawing cheques for payment of the October taxes. He says the remittance advices were generated by printing from computer records. But Mr Barclay says that there are no records held by the Australian Taxation Office which indicate that the cheques were in fact received. Paragraph 3 of the letter of 6 November 1996 requires that monthly Group and PPS tax be paid on time, and paragraph 5 (which, in my view, applies to paragraph 3) says that payment is to be made by bank cheque to the stated address of the Australian Taxation Office, marked to Mr Barclay's attention. Mr Dickerson's evidence indicates that the payments were not by bank cheque. Additionally, there is no receipt or covering letter in evidence, nor any basis for disbelieving Mr Barclay's assertion that the cheques were not received. The only available conclusion is that, whether or not the cheques were drawn by Cadima, they were not received by the Commissioner prior to 19 December 1996.
65 Mr Dickerson's affidavit annexes remittance advices with respect to the November Group and PPS tax, but no other evidence of payment. Mr Barclay says that there are no records held by the Australian Taxation Office which indicate that the cheques referred to in the remittance advices were received. Again, the only available conclusion, on the evidence, is that whether or not the cheques were drawn, they were not received by the Commissioner prior to 19 December 1996. Further, it appears from Mr Dickerson's evidence that the cheques, if drawn, were not bank cheques, and according to the remittance advices, the cheques were drawn on 17 December 1996, after the due date for payment. Once again, therefore, the only available conclusion is that the terms of the letter of 6 November were not complied with as regards the November Group and PPS tax. The evidence indicates that payment was made only after replacement cheques were drawn pursuant to Bennett A-J's orders, to which I have referred.
66 The applicant contends that the Commissioner accepted Cadima's cheques for the October and November Group and PPS tax as constituting performance by Cadima of paragraph 3 of the letter of 6 November. Mr Barclay's evidence, however, implies that the cheques were not received by the Commissioner. In the draft Second Cross-claim the applicant asserts, in support of his contention that the cheques were accepted by the Commissioner, that at the hearing before Bennett A-J on 20 December 1996 orders were made on the basis that the cheques had been misplaced within the Parramatta office of the Commissioner. But that assertion is not supported by the report by Mr Dickerson's counsel to his instructing solicitors on 20 December 1996, and it appears to me highly unlikely that the Commissioner would have acknowledged receipt and misplacement of the cheques in light of Mr Barclay's affidavit evidence of 12 May 1997. In my view the contention that the Commissioner accepted cheques for the October and November payments prior to 19 December 1996 cannot plausibly be maintained.
67 The replacement cheques were drawn on 23 December 1996, pursuant to an undertaking given by Mr Dickerson to Bennett A-J, and their receipt and payment cannot be relied upon as an act of acceptance of performance or waiver of a kind which would render the Commissioner's conduct at an earlier point in time, namely 19 December 1996, a breach of contract.
68 Mr Barclay's affidavit asserts that as at 19 December 1996, the company had not provided the details of Group and PPS tax liabilities for the months of May to September 1996 as required by paragraph 4 of the letter of 6 November 1996, but Mr Dickerson's affidavit of 20 December 1996 annexes a copy of a letter of 7 November 1996 which purports to supply such particulars. On the evidence before me in the present application, I cannot conclude that a breach of paragraph 4 of the letter of 6 September 1996 has been established beyond challenge.
69 My conclusion is that on 19 December 1996 Cadima was in breach of paragraphs 2, 3 and 5 of the letter of 6 November 1996, and was therefore in breach of its obligations under its contract with the Commissioner in respect of matters which the contract treated as essential. It had, in my view, repudiated the contract between it and the Commissioner by breach, and the Commissioner was entitled to repudiate the contract and regard himself as no longer bound by it. Therefore, even if (as a matter of construction, contrary to my view), the Commissioner's obligation under the contract would have prevented him from seeking a winding up order on 19 December 1996, Cadima's repudiation freed him of any such obligation.
70 As at 19 December 1996, the day upon which the Commissioner applied for and obtained a winding up order, it must have appeared to Mr Barclay that Cadima had completely repudiated the agreement. Further, there was no appearance on Cadima's behalf at the hearing. In my opinion it was clear beyond argument that in those circumstances, the Commissioner was entitled to seek a winding up order on 19 December 1996 without breach of the agreement recorded in the letter of 6 November.
71 The applicant's alternative submission is that if, contrary to its contentions, Cadima is found to have repudiated the contract by breach, nevertheless the contract remained on foot because the Commissioner made an unequivocal election to affirm it prior to 19 December 1996. The Commissioner's affirmation is said to have arisen in consequence of four matters. First, it is said that the Commissioner did not assert any repudiation by Cadima, or acceptance of repudiation by him, on or before 19 December 1996. The evidence suggests that the Commissioner did not immediately rely on Cadima's breaches, but in my opinion that conduct (if it be established) would not support the alleged affirmation. The Commissioner's conduct is consistent with my construction of the contract, according to which he was under no continuing obligation not to seek Cadima's winding up at the adjourned hearing date of the winding-up summons. Further, mere failure to assert the termination of the contract on or before 19 December 1996 could not in the circumstances constitute affirmation, since the full facts with respect to Cadima's payments did not emerge until after the hearing on that date.
72 Secondly, the applicant says that the Commissioner's conduct in seeking the adjournment of the winding-up summons on 7 November 1996 was an affirmation of the contract notwithstanding non-receipt of the October Group and PPS tax payments. Since the PPS tax payment was not due until 14 November and the Group tax payment was due only on 7 November, the applicant's contention cannot be entertained.
73 Thirdly, the applicant says that the Commissioner did not assert a breach of the contract at the hearing on 19 December 1996 or at any earlier time. In my opinion the submission that a person who has rights which flow from a breach of contract must assert the breach before exercising those rights is unsustainable.
74 Fourthly, the applicant contends that the Commissioner affirmed the contract by seeking replacement cheques at the hearing before Bennett A-J. But that hearing was on 20 December 1996, the day after the making of the winding up order, and cannot be evidence of an election to affirm prior to the making of the winding-up order on 19 December 1996.
75 The applicant also contends that between 20 December 1996 and 7 July 1997 the Commissioner affirmed the continued operation of the agreement set out in the letter of 6 November 1996 on several occasions. As I have said, the conduct of the Commissioner after the termination of the contract, which occurred no later than 19 December 1996, cannot constitute any election to affirm it. Further, the conduct which the applicant relies upon shows only that the Commissioner made various payment arrangements in exchange for agreeing not to oppose applications to set aside, terminate or stay the orders of 19 December 1996. Thus, in his letter to Mr Beilby of 15 January 1997, the Commissioner confirmed a repayment arrangement which he set out, and said that if the arrangement was adhered to his office would not oppose an application to have the orders appointing the liquidator set aside at the hearing on 10 February 1997. On 28 January 1997 the Commissioner's solicitor wrote to Mr Beilby saying that if his client strictly complied with the arrangement which had been agreed to (presumably, the arrangement set out in the Commissioner's letter of 15 January 1997), the Commissioner would not oppose an application that the winding up order be set aside. On 24 March 1997 the Commissioner appeared at a hearing of the application to set aside the winding up order and indicated that he would neither consent to nor oppose an application for an adjournment, with a stay of the winding up in the meantime. The Commissioner did not oppose subsequent adjournments of those proceedings. But the Commissioner's conduct cannot be regarded as reviving or affirming the arrangements of 6 November 1996, since it was directed to a different issue, namely the staying and termination of the winding-up order.
76 Next, the applicant contends that by his conduct in adjourning the winding up summons for six weeks at the hearing on 7 November 1996, the Commissioner created an assumption on the part of Cadima and its solicitors, to the effect that as long as Cadima continued to perform its obligations under the agreement set out in the letter of 6 November 1996, the Commissioner would continue to seek adjournments of the winding-up summons and would not seek to have the summons heard and determined. However, in my opinion the Commissioner's conduct in obtaining an adjournment at the hearing on 7 November 1996 was conduct in performance of his obligation under the contract and created no basis for any assumption beyond the terms of the contract. Consequently the estoppel argument must fail. Since Cadima's conduct amounted to repudiation of the contract set out in the letter of 6 November 1996, and the Commissioner accepted the repudiation and terminated the contract, the applicant's contention that in applying to wind up Cadima on 19 December 1996 the Commissioner repudiated the agreement must also fail.
77 In summary, my opinion is that the applicant has not demonstrated any plausible factual basis for the assertions contained in the draft Second Cross-claim, and I therefore conclude that there is no arguable case or solid foundation for the relief which the draft Second Cross-claim seeks. In my opinion, therefore, the application for appointment of a receiver to commence and prosecute such proceedings must be denied.
78 If, contrary to my view, there had been an arguable case to support the allegation of breach of contract, there would still be a question whether Cadima's loss or damage was caused by the Commissioner's conduct in applying for the winding up order, or by the applicant's own failure to have the winding up terminated in light of the facts alleged in the proposed Second Cross-claim.
79 If, contrary to my view, there was an arguable case or solid foundation to support the proposed proceedings, the question would arise whether it is appropriate in a procedural and practical sense that a receiver be appointed in the present circumstances. Given my conclusion on the 'arguable case' issue, it is unnecessary for me to express a final view on this point, but I doubt very much that I would be satisfied that the case for the appointment of a receiver had been made out, even if the proposed proceedings had identified an arguable case for relief. Here the liquidator has considered the matter and has decided not to risk the company's assets by taking proceedings. Mr Dickerson has offered a detailed undertaking to be personally liable for the cost of the proposed proceedings to the exclusion of the company, and that he will personally give security to the Commissioner for costs by granting an equitable charge over a property, to be secured by a caveat. But I am not convinced that these arrangements would protect the company and the Commissioner completely, since they depend on the Court fixing the amount of the security for costs and they assume that the value of the applicant's equity in the property will always exceed that amount, although there is no undertaking not to create prior ranking encumbrances over the property. I note that Mrs Dickerson, who is evidently a co-owner of the property offered as the subject of the equitable charge, has not offered to give an undertaking to the Court.
80 Even if the arrangements proposed by the applicant were adequate to ensure that the company and the Commissioner were protected, and there were an arguable case to support the proceedings, it would not necessarily follow that the application should succeed. The Court should not overrule the liquidator's judgment unless a good reason for doing so is established. In the Butler Pollnow cases a winding up order had not been made and it was likely that Mr Pollnow would have set up by way of defence in the winding up proceedings the very matters which he wished the company to assert in the other proceedings. The provisional liquidator could not conduct a defence to the winding up proceedings, and ought not to assert the same matters in proceedings brought on behalf of the company, and therefore it was appropriate to appoint a receiver to assert the company's cause of action. In Christianos v Aloridge the Court declined to appoint a receiver in order that the decision to pursue the alleged course of action could be taken by the liquidator, once appointed. In the present case there is nothing comparable with the special circumstances of the Butler Pollnow cases, and Christianos v Aloridge shows that the Court should normally give weight the liquidator's decision.