Supreme Court of WA|2010-11-10|Before: Act J, Simmonds J

COMPUTER ACCOUNTING AND TAX PTY LTD (in liq) -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 2] [2010] WASC 318 (10 November 2010)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : COMPUTER ACCOUNTING AND TAX PTY LTD (in liq) -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 2] [2010] WASC 318

BETWEEN : COMPUTER ACCOUNTING AND TAX PTY LTD (in liq)

DONALD CAMPBELL-SMITH As Executor of the Estate of MARTIN PAUL BANNING

Enforcement of judgments - Receivership orders - Cancellation of receivership orders and discharge of receiver - Cancellation where assigned task performed - Cancellation where services of receiver not likely to be required for a significant period or not required at all - Whether 'judgment debt' satisfied - Meaning of 'judgment debt' - Whether grounds for cancelling receivership orders made out

Enforcement of judgments - Receivership orders - Discharge of receiver - Discharge where irregularity - Whether irregularity in receiver's failure to obtain prior court authorisation to obtain legal assistance and to participate in legal proceedings - Whether irregularity in receiver's continuing to act as receiver in the face of serious allegations against him by execution debtors - Whether receiver should be discharged where any or a combination of irregularities made out

Enforcement of judgments - Receivership orders - Directions and declarations sought by receiver - Directions sought as to lien - Whether there was a lien - Directions sought as to costs and expenses - Whether costs and expenses should be allowable where there were irregularities

Corporations Regulations 2001 (Cth), reg 5.3A.06, reg 59, sch 8A

Australian Securities and Investments Commission v Atlantic 3-Financial (Aust) Pty Ltd (No 3) [2003] QSC 386; [2004] 1 Qd R 591

Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (in liq) (No 3) [2008] FCA 448; (2008) 246 ALR 580

Boehm v Goodall [1911] 1 Ch 155

Bowesco Pty Ltd v Cronin [2008] WASC 296; [2010] ALMD 1448

Capewell v Revenue and Customs Commissioners [2007] UKHL 2; [2007] 1 WLR 386

Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552

Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [2010] WASCA 171

Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133

Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S)

Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [No 4] [2009] WASC 407

Duffy v Super Centre Development Corp Ltd [1967] 1 NSWR 382

Harrison v Boydell [1833] EngR 698; (1833) 6 Sim 211; 58 ER 573

Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569

Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93

Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38

Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183

Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 (S)

Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2010] WASC 113

Wayland v Nidamon Pty Ltd (1986) 11 ACLR 209; (1987) 5 ACLC 73

Wilton v Commonwealth Trading Bank of Australia [1974] 2 NSWLR 96

1 Graeme Lean (Mr Lean, or the receiver) is the receiver appointed by orders I made who was to appropriate and realise certain property of the second defendant, Martin Paul Banning (Mr Banning), to satisfy the 'judgment debt' that at that time Mr Banning, together with Professional Services of Australia Pty Ltd (PSA), owed to the plaintiff, Computer Accounting and Tax Pty Ltd (CAT or the plaintiff) (the receivership orders). The judgment debt arose out of the judgment in favour of CAT that I gave in its action against PSA and Mr Banning. See Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (CAT WASC). That action was for damages for loss arising out of certain conduct and representations made by PSA for which PSA's sole director and secretary, Mr Banning, was the maker or in which he was involved.

2 Mr Banning died not long after the delivery of the judgment in CAT WASC. His personal representative, Mr Donald Campbell-Smith (Mr Campbell-Smith, to whom I will refer in that capacity, unless otherwise indicated), and PSA (together, PSA and Mr Campbell-Smith, or the defendants) have applied by chamber summons dated 13 August 2009 to have Mr Lean discharged from his receivership. PSA and Mr Campbell-Smith made their application on two bases.

3 One basis is what they say is the power of the court to cancel the receivership orders when it should be seen that the receiver has performed the task assigned to him. An alternative form of this basis is what they say is the power of the court so to order when the services of a receiver are not likely to be required for a significant period, or indeed are not likely to be required at all.

4 PSA and Mr Campbell-Smith say that the task assigned to the receiver has been performed because he has sold the only property, a share, that it was contemplated he would take into his possession. While the completion of that sale by registration of the transfer by the company is presently the subject of proceedings by the purchasers against the company's directors, proceedings to which the receiver is a party, they say that this does not change the fact that the receiver performed his assigned task, which is the position he has taken in those proceedings.

5 PSA and Mr Campbell-Smith say that the receiver's services are not likely to be required for some significant period because the proceedings referred to are expected to run for some time yet. PSA and Mr Campbell-Smith say that the receiver's services are likely not to be required at all because of either of two other sets of circumstances. The first of these is that the judgment debt has been substantially paid, and any remaining amounts which might arguably form part of the judgment debt, being the costs of the action and the costs of enforcement, are, in the first case, not presently payable, as they await the outcome of taxation, and in any event are otherwise provided for; while in the second case the amount is disputed. The taxation process is also expected to run for some time yet, while the dispute is not expected to be resolved soon.

6 The other basis put for the discharge of the receiver is what PSA and Mr Campbell-Smith say is the power of the court to correct an irregularity in the carrying out of the receivership orders. There were irregularities, they say, of two kinds. One irregularity was that Mr Lean, without prior authority from the court, obtained legal advice and representation from early in the receivership, and then later, in the proceedings in which he was named as a co-plaintiff. The other kind of irregularity was that Mr Lean continued to act as receiver after being asked by Mr Campbell-Smith and PSA to cease doing so, following their making serious allegations concerning his conduct.

7 At the hearings on 7 and 13 October 2009 (the October 2009 hearings) before me both CAT and Mr Lean were represented. CAT opposed the granting of the application to discharge Mr Lean, while Mr Lean appeared to neither oppose nor to consent to that discharge. However, counsel for Mr Lean sought directions and declarations, principally as to the meaning of 'judgment debt' in the order appointing him and whether or not he had an equitable lien for his costs on the asset of which he was receiver or on the proceeds of its sale. As I will explain, I consider I have the power to issue such directions and declarations, and I consider it is appropriate to respond to that request, not least in view of the overlap of the issues the directions and declarations involve with issues PSA and Mr Campbell-Smith have raised by their application to discharge the receiver.

8 Following my reservation at the conclusion of the October 2009 hearings of my decision on the application to discharge the receiver and the matter of the directions, there were a number of further events (the further events) to which my attention was called in supplementary submissions for PSA and Mr Campbell-Smith dated 10 June 2010 (the defendants' supplementary submissions). I understood those submissions to be for the purposes of an application for leave to re-open the application for cancellation of the receivership orders and the matter of the directions.

9 The overall effect of those submissions, as I understood them, was that the further events made it clear that the services of the receiver were likely not to be required. The further events were of two kinds: one kind had to do with the appeal against the damages orders following CAT WASC; the other kind had to do with CAT's winding up in insolvency.

10 As to the further events of the first kind, by a decision following the October 2009 hearings, an appeal against the damages orders following CAT WASC succeeded as to the greater part of the judgment debt ordered to be paid. See Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 (PSA [No 2] WASCA). Subsequently, the Court of Appeal for the reasons given in a supplementary judgment made orders to give effect to its conclusions, including ones ordering the greater part of the judgment debt paid to be repaid and remitting the matter of the costs of the trial to me. See Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 (S) (PSA [No 2] WASCA (S)). PSA and Mr Campbell-Smith say that, while there remains the matter of the costs of the action to be addressed, it is likely as a result of the basis on which the appeal was successful that there will be no costs payable to CAT, and indeed a balance payable to PSA and Mr Campbell-Smith.

11 Further, an application for special leave to appeal the decision in PSA [No 2] WASCA to the High Court was dismissed.

12 As to further events of the second kind, subsequent to the October 2009 hearings orders were made to wind up CAT in insolvency. An appeal has been made against those orders, although it now appears that that appeal is only being pursued as to certain of the costs orders and not the order to wind up itself. PSA and Mr Campbell-Smith say, as I understand their submissions, that, as a result of the statutory right in insolvency for them to set off any amounts for costs including enforcement costs of this action that they may still owe CAT against the amount to be repaid by CAT to them, there will be no balance left due to CAT. Thus, there will be no amount left in respect of which there is a need for enforcement by means of the receivership orders.

13 As a result of the distribution of the defendants' supplementary submissions of 10 June 2010, efforts were made to determine if there was consent to having leave to re-open with any necessary leave so to proceed notwithstanding the winding up of CAT in insolvency, under Corporations Act 2001 (Cth) s 471B. When those efforts proved unavailing I called the parties back for submissions as to how I should proceed. At a hearing on 3 September 2010, and without opposition, I granted the leave to re-open and the leave to proceed. I also made programming orders to permit the receiver within 14 days to make written submissions to respond to the defendants' supplementary submissions of 10 June 2010, which I was told by counsel for the receiver had not been received by her or by her instructors before the hearing of 3 September 2010. I further provided for a decision to be made no less than seven days thereafter without the need for a further hearing, as well as for a liberty to apply. In the event there were no submissions received from the receiver within the time so provided for.

14 However, the receiver subsequently provided to the court and to the other parties supplementary written submissions, in the form of the 'Receiver's Supplementary Submissions in Response to Defendants' Submissions' dated 15 October 2010 (the receivers supplementary written submissions). As I was informed the other parties had no objection to my considering the receiver's supplementary written submissions, I have done so.

15 I note that the receiver's supplementary written submissions, among other things, states that, in view of the successful appeal against the damages orders, the receiver's position was that there was no need for the receivership to continue and that 'subject to resolution of issues as to his costs and remuneration, he can retire or be discharged'.

16 Also at the hearing of 3 September 2010 counsel for PSA and Mr Campbell-Smith handed up a document entitled 'Minute of Final Orders sought by Defendants in relation to Discharge of Court Appointed Receiver' dated September 2010 (the minute of September 2010 of PSA and Mr Campbell-Smith). The proposed orders under the minute of September 2010 of PSA and Mr Campbell-Smith appear to replace the orders sought by their chamber summons dated 13 August 2009, while a number of the proposed orders appear to be put to substitute for a number of the directions sought by the receiver. I will consider the application for discharge of the receiver and the matter of the directions by reference to that understanding of the minute of September 2010 of PSA and Mr Campbell-Smith.

17 I turn now to deal with the issues in the application for discharge of the receiver and the matter of the directions.

Discharge where the task assigned under the receivership has been performed

18 I consider that I have the power to make an order cancelling the receivership orders the receiver under Civil Judgments Enforcement Act 2004 (WA) s 103 (CJE Act) with the effect of discharging the receiver. The contrary was not put to me.

103. Amending and cancelling orders etc.

(1) If a court makes an order under this Act (the original order), a person -

(a) who obtained the original order;

(b) to whom the original order is addressed;

(c) who is authorised to do anything under the original order; or

(d) who is affected by, or whose property is affected by, the original order,

may apply to the court for an order that amends or cancels the original order.

(2) The court may make an order that amends or cancels the original order and may do so on terms as to costs or otherwise.

(3) The person who made the application under subsection (1) must serve the order made under subsection (2) on each of the other persons referred to in subsection (1).

(4) Unless it orders otherwise, the order made under subsection (2) has effect -

(a) if the person referred to in subsection (1)(b) or (c) applied for it, when it is made; or

(b) otherwise, when it is served on the person to whom the original order was addressed.

20 It was common ground that my jurisdiction to make a cancellation order with the effect of discharging a receiver was under s 103. I consider that, by reference at least to the provision of the receivership orders making the costs of the receiver 'primarily payable by the judgment debtors' (order 8), and provided that s 103 applied to the receivership orders, PSA and Mr Campbell-Smith have standing to apply for such an order, by virtue of CJE Act s 103(1)(d). I return to order 8 below. It was common ground s 103 applied to the receivership orders, and in any event I consider that s 103 does so apply, as those orders were made under s 86 and s 87, to which I return below. CJE Act s 103, in permitting the cancellation of a receivership order and thereby the discharge of a receiver, appears to represent a provision of the kind the absence of which for other receivers was noted in Bowesco Pty Ltd v Cronin [2008] WASC 296; [2010] ALMD 1448 [14] (Sanderson M).

21 If an order cancelling the receivership orders were made on the basis that the assigned task had been performed, or on either of the alternative forms of that basis, then it seems to me that no question of whether or not I should appoint a replacement receiver would arise. The order should simply be terminated. As I indicate below, I consider different considerations would arise with respect to an order discharging Mr Lean on the other basis Mr Campbell-Smith and PSA contend for, that of irregularity.

22 I must first determine if Mr Campbell-Smith and PSA have made out that Mr Lean has performed the assigned task. If they have made that out, it seems to me that my discretion to make the order applied for should be exercised. See the authorities on discharge of a receiver at common law 'when the object of his appointment has been fully effected' cited in Walton R, (ed) Kerr on the Law and Practice as to Receivers (16th ed, 1983) (249).

23 The receivership orders were made on 20 November 2008. The material provisions were as follows:

Until further order Graeme Trevor Lean, is appointed as the Receiver of the property pursuant to s 86(1)(b) alternatively s 86(1)(e) of the Civil Judgments Enforcement Act 2004.
For the purposes of these orders the Receiver is appointed in this action to appropriate and realise the property so as to satisfy the judgment debt.
For the purposes of these orders the property is that described and referred to in the schedule hereto.
The Receiver shall have the following powers in respect of the property:

the power to register the shares comprising the property in the name of the receiver and to sell those shares in satisfaction of the judgment debt ...

24 The property referred to in the schedule to the receivership orders for the purposes of order 3 was described in a list of eight numbered items. It was common ground that the only property of substantial value that CAT, PSA and Mr Campbell-Smith contemplated Mr Lean would 'appropriate and realise' under order 2 was item (i)4, being 'one share (50% shareholding)' (the share) in Banning Holdings Pty Ltd (Banning Holdings), a company of which the late Mr Banning and his widow, Mrs Sandra Banning (Mrs Banning), were the only directors, and the only shareholders, in equal shares.

25 I now describe events subsequent to the making of the receivership orders. Except as noted, these matters are not in contest.

26 The share was an asset of the estate of the late Mr Banning. Following the registration of Mr Lean as the holder of the share, Mr Lean conducted a sale process in November 2008. This process included what the receiver and CAT contend was a form of auction for the share.

27 As a result of that process a contract of sale (the contract of sale) was entered into between Mr Lean as seller and Mrs Angela Frigger (Mrs Frigger) and Mr Hartmut Frigger (Mr Frigger) (together, the Friggers) as the highest bidders at that auction. The Friggers were the only directors and shareholders in CAT. Mr Lean executed a transfer of the share to the Friggers (the transfer). The Friggers paid Mr Lean the purchase price of $730,000. However, it became apparent to Mr Lean that registration of the transfer would not occur without court order. On advice from his solicitors Mr Lean did not pay this amount to CAT, but rather returned to the Friggers all but $20,000 of the purchase price. This followed the Friggers not agreeing to indemnify Mr Lean in respect of any on-payment to CAT. The $20,000 held back was the deposit under the contract of sale. Mr Lean understood the return to the Friggers was pending a determination by the court as to whether or not the Friggers were entitled to become registered as holders of the share.

28 Subsequently to the return of the purchase price of the share, proceedings in CIV 1727 of 2009 were commenced in which the Friggers and Mr Lean were named as plaintiffs, and Mr Campbell-Smith and Mrs Banning (in their capacities as directors of Banning Holdings) and Banning Holdings the defendants. Not long afterwards Mr Lean ceased to be a co-plaintiff, but was joined as a further defendant. CIV 1727 of 2009 is presently an action under Corporations Act 2001 (Cth) s 1071F in which the Friggers seek registration of the transfer of the share to them. In the same proceedings Mr Campbell-Smith, Mrs Banning and Banning Holdings have filed a defence and counterclaim in which among other things they plead a pre-emptive rights provision (article 22A) in the constitution of Banning Holdings to which Mr Lean was required to have due regard and which 'enured to the benefit of' Mrs Banning; and that the sale of the share by the contract of sale was, to the knowledge of the Friggers and Mr Lean, 'improvident', as one half of the net assets of Banning Holdings was 'truly valued at in excess of twice the value of the Plaintiffs' bid for the Share'. Mr Campbell-Smith, Mrs Banning and Banning Holdings in their claim for relief seek among other things a declaration that the sale by the contract of sale was invalid and an order for a mandatory injunction that Mr Lean offer the share to Mrs Banning in the terms of article 22A. In their counterclaim Mr Campbell-Smith, Mrs Banning and Banning Holdings plead that Mr Lean breached duties owed to Mr Campbell-Smith as executor of the estate of the late Mr Banning and to Mrs Banning as equitable owner of the share, in that Mr Lean did not obtain any advice or opinion from a qualified person or persons as to the market value of the share and purported to value it at what was a 'gross undervalue'; and in that he failed to offer the share to Mrs Banning pursuant to her rights of pre-emption under article 22A.

29 Mr Lean is defending the counterclaim. In particular by his defence to counterclaim he has, as to article 22A, pleaded estoppel, waiver, that article 22A did not apply in the circumstances and that he complied with it; and, as to the undervaluation matters, including that he failed to obtain any advice or opinion from a qualified person or persons as to the value of the share, he denies the pleaded allegations.

30 The proceedings in CIV 1727 of 2009 are continuing, and there has not yet been a listing for trial. However, at the time of writing these reasons there is a possibility as I will indicate below that the judge in charge of the matter will order a permanent stay of the proceedings.

31 Counsel for PSA and Mr Campbell-Smith submitted that I should find that Mr Lean completed the task assigned to him by the receivership orders. Counsel acknowledged that Mr Lean has not passed on to CAT the proceeds of realisation of the share and continues to hold the deposit. Of course Mr Lean also remains as the registered shareholder in respect of the share formerly held by the late Mr Banning. However, as I understood counsel's submission, in the event Mr Lean was discharged, those matters could be the subject of appropriate consequential orders, such as for the payment of the deposit and any amount received by him from the Friggers (for example, an amount paid by them following the resolution of CIV 1727 of 2009) into court. I should add that questions of enforcement of the contract of sale might also arise dependent on such resolution and the position adopted by the Friggers for which consequential orders would also be needed. Neither counsel for CAT nor counsel for Mr Lean submitted to me that it was not possible to craft suitable consequential orders of either of the two types referred to. I consider such orders could be crafted.

32 However, I am of the view that in circumstances where the effectiveness of the sale under the contract of sale is in question, and payment of the purchase price under the contract of sale has been largely reversed, it is not possible to say that Mr Lean has achieved the purposes of the receivership orders order 2. In the terms of order 2, Mr Lean, while he has succeeded in appropriating the share, has not been able 'to realise [the share] so as to satisfy the judgment debt'. It is true Mr Lean has taken the position, not least in CIV 1727 of 2009, that the sale was properly made and Banning Holdings should register the transfer. However, I do not draw from that that I am precluded from finding that Mr Lean has not yet achieved the purposes of order 2.

33 At the same time, on further facts I will reach there is a question whether or not steps other than action by Mr Lean have been taken, successfully, to 'satisfy the judgment debt'. Were that question to be answered affirmatively, it might be said that the purposes of the receivership orders order 2 have been achieved. For the reasons I will indicate when I consider whether or not the services of the receiver are likely to be required at all, it seems to me that at least since the insolvency of CAT that question indeed should be answered in the affirmative.

34 Accordingly, I would not cancel the receivership orders, and thus discharge Mr Lean, on the basis that Mr Lean has achieved the purposes of order 2. However, I will return to the matter of the achievement of the purposes of order 2 by other means.

Discharge where the services of the receiver are not likely to be needed for some time

35 The submissions for PSA and Mr Campbell-Smith rest on the proposition that the proceedings in CIV 1727 of 2009 are unlikely to conclude for some time. I did not understand that proposition to be in contest, although I will have occasion to return to the matter below. In those circumstances, the submission was that there will be no need for any significant services from Mr Lean for some time. It appeared to be common ground that until those proceedings concluded, Mr Lean's only responsibilities under the receivership orders were those given by order 5, which is as follows:

The Receiver shall report in writing to the judgment creditor and to the court from time to time and not later than one month after the issue of these orders regarding:

(a) the nature and details of the property identified including any interest in any trust (including as a beneficiary of a discretionary trust, whether named or not, and a power or appointment of the trustee of any trust or power of direction);

(b) the assets and liabilities of the judgment debtors and Banning Holdings Pty Ltd;

(c) the costs of her appointment, the future costs thereof and the cost that may be incurred by her in the future;

(d) any other information in relation to the property that the Receiver thinks necessary to protect the interests of the judgement creditor, in respect of the judgment debt.

36 I leave aside the matter of Mr Lean's defence in CIV 1727 of 2009. For reasons I give below, I consider the reasonable costs incurred in that defence, whether or not he is discharged, represent costs for which he is entitled to claim under the receivership orders.

37 The reference to 'her' in order 5(c) I take to be a reference to Mr Lean. In the initially proposed receivership orders, provision was made for the appointment of Mrs Frigger as the receiver, a provision which was removed from what became the receivership orders.

38 To and including his report of 15 September 2009, Mr Lean appears to have provided the court with five reports. In them, for the most part, he provides information on the affairs of Banning Holdings. It did not appear to be in contest that his reporting obligations while CIV 1727 of 2009 continues did not represent a great deal for Mr Lean to do.

39 However, the submissions for PSA and Mr Campbell-Smith were that the probable costs of those services would not be warranted by any benefits in continuing to have a receiver in such circumstances.

40 Counsel for PSA and Mr Campbell-Smith put to me that I should approach the present matters for the purposes of the exercise of my discretion to cancel the receivership orders under CJE Act s 103(2) in the same way I had been required to approach the question of whether or not to make the receivership orders. It was common ground that the latter question had to be approached by reference to CJE Act s 86 and s 87, which are as follows:

86 . Appointing a receiver, injunctions etc.

(1) If an available asset of a judgment debtor cannot be conveniently appropriated or realised under this Part for the purposes of recovering a judgment debt, whether due to acts or omissions of the judgment debtor or otherwise, the judgment creditor may apply to the court for any or all of the following -

(a) an order that determines the nature and extent of the asset;

(b) an order that appoints a receiver of the asset;

(c) an order that the judgment debtor or any person in possession or control of the asset -

(i) deliver the asset to a person named in the order;

(ii) do, not do, or cease from doing, any act that relates to the asset and that is specified in the order;

(d) an order that prohibits the judgment debtor or any other person from disposing of or otherwise dealing with the asset;

(e) an order that facilitates the appropriation or realisation of the asset.

(2) The court may make any such order, subject to section 87.

(3) The court may make any such order even if no other proceedings have been taken to enforce the monetary judgment concerned.

87. Receiver, appointment of etc.

(1) In determining whether to appoint a receiver under section 86 the court must consider at least the following -

(a) whether appointing a receiver would be an effective means of realising the property;

(b) the probable cost of the receivership in relation to the probable benefits to be derived by appointing a receiver;

(c) whether appointing a receiver would cause undue hardship or prejudice to the judgment debtor or any other person;

(d) the likelihood of the judgment debt being recovered by means of any other enforcement order without realising the available asset in question.

(2) A court must not appoint a person as a receiver unless -

(a) the person satisfies the qualifications, if any, prescribed by the regulations; and

(b) the person has agreed in writing to act as receiver in respect of the available asset in question.

(3) Unless otherwise ordered by the court, a receiver appointed by the court may take into the receiver's custody and control the available asset in respect of which the receiver is appointed.

(4) When or after appointing a receiver the court may make any ancillary or consequential order needed to enable the receiver to realise from the available asset sufficient money to satisfy the judgment debt.

(5) Without limiting subsection (4), the court may make -

(a) any order needed to give the receiver power to take custody or control of, manage, sell, dispose of, divert income from, or take proceedings in relation to, the available asset;

(b) any order needed as to the payment of the receiver's fees and expenses.

41 Counsel for PSA and Mr Campbell-Smith as I understood his submissions laid particular emphasis on the factors in s 87(1)(b) - (d).

42 Counsel for PSA and Mr Campbell-Smith did not cite to me any authority in support of his submission as to the relevance of CJE Act s 86 and s 87, and there appears to be no authority on the discharge of a receiver by cancellation of a receivership order under CJE Act s 103.

43 In my view, because of their subject matter, CJE Act s 86 and s 87 are relevant, mutatis mutandis, to the exercise of my discretion under s 103(2). In particular I should note the factors in CJE Act s 87(1)(b) - (d). However, in my view greater account than counsel for PSA and Mr Campbell-Smith appeared to allow for should also be taken of the different nature, from the making of a receivership order, of a cancellation of a receivership order under which actions have been taken. In the latter context the receiver may have done substantial work towards achieving the purposes of the receivership. In this case I consider such work has been done, involving appropriating the share, including having Mr Lean registered as its holder, and his familiarising himself with the affairs of Banning Holdings. This in my view would render inapplicable the consideration in s 86(1) which must be satisfied to enliven the discretion to make a receivership order.

44 I turn to consider each of the three matters on which counsel for the applicants laid particular emphasis.

45 On the evidence before me the quantum of the probable cost of continuing the receivership following the entry into the contract of sale to the Friggers and the execution of the transfer, and the nature and quantum of the probable benefits to be derived from not cancelling the receivership orders (see CJE Act s 87(1)(b)), were not made clear to me. I draw from the evidence my best assessment of those costs and those benefits as I now explain.

46 The costs of the receivership are provided for in the receivership orders order 8, which is:

The costs of the Receiver including his remuneration, the cost of obtaining his appointment, of completing his security, of passing of accounts and of obtaining his discharge shall be taxed unless assessed by the master and shall be primarily payable by the judgment debtors by making payment of the taxed costs to the judgement creditor within such time as the Master may allow on taxation or assessment or is otherwise ordered by this honourable court.

47 It was common ground that the costs in question are the proper costs of Mr Lean, being those incurred in activities reasonably undertaken incidentally to performing the function created by his employment: see Civil Procedure in Western Australia [51.4.2] as at 28 October 2010, referring to Wayland v Nidamon Pty Ltd (1986) 11 ACLR 209; (1987) 5 ACLC 73, 222 (Hodgson J). That function is described in order 2, which in my view is to be read with order 5, the obligation to report. I have already indicated why in my view the function in order 2 has not yet been completed. I would confirm that in my view the issuance of reports with the monitoring of the matters the subject of those reports would be capable of being activities reasonably undertaken incidentally to performing the function to be served by Mr Lean's employment.

48 I should add that Eady v Eady (1895) 16 LR (NSW) Eq 70, 79 (Owen CJ in Eq) is the authority commonly referred to in relation to what costs, charges and expenses of a receiver that receiver is entitled to recoup:

It is a most extreme course to adopt to refuse a receiver his costs, charges and expenses, and this Court would never make such an order unless it was shewn that the receiver had acted without the authority of the Court or had deliberately acted in the wrong; no mere error of discretion would be sufficient. I see nothing of that nature in the present case, and I am therefore satisfied that the receiver is entitled to be recouped the costs, charges and expenses he has incurred in defending these bankruptcy proceedings.

49 However, I further note the following from Civil Procedure in Western Australia [51.4.4] (as at 28 October 2010) as to remuneration:

A receiver is entitled to have his or her costs, charges and expenses properly incurred in the discharge of his or her ordinary duties or in the performance of extraordinary services that have been sanctioned by the court. The receiver has the burden of justifying the reasonableness and prudence of the tasks undertaken for which remuneration is sought. A receiver's remuneration is not in the same category as costs and is a fair recompense for what he or she has actually done. The court's objective is to award a sum or devise a formula which will reasonably compensate the receiver for the time and trouble expended in the execution of his or her duties and, to some extent, the responsibility he or she has assumed.

50 I have already indicated there is not a great deal for Mr Lean to do at present, the matter of conducting his defence in CIV 1727 of 2009 aside.

51 The probable benefits to be derived from not cancelling the receivership orders include that the steps taken by Mr Lean to appropriate the share would not have to be taken again if, as counsel for PSA and Mr Campbell-Smith had in argument accepted at the October 2009 hearings, it is necessary to appoint a new receiver after the conclusion of the proceedings in CIV 1727 of 2009. Of course account would also have to be taken of the degree of likelihood of such a new appointment, a matter to which I return.

52 Further, depending on the outcome of CIV 1727 of 2009 and the position of the Friggers under their contract of sale, having Mr Lean continue as receiver might (subject to the effect on that continuation of the further events since the October 2009 hearings) involve him in recovering from them the balance of the proceeds of the sale, or re-starting the process of selling the share, including the possibility of negotiating a new sale to the Friggers. In respect of any such negotiation, although counsel for PSA and Mr Campbell-Smith put the contrary to me, I do not consider I have a reason to believe Mr Lean would not conduct himself in accordance with his duties as a court-appointed receiver. In either moving to recover that balance, or restarting that process, Mr Lean would in my view be in a position to turn to account both his position as the registered holder of the share and the knowledge of Banning Holdings he had acquired in the performance of his duties under order 5 of the receivership orders.

53 However, the realisation of any such benefits would await the outcome of CIV 1727 of 2009, and the probable benefits described must be discounted accordingly.

54 As to whether or not cancelling the receivership orders would cause undue hardship or prejudice to PSA and Mr Campbell-Smith as judgment debtors, or to any other person (see CJE Act s 87(1)(c)), I consider the only hardship shown was the probable costs of not cancelling the receivership orders, being the costs of the reports and monitoring referred to earlier.

55 As to the likelihood of the judgment debt being recovered by means of any other enforcement order without realising the share (see CJE Act s 87(1)(d)), I consider that, while there is no other enforcement order in this case, that factor warrants me in the exercise of my discretion under CJE Act s 103(2) considering the likelihood of satisfaction of the judgment debt the result of other matters than another enforcement order.

56 As I have previously indicated, and will consider in the next section of these reasons, there has been recovery of the largest portion of the judgment debt, as well as the further events since the October 2009 hearings. As I will explain below, I consider that prior to the insolvency of CAT there still remained the possibility of an amount due to CAT in respect of the judgment debt, being an amount for costs of the action and enforcement costs net of amounts for costs due from CAT to PSA and Mr Campbell-Smith, which could not be set off against the amount CAT had to repay. However, if after insolvency that amount could be so set off, it would be improbable that that set-off would leave a net amount due from PSA and Mr Campbell-Smith to CAT. The consequence would be that it would be unlikely the services of the receiver would be required at all. As I will explain in the next section of my reasons, it is my conclusion that since the insolvency, but not before, it is in fact unlikely the services of the receiver will be required at all.

57 Weighing all the factors I have referred to, I would only cancel the receivership orders on the present basis as a result of the insolvency of CAT.

58 I turn then to the matter of whether or not the services of the receiver are not likely to be required at all.

Discharge where the services of the receiver are not likely to be required at all

59 It was common ground that on 2 and 5 June 2009 CAT was paid amounts totalling $1,165,661.54 (the paid amount). It was also not in contest that the paid amount was all or almost all of what under the orders entering judgment for CAT was made payable by PSA and the late Mr Banning. There appears to be a contest as to a relatively very small amount in respect of that last sum. Those orders, made on 9 July 2008 (the trial judgment orders), were in relation to that sum as follows:

1.1 The sum of $287,125.00 together with the sum of $89,440.80 being interest thereon at the rate of 6 per centum per annum from 1 May 2003 to 9 July 2008, and thereafter $47.19 per day from 9 July 2008 to the date of payment.

1.2 the sum of $4,999.50 together with the sum of $1,444.24 being interest thereon at the rate of 6 per centum per annum from 15 September 2003 to 9 July 2008, and thereafter $0.82 per day from 9 July 2008 to the date of payment

1.3 the sum of $675,078.00 together with the sum of $47,939.79 being interest thereon at the rate of 6 per centum per annum from 3 May 2007 to 9 July 2008, and thereafter $110.97 per day from 9 July 2008 to the date of payment.

60 It was not in contest that the paid amount included no part of the costs of the action before enforcement costs. The trial judgment orders had provided for written submissions as to the orders to be made on costs (order 2). Orders as to costs (the trial costs orders) were made on 6 May 2009 following the delivery of the reasons in Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S) (CAT WASC (S)). The trial costs orders relevantly provided that 'the Defendants pay 90% of the plaintiff's costs of the action to be taxed if not agreed' (order 1).

61 It was also not in contest that the paid amount included no amount for enforcement costs, which include both the costs of the receivership, which as has been seen are by the receivership orders made 'primarily payable' by PSA and the late Mr Banning (the receivership orders, order 8), and the costs under a property (seizure and sale) order made on 25 September 2009 (the September 2009 PSSO). The September 2009 PSSO provides that it is for the satisfaction of previous enforcement costs and interest as well as the enforcement costs of the September 2009 PSSO itself.

62 There is a question whether or not the costs of the action and the enforcement costs were included in the 'judgment debt' for the purposes of the receivership orders. I understood counsel for PSA and Mr Campbell-Smith to contend that neither class of costs was included, although it was not clear he pressed the point. Counsel for Mr Lean sought clarification of the matter as part of directions the receiver sought to which I return below. In my view it is necessary to provide that clarification at this point, in order to resolve the present basis for cancellation of the receivership orders.

63 I note the following provisions of CJE Act s 3 defining 'enforcement costs', 'judgment debt' and 'judgment sum' as follows:

3. Terms used

In this Act, unless the contrary intention appears -

...

enforcement costs, of a judgment, means -

(a) any fees, expenses, or other amounts, that are paid, ordered to be paid, or payable, under this Act or another written law in connection with enforcing the judgment; and

(b) any costs of taking, or in relation to, any proceedings under this Act to enforce the judgment that are ordered by a court to be paid by the person against whom the judgment is given;

...

judgment debt means the unpaid amount of any of the following -

(a) a judgment sum;

(b) interest on the judgment sum;

(c) enforcement costs of the judgment;

...

judgment sum means the amount of money ordered to be paid under a monetary judgment, whether or not the money is or includes costs or pre-judgment interest;

...

64 As I understood the positions of the parties, there was no contest that the costs of the receivership and the costs of the September 2009 PSSO are enforcement costs within CJE Act s 3. However, there was a sharp contest over what the proper costs in each case were, as will shortly appear.

65 Further, in my view it is clear from the statutory provisions I have just quoted, the relevant language of which is used in the receivership orders, that the costs of the action are part of the judgment sum within CJE Act s 3.

66 In my view it follows that the costs of the receivership and the costs under the September 2009 PSSO as well as the 'judgment sum' are included within the meaning of CJE Act s 3 'judgment debt'.

67 In my view, given that the receivership orders were made under CJE Act s 86 and s 87, and given that they used 'judgment debt' in order 2, the meaning to be given that term in order 2 is that given by CJE Act s 3.

68 It follows that the paid amount did not provide satisfaction of the judgment debt for the purposes of the receivership order order 2, leaving aside the contest as to the relatively very small amount I referred to.

69 It was common ground that taxation of the costs of the action will not occur for some time, and that there are questions as to the quantum of the costs, if any, which will be taxed out and become payable by PSA and Mr Campbell-Smith, in view of the setting aside of the trial costs orders as a result of the decision in PSA (No 2) WASCA.

70 In any event, counsel for PSA and Mr Campbell-Smith put to me that adequate provision is made for the payment of the costs of the action by provisions of a deed of company arrangement entered into in respect of PSA on 20 March 2009 and amended since (the DOCA). The DOCA cl 5.1.3 provides as follows:

5.1.3 Subject to the condition set out in clause 6.3, the remaining liability to the Judgment Creditor for the taxed costs of the Action after the payments made pursuant to clauses 5.1.1 and 5.1.2, is to be satisfied from the proceeds of the sale of the Property on or before 31 December 2009, provided that the marketing of the Property for sale shall not be commenced until on or after 31 July 2009. Should the costs not be taxed by 31 December 2009 then the date for payment of the remaining liability for costs shall be extended to a date 7 days after such taxation is completed.

71 Neither 'taxed costs' nor 'costs' is defined, while 'Action' is defined as the action in CIV 2265 of 2006 (cl 1.1). It seems to me that such costs would include, not only 'costs' as that term is used in CJE Act s 3 'judgment sum' (apparently, to the exclusion of 'enforcement costs' there defined: see s 3 'judgment debt'), but also enforcement costs and costs in the appeal, including the application for leave to appeal to the High Court. The 'Property' referred to is the premises at 11 Lacey Street Perth (DOCA cl 1.1).

72 At the hearing before me on 13 October 2009 counsel for PSA and Mr Campbell-Smith referred me to what I took to be the evidence as to the adequacy of this provision, evidence which was before me at the hearing on 17 September 2009 of an application by CAT for variation of freezing orders obtained by CAT against PSA and Mr Campbell-Smith and on which I made findings in the reasons I delivered on that day, reasons that were subsequently published. See Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [No 4] [2009] WASC 407 (CAT [No 4] WASC). See [56] - [61], on the amount that might, on the evidence referred to, be expected to be left from the proceeds of a sale of the Property after payment of the remaining unpaid amounts in cl 5.1.1 and cl 5.1.2, of $358,163. See also [31] - [36], on the estimates in the evidence referred to of the costs of the action, of approximately $701,000 (on the evidence for CAT) and $315,000 (on the evidence for PSA and Mr Campbell-Smith). However, the estimates of the costs of the action were made before the decision in PSA [No 2] WASCA (S), a matter to which I will return.

73 However, I consider that there are three qualifications on the DOCA cl 5.1.3. One is that on the range of estimates described before allowance for the decision in PSA [No 2] WASCA (S) it is not clear the provision in the DOCA cl 5.1.3 will be adequate for the costs of the action. Further, I note that the source of the payment, PSA, is a company under a deed of company arrangement, which I consider would ground a concern that it might be insolvent at the point at which payment is to be made after taxation of the costs of the action. Finally, I note that it is not clear that enforcement costs are covered by the DOCA cl 5.1.3.

74 I have noted that CAT has taken the position that the DOCA is not valid, on a number of grounds. However, there has yet to be a hearing of any application to set it aside, and I do not consider that I am in a position to reduce on that account the weight that I would give to the DOCA in my deliberations.

75 As to the enforcement costs in the forms of the costs of the receivership and the costs under the September 2009 PSSO, there was evidence referred to in CAT [No 4] WASC as to the former, for an amount of $150,000 before any disallowance of costs of the kinds sought in the present application (see [39] and [43]); and as to the enforcement costs prior to the September 2009 PSSO, for an amount of about $32,000 which was (and remains) in dispute (see [44]).

76 It seems to me that I should leave aside the costs of the receivership. This is because, as I will explain below, in my view they are not chargeable to CAT, and the receiver has a lien for his costs on the share or its proceeds. That lien survives his discharge: see Re Andrews [1999] EWCA Civ 864; [1999] 1 WLR 1236; [1999] 2 All ER 751, 1243 (Ward LJ), referring to Mellor v Mellor [1992] 1 WLR 517; [1992] 4 All ER 10; [1993] BCLC 30; [1992] BCC 513. In those circumstances it seems to me the continued services of the receiver are not likely to be required simply to satisfy the costs of the receivership.

77 However, in my view, allowing for the costs of the action under the trial costs orders and the enforcement costs under the September 2009 PSSO, with the limitations of the DOCA cl 5.1.3 to which I have referred, it could not be said that it was likely the services of the receiver would not be required at all.

78 However, there is further matter to be taken account of, that of the further events. As to the first kind of the further events, in respect of the appeal against the damages orders following CAT WASC, I note that, following the October 2009 hearings, the Court of Appeal on 23 October 2009 delivered its judgment in PSA [No 2] WASCA. The court's decision was that the award of damages plus interest for the loss on acquisition of the property in Armadale, which as a result of the decision in CAT WASC was $287,125 plus interest, should be reduced by $6,500 with a corresponding reduction in the interest on that sum; and that the award of damages for the loss of investment opportunity plus interest, which was $675,078 plus interest, should be set aside altogether: [122] (Martin CJ, Buss & Newnes JJA agreeing).

79 On 7 December 2009, following the decision in PSA [No 2] WASCA, the Court of Appeal delivered a supplementary judgment, PSA [No 2] WASCA (S), in which it stated that the orders made in the appeal (the appeal orders) were the following, in [21]:

In addition to orders 1, 2 and 7 pronounced on 23 October 2009, allowing the appeal, setting aside the judgment of the trial judge and ordering the payment out of court of the $38,000, the following orders are made:

In lieu of order 1 of the orders made by the trial judge it is ordered that:
1. The defendants do pay to the plaintiff:

1.1 the sum of $280,625.00 together with the sum of $87,370.48 being interest at the rate of 6 per cent per annum from 1 May 2003 to 9 July 2008, and thereafter $60.49 per day from 9 July 2008 to the date of payment.

1.2 the sum of $4,999.50 together with the sum of $1,444.24 being interest thereon at the rate of 6 per cent per annum from 15 September 2003 to 9 July 2008, and thereafter $1.06 per day from 9 July 2008 to the date of payment.

The respondent do pay to the appellants the sum of $716,188.45 plus interest at 6 per cent per annum from 2 June 2009 until 23 October 2009 in the sum of $16,835.33 plus further interest at 6 per cent per annum from 23 October 2009 being $117.73 per day to the date of payment.
The respondent do pay to the appellants the sum of $59,634.27 plus interest at 6 per cent per annum from 5 June 2009 until 23 October 2009 in the sum of $1,372.41 plus further interest at 6 per cent per annum from 23 October 2009, being $9.80 per day to the date of payment.
The respondent do pay to the appellants 80% of their taxed costs of the appeal, save that in respect of the appellants' costs of the issues relating to the orders to be made upon publication of the court's reasons, the respondent do pay the entirety of the appellants' costs to be taxed on an indemnity basis, in that the appellants are to be awarded all costs reasonably incurred which are reasonable in amount.

The costs orders made on 6 May 2009 by the trial judge be set aside and the question of the costs of the trial be remitted to the trial judge for reconsideration in light of the reasons of this court.
Liberty to apply within 14 days in relation to whether there should be a stay of any of orders 4, 5 and 7.

80 I further note that special leave to appeal to the High Court against the decision in PSA [No 2] WASCA was refused on 28 May 2010, with costs to the respondents (the defendants).

81 It would seem that the effect of order 1.1 is that the amount there referred to before interest represents the portion of the paid amount which is to be credited to CAT, while the effect of order 4 and order 5 is that the sum of the amounts there referred to before interest represents what PSA and Mr Campbell-Smith overpaid CAT. It will be seen that the sum of the amounts in order 4 and order 5 before interest is about two-thirds of the paid amount. There has not yet been any repayment.

82 It will also be seen that the trial costs orders have been set aside, and the question of 'the costs of the trial' remitted to me for reconsideration in light of the reasons of the Court of Appeal. There has as yet been no hearing on the remitter. The present application is of course not the setting for a determination of the matters of costs so remitted. However, in order to determine the present issue, it is necessary I indicate what on the material presently before me appears to be the range of possible outcomes on that remitter.

83 One possible outcome is that a costs order in favour of PSA and Mr Campbell-Smith, might be determined to be appropriate: see, however, Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569, 575, quoted in CAT WASC (S) [43].

84 However that may be, it seems to me improbable that there will not be at the least a substantial percentage reduction in the costs of the action that would otherwise be awarded to CAT, to reflect the now substantially increased areas and degrees of lack of complete success in the action that CAT has sustained. See CAT WASC (S) [47] and authorities cited there. In addition, account would need to be taken of the contribution of the now unsuccessful claim for loss of investment opportunity to a number of the determinations in CAT WASC (S) that special costs were appropriate. See for those in respect of which such a contribution was expressly referred to in the decision [167] - [171] (amendment of statement of claim to plead such loss); [174] (getting up with respect to evidence of valuer related to such claim); and [199] (trial, including total recovery and cross-examination of same valuer). This is not necessarily exhaustive of that contribution.

85 In my view this range of outcomes would remove the first qualification on the DOCA cl 5.1.3 I described above, that it is not clear the provision for the costs of the action in DOCA cl 5.1.3 will be adequate. However, the remaining two qualifications would apply.

86 Further, it seems to me that, at least to this point in my description of events, CAT would have been unable to set off the anticipated amount of the costs of the trial against the amount it must repay. Such a set-off would appear to be excluded by the DOCA cl 6.1.3, which reads as follows:

The payment of costs following the taxation of the costs of the Judgment Creditor shall subject to the outcome of the Appeal, if this is heard and determined prior to the finalization of the taxation of costs. If the Judgment Sum is reduced on Appeal, the Judgment Creditor shall forthwith repay the excess amount it has been paid (with interest that has been paid that relates to that sum) to Banning Holdings. The amount repayable by the Judgment Creditor shall be set off against any costs owing on the taxation, and must be repaid prior to the taxation if the costs have not at that time been determined. (emphasis added)

87 This provision, like the other provisions of the DOCA, binds CAT as one of the creditors of PSA as well as PSA and Banning Holdings, although not Mr Campbell-Smith in his capacity as the personal representative of the late Mr Banning, as the estate is not a party to the DOCA: see Corporations Act s 444D(1). By Corporations Act s 444(5) it seems to me the provision, taking account of the emphasised words, has the effect of displacing what would otherwise be any right of set-off in the terms of s 553C. Those terms are incorporated into the DOCA as a result of Corporations Regulations 2001 (Cth) reg 5.3A.06 read with sch 8A item 8, which might apply notwithstanding that costs have not been 'determined' at the time for payment. The costs of the action, including enforcement costs, have not yet been 'determined' (which I understand to mean fixed), at least not to any significant extent.

88 I note that the repayment obligation under DOCA cl 6.1.3 is owed to Banning Holdings, where the obligation to pay under the appeal orders order 4 is owed to PSA and Mr Campbell-Smith. However, it seems to me that the emphasised words mean that the obligation to repay is to be determined by reference to any right of set-off of the costs of the action, including enforcement costs, to the extent costs have been 'determined' at the time for repayment: in this case, however, as I have indicated there are no costs 'determined' as yet to any significant extent.

89 I return to the right of set-off in s 553C below.

90 However, as was put by counsel for PSA and Mr Campbell-Smith in the submissions of 10 June 2010, there are further considerations relevant to whether the services of the receiver are likely to be required. These arise out of the further events, both from the proceedings in the appeal against the decision in CAT WASC and the application for leave to appeal against the decision in PSA [No 2] WASCA, on the one hand, and from the recently ordered winding up in insolvency of CAT, on the other.

91 With respect to the proceedings in the appeal and the application for leave to appeal, I note the order for 80% of the costs of the appeal plus an indemnity costs order already quoted made in favour of PSA and Mr Campbell-Smith against CAT, costs which have not yet been assessed. Further, CAT was ordered to pay the costs of the special leave application to PSA and Mr Campbell-Smith.

92 With respect to the insolvency, on 21 January 2010 I had appointed a provisional liquidator of CAT (see Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2010] WASC 38); and on 15 February 2010 I had refused an application to terminate that appointment (see Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2010] WASC 113).

93 On 6 May 2010, following the decision of Sanderson M in Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93 the learned master ordered the winding up of CAT in insolvency, with the costs fixed at $48,899.40 payable to PSA and Mr Campbell-Smith by CAT, $33,661.90 of which was also made payable by CAT and the Friggers jointly and severally. An appeal against this winding up decision is pending, although an appeal against the making of the winding up order is not now being pursued. Rather, the appeal being pursued is against the learned master's order for the payment of the amount of $33,661.90 by the Friggers jointly and severally with CAT. See Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [2010] WASCA 171 [12] (Newnes JA), (CAT (in liq) WASCA), the reasons for a judgment granting the application by the Friggers to have enforcement of the costs order appealed against suspended.

94 It seems clear to me that outside any insolvency of CAT the costs of the proceedings on the appeal against the trial decision and the application for leave to appeal against the decision in the appeal could be set off against any of the other costs of the proceedings in CIV 2265 of 2006, including enforcement costs, such as the costs of the receivership. See Derham, Rory, The Law of Set-off (3rd ed, 2003) [2.80] and authorities there cited. In my view the 'costs' referred to in DOCA cl 6.1.3 may be seen as the net resulting from this form of set-off. There are reserved costs of a number of proceedings in the action yet to be determined, including costs in the Local Court and the District Court of earlier forms of the present action which in my view are part of the costs of the action, as well as interlocutory proceedings in this court in which PSA and Mr Campbell-Smith were successful. Considering the nature of those proceedings, it seems to me that it is likely, although by no means inevitable, there will be a balance owing by CAT to PSA and Mr Campbell-Smith in respect of those reserved costs.

95 Considering all of the matters I have just referred to, including the range of possible outcomes on the remitter, it seems to me that it is likely the sum for the costs of the action including enforcement costs owing by PSA and Mr Campbell-Smith to CAT will be significantly less than it would have been prior to the decisions on the appeal.

96 In addition, in the insolvency of CAT account must be taken of the set-off provision for insolvencies under Corporations Act s 553C. That provision would prevail over a provision like DOCA cl 6.1.3 in the event of any inconsistency between them: see Derham [6.71]. In any event, it seems to me that in the event of the insolvency of CAT the effect of that provision must be taken into account because of the language in cl 6.1.3 that I emphasised and considered above.

97 In the insolvency of CAT it seems to me to be clear that under Corporations Act s 553C the amount payable by it under the appeal orders and any balance falling due after the insolvency for the costs of the action including appeals and enforcement costs each represents 'what is due from the one party [CAT or PSA and Mr Campbell-Smith, as the case may be] to the other party [CAT or PSA and Mr Campbell-Smith, as the case may be] in respect of ... mutual dealings': see Derham [8.45] (damages for misrepresentation leading to entry into a contract can be employed in a set-off).

98 Thus, it seems to me that in the insolvency of CAT there would be a set-off of any balance on account of costs owing to it by PSA and Mr Campbell-Smith against the amount which CAT is required to repay under the appeal orders. See Derham [6.70]. It seems to me to be improbable that there were will be a sum on account of costs that will exceed the amount which CAT must pay them under the appeal orders.

99 It follows that it is improbable the services of the receiver will be required. Indeed it may be said that as a result of the payment of the paid amount to CAT and events since then steps have been taken to 'satisfy the judgment debt'. However that may be, at the very least I do not consider the probable benefit of continuing the receivership would justify even the relatively low costs of continuing it.

Conclusion on application to discharge the receiver

100 For the foregoing reasons, I consider that the receivership orders should be cancelled, and I would order that cancellation effective with the date of delivery of this decision, with the effect of discharging the receiver. As I understood it this is what is sought by proposed order 1 of the September 2010 minute of PSA and Mr Campbell-Smith. I return below to the matter of consequential orders on such cancellation. I also return below to the choice of the date of this decision for the effective date of the cancellation.

101 That conclusion means it is strictly unnecessary for me to address the other basis put for an order to the same effect, that of irregularity. However, in view of the argument addressed to me on it, and its bearing on the orders sought by the receiver, I will consider the application on this basis.

102 I consider I have jurisdiction to make an order for such discharge in such a circumstance under CJE Act s 105. The contrary was not pressed on me. CJE Act s 105 says this:

105. Irregular enforcement, courts' powers as to

If the court that made an order under Part 4 or 5 or section 101 is satisfied that an irregularity has occurred in connection with the making or carrying out of the order, the court may make any order needed to correct the irregularity including an order -

(a) that sets aside the order or an act done under the order;

(b) that requires the restitution of property or the payment of money, compensation or damages.

103 However, it is not evident to me that irregularities of the kind PSA and Mr Campbell-Smith relied on would warrant setting aside the receivership orders, as opposed to varying them to replace Mr Lean with another receiver. In view of my conclusions in respect of those irregularities, I do not need to further explore this matter.

104 Counsel for PSA and Mr Campbell-Smith confirmed that it was not contended in the application before me that the receiver acted negligently or in breach of any other duty. I accept that matters going to negligence and other breaches of duty have been raised in CIV 1727 of 2009, and counsel accepted that it was not appropriate, even if it were possible, for me to make findings in those respects. Thus, the present proceedings are not ones under Civil Judgment Enforcement Regulations 2005 (WA) reg 59 for the discharge of the receiver for his failure to perform any duty (see reg 59(2)(d)).

105 However, as will be seen, counsel for PSA and Mr Campbell-Smith did contend that it was an irregularity for the receiver to continue acting when he had been asked to consent to his discharge by PSA and Mr Campbell-Smith, who had made serious allegations of matters of that kind in CIV 1727 of 2009.

106 I also note that counsel for PSA and Mr Campbell-Smith indicated they did not wish the receiver's discharge on any basis to work a release from claims against him in CIV 1727 of 2009. However, I consider no special order is required in that regard. See Harrison v Boydell [1833] EngR 698; (1833) 6 Sim 211; 58 ER 573, referred to in Kerr on the Law and Practice as to Receivers (16th ed) 244; and see Civil Procedure in Western Australia [51.6.4] (as at 28 October 2010).

107 I understood from the hearing on 3 September 2009 that there was to be a hearing on 10 September 2010 on the motion of the judge managing CIV 1727 of 2009, Kenneth Martin J, to determine whether or not proceedings on the statement of claim should be permanently stayed. I understand that that hearing took place, and his Honour has reserved his decision. Assuming that any such stay order were made, and had the effect of also terminating the claims against the receiver in those proceedings, I would confirm that nothing in the present judgment reaches any claimed liability of the receiver relied upon in those proceedings. I would further confirm that I am not called upon to determine whether or not the bases of that claimed liability have been made out for any purpose, including for the purpose of disentitling the receiver to his costs of acting in the ways described by those bases. I will return to this matter below.

108 The irregularities on which PSA and Mr Campbell-Smith rely are three. One is the receiver obtaining legal advice from time to time, including to write letters on his behalf without prior authorisation from the court. Another irregularity is his involvement in CIV 1727 of 2009, obtaining legal advice in that respect before making a claim on his insurer. I should add that in submissions to me nothing was made of the matter of making a claim on the receiver's insurer, and I was unable to see what significance the reference to it had and I set it aside. The third irregularity is his continuing in the role of receiver after being asked to cease acting in that role by PSA and Mr Campbell-Smith following their making serious allegations concerning his conduct. I will deal with each irregularity separately, before dealing with them together. The submission of counsel for PSA and Mr Campbell-Smith was that, while none of the irregularities individually might be sufficient to warrant an order for the receiver's discharge, in combination they were sufficient for that purpose.

109 It did not appear to be in contest that the receiver obtained legal advice resulting in his solicitor writing letters on his behalf on a number of occasions. These were in or about December 2008 in relation to obtaining documents for the purpose of valuation of the share, prior to his efforts to sell it, as well as on other occasions, where the receiver sought legal advice with respect to his costs, the scope of his investigations and the meaning of 'judgment debt' in the receivership orders, order 2, and with respect to his participation as a co-plaintiff in CIV 1727 of 2009. In his argument, counsel for PSA and Mr Campbell-Smith drew my attention to other occasions, being the obtaining of advice in February 2009 concerning the DOCA and in March 2009 after the sale of the share. However, my attention was not drawn to any evidence as to the advice he obtained on the former occasion; at the same time I would infer such advice was obtained, from the letter dated 11 May 2009 from the solicitors for the receiver to the solicitors for PSA and Mr Campbell-Smith in evidence before me. I was invited to infer from the obtaining of all of this advice that the receiver engaged in the practice of consulting lawyers whenever requests were made of the receiver by CAT; however, I consider the evidence insufficient in that regard.

110 It is also not in contest that the receiver had not been given prior authority from the Court to seek any of the legal advice referred to.

111 The law applicable to a receiver's resort to legal assistance is sufficiently stated for my purposes in Andrew v Vuleta (Unreported, WASC, 17 June 1987), 11 (Seaman M) as follows:

A receiver should normally make any application to the Court through the solicitors for the party having the carriage of the order, and if necessary he should apply in person for an order giving him leave to appoint his own solicitor: Kerr on Receivers, 16th edn, pp 168, 171. That course has not been followed in this case. Although the matter of representation has been dealt with irregularly, I am satisfied that the receiver required separate representation in the circumstances of this case.

112 I should add that for the receiver it was contended order 4(a) of the receivership orders included taking legal advice as appropriate. Order 4(a) gave the receiver the following power:

[T]he power to do all things necessary or convenient to be done or in connection with, or as incidental to, the identification, preservation and securing of all of the property ... for the benefit of the judgment creditor.

113 However, I do not consider that power sufficient to dispense the receiver from the requirement that would 'normally' apply to secure prior authority from the Court to seek separate legal advice.

114 At the same time it is evident from Andrew that it is not every failure to obtain prior authority that would represent an irregularity from which serious consequences would flow. This is made clear, in respect of advice on matters not involving an application to the court, in the passage in Kerr on the Law and Practice as to Receivers (16th ed) pages 170 - 171, to which it appears Seaman M was referring in Andrew (footnotes omitted):

It is not only in the case of a partnership, that it may become necessary for the receiver to be advised by a separate solicitor in order that he may hold an even hand between the various parties interested. But the mere fact that he consults a solicitor who is also a party, provided the advice is proper, does not necessarily invalidate a transaction with regard to which the advice is given, as against other parties. If the receiver desires to employ a separate solicitor, except in the matter of vouching his own accounts, he should obtain the leave of the court, on his own application if necessary.

115 In this case, while it may have been irregular for the receiver not to have applied in person to the court for leave to employ a solicitor separate from the solicitor representing the party (CAT) which procured his appointment, it seems to me that such irregularity is not one which of itself would warrant an order effecting his discharge. It is not in dispute that concerns had been expressed by the solicitors for PSA and Mr Campbell-Smith in December 2008 that the receiver should act 'independently', and in particular he was not entitled to act as agent for, or, at the behest of the Plaintiff [CAT]. In those circumstances it seems to me that had the receiver applied to the court then, the court would have granted him authority to employ his own solicitor.

116 In those circumstances, it seems to me that any irregularity in not obtaining prior court authorisation for the employment of a solicitor would not of itself warrant the discharge of the receiver.

117 The contention that this was an irregularity rested on the receiver having been involved in those proceedings as a co-plaintiff and having subsequently sought legal advice in that regard. It was common ground that the receiver was initially involved as a co-plaintiff in those proceedings having agreed to be so involved subject to obtaining the advice of solicitors. However, the receiver is no longer a co-plaintiff.

118 In my view the matter of the receiver's obtaining that advice - which was that his involvement as co-plaintiff was not appropriate - is sufficiently addressed in the previous section of these reasons.

119 As to the matter of the receiver having agreed to be joined at all, I note that it was not in contest that the receiver, as registered holder of the share in Banning Holdings, was a necessary party to the proceedings in CIV 1727 of 2009 as originally instituted. That was because orders were sought on the basis of Corporations Act s 232, the 'oppression remedy', under which the receiver, but not the Friggers, had standing: see s 234. While a receiver cannot as receiver bring action in his own name, a receiver who as a result of the receivership obtains possession of property is entitled to maintain an action in respect of that property: see Wilton v Commonwealth Trading Bank of Australia [1974] 2 NSWLR 96, 98 (Hutley JA; Street CJ & Glass JA agreeing). I accept arguendo that this would not dispense with the normal requirement to seek the prior authority of the court before so proceeding. However, in view of the necessity referred to, it seems to me the court would have granted such authorisation. In any event, it appears that not long afterwards the oppression claim was dropped, and the receiver, whether then or earlier, ceased to be a co-plaintiff.

120 In those circumstances, it seems to me that any irregularity in not obtaining prior court authorisation to participate in CIV 1727 of 2009 would not of itself warrant the discharge of the receiver.

Continuing in the role of receiver after request to cease so to act

121 It was not in contest that serious allegations of breach of duty owed to the estate of Mr Banning and Mrs Banning had been made in provisions in the defence and counterclaim in CIV 1727 of 2009. On the receiver's response in his pleadings to those provisions, I consider it is clear that issue has been joined by confession and avoidance or denial on all of those allegations.

122 It is also not in contest that, by letter dated 15 May 2009 to the solicitors for the receiver, the solicitors for PSA and Mr Campbell-Smith had sought the receiver's consent to his being discharged as receiver on the basis he 'should not be purporting to continue in his role as receiver when it is subject to a legitimate challenge which has yet to be heard'. The 'challenge' referred to appears to be that in CIV 1727 of 2009.

123 No authority was cited to me in support of the submission that a refusal to consent to discharge in such circumstances should be treated as an irregularity for the purposes of a provision like CJE Act s 105. While the position might be otherwise if the serious allegations were not contested in some fashion, it seems to me that it is not an 'irregularity' to make such a refusal where issue has been joined on those allegations. I return shortly to the question whether or not such refusal has relevance for the purposes of the receiver's claim for his costs, charges and expenses.

124 I consider no irregularity has been shown here.

Whether the circumstances in combination would warrant discharge

125 I have considered whether, in respect of the matters which I have found to have been irregularities, in combination they would warrant the receiver's discharge.

COMPUTER ACCOUNTING AND TAX PTY LTD (in liq) -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 2] [2010] WASC 318 (10 November 2010)

At a glance

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Judgment (293 paragraphs)

COMPUTER ACCOUNTING AND TAX PTY LTD (in liq) -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 2] [2010] WASC 318 (10 November 2010)

Legislation Cited (7)

Cases Cited (3)