Edwards & Ors v Attorney General & Anor

JUDGMENT OF : Spigelman CJ at 1; Mason P at 30; Young CJ in Eq at 35 DECISION : (1) The application under s 63 of the Trustee Act is dismissed; (2) Order that each of the first plaintiffs be relieved in whole from liability for any negligence, default, breach of trust or breach of duty in his capacity as a director of the second plaintiff, Amaca Pty Ltd (ABN 49 000 035 512) and/or Amaba Pty Ltd (ABN 98 000 387 342) arising out of the payment on or after 24 June 2004 up to the date of this order by those companies of their debts, as and when they fall due, including debts arising in respect of claims made for asbestos-related liabilities; (3) No order as to costs; (4) Refer the matter to the Equity Division to deal with any further aspects of the proceedings; (5) Liberty to the plaintiffs to apply on or before 6 December 2004 for similar orders to order (2) in respect of any payments made between the date of this order and 6 December 2004; (6) Like liberty to apply to a Judge to vary the date of 6 December 2004 referred to in the previous order

CATCHWORDS : CORPORATIONS- Directors- Intending to act in a way where personal liability might attach- Directors unable to obtain insurance- Whether Court can give protection for past and future "breaches" under s 1318 of the Corporations Act- Whether provisions of s 197 of that Act relevant. CORPORATIONS- Difference between (a) potential unliquidated claim and (b) prospective or contingent debt. CORPORATIONS- Construction of Corporations Act- Preferable approach. TRUSTS- Partly charitable trust- Trustees also directors of trading companies- Problems with possible solvency of companies- Whether Court should give judicial advice. Acts Interpretation Act 1901 (Cth), s 15AA Charitable Trusts Act 1993 (NSW), s 23 Conveyancing Act 1919 (NSW), s 37D Companies Act 1948 (Imp) s 448 LEGISLATION CITED : Companies Act 1985 (Imp) s 727 Companies Code 1981 (Cth) Corporations Act 2001 (Cth), ss 5C, 9, 197, 411, 419A(7), 510, 1318 Judicial Trustees Act 1896 (Imp), s 3 Limited Liability Act 1855 (Imp) Trustee Act 1925 (NSW) ss 63, 85 Agar v Hyde (2000) 201 CLR 552 Amaca Pty Ltd v State of New South Wales [2004] NSWCA 124 Bovis Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612 Boyded Industries Pty Ltd v Canuto [2004] NSWCA 256 Brown v Burdett (1882) 21 Ch D 667 Circle Petroleum (Qld) P/L v Greenslade (1998) 16 ACLC 1577 Cole v South Tweed Heads Rugby League Football Club Ltd [2004] HCA 29 Commissioner of Taxation v Simionato Holdings Pty Ltd (1997) 15 ACLC 477 Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 Customs & Excise Commissioners v Hedon Alpha Ltd [1981] QB 818 Daniels v Anderson (1995) 37 NSWLR 438 Darvall v North Sydney Brick & Tile Co Ltd (1989) 15 ACLR 230 Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 15 ACLC 833 Derek v Cheung (2001) 181 ALR 310 Downing v Commissioner of Taxation (1971) 125 CLR 185 FAI Insurances Ltd v Winnecke (1982) 151 CLR 342 Ferrier & Knight v Civil Aviation Authority (1994) 55 FCR 28 Ghantous v Hawkesbury City Council (2001) 206 CLR 512 Graham Barclay Oysters Pty Ltd v Ryan (2003) 211 CLR 540 Hallett v Dowdall (1852) 21 LJQB 98 Hanel v O'Neill (2003) 48 ACSR 378 In re European Life Assurance Society (1869) LR 9 Eq 122 Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd (1953) 89 CLR 78 Intagro v ANZ Banking Group [2004] NSWSC 618 Kenna & Brown Pty Ltd v Kenna (1999) 32 ACSR 430 Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722 Lawson v Mitchell [1975] VR 579 Leslie v Howship Holdings Pty Ltd (1997) 15 ACLC 459 Liftronic Pty Ltd v Unver (2001) 179 ALR 321 Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254 Nardell v Hunter Valey Coal Processing (2003) 178 FLR 400 National Australia Bank Ltd v Market Holdings Pty Ltd (2000) 50 NSWLR 465 New South Wales v Lepore (2003) 212 CLR 511 New South Wales v Paige (2003) Aust Torts Rep 81-676 Newcastle City Council v Shortland Management Services (2003) 57 NSWLR 173 CASES CITED : Orica Ltd v CGU Insurance Ltd [2003] NSWCA 331; 13 ANZ Insurances Cases 61-596 Oshlack v Richmond River Council (1998) 193 CLR 72 People of New York; By Bohlinger, Superintendent of Insurance v The International Workers Order Inc 106 NYS (2d) 953 (1951) Re Allsop [1914] 1 Ch 1 Re Bond Corporation Holdings Ltd (1990) 8 ACLC 153 Re Botar-Tatham Pty Ltd (2001) 52 NSWLR 680 Re Capital Annuities Ltd [1979] 1 WLR 170 Re Denley's Trust Deed [1969] 1 Ch 373 Re Home Treat Ltd [1991] BCLC 705 Re Homemaker Retail Management Ltd (2001) 187 ALR 520 Re Inkerman Grazing Pty Ltd (1972) 1 ACLR 102 Re International Harvester Australia (1983) 1 ACLC 700 Re International Vending Machines Pty Ltd [1962] NSWR 1408 Re Mirvac Ltd (1999) 32 ACSR 107 Re Perpetual Trustee Company Ltd [2003] NSWSC 1185 Re Rosenthal [1972] 1 WLR 1273 Re Schulz [1961] SASR 377 Re Simpson [1961] QWN 50 Re Tollemache [1903] 1 Ch 457 Re United Medical Protection Ltd (2002) 41 ACSR 623 Re Vouris (2003) 47 ACSR 155 Reynolds v Katomba RSL All Services Club Ltd (2001) 53 NSWLR 43 Richmond Valley Council v Standing (2002) Aust Torts Rep 81-879 Roman Catholic Archbishop of Melbourne v Lawlor (1934) 51 CLR 1 Rosenberg v Percival (2001) 205 CLR 434 State of New South Wales v Godfrey & Godfrey (2004) NSWCA 113 Steen v Law, Liquidator of International Vending Machines Pty Ltd (1963) 37 ALJR 229 Stonegate Securites Ltd v Gregory [1980] Ch 576 Sullivan v Moody (2001) 207 CLR 562 Tame v New South Wales (2002) 211 CLR 317 Taylor v Taylor (1910) 10 CLR 218 The Millstream Pty Ltd v Schultz [1980] 1 NSWLR 547 Union Trustee Co of Austalia Ltd v Church of England Property Trust (1946) 46 SR (NSW) 298 University of Wollongong v Mitchell [2003] Aust Torts Rep 81-708 Van Der Sluice v Display Craft Pty Ltd [2002] NSWCA 204 Woods v Multi Sport Holdings Pty Ltd (2002) 208 CLR 460 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 78 ALJR 628 Wyong Shire Council v Vairy [2004] NSWCA 247 Young v Murphy (1994) 13 ACSR 722 Sir Llewellyn Edwards, Peter Jollie, Ian Hutchinson and Dennis Cooper (P1) PARTIES : Medical Research and Compensation Foundation (P2) The Attorney General in and for the State of New South Wales (D1) The Australian Securities and Investment Commission (D2) FILE NUMBER(S) : CA 40631/04 J T Gleeson SC, L McCallum and J A C Potts (P) COUNSEL : S Gibb SC (D1) I M Jackman SC (D2) Clayton Utz (P) SOLICITORS : Crown Solicitor (D1) Kim Turner (D2)

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40631/04 ED 3608/04

SPIGELMAN CJ MASON P YOUNG CJ in EQ Friday 6 August, 2004 EDWARDS & ORS v ATTORNEY GENERAL & ANOR

FACTS : Two companies, Amaca and Amaba traded in such a way with respect to asbestos products that it was likely that injury would be caused to its workers and others over the next forty years or so to whom they could be liable in damages. No-one could predict the name of possible claimants or the amount of their claims. The claim would only arise when the injury was in fact suffered.

In 2001, Amaca and Amaba were subsidiaries of James Hardie Industries Ltd. Under a set of transactions set up in 2001, a company limited by guarantee, Medical Research and Compensation Foundation (MRCF) was set up. MRCF became the holding company of Amaca and Amaba. The first set of plaintiffs are the directors of MRCF, Amaca and Amaba.

MRCF was also the trustee of a trust under which Amaca and Amaba were to continue in operation, pay their debts including claims for asbestos-related injury with certain funds going to medical research.

The first set of plaintiffs became aware that there were potential claims against the subsidiaries which vastly exceeded their assets. However, the provable claims against Amaca and Amaba on a winding up were only minor.

The first set of plaintiffs were concerned that they could be personally liable if they continued their practice of paying current claims in full. They also found that they could not get insurance against the risk of personal claims being made against them.

There is currently a Special Commission of Enquiry considering the whole of the problems connected with claims against the James Hardie Group which is due to report at the end of September 2004.

The first set of plaintiffs had examined the options, and taken advice of senior and junior counsel. The view the plaintiffs had taken was that they should continue to pay all current claims until the Special Commission of Inquiry's report was released and they had had a reasonable period to study it. They also considered that, with their knowledge and experience, it was preferable that they stay in office to administer the companies and the trust.

The first set of plaintiffs sought to get relief under s 1318 of the Corporations Act excusing them from liability for any default in taking this attitude.

MRCF, as trustee of the trust, also sought judicial advice under the Trustee Act that its proposed course of action was justified.

It was inappropriate for the Court to give MRCF judicial advice. There was doubt as to the proper classification of the trust involved in the case and it was inadvisable for the Court to assume the facts to be as presented by the applicants.

Section 1318 of the Corporations Act should be given a wide interpretation and permits the Court to protect directors from claims made by third parties not just claims made against them by or on behalf of the corporation: Custom & Excise Commissioners v Hedon Alpha Ltd [1981] QB 818 not followed.

Section 1318(2) of the Corporations Act has no prospective operation.

However, the approach in Re Home Treat Ltd [1991] BCLC 705 should be adopted that, the general principle having been accepted, subsequent protection could be almost assuredly given later.

Section 197 of the Corporations Act which affects directors of trustee companies may affect the first set of plaintiffs, but that was a matter for them and not the Court. The construction of that section by the majority of the South Australian Supreme Court in Hanel v O'Neill (2003) 48 ACSR 378 was unconvincing.

People who had not yet suffered injury were not either prospective or contingent creditors of Amaca or Amaba. Thus, such people had nothing to gain in the appointment of any provisional liquidator or winding up process.

It was inappropriate to appoint a receiver to carry out the administration of the company. In any event, it may well be that the receiver also would not be able to obtain insurance.

In all the circumstances, the course which the plaintiffs sought to adopt was the only reasonable course and the Court should provide the protection asked for past acts and allow future acts up to December 2004 to be protected in a later interlocutory application in these proceedings.

(1) The application under s 63 of the Trustee Act is dismissed.

(2) Order that each of the first plaintiffs be relieved in whole from liability for any negligence, default, breach of trust or breach of duty in his capacity as a director of the second plaintiff, Amaca Pty Ltd (ABN 49 000 035 512) and/or Amaba Pty Ltd (ABN 98 000 387 342) arising out of the payment on or after 24 June 2004 up to the date of this order by those companies of their debts, as and when they fall due, including debts arising in respect of claims made for asbestos-related liabilities.

(4) Refer the matter to the Equity Division to deal with any further aspects of the proceedings.

(5) Liberty to the plaintiffs to apply on or before 6 December 2004 for similar orders to order (2) in respect of any payments made between the date of this order and 6 December 2004.

(6) Like liberty to apply to a Judge to vary the date of 6 December 2004 referred to in the previous order.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40631/04 ED 3608/04

SPIGELMAN CJ MASON P YOUNG CJ in EQ Friday 6 August, 2004 Judgment 1 SPIGELMAN CJ: In this matter I have had the advantage of reading in draft the judgment of Young CJ in Eq. I agree generally with his Honour's reasons. I make the following additional observations. 2 With respect to the application by the Medical Research and Compensation Foundation for judicial advice under s63 of the Trustee Act 1925, I would also decline to give advice but for different reasons. 3 The only matter upon which advice is sought relates to whether the Foundation is "entitled to refrain from applying for the appointment of a provisional liquidator" to the subsidiary companies. Counsel for the Foundation, Mr J Gleeson SC, could only point to one basis for any uncertainty with respect to the Foundation's position in this regard. That basis was the possibility that the Foundation may be exposed to liability in tort for failing to take steps to appoint a provisional liquidator. Mr Gleeson SC described any such proceedings as "speculative". I would describe them as far-fetched. 4 There may once have been a basis for apprehension as to just where the law of negligence was heading in Australia by reason of a process described by the late Professor P S Atiyah as "stretching the law". (P S Atiyah The Damages Lottery (1997) Hart Publishing, Oxford, Ch 2 and Ch 3). A series of decisions in the High Court and in this Court make it quite clear that this process is over. (Liftronic Pty Ltd v Unver (2001) 179 ALR 321; Derrick v Cheung (2001) 181 ALR 301; Agar v Hyde (2000) 201 CLR 552; Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254; Rosenberg v Percival (2001) 205 CLR 434; Ghantous v Hawkesbury Shire Council (2001) 206 CLR 512; Sullivan v Moody (2001) 207 CLR 562; Woods v Multi-Sport Holdings Pty Ltd (2002) 208 CLR 460; Graham Barclay Oysters Pty Ltd v Ryan (2003) 211 CLR 540; New South Wales v Lepore (2003) 212 CLR 511; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 78 ALJR 628; Cole v South Tweed Heads Rugby League Football Club Ltd (2004) 207 ALR 52; Reynolds v Katoomba RSL All Services Club Ltd (2001) 53 NSWLR 43; Van Der Sluice v Display Craft Pty Ltd [2002] NSWCA 204; Richmond Valley Council v Standing (2002) Aust Torts Rep 81-679; University of Wollongong v Mitchell [2003] Aust Torts Rep 81-708; New South Wales v Paige (2003) Aust Torts Rep 81-676; Newcastle City Council v Shortland Management Services (2003) 57 NSWLR 173; New South Wales v Godfrey & Godfrey (2004) Aust Torts Rep 81-741; Amaca Pty Ltd v New South Wales [2004] NSWCA 124; Wyong Shire Council v Vairy [2004] NSWCA 247; Boyded Industries Pty Ltd v Canuto [2004] NSWCA 256.) 5 This development has of course not all been one way. In the context of liability for exposure to asbestos, the High Court imposed liability in a manner which may not have been predictable (Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1). However, crucial to the Court's judgment in that case was the control which the Stevedoring Industry Committee had with respect to the determination of circumstances that exposed a worker to the risk of injury. (See also Amaca Pty Ltd v New South Wales at [40]-[47].) In the present case, it cannot be said that such a consideration is of any, let alone of determinative, significance. The Foundation is a shareholder and has standing to apply for a winding up under s462 of the Corporations Act 2001 (Cth) as a contributory. It is, however, only one of a list of persons to have such standing. 6 One of the factors that has proven to be important in restraining the hitherto imperial march of the tort of negligence has been the development by the High Court of a doctrine in which the importance of coherence in the law, considered as a whole, has come to receive considerable emphasis. The tort of negligence has, on a number of occasions, not been permitted to extend so as to interfere with another area of the law which has developed a distinctive approach to balancing the conflicting interests that inevitably arise in the interaction of persons in disparate spheres of discourse. Questions of coherence have arisen in a number of cases in which the exercise of a statutory duty is alleged to have been negligent. It has also arisen in the interaction between negligent words causing mental harm and actions in defamation and in the sphere of negligent conduct creating a nuisance, where the law of nuisance would not permit recovery. (See Sullivan v Moody at [53]-[55]; New South Wales v Paige at [93], [101], [132], [154]-[155] and [174]-[177]; Tame v New South Wales (2002) 211 CLR 317 at [28], [58], [123], [323]; Newcastle City Council v Shortland Management Services at [86]-[89]; New South Wales v Godfrey at [71]-[80]. 7 The Corporations Act 2001 and its predecessors contain elaborate provision for balancing the conflicting interests that arise between present and future creditors and between shareholders and creditors. 8 Issues of coherence between the law of negligence and the regulatory scheme of the Corporations Act 2001 can arise in a variety of contexts. Particularly relevant for present purposes is the introduction by the Corporate Law Reform Act 1992 (Cth) of Pt 5.3A headed "Administration of a company's affairs with a view to executing a deed of company arrangement". This scheme was introduced on the recommendation of the Australian Law Reform Commission: General Insolvency Inquiry vol 1, Australian Law Reform Commission Report No 45 (Canberra, AGPS, 1988), known as the "Harmer Report". The purpose of this scheme was to encourage attempts to preserve a company and avoid the economic and social costs of a winding up. The Australian Law Reform Commission considered that the earlier system known as "official management" was not adequate to avoid companies being placed in liquidation unnecessarily. 9 It appears to me to be quite inconsistent with the objectives of this legislative scheme to impose a duty on any of the persons who are given standing by the Corporations Act to make applications for the winding up of a company to exercise that statutory right on the basis of a duty said to exist to future creditors of the company. Indeed, by s440A of the Corporations Act, the Court is obliged to adjourn an application for a winding up order, and is not to appoint a provisional liquidator, in the case of a company under administration, if it is satisfied that it is in the interests of the creditors to remain under administration. 10 I realise that, in a sense, my analysis of the situation is such as to constitute, in substance, the giving of advice of the character sought by the Applicant. However, I believe the Court should leave the matter in this way. 11 An issue has arisen in the course of the submissions made by the Australian Securities & Investments Commission as to whether or not the applicant for advice is in truth a charitable trust, as stated in the Trust Deed under which it is constituted. ASIC has intervened at the behest of the Court, in order to ensure that there is some proper contradictor on the application before the Court. It does not have any interest in asserting the proposition which it raised for the attention of the Court. The evidence before the Court has been gathered on the part of the Applicant only. It is by no means clear that all relevant evidence is before the Court. In these circumstances, it is undesirable for the Court to proceed on a factual assumption and to give advice, in circumstances where such advice is unnecessary. 12 With respect to the Director's application under s1318(2) of the Corporations Act 2001 (Cth), the primary issue that was raised concerns the possibility that present creditors will receive a benefit at the expense of future creditors. The principle of equality between creditors has been accepted as a long-standing principle in corporations law. (See, for example, the observations in Ferrier & Knight v Civil Aviation Authority (1994) 55 FCR 28 at 42-43, observations not affected by the judgment of the High Court on appeal.) 13 It is a material consideration when exercising the power to excuse under s1318 that the consequences of the conduct may be to prefer one group of creditors to another group. Nevertheless, in the present case the countervailing considerations substantially outweigh the application of this principle. 14 First, it can be seen that the extent to which the group identified as "future creditors" are disadvantaged will be quite small on a per capita basis. On the evidence before the Court the expenditure of the subsidiaries is running at about $5 million a month. The amount that will be paid out pursuant to the s1318 order sought would be of the order of $30 million. This is to be contrasted with the estimates of the total present and future liabilities of the Foundation which range from about $1 billion to $1.5 billion, of which the overwhelming proportion concerns future liabilities. 15 Secondly, the body of future creditors may not receive any advantage from the only feasible alternative to a continuation of the status quo. The majority of persons identified as "future creditors" do not, on the submissions made to this Court, have a present right of action although, on an actuarial basis, it is certain that such causes of action will emerge in the future. 16 Mr Gleeson SC put before the Court the various submissions that had been made to the Jackson Inquiry and adopted their analysis that the appointment of a provisional liquidator would be such as to prevent the incurring of future liabilities, so that those presently entitled would be protected. Mr I Jackman SC, who appeared for ASIC, accepted this conclusion. On this basis the process of liquidation would ensure the very inequality which the written submissions of ASIC said the Court should take into account, i.e. present creditors would automatically be preferred to future creditors. 17 Mr Jackman SC suggested that perhaps a receiver could be appointed, a course which would not necessarily have that consequence. In addition to the reasons for rejecting the alternative identified by Young CJ in Equity, it is impossible to conceive a receiver accepting appointment in circumstances where the directors have been refused professional indemnity insurance. A receiver, it can be safely assumed, would also be unable to obtain such insurance. 18 The only practical alternative to the continuation of the control of the present directors is the commencement of a winding up and the appointment of a provisional liquidator. 19 Thirdly, there is a question of the balance of convenience between persons who have become or will, over the next few months become, entitled to receive payment and those, if any, who will be disadvantaged to some degree by what may appear to be, with the benefit of hindsight, some kind of preference. With respect to most asbestos induced illnesses the time between diagnosis and death is unfortunately quite short. The delays associated with the appointment of a provisional liquidator will inevitably be such that a number of persons who would otherwise receive awards, and therefore die with the knowledge that their families would be provided for, would die in a state of uncertainty as to that position. 20 Fourthly, the costs and delays associated with a provisional liquidation should be avoided. The directors are pursuing the issues that have arisen in the context of the Jackson Inquiry, and the possibility of action to recoup additional funds, in a manner which the evidence before the Court does not suggest is anything other than diligent. The material before the Court does not enable a comparison between the likely costs of a liquidation and the costs associated with the administration of the company. However, the experience of the Court strongly suggests that a liquidation is likely to be substantially more expensive. At the least, there would be substantial costs involved in a provisional liquidator becoming familiar with, and instructing such advisers as he or she may be minded to instruct, about the full range of issues which are presently under consideration in the Foundation. 21 Finally, the urgency associated with the current Inquiry process, and its consequences, strongly indicate that it is desirable that the status quo be maintained for the time being in the absence of any evidence or suggestion that the present directors are not pursuing the issues with diligence. 22 For the above reasons the Court should exercise the power to excuse under s1318(2). The issue is whether the power extends to future acts. Young CJ in Eq has concluded that it does not. His Honour proposes orders limited to the payment of debts until the date of the order. However, if the circumstances remain the same, the directors could proceed on the basis that retrospective relief would almost certainly be available in the future. 23 I have come to the same conclusion as Young CJ in Eq on the construction point. Subsection 1318(2) looks to the future in the sense that proceedings are only 'apprehended'. The Court is required to put itself in same position as it would have been if civil proceedings for negligence default, breach of trust or breach of duty had been brought. 24 Before making any order the Court is required to have regard to "all the circumstances of the case" and is specifically required to determine that the applicant for relief has acted honestly. This statutory requirement strongly indicates that the power is concerned with past conduct only. If this were not the case then the Court would need to speculate about future circumstances and the Applicant's future state of mind. Although it may generally be assumed that the circumstances or the state of mind will be the same in the future, it will often be difficult to frame an order excusing the liability contingent on circumstances not changing. Indeed it will not be possible to identify all relevant circumstances in advance. 25 As Young CJ in Eq notes, the terminology of s1318 is derived from s3 of the Judicial Trustees Act 1896 (Imp) now reflected in s85 of the New South Wales Trustee Act 1925. A trustee applicant for relief must, however, establish that he or she acted "reasonably" as well as "honestly." (The reference to "reasonably" was deleted by the 1981 Companies Code.) 26 Furthermore, a trustee must establish more than that he or she "ought fairly to be excused for the breach of trust". Section 85(2) of the Trustee Act 1925 also requires the trustee to establish that he or she "ought fairly to be excused… for omitting to obtain the direction of the Court …". This express reference to the possibility of obtaining judicial advice in advance encompasses an application under s63 of that Act. This indicates that, in the case of a trustee, the power to excuse cannot be used in the case of a prospective breach, as suggested in Re Tollemache [1903] Ch 457. 27 As the trustee provision was the model used by the drafter of corporations legislation, first in England and then in Australia, I think it likely that a similar effect was intended, i.e that the power to excuse does not extend to prospective breaches. If Parliament had intended that officers of a corporation and others involved in its affairs should be able to apply to a court for advice, it had before it a model for such a power in the very statute from which the predecessors of s1318 was drawn. It did not do so. 28 I am reinforced in this conclusion by the express provisions found elsewhere in the Corporations Act for some, but not all, of those who are entitled to apply for an order under s1318 by subss(4) and (5), to apply for directions from the Court with respect to future conduct. (See s424 for controllers, which by s9 includes receivers; s467D for administrators and s479(3) and s511 for liquidators, including provisional liquidators by s472.) 29 I agree with the orders proposed by Young CJ in Eq. 30 MASON P: I have had the benefit of reading in draft the judgment of Young CJ in Eq and the additional observations of the Chief Justice. 31 I agree with the orders proposed by Young CJ in Eq and generally with his reasons. 32 In particular, I agree that there are significant points of distinction between this case and Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd (1953) 89 CLR 78. This said, the presently constituted proceedings are not a proper vehicle for resolving the question whether the two subsidiaries of the Medical Research and Compensation Foundation are presently technically insolvent. 33 If however, that were the case or if it were otherwise appropriate for the companies to be wound up on the just and equitable ground, this could have a disastrous impact in relation to asbestos victims yet to be inflicted or yet to disclose any manifestation of disease. Young CJ in Eq demonstrates why this group of claimants would be unable to prove in the liquidations of the subsidiaries. It would follow that those liquidations would produce very substantial surpluses of funds. Those assets would pass to the Foundation in circumstances that would not involve any breach on the Foundation's part of clause 4 of the Deed of Settlement of February 2001. On my reading of that Deed, the funds would then be wholly impressed with the charitable purpose stipulated in clause 3.1. That purpose has nothing to do with meeting the legal claims of tort victims. 34 This reinforces the conclusions of the Chief Justice at pars 13-22, being reasons with which I also agree. 35 YOUNG CJ in EQ: The plaintiffs seek two orders: (a) judicial advice under s 63 of the Trustee Act 1925; and (b) relief under s 1318(2) of the Corporations Act 2001. 36 I need to spend a little time tracing the background to the present problem. 37 The second plaintiff, Medical Research and Compensation Foundation (MRCF) is a company limited by guarantee. By deed of February 2001, James Hardie Industries Ltd (JHIL) established what that deed called "a charitable private fund for the purposes of medical research into asbestos related diseases". MRCF is the trustee of that fund. 38 The first plaintiffs are the current directors of MRCF. All except Mr Hutchinson were directors from its incorporation. The principal assets of MRCF are the whole of the shares in what the deed called the "Foundation Company", there are two corporations within this category, both formerly subsidiaries of JHIL. These are Amaca Pty Ltd, formerly James Hardie & Coy Pty Ltd (Amaca) and Amaba Pty Ltd, formerly Jsekarb Pty Ltd (Amaba). 39 Essentially, on the coming into operation of the deed, Amaca and Amaba ceased to be subsidiaries of JHIL and became subsidiaries of MRCF. The first set of plaintiffs are also the directors of Amaca and Amaba. 40 The establishment of MRCF and the fund it administers and the change of beneficial ownership of the shares in Amaca and Amaba were a result of a series of transactions that were entered into in February 2001. It is not necessary to go fully into the details of those transactions. It suffices to say that there was a deed of covenant and indemnity the same month between JHIL, Amaba and Amaca, that in consideration of JHIL paying seven figure sums of money to Amaba and Amaca on each 15 February between 2001 and 2042, Amaba and Amaca would not sue JHIL. The name of JHIL was changed at the same time to ABN 60 Pty Ltd. 41 A scheme of arrangement under s 411 of the Corporations Act was then put to the Court and approved by the Court whereby the control of the remaining companies in the James Hardie Group was effectively moved to James Hardie Industries NV of Amsterdam, The Netherlands, which became the holding company of ABN 60, formerly JHIL. There was some mention before us that this scheme of arrangement was predicated on there being available partly paid shares in ABN 60 which could be called up should there be a shortfall, but which partly paid shares or the liability to make them fully paid shares was later cancelled despite what had been told to the Court when the scheme of arrangement was approved. It is sufficient to record this allegation; it is unnecessary for me to delve into it. 42 Essentially then, on the coming into operation of the deed, Amaca and Amaba ceased to be subsidiaries of JHIL and became subsidiaries of MRCF. Amaca and Amaba are subject to numerous claims for injury and death caused by asbestos and it would appear they are regularly paying out substantial monies to meet judgments and settlements of claims against them. 43 Actuarial evidence suggests that whilst there are sufficient funds to pay all judgments that are obtained in the next year or so, the assets of Amaca and Amaba will be exhausted well before many of the asbestos related claims are formulated or adjudicated upon. 44 The essential problem is that if MRCF, Amaca and Amaba continue to authorise or pay current claims, this will make the pool of funds available to meet future claims rather diminished. However, if claims including judgments are not paid, then a person who has obtained a judgment could force Amaca and Amaba into liquidation. Alternatively, this can be anticipated and MRCF or Amaba and Amaca can move themselves into liquidation and appoint a provisional liquidator. 45 Superadded to all this is the fact that Her Excellency the Governor, on 27 February 2004, issued Letters Patent to David Francis Jackson QC under the authority of the Special Commissions of Inquiry Act 1983, to enquire into various matters concerning MRCF and the James Hardie Group including: "4. The adequacy of current arrangements available to MRCF under the Corporations Act to assist MRCF to manage its liabilities, and whether reform is desirable to those arrangements to assist MRCF to manage its obligations to current and future claimants."

Mr Jackson has entered into his inquiry and taken evidence and heard submissions and he is to report back to the Governor by 30 September 2004. 46 The two sets of plaintiffs asked for advice from counsel as to what they should do about paying claims up until a reasonable time had elapsed after Mr Jackson's report became public and the interested parties had a reasonable time to consider its ramifications. This period has been thought to end somewhere in early December 2004. 47 Experienced counsel advised the plaintiffs that the better course was for them to continue to pay claims during this period. However, to do so may make the plaintiffs liable to some action or other. The plaintiffs are not, of course, completely protected, even if they rely on the advice of competent advisers including counsel. Accordingly, the plaintiffs, on 24 June 2004, issued an originating process under the rules made pursuant to the Corporations Act seeking orders under s 1318(2) of the Corporations Act and advice of the Court under s 63 of the Trustee Act 1925. 48 As finally refined, the order under the Trustee Act was sought as follows: "That the second plaintiff as trustee of the Medical Research & Compensation Foundation, a charitable trust, is justified in proceeding on the basis that it holds its shares in its subsidiaries Amaca Pty Ltd and Amaba Pty Ltd on trust pursuant to the deed dated 15 February 2001, and as shareholder should refrain from applying for the appointment of a provisional liquidator to its said subsidiaries until the findings of the Special Commission of Inquiry into the Medical Research & Compensation Foundation constituted pursuant to the Special Commissions of Inquiry Act 1983 (NSW), by Letters Patent issued on 27 February 2004, are made public, and the directors have had a reasonable time to study and digest those findings. 49 The order sought under the Corporations Act is: "An order that each of the first plaintiffs be relieved, in whole, from liability for any negligence, default, breach of trust, or breach of duty in his capacity as a director of the second plaintiff, Amaca Pty Limited … and/or Amaba Pty Limited … arising out of the payment by those companies of their debts on and after 24 June 2004 and before 11.59 pm on blank December 2004 as and when they fall due including debts arising in respect of claims made for asbestos-related liabilities."

The Australian Securities and Investments Commission suggested that the word "solely" should be inserted before the word "arising", a suggestion which the plaintiffs indicated they considered was unnecessary. 50 The Attorney General, as the protector of charities, was sued as defendant. The Attorney General appeared by the Solicitor General and Mr S Gibb SC and submitted that the Attorney agreed that the case involved a charitable trust, but otherwise took the view that the Attorney was here to assist the Court generally and not to embrace any particular point of view. 51 After Austin J had made preliminary directions, the case came into my list as a single Judge sitting in Equity on Wednesday 21 July. On that occasion I read the evidence and heard brief submissions from Mr Justin Gleeson SC, Miss Lucy McCallum and Mr JAC Potts for the plaintiffs, Mr M G Sexton SC SG and Mr S Gibb SC for the Attorney General, and Mr I M Jackman SC for ASIC. ASIC, through Mr Jackman, applied to be made a party. This was opposed by Mr Gleeson, but it seemed to me that even though there was something bizarre about a Federal instrumentality becoming the defendant in this matter, especially as the Attorney was already a defendant, the only way in which I was going to get a proper contradictor was by granting ASIC's application. I did so. 52 It was clear from my discussion with the parties that there were good reasons for referring this matter to the Court of Appeal. I made that order and the proceedings were heard by the Court of Appeal as presently constituted on Friday 23 July. Appearances were as before me on the Wednesday, save that Mr Sexton was unable to be present. 53 The Court is indebted to counsel for their learned submissions, both the written submissions that are filed in the orange appeal book, and their oral presentations. The matter raises significant issues. However, it is not necessary in my view to resolve all of these on this application, and indeed, because of other factors, not the least of which is that there may well be other interested parties who would wish to be heard, it is desirable not to do so. 54 Logically, I believe it is appropriate to deal with the matters raised under the following headings:

4. Is this properly considered to be an application made by trustees?

3. Does s 1318 only operate in respect of claims by or on behalf of the company?

D. THE ORDERS THAT SHOULD BE MADE 55 A1. It should be said at the outset that any "facts" set out in these reasons are not findings of fact in the true sense but the information which has been provided to the Court to enable it to deal with these applications which information appears to be correct but which has not been tested. 56 On the information available to the Court, the probabilities are that at least until 2040 claims will be made by persons suffering from asbestos-related illnesses or their relatives. In many cases the people concerned do not know at this stage that they have within them the seeds of destruction caused by asbestos and this will only become manifested sometime between now and 2040 or thereabouts. It is hard to see how future claimants can be protected by any scheme. The basal problem is that the class of so-called future claimants is largely comprised of people who may not yet have suffered damage as a result of exposure to asbestos products of Amaca and Amaba. 57 The legal position was well defined by counsel for the plaintiffs in their advice. Although this is a confidential document, the passage from which I have really borrowed below is acknowledged by all counsel to represent the law. 58 On current authority, persons injured through exposure to asbestos manufactured or supplied by Amaca or Amaba do not have a completed cause of action until damage is suffered and that usually involves manifestation of the disease: Orica Ltd v CGU Insurance Ltd [2003] NSWCA 331; 13 ANZ Insurances Cases 61-596. Indeed, some of the future claimants could be in the more extreme category where the people concerned have not yet been exposed to the asbestos such as home renovators doing future renovations or may even be people not yet born who might be involved in demolishing an asbestos ridden building somewhere in 2030. No-one can currently know the identity of the future claimant. 59 This type of liability must be distinguished from the case of a contingent creditor. A contingent creditor is a person to whom a corporation owes an existing obligation out of which a liability on its part to pay a sum of money will arise in a future event, whether that event be one which must happen or only an event which may happen: Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455; Re International Harvester Australia (1983) 1 ACLC 700 at 703. Again, the liabilities in this case must be distinguished from the case of a prospective creditor, a prospective creditor being one who is owed a sum of money not immediately payable but which will certainly become due in the future either on some date which has already been determined, or on some date determinable by reference to future events: Stonegate Securities Ltd v Gregory [1980] Ch 576; Commissioner of Taxation v Simionato Holdings Pty Ltd (1997) 15 ACLC 477. 60 The distinction is vital because whilst contingent or prospective creditors are taken into account in assessing solvency, possible future claims that might crystallise are not. The great probabilities are that if Amaca and Amaba were to go into provisional liquidation now, then the only claims that would be paid by the liquidator would be those which have crystallised and, after paying the doubtless heavy expenses of liquidation, there would be a distribution of surplus funds to the shareholder MRCF which would be used for the purpose of the alleged charitable fund. The future creditors would get nothing and this may very well be the case even if the claim matured the day after the liquidation commenced. 61 Accordingly, the choice between continuing to pay claims at present and going into liquidation will not advantage the future claimants one whit. Moreover, going into liquidation would preclude any possibility of further funds being injected into the pool to meet future claims. The material before the Court shows that there is at the very least a realistic possibility that there might be a further injection of funds into the pool. 62 It is very difficult to see any other course that could be taken other than liquidation or continuing to go on as usual. Of course, some completely unanticipated event might occur such as the large injection of funds or special legislation, but at least, short of this, there is no way in which any alternative method can protect the future claimants. 63 I must mention one particular difficulty raised by Mr Gleeson with respect to a winding up including the appointment of a provisional liquidator. The deeds of February 2001 contain prohibitions against the directors seeking to wind up the companies Amaba and Amaca. These are part of the trusts to preserve the assets to which I will refer later. However, they do not pose any insuperable barrier. The directors of a company in NSW are able to commence proceedings to wind up the company: Re Inkerman Grazing Pty Ltd (1972) 1 ACLR 102. They are also the shareholders who as contributories have similar rights and if all else fails, they can draw the attention of the Court to the plight of the company and the Court can, in exceptional cases, wind companies up sua sponte: Re Botar-Tatham Pty Ltd (2001) 52 NSWLR 680. 64 This is probably the key argument for the plaintiffs as to why the order under s 1318(2) of the Corporations Act should be made, a matter to which I will return. Failing to find any better answer, at about mid-way through the argument Mr Jackman SC said that the Court should appoint a receiver rather than a provisional liquidator. This would relieve the present directors of liability and throw it on to the receiver. When challenged that that was just allowing the same problem to break out somewhere else in the next week, Mr Jackman replied that the receiver could obtain directions from the Court and protect himself from liability and he cited Re United Medical Protection Ltd (2002) 41 ACSR 623 at 624. 65 A2. Prima facie, the Corporations Act does not seem to provide any solution for the present case. For the reasons given liquidation is not the answer. Receivership is only a temporary solution. 66 Further, there can be no scheme of arrangement under s 411 of the Corporations Act because any arrangement would not be between the members or the creditors as defined. It would seem also that there can be no scheme of arrangement under s 510 of the Corporations Act under which the companies could set aside a fund for future creditors as, unless all creditors consented, there could be no arrangement at all. 67 This must be so even though the authorities show that there is a lesser test as to who is a creditor for a scheme of arrangement, namely, a person with an arguable case that it is an actual or contingent creditor; see eg National Australia Bank Ltd v Market Holdings Pty Ltd (2000) 50 NSWLR 465, 469 and Bovis Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612, 685. The reason for this is that there is still the requirement to show an actual or contingent debt merely that it is arguable rather than established; see also Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 15 ACLC 833. 68 Likewise, there would not seem to be any room for the Court to advise a liquidator that he would be justified in participating in an unorthodox distribution as has occasionally happened in the liquidation of insurance companies or interlocking companies where there is difficulty in precise identification of assets and creditors because again the Court could only advise the liquidation to take a course which would be for the benefit of creditors strictly so called. Accordingly, it would not seem that the Corporations Act can in any way benefit the future creditors. I use the word "seem" advisedly because the ingenuity of man and woman in corporate matters never ceases to amaze me. 69 A3. Legislation provides that in interpreting the Corporations Act, a court must tend towards a construction which promotes the purpose or object underlying the Act. The present legislation is s 5C of the Corporations Act which applies s 15AA of the Acts Interpretation Act 1901 as in force on 1 November 2000. This replaced the pre-2001 section 109H of the Corporations Act itself. 70 Section 109H and its predecessors were given full weight in the interpretation of the Corporations Act; see eg Darvall v North Sydney Brick & Tile Co Ltd (1989) 15 ACLR 230, 257. 71 The problem raised by this provision is to discern what is the purpose or underlying object of the Corporations Act. 72 Indeed, with that Act, it may be said that there is an underlying object of the Act as a whole and there may be a separate object of discrete parts of it, subject of course to the purpose of the whole. 73 Thus, the object of the winding up part of the Act may be to enshrine as much as possible the pari passu principle, a point on which Mr Jackman put much emphasis. However, that object would still need to be examined to see whether in the overall scheme of things it was wholly conducive to the overall object of the legislation. 74 Up until 1855 in England, when the Limited Liability Act was enacted, British business was at a distinct disadvantage because people were not prepared to take the risk of being liable for unlimited contributions where an entrepreneurial scheme failed. There were some avenues open to secure limited liability such as registering the company in France and including a complex limited liability clause to the deed of settlement, see Hallett v Dowdall (1852) 21 LJQB 98, see in general Farrar's Company Law 4th ed (Butterworths, London, 1998) p 20. 75 The Limited Liability Act which was taken up in the significant English Companies Acts of 1856 and 1862, the forerunner of the modern law, set up a system whereby people could simply by registering with the appropriate official, create a new corporate entity with limited liability, trade and take risks in advancing the economy of the nation without the consequence of losing everything if the venture failed. 76 The purpose of the Corporations Act and its predecessor was for the permitting the economy to be advantaged by such entrepreneurial ventures with limited liability and to regulate the rights of members inter se the rights between members and creditors of corporations. 77 As time went on, it was realised that fraudsters could manipulate the system so as to perpetrate fraud and exceptions were placed against limited liability such as liability for trading while insolvent. Nonetheless the essential purpose of the Act remains and whenever one is construing any particular provision one must be careful not to take one's gaze off the essential purpose and pay overmuch attention to technical details of wording of individual provisions. One must not so concentrate on the wording of single sections of the Corporations Act that one misses where they fit into the jigsaw showing the whole picture. To put the matter another way, just like in life, those who concentrate on a single issue are likely to miss the riches of the big picture, so those who concentrate too narrowly on a particular provision are likely to run foul of s 15AA of the Acts Interpretation Act as applied to the Corporations Act. 78 A4. Solvency of the Fund. As has been seen from what is written earlier, were the usual rules governing the administration of companies observed, both Amaca and Amaba would be solvent. This is because, as I have said, one takes no account of future uncrystallised possible claims as at the date of commencement of the winding up. 79 Mr Jackman for ASIC argued that by analogy with the decision of the High Court in the life insurance case, Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd (1953) 89 CLR 78, 111, the Court applies a different rule to companies which have liabilities of the instant sort. 80 The Associated Dominions case was an application by the Insurance Commissioner that a life insurance company be wound up under the Life Insurance Act 1945 as amended (Cth). At p 90, Fullagar J who had the matter as a single Justice of the High Court of Australia said that he considered that the principles he needed to apply were those inherent in the words "just and equitable" in the Companies Acts (vide p 90). At pp 110-111 his Honour concluded that the company ought to be wound up. He said: "The central and outstanding fact in the whole case appears to me to be that the company is insolvent. I regard this as quite clearly established. The company is insolvent not merely in a technical sense but in a practical and commercial sense, not merely in slight degree but in a very serious and substantial degree. This does not mean that it is unable at the moment to pay its debts as they fall due. It could, so far as the evidence goes, discharge its current liabilities tomorrow, and it will for some time to come be able to pay its policy holders in full as and when their claims mature. But it is highly probable - practically certain, I think, as matters stand - that it will in the not very distant future be unable to discharge in full claims under maturing policies. When that event will occur cannot in the nature of things, be precisely stated. I did not understand it to be suggested that it was likely to occur before 1960. "That being the position of the company, there is, in my opinion, a high degree of probability that, if it is not placed in liquidation, policy holders whose claims mature in the near future will be paid in full at the expense of those whose claims mature in the more distant future. … But such a state of affairs ought not, in my opinion, to be allowed to continue. In a winding up all policy holders will stand on an equal footing, whether their claims are due to mature soon or late. It seems to me to be prima facie just and equitable - just and equitable from the point of view of the policy holders generally - that a company which finds itself in the position of this company should be wound up." 81 Mr Jackman uses those words to base two submissions. First, that by analogy in a practical and commercial sense, the Amaca and Amaba companies are in a like plight to the life insurance company in the Associated Dominions case and are practically and commercially insolvent. Secondly, that the basal principle that in a winding up all claims should be paid pari passu is a very strong factor so that if a court can see that if a company is allowed to continue in existence claims will not be paid pari passu, then it is just and equitable to wind it up and it should be wound up. 82 Mr Jackman says at para 8 of his written submissions: "The fundamental objective of the law pertaining to winding up is to ensure, to the extent practicable, that there is distributive justice in the treatment of creditors, each of whom has a commutatively just claim against a limited pool of assets. As in Associated Dominions , the Court may be unable to do anything about the payment in full to creditors in the past. But the Court should not lend its aid to a stated intention by the directors of continuing to do so in the future, in circumstances where that would in all likelihood be at the expense of the actuarially known future claimants." 83 There have been few reported cases which have considered the present type of problem. There is, of course, in New York the notorious People of New York; By Bohlinger, Superintendent of Insurance v The International Workers Order Inc 106 NYS (2d) 953 (1951), where an insurance company that was suspected of being communist controlled was wound up apparently on the just and equitable ground, but this offers no guide in the present case. 84 Perhaps the case closest to the present one, or at least closest to Associated Dominions, is In re European Life Assurance Society (1869) LR 9 Eq 122. That was an application to wind up a life insurance company on the just and equitable ground. The company was paying its debts but it would appear that it was only able to pay policy holders who died out of fresh premiums. James VC said at 128: "… The court has nothing whatever to do with any question of future liabilities, that it has nothing whatever to do with the question of the probability whether any business which the company may carry on tomorrow or hereafter will be profitable or unprofitable. That is a matter for those who may choose to be the customers of the company and for the shareholders to consider. I have to look at the case simply with reference to the solvency or insolvency of the company … exactly as it stood on … 31st of December 1868 … I must take it as if all the business which the company ever intended to do was then done, as if its business were confined to its existing contracts, and as if it did not mean to enter into one single fresh contract or do anything more." 85 The only case which seems to have considered the European Life Assurance case in any depth is the decision of Slade J in Re Capital Annuities Ltd [1979] 1 WLR 170, a case of an insurance company which specialised solely in annuity contracts. In that case, Slade J dismissed an application by the Policy Holders Protection Board on the basis that, while the company's financial position was precarious, it had not been proved that the present condition of contingent and prospective liabilities exceeded the present value of the assets. 86 There does not seem to be any case of winding up of a life insurance company that has been reported since 1953.

87 Of course, the present case is quite different to a case of winding up a life insurance company. In a life insurance company one knows that only the policy holders or their assignees or dependants can be claimants, one knows they certainly all will die. Furthermore, one can value their claims against the company at any one point in time. Accordingly, one has a series of people who can claim in a winding up. The present case is very different. Moreover, in the Associated Dominions case there was distinct benefit to some people to wind the company up. In the present case, winding the company up would be of no benefit to anyone. 88 Mr Jackman does not go so far as to suggest that there is legal insolvency in the instant case, but says that one should apply the Associated Dominions case that there is commercial insolvency and that people should be protected. The first part of that proposition may be correct; the second is not. 89 Before leaving this subject I should note that in any event I am not convinced that one can glean from the Associated Dominions case the proposition that pari passu distribution amongst claimants is a fundamental purpose of the Corporations Act. If one is in the subset insolvent companies or winding up then the pari passu principle is one of the basic norms. However, when one is dealing with a wider picture, the purpose of a corporation in life, not as much emphasis is put on what will happen if future claims overwhelm the company, but rather on its purpose in life and its administration. 90 Although the present situation with possible claims coming up 40 years into the future is unusual, it is not unique. There would be a number of companies currently trading which are not insolvent in the eyes of the law, but as soon as they go into insolvent administration at least some of their employees' entitlements will become crystallised and they will be very much insolvent. However, until trading ceases the employees' entitlements are merely prospective debts and so do not affect legal solvency. 91 Again, there are other situations where corporation insolvency law does not take into account commercial reality as to a corporations financial position. Thus, in Re Bond Corporation Holdings Ltd (1990) 8 ACLC 153 at 161, the evidence was that the operating revenue of the defendant company was unlikely to be as high for 1990 as it was in 1989 and the expert accountant forecast that at some time in the future the company would not be able to pay its debts, vide p 161. Ipp J, then a Judge of the Western Australian Supreme Court, held that that was insufficient to wind up the company on the ground of insolvency. 92 Again, in Leslie v Howship Holdings Pty Ltd (1997) 15 ACLC 459, 476, Sackville J said, when dealing with an insolvency petition: "… the question is not whether the company will survive for the foreseeable future. It is whether the company has discharged the burden of showing that it can pay all of its debts as and when they become due and payable."

Accordingly, even though, as his Honour said the evidence suggests that the company's financial position was precarious, it was not insolvent. 93 B1. Both the Attorney and the plaintiffs say that the present case concerns a charitable trust. However, one needs to be a little more specific than this. Plaintiffs' counsel say that by its instrument of creation MRCF claims to be the trustee of a charitable trust, the purpose for which it is expressed to be created is a charitable trust within the usual meaning of the term. The Attorney General suggests that authorities such as Taylor v Taylor (1910) 10 CLR 218; Re Schulz [1961] SASR 377 and Re Simpson [1961] QWN 50, show clearly that a trust for research work in the field of human diseases are charitable. Mr Jackman concedes that a trust for the purpose of furthering medical research into asbestos-related diseases is undoubtedly a charitable purpose, a proposition for which Taylor v Taylor, supra, is certainly an authority. However, he says that may not be a case where one can assess the nature of the trust merely by looking at the document setting it up because contemporaneous press statements and the conduct of the persons involved show that there were other aims which are non-charitable. 94 The more one listened to counsel and the more one read the documents, the more plausible Mr Jackman's submissions appeared to be. MRCF was set up under a very complex arrangement. The trust for the advancement of medical research, if I can shortly describe it as that, is really the "remainderman" in a series of limitations. The whole purpose of the exercise can be described as retaining Amaca and Amaba as viable entities, not interfering with the functioning of the subsidiaries, letting the subsidiaries pay claims etc and then at the end of the day, using the surplus for medical purposes. 95 There would be no perpetuity problems after the Perpetuities Act 1984, but an arrangement merely to preserve an asset may run into the sort of problems encountered in Brown v Burdett (1882) 21 Ch D 667, though the present is not such a blatant case as that one. 96 The other problem with the part of the trust to preserve is that there is no beneficiary. Unless there is a charitable trust, the so-called trust is also in trouble because there is no beneficiary. I examined with counsel during argument whether Re Denley's Trust Deed [1969] 1 Ch 373 might save a non-charitable purpose trust here. However, even if that decision is part of Australian law (a proposition that most equity lawyers would deny; see eg Jacobs on Trusts 6th ed [1008], footnote 46(2)), Mr Jackman's submission is certainly right that the present case would not come within the principle. 97 The present is not the time and place to decide definitively whether there is a charitable trust. In any event, even if the so-called charitable trust failed, there would be a strong argument that MRCF holds the property on some resulting trust. Mr Jackman said, "No", MRCF was to hold the property beneficially. I must confess I find it very difficult to reach that conclusion, my difficulty being reinforced by the fact that MRCF is a company limited by guarantee, seemingly with four members, none of whom contributed any assets to the company and it would be bizarre if the result was that the four gentlemen who constitute the first set of plaintiffs could take the millions of dollars in MRCF beneficially. 98 Again it is not necessary to resolve these matters here and it may be inappropriate to do so. It is sufficient for my purposes to demonstrate that the question of there being a charitable trust or a trust is not an open and shut one. 99 B2. Section 23 of the Charitable Trusts Act 1993, which was formerly s 37D of the Conveyancing Act 1919, is as follows: "1. A trust is not invalid merely because some non-charitable and invalid purpose as well as some charitable purpose is or could be taken to be included in any of the purposes to or for which an application of the trust property or of any part of it is directed or allowed by the trust. 2. Any such trust is to be construed and given effect to in the same manner in all respects as if no application of the trust property or of any part of it to or for any such non-charitable and invalid purpose had been or could be taken to have been so directed or allowed." 100 It is well known that this provision was originally enacted because it was thought to be contrary to the public interest to allow trusts such as "for parish purposes" to fail when probably the majority, but certainly not all "parish purposes" were religious; see eg Union Trustee Co of Australia Ltd v Church of England Property Trust (1946) 46 SR (NSW) 298. 101 If the section applied, it might mean that the whole of the funds under the control of MRCF had to be devoted to medical research and none to pay claims of persons who suffered asbestos-related diseases. This is probably not the correct analysis because those claimants are creditors of the subsidiary companies or become creditors of the subsidiary companies before monies flow through them to MRCF. 102 Section 23 is not applied so as to convert a predominantly non-charitable gift into a valid charitable gift: Downing v Commissioner of Taxation (1971) 125 CLR 185 and see Jacobs op cit [1065]. Again the section cannot be used to convert the trust into something completely different to that which was intended by its founder: Roman Catholic Archbishop of Melbourne v Lawlor (1934) 51 CLR 1. 103 Accordingly, s 23 of the Charitable Trusts Act does not assist in the instant case. 104 B3. Section 63 of the Trustee Act 1925 empowers a trustee to apply to the Court for its opinion, advice or direction on any question regarding the management or administration of the trust property or regarding the interpretation of the trust instrument. The way in which the section has been considered over the years is that the Court has a discretion as to whether it will give advice to the trustee or not. It was said that one Judge who sat in Equity for many years would never give advice to a trustee company as the company was earning good money for being a trustee and the section was only in place to help persons who had taken on the role of trustee voluntarily. The Court's attitude has softened since then, but still the Court will decline to give advice where it is inappropriate to do so; see eg Re Mirvac Ltd (1999) 32 ACSR 107; Re Homemaker Retail Management Ltd (2001) 187 ALR 520. I put these thoughts together in Re Perpetual Trustee Company Ltd [2003] NSWSC 1185 which, in accordance with the new standard form of advocacy, was quoted back to me in the written submissions of the plaintiffs. 105 The words "respecting the management or administration of the trust property" are very wide, but it is not every situation where a person just happens to be a trustee of property which is affected by some transaction that recourse can be had to s 63. The problem that the trustee has may be completely unrelated to the trust management, for instance where the trustee is sued by a third party or where a trustee needs to make a decision about a call on shares or a takeover offer in respect of shares held by the trust. 106 The section will also extend to a situation where, because he or she is a trustee of a trust, the trustee is ex officio a director of a corporation such as, for instance, where the trustee of a local community hall is an ex officio member of a board of a community radio station. However, the mere fact that the trustee is a trustee of a trust which is a shareholder in a company and the trustee is also a director of that company is insufficient nexus in my view to allow the trustee to get judicial advice under s 63 of the Trustee Act as to what he or she should do as a director of that company. 107 In the instant case, I am concerned that there has been an elision of roles. The trustee of the charitable trust is MRCF. It alone can get judicial advice. It is not a director of either of the companies Amaca or Amaba. It is possible, though doubtful, that directors of a trustee company may get judicial advice under s 63 (the point never arises because the company is the applicant), but I cannot see how there is sufficient nexus if the directors of the trustee are also directors of companies in which the trustee has invested its money and the problem arises with the subsidiary companies. Accordingly, in my view either there is no jurisdiction under s 63 to make any such order, or alternatively, as a matter of discretion those orders should not be made. 108 B4. It follows from what I have said in B3 that in my view no order should be made under the s 63 of the Trustee Act in this case. It may well be that the parties involved will be able to get sufficient comfort in their commercial endeavours from the reasons for judgment. That is, of course, an entirely different matter. 109 C1. Section 1318 of the Corporations Act provides as follows: " 1318(1) [ Court's power to relieve certain persons from liability] If, in any civil proceedings against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit. 1318(2) [Application for relief] Where a person to whom this section applies has reason to apprehend that any claim will or might be made against the person in respect of any negligence, default, breach of trust or breach of duty in a capacity as such a person, the person may apply to the Court for relief, and the Court has the same power to relieve the person as it would have had under subsection (1) if it had been a court before which proceedings against the person for negligence, default, breach of trust or breach of duty had been brought. 1318(3) [Judge may withdraw case] Where a case to which subsection (1) applies is being tried by a judge with a jury, the judge after hearing the evidence may, if he or she is satisfied that the defendant ought pursuant to that subsection to be relieved either wholly or partly form the liability sought to be enforced against the person, withdraw the case in whole or in part from the jury and forthwith direct judgment to be entered for the defendant on such terms as to costs or otherwise as the judge thinks proper."

Subsections (4) and (5) make it clear that the section applies, inter alia, to a director, secretary, executive officer or employee of the corporation. 110 There has been debate as to the scope of s 1318 of the Corporations Act. Mr Gleeson and his team say that the section is of wide application and it is a perfect mechanism for dealing with the present problem. This is a situation where the directors are highly skilled company directors, there is an awkward problem of corporate administration, they have given evidence as to why they wish to continue to use their skills in their role of directors, they have taken legal advice on their position, considered all available options, their motives are honourable and altruistic, each wishes to see the best outcome for all stakeholders. However, they have been unable to obtain insurance, there is a personal risk that they may be held to have breached some duty to someone along the line, so that their personal fortune is at risk. This is quite unfair they say. To this, the arguments are that (1) the matter can be dealt with by putting in a receiver which would solve the problem (see earlier); (2) an order under s 1318 only applies to past problems, not to future conduct; and (3) that the section only protects directors against claims by the company.

111 As to (1), I have already discarded this as a viable option. (2) is considered in section C2: (3) will be dealt with in section C3. 112 Mr Gleeson notes that the plaintiffs have been unable to find any case in which an order pursuant to s 1318(2) has been made excusing a breach for which a claim is apprehended. He puts, however, that the clear wording of the subsection expressly contemplates that the Court may grant relief prospectively in respect of claims not yet brought but apprehended. He referred us to the Oxford English Dictionary definition of apprehended. He put that the subsection does not require an apprehension that a claim will be made, but rather that it might be made. However, the authorities which I have consulted and which are discussed in sections C2 and C3 show that the scope of the section is narrower than that for which Mr Gleeson contends. 113 C2. I will now deal with the second objection, that is, that s 1318 does not deal with future conduct, only past conduct. When the case started this was more of a problem as the first set of plaintiffs seemed to be seeking protection for a continuous period. It is now clear that they only are seeking protection for a closed period, up until some day in early December, and because of this, Mr Jackman was not quite so pressing. 114 The question remains, can relief be given in respect of possible future breaches? 115 In Nardell v Hunter Valley Coal Processing (2003) 178 FLR 400, Campbell J considered the approach that must be taken to working out the proper construction of s 419A(7) of the Corporations Act. That section permits the Court to excuse receivers from liability in certain situations. Campbell J said that, although on the face of it the Court's power to excuse appears to be unconfined, it must be remembered that a court when exercising its discretion must ascertain the scope and purpose of the statutory enactment and exercise the power judicially, that is to say, not arbitrarily or capriciously so as to frustrate the legislative intent. His Honour relied on what had fallen from Mason J in FAI Insurances Ltd v Winnecke (1982) 151 CLR 342 at 368 and per Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at 81.

116 The same general approach should be adopted with respect to s 1318. However, unlike s 419A, it is a stand alone section which empowers the Court to give relief generally, rather than merely a part of a group of provisions directed towards a particular end. 117 In the Nardell case, Campbell, J, from 416 onwards, analysed the history of the section including how as a result of the Harmer Report it came to achieve its current form. This exercise cannot be performed with respect to section 1318. A section in almost identical words to 1318 has been part of the law of NSW since the enactment of s 361 of the Companies Act 1936. 118 In England an almost identical provision was made in s 372 of the 1929 Companies Act and 448 of the 1948 Companies Act and it originally derived from the Judicial Trustees Act 1896 s 3 (Imp). This section was rather like s 85 of the NSW Trustee Act 1925 which is the approximate equivalent of s 1318(1) alone. 119 Section 3 of the Judicial Trustees Act was considered by Kekewich J in Re Tollemache [1903] 1 Ch 457 at 465-6. His Lordship analysed the application of the trustees as a proposal to sanction a change of investment not authorised by the trust instrument on the ground that it would be to the advantage of the beneficiaries. He then asked himself whether s 3 entitled him to relieve a trustee for a future breach of trust. He said at 466: "The point made is that, inasmuch as the court has authority to excuse a trustee from liability for a breach of trust committed, or, in other words, to bind the beneficiaries to accept what was done as if it were no breach of trust at all, therefore the Court must have power to exercise that authority by anticipation, and to excuse a trustee from liability for a breach of trust contemplated. I am not convinced." 120 That case is cited by Wallace and Young in their commentary on the 1961 Companies Act as authority for the proposition that the corresponding section of the 1961 Act (s 365) did not authorise the Court to relieve against a prospective breach. 121 Tollemache's case has never been judicially considered on this point since, but a similar result was reached by Plowman J in Re Rosenthal [1972] 1 WLR 1273, 1278. However, both Tollemache's case and Rosenthal's case were decided on legislation which did not contain any equivalent to what is s 1318(2) of the Corporations Act. 122 There have been a considerable number of reported cases which have considered s 1318 or its predecessors, though none of these is directly on point and there has been very little on s 1318 (2). Nonetheless a brief resume of these authorities is useful. 123 Although Re Allsop [1914] 1 Ch 1 was decided before the 1929 Companies Act, it has been applied to applications under the Act. Cozens-Hardy MR said: "The respondent contends that the section applies only to a case where the breach of trust arises from some executive or administrative blunder, and not to a case where money is paid to a person not entitled according to the true construction of the will. … I can see no ground for narrowing or limiting the application of the wide words of the section. 'Any breach of trust' are emphatic words. The statute was obviously designed to protect honest trustees, and it ought not to be construed in a narrow sense." 124 In Re International Vending Machines Pty Ltd [1962] NSWR 1408 at 1424, Jacobs J applied that principle to the predecessor of the present section. His Honour also outlined the guidelines for the exercise of discretion which are not relevant in the present case. The decision of Jacobs J was affirmed in the Privy Council sub nom Steen v Law, Liquidator of International Vending Machines Pty Ltd (1963) 37 ALJR 229, but the present point was not considered. 125 It might be remarked that not all recent decisions seemed to have complied with the policy that the section should not be narrowly construed. However, many cases are dealing with situations where the conduct of the director concerned has been outrageous so that the point does not really arise. 126 In Lawson v Mitchell [1975] VR 579, the Victorian Full Court (Young CJ, Newton and Kaye JJ) examined in fair detail the history of the section to December 1974 and the cases decided to that date. The Court held that s 1318 or its predecessor cannot be applied to criminal proceedings. However, at p 582 Young CJ and Newton J referred to a number of cases, each of which I have read and none of which deal with a future breach. Kaye J at 595 appears to be the only Judge who was ever focussed on subsection 3 in a reported decision. He says that as there is no power for a judge to take a case away from a jury in a criminal proceeding in Victoria therefore subsection 3 shows that s 1318 was only to apply to civil proceedings. 127 In Re Vouris (2003) 47 ACSR 155, Campbell, J applied Lawson v Mitchell in an entirely different factual situation. In that case, Mr Vouris, as administrator of a company was one day late in convening a meeting of creditors. A creditor complained that Mr Vouris had breached his duty and ASIC commenced disciplinary proceedings against him before the Companies, Auditors and Liquidators Disciplinary Board (CALDB). Mr Vouris sought from Campbell J relief under s 1318. His Honour declined to give that relief because he said at para [118] at 192 the power of a court under s 1318(1) is one which can be exercised only in a "civil proceeding", "for negligence, default, breach of trust or breach of duty". It follows that the capacity of a Court under s 1318(2) to grant relief is limited to relief against the type of claim which can be brought, in a court, in a "civil proceeding", "for negligence, default, breach of trust or breach of duty". Accordingly there was no power under 1318 to make an order which could relieve against the consequences of disciplinary proceedings. 128 In Kenna & Brown Pty Ltd v Kenna (1999) 32 ACSR 430, 456, [160] Bergin J again examined the cases on s 1318 to that date and made it clear that all the circumstances of the case, including the reasonableness of the conduct of the directors, were very relevant matters in deciding whether the Court would exercise its discretion in favour of the applicant. See also Circle Petroleum (Qld) P/L v Greenslade (1998) 16 ACLC 1577, 1598. 129 I have searched through the cases decided in England under s 727 of the Companies Act 1985 as reported in Butterworths Company Law Cases from 1983 to 2004, and the Australian Corporations and Securities Reports from Volume 1 to Volume 49. There does not appear to be any instance amongst the approximately 20 reported cases under the section where an order has been made prospectively; indeed, there is no mention of 1318(2) in any of them. However, this can be explained up to a point because the reliance on 1318 is usually pleaded by a director who is sued rather than a director or officer taking the initiative. 130 One case needs to be mentioned, and that is the decision of Harman J in Re Home Treat Ltd [1991] BCLC 705. There a company went into administration. It had been carrying on a business of running nursing homes which was ultra vires. The administrator sought protection under the English equivalent of 1318. Harman J granted that protection. The administrator made it clear that he wanted not only protection for past running of a business that was ultra vires, but also wished to continue so that he could sell the business as a going concern. His Lordship said at 711 that the administrator should be given a direction validating their conduct of the affairs of the company. He then said: "In my judgment the administrators ought to be relieved from any future claim against them since they plainly are acting honestly and reasonably and ought fairly to be excused when they are acting in pursuance of the order of the court appointing them to do that which they are doing."

This is weakened a little by the preceding sentence: "That direction should be made upon the basis that there was an informal alteration of the memorandum by alteration of object 3(a) to which all members of the company consented before the business was begun to be carried on." 131 It should also be noted that no-one seemed to argue about jurisdiction to excuse future conduct in the Home Treat case: the main problem for his Lordship was whether administrators were officers within the corresponding English section.

132 Applying all that learning to the present situation, the bulk of authorities suggest that one can only apply s 1318(2) where, at the time of the application, a person has reason to apprehend that a claim might be made against him or her in respect of default etc. That apprehended claim must be one that would come within subsection 1. Under subsection 1 there can only be a claim with respect to past or perhaps past and continuing breach. Therefore under subsection 2 there can be no jurisdiction unless there has been a past or continuing breach. 133 It would follow that if there has been no breach at all but merely an anticipated breach, then no application can be entertained under s 1318(2). 134 However, if there is a continuing tort or breach of contract or breach of trust it may be that relief can be given. This is an awkward area of the law because, in tort, it is sometimes difficult to differentiate between a trespass to land with aggravation because it continues, or a continuing trespass and there are even some cases which say that each day the trespass goes on there is a new trespass. Likewise, in contract there are some situations where there is a once and all breach of contract with new damages accruing day by day and other times a continuing breach or new breaches each day; see eg The Millstream Pty Ltd v Schultz [1980] 1 NSWLR 547. 135 It is quite clear in the present case that each time there is a new payment out to a claimant there is a fresh act which might be an act of default. Accordingly, these would be future acts which the Court cannot prospectively sanction. 136 However, as in Re Home Treat Ltd [1991] BCLC 705, where a court finds a particular type of conduct to be for the benefit of a corporation and not for the personal benefit of the directors, it would ordinarily follow that a fresh application made at the appropriate time would yield an identical order to the order that might be made in the present case. 137 C3. In Customs & Excise Commissioners v Hedon Alpha Ltd [1981] QB 818, the English Court of Appeal held that the English equivalent of s 1318 only operated to protect a director against the claim by or on behalf of the company and not claims by outsiders. Mr Jackman has suggested that this Court should follow that decision despite the criticisms that were levelled at it by this Court in Daniels v Anderson (1995) 37 NSWLR 438, particularly at p 524-5. The only time in Australia that the case has been followed as far as I am aware, is by Tadgell J in Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 at 193, that discussion is not directly on point and it should be observed that Friedrich's case is no longer the law because of statutory amendment to the preference sections of the Corporations Act. 138 The limitation read into the English equivalent of s 1318 is not one which appears in the text of the section. The English Court reasoned mainly from the state of affairs in England when the English Companies Act 1929 was adopted. It is doubtful whether those factors have any relevance to NSW. 139 It is also significant that the learned Judges in the English Court of Appeal gave no weight at all to subsection 3 of the s 448 of the English Act which they were considering which is the equivalent of s 1318 of the Corporations Act. It is almost impossible to see how a claim by the company would ever be tried by a jury. The scheme of the Corporations Act is that it was mostly when an application was made in the winding up or in equity for breach of duty that the section would be brought into play. However, subsection 3 clearly envisages that there will be a common law cause of action against the director and the Judge may direct a verdict. This is almost conclusive material to show that the legislature thought that there would be a far wider set of applications than those by the company in the winding up or otherwise in equity. 140 Whilst doubtless most applications for relief by directors will arise in the context of an alleged breach of duty to the company, when one remembers the authoritative dicta that one must not approach the section in a narrow way, one must have very real doubts as to the correctness of the approach taken by the Court of Appeal in the Hedon Alpha case. 141 Accordingly, in my view, the Court should not follow the Hedon Alpha case. 142 C4. The next objection is that s 1318 does not apply at all where there is a corporation which is purporting to act as trustee. In that situation s 197 of the Corporations Act alone operates. 143 The first thing to say about this proposition is that, insofar as the first set of plaintiffs apply as directors of Amaca and Amaba, s 197 can have absolutely no application. 144 Insofar as the first set of plaintiffs are also directors of a trustee company, MRCF, the submission that s 197 alone applies is predicated on the proposition that because of the Hedon Alpha case, s 1318 only protects against claims by or on behalf of the company, whereas s 197 goes to claims by outsiders. Therefore it is said that it is of no value to make an order under s 1318 as the real attack will come under s 197. 145 It is true that the better view of 197 is that the section is only concerned with a liability incurred by the trustee in breach of trust and its operation is confined to creditors of a trust: Young v Murphy (1994) 13 ACSR 722 at 756-760, and it is also true that this is the broad class of people who if anyone attacks the first set of plaintiffs it will be those people. 146 However, for reasons given in section C3, the initial proposition based on the Hedon Alpha case is rejected. After this has been done there is not necessarily a conflict between sections 1318 and 197 and it may be that relief given under s 1318 will operate to assist directors if a claim is ever made against them under s 197. 147 The Court does not need to or indeed want to decide that matter in the instant application. The plaintiffs have sought an order under s 1318; if it is not efficacious, then so be it. It is sufficient that prima facie there are strong arguments in favour of it being efficacious. 148 Attention was drawn during argument to the decision of the Full Court of the South Australian Supreme Court in Hanel v O'Neill (2003) 48 ACSR 378. Mr Jackman put to us that this decision being a decision of an interstate Full Court on the national legislation should be followed unless plainly wrong and he put it was not plainly wrong. 149 Hanel was a decision of a three member Court, Mullighan, Debelle and Gray JJ. All Judges held that the purpose of s 197 is to impose a statutory liability on a director of a corporate trustee in circumstances where the corporate trustee has incurred a liability and is not entitled to be fully indemnified out of the trust assets. The majority held that if there were no assets in the trust fund then there could be no entitlement to indemnification so that if the trustee corporation could not pay the debt, the director was liable. Debelle J dissented on this point and said that even if the trust does not have sufficient assets to provide a complete indemnity to the corporation if there is an entitlement to indemnification the section will not operate against the director. 150 The judgment was recently analysed by McDougall J in Intagro v ANZ Banking Group [2004] NSWSC 618. McDougall J had great difficulty in accepting the reasoning of the majority in Hanel but said at [61] he also had difficulty in accepting the reasoning of Debelle J, at least as that judge phrased it and accordingly, whilst he was tempted to the conclusion that the majority view was plainly wrong, he thought he should, as a single Judge, follow the decision. He pointed out at [27] that the approach of the majority could lead to the most extraordinary consequences. 151 In argument it was virtually conceded by Mr Jackman that the particular construction of s 197 adopted by the majority would make the question of whether the trustee company was trading whilst insolvent to be otiose. All one would really look at would be whether at the time when the liability was incurred, there were sufficient assets to discharge the liability. Indeed, there would really be considerable overlap between paragraphs (a) and (b) of s 197. 152 For reasons which have already been made clear, this Court does not have to deal with s 197. If it did, sitting as a Court of Appeal I may well have yielded to the temptation so valiantly resisted by McDougall J in the Intagro case. 153 C5. Putting aside all the legal problems and technicalities, the basal problem in the instant case is that the first four plaintiffs are in charge of a situation where they can foresee that there may well be claims made against the assets of Amaca and Amaba which exceed those assets, yet many of those "claims" are not currently debts in any legal sense. There are various options open to the plaintiffs including appointing a provisional liquidator, but none of those options are going to make the position of future claimants any stronger and indeed, some will remove their prospects of ever obtaining any money at all. Accordingly, good business sense suggests that it would be wise to carry on as before. However, the directors of Amaba and Amaca cannot obtain insurance and there is at least a risk that a court might extend the principle in Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722 and hold that a company in a precarious financial position might not only owe duties to the shareholders and creditors but also to the interests of likely future creditors. 154 Whilst it is important to ensure that people do not misuse the corporate veil and the principle of limited liability and trade whilst insolvent, it is also necessary to see to it that where companies are in a precarious position they are managed by people with the appropriate business expertise. One consequence of the trading whilst insolvent provisions is that such expertise is not available to companies because of the justified fear that personal liability might attach or even that there will be an attempt by a creditor to say that personal liability attaches which can only be tested in an expensive set of proceedings. 155 The solution latterly suggested by Mr Jackman of receivership is with respect, just another manifestation of the way in which the Corporations Act compels companies in a precarious financial position to spend mega dollars on accountants to endeavour to salvage their position instead merely of appointing more experienced directors to the board. However, as the law at the moment does not permit a court to announce absolution in advance it will only be in rare cases that the Court can do anything about the matter. 156 C6. The consequence is that the factors presented by Mr Gleeson do justify relief under s 1318(2) being granted. However, for the reasons set out in s C2, that relief can only be of a limited nature. 157 D. It seems to me that the following orders need to be made:

(1) The application under s 63 of the Trustee Act is dismissed.

(2) Order that each of the first plaintiffs be relieved in whole from liability for any negligence, default, breach of trust or breach of duty in his capacity as a director of the second plaintiff, Amaca Pty Ltd (ABN 49 000 035 512) and/or Amaba Pty Ltd (ABN 98 000 387 342) arising out of the payment on or after 24 June 2004 up to the date of this order by those companies of their debts, as and when they fall due, including debts arising in respect of claims made for asbestos-related liabilities.

(4) Refer the matter to the Equity Division to deal with any further aspects of the proceedings.

(5) Liberty to the plaintiffs to apply on or before 6 December 2004 for similar orders to order (2) in respect of any payments made between the date of this order and 6 December 2004.

(6) Like liberty to apply to a Judge to vary the date of 6 December 2004 referred to in the previous order.

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