HRNG ADELAIDE, 13 June 1995 #DATE 1:8:1995 #ADD 20:9:1995

Counsel for plaintiff: Mr M L Abbott QC with Mr G Grieve

Counsel for defendant: Mr W J N Wells QC with Ms R Pak-Poy

Solicitors for defendant: Minter Ellison Baker O'Loughlin

JUDGE1 DOYLE CJ This is an appeal from a decision of a Judge of this Court. The issue is whether a secured creditor of a company in liquidation, by voting at a meeting of creditors of the company, has surrendered its security by virtue of the operation of a provision of the Corporations Regulations. There is also an appeal and a cross-appeal in respect of the order which the Judge made as to the costs of the proceedings before him.

The following summary of the facts is taken from the judgment under appeal.

The plaintiff in these proceedings, Health and Life Care Limited (in liquidation) ("HLC") is a company which is in the course of being wound up. The winding up order appointed Mr Sheahan and Mr Sims as joint liquidators of the company. I will refer to them hereafter as "the liquidators".

The defendant in the proceedings is South Australian Asset Management Corporation ("SAAMC"). Pursuant to s19 of the State Bank of South Australia Act 1983 SAAMC has the function of, among other things, dealing with the remaining assets of the State Bank of South Australia. In that capacity SAAMC holds a registered mortgage debenture which gives a fixed and floating charge over the whole of the undertaking and all of the assets of HLC. On 22 February 1993 SAAMC appointed receivers and managers of HLC exercising the powers given by the mortgage debenture.

On 27 April 1994 SAAMC applied to wind up HLC. On 24 May 1994 the Court ordered the winding up of HLC and appointed the liquidators to conduct that winding up.

In other proceedings between the liquidators and SAAMC the liquidators challenged the applicability of the mortgage debenture to the cause of action the subject of certain proceedings between HLC and Price Waterhouse, a firm of Chartered Accountants. The Judge found in favour of SAAMC. That judgment also was taken on appeal to this Full Court. In a judgment given this day that appeal has been dismissed.

The Judge's decision was that SAAMC was entitled to resume control over the conduct of the action against Price Waterhouse, which control it had surrendered to the liquidators at about the time of their appointment. The Judge and this Court on appeal have held that the mortgage debenture permitted SAAMC to resume control of the cause of action.

After that judgment was given by His Honour the liquidators commenced these proceedings seeking declarations that SAAMC had surrendered its security. The point at issue is stated at the beginning of this judgment. The meeting at which the liquidators alleged SAAMC had surrendered its security took place well before His Honour was asked to decide whether SAAMC was entitled to resume control over the cause of action. The point raised in the new proceedings is a point which, if good, was central to the dispute before His Honour in the first set of proceedings.

Early in his judgment His Honour raised the question of whether the liquidators should now be permitted to raise this further point. He referred to the decision of the High Court in Port of Melbourne Authority v Anshun Pty Ltd (No 2) [1981] HCA 45; (1981) 147 CLR 589. He decided that it was unnecessary to consider the question. On appeal the Court decided to follow the same course, counsel for the respondent not contending otherwise.

I now turn to the facts which gave rise to the present issue.

On about 10 August 1994 the liquidators sent a circular to creditors, both secured and unsecured. The circular gave a brief summary of the state of the liquidation, drawing on a Report as to Affairs prepared by the receiver and manager of HLC. The Report disclosed a substantial deficiency of assets against liabilities, but made the point that for the purposes of that deficiency no attempt had been made to quantify the value of the claim by HLC against Price Waterhouse. The circular indicated that it was proposed to discuss the action with creditors. The circular gave notice of the intention to call a meeting of creditors of various companies in the HLC group. With the circular was a Notice of Meetings, a document described as "Informal Claim Form for the purposes of voting" and a form for the appointment of a proxy.

The Notice of Meeting included an Agenda with the following items: " - To consider a report from the Liquidator regarding the conduct of the liquidations, including particulars of asset realisations and investigations into the affairs of the companies.

• To obtain creditors' instructions concerning further investigations.

• To consider the appointment of a Committee of Inspection.

• To consider the destruction of the books and records.

The second document referred to in the circular was headed "Particulars of Debt (Informal Claim)". It was addressed to the Liquidator/Chairman. It was provided in blank, for completion by a creditor. When completed it enabled the creditor to assert that one of the companies in the HLC group was justly and truly indebted to the creditor and to fill in the amount of the indebtedness and a description of the indebtedness. Only 1.5 lines were allowed for the description. The form also provided for the creditor to indicate either that it did not hold security over the debt, or that it did have security (a line was left for the security to be described) and provision was then made for the creditor to value the security by inserting an amount in a space provided.

I do not think it is necessary to describe the "Appointment of Proxy" form.

The "Particulars of Debt (Informal Claim)" form was completed by Ms Hind on behalf of SAAMC. It disclosed a debt of $37,096,784.00, it disclosed security described as "fixed and floating charge over all assets" and it valued the security at "nil". Ms Hind and another person were appointed as proxies for the purposes of the meeting.

There were four meetings of creditors of companies in the HLC group, and they were held as one. The Minutes of the meeting do not appear to have been exhibited to the affidavits in these proceedings, but they were an exhibit in the other proceedings before His Honour which proceedings were also subject of an appeal to this Full Court, and they were referred to before us without objection.

They disclosed that at the meetings there was a handful a creditors of each of the companies. A number of them had appointed the Chairman of the meeting as proxy. The creditors represented at the meeting were recorded in the Minutes in tabular form under three column headings - "Creditor" "Proxy Holder" and "Admitted for Voting $".

SAAMC was recorded as a creditor in respect of each of the four companies. Ms Hind was shown as the proxy holder. Under the column "Admitted for Voting $" was recorded the amount $37,096,784.00.

The Minutes record that a number of matters were the subject of report and discussion at the meeting. The Minutes do not distinguish in any way between secured and unsecured creditors, although along the way the Minutes record reference to the secured creditors. The Minutes record that Ms Hind moved three resolutions in the latter stages of the meeting. The first resolution was to appoint a Committee of Inspection. The second resolution was to delegate to the Committee of Inspection approval of liquidators' remuneration and other expenses. The third was to empower the liquidators to invest surplus funds. The Minutes record that all creditors represented at the meeting voted in favour of each resolution. As to the first two of the resolutions the Minutes also record that the resolution was "carried unanimously". As to the third the Minutes simply record "carried".

The Minutes do not record how the vote was taken. But it was common ground before us and the basis of His Honour's judgment that the resolutions were carried on the voices or by show of hands. I do not think it matters which it was. The important point is that no poll was taken. It has been assumed throughout that the voting was in accordance with reg5.6.19 of the Corporations Regulations, that the vote was decided on the voices and that there was no demand for a poll.

It is clear from all this that SAAMC voted on each resolution. The liquidators claimed before His Honour and before us that by voting on these resolutions or by its conduct at the meeting SAAMC had surrendered its security. The liquidators rely upon reg5.6.24(3) of the Corporations Regulations. They argue that the Minutes show that SAAMC was admitted to vote in respect of the whole of its debt or claim and had voted in respect of the whole of its debt or claim and so, pursuant to sub-regulation (3), SAAMC must be taken to have surrendered its security.

His Honour rejected the argument. He had three reasons for doing so. First, because in his opinion SAAMC had not voted in respect of the whole of its debt or claim. Secondly, because SAAMC had not in fact brought itself within reg5.6.24 in that it had not completed a proof of debt or claim. Thirdly, because in his opinion reg5.6.24(3) was outside the regulation making power and invalid.

DID SAAMC VOTE IN RESPECT OF ITS WHOLE DEBT OR CLAIM? 23. The regulations govern the manner in which voting is to be conducted at meetings of members and creditors. They govern both voting on the voices and the taking of a poll if one is demanded. They prescribe the manner of determining whether a resolution has been carried. I refer in particular to regs5.6.19 to 5.6.22.

The appellant's argument was mounted under reg5.6.24. That provides as follows: "5.6.24(1) For the purposes of voting, a secured creditor must state in the creditor's proof of debt or claim: (a) the particulars of his or her security; and (b) the date when it was given; and (c) the creditor's estimate of the value of the security; unless he or she surrenders the security.

5.6.24(2) A creditor is entitled to vote only in respect of the balance, if any, due to him or her after deducting the value of his or her security as estimated by him or her in accordance with regulation 5.6.41.

5.6.24(3) If a secured creditor votes in respect of his or her whole debt or claim, the creditor must be taken to have surrendered his or her security unless the Court on application is satisfied that the omission to value the security has arisen from inadvertence.

5.6.24(4) This regulation does not apply to a meeting of creditors convened under Part 5.3A of the Corporations Law."

It can be seen from this that reg5.6.24(3) refers to a creditor who has voted in respect of his or her whole debt or claim. The question is whether that is what happened here.

In my opinion common sense suggests a fairly simple and direct answer, the answer which His Honour gave. I am not aware of any authority which would compel a different view, and I would be reluctant to take a different view. In my opinion the answer that His Honour gave was the sensible one. I would express the position as follows.

When a vote is taken on the voices or by a show of hands each creditor who votes does so simply in the capacity of a creditor. If a resolution is carried on the voices each creditor has one vote. The task of the Chairman is to ascertain the number of creditors voting for and against the resolution. The value of the creditor's debt or claim is irrelevant to the task of the Chairman. The creditor simply votes, as already mentioned, as a creditor.

The concept of voting in respect of the whole debt or claim of a creditor makes sense only if the value of the debt or claim is relevant to the fate of the resolution. It becomes relevant if a poll is demanded under reg5.6.19(1). Regulation 5.6.21 provides that if a poll is taken a resolution is carried only if a majority of the creditors voting vote in favour of the resolution and the value of the debts owed to those voting in favour of the resolution is more than half the total debts owed to all the creditors voting. That is when the value of a voting creditor's debt or claim becomes relevant.

In my opinion it cannot be said that a creditor who votes on the voices (or by show of hands) votes in respect of the value of the debt or claim. The fact that on the voices three creditors with a debt of $1.00 each can outvote one creditor with a debt of $100.00 makes the point. Counsel for the appellant argued that in such a situation the small creditors might not call for a poll because they would expect to be outvoted by the larger creditor. In my opinion that is neither here nor there.

We do not have to consider in this case what the position would have been had there been the demand for a poll and a poll taken.

In my opinion the manner in which the Minutes record those present cannot affect the application to the present facts of reg5.6.24(3).

If the liquidators were correct it would seem to follow that a creditor whose security was equal to or in excess of the amount of the creditor's debt or claim could not vote on the voices, without surrendering its security, because there would be no unsecured balance in respect of which it could vote. On the appellant's argument it is also difficult to see the difference between a creditor in the position of SAAMC and a secured creditor who values the security at something less than the amount of the debt or claim and then proceeds to vote. On the voices the vote of each is equal, but presumably in this situation the liquidators would not argue that the hypothetical creditor had voted other than in respect of the excess over the value of its security.

In what I have said I have not overlooked the fact that a creditor might be taken by its conduct to have surrendered its security: see Moor v Anglo-Italian Bank (1879) 10 ChD 681 at 689-690; Seventeenth Canute Pty Ltd v Bradley Air Conditioning Pty Ltd (1987) 1 QdR 111. That was not the basis of the argument here. Nor do I think there is any reason to think that SAAMC has by its conduct independently of reg5.6.24(3), surrendered its security.

In my opinion His Honour was correct. SAAMC did not surrender its security by voting in favour of each of the resolutions referred to. In my opinion the regulation upon which the liquidators relied does not apply to a resolution passed on the voices.

DOES REG5.6.24 APPLY IN THE PRESENT CASE? 35. It is not necessary, strictly, to decide this issue, but His Honour dealt with it and it was argued before us. I therefore propose to deal with it.

His Honour found that this particular regulation was not called into play in the circumstances. The terms of the regulation are set out above.

His Honour held that a secured creditor cannot vote unless the creditor surrenders the security or lodges a proof of debt or claim. In other words, His Honour found that reg5.6.24(1) specified exhaustively the entitlement of a secured creditor (whose claim has not been admitted) to vote. In this case a proof of debt or claim had not been called for by the liquidator nor had one been lodged. Nor had the security been surrendered before the meeting began.

It seems clear that the liquidators had proceeded on the basis that the entitlement to vote at the meeting could be dealt with by calling for particulars of the relevant debt or claim under reg5.6.23. That regulation provides (in part) as follows: "5.6.23(1) A person is not entitled to vote as a creditor at a meeting of creditors unless: (a) his or her debt or claim has been admitted wholly or in part by the liquidator or administrator of a company under administration or of a deed of company arrangement; or (b) he or she has lodged, with the chairperson of the meeting or with the person named in the notice convening the meeting as the person who may receive particulars of the debt or claim: (i) those particulars; or (ii) if required - a formal proof of the debt or claim.

5.6.23(2) A creditor must not vote in respect of: (a) an unliquidated debt; or (b) a contingent debt; or (c) an unliquidated or a contingent claim; or (d) a debt the value of which is not established; unless a just estimate of its value has been made."

I should mention here that s553D of the Corporations Law enables a liquidator to require a debt or claim to be proved formally or that it "may be proved in some other way, subject to compliance with the requirements of the regulations (if any) relating to the informal proof of debts and claims." (s553D(2)). In the present case the liquidators had not required that debts or claims be proved formally, nor, it seems, had they decided that they could be proved in some other way. If that is so it follows that the provisions of s554E of the Corporations Law, which regulate the proof of debt by secured creditors, surrender of the security and some other related matters, were not applicable.

The essence of His Honour's reasoning was that it was not possible for a secured creditor to vote simply by lodging with the Chairperson particulars of the debt or claim pursuant to reg5.6.23. His Honour held that if a secured creditor intends to vote at a meeting, the secured creditor must have lodged a proof of debt or claim which complies with s554E and also must provide in that proof the information required by reg5.6.24(1). His Honour found there was no procedure by which a secured creditor could lodge an informal proof of debt or claim.

His Honour found that the requirements of reg5.6.24 had not been complied with by the liquidators in that SAAMC was not required to lodge a proof of debt which complied with s554E. His Honour held that as a proof of debt or claim had not been lodged, reg5.6.24 was not called into operation and could not be used to effect a forfeiture of the security.

It would seem to follow from that, that the vote taken was irregular, but presumably His Honour's view was that because the creditors were unanimous this did not matter.

I respectfully disagree with His Honour's reasoning on this topic.

In my opinion reg5.6.23 applies to all creditors, secured and unsecured. I do not consider, as a matter of practicality or of construction, that the intention was to require that the person convening a meeting must require a secured creditor to lodge a formal proof which complies with s554E. I think that the more natural reading of reg5.6.23(1) is that this course is open to the convenor of the meeting as an alternative to particulars.

On the other hand, I consider that reg5.6.24(1) applies to a secured creditor who lodges a formal proof of debt under reg5.6.23(1)(b)(ii) and to a secured creditor who lodges particulars under reg5.6.23(1)(b)(i). It seems to me that in the Regulations the expression "proof of debt" is used on occasions to embrace proof by such process as may be called for on the relevant occasion, namely, by particulars or by formal proof of debt. I realise that the Regulations are not completely clear in this respect, but that is the view that I have taken.

If I am correct then reg5.6.24 was invoked on this occasion, and the proof by particulars was irregular because it did not state the date when the security was given: see reg5.6.24(1)(b). It is not necessary to decide what effect that has upon the vote taken.

It follows that reg5.6.24(3) applied, but for the reasons already given did not effect a deemed surrender when SAAMC voted.

Although I disagree with this aspect of His Honour's reasons, my ultimate conclusion is not affected. My conclusion still is that reg5.6.24 does not effect a deemed surrender of SAAMC's security.

THE VALIDITY OF REG5.6.24(3) 49. Although it was unnecessary for His Honour to determine the validity of this provision, having decided that the regulation did not come into operation in the instant case, he said that he would have concluded that it was invalid.

Because of the cloud which this puts over the validity of the regulation, and because the matter was argued, I think it is appropriate to deal with the matter.

The power to make regulations is found in s22 of the Corporations Law. It is in the common form and empowers regulations prescribing matters which are required or permitted by the law or necessary or convenient to be prescribed to carry out or give effect to the law. There are two particular sub-paragraphs which are relevant. The first is sub-paragraph (f) which empowers the making of regulations: "for or in relation to the convening of, conduct of, and procedure and voting at, meetings of creditors, meetings of contributories and meetings of holders of debentures, and joint meetings of creditors and members of companies, the number of persons required to constitute a quorum at any such meeting, the sending of notices of meetings to persons entitled to attend at meetings, the lodging of copies of notices of, and of resolutions passed at, meetings, and generally regulating the conduct of, and procedure at, any such meeting."

The next is in sub-paragraph (h) which provides for regulations: "for or in relation to the proving of debts in the winding up of a company, the manner of proving debts and the time within which debts are required or permitted to be proved and generally regulating the proving of debts."

His Honour considered that the terms of sub-paragraph (f) did not give a power to make regulations concerning the rights of secured creditors. His opinion was that the matters dealt with were "quite distant from the rights of secured creditors." With this I agree. I also consider that sub-paragraph (h) does not provide a basis for the regulation.

His Honour then examined certain rules under the Bankruptcy Act imported by s553E of the Corporations Law. His conclusion was that although in bankruptcy a secured creditor cannot both retain the security and prove the debt, there is no rule in bankruptcy that provides that where a secured creditor at a meeting of creditors called pursuant to s64 has voted in respect of the whole of the debt, the secured creditor is deemed to have surrendered the security. The absence of any such rule in bankruptcy pointed, in His Honour's mind, to the conclusion that such a law is not required to give effect to the Corporations Law.

He contrasted with that the position of a secured creditor who voted at a meeting called to consider an arrangement under Part X of the Bankruptcy Act. In such a case, pursuant to s207(3), the secured creditor who voted without surrendering the security could be required by the trustee of the composition to surrender the security.

The thrust of His Honour's observations was that under the Bankruptcy Act while a secured creditor was not entitled to vote unless the debt exceeded the estimated value of the security (s64Za), the fact that there was no sanction if a secured creditor voted contrary to that injunction, and in particular no provision for forfeiture of security, all went to prove that the relevant provision of the Corporations Law was not required to give effect to the Corporations Law.

It seems to me that this is too strict a test. In Shanahan v Scott [1957] HCA 4; (1957) 96 CLR 245 the High Court, in words often cited, described the ambit of a power of the common type to make regulations. The Court said:

"It will authorise the provision of subsidiary means of carrying into effect what is enacted in the statute itself and will cover what is incidental to the execution of its specific provisions. But such a power will not support attempts to widen the purposes of the Act, to add new and different means of carrying them out or to depart from or vary the plan which the legislature has adopted to attain its ends."

It seems to me that in deciding whether the regulation does in fact fill out the details of the legislative scheme or cover something which is incidental to its execution, it is not necessarily to the point to show that things could have been done differently. I regard the contrast between the Bankruptcy Act and the Regulations under the Corporations Law as relevant, rather than as being decisive. However, that is probably all that the Judge himself meant.

I would approach the matter this way. The scheme of the Corporations Law relating to liquidations is one in which meetings of creditors may be called either at the instance of the liquidator or, under certain circumstances, at the instance of the creditors: see, for example, s479, s547, s548. It is implicit in these provisions that the creditors will vote at the meetings. The scheme of the Law is also one in which a secured creditor may surrender its security, realise its security and prove for the balance or prove for the balance after deducting the value of the security as estimated: s554E. There is also a principle well established by case law that a secured creditor who proves for the full amount of the claim will usually be regarded as having elected to give up the security: Moor v Anglo-Italian Bank (1879) 10 ChD 681; Seventeenth Canute Pty Ltd v Bradley Air-Conditioning Pty Ltd (In Liq) (1987) 1 QdR 111. The underlying notion is that the secured creditor participates in the liquidation on the basis of its debt which is unsecured (assuming it to be partly unsecured), when the value of debt is relevant.

The question is whether, in the context of those statutory provisions and the overall scheme and bearing in mind the well established principle of election which has been applied in this area of the law, it can be said that a provision that effects a statutory election as between two inconsistent courses of action can be regarded as filling out the statutory scheme or as dealing with something which is incidental to the execution of its specific provisions. I should add that in this context it seems to me that for a secured creditor to vote at a meeting of creditors in respect of the whole amount of its debt is as likely to be evidence of an election as is the act of proving for the full amount of the debt.

I consider that it is also permissible to take into account the fact that reg5.6.24(3) is itself part of a scheme in the regulations relating to proofs of debt and voting at meetings. If the regulation is beyond power the fact that it is linked to other regulations cannot, of course, save it. But in my opinion it is relevant to note that it is part of a scheme which in general terms is, in my opinion, authorised by the Act.

In the end I have come to the conclusion that the regulation is valid. I do not put much significance on the fact that there is no similar regulation under the Bankruptcy Act. In the context of legislation which requires a secured creditor to choose between one of three courses of action, and which provides for meetings of creditors at which the creditors may vote, it is my opinion that it is within power to provide for voting by number of creditors and by reference to value, to provide for secured creditors to vote on the same basis as their debts are or are to be proved and, having regard to established principles of election, to provide for a statutory election in the case of a creditor who votes for the full value of the creditor's debt.

I do not think that the regulation departs from the scheme of the legislation, even though the sanction which it adopts to ensure adherence to the voting scheme might in some cases prove to be a severe one, and even though the sanction is not essential to a requirement that a secured creditor should vote (where value is relevant) only in respect of the unsecured part of its debt.

For those reasons, were it necessary to decide the validity of the regulation, I would be prepared to uphold its validity.

APPEAL AND CROSS-APPEAL ON COSTS 65. Having succeeded in the action before the Judge, SAAMC applied for costs against the liquidators on an indemnity basis. The Judge refused to make such an order. The Judge took the view that the liquidators had not acted improperly in litigating the issues before him. I agree with that. Some of the issues raised in this matter were by no means simple, and I do not think it can be said that it was unreasonable of the liquidators to have raised them. True it is that the liquidators raised these issues late in the piece, and they are open to criticism for that. They themselves acted somewhat inconsistently, sitting on this point for some time. But I do not think that this shows that they acted improperly, merely that they did not act in a timely fashion. They can be criticised for that, but I do not think that that is sufficient to entitle SAAMC to the order which it sought. In my opinion this is not a case in which the liquidators' conduct was such that the ordinary rule should be departed from. They have not persisted with a hopeless case, they have not raised improper allegations, there is no finding of an improper motive: cf Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 118 ALR 248; Bent v Gough [1992] FCA 267; (1992) 108 ALR 131. I would dismiss the cross-appeal against the refusal to order costs on an indemnity basis.

66. The Judge made an order in favour of SAAMC for one half of its costs of action. He took the view that the issues raised before him could and should have been raised in the earlier proceedings between the liquidators and SAAMC. Had that been done His Honour's view was that he probably would not have made an order for costs in favour of the defendant. This reflected his reasoning in the earlier proceedings that the need to bring the matter before the Court was the result of SAAMC having changed tack by deciding to exercise its rights as a secured creditor, having previously permitted the liquidators to control the cause of action the subject of its security. But because the liquidators raised the point in these later proceedings after they should have done so, he gave SAAMC one half of its costs. I am not prepared to say that that was wrong. I agree that the points raised in these later proceedings should have been raised in the earlier proceedings, that had they been raised then His Honour would have been entitled not to make an order for costs in favour of the defendant, and that the proper solution was to award the defendant one half of its costs reflecting the additional costs which it had incurred by having to resist a fresh set of proceedings. I reject that attack on His Honour's order.

67. It follows that in my opinion the cross-appeal (pursuant to leave given by the Judge) by SAAMC must fail.

68. His Honour ordered the liquidators to pay the costs personally. He recognised that this course of action was exceptional, but made the order because the liquidators should have raised the issue in the earlier proceedings. By delaying as they had SAAMC had been put to additional costs. The liquidators appealed against this order. In my opinion it was permissible for His Honour to make the order against the liquidators although they were not parties: Knight and Anor v F P Special Assets Limited and Ors (1992) 174 CLR 178; Supreme Court Act 1935s40. Granted, the liquidators were acting to protect the rights of unsecured creditors and were acting on legal advice. But on the other hand they were raising a point which clearly should have been raised in earlier proceedings. Their failure to do so was the cause of SAAMC incurring additional costs. In my opinion His Honour was entitled to make this order. I would dismiss the appeal by HLC and the appeal by the liquidators against that order. (The liquidators were given leave by His Honour to intervene on the issue of costs, and were heard on this issue on the appeal. They were represented by counsel for HLC.)

CONCLUSIONS 69. In my opinion the appeal by the liquidators against the order dismissing the claim for declarations should be dismissed. The appeal by the liquidators against the order that they should pay one half of the costs of SAAMC should also be dismissed. The cross-appeal by SAAMC against His Honour's refusal to award costs on an indemnity basis, and against his refusal to award to SAAMC the whole of its costs should likewise be dismissed.

70. There was also an appeal by the liquidators against the order that they should be entitled to recover their costs out of the assets of HLC, and to be indemnified by HLC from those assets against the costs payable to SAAMC, these entitlements to rank after SAAMC's charge over the assets and undertaking of the company. Consistently with what I have already said it is my opinion that that appeal also should be dismissed. An order in these terms was appropriate to ensure that SAAMC would not finish up meeting the liquidators' costs. In my opinion that was an appropriate order.

JUDGE2 DUGGAN J I agree that the appeal and cross-appeal should be dismissed for the reasons given by the Chief Justice.

JUDGE3 NYLAND J I have had the advantage of reading the draft reasons for judgment of the Chief Justice. I agree with the conclusions that he has reached.

2. I would dismiss the appeal by the liquidators against the order dismissing the claim for declarations together with the appeal by the liquidators against the order that they should pay one-half of the cost of SAAMC.

3. I agree that the cross-appeal by SAAMC against his Honour's refusal to award costs on an indemnity basis and against his refusal to award to SAAMC the whole of its costs should also be dismissed.

4. I further agree that the appeal by the liquidators against the order that they should be entitled to recover their costs out of the assets of HLC are to be indemnified by HLC from those assets against the costs payable to SAAMC should also be dismissed for the reasons expressed by the Chief Justice.