27 After considering the nature of the discretion as expressed in Ogilvie-Grant v East, Rogers CJ in Comm D addressed the factors which he considered pertinent to the exercise of his discretion in the following way:
"I think this is such a situation [that leave to proceed should be granted]. The reasons for it are as follows:
(1) The proceedings were commenced prior to the commencement of the liquidation.
(2) There is a very serious issue to be tried between the parties.
(3) It is not known when final liquidation and/or the scheme of arrangement will be put in train.
(4) The evidence shows that whether it be in a liquidation or in a scheme of arrangement, it will be necessary for the plaintiff in this action to appeal against a refusal of its proof of debt, unless there is a determination of its entitlement in these proceedings.
It is to be only fair to the provisional liquidators to point out that their present view is that the claim of the plaintiff is misconceived and ought to be resisted. I can see no room for a change of mind on the part of the liquidators, now or in the future. I ask rhetorically, what may come to pass that would bring about a change of mind? It was faintly suggested by counsel that perhaps the proof of debt may be admitted if the dividends to be paid in the liquidation or under the scheme of arrangement are seen to be lower than presently anticipated. I must say that I am not clear why this should be so, and certainly there is no foundation for such supposition in the evidence.
It is perfectly correct to say, as counsel did, that if a proof of debt is rejected the creditor may appeal, and that is the usual and proper method of disposing of a dispute between a liquidator and a creditor. But that is in circumstances which are quite different from those which obtain here.
In addition to the matters to which I have already pointed, there is the factor that any appeal in a winding up would have to be taken to the Supreme Court of Queensland. As counsel for the plaintiff pointed out, there is a likelihood in those circumstances that the work which has already been done in the present action will have to be duplicated in the context of an appeal to that court.
Mr Reeves, for the provisional liquidators, has made another point which I think needs attention. He said that if leave to proceed is now granted and a winding up order is made on 2 May, there will then be imposed a fresh stay of proceedings and a further application will become necessary.
There are two points to be made in the context of that submission. First, it is by no means certain that, in fact, the Supreme Court of Queensland will, on 2 May, make a final order for the winding up of the defendant. Second, I would have thought that even if such an order was made and another application for leave to proceed be necessary - as to which I express no opinion - a judge would almost automatically make that order, because the only change in circumstances would be a neutral factor.
Mr Reeves suggested that if this application is granted, there may be an avalanche of litigation unleashed on the provisional liquidators. With all due respect, that not only is not supported by the evidence, but, indeed, is in the teeth of the evidence. As I understand it, no one has foreshadowed commencing an action against the provisional liquidators and, indeed, it would be very difficult at this point of time for anyone to put himself or itself in the same position as the plaintiff in the present case. While I am not suggesting that the plaintiff is in a unique position, so far as any individual factor is concerned, the concatenation of circumstances which persuades me that I should grant leave to proceed cannot be replicated; there is not any other person who has an action on foot commenced prior to the appointment of the provisional liquidators, or one whose claim is as strongly resisted as the present plaintiff.
In conclusion, I should say that I am anxious that I should give full effect and recognition to the legislative purpose which underlies the statutory provision for a stay of proceedings. However, where it is clear, as it is in the present case, that the difference between the parties will have to be litigated, then it seems to me that in the circumstances of the present case, it should be litigated in proceedings which are fixed for hearing at an early date.
I should complete what I have said by mentioning that Mr Reeves suggested that the provisional liquidators may be distracted from the work that they are presently undertaking by the need to attend to this present litigation. Again, with due respect, that is something which is unlikely to take place. The evidence which will be required to be adduced by the defendant will be evidence from former officers of the defendant company. The work in question will be undertaken by the legal advisers to the provisional liquidators. If I were of the view that there was any danger of the provisional liquidators having to attend to this litigation in preference to attending to orderly liquidation of the defendant, I would be reluctant to give leave to proceed. However, I do not think that this is the case here."
(at 352 -353)
28 It is common ground that there is a serious question to be litigated in these proceedings.
29 The plaintiff is prepared to accept as a condition of the granting of leave that any judgment in its favour in the proceedings be stayed until further order.
30 In my view leave to proceed should be granted.
31 To defer the making of an order, or to refuse the granting of leave would lead to a vacation of the hearing fixed for these proceedings and, inevitably, in my view, a significant waste of some of the resources expended by both parties in bringing the matter to a state of readiness for hearing.
32 I am also of the view that the nature of the issues raised in these proceedings is such that they should be determined in this Court, in these proceedings, rather than by recourse to the machinery of lodgment of proof of debt, if the provisional liquidators move in that direction : the more so when the proceedings are close to hearing.
33 The evidence establishes that the provisional liquidators are faced with a daunting task in ascertaining the financial position of companies within the HIH Group and in the implementation of protocols for the continuation of the respective businesses conducted by those companies affected by the order of 15 March 2001, and for the administration of claims. There will be some distraction to the provisional liquidator in attending to the conduct of these proceedings, in granting leave to proceed.
34 However, I think that distraction is far from significant having regard to the state of preparation of the proceedings and the imminence of the pending hearing. The marshalling of resources required for the defence of the proceedings will be the responsibility of the defendant's solicitors.
35 I place little reliance upon the evidence that the provisional liquidators will require advice as to the substance of the defendant's defence in the proceedings, having regard to the fact that serious issues have been raised by the defendant in the proceedings. One assumes that those issues have been raised, conscious of the defendant's obligation to act in good faith to the plaintiff and that the defendant's solicitors will have advice readily available as to the merits of the plaintiff's claim.
36 It is in that context that I think one should view the evidence of the provisional liquidators that they will have to make a value judgment whether the proceedings should be allowed to go by default if leave is granted.
37 In that respect, the amount of the claim far outweighs the additional costs of what is estimated to be a three day hearing, namely $66,500. As to the costs owing to the solicitors on the record for the defendant, they assert that they "hold a lien over the file and have the ranking of a secured creditor" in respect of costs to date of approximately $72,000.
38 I find it difficult to accept that, if there is a meritorious defence to these proceedings, it would be in the interests of creditors of the defendant and its shareholders to allow the proceedings to go by default, particularly having regard to the amount of the claim and to the limited amount of estimated costs of defending the proceedings.
39 Senior counsel for the defendant has pressed upon me the consequences of a "precedent" in granting leave. It was submitted that a considerable number of applications for leave would flow on from a successful application and that the provisional liquidators could not cope with that. I am not prepared to accept that any such consequence would flow from the granting of leave in the particular circumstances of this case. Each application needs to be addressed on the particular circumstances governing the exercise of discretion.
40 While the status of the appointment of the liquidators is provisional there is no statutory requirement for the submission of proof of debts and, in one sense, the maintenance of these proceedings is the only basis upon which the plaintiff's claims may be litigated. Assuming that a winding up order is made the machinery of lodgment of proof of debt and appeal from its rejection is, in my view, a particularly unsatisfactory method of determining the plaintiff's rights as advanced in these proceedings. It is my view that the only satisfactory way of resolving that dispute will lie in the processes available to the parties in these proceedings.
41 It follows that I do not accept that the considerable burden imposed upon the provisional liquidators is, in itself, sufficient to determine that all applications for leave should be refused regardless of the circumstances of the individual applicant, or that all applications should be deferred.
42 In this particular case, I think leave should be granted.
43 In granting leave, it does not follow that the provisional liquidators are shut out from making any application for a short adjournment of the hearing of these proceedings. In that respect, I note that the plaintiff is not averse to a deferment of the hearing to a date in July, which would be available to the parties if the Court was satisfied that some further time should be given to the defendant to address the matters referred to by the provisional liquidators and which are peculiar to these proceedings.
44 Accordingly, I grant leave to proceed in these proceedings upon condition that any judgment obtained by the plaintiff in the proceedings be stayed until further order of the Court. The costs of the application will be costs in the proceedings.