Jackgreen (International) Pty Ltd [2010] NSWSC 817

CATCHWORDS : CORPORATIONS - receivers controllers and managers - receivers appointed out of court - whether sum payable to company is within charge held by receivers' appointor - liabilities of receivers - where company may be susceptible to civil penalty order under Queensland electricity legislation - whether personal liability may attach to receivers - receivers' lien in support of indemnity by company - proposed retention by receivers upon retirement - no demonstrated basis for finding of actual or contingent liability of receivers

Electricity Act 1994 (Qld), Chapter 5, Part 1A, ss 22, 25, 26, 27, 28, 29, 30 to 36A, 37, 38, 39, 46, 47, 55D to 55G, 57, 58, 120A, 120X, 133, 226A, 240A LEGISLATION CITED : Electricity-National Scheme (Queensland) Act 1997 (Qld) National Electricity Law enacted by the National Electricity (South Australia) Act 1996 (SA), s 87

Allen v Allen (1955) 55 SR(NSW) 75 Australian Securities and Investments Commission; Re Lanepoint Enterprises Pty Ltd v Lanepoint Enterprises Pty Ltd (2006) 64 ATR 524; [2006] FCA 1493 Dyson v Peat [1917] 1 Ch 99 Flexible Manufacturing Systems Pty Ltd v Fernandez [2003] FCA 1491; (2004) 22 ACLC 47 CASES CITED : Hill v Venning (1979) 4 ACLR 555 Mellor v Mellor [1992] 1 WLR 517 Re Sutherland [1963] AC 235 Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129 Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702

TEXTS CITED : S Frisby and M Davis-White (eds), "Kerr and Hunter on Receivers and Administrators", 19th edition (2010)

Sule Arnautovic and John Kukolvski as joint receivers and managers of Jackgreen (International) Pty Limited - First Plaintiffs Jackgreen (International) Pty Limited - Second Plaintiff PARTIES : Atle Crowe-Maxwell and John Frederick Lord as deed administrators of Jackgreen (International) Pty Limited - First Defendants Australian Energy Market Operator Ltd - Second Defendant Queensland Competition Authority - Third Defendant

COUNSEL : Mr S M Golledge - Plaintiffs Mr W M Addison - First Defendant

SOLICITORS : Middletons - Plaintiff DibbsBaker - First Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

2010/225662 SULE ARNAUTOVIC & ANOR AS JOINT RECEIVERS AND MANAGERS OF JACKGREEN (INTERNATIONAL) PTY LIMITED v ATLE CROWE-MAXWELL & ANOR AS DEED ADMINISTRATORS OF JACKGREEN (INTERNATIONAL) PTY LIMITED & 2 ORS JUDGMENT

Parties 1 Jackgreen (International) Pty Ltd ("Jackgreen") carried on a business of retailing electricity sourced from the National Electricity Grid to customers in New South Wales, Queensland and Victoria. Jackgreen is the second plaintiff.

2 Mr Arnautovic and Mr Kukolvski ("the receivers") of the firm Jirsch Sutherland are receivers and managers of Jackgreen. They were appointed out of court by Australian Executor Trustees Ltd in exercise of a power of appointment conferred by a charge dated 6 November 2007. The appointment was made by a deed of appointment dated 23 December 2009. Mr Arnautovic and Mr Kukolvski are the first plaintiffs.

3 Mr Crowe-Maxwell and Mr Lord are the administrators of a deed of company arrangement executed by Jackgreen on 19 July 2010 They were initially appointed as administrators under a voluntary administration on 18 December 2009. They are the first defendants. 4 Australian Energy Market Operator Limited ("AEMO") administers and supervises the conduct of electricity industry participants through the National Electricity Rules made pursuant to s 87 of the National Electricity Law enacted by the National Electricity (South Australia) Act 1996 (SA) and replicated in other States by State statutes, including the Electricity-National Scheme (Queensland) Act 1997 (Qld). AEMO is the second defendant. It has filed a submitting appearance, except as to costs. 5 Queensland Competition Authority ("QCA"), is a Queensland statutory body which has, among other functions, the function of enforcing compliance with the Electricity Industry Code. QCA is the third defendant. It has also filed a submitting appearance, except as to costs. The deed of company arrangement 6 The effect of the deed of company arrangement, briefly stated, will be to establish a creditors trust on the footing that partial payment will be made to Jackgreen's pre-administration creditors out of a fund of some $400,000 to be contributed by a company called Green Box, the claims of the pre-administration creditors will then be barred, Jackgreen's holding company will transfer all the shares in Jackgreen to Green Box and a new board of directors of Jackgreen will be created, so that Jackgreen continues into the future under new ownership and management freed from its pre-administration debts.

7 A condition precedent to the operation and commencement of the deed of company arrangement is, however, as follows: "the receivers and managers of Jackgreen have retired as, and have ceased to be, the receivers and managers of Jackgreen on or before 31 July 2010 (or such later date as is agreed between the Administrators and Green Box in writing, for a maximum of 14 days, which may be extended further by mutual consent)." 8 The matters that have caused the receivers and Jackgreen to commence these proceedings and to pursue them urgently are relevant to the receivers' decision to retire which, in turn, is relevant to the satisfaction of the condition precedent in the deed of company arrangement. The issues 9 Two issues are raised by the present proceedings. The first is an issue principally between the plaintiffs (that is, Jackgreen's receivers) and the first defendants (the administrators of Jackgreen's deed of company arrangement) but is also something in which AEMO has a clear interest. It concerns certain moneys receivable by Jackgreen from AEMO and the question whether it is the receivers or the administrators of the deed of company arrangement who can, as it were, give a good acquittance for Jackgreen in respect of those moneys. It is for this reason that I say that AEMO has a clear interest in the matter. 10 The second matter concerns a question of personal liability of the receivers and about their entitlement to be protected out of Jackgreen's assets in that respect. 11 The first matter is relevant to any decision of the receivers to retire since it goes to the question whether their functions have been fully performed. The second is also relevant to the decision (at least in a practical sense) since, after retirement, the receivers will no longer have possession of any part of the assets of Jackgreen. Background to the first issue 12 As a participant in the relevant market for electricity, Jackgreen was bound by and operated under the National Electricity Rules. AMEO plays a clearing house role under those rules. It has a function of calculating each market participant's "settlement amount" for each trading period. If the settlement amount for a particular period is positive, AMEO must pay that amount to the participant. If it is negative, the participant must make a payment to AMEO. 13 When Jackgreen became subject to voluntary administration on 18 December 2009, Jackgreen's registration under the National Electricity Rules was suspended. The suspension continues and has had the effect that Jackgreen has ceased supplying customers with electricity. Its former customers are now supplied by other suppliers.

14 Following Jackgreen's suspension, the final balance of Jackgreen's account with AMEO was calculated. The result was a positive sum of more than $1 million in favour of Jackgreen. AEMO does not dispute its liability to make this payment to Jackgreen. The only question is whether, in a physical sense, the payment should be directed to the receivers or to the deed administrators. 15 The activities of the plaintiffs as receivers and managers have been confined to collecting debts for the supply of electricity by Jackgreen up to cessation of its business on 18 December 2009. The plaintiffs have collected debts existing at the time of their appointment and raised (and received payment of) final bills on customer accounts up to 18 December 2009. A position has apparently been reached where this process is complete and the plaintiffs would appropriately retire - were it not for the uncertainty they regard as existing on the question of their personal liability on which they consider that no satisfactory explanation or assurance has been received from the Department of Mines and Energy, QCA and AEMO. 16 In relation to the matters just described, the receivers and Jackgreen seek relief as follows: "1. The Court declares that any amount payable by the Second Defendant to the Second Plaintiff pursuant to paragraph 3.15.13 of the National Electricity Rules falls within the definition of 'Secured Property' in the Charge provided by the Second Plaintiff to Australian Executor Trustees Limited dated 6 November 2007 and registered No. 1545824 in the register of company charges at the Australian Securities and Investments Commission. 2. The Court orders that the Second Defendant pay any amount presently due to the Second Plaintiff pursuant to paragraph 3.15.13 of the National Electricity Rules to the First plaintiffs as receivers and managers of the Second Plaintiff." Background to the second issue 17 The second aspect of these proceedings (concerning the possibility of personal liability of the receivers and their entitlement to the protection) arises from correspondence to which I now turn. 18 On 5 March 2010, QCA wrote to Mr Arnautovic, one of the receivers, referring to complaints of overcharging or otherwise irregular charging received from unnamed former customers of Jackgreen. The letter said that it appeared that Jackgreen had, in respect of the matters mentioned, breached certain provisions of the Electricity Industry Code and the Electricity (Retail Billing Guarantees Service Level Scheme) Code. Reference was also made to certain reporting obligations which, it was said, Jackgreen had not performed. 19 After referring to the apparent breaches and drawing attention to ongoing requirements, QCA's letter said: "Failure by Jackgreen to comply with its Code obligations may result in the Authority issuing you, as controller of Jackgreen, with a (public) Warning Notice under section 120S of the Electricity Act 1994 which, if not complied with, may result in the Authority applying to the Supreme Court for civil penalty orders of up to $500,000 for a corporation or $100,000 for an individual." 20 In a response dated 31 March 2010, Mr Arnautovic commented on the substantive matters raised and said: "You assert in your letter that in the event Jackgreen fails to comply with its obligations under the relevant codes, that the Authority will issue a warning notice to me personally as Jackgreen's controller. Section 120S of the Electricity Act 1994 (Qld) ( the Act ) empowers the Authority to issue a warning notice to an "electricity entity". Given that I am not an "electricity entity", I am unsure on what basis the Authority claims it is entitled to issue a warning notice to me personally for any alleged breach of the relevant codes by Jackgreen. I would appreciate you confirming the Authority's position on this issue." 21 QCA wrote again to Mr Arnautovic on 14 April 2010. After making certain observations and requests in relation to alleged overcharging, the letter said: "If these matters cannot be resolved promptly, given the time that has already elapsed, the Authority will have to consider issuing Jackgreen (Jirsch Sutherland as receiver and manager of Jackgreen) with a (public) Warning Notice under section 120S of the Electricity Act 1994 requiring it to comply with its obligation under the Code and referring the matter to the regulator (Queensland Mines and Energy)." 22 The receivers' solicitors wrote to QCA on 30 April 2010 in response to the letter of 14 April 2010. Their letter contained a paragraph as follows: "Your letter makes reference to issuing a warning notice to our clients. Section 120S of the Electricity Act 1994 empowers the QCA to issue a warning notice to an electricity entity . The definition of electricity entity in s 22(1) is an entity that is a participant in the electricity industry (being generation, transmission, distribution and retail entities who hold the relevant authority). As the receivers and managers do not fall within the definition of an electricity entity we fail to see how section 120S can apply to our clients as receivers and managers of Jackgreen." 23 Further correspondence in similar vein passed between Mr Arnautovic, the receivers' solicitors, QCA and the Queensland Government (Department of Mines and Energy) over the following weeks. In a letter of 28 June 2010, the receivers' solicitors said: "Our clients remain of the view that they, as receivers and managers, do not fall within the definition of an electricity entity and as such consider there is no basis for the Authority to issue a warning notice and /or obtain civil penalty orders against them personally for any alleged breach of the electricity Codes by Jackgreen. Despite previous requests and noting the very serious nature of the allegation and pecuniary penalty, the Authority has neither confirmed the basis on which the receivers can be liable under section 120 of the Electricity Act 1994 or withdrawn its previous threats that the receivers may be personally liable for a civil penalty order for alleged breaches by Jackgreen of the relevant Codes." 24 QCA said in a reply of 30 June 2010: "While you may be of the view that your clients do not fall within the definition of a retail entity, the advice provided by the Regulator (the Assistant Director-General of the Department of Employment, Economic Development and Innovation (DEEDI) to Jirsch Sutherland on 26 February 2010, set out the obligations on Jackgreen, and the Receiver and Manager of Jackgreen, given that Jackgreen continued to hold an electricity Retail Authority in Queensland." 25 Since reliance was here placed on a letter of 26 February 2010 from the Department of Mines and Energy, it is appropriate to set out in full the text of that letter (addressed to Mr Arnautovic, as receiver and manager of Jackgreen): "Dear Mr Arnautovic I am writing to you in your role as joint Receiver and Manager of Jackgreen (International) Pty Ltd (Jackgreen), an electricity retail entity currently licensed in Queensland. A number of complaints have been received from former customers of Jackgreen in Queensland indicating that they have received a final bill from Jackgreen seeking recovery of: (1) The final payment owed under their contract with Jackgreen (prior to the happening of the Retailer of Last Resort event); (2) an amount already paid in respect of the previous bill issued to them by Jackgreen; and (3) a late payment fee of $10.00. I understand Mr Edward Harriman, Senior Accountant of Jirsch Sutherland, has been contacted by the Energy Ombudsman Queensland and the Queensland Competition Authority (QCA) in relation to this matter. Jackgreen continues to hold a Retail Authority in Queensland, issued under the Electricity Act 1994 (the Act). As such the company and its administrators are subject to Queensland legislative requirements, including those relating to the billing of customers. Under section 55E of the Act, all holders of Retail Authorities in Queensland are required to comply with all codes applying to the retail entity under the Act. Jackgreen is therefore subject to the Electricity Industry Code and I request that you take immediate action to comply with section 4.11.3(a)(ii) of the Code in relation to the overcharging of customers. I have provided section 4.11 of the Electricity Industry Code entitled 'Undercharging and overcharging' as an enclosure to this letter for your convenience. The provisions of the Electricity (Retail Billing Guaranteed Service Level Scheme) Code should also be complied with in relation to this matter. More specifically, Jackgreen (as a retail entity under that Code) must now use its best endeavours to automatically give a Guaranteed Service Level rebate to those customers to whom it has issued an electricity bill that contained a material error (refer to the various provisions under section 2.2 of the Code which are enclosed with this letter for your convenience. I refer you also to section 80 of the Electricity Regulation 2006 (the Regulation), which provides that a customer affected by a Retailer of Last Resort (ROLR) event is not liable to pay the defaulting retailer, or an insolvency official for the defaulting retailer, for services provided after the ROLR event. Section 80 should be read in conjunction with section 74 of the Regulation. Section 74 of the Regulation declares part 3 of the Regulation ('Retailer of last resort scheme') to be a Corporations legislation displacement provision for the purposes of the Corporations Act 2001 (Cth), section 5G, in relation to the provisions of chapter 5 of that Act. The effect of section 74 is that the powers available to external administrators of corporations pursuant to chapter 5 of the Corporations Act 2001 must be exercised subject to Part 3 of the Regulation and which includes section 80 (to the extent there is an inconsistency). Therefore, if a final bill sent by Jackgreen to customers includes any charges for electricity supplied after the ROLR event occurred, this amount would be considered an overcharged amount, together with any billing for amounts previously paid and the late payment fee, and dealt with in accordance with the relevant Codes. Please be aware that breaches of the legislation and Codes may be subject to enforcement action by the Regulator (the Director-General of the Department of Employment, Economic Development and Innovation) and the QCA. Enforcement action by the Regulator can include monetary penalties of up to 1333 penalty units ($133,000) for each contravention, and penalties imposed by the QCA can be up to $500,000 for companies and $100,000 for individuals. I seek your prompt action in dealing with this issue to ensure no further inconvenience is experienced by customers, in relation to the failure of Jackgreen. If you require any further information please contact Ms Phyllis Davey of the Department of Employment, Economic Development and Innovation on 07 3239 0038." 26 It is, I think, fair to say that, while AEMO, QCA and the Department pointed out in the letters to Mr Arnautovic and the receivers' solicitors what were seen as breaches of applicable provisions by Jackgreen and the consequences that might flow from any such breaches (including a civil penalty order made by the Supreme Court of Queensland under s 120X of the Electricity Act 1994), there was no direct response to the question, posed by Mr Arnautovic and his solicitors on several occasions, whether it was suggested that such consequences might be visited upon the receivers personally. 27 The relief the plaintiffs seek in relation to the second issue is as follows: "3. The Court declares that the First Plaintiffs are not an electricity entity within the meaning of section 120X of the Electricity Act 1994 (Qld). 4. The Court directs, pursuant to Corporations Act s 424, that the First Plaintiffs would be justified, upon their retirement as Receiver and Managers of the Second Plaintiff in retaining from the assets of the Second Plaintiff an amount of $500,000 plus an amount reasonably calculated by them up to a maximum of $150,000 on account of costs estimated to be incurred in respect of any proceedings taken against them personally by the Third Defendant for breaches of the Queensland Electricity Code." The receivers' position and powers 28 The position occupied by the receivers and the powers they have are defined, in the first instance, by the terms of the charge under which they were appointed. The power of the chargee to appoint a receiver was created by clause 12.11(a). Clause 12.11(c) authorised the chargee to: "remove the Receiver, appoint another in his or her place if the Receiver is removed, retires or dies, and reappoint a Receiver who has retired or been removed;" 29 Powers of a receiver so appointed come from clause 13.2: "(a) A Receiver will have the right in relation to any property in respect of which the Receiver is appointed to do everything that the Chargor may lawfully authorise an agent to do on behalf of the Chargor in relation to that property and without limitation, a Receiver may in relation to that property exercise: (i) the rights capable of being conferred upon receivers and receivers and managers by the Corporations Act and the laws of any relevant jurisdiction; (ii) the rights set out in clauses 12.3 to 12.10 inclusive; (iii) the rights of the Chargor and the directors of the Chargor; and (iv) any other rights the Lender may by written notice to a Receiver give to a Receiver. (b) The Lender may by written notice to a Receiver at the time of a Receiver's appointment or any subsequent times give any rights to a Receiver that the Lender thinks fit." 30 It is necessary to refer also to the provisions of the deed of 23 December 2009 by which the chargee appointed the receivers: " Appointment (a) The Chargee appoints the Receivers, jointly and severally, to be receivers and managers of the Chargor. (b) The Receivers, without limitation, are vested with and have all the powers, authorities and discretions as are available to receivers and managers appointed under the provisions of the Charge whether at law, in equity, by statute or otherwise. (c) The Receivers accept the appointment. Agency (a) To the full extent permitted by law the Receivers are and act as agents of the Chargor. (b) The Chargor is solely responsible for the Receivers' acts and defaults and for the Receivers' remuneration unless and until the Chargee otherwise directs in writing and the Chargee is NOT responsible for the Receivers' acts or defaults to any person having dealings with them on any account whatever. (c) The Chargee declares that save as otherwise directed in accordance with the provisions of the Charge or unless otherwise required by law, all surplus moneys from time to time held by the Receivers (excluding their remuneration, costs, expenses and charges) must be accounted for to the Chargee. Termination (a) This appointment is made without prejudice to and with full reservation of the Receivers and as to the powers, authorities and discretions of the Chargee. (b) The Chargee may at any time revoke the Receivers' appointment as receivers and managers contained in this instrument by notice in writing to the Receivers, but any act done by the Receivers prior to receiving such notice will be valid as if such notice had not been executed." 31 From the charge and the deed of appointment, several basic (and quite uncontroversial) propositions may be extracted: first, the receivers are agents of Jackgreen (which, by its execution of the charge, consented to the receivership regime for which it provided); second, the chargee accepts no responsibility for the acts and defaults of the receivers; third, it is the function and responsibility of the receivers to account to the chargee for moneys received, subject to such applications as are made in the proper performance of the receivers' functions; fourth, the receivers may, if they wish, resign; and, fifth, if the receivers do resign, it is open to the chargee to appoint another receiver in their place. Decision on the first issue 32 The theoretical contest here as to the right to receive the money for Jackgreen is between the receivers and the administrators of the deed of company arrangement. I refer to it as a theoretical contest because, in reality, the administrators do not claim to be the appropriate recipients. 33 The course the declaration and order in items 1 and 2 at paragraph [16] above contemplate is obviously the correct one. The charge under which the receivers were appointed was a charge over the whole of the property of Jackgreen, present and future. The chose in action of Jackgreen as against AEMO, whenever it arose, is caught by the charge. The receivers appointed by the chargee are therefore entitled to receive the proceeds of the chose in action. 34 The declaration and order in items 1 and 2 at paragraph [16] above will therefore be made. The second issue - the statutory regime 35 The question whether the receivers are an "electricity entity" as defined by the Electricity Act 1994 (Qld) is to be approached, in the first instance, by reference to s 22 of that Act: "(1) An electricity entity is an entity that is a participant in the electricity industry. (2) The following entities are the participants in the electricity industry-- (a) generation entities; (b) transmission entities; (c) distribution entities; (d) retail entities." 36 It is thus made clear that an entity is an "electricity entity" only if it falls within one of the categories in s 22(2). Subsequent provisions identify the persons within each category. Thus, for example, s 25 states that a "generation entity is a person who holds a generation authority", while s 29, s 37 and s 46 respectively make like provision in relation to transmission entities, distribution entities and retail entities (referring, in each case, to a "person who holds" an authority of the corresponding designation). Provisions ancillary to each provision constituting and defining a particular category of entity then state what an authority of the particular kind authorise its holder to do and specify the conditions to which an authority of that kind is subject: see, in relation to s 25, ss 26 to 28; in relation to s 29, ss 30 to 36A; in relation to s 37, ss 38 and 39; and in relation to s 46, s 47 and ss 55D to 55G. 37 The clear effect of the provisions mentioned is that a "person" (the expression used in each of s 25, s 29, s 37 and s 46) cannot be an "entity" within any of the stated categories of "electricity entity" unless the person is the holder of an "authority" granted under the Electricity Act.

38 In Part 1A of Chapter 5 of the Act, "electricity entity" has an extended meaning created by s 120A. It includes a "special approval holder", the meaning of which, according to the dictionary in Schedule 5, comes from s 57 which, in turn, says that a "special approval holder" is "a person who has a special approval". By force of s 58, a special approval authorises its holder to do anything stated in the approval that a generation entity, a transmission entity, a distribution entity or a retail entity may do under the Act. 39 There is no suggestion that the receivers, as distinct from Jackgreen, hold or have ever held any authority or approval of a kind mentioned in paragraphs [36] and [38] above. There is therefore no conceivable basis on which they can be said to be an "electricity entity" within either the general meaning of that expression in the Electricity Act or the special meaning, for the purposes of Part 1A of Chapter 5, that emerges from s 120A. It follows that the receivers have made out a case for the grant of the relief at item 3 of paragraph [27] above. It is noteworthy that neither QCA nor AEMO sought, as a defendant, to make submissions on the subject. 40 The receivers have an apprehension, however, that they may nevertheless have some personal exposure if Jackgreen is susceptible to the making of a civil penalty order against it. Section 120X of the Electricity Act is in these terms: "(1) This section applies if, on the application of QCA, the Supreme Court is satisfied an electricity entity has-- (a) committed a material contravention of an industry code; or (b) attempted to a commit a material contravention of an industry code; or (c) been involved in a material contravention of an industry code.

(2) The court may order the entity to pay the State as a civil penalty an amount of no more than-- (a) for an individual--$100000; or (b) for a corporation--$500000.

(3) In fixing the penalty, the court must consider-- (a) the nature and extent of-- (i) the contravention; and (ii) loss or damage suffered because of the contravention; and (b) the circumstances in which the contravention took place; and (c) whether the entity has previously been found by the court in proceedings under this Act to have engaged in any similar conduct.

(4) For subsection (1)(c), an electricity entity is involved in a contravention if the entity -- (a) has aided, abetted, counselled or procured the contravention; or (b) has induced the contravention, whether through threats, promises or in another way; or (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention." 41 Under this section, the Supreme Court of Queensland may, in certain circumstances, order an "electricity entity" to pay a sum of money to the State of Queensland "as a civil penalty". The section is within Part 1A of Chapter 5, so that the extended meaning of "electricity authority" already noticed applies. Only a person who is a "electricity authority" according to either the general meaning or the extended meaning can be made the subject of such an order (this is so in relation to each kind of conduct described in s 120X(1), including that consisting of aiding, abetting and the like). It follows that the receivers, who are not an "electricity entity", cannot be made the subject of a civil penalty order under s 120X. 42 The receivers next point to s 240A of the Act as a source of apprehension of potential personal liability: "(1) The executive officers of a corporation must ensure the corporation complies with this Act.

(2) If a corporation commits an offence against a provision of this Act, each of the corporation's executive officers also commits an offence, namely, the offence of failing to ensure the corporation complies with the provision. Maximum penalty--the maximum penalty for the contravention of the provision by an individual.

(3) Evidence that a corporation has been convicted of an offence against a provision of this Act is evidence each of the corporation's executive officers committed the offence of failing to ensure the corporation complies with the provision.

(4) However, it is a defence for an executive officer to prove-- (a) if the officer was in a position to influence the conduct of the corporation in relation to the offence--that the officer took reasonable steps to ensure the corporation complied with the provision; or (b) the officer was not in a position to influence the conduct of the corporation in relation to the offence.

(5) In this section-- executive officer, of a corporation, means a person who is concerned with, or takes part in, the corporation's management, whether or not the person is a director or the person's position is given the name of executive officer." 43 Let it be assumed that receivers and managers occupying the position and with the powers and responsibilities of the receivers in this case are within the "executive officer" concept in s 240A(5). What follows? 44 The Act creates a number of offences but draws a clear distinction between civil penalty proceedings and proceedings for an offence. Section 226A addresses the situation where an application under s 120X is brought against a person, a "criminal proceeding" has been brought against the same person "for an offence" and the conduct alleged in both proceedings is the same or substantially the same. The section goes on, in effect, to require the civil penalty proceeding to be stayed either permanently or until the criminal proceeding has been concluded. 45 It is clear that the derivative liability of a person as an "executive officer" under s 240A can only arise if the company of which the person is such an officer "commits an offence against a provision of this Act". A company which engages in conduct that may expose it to a claim for a civil penalty order does not thereby commit an offence against a provision of the Act. There would be an offence only if the same conduct were made an offence by some provision other than a provision dealing with civil penalties. 46 The receivers have not identified any conduct of Jackgreen that might be regarded as constituting an offence against the Act. Nor, as I read the correspondence that has been put into evidence, has any of QCA, AEMO and the Department of Mines and Energy pointed to any potential source of liability for an offence. All that has been identified is the conduct with respect to charging of customers referred to in the correspondence at paragraphs [18] to [25] above, being conduct of Jackgreen. While that conduct is of a nature relevant to the possibility of civil penalty proceedings under s 120X, no conceivable basis for regarding the conduct as an offence attracting the potential operation of s 240A has been suggested. 47 It follows that the receivers cannot be regarded as having demonstrated any basis on which they might themselves become liable to pay money out of their own pockets on account of conduct of Jackgreen within the purview of the Electricity Act. There is no more than an apprehension generated by the failure of QCA, AEMO and the Department to answer the receivers' specific question, that an enforcement authority may assert some personal liability of the receivers.

The second issue - the receivers' indemnity and lien 48 The following general proposition is stated at paragraph 20-61 of "Kerr and Hunter on Receivers and Administrators", 19th edition (2010) edited by S Frisby and M Davis-White: "If the receiver becomes liable to third persons, in respect of acts done or contracts entered into by him in the course of his duties as receiver, he is entitled to indemnity out of the assets subject to the charge, unless he has forfeited such right by improper conduct; such indemnity extends to his costs as between solicitor and client. He is not however entitled to a lien in respect of possible future claims." 49 The receivers are thus entitled to be indemnified out of the assets of Jackgreen for personal liabilities they incur as receivers, subject to the possibility that the right of indemnity will be denied if the liability was improperly incurred. The right of indemnity carries with it an equitable lien which attaches to the mortgaged property until their claim is realised. 50 The receivers' lien does not depend on the continuation of possession by them. It may be asserted in respect of the assets the subject of the receivership even though the receivership has been discharged and control of the assets has reverted to their owner: Mellor v Mellor [1992] 1 WLR 517. At the same time, however, the receivers may resist removal and delivery up of assets in their possession while a claim to be indemnified for which the lien stands as security remains unsatisfied: Hill v Venning (1979) 4 ACLR 555. As a corollary (and as was pointed out by counsel for the receivers in the present case), it was held in Australian Securities & Investments Commission; Re Lanepoint Enterprises Pty Ltd v Lanepoint Enterprises Pty Ltd (2006) 64 ATR 524; [2006] FCA 1493 that it is within the power of retiring receivers to retain a provision out of the assets they hold against a threatened claim.

51 French J noted in that case that the company of which the receivers were agents had threatened them with proceedings and that the company could hardly complain if the receivers made provision to meet that threat out of the charged funds, at least if the proceedings were actually commenced and turned out to be unsuccessful. French J said:

"In my opinion it was within the power of the receivers and managers in this case to retain a provision out of the fund charged against the threatened legal action by Lanepoint and by Bowesco."

52 This, it might be noted, did not entail any finding either that the lien extended to only part of the relevant property as distinct from the whole or that a receiver could be compelled to retire upon part of that property being set aside to remain with them; merely that they could, if they chose, retire and retain a suitable provision. 53 The right to retain, whatever might be its precise scope, depends on the existence of some liability to which the receivers' indemnity extends. As is stated in the above extract from "Kerr and Hunter on Receivers and Administrators", no lien exists "in respect of possible future claims". This was made clear in Dyson v Peat [1917] 1 Ch 99, the case that Kerr and Hunter cite as authority for the proposition just stated. Dyson v Peat was discussed in Flexible Manufacturing Systems Pty Ltd v Fernandez [2003] FCA 1491; (2004) 22 ACLC 47. Heerey J said (at [27]-[28]):

"True it is that even after termination of receivership receivers have a lien on the assets in their hands against all proper liabilities for which they are personally liable: O'Donovan, Company Receivers and Administrators, para 12.650; Hill v Venning (1979) 4 ACLR 555. However, as O'Donovan points out (loc cit, footnote 7) the lien does not cover contingent, as distinct from actual, liabilities. The authority for the last-mentioned proposition is Dyson v Peat [1917] 1 Ch 99. A receiver sought to maintain a lien to indemnify him against possible claims for damage to the surface of land above a colliery which he had worked. The reasoning of Eve J at 103-104 is instructive: 'In the case of Hammonds v Barclay 2 East 227,235, cited by Mr Clayton in the course of argument, there happens to be in the judgment of Grose J a definition of a lien which it is convenient to quote. He says: "A lien is a right in one man to retain that which is in his possession belonging to another, till certain demands of him the person in possession are satisfied." It is clear that no liability has yet accrued here, and it is admitted that no cause of action on the part of any surface owner has yet arisen. There has been no payment made by the defendant on behalf of the plaintiffs, no demand has been made upon him, and so far as is known there is no liability ripening against him. In these circumstances it is impossible to suggest that he has any lien at law. Has he then any equitable lien? I am of opinion that he has not either upon principle or authority. If any principle existed under which a lien could be asserted in cases of this sort it would lead to very extra-ordinary results. A receiver appointed by a mortgagee to execute work of this nature, involving the excavation of strata underlying the earth's surface, always runs some risk, however careful he may be in performing his duties, and his operations are calculated to create a state of things which at some distant date may give rise to a cause of action. Whey then, if he is entitled to assert a lien on his receipts for any possible future claim which may be made against him, should he part with a single halfpenny of his receipts? He would certainly have a better claim to assert a lien on these than on other moneys of his principal which have reached his hands from another source and are not the fruit of his work as agent. But the result of holding him entitled to assert such a lien over his receipts would be to paralyse his activities as the principal's agent and, in a case like the present where the main and practical object of his appointment is the getting and marketing of the coal, would be destructive of the advantages intended to be secured by the appointment. When this is once realized it is not to be wondered at that no authority has been produced in support of the defendant's claim. In my opinion it cannot be sustained, and I must declare that the defendant is not entitled to retain, as against the plaintiffs any part of these investments, and that the plaintiffs are entitled to have them transferred to their names.' The validity of the lien has to be assessed as at the termination of the receivership. If there was then no lien, the respondent was obliged to hand over the funds to the mortgagees or pay it at their direction to FMS. Since there was at best a contingent claim, the respondent was not entitled to retain the funds." Decision on the second issue 54 No actual liability on the part of the receivers has been shown in respect of any civil penalty or offence under the Electricity Act, nor did the letters to the receivers from AEMO, QCA and the Department (see paragraphs [18] to [25] above) allege either an existing liability of the receivers or a basis for the imposition of a future liability upon them.

55 The statutory authorities presumably had reasons of their own for pointedly ignoring the repeated requests of the receivers and their solicitors for an explanation of the basis on which the receivers themselves might be made liable for civil penalties under the Electricity Act. In the letter of 30 June 2010, there was ultimate reliance on the content of the letter of 26 February 2010 which, by referring to "penalties" of up to $500,000 for companies and $100,000 for individuals, drew attention indirectly to s 120X, which is the only provision of the Act providing for such penalties; and by referring to "monetary penalties of up to 1333 penalty units", drew attention to s 133 which is the only provision mentioning such penalties and is concerned with "disciplinary action against electricity entities". The letter of 30 June 2010 thus merely completed a circle of non-explanation. Nor, of course, did either AEMO or QCA, as a defendant, seek to take an active part in these proceedings.

56 The analysis of the statutory provisions suggests that there is no basis on which the receivers themselves could be made liable to a civil penalty under the Act; also that there is no evident basis on which they could be found guilty of an offence in respect of which a fine might be imposed. 57 The receivers nevertheless argue that there exists some form of contingent liability sufficient to activate their lien. Mr Gollege of counsel, who appeared for the receivers, referred to a number of cases about the concept of "contingent liability" - in essence, a liability under which a sum is payable if a certain thing happens but which otherwise will never become payable (this is a paraphrase of words used by Lord Reid in Re Sutherland [1963] AC 235 at 249). Mr Gollege placed particular reliance on observations of Priestley JA in Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702 where it was said that a bankrupt was subject to a contingent liability for insolvent trading by a company of which he was a director where all elements of the cause of action for insolvent trading existed except the winding up of the relevant company. There had been no application for winding up and no threat of any such application but the company appeared to be insolvent and winding up was for that reason seen as a "realistic possibility", given that insolvent companies often end up in liquidation sooner or later. 58 This case is far removed from that. There, it was possible to see, clearly existing, all the elements of the relevant cause of action except one; and the missing element was regarded as a "realistic possibility". Here, by contrast, it has not been shown that there is any basis at all, even allowing for future events, for the imposition of personal liability on the receivers. There has been no more than an amorphous and essentially unexplained foreshadowing by the relevant authorities, coupled with their non-acceptance, on several occasions, of an invitation to state their position clearly in relation to the question of the receivers' personal liability.

59 It follows that the receivers have shown nothing in relation to which a right to retain upon termination of receivership might properly be exercised in consequence of the existence of a lien on their part.

60 I should perhaps add, by way of comment, that such a right might, in any event, not be exercisable in respect of any personal liability of the receivers for a fine for an offence committed by them or for a civil penalty of the kind provided for in s 120X of the Electricity Act. Civil penalties of this kind are penal in character and attract analogies with criminal sanctions: Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129. The indemnity to which receivers, like any agents, are entitled extends only to liabilities properly and legitimately incurred, although there may be a distinction between a case where receivers are aware of the illegality and one where they are not: see, as to agents generally, Allen v Allen (1955) 55 SR(NSW) 75.

61 As I have said, a declaration in the terms of item 3 at paragraph [27] above will be made. However, the receivers have not made out a case for the making of the declaration in terms of item 4 and no such declaration will be made.

62 The receivers seek their costs out of the assets under their control. The application was properly and responsibly brought in the light of the responses received from the Queensland electricity authorities. The order will be that the receivers' costs and expenses of this application are to form part of the costs of the receivership of Jackgreen.

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