Jacqueline Foyster v Foyster Holdings

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

5585/01 JACQUELINE FOYSTER v FOYSTER HOLDINGS PTY LIMITED (in liquidation) JUDGMENT - Ex Tempore HIS HONOUR: The Applications Before the Court 1 There are two interlocutory processes before the Court. The first of them is an interlocutory process filed by Mr Hancock who is the liquidator of Foyster Holdings Pty Limited ("Foyster Holdings"). He seeks an order under section 477(2A) of the Corporations Act 2001 that the Court approve a compromise of a debt to the Company on the terms of a particular deed of settlement and mutual release. He also seeks, pursuant to section 479(3) of the Corporations Act, directions concerning two matters. The first is that he is justified in compromising that debt on the terms of the deed of settlement and mutual release. The second is that he is justified in completing a share sale agreement dated the 12 May 2003 between Foyster Holdings and Debra Russell, and transferring two ancillary shares held by Foyster Holdings in Tasmanian Titanium Holdings for the sum of a dollar. 2 The second interlocutory process is one which is brought by Mr David Foyster. The only order that is relevant to today's proceedings is an order refusing the approval which Mr Hancock seeks in his interlocutory process. Mr David Foyster's process also seeks an order for the removal of Mr Hancock as liquidator of Foyster Holdings pursuant to section 473(1) of the Corporations Law and an order for the appointment of an alternative person as liquidator. I have been informed that, in the event that the approval which Mr Hancock seeks is granted, those orders for Mr Hancock's replacement will not be pressed. It has been made clear, by counsel for David Foyster, that the principal concern which he has is with the proposed sale of the shares, not with the compromise of the debt. Assets and Liabilities of Foyster Holdings 3 The assets of Foyster Holdings include 1,287,962 ordinary shares in Tasmanian Titanium Pty Limited - a company which I will refer to as "Tasmanian Titanium", and two ordinary shares in Tasmanian Titanium Holdings Pty Limited - which I will refer to as "Tasmanian Titanium Holdings". It has some shares in a company called Country Properties Pty Limited, but in the liquidator's view, those shares are worthless and nothing has been put to suggest that the liquidator's view in that respect is incorrect. 4 The Company has no other assets. The potential liabilities of the Company have been estimated by the liquidator. There is a claim by the trustee in bankruptcy of Mr Lloyd Foyster for an amount of the order of $330,000. There are claims by members of the Foyster family for wages, and a claim by some lawyers who had been instructed by the Foysters, of the order of a little less than $6,000. The Australian Taxation Office is owed an amount which I am told is of the order of $140,000. The Commonwealth Bank is owed $10,000. It is possible that a legal firm connected with Mr Hopkins is owed a sum of money. Apart from that, the liabilities of the Company are the petitioning creditor's costs and the fees of a provisional liquidator and liquidator, and their respective legal advisors. The liquidator has not yet decided which of the claims he will admit to proof. 5 The shares which Foyster Holdings owns in Tasmanian Titanium represent 48.94 percent of the issued shares in that Company. Tasmanian Titanium Holdings holds an additional 17.63 percent of the issued shares in Tasmanian Titanium. The other shares in Tasmanian Titanium are held by various small shareholders, none of whom hold more than 7.6 percent. 6 The shares in Tasmanian Titanium Holdings are held on terms whereby the value of the shares it holds in Tasmanian Titanium flow to the holders of "B" Preference Shares. Foyster Holdings has no "B" Preference Shares in Tasmanian Titanium Holdings. It has two ordinary shares, which confer voting rights. The Rights Issue of Tasmanian Titanium 7 While I am talking about the structure of Tasmanian Titanium I shall mention a matter which arose in submissions, although in the ultimate result it is not of central importance. In December 2001 Tasmanian Titanium had a rights issue. That rights issue occurred at a time when Foyster Holdings had been placed into provisional liquidation. On 28 December 2001 David Foyster signed an application for allotment of shares pursuant to that rights issue. The application stated that it was made with the knowledge and consent of Anne Robinson and Ian Struthers. Ms Robinson has been a director of Foyster Holdings. Mr Struthers was the provisional liquidator of Foyster Holdings. That application applied for 143,106 shares. The application price for those shares was $200,348. 8 The terms of the offer required the application money to be provided by the 1 February 2002. In fact that was not done, but it appears that the Board of Tasmanian Titanium might have been prepared to overlook that departure from the terms of the offer. I say this because a draft notice of convening of a shareholders meeting in October 2002 referred to the possibility that shares might be issued to Foyster Holdings pursuant to the rights issue by those shares being paid for by the reduction of a debt which Tasmanian Titanium owed to Foyster Holdings once the quantum of that debt had been decided. As well, in April 2003, Tasmanian Titanium wrote to the liquidator of Foyster Holdings confirming that it was willing to release Foyster Holdings from a commitment to take up the rights issue shares but that it would need to reconsider its position if agreement could not be reached on deferred payment of the amount of a debt that was owing by Tasmanian Titanium to Foyster Holdings. 9 It has been suggested on behalf of Mr David Foyster that the liquidator may have, even now, a right to avail himself of that rights issue and to acquire shares in Tasmanian Titanium which would take the holding of Foyster Holdings over the 50 percent mark. That is an issue which arose in the course of submissions, and no complete evidentiary foundation has been laid as to whether the submission is right or not. However, even if it were the case that the rights issue were still available to the liquidator, it would require co-operation on the part of Tasmanian Titanium before the liquidator would be able to take up any less than the 143,000 odd shares which were applied for. That would require payment of the application moneys. The liquidator simply does not have that money. No-one is offering to lend it to him, or in any other way make it available to him. 10 As well, even if the liquidator were able to get into a position where Foyster Holdings had more than 50 percent of the shares, that would not bring with it the advantages that normally come from holding more than 50 percent of the shares in a corporation, because Foyster Holdings has entered into a shareholders agreement which obliges it to ensure that there are always at least two directors on the Tasmanian Titanium Holdings board who were not associates of Foyster Holdings or its directors. Thus, it would not be possible, even if the liquidator were to acquire more than a 50 percent shareholding, to use that shareholding as the basis for a takeover of the Board. I say that separately of any consideration of how the rights of minority shareholders would impact on the agreement, under the general law. 11 This shareholders agreement likewise would affect the ability of Foyster Holdings to use the shares which it held in Tasmanian Titanium Holdings to gain effective board control of Tasmanian Titanium. 12 Thus the shareholding which Foyster Holdings has in Tasmanian Titanium is a minority shareholding, subject to the possibility of being increased to a majority shareholding, which would itself have the limitation on it which I have just mentioned. Assets of Tasmanian Titanium 13 Tasmanian Titanium is a company which was incorporated in August 1999. Its assets are some mining tenements located on King Island in Bass Strait, some real property associated with those mining tenements and some plant and equipment. The assets were in large part purchased from the liquidator of a company referred to as Australian Titanium for the sum of $500,000, plus the settlement of some litigation. The tenements had a carrying value in the books of Australian Titanium of $500,000 or thereabouts. The litigation which was settled was a claim that Australian Titanium held the tenements on trust for Mr Foyster. The liquidator of Foyster Holdings inquired of the liquidator of Australian Titanium concerning that claim. He was told that the liquidator of Australian Titanium regarded it as fanciful, though he did not give any details as to why it was that he formed that view. It does appear that, for whatever reason, it was not a claim which Mr Lloyd Foyster actually brought to trial. 14 As well, Mr Lloyd Foyster transferred to Tasmanian Titanium a mining tenement which he held in his own name. This has been described as a wedge and Mr Foyster's ownership of that wedge tenement would, it seems, have made it difficult if not impossible to mine the rest of the tenements around it. 15 Connected with the project there were some tailings dumps which arose from previous attempts to mine the area. There have been various figures put forward in the evidence about what the tailings dumps might be worth. The liquidator has heard figures suggesting that they could be worth anywhere between 6 and 14 million dollars. However he also says that the viability of actually processing them has not been finally assessed. There was some evidence given by Mrs Foyster, who is the former wife of Mr Lloyd Foyster, that feasibility studies showed that the value of the company was about 165 million dollars. All of these figures are ones which are presented to the Court with no basis shown on which they were arrived at. When there is no basis shown on which they were arrived at and when any questions of value are necessarily matters of expert opinion, it follows from the decision in Makita (Australia) Pty Ltd v Sprowles [2002] NSWCA 305; (2001) 52 NSWLR 705 that the Court could not simply just accept any of those figures as being accurate. 16 There is some evidence before the Court about what would be involved in realising the product of the mines. As I have said, they are on King Island in Bass Strait. Before Mr Lloyd Foyster ceased to be a director of Tasmanian Titanium in December of 2000 he was looking at arrangements for selling Rutile, Zircon and Ilmenite concentrates by delivering them to Bunbury in Western Australia, and selling Rutile and Zircon concentrates by delivering them to Brisbane. He was looking at establishing a dry mill in Geelong in Victoria to process separate products of Rutile, Zircon, Ilmenite, Garnet and Leucoxene that were sourced from the mining operations. At that stage there was still further work to be done on geological assessment and steps were under way to carry out a bankable feasibility study. 17 Some arrangements had been explored to process concentrates that were to be extracted from the stockpiles and to market those concentrates. None of the financing for this had been found. Tasmanian Titanium was in a situation where it had been refused a loan by the National Australia Bank and refused a loan by the Commonwealth Bank of Australia and it was carrying on with loans that were made to it by Foyster Holdings. In around mid 2001 Mr Lloyd Foyster started looking at the possibility of having the mine product processed in Thailand. 18 When Tasmanian Titanium was formed its initial business plan, which is referred to in a shareholders' agreement, was a more modest one. It was to undertake a small scale mining operation to reprocess the tailings that were situated on the Company's tenements and to undertake such exploration as was necessary to comply with the Company's obligations under its tenements so to prove up the resources that were situated on the tenements. The Liquidator's Attempts to Realise the Tasmanian Titanium Shares 19 It was in December of 2001 that a provisional liquidator was appointed to Foyster Holdings. Mr Hancock was appointed as liquidator of Foyster Holdings on 16 August 2002. The liquidator took some steps towards realising the principal asset of the Company in October 2002 when he wrote a letter to each of the directors of Tasmanian Titanium, and each of the people who he knew of as being connected with shareholders or directors of Foyster Holdings, saying: "It has become apparent that none of the parties has the wherewithal, or for that matter the inclination, to offer me an alternative, in the form of a Deed of Company Arrangement, to an outright sale of the only known asset of Foyster Holdings, a 48.94% shareholding in Tasmanian Titanium Pty Limited. Accordingly you are herewith advised that, in the absence of a viable alternative solution, it is now my intention to sell all of the shares held by tender. Advertisements have been prepared and will be placed in various newspapers over the next few weeks. I anticipate that the tender process should take no more than 8 to 10 weeks."

The letter then gave the telephone number of a person to contact. 20 In fact the liquidator has taken longer than he originally anticipated to go through a tender process. Part of the reason for that is because there were, after that letter of 16 October, various indications that a deed of company arrangement might be arranged. All of those indications, however, have come to nothing. There is evidence from Mr David Foyster that, as late as 11 March 2003, the liquidator told him that if members of the Foyster family could provide him with evidence that they have the means and the wherewithal to put together a deed of company arrangement, he would support it. The liquidator told Mr Foyster that he would, of course, still need to deal with the Australian Taxation Office and the claim against Tasmanian Titanium. (This claim is a claim for debt, which is the subject of the compromise.) 21 On 18 March 2003 the liquidator placed an advertisement in the Australian Financial Review, inviting expressions of interest in the parcel of shares he had to offer. Prior to that date he had prepared an information memorandum, which he intended to make available to any interested purchasers. The information memorandum is one which was made available in draft form to Mr Lloyd Foyster on the 20 March 2003. The liquidator did not receive any comments from any of the Foysters about the draft information memorandum. 22 The advertisement in the Australian Financial Review is one which stated that offers to purchase closed at 5pm on the 8 April 2003. 23 There is an organisation called TZ Minerals International Pty Limited, which is a consulting firm which specialises in collecting, analysing and distributing data on the titanium minerals and related products. It puts out a newsletter to approximately 400 people who have an interest in that industry. Apparently it picked up the advertisement in the Australian Financial Review and, in a newsletter which was published, it seems, on 10 April 2003 it made mention of the offer of a substantial shareholding in a company which owns a mineral sands mine on King Island, Tasmania. 24 Following that tender, the liquidator received 13 inquiries. Of those 13 inquiries, 8 requested tender documents. The information memorandum did not itself give full details about the nature of the mining resource which was available on King Island and in which an economic interest would be purchased through the purchase of the Tasmanian Titanium shares. It did, however, state that geological reports, metallurgical reports and feasibility studies would be made available for inspection at the offices of Tasmanian Titanium. One person requested Tasmanian Titanium to provide the detailed geological report and two people attended at the offices of Tasmanian Titanium to review some of the papers relating to the project. There were letters received from two companies involved in the resources industry expressing an interest in the shares. One of the 13 people was a man who rang the liquidator on 22 April. Even though this was after the closing date of tenders, the liquidator still sent him a copy of the information memorandum. Ms Russell's Offer to Purchase the Shares 25 Only one offer to purchase the shares was received. This is an offer which was received from Debra Russell on 11 April 2003. Ms Russell is the wife of one of the directors of Tasmanian Titanium. The liquidator exchanged a conditional contract with her on 12 May 2003 for the sale of the shares. It is that contract for which approval is sought. 26 The contract is one which provides for the sale of the shares for $150,000. As well as being subject to Court approval, it is subject to there being no objection by Tasmanian Titanium to the sale terms, in terms of a pre-emptive rights clause in the Constitution of Tasmanian Titanium, and to the pre-emptive rights clause not resulting in the shares being sought to be purchased by anyone else. It is also subject to the approval of a compromise of the claimed debt which is owed by Tasmanian Titanium to Foyster Holdings. The Deed of Compromise of Debt 27 The compromise of debt is one which has been effectuated by a deed entered on 17 June 2003. That deed of settlement and mutual release is one which makes provision for Tasmanian Titanium to pay Foyster Holdings $150,000 in settlement of all claims which Foyster Holdings might have against Tasmanian Titanium or its officers, yet expressly states that it releases any claims that Tasmanian Titanium would have to require Foyster Holdings to take up shares in its December 2001 rights issue. Likewise, Foyster Holdings gives, under that deed, a release of all claims which it has against Tasmanian Titanium, including claims to participate in the rights issue. The deed of settlement and mutual release provides that it also is subject to approval of the Court, and also to Ms Russell providing to Tasmanian Titanium loans of not less than $150,000. The share sale agreement requires that, as well as paying Foyster Holdings for the shares, Ms Russell will lend $150,000 to Tasmanian Titanium. The Allegations Against the Liquidator 28 There have been severe disputes within Tasmanian Titanium for several years now. Essentially, the Company is split into two factions, the Foyster Holdings faction and the rest. It may be that there are some shareholders who are not aligned with either camp but, broadly, there are two factions. The liquidator has been severely criticised by people connected with Foyster Holdings for his decision to sell the shares to Ms Russell, at the price that she offered. It has been alleged that he has accepted, without reservation, things that were told him by the interests associated with Mr Hopkins, who appears to be regarded by the Foysters as the principal leader of the other camp in the dispute. It has been said that there is a conspiracy against the Foyster interests by the Hopkins group within the company and that the liquidator has effectively aligned himself with the Hopkins group by taking the offer of Ms Russell, whose husband is part of that group. 29 Let me say at the outset that there is nothing in the evidence before me to justify these extreme claims made against the liquidator. The only offer which the liquidator received was from Ms Russell and, unless he was to not sell the shares at all, under those circumstances acceptance of the offer would necessarily involve delivering the shares into the hands of someone who was connected with the Hopkins group. There has been no basis for suggesting that the liquidator has joined in any conspiracy which there might be, or that he has done anything other than maintain a proper, professional independence, or that he has failed to consider and evaluate information which he has received. When I say "any conspiracy that there might have been", I am not intending to suggest that I have a view one way or the other about whether there is or is not a conspiracy among some of the directors. That is something which, if it gets sorted out, it can be sorted out in some other Court or place. 30 The liquidator has been criticised by counsel for David Foyster because it is said that Tasmanian Titanium is insolvent and the liquidator has not responded appropriately. It is clear enough that assets of Tasmanian Titanium are not producing any income, have not produced any income for the four years or so that Tasmanian Titanium has been in existence, and that Tasmanian Titanium is liable for various ongoing expenses to maintain its assets. A balance sheet of Tasmanian Titanium shows that it has a few hundred dollars in the Bank. It appears that it is dependent upon continuing injections of funds by its shareholders to be able to meet its debts. It is suggested that when Tasmanian Titanium is in this state, the liquidator would do better to wind it up rather than to sell the shares in Tasmanian Titanium. It is suggested that if that were to happen then the assets of Tasmanian Titanium would be able to be sold on the open market and their value would be able to be tested. 31 The liquidator has decided not to take that course. The reasons he gave in cross-examination are that if he were to do that it would mean that there would be a fire sale of the assets of Tasmanian Titanium; that if that happened recovery of the debt which Tasmanian Titanium owed to Foyster Holdings might become impossible. He said that there were creditors of Tasmanian Titanium of about 1.2 million dollars, so that it would be necessary for its assets to be sold for more than 1.2 million dollars plus realisation costs before there was any prospect of a dividend. He was not confident that, if the assets of Tasmanian Titanium were to be sold, it would result in realisations of more than 1.2 million dollars plus realisation costs. 32 The assets of Tasmanian Titanium, insofar as they did not consist of the "wedge" were acquired from Australian Titanium for $500,000. In these circumstances the liquidator's judgment is that he could not be confident that more than 1.2 million dollars plus realisation costs would result. Nothing has been put to me to suggest that that judgment is one which the Court ought question. 33 Another submission which has been put is that when the liquidator does not have adequate information about the value of the mine, his better course is to not sell the shares. It is put that that will do no harm to any of the other creditors and that it is only the liquidator and the other priority creditors who will have to wait before they get their money. What he should do, it is submitted, is to sit and hold the shares until there is some progress with the Tasmanian Titanium project, or he has been provided with more information about it. 34 There are several difficulties with that submission. The first is that the purpose of litigation is to reduce the Company's assets to cash or divisible property, pay the debts and distribute any surplus amongst the members; see Re GA Listing and Maintenance (1994) 15 ACSR 308. The liquidator's duty is to proceed, as fast as he reasonably can, with realisation of assets. It can, in an appropriate case, be the correct course for a liquidator to take to delay realisation, if by so doing he will or is likely to achieve a better ultimate return to creditors and contributories. However, I am not persuaded that the liquidator is mistaken in refusing to take that course here. 35 Another difficulty with the submission that the liquidator should do nothing is that, even though the liquidator would not actually sell the shares, he would still need to carry out some activities with a view to keeping under review when it was appropriate to sell the shares, and to take steps in the future to sell the shares. All of those things would involve some expense. A fundamental difficulty with this liquidation is that the liquidator has no funds. 36 Section 545 of the Corporations Act 2001 says: "(1) Subject to this section, a liquidator is not liable to incur any expense in relation to the winding-up of a company unless there is sufficient available property." 37 One exceptions which is incorporated by the introductory words of "subject to this section" is that, if a creditor or contributory offers to indemnify the liquidator for recovery of a particular amount expended, and perhaps provides security for that indemnity, then the Court or ASIC can direct the liquidator to make the expenditure. Another exception is that under all the circumstances the liquidator must lodge with ASIC those documents the Act requires him to lodge. When no-one has offered to put the liquidator into funds, and there are creditors who have not been paid, the liquidator is, in my view, justified in deciding to sell now rather than wait. 38 It is submitted that it is likely that if this particular purchase was not approved the price would go up. In my view that is speculation and a liquidator is justified in not speculating. 39 The fundamental criticism which is made of the liquidator is that the interests of the creditors have not been properly considered or protected by this transaction. It is clear, as Giles J said in Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85 that: "The powers given to a Liquidator...are directed to achieving the efficient winding-up of the Company, that is, the collection and distribution of its assets for the general benefit of its creditors." 40 It is submitted that here, the liquidator has not gone through an adequate process to find out the value of the interest he is selling, or to expose it to the market. 41 The course which the liquidator has taken is one which recognises that the interest which is being offered is a minority interest in an unlisted company. The Company in which the shares are offered has a pre-emptive rights clause in its Constitution. Tasmanian Titanium is a company which, if not actually insolvent, is kept from insolvency only by ongoing injections of funds by its shareholders. The Tasmanian Titanium company has been the subject of dispute at both Board level and shareholder level for years. The Tasmanian Titanium company is presently a defendant in litigation which has been brought by Mr David Foyster. That litigation does not seek any orders against Tasmanian Titanium, but it seeks orders which relate to Tasmanian Titanium. 42 Amongst other things the litigation seeks an order that Mr Hopkins, Mr Coggan and Mr Russell be removed as directors of Tasmanian Titanium and it seeks the appointment of a receiver and manager of Tasmanian Titanium. It makes numerous criticisms of in particular Mr Hopkins on a variety of bases. Those bases include the way in which he has conducted himself concerning the affairs of Tasmanian Titanium. 43 The existence of that litigation is the sort of thing which could well have a depressing effect on any price for shares in Tasmanian Titanium. As well, the fact that the Company in which the shares are offered is a mining company which is not in production and will need significant capital to be able to get in production is a relevant matter. 44 The project is one which has not been actually mined for the last 24 years. The Company which was previously interested in mining it, Australian Titanium, went into liquidation. Tasmanian Titanium does not itself have an income stream and so the most ready way of valuing its shares is not available. The information of a geological nature which would be used by anyone interested in purchasing it is not complete. 45 The liquidator has encouraged the Foysters to find an investor who was prepared to invest in Foyster Holdings. If that happened, and a deed of company arrangement could be put together, this would mean that the shares in Tasmanian Titanium did not need to be sold and would provide a way of realising the value of the Tasmanian Titanium shares held by Foyster Holdings. However, over a period of numerous months the Foysters have not been able to find any such investor. 46 The liquidator has received advice from his solicitor that it was his duty in those circumstances to sell the shares by tender. The advertisement in the Financial Review produced the response which I have earlier mentioned. There was no expert evidence in this case, of the type that one sometimes comes across in cases where a mortgagee's power of sale is challenged, to suggest that the nature or extent of the advertising campaign was inadequate. The information memorandum which the liquidator prepared, was one which the Foysters were given the opportunity to comment on and chose not to make any comments about. 47 There was some criticism by counsel for Mr David Foyster of a passage in the information memorandum which reads: "However due to the insolvency of the major shareholder, Foyster, and an ongoing dispute involving protracted litigation between the directors of Foyster [Holdings] and the Board members of Tasmanian Titanium, to which I, as Official Liquidator, am not a party, the project is currently in a state of limbo." 48 Given the nature of the allegations made in the statement of claim, this is a perfectly credible result. As well, the accuracy of that statement is supported by the evidence of Mrs Foyster, who gave evidence to the effect that the Company seemed to be becalmed. 49 The liquidator has followed up such responses as there were to the advertisement. The end result is that there is only one offer. When A Liquidator is Given Directions 50 The principles on which the Court acts in deciding whether it will give directions to a liquidator have been summarised by Goldberg J in Re Ansett Australia Limited and Korda [2002] FCA 90; (2002) 40 ACSR 433. He says, at paragraph 65: "This review of the authorities satisfies me that the prevailing principle adopted by the Court, when asked by the liquidators and administrators to give directions, is to refrain from doing so where the direction sought relates to the making and implementation of a business or commercial decision either committed specifically to the liquidator or administrator or well within his or her discretion, in circumstances where there is no particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the discretions are sought. There must be something more than the making of a business or commercial decision before the Court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness but some such issue of this nature is required to be raised."

See also the decision of Mansfield J in Re Addstone Pty Ltd (in liq) (1997) 25 ACSR 357 at 362-3. 51 In the present case the liquidator has had his bona fides attacked in the most vigorous way. That attack has occurred not only in the course of submissions in Court. On 29 April 2003 the liquidator received a memorandum from Lloyd, David and Jane Foyster and Anne Robinson which complained vigorously about his conduct. It referred to his advertisement in the Financial Review and said: "This action was contrary to another arrangement that we were pursuing with you at the time and we were very much taken by surprise to learn about your sudden decision to sell without proper reference to us concerning the matter. You have neglected to comply with our reasonable request that you obtain and provide us with copies of TT financial reports and copies of a draft report of a TT bankable feasibility study that was commissioned by letter dated the 24 August 2001 by TT to Peter Stitt & Associates...We believe you have not acted in good faith and fear that you intend to proceed to finalise a sale of the FH shares in TT for an amount of money that would yield considerably less than a fair market value that could have been otherwise procured had you adhered to your arrangement with us and taken reasonable notice of relevant information that we had conveyed to you concerning the affairs of FH and the King Island project generally... In view of the overall circumstances we hereby place you on notice that we hold you responsible for any financial loss or damage that may be suffered by us in relation to the conduct of your administration. We urge you to take all measures possible to co-operate with us in the future in the hope that this will prevent the necessity for litigation or mitigate any loss or damage in respect to our claims against you." 52 The threat to the liquidator from that letter could not have been clearer. It is to deal with that very sort of situation that liquidators are afforded the protection of directions of the Court, as to whether a proposed action is an appropriate one. 53 The issue in the present case is not what is the value of the shares which Foyster Holdings has in Tasmanian Titanium. The issue is whether the liquidator would be acting appropriately in accepting the offer which he has, conditionally, accepted. The practice of the courts in these matters is that the Court does pay regard to the commercial judgment which the liquidator has arrived at, see Re Chase Corporation (Australia) Equities Limited (1990) 8 ACLC 1118, Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85. Here, the liquidator has formed the commercial view that this is an appropriate offer to accept. 54 Of course, merely because the liquidator has formed that view does not mean that the Court automatically accepts it. However, in the present case it seems to me that the liquidator has no real practical choice which is consistent with his duties other than to accept the offer. Approval of Compromise of Debt 55 By the close of submissions there was no opposition put, on any separate ground, to the granting of approval to the compromise of the debt. However, that is not sufficient to mean that the order is automatically made. An order under section 447(2A) is one which is made in circumstances where the liquidator simply does not have power to compromise a debt for more than $20,000 unless the Court grants him approval, see State Bank v Turner (1994) 14 ACSR 480 at 483 per Tamberlin J. 56 The evidence which has been put before me shows that the claim for the debt was one which was supported by documentation which was scrappy and incomplete, but which suggested that there was still a claim of some sort to be made. The claim at its highest is for an amount of the order of $300,000. Tasmanian Titanium, after going through all the documentation, accepted that around $70,000 of it was justified. The compromise is one concerning which the liquidator sought legal advice. That advice was, in summary, that there were three principal difficulties facing the Company in pursuing its claim - there were problems of evidence, there were problems that the liquidator did not have any money, and there were problems that Tasmanian Titanium itself was in a financially precarious situation, so that a win in Court would not necessarily result in what was called "fruit for the sideboard of the Company". The compromise is one which, in the liquidator's commercial judgment, was a reasonable one. 57 In these circumstances, it is appropriate to approve the compromise. Orders 58 I make orders in accordance with paras 1 and 2 of the liquidator's Amended Interlocutory Process dated 25 August 2003, deleting the words "to the plaintiffs" from the prayer for relief numbered 2 (ii). I dismiss Mr David Foyster's Interlocutory Process. Costs 59 In this matter the liquidator seeks a limited order for costs against Mr David Foyster. The liquidator recognises that the need for an application to the Court was one which he contemplated at the time the share sale and compromise of debt were proposed. However, he submits that if Mr David Foyster had not intervened, all that would have been required for that would have been the drafting of the interlocutory process and drafting and filing of the principal affidavit of the liquidator dated 9 July 2003, together with the preparation of affidavits of service. The application would, it is submitted, have been over inside a day. As it has happened, the hearing has occupied three days. On that basis the liquidator says that Mr David Foyster should pay the additional costs which have been incurred, beyond what would have been involved in an unopposed application. 60 David Foyster opposes that application, saying that his intervention has resulted in additional material coming before the Court. 61 In my view the submissions of the liquidator are correct. The material which was contained in the liquidator's principal affidavit is material which is, in substance, the basis upon which I have made the decision which I made. There are some matters of detail which were elaborated by evidence coming from the Foysters, but they did not change the essential outlines of the case as presented in the liquidator's initial affidavit. 62 I order David Foyster to pay the costs of the proceedings, excepting therefrom all the costs of drafting and preparing the liquidator's Interlocutory Process, the affidavit of Geoffrey Trent Hancock of 9 July 2003, the two affidavits of Maria Bertoia of 18 July 2003, and the costs of one day's hearing. **********

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