16 This reasoning is redolent of the language of waiver, rather than that of statutory interpretation. Nevertheless it states that where proceedings have been pursued by a company after it has been ordered to be wound up, other parties may take "defensive proceedings" without leave. It is not clear what is meant by "defensive proceedings", but it encompasses prosecuting an appeal.
17 There are two points of distinction in the present case. First, the company was not in liquidation at the time of the proceedings below. Secondly, and more significantly, it appears from the judgment of Lord Davey that the House of Lords could not grant leave to appeal. The submission made, which his Lordship appeared to accept, was that only the court which had made the winding up order could grant leave. (The practice under the 1862 Act is set out by Jessell MR in In re International Pulp and Paper Company (1876) 3 Ch D 594 at 598-9). Where there are such jurisdictional limits on the statutory power, it is understandable that the word "proceedings" would be read down so as not to encompass an appeal. No such reason exists under the Corporations Law scheme in Australia. (See Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1).
18 In BPM the Full Court of the Supreme Court of Western Australia rejected a submission that leave was required to appeal a decision refusing to order security for costs against a plaintiff corporation that had gone into liquidation after the first instance decision. Anderson J, with whom Kennedy and Ipp JJ agreed, adopted the terminology of Lord Davey in Humber and described the application for security as a "defensive" measure. (See at 860). His Honour also characterised the application as procedural, when he said at 859:
"In my opinion, an application for security for costs is not a proceeding against the company within the meaning of s471B. We were not referred to any authority directly in point but in my view the section is concerned with proceedings initiated against the company, not with procedural applications by defendants in an action initiated by the company. If it was intended that the section should operate to cut down the defensive procedural measures that would otherwise be available to a defendant in an action brought by the company, thereby reducing the defendant's normal rights in the litigation whilst leaving the company's rights intact, much clearer language would have been used in the legislation."
19 The significance of the procedural character of an application for security for costs was also emphasised in obiter remarks by Finn J in Pasdale Pty Ltd v Concrete Constructions (1995) 59 FCR 446 at 448, where his Honour was concerned with s440D(1), the equivalent provision with the respect to proceedings against companies in administration. (See also Simoon Pty Ltd v Renbay Systems Pty Ltd (1995) 13 ACLC 1,792 at 1,794 per Santow J).
20 Both Humber and BPM are distinguishable from the instant case. Nevertheless, Humber and arguably BPM by its acceptance of the reasoning in Humber, may stand for a more general proposition. It is sometimes referred to as authority for the proposition that lodging an appeal does not require leave. (See Keay McPherson: The Law of Company Liquidation (4th ed pp246, 249). This issue was not raised in argument before the Court. By reason of the Appellant accepting that he needs leave, it is not necessary to express a final view on the issue.
21 The Court raised with counsel for the Appellant the prospect that the Appellant may also require leave pursuant to s101(2) of the Supreme Court Act 1970, by reason of the form of the orders which were actually made by Einstein J and which I will hereafter set out. Counsel sought leave under that sub-section, if the Appellant needed leave, which counsel did not concede. That sub-section relevantly provides:
"101(2) An appeal shall not lie to the Court of Appeal except by leave of the Court of Appeal, from:
…
(c) a judgment given or order made in proceedings in the Court … as to costs only which are in the discretion of the Court."
22 Although his Honour made findings on the basis of s420A of the Corporations Law against the Appellant in his capacity as receiver, no order in fact was made against the receiver, other than an order for costs.
23 Einstein J concluded his reasons with the following:
"481 The plaintiffs pursued both the Bank and the receiver in the proceedings. No separate submissions were advanced with respect to the question of the Bank's liability as opposed to that of the receiver. It seems to me appropriate to allow both parties with the benefit of these reasons, to address such submissions as they may seek to address on the question of whether judgment is to be entered only against the receiver or ought extend to include the Bank and if so, as to the precise suggested basis for the latter course. As necessary, a supplementary judgment may require to be delivered dealing with questions relating to the Bank.
482 The proceedings will be stood over to permit the parties to bring in Short Minutes of Order and to address further submissions on the matters reserved for such submissions and in relation to costs. …"
24 Nothing in the materials before the Court suggests that any further submissions were made to his Honour. It appears that the parties agreed between themselves upon the practical commercial implications of what his Honour had held and formulated orders in terms of those practical implications, rather than in terms of the pleadings and the judgment.
25 The submissions before his Honour, which his Honour accepted, included calculations as to the deficiency in the amounts received upon the sale of the two herds of cattle. The deficiency with respect to the cattle located at the Hernani Station was $160,201.00. The deficiency with respect to the cattle located at the Jeogla Station was $905,448.20.
26 The orders upon which the parties agreed, and which his Honour made on 16 July 1999, referred to the First Plaintiff, ie Jeogla Pty Limited, the First Defendant, ie the ANZ Bank and the Second Defendant, ie the Appellant receiver, were as follows:
"1. The account between the First Plaintiff as Mortgagor and the First Defendant as Mortgagee be calculated upon the basis that the First Defendant be deemed to have received the following sums:
(i) $160,201.00 on 16 June 1998; and
(ii) $905,448.20 on 23 November 1998
2. The Second Defendant pay the Plaintiffs' costs of the proceedings pursued by the Plaintiffs' against both Defendants.
3. No Order as to the First Defendant's costs of the proceedings."
27 The form of the order was more in the nature of terms of settlement approved by the Court, rather than orders flowing from the causes of action actually pleaded and upon which judgment had been delivered. Specifically, there was no order in the form of a computation of damages against the Appellant, pursuant to the combined operation of s420A(2) and s1324(10), or any other basis for damages. The only order against the Appellant was the order as to costs. As counsel who appeared for the Appellant conceded during the course of argument on the leave application, the form of the order actually made would have been appropriate in an action for accounts on the basis of wilful neglect and default on the part of the mortgagee bank. These were not the proceedings before his Honour.
28 The order as to costs was that the receiver would pay the cost of the successful Plaintiffs, but no order for costs would be made against the bank. This also appears to be an outcome of some course of negotiation. There was no suggestion at any stage that his Honour exercised any discretion with respect to the determination of who should pay the costs. His Honour accepted the outcome of the negotiation and implemented it as requested by orders.
29 Pursuant to s101(1)(a) of the Supreme Court Act, an appeal to this Court lies from "a judgment or order" of the Court in a Division. The only order against the Appellant is an order as to costs. I am inclined to the view that this is a case of an appeal "as to costs only", within the meaning of s101(2)(c) of the Supreme Court Act. However, the case can be determined on the basis of the Appellant's concession that leave was required under s471B of the Corporations Law.
30 The evidence before the Court included a statement by the liquidator of Jeogla that he is without funds in his administration and accordingly does not intend to instruct a solicitor to appear in these proceedings. He also indicated that he did not object to the Appellant receiving leave pursuant to s471B to pursue the appeal. The letter by the solicitor for the Appellant to the liquidator enclosed a copy of the Appellant's submissions in these proceedings, which indicated that the Appellant sought to set aside Order 2 in the proceedings below, namely the costs order in favour of Jeogla.
31 The Court would not exercise the discretion in 471B of the Corporations Law in order to permit a person to proceed with proceedings which are not reasonably arguable. As the Full Court of the Federal Court said with respect to the predecessor of s471B in s371(2) of the Companies Code, the courts:
"… have required to be affirmatively satisfied that the claim has a solid foundation and gives rise to a serious dispute" ( Vagrand Pty Ltd ( In liquidation ) v Fielding (1993) 41 FCR 550 at 556).
32 In the submissions filed for this appeal, the Appellant gave primary weight to a submission that the two paragraphs of s420A(1) are true alternatives, in the sense that para (b) articulates a duty which will generally be applicable and para (a) articulates an alternative duty which will have application in some circumstances.
33 I would not regard this construction as reasonably arguable. The use of the word "otherwise" as the introductory word of s420A(1)(b) indicates that the two paragraphs are intended to be both exhaustive and mutually exclusive.
34 The Appellant also argued, however, that the construction of "market value" means an "established" market price. His Honour appeared to apply a test of whether or not a market value was ascertainable, in accordance with the classic statement of valuation principle in Spencer v The Commonwealth (1907) 5 CLR 418. The effect of this construction is that para (b) will have very little, if any, work to do. It may be that it would be limited to the case of property which in fact has only a single buyer, for example, a right of way to land-locked real property. Nothing in the legislative history would suggest that para (a) was intended to have so dominant, if not exclusive, a role.
35 The origins of the sections are to be found in the Harmer Report which made recommendations for the introduction of a duty in terms only of what is now para (b) (Australian Law Reform Commission, General Insolvency Inquiry, Report No. 45 Vol. 1 1988 para 236, second bullet point). After a process of extensive consultation and deliberation, in March 1992 a Public Exposure Draft and Explanatory Paper was issued for draft legislation implementing, inter alia, the recommendations of the Harmer Report. That Bill and explanatory material maintained the position that the proposal was for the implementation only of what is now para (b). (See Corporate Law Reform Bill 1992 - Public Exposure Draft and Explanatory Paper, CCH, 1992 para 585). The explanatory material indicated that the formulation was based on a New Zealand provision (then s345 of the Companies Act 1955 (New Zealand) now s19 of the Receiverships Act 1993 (New Zealand)). After the circulation of the Exposure Draft, further consultations occurred (see Hansard, House of Representatives, 3 November 1992, p2402). The formulation of what is now (a) of sub-section 420A(1) was introduced in the final Bill, but with no explanation in the Second Reading Speech or the final Explanatory Memorandum, as to why the recommendation had been changed.
36 Einstein J does not indicate that his research has discovered any aspect of the consultation process which might have led to the addition of para (a). Nor was any such material or explanation proffered in the written submissions filed in these proceedings. In the events that have happened, the Court has not found it necessary to pursue the question.
37 Suffice it to say that this legislative history is not such as to give support to a construction of the sub-section that would give overwhelmingly dominant practical application to para (a). The central difficulty in the construction of s420A(1) is that it is premised on the basis that there is a category of property that is in fact "sold" but which has no "market value". This incongruity is enough to indicate that a very particular concept of "market value" is being employed.
38 The construction favoured by Einstein J was to the effect that the words "market value" meant that a value was, in effect, ascertainable. Two alternative constructions suggest themselves as reasonably arguable. First, that "market value" means a definite value. Secondly, that "market value" means a readily determinable value.
39 By "definite value" I mean a value that is clearly and obviously established as a market price. By way of example, a small parcel of shares in a company listed on the Stock Exchange has a definite market value which can be ascertained at any point of time simply by looking up a document. Shares in a company which is not listed do not have a definite value in this sense.
40 By the alternative of "determinable value" I mean to refer to property for which the number and nature of comparable sales, and the closeness of the degree of comparability, is such that at any point of time a market value can be readily determined. This is in contrast with property which has so unique a quality that comparisons cannot readily be made, or is so scarce that sales are rare.
41 It is not necessary to choose between these alternatives for present purposes. It is sufficient to indicate that the alternative constructions are reasonably arguable. Each is capable of having a relevant application in the present case.
42 The "definitive value" construction would mean that his Honour erred in assessing the case only on the basis of s420(1)(a). Similarly, a case could be made that the quality of the cattle on Jeogla Station, with over a century of careful genetic breeding, was sufficiently unique that they did not have a "market value" on a "determinable value" test. This question would of course require a factual inquiry that has not, in terms, been undertaken.
43 There are three particular elements relevant to the exercise of the discretion under s471B of the Corporations Law and which, in my opinion, lead to the conclusion that the discretion should be exercised against the Appellant. These elements are: