For the reasons I have given, however, in this instance I am not persuaded that any of the grounds taken by the appellants to sustain the second appeal has been made out.
[2]
Accordingly I think that both appeals should be dismissed, with costs. Linen House was party only to the first appeal but it made its position plain on both. On the second appeal it was concerned to do no more than to preserve the orders for costs that were made below in its favour. That will be achieved if both these appeals are now dismissed as I suggest.
[3]
I agree that each appeal should be dismissed for the reasons stated by Phillips, J.A.
Parties
Applicant/Plaintiff:
McVeigh & Anor
Respondent/Defendant:
Linen House Pty Ltd & Rugs Galore Australia Pty Ltd
During argument I confess to having been attracted at first to the proposition that, termination having been ordered as contemplated by s.445D, there was nothing left to stay. If the order for termination operated like a declaration of status, an attempt to "stay" the operation of the order was no more than an empty gesture. But the consequence of that view is that no appeal would be possible, or at all events no appeal having the consequence of avoiding liquidation altogether. Mr. Hayes acknowledged this, asserting that once liquidation supervened by virtue of the regulation, the only course then open was to stay the liquidation if appropriate, putting an end to the liquidation but not, of course, denying its occurrence: see s.482 of the Law and the remarks made in passing by the High Court in MYT Engineering Pty. Ltd. v. Mulcon Pty. Ltd.[1999] HCA 24; (1999) 162 A.L.R. 441 at 451. He contended, too, that with a deed of company arrangement like the present one, which was dependent upon the constitution of a fund for distribution to creditors, staying the liquidation would be unnecessary because both the scheme constructed by the deed and the liquidation could coexist.
If a stay is to be imposed on an order terminating a deed of company arrangement it seems to me, as at present advised, that it would be preferable if it were imposed in the manner adopted by Santow, J. in Re Spargold Enterprises Pty. Ltd. ex parte McDonald[1999] NSWSC 623; (1999) 32 A.C.S.R. 363 at 366; that is, by declaring expressly that the order for termination become effective on such and such a date. Alternatively, and perhaps even more directly, the order might be that the deed be terminated on such and such a date, unless otherwise ordered in the meantime, leaving no doubt that immediate termination is not being ordered and that there is room to alter the date of operation if the Court is persuaded that that should be done. By the conditions imposed in this case his Honour sought, no doubt properly, to preserve the status quo while the stay was in place but it might have been better, I suggest with respect, to have exacted undertakings or, if refused, to have preserved the status quo by means of injunction. The authenticated order of 4 June 1999 reveals that the Judge took an undertaking from the solicitor for the administrators not to distribute under the deed before 5 p.m. on 21 June; but in respect of RGA, the respondent to the notice of motion, he imposed conditions.
The main question on the first appeal was whether the order for termination which was made on 4 June should be set aside as having been wrongly made. The order was made in the exercise of a discretion - so much was common ground - and so the usual constraints apply in relation to the appeal, according to the well-known passage in the judgment of Kitto, J. in Australasian Coal and Shale Employees Federation v. Commonwealth[1953] HCA 25; (1953) 94 C.L.R. 621 at 627. But in this instance there is an earlier question, the question of jurisdiction.
At least on the face of it, there appears to be some inconsistency in this evidence about new creditors, but emphasising the testimony that such creditors "would be very few and minor only" appellants' counsel submitted that the evidence did not demonstrate insolvency as defined in s.95A of the Law. As at 15 June the secured creditors, he said, were not calling for their money; the unsecured creditors as at 26 March were bound by the first deed of company arrangement, the order for termination made on 4 June being still subject on 15 June to a stay; and current trade creditors were being paid. True it was that this was being achieved only with the assistance of Pindos which was continuing to fund RGA as and when required, but, said counsel, there was no indication on 15 June that that support might be withdrawn and the question of solvency should be determined after taking such assistance into account. He referred to Sandell v. Porter[1966] HCA 28; (1966) 115 C.L.R. 666, Calzaturificio Zenith Pty. Ltd. v. N.S.W. Leather & Trading Co. Pty. Ltd.[1970] VicRp 80; [1970] V.R. 605 at 608 and Standard Chartered Bank v. Antico[1995] NSWSC 31; (1995) 38 N.S.W.L.R. 290 at 329, a case on the liability of officers for incurring debts without reasonable expectation of being able to pay them. I am not sure that these cases are of much assistance to the appellants but at least this can be said: so long as RGA continued to trade I suppose that there was every reason to think that Pindos would continue to support RGA as it had been doing for some time, especially if, as was sometimes claimed, Pindos was doing so in order to recover something of its not insubstantial "investment" to date in RGA. After all, by this time Mr. Dowson had been replaced and the management and control of RGA was in the hands of the new directors, Messrs. Lagas, Economou and Bourke, all of them directors of Pindos, the first-ranking secured creditor after the bank.