National Australia Bank Ltd v Bond Brewing Holdings Ltd

In allowing the respondents' appeal from the orders made by Beach J., the Full Court pointed to a number of undesirable features of the ex parte application, including the circumstance that it was made ex parte when notice could have been given. The principal factor which induced their Honours to set that order aside was that it operated unfairly by reason of the primary judge having failed to require the applicants to give an undertaking as to damages. The applicants did not offer such an undertaking before the primary judge, either on the ex parte application or on the subsequent contested hearing. Nor did they offer such an undertaking before the Full Court.

Their Honours expressed the view that there were limitations on the exercise of the power of the court to appoint receivers which, having regard to the way in which the applicants' case had been presented, would inhibit the appointment of receivers to a company at the suit of an unsecured creditor. None the less, the Court posed for itself as the critical and primary question for determination: "whether, on the findings of fact except in so far as these have been successfully assailed, there is such a danger of future breaches of covenant proved as made it appropriate in all the circumstances to appoint receivers and managers."

We find it unnecessary to determine whether his Honour was wrong in concluding that it was strongly arguable that sidestreaming and upstreaming had continued since 15 November 1989, for even on his Honour's finding here we would not ourselves be satisfied that an injunction would not meet the case. We say this despite the highly unfavourable view formed by the learned Judge of the behaviour of some at least of those who controlled the Bond group. We would regard the danger of the carrying into effect of the agreement for the sale of the Australian brewing assets as not sufficient in all the circumstances, including the undertakings, to warrant even an injunction, but if any relief was to be given an interlocutory injunction was sufficient. The right conferred on the banks in November 1989 to have Peat Marwick Hungerfords monitor and review the day to day activities and affairs of the B.B.H. group is important here.

As has been indicated, their Honours attached great importance to the absence of an undertaking as to damages which they described as the "usual undertaking" to be required, clearly having in mind contested applications as well as ex parte applications for the appointment of receivers and managers. This led their Honours to conclude that the primary judge was incorrect in refusing on 9 February to set aside his earlier order. The Full Court's conclusion in this respect is expressed in these terms:

In any event, if any case for the interim or interlocutory appointment of receivers and managers of the undertakings and assets was made out, the usual undertaking would have to be exacted, and justice would require that the undertaking attach to the original appointment as well as to any order modifying the original order. The argument on the appeal has proceeded on the basis that the respondents are not willing, in order to keep the receivers in possession, to give an undertaking as to damages which will protect the appellants against the consequences of the orders of 29 December and 9 February. To preserve the receivership without a satisfactory undertaking as to damages is unthinkable.

The applicants seek special leave to appeal on four grounds, namely: 1. that the Full Court erred in principle in treating as settled law or practice that a party obtaining the appointment of a receiver pending trial, after a contested hearing, is required to give an undertaking as to damages; 2. that the Full Court erred in saying that a receiver could only be appointed if an injunction would not afford sufficient protection; 3. that the Full Court was wrong in concluding that there was power to appoint a receiver to a financially embarrassed company at the instance of a hostile creditor, but the power would not be exercised; and 4. that, in addition to the matters already mentioned, the Full Court misapprehended the nature of the applicants' case, the way in which the primary judge had treated the case and the fact that an undertaking to commence proceedings had been given to the primary judge. As will appear, it is unnecessary for us to deal with these grounds seriatim. We are prepared to assume, for the purposes of this application, that circumstances could arise in which the appointment of a receiver of the assets of a company which is not expressly alleged to be insolvent would be justified even on the application of a plaintiff who claims to be an unsecured creditor: cf., e.g., Derby & Co. Ltd. v Weldon [47] .

Even on that assumption, however, we do not think that the proposed appeal in the present case would enjoy sufficient prospect of achieving a restoration of the primary judge's orders. For one thing, it is clear that a contrary view to that involved in such an assumption was not part of the ratio decidendi of the decision of the Full Court. To the contrary, the members of the Full Court expressly emphasized "that there was no attempt at any stage in the present case to make a Mareva-type case of apprehended danger of dissipation of assets". We would note that we do not read their Honours' reference to a Mareva-type case as involving a mistaken view that a Mareva injunction cannot be obtained in the absence of a positive intention to frustrate any judgment: see Jackson v Sterling Industries Ltd. [1] .

Further, and more importantly, the primary issue on the appeal to the Full Court was whether the primary judge had been in error in refusing to vacate or rescind the orders of 29 December 1989 appointing receivers. Those orders had been made ex parte and without any undertaking as to damages being proffered or required. It is clear that they should not have been made in those circumstances. The orders should have been rescinded or vacated when the matter came again before the learned primary judge, in the continued absence of any proffered undertaking as to damages even at that stage.

The damage to be apprehended by the making of an order for the appointment of a receiver and manager is not so much that the receiver and manager may so exercise his powers as to occasion loss in the business to which he has been appointed. It consists of the consequences flowing from the fact of appointment and of the defendant's loss of "its title to control its assets and affairs" (the phrase of Viscount Haldane L.C. in Parsons v Sovereign Bank of Canada [2] ).

Where damage of those kinds is to be apprehended as flowing from the appointment of a receiver by interlocutory order, consideration must be given to requiring, from the party seeking the order, at least some appropriate undertaking as to damages in the event that the appointment is ultimately shown to be unjustified.

In the present case, where the judge at first instance was prepared to appoint receivers and managers over the whole of the assets and undertakings of the respondent companies on the application of unsecured creditors, it was clear that some such undertaking was an essential condition to the making or the continuation of an order.

In the result the application for special leave to appeal is refused.