REASONS FOR JUDGMENT
1 On 25 February 2004 the plaintiffs, National Investment Institute Pty Ltd (in liquidation) ("National Investment Institute") and its liquidator Mr Andrew Hewitt, commenced a proceeding in the Court seeking orders that the defendant Property Corporate Services Pty Ltd ("PCS") be wound up on the basis of insolvency pursuant to s 459A and 459B of the Corporations Act 2001 (Cth) ("the Act") or alternatively be wound up pursuant to s 461 of the Act on the ground that it was just and equitable so to do.
2 The plaintiffs also sought an interlocutory order pursuant to s 472(2) of the Act that until the hearing of the proceeding a provisional liquidator be appointed to PCS. The plaintiffs have nominated Mr Gregory Keith, a partner of Mr Hewitt at Grant Thornton, Chartered Accountants, for that role. I return to this issue later.
3 At the hearing of the interlocutory application the plaintiffs were supported by the Australian Securities and Investments Commission ("ASIC"). PCS opposed the orders sought and were supported by LAS Investments Corporation Pty Ltd ("LAS"), a company associated with the interests of Mr Leslie Alan Smith, a property developer.
4 The principles to be applied in determining whether a provisional liquidator should be appointed are well established. In general terms it may be said that provisional liquidators are appointed to preserve the assets of the company and to preserve the status quo in relation to the company's affairs. The usual purpose, but not the only purpose, for which a provisional liquidator may be appointed is to preserve the assets of the company and the status quo in relation to its affairs: Zempilas v J N Taylor Holdings Ltd (No 2) (1990) 3 ACSR 518 at 520. In Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd (2003) 47 ACSR 197 Austin J said at 217:
"Thus, the primary duty of a provisional liquidator is to preserve the status quo so as to ensure the least possible harm to all concerned and to enable the court to decide, after a proper final hearing, whether the company should be wound up."
5 In Constantinidis v J L Trading (1995) 17 ACSR 625 (at 636), Kirby P, with him Meagher JA agreed, adopted the following principles which had been set out in Re McLennan Holdings Pty Ltd (1983) 7 ACLR 732 at (737 - 8):
"(1) A provisional liquidator is not automatically appointed by the court for the mere asking … even when the company presents its own petition.
(2) A provisional liquidator may only be appointed after presentation of a duly authorised petition which must disclose a good ground for winding up. …
(4) While the ultimate fate of the petition must be left to the court finally hearing the matter, a provisional liquidator will not usually be appointed unless it appears in the material that a winding up order is likely. This presupposes that there should be adequate evidence adduced on an application for appointment of a provisional liquidator to show that a winding up is, in the absence of material to the contrary, likely.
(5) A company seeking the appointment of a provisional liquidator … is in no way limited. … The circumstances (which may constitute sufficient ground) under which a provisional liquidator may be appointed are infinite: Re Club Mediterranean Pty Ltd (1975) 11 SASR 481, 484 … There is no reason why the public interest should not operate in favour of or against the making of an appointment in particular circumstances. …
(7) Whilst mere evidence of insolvency alone is usually insufficient to justify the appointment of a provisional liquidator at the instance of a creditor … such evidence in the case of an application by a company may be sufficient to show that the application is bona fide and may be capable of constituting a "sufficient ground" …"
6 The facts and relevant circumstances may be shortly stated. The first plaintiff, National Investment Institute, and PCS are each part of a group of companies ultimately owned and controlled by Mr Henry Kaye. In the past, various companies in the group have conducted property advice seminars whilst other companies in the group have undertaken property developments. The ultimate holding company of the group is Provident Group Pty Ltd, of which Mr Kaye is the sole director and shareholder. National Investment Institute is a subsidiary of other subsidiaries of Provident Group Pty Ltd. The group is, in general terms, divided into two streams, an education stream and a property stream. National Investment Institute is part of the education stream, whereas PCS is part of the property stream. PCS is a subsidiary of Provident Properties Pty Ltd which is itself a subsidiary of Provident Group Pty Ltd.
7 On 25 November 2003 National Investment Institute was placed in voluntary administration pursuant to the provisions of Pt 5.3A of the Act. On 18 February 2004 at a meeting of creditors held pursuant to s 439(6) of the Act, the creditors resolved that National Investment Institute go into liquidation.
8 On 2 December 2003, ASIC commenced a proceeding in the Court against PCS and Mr Kaye seeking orders for the appointment of a receiver over the property of Mr Kaye and that of PCS ("the ASIC proceeding"). Interlocutory relief was sought in the form of the appointment of receivers to their property. As a result of undertakings given to the Court periodically by Mr Kaye and PCS the application for the appointment of receivers to their property has been adjourned from time to time and is now scheduled for hearing before Merkel J on 12 March 2004.
9 Relevantly for present purposes, it is necessary to refer to undertakings given to the Court in the ASIC proceeding by PCS and Mr Kaye initially on 4 December 2003 and then on 15 December 2003 and 30 January 2004. On 15 December 2003, PCS and Mr Kaye undertook to the court that:
"1. The defendants and each of them, undertake to the Court that until 4.15 pm on 23 December 2003 they will not, either by themselves or by their servants and agents or by any person who directly or indirectly acts on their direction, transfer, deal with, charge, diminish, mortgage, assign or dispose of any of their assets wherever situated, otherwise than:
(a) for full value and in the ordinary course of business; or
(b) for reasonable legal expenses of an incidental to this proceeding; or
(c) in the case of the second defendant for ordinary living expenses.
2. The defendants and each of them undertake to the court, that until 4.15 pm on 23 December 2003 they will not either by themselves or by their servants and agents or by any person who directly or indirectly acts on their direction, cause or suffer the assets wherever situated of any company under the control of either or both of them to be transferred, dealt with, charged, diminished, mortgaged, assigned or disposed of, otherwise than:
(a) for full value; or
(b) for reasonable legal expenses of an incidental to this proceeding; or
(c) for ordinary living expenses of the second defendant."
10 On 30 January 2004, Mr Kaye and PCS gave undertakings to the Court in the following terms:
"1. The Defendants and each of them, undertake to the Court that until 4.15pm on 12 March 2004 they will not, either by themselves or by their servants and agents or by any person who directly or indirectly acts on their direction, transfer, deal with, charge, diminish, mortgage, assign or dispose of any of their assets wherever situated, otherwise than:-
(a) for full value and in the ordinary course of business; or,
(b) for reasonable legal expenses of and incidental to this proceeding; or
(c) in the case of the Second Defendant, for ordinary living expenses.
2. The Defendants and each of them, undertake to the Court that until 4.15pm on 12 March 2004 they will not, either by themselves or by their servants and agents or by any person who directly or indirectly acts on their direction, cause or suffer the assets wherever situated of any company under the control of either or both of them to be transferred, dealt with, charged, diminished, mortgaged, assigned or disposed of, otherwise than:-
(a) for full value; or
(b) for reasonable legal expenses or and incidental to this proceeding; or
(c) for ordinary living expenses of the Second Defendant."
11 The matters and circumstances to which I will now refer are found in various affidavits and exhibits filed in the proceeding. National Investment Institute was a revenue raising entity within the Henry Kaye Group. It charged students fees for attending educational courses and generated significant amounts of cash. PCS was the treasury entity for the various companies in the Henry Kaye group, which I was informed numbered in excess of 100. PCS did not carry on an active business itself, but was rather the recipient for and dispenser of money for property development purposes.
12 According to Mr Hewitt, at the time he was appointed administrator of National Investment Institute the accounts showed that an amount of the order of $29.1 million had been lent by National Investment Institute to PCS. There does not appear to be any documentation recording or evidencing that loan or the loans which comprise it. An ASIC officer, Ms Sonia Kohary, has been a member of a team formed by ASIC to investigate the affairs of National Investment Institute. She has had access to records of PCS which have disclosed to her that a debt of the order of $28 million due by PCS to National Investment Institute has been reported in its balance sheets from time to time as a current liability at each reporting date.
13 Mr Hewitt has concluded that PCS is insolvent on both the balance sheet and cash flow tests. In the course of the administration of National Investment Institute, Mr Kaye proposed a deed of company arrangement which contemplated the repayment of the moneys owing by PCS to National Investment Institute up to a maximum of $20 million. On 1 December 2003, the then receiver and manger of National Investment Institute wrote to PCS demanding repayment of $28,774,125. PCS has not responded to that letter or the demand made in it. Mr Hewitt contends that the amount of the indebtedness of PCS to the National Investment Institute was $28,635,276 as at 25 February 2004. It has been recorded in the respective books of account of the companies as being a current asset and a current liability which supports Mr Hewitt's view that the loan is at call.
14 LAS, a company associated with Mr Smith, has been involved in a number of commercial transactions and property developments with companies in the Henry Kaye group. On 23 November 2003, PCS granted a fixed and floating charge over its assets and undertakings in favour of LAS ("the charge"). The charge was registered with ASIC on 24 November 2003. On 26 February 2004, the day of the hearing before the Court in this matter, Mr Smith, on his own behalf and on behalf of LAS, appointed Mr Barry Taylor as receiver and manager of the assets and property of PCS pursuant to the charge.
15 On 23 November 2003, Mr Kaye, PCS and other companies in the Henry Kaye group executed a governing deed with Mr Smith and LAS ("the governing deed"). At that time, companies in the Henry Kaye group were in need of further financial assistance to fund a number of their developments and activities. By the governing deed, Mr Smith and LAS agreed to provide financial accommodation by way of forbearing to sue for the repayment of financial accommodation earlier given and by way of further accommodation. In the governing deed it was acknowledged by Mr Kaye and the companies in the Henry Kaye group that PCS owed National Investment Institute approximately $29 million.
16 By the governing deed there was an acknowledgment that LAS had already made an advance of $1,577,000 to PCS. It was also agreed that Mr Smith and LAS would procure an additional advance of $1,423,000 to PCS.
17 The governing deed was varied by a deed of variation on 8 December 2003 ("the deed of variation"). In particular, Mr Smith and LAS agreed to procure an additional advance of $1,423,000 to a property development by Marrickville Holdings Pty Ltd ("the Marrickville company") located at 11-23 Gordon Street, Marrickville ("the Marrickville property"). The Marrickville property has been lent no less than $6 million, by PCS to finance the development of the property, the sale of which is to be settled on Monday next, 1 March 2004.
18 The deed of variation inserted a new clause 5.1.9 into the governing deed which provided in substance that in consideration of the additional advance of $1,423,000 to the Marrickville company, the Marrickville company would, inter alia, grant a fixed and floating charge over its assets in favour of Mr Smith and LAS ("the second charge"). It should be noted that the deed of variation was entered into eight days before the undertaking referred to in par [9] above, which was given to the Federal Court before Merkel J on 15 December 2003. The undertaking given to the court on 4 December 2003 did not include an undertaking in relation to companies under the control or direction of Mr Kaye and PCS.
19 Under cl 6 of the governing deed, Mr Kaye and the Henry Kaye entities therein defined have covenanted that they will indemnify Mr Smith and LAS against the non-payment of any of the financial obligations owed to Mr Smith and LAS.
20 On 13 January 2004 LAS registered the second charge over the Marrickville company, which charge had apparently been created on the previous day. The second charge was apparently lodged pursuant to the provisions of the deed of variation. The plaintiffs contended that this was a breach of the undertaking given to the Court on 15 December 2003. PCS responded that it was a charge given for full value and therefore it was not prohibited by that undertaking. However it is not clear whether full value has been given for the charge. In any event, whether or not there was a breach of the undertaking is simply an evidentiary matter in this proceeding.
21 On 1 March 2004 the Marrickville company, part of the Henry Kaye group, settles the sale of the Marrickville property. After discharging selling costs and paying the mortgage holders, an estimated $6 million will be available to the Marrickville company, which has two substantial creditors recorded in its balance sheet. These are PCS, with a value of $7,755,017, and Vilacon Corporation Pty Ltd which has a debt due to it of $523,415. If one approaches the sale proceeds of the Marrickville property on a pro rata basis, PCS should receive $5.62 million of the $6 million anticipated to be received.
22 Mr Hewitt has expressed concern that PCS and through it, National Investment Institute, will not receive its proportionate entitlement to those moneys and that other creditors in the Henry Kaye group will be preferred ahead of PCS and the creditors of National Investment Institute.
23 The appointment of a provisional liquidator to PCS will not of itself result in the protection or insulation of the sale proceeds of the Marrickville property. If a provisional liquidator is appointed to PCS it would be necessary, if any protective steps were to be taken, for that provisional liquidator to seek undertakings from the Marrickville company to remit moneys to him on the day of settlement.
24 Mr Hewitt has expressed concern that if a receiver and manager were to be appointed to PCS, which has now happened, National Investment Institute may not obtain access to any proceeds from the sale of the Marrickville property.
25 There are numerous loans from National Investment Institute to PCS and from PCS to other companies within the Henry Kaye group, but, according to Mr Hewitt, they are devoid of loan and security documentation. Mr Hewitt has expressed the view that it is essential, in order to ensure that PCS is able to enforce the recoverability of loans and to pay National Investment Institute, that an independent person take control of its affairs and make the requisite demands on other companies within the Henry Kaye group to which it has made loans. He is "fearful" that unless a provisional liquidator is appointed to PCS urgently, PCS will fail to ensure that the proceeds of sales by companies such as the Marrickville company will not be dissipated to other entities within the Henry Kaye group or paid to other unrelated liabilities of Henry Kaye or his other companies.
26 The plaintiffs submitted that the evidence disclosed that PCS was insolvent and that there are just and equitable grounds for it to be wound up. I am satisfied that there is at least a prima facie case that PCS is insolvent. I do not consider at the present time that there is sufficient material before me on which I could make a determination as to whether there is a prima facie case that there are just and equitable grounds for PCS to be wound up. That consideration must await another day.
27 Counsel for PCS accepted that there was a prima facie case that money was owing, but did not accept that the moneys due from PCS to National Investment Institute were repayable at call. On the basis of the evidence before me, I am satisfied that there is a prima facie case that those moneys are repayable at call. If they are not repayable at call, I am satisfied that an amount of the order of $5 million or thereabouts will be repayable on 1 March 2004 because the development of the Marrickville property has been completed in the sense that the property has been sold and National Investment Institute is in need of a repayment of the funds lent to PCS in order to satisfy its unsecured creditors.
28 Mr Kaye swore an affidavit in the ASIC proceeding, on 12 December 2003, in which he denied that the funds loaned from National Investment Institute to PCS were repayable at call or within seven days of demand. Mr Kaye said:
"The funds loaned from NII [National Investment Institute] to PCS were not repayable at call or within 7 days of demand. The purpose of the loans by NII to PCS was to enable PCS to fund long-term property development projects. I intended that the moneys lent would remain available to PCS for its purposes, and the purposes of the construction, landowning and orphaning companies and would not be repaid to NII unless and until NII needed funds for some purpose. In the event that funds were required to be repaid by PCS to NII, I intended that PCS would make such repayment from the repayment of loans by it to the construction, landowning and orphan companies as and when funds became available from the various property development projects. In this way, moneys would become available for payment by PCS to NII within a reasonable period of time and following the orderly sale of property (but not on demand or on seven days' notice)."
29 It is debatable whether Mr Kaye's intention as referred to therein is relevant. Nevertheless, accepting for the moment that his intention is relevant, it is apparent that the moneys were to remain available to PCS for its purposes. So far as the Marrickville company was concerned, that purpose was to fund the development of the Marrickville property. According to Mr Kaye, such moneys would not be repaid to National Investment Institute unless and until it needed the funds for some purpose. National Investment Institute now has such a purpose, namely, the realisation of its assets for the purpose of distribution of the proceeds to its unsecured creditors.
30 It is also apparent from Mr Kaye's affidavit, to which I have referred, that he intended that when funds became available from property development projects, those funds would be the source for PCS to repay the loans to NII. Funds are so becoming available from the Marrickville company on Monday, 1 March 2004.
31 Although Mr Smith and LAS have appointed a receiver to the assets of PCS, I do not consider that such appointment should be a bar to the appointment of a provisional liquidator, having regard to the fact that Mr Kaye has given an indemnity to LAS, to which I have referred earlier, in relation to a shortfall or a deficiency in amounts paid to it.
32 I accept, in the terms referred to by Kirby P in Constantinidis (supra), that the appointment of a provisional liquidator is a drastic step and should not be taken unless there is an immediate need for the preservation of the assets of the company and that there is no other avenue by which the assets may be protected.
33 It is also relevant in considering whether a provisional liquidator should be appointed, to have regard to the state of the accounts of PCS and the extent to which there is or may be difficulty in tracing through and identifying the assets of or payments to and payable to PCS. As I have noted earlier, Mr Hewitt has been unable to locate any loan documentation in the records of National Investment Institute in respect of its loan or loans to PCS. There is no loan documentation, nor is there any security documentation, notwithstanding the fact that the loans amount to millions of dollars.
34 Thus, although a receiver has been appointed to the assets and undertaking of PCS, it is not readily apparent on the material placed before the Court whether the indebtedness or the claimed indebtedness of PCS to Mr Smith and LAS is sufficiently documented.
35 It is important that the loans made by PCS be clearly identified so that the recoverability of those loans may be ensured in the interest of all the creditors of PCS, including National Investment Institute.
36 It is essential that an independent person take control of the affairs of PCS as soon as possible to ensure and protect the integrity of the recoverability of the debts and obligations otherwise due to it. The situation of the Marrickville company is but one example of a number of development projects which, in due course, will generate funds available to PCS. Although it might be contended that a receiver under a debenture charge is a person who is independent of the directors of, and shareholders in, the company, it must be remembered that Mr Kaye's financial fortunes are intimately tied up with those of Mr Smith and LAS. By virtue of clause 6.1 of the governing deed, Mr Kaye has a personal interest in having the interests of Mr Smith and LAS preferred over other creditors. The receiver appointed by Mr Smith is likewise focused on the interests of his security holder.
37 The plaintiffs relied upon an alleged breach of the undertaking given in the ASIC proceedings to demonstrate that the assets of PCS were in jeopardy. It was PCS's contention that although the undertakings were extensive and were in place, they had not been breached but rather had been faithfully observed, and accordingly, there was no need to provide any further protection for the assets of PCS. I do not consider that this is an argument I should accept. Having regard to the fact that National Investment Institute is now in liquidation, it is necessary for it to get at its assets as promptly as can be to enable distributions to unsecured creditors. It is therefore necessary that the assets be realised into cash. The present form of the undertakings does not preclude Mr Kaye from procuring companies such as the Marrickville company from entering into further commercial transactions thereby locking up funds for further periods. The effect of so doing would be to postpone the opportunity for assets to be available for distribution to creditors of PCS and National Investment Institute.
38 The undertakings given in the ASIC proceeding may not have been breached by virtue of the prior date of the governing deed, the variation deed and the terms of the debenture over the Marrickville company, but what has occurred in relation to the Marrickville company demonstrates that the undertakings are not sufficient protection for freezing or isolating debts due to PCS. The undertakings do not assist in ensuring that the assets of PCS, including funds due to PCS from other companies in the Kaye group, can be preserved.
39 I am satisfied that a provisional liquidator should be appointed to PCS for a number of reasons. I point out that the reasons have been crystallised or brought into sharp focus by the issue relating to the settlement of the Marrickville property on Monday, 1 March next. However, it is necessary when considering the application for the appointment of a provisional liquidator to look not only at the immediate facts but also at the overall picture that is presented to the Court and the accumulation of the issues which have been raised before it.
40 I refer to the following reasons:
- Prima facie PCS is insolvent. This was conceded by counsel for PCS;
- PCS is not trading. Accordingly the appointment of a provisional liquidator cannot impinge upon any current trading activities;
- I do not consider the undertakings given in the ASIC proceeding on 30 January 2004 are sufficiently adequate to protect PCS from having the funds that would otherwise be available to it from the Marrickville company and similar companies, being used or disbursed in such a way as to put them further beyond the reach of PCS in the immediate future;
- there is a significant likelihood that the court will wind up PCS on the ground of insolvency;
- the need to preserve moneys due from companies like the Marrickville company.
- the informality and casualness of loans of millions of dollars to PCS. As I noted earlier, there is no loan documentation or security documentation available to evidence or support these loans;
- the desirability of independent supervision of the financial affairs of a group of some 100 companies ultimately controlled by one director.
41 One matter which has troubled me is that ASIC was prepared, or at least has been prepared for almost three months, to be content to accept undertakings from Mr Kaye and PCS in relation to the preservation of its assets without there being need to have a receiver or, by parity of reasoning, a provisional liquidator appointed. However, I am satisfied, as I have noted earlier, that those undertakings are not sufficient to preserve the assets in the form in which they should be preserved at the present time for creditors of PCS.
42 I was also troubled by the fact that a receiver has just been appointed to PCS and that such appointment effectively takes the control of day-to-day activities of PCS out of the hands of Mr Kaye. However, as I have noted earlier, Mr Kaye has given an indemnity to the debenture holder and in my opinion this creates a situation which renders it desirable that someone quite independent of all parties supervise and control the return and distribution of the assets of PCS. I hasten to add that I am casting no aspersions on the integrity of the receiver himself; rather I am referring to the nature of the conflict which is inherent in his appointment, having regard to the indemnity given.
43 PCS submitted that the appointment of the receiver meant that the application for the appointment of the provisional liquidator should be refused. It relied upon the decision of Natwest Australia Bank Ltd v Glen Pacific Pty Ltd (1993) 6 ACSR 711, in which, amongst other reasons, the court refused an application to appoint a provisional liquidator as the applicant had already appointed a receiver. That case is distinguishable because the facts before the court were quite different to those before me in the present application. In particular, different interests were behind the appointment of the receiver and behind the application for the appointment of the provisional liquidator.
44 The plaintiffs have proposed that Mr Gregory John Keith be appointed provisional liquidator of PCS and he has consented to so act. He is a partner of Mr Hewitt, whose staff have already undertaken a substantial analysis of the books and records of PCS. According to Mr Hewitt, the appointing of a different provisional liquidator would result in duplication of work in numerous respects. Mr Hewitt proposes that a partner in another accounting firm who is prepared to act be appointed as an independent arbitrator to determine whether the proof of debt that National Investment Institute lodges in any liquidation of PCS should be accepted in full or in part.
45 PCS has submitted that s 532(2) of the Act precludes Mr Keith from being appointed as a provisional liquidator because he is a partner of "an officer of PCS". It makes that submission because the definition of "officer" in s 532(2) is extended in subs (6) of that section to include "an officer of a related body corporate". However, the appointment is subject to the leave of the Court and in my opinion, there are circumstances which warrant such leave being given, namely the urgency of the application which is being made and the short time frame within which it will be necessary for the provisional liquidator to move, if he so needs to do so, to protect the proceeds of the sale of the Marrickville property. I accordingly grant such leave as may be necessary to enable Mr Keith to be appointed provisional liquidator of PCS.
46 I therefore propose to order that Gregory Keith be appointed provisional liquidator of Property Corporate Services Pty Ltd
47 There is one remaining matter. Regulation 6.1 of the Federal Court Corporations Rules now provides that the court may require the plaintiff to give an undertaking as to damages. I understood counsel for PCS to submit that such undertaking should be given. I am not sure I gave the plaintiff the opportunity to speak to the question of the undertaking and I will now grant the plaintiffs that opportunity.
48 Having heard further from the plaintiffs I am satisfied that the plaintiffs should be required to give an undertaking as to damages as a condition for the appointment of a provisional liquidator.
49 The plaintiffs submitted that an undertaking as to damages was not necessary as PCS was not a trading company and the provisional liquidator would only be obtaining the repayment of loans to PCS and proportionately paying creditors. It was submitted that because PCS was not trading it could not do any damage. The plaintiffs submitted that the presumption should be against the giving of an undertaking as a condition of appointment of a court appointed officer such as a provisional liquidator, unless circumstances warranted the seeking of the undertaking. Counsel for Mr Smith and LAS submitted that the undertaking should be required because the appointment of the provisional liquidator prevented the receiver appointed by Mr Smith and LAS from receiving moneys due to PCS without an order of the Court.
50 Regulation 6.1 came into operation on 1 January 2000. Prior to that date it does not appear that it was the practice to require the giving of an undertaking as to damages as a condition of the appointment of a provisional liquidator: Zempilas v JN Taylor Holdings Ltd (No 2) (supra)at 522. Counsel for the plaintiff submitted that it was not conceivable that the provisional liquidator could not cause any damage to LAS. He relied upon the observation of Austin J in Lubavitch Mazel v Yeshiva (supra) at par [110]:
"…I find it hard to see how the appointment of a provisional liquidator could cause damage to the Yeshiva Properties companies, even if the effect of the appointment of a provisional liquidator were to be to cause the school to be closed forever. I shall therefore not require Lubavitch Mazal to give the undertaking."
51 I do not consider that this is the approach to take in determining whether the undertaking should be given, especially when the appointment is made as a matter of great urgency and on very short notice. The categories of possible damage caused by the appointment of a provisional liquidator was not the subject of any significant consideration. The only interest considered was that of the debenture holder. No other interests were considered. It is not easy for a judge to anticipate the possible damage that might result from the appointment of a provisional liquidator in the circumstances of any particular case. Rather than asking whether the appointment might or could cause damage to any person, I consider the Court should ask whether there are any appropriate reasons against requiring the party seeking the appointment of a provisional liquidator to give the undertaking as to damages.
52 I am satisfied that there are no such grounds other than the consideration that the liquidator of National Investment Institute should be limited in his undertaking to his recourse to the assets of National Investment Institute. Having regard to the circumstances relating to LAS and its recent appointment of a receiver to PCS, I consider that the undertaking as to damages should be required.