"(a) a person entitled to the property; or
(b) a person in or to whom it seems to the Court appropriate that the property be vested or delivered … ".
17 Mr Aitken of counsel who appears for the plaintiff says that the plaintiff is a person who has an interest in the disclaimed property. The plaintiff is a bailee of the material and it is well recognised that such a bailee has what is often described as a "special property" in the goods bailed; see eg A L Hamblin Equipment Pty Ltd v Federal Commissioner of Taxation (1974) 131 CLR 570, 581 and Palmer, Bailment (Law Book Company, Sydney, 1979) pp 65-66. Then he says that his client suffers great prejudice because she has the goods on her property which are occupying about 50% of her storage area and constitute 80% of all the goods which she currently has stored in her warehouse. Furthermore, it will cost about $400,000 for her to dispose of the goods with no return other than a claim against the company in liquidation. She says that no prejudice will be caused to the Company's creditors because the Company has not got any creditors, it being a members' voluntary winding up where the liquidator must be taken to have formed the view that the Company will be able to pay all its creditors in full within 12 months of the commencement of the winding up or else he would have had to comply with his statutory duty to call a meeting under s 496 of the Act, which he has not done.
18 Mr Menzies QC and Mr Philips, who appeared for the first and second defendants, submitted that no order should be made setting aside the disclaimer because the first defendant, the Company, has no licence to either store or process contaminated waste. As the first defendant could not take possession of the drums, the Court should not order it to commit a breach of the law. Furthermore, no order could be made against the liquidator personally because company property does not, short of a vesting order, vest in the liquidator and the contaminated oil is a problem for the Company not the liquidator personally.
19 They also submit that no proceedings can be brought against any liquidator, including a liquidator in a members' voluntary winding up, without leave of the Court which the Court has not yet given. They recognise that the authorities only go so far as to the say that this applies to a Court appointed liquidator, but cite the 4th edition of McPherson on the Law of Company Liquidation (LBC, Sydney, 1999) pp 287-8. The submission is one which cannot be accepted. The reason why one cannot sue a Court appointed liquidator is as McLelland J pointed out in Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25, 28; (1991) 9 ACLC 1587, 1590, based on the decision of Lord Brougham LC in Aston v Heron (1834) 2 MY & K 390, 396-7; 39 ER 993, 995, that the position of a Court appointed liquidator is the position of the Court and no-one can disturb it but through an application to the Court. Even if this point were of some merit, the Court would almost certainly grant leave to sue in the present circumstances.
20 Mr Menzies QC and Mr Philips say that in issuing the notice and attempting to disclaim the property, the liquidator is acting in the best interests of the Company and its creditors at large. As all the creditors are to be paid in full one doubts the second part of that statement: the first part is undoubtedly correct, but one may ask "So what?".
21 Counsel then say that an order setting aside the notice of disclaimer will not necessarily achieve what the plaintiff wishes to achieve, because the Court cannot make a vesting order vesting the material into either the Company or the liquidator, as they do not hold a licence to keep it.
22 They then say that there is no certainty that the property is property of the Company in any event. The short answer to this is that if it is not, then how can it be disclaimed. However, certainly when I first started the hearing of this case I wondered whose property I was really dealing with, and I thought that the questions which I directed to counsel showed that the Company had at least some property in the goods and that no-one else was asserting a title higher than that of the Company.
23 Counsel suggest that the property is bona vacantia and may have vested in the Crown. They refer to Re Potters Oils Ltd [1985] BCLC 203, 205.
24 Because I had notice of this submission at the commencement of the hearing, I indicated that I thought that the Crown might need to be joined as a party. No-one was particularly interested in picking up that suggestion so that the decision was made to proceed with the case as far as possible. I note, however, that in Re Potters Oils Ltd Harman J made it quite clear that he would not thrust such a chattel on the Crown without the Crown being given an opportunity to be heard and that in the only comparable case to the present, Tubbs v Futurity Investments Ltd [1998] 1 NZLR 471, the Crown was also a party.
25 I will return to Tubbs' case in a moment. Mr Menzies QC and Mr Philips say that I get no assistance from that case at all because of the completely different form in which the current disclaimer provisions of the Corporations Act appear. Traditionally, liquidators had to get leave to disclaim. To a great extent whether the liquidator got leave to disclaim was discretionary. However, in the exercise of that discretion, the Court took into account the effect of the disclaimer on all interested parties: Re Katherine et Cie Ltd [1932] 1 Ch 70; Re Middle Harbour Investments Ltd [1977] 2 NSWLR 652 and Re Tulloch Ltd (1978) 3 ACLR 808. Indeed, in that lastmentioned case, Needham J said at 816-7 that the discretion is exercised by taking into account the prejudice to the creditors if the disclaimer is not allowed weighed against a prejudice to other interested persons if the disclaimer is permitted to take place.
26 Thus, although after the Harmer Report the disclaimer provisions of the Corporations Act were recast, I do not consider that there is any great change from the previous position. There is only a change in degree in that s 568B(3) means that the Court does not set aside the disclaimer unless it finds not only that the prejudice falls one way rather than the other, but only if the prejudice caused to other interested persons is "grossly out of proportion" to the prejudice suffered by the creditors.
27 The only reported case on s 568B to my knowledge is Re Real Investments Pty Ltd [2000] 2 Qd R 555, 563-565.
28 In that case, Chesterman J laid down some clear guidance as to the exegesis of sub-section (3). He said at [29]-[31]:
"Section 568B demands a comparison between the position of the person who will lose if the disclaimer is not set aside and that of the person who will lose if it is. Only if the prejudice to the former is 'grossly out of proportion' to the prejudice of the latter will the court be authorised to set the disclaimer aside. 'Prejudice' is a wide term, no doubt chosen deliberately. In most, if not all, cases one would expect prejudice to manifest itself in financial disadvantage.
[30] In fact two sets of comparisons are called for. The first is an examination of the relative positions of [the company] and the creditors, on the supposition that the agreement is ended by disclaimer. The second is the same examination on the supposition that the agreement remains in force. The contrast in position between those comparisons allows the court to make the assessment described by the section.
[31] The pre-condition is satisfied only if the alteration in [the company's] position between the first and second comparisons is to its disadvantage and is grossly out of proportion to the prejudice suffered by the creditors as shown by the two comparative positions. What is meant by 'grossly out of proportion' is, I think, that the change in [the company's] position between comparison one and comparison two must be much greater than the alteration in the creditors' position."
29 His Honour said later at [39]-[40]:
"[39] I do not think that s 568B(3) is concerned with such potentialities. It is concerned with a more immediate comparison. It does not look to what subservient advantage may be wrought from the consequences of the disclaimer. It compels examination of what the primary consequence will be to those interested in the property or contract and the creditors should there be a disclaimer. Anything beyond direct consequences is to be ignored.
[40] The language of the section suggests this approach. It talks of prejudice that the disclaimer 'would' cause, not that it 'might' cause. Any comparison beyond the immediate and direct effect of the disclaimer is too hard to evaluate with the necessary certainty to arrive at a conclusion that disproportionate prejudice 'would' occur."
30 I would respectfully adopt what his Honour said. However in a case where there are no creditors who will remain unpaid, the prejudice to the creditors is close to nil so that the prejudice to be demonstrated by the applicant is not great.
31 In Tubbs, Tubbs was the liquidator of a foundry. An integral part of the furnace owned by the foundry was a number of capacitors containing PCBs. The liquidator sold the furnace excluding the capacitors. The liquidator then sought to disclaim the PCBs. The liquidator sought consent to disclaim. Hansen J said that it was proper for the Court to balance the advantages and disadvantages of a disclaimer to be gained by the liquidator as against that of persons affected by the disclaimer (477). His Honour held that he should not exercise his discretion in favour of the disclaimer. He said at 479-480:
"In this case, the liquidator was also the receiver. The receiver sold the goods knowing of the position. It was a voluntary, not Court-ordered liquidation. If disclaimer was allowed it would mean that a voluntary liquidation was no more than a way in which the company in liquidation could avoid its regulatory obligations and improve the payout to the creditors in circumstances where it was a creditors' voluntary liquidation. I do not believe the discretion should be exercised to achieve that result."
32 In my view, the disclaimer should be set aside, not only for the reasons given by Hansen J which are closely applicable to the present case where the whole of the evidence strongly suggests that the present is a device by those controlling the Company to avoid liability for the contaminated waste, but also because there is no appreciable prejudice to the creditors as they are all to be paid and there is significant prejudice to the plaintiff. The prejudice to the plaintiff is grossly out of proportion to the prejudice the other way.
33 Having reached this conclusion, it is not necessary to consider whether the Crown should have been joined. My feeling is, however, that in this sort of case generally, the Court would expect the Crown to be served and made a party.
34 The question now is what should happen to the material?
35 As I have set aside the disclaimers, there is no room for making any order under s 568F as that section deals solely with the Court's powers over disclaimed property.
36 However, as the matter was fully argued, I should say something about it in case the matter goes further.
37 Section 568F is the successor of legislation which has been in force since the 1929 English Act. The classical section was such as s 323 of the English Companies Act 1948 which continued to find its place in NSW Companies Acts up to s 296 of the 1961 Act. Section 296(6) of the 1961 Act empowered the Court to "make an order for the vesting of the property in or the delivery of the property to any person entitled thereto, or to whom it seems just that the property should be delivered by way of compensation for such liability as aforesaid". The purpose of that provision was to enable effect to the given to the intention of the legislature that the disclaimer should cause as little disturbance to the rights and liabilities of third parties as possible; see Re Carter & Ellis; Ex parte Savill Bros [1905] 1 KB 735, 742, 744. Thus, under the previous section, orders were often made vesting disclaimed property in a mortgagee: Re Carter & Ellis (supra); Re Middle Harbour Investments Ltd (supra) at p 658.
38 In Re Tulloch (supra) at 815, Needham J said of that sub-section:
"It may be that there could be circumstances where a vesting order could be made in 'favour' of an unwilling recipient. I cannot, for the moment, conceive of such a case as being 'just', but I do not have to decide, in this case, whether such an order could ever be made."