REASONS FOR JUDGMENT
1 The Court has before it today an application for leave to appeal brought by the plaintiffs in respect of a judgment which I handed down at 2.15 pm yesterday (Wentworth Metals Group Pty Ltd v Leigh and Owen (as liquidators of Bonython Metals Group Pty Ltd): In the matter of Bonython Metals Group Pty Ltd (In liq) [2013] FCA 349). Under s 24(1A) of the Federal Court of Australia Act 1976 (Cth) an appeal from an interlocutory judgment can only be brought with leave, granted either by the Court or by a judge. The plaintiffs made an oral application yesterday at the time of delivery of the judgment, an application which it is now confirmed was made pursuant to r 35.01 of the Federal Court Rules 2011 (Cth). That rule provides:
35.01 Oral application for leave to appeal
A party may apply orally for leave to appeal from an interlocutory judgment or order of the Court:
(a) at the time of the pronouncement of the judgment or the making of the order; and
(b) to the Judge who pronounced the judgment or made the order.
2 The plaintiffs also had the option of another course in respect of seeking leave to appeal, as is provided for in r 35.11. Instead they elected to proceed, as they were entitled to do of course, under r 35.01. The task then falls to me as the trial judge on the interlocutory matter to decide whether or not leave to appeal should be granted from my interlocutory judgment.
3 One assumes that at least one of the reasons why a decision was taken to proceed by way of an oral application for leave to appeal was because of some urgency in the matter. That urgency relates primarily, as I understand it, to the imminent termination of some amended undertakings that have been provided to the Court which will expire at 2 pm today. The amended undertakings provide as follows:
1. The second defendant undertakes, by its solicitors, that it will not, until 2.00 pm on Friday 19 March 2013, take any step under clause 13.5 of the Exploration Joint Venture and Farm-in Agreement (JVA) between the second defendant and the third defendant.
2. The third defendant undertakes, by its solicitors, that it will not, until 2.00pm on Friday 19 April 2013, exercise or waive any of its rights pursuant to clause 13.4 of the JVA.
4 I should also observe at this point that there is another degree of urgency about the matter because the pre-emptive rights held by the third defendant under the joint venture agreement will themselves expire this Sunday. That is a matter that I will come back to and deal with in due course.
5 When the oral application for leave to appeal was made yesterday the application was stood over to be heard by me this morning at 9.30 am in order to provide the plaintiffs with an opportunity to at least review the judgment which I delivered yesterday.
6 There was no real dispute between the parties concerning the relevant principles governing the exercise of the discretion to grant leave to appeal against an interlocutory judgment. Those principles are well settled. They are set out in a well-known decision of the Full Court of this Court in Décor Corporation v Dart Industries (1991) 33 FCR 397. The Full Court (constituted by Sheppard, Burchett and Heerey JJ) said at 398-399:
The first test, which relates to the prospects of the proposed appeal, is "whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its being reconsidered by the Full Court". The second "is whether substantial injustice would result if leave were refused, supposing the decision to be wrong.
…
In my opinion, the sufficiency of the doubt in respect of the decision and the question of substantial injustice should not be isolated in separate compartments. They bear upon each other, so that the degree of doubt which is sufficient in one case may be different from that required in another. Ultimately, a discretion must be exercised on what may be a fine balancing of considerations. (citations omitted)"
7 The relevant principles were also stated more recently in another decision of the Full Court of this Court in Sutherland v Pascoe; in the matter of Matrix Group Limited as Trustee for the Matrix Group Unit Trust (in liq) ACN 061 549 371 [2013] FCAFC 15. In particular, the Full Court stated at [41]:
Some of the relevant principles are identified in the Full Court's decision in Décor Corporation Pty Limited v Dart Industries (1991) 33 FCR 397. The following principles are of particular relevance here:
(a) whether, in all the circumstances, the primary judge's decision is attended with sufficient doubt to warrant its being reconsidered by the Full Court;
(b) if leave were refused, would substantial injustice occur supposing the decision to be wrong;
(c) a distinction may be drawn between an interlocutory decision on a point of practice or procedure as opposed to an interlocutory decision determining a substantive right; and
(d) given the breadth of the discretion in determining whether or not to grant leave to appeal, allowance also needs to be made for cases raising special considerations.
8 The plaintiffs also placed particular reliance upon a passage in the High Court's decision in Ex parte Bucknell (1936) 56 CLR 221 which emphasises the relevance in the exercise of the discretion whether or not to grant leave to appeal as to whether the interlocutory decision is tantamount to determining the matter on a final basis. At 225-226 the High Court said:
There is one class which raises little difficulty. If the interlocutory order…has the practical effect of finally determining the rights of the parties, though it is interlocutory in form, a prima facie case exists for granting leave to appeal. For example, a judgment for either party on a demurrer might, in effect, be decisive of the whole litigation. Although such a judgment would often be interlocutory, it might be final in determining the issue between the parties, and, in such a case, leave would be granted almost as of course.
9 The main issue (whether or not leave to appeal should be granted) involves the exercise of discretion which, of course, should take into account established principles and considerations. Without derogating from the very broad discretion which is necessarily presented by an application for leave to appeal, the various principles governing the exercise of that discretion can, in broad terms, be reduced to two propositions. The first is whether the decision the subject of the proposed appeal is sufficiently doubtful to warrant it being reconsidered by the Full Court. The second broad proposition, as reflected in the authorities to which I have made mention, is whether it is in the interests of the administration of justice that the appeal should be allowed to proceed. It is in that context that issues of substantial injustice to one or other of the parties, in the event that leave is refused or granted, becomes a relevant consideration.
10 There is another matter which has weighed heavily with me as a relevant consideration in determining an application made under r 35.01. It is as follows: the view has generally been taken in this Court that there is no appeal from an order of a judge granting or refusing leave to appeal against an interlocutory judgment. Probably the best known authority in support of that proposition is Thomas Borthwick & Sons (Pacific Holdings) Ltd v Trade Practices Commission (1988) 18 FCR 424. Having regard to that important consideration, any application for leave to appeal made under r 35.01 (or, I might add, made to any single judge of this Court) should be assessed, at least in part, by reference to the potential consequences for an unsuccessful applicant seeking such leave. That consideration is also partly reflected in the second broad proposition which I outlined above by reference to the due administration of justice and relevant substantial injustice to a party if leave is refused.
11 The first matter then becomes one of whether the plaintiffs have established that there is sufficient doubt in the judgment handed down yesterday as to warrant reconsideration by the Full Court. The plaintiffs have filed in Court today (after having produced an earlier draft document this morning), a proposed notice of appeal. It sets out three proposed grounds of appeal: the first dealing with the question of serious question to be tried, the second dealing with balance of convenience and the third dealing with damages as an adequate remedy. It is convenient if I deal with those matters seriatim.
12 As to the proposed grounds of appeal concerning my conclusion that there was no serious question to be tried, the plaintiffs particularised the following three draft grounds of appeal on that matter:
a) His Honour erred in failing to take into account evidence as to the value of the interest of BMG in the Hawsons Iron Project according to the 2011 valuation evidence and the extent to which the Liquidators ought to have considered the same in reaching their decision
b) His Honour erred in failing to apply the proper test for the duty applicable to the exercise by the Liquidators of their power of sale in the circumstances, namely a duty to exhibit care including diligence and skill to an extent that is reasonable in all the circumstances, including the facts that the Liquidators are persons practicing a profession, that they hold themselves out as having special qualifications, training and experience pertinent to the liquidator's role and function and that the Liquidators are paid for their work.
c) His Honour erred in taking into account any analysis of the business judgment rule that might be available in defence of the Liquidators' conduct upon a final hearing an in accepting the untested evidence of the Liquidators upon the interlocutory application for an injunction.
13 The first identified basis for appeal relates to an allegation that the primary judgment failed to take into account evidence as to the value of the interest of BMG in the Hawsons Iron Project. In particular attention was drawn to the availability of valuation evidence dating back to 2011 in respect of the value of the interest. It was said that the liquidators ought also to have considered that valuation evidence in reaching their decision and that the primary judgment fails to address the plaintiffs' complaints in respect of that matter. I do not consider that this proposed ground exposes an aspect of the primary judgment which suggests that it is attended by sufficient doubt as to warrant reconsideration. That is because the liquidator in his affidavit makes express reference to Robertson J's judgment in Ample Source International Limited v Bonython Metals Group Pty Limited; In the Matter of Bonython Metals Group Pty Limited (No 6) [2011] FCA 1484 in which his Honour dealt at some length with the relevant valuation evidence which was before him.
14 As to the claim that the primary judgment fails to deal with the issue of the 2011 valuation evidence, it is to be noted that express reference is made to that evidence in [33(b)] of the reasons for judgment. Equally significantly perhaps, is the observation that is made at [45(c)] of the reasons to the effect that there was no obligation on the liquidators to obtain a valuation of the BMG joint venture interest and they were entitled to proceed by way of a competitive sales process. The process which was selected by the liquidators was one which of its nature was reasonable to adopt and would itself provide material concerning the true value of the property. I fully accept that the plaintiffs have criticised various aspects of that process but, as is evident from my reasons for judgment, I do not accept that any serious issue is raised by any of those criticisms.
15 There is also a degree of irony about this aspect of the proposed appeal which places heavy emphasis on the preferred value of the interest being assessed as a little below $41 million back in 2011 when the plaintiffs themselves put in a unsuccessful bid of $13 million. In any event, I do not believe that the proposed ground of appeal warrants leave being granted.
16 The next attack on the judgment, insofar as whether there was a serious question to be tried, relates to the question of whether I failed to apply the proper test for the duty applicable to the exercise of a power of sale by liquidators in the circumstances of this case. Emphasis was placed on passages from the judgment of Lindgren J in Pace v Antlers Pty Ltd (in liquidation) (1997) 80 FCR 485 (Pace), where his Honour said:
The liquidator's duty to exercise reasonable care and skill has been the subject of some debate. The following propositions, however, appear to have gained acceptance in Australia:
The court should not be quick to condemn a person in the difficult position of a liquidator, and, in particular should not judge his or her conduct with wisdom born of hindsight…it is not every error of judgment that will be accounted negligence;
At the same time a high standard of care and diligence is to be expected of a liquidator as a professional person who is being paid for his or her services;
A liquidator is under a duty to complete that administration of the assets within a reasonable time and not to protract the liquidation unduly;
If there is a difficulty at any stage of the administration, it is the liquidator's clear duty to inform the court and seek directions.
…
In my view, a liquidator must exhibit care (including diligence) and skill to an extent that is reasonable in all the circumstances. "All the circumstances" will include the facts that a liquidator is a person practising a profession, that a liquidator holds himself or herself out as having special qualifications, training and experience pertinent to the liquidator's role and function, and that a liquidator is paid for liquidation work. "All the circumstances" will also include the fact that some decisions and courses of action which a liquidator is called upon to consider will be of a business or commercial character, as to which competent liquidators acting with due care, but always without benefit of hindsight, may have differences of opinion (citations omitted).
17 There are two points to be made immediately about this proposed ground of review. The first is to refer to [29] of the reasons for judgment delivered yesterday in which, in rejecting an argument which was then advanced by the plaintiffs to the effect that there was an obligation on the liquidators to achieve the best possible price by reference to s 420A of the Corporations Act 2001 (Cth), I said:
In exercising their powers under the relevant provisions of s 477 of the [Corporations Act 2001 (Cth)], the Liquidators are subject to some relevant duties, including duties of skill and care and duties owed by a fiduciary to the company, its creditors and its contributories.
18 Secondly, I also note that the passages relied on from Lindgren J's judgment in Pace (which to my mind are consistent with the more succinctly expressed matters referred to in my judgment), also include references to decisions such as Re Mineral Securities Australia Limited (in liq) [1973] 2 NSWLR 207 in which the principle of business judgment and the standard of review of a liquidator's decision are set out. On my reading, they are entirely consistent with the analysis in my decision.
19 That leads then to the third aspect of the application for leave to appeal on the serious question matter. That relates to the question of the relevance of the business judgment rule. The plaintiffs say that leave to appeal should be allowed in order to examine a proposed ground of appeal that I erred in taking into account any analysis of the business judgment rule that might be available in defence of the liquidators' conduct upon a final hearing and also in accepting the untested evidence of the liquidators upon the interlocutory application for an injunction.
20 There are a couple of points that need to be made in respect of that proposed ground of appeal. The first is that it is difficult to see how any sufficient doubt warranting an appeal could be found in the relevance attached in the primary judgment to the need to take account of the business judgment rule in dealing with a power of sale. I note in this respect that Barrett J in his decision in Hausmann v Smith [2006] NSWSC 682, a decision which incidentally also involved an application for interlocutory injunctive relief to restrain liquidators from making or completing a contract for the sale of a company's assets, had no difficulty in that context in bringing to account the business judgment rule. I refer in particular in this respect to [14] of his Honour's judgment which refers itself to an earlier decision by Young CJ in Eq in Naumoski v Parbery (2002) 171 FLR 332 (in particular at [13]-[15]).
21 It is true that Young CJ in Eq in that case was dealing with an application on a final basis. But, as I have already indicated, Barrett J (correctly in my view) regarded the following observations made by Young CJ in Eq as applicable, in particular at [13], where his Honour said:
…There is a considerable amount of learning to the effect that under the modern system of company liquidation, the court rarely interferes with the exercise by liquidators of their statutory powers, and in particular it does not interfere where the liquidator's decision is really one of commercial judgment.
22 In my respectful view, there is nothing in my decision handed down yesterday to suggest that the business judgment rule operates to make liquidators' decisions "unassailable", to adopt the word used by Mr Baird in oral argument before me today. On the contrary, it seems to me reasonably clear that the point that was being made was that, in dealing with an application for interlocutory relief in the context of a substantive appeal under s 1321 of the Corporations Act 2001 (Cth), some account has to be taken of the relevance of the business judgment rule and to the fact that the decisions which are being impugned are decisions which necessarily drew upon considerable amounts of the business and commercial acumen of the liquidators. I have great difficulty in seeing how there is any issue of sufficient doubt about the use to which the business judgment rule was put in the primary decision to warrant leave to appeal.
23 The second aspect of the plaintiffs' proposed challenge on the business judgment issue relates to the complaint that there was an appellable error in accepting the untested evidence of the liquidators upon the interlocutory application for an injunction. I have to say that I have great difficulty with that argument in circumstances where, as I pointed out to Mr Baird in oral argument today, it was the plaintiffs' presumably considered forensic decision not to seek to cross-examine Mr Leigh on his evidence. That evidence contained a detailed explanation as to the reasons why he rejected the bid by WMG as well as the reasons why he accepted the Pure Metals offer.
24 The matter was one for the plaintiffs to consider as to whether or not they wished to subject Mr Leigh to cross-examination in respect of those reasons. No attempt was made by the plaintiffs to seek to cross-examine him. I might also add in this context that it was made clear in [31] of my reasons for decision that the plaintiffs' application for interlocutory injunctive relief did not require any final views to be expressed on the question whether the liquidators had acted reasonably or unreasonably, or indeed been responsible for some other defect in their conduct or decision-making which would warrant judicial intervention within the scope of authorities such as French J's decision in ASIC v Forestview Nominees Pty Ltd (Receivers and Managers Appointed) [2006] FCA 1530. The views that were expressed were views which reflected the interlocutory nature of the application which was heard and then determined.
25 So for all those reasons I do not consider that the plaintiffs have demonstrated that that part of the decision relating to the absence of a serious question to be tried is attended with sufficient doubt to warrant it being reconsidered.
26 That would be sufficient of itself to dismiss the application for leave to appeal but, for completeness, I will proceed to deal with the proposed grounds of appeal in respect of my observations concerning balance of convenience and the adequacy of damages as a remedy.
27 The proposed notice of appeal simply states that I erred in determining that the balance of convenience favoured the defendants. It is singularly uninformative about the true nature of the appellable error which is said to taint that aspect of my reasons (which were in their nature, and for reasons that I gave, dicta). The plaintiffs' written submissions elaborate on the nature of their grievances concerning my findings on balance of convenience. There are three primary matters that are raised. The first is a proposition that is expressed as follows:
On no analysis of the legal position do the plaintiffs themselves have any cause of action for damages, and the related proposition that damages accordingly cannot be an adequate remedy.
28 There are two matters which ought to be stated immediately in respect of those propositions. The first is that in their originating process filed on 4 March 2013 and in the amended originating process filed 28 March 2013 the plaintiffs themselves seek damages. An inference can be reasonably drawn that, at least the time of the proceedings being commenced and when the amended originating process was filed, the plaintiffs considered that they may have an entitlement to damages. Mr Baird has submitted in oral submissions before me today that he has a note of the hearing last week in respect of the application for interlocutory injunctive relief in which Mr Newlinds SC (who then appeared for the plaintiffs) acknowledged that the plaintiffs would have no such entitlement to damages. The transcript was not referred to, but I have no reason to doubt what Mr Baird's note reflects. Having said that, however, Mr Newlinds SC also drew attention at the hearing to the possibility of damages being able to be obtained from the liquidators through the possible appointment of a special liquidator.
29 In my judgment I also drew attention to a line of respected authority standing for the proposition that, even though a statutory derivative action may not be available, it would be open to the second plaintiffs (who collectively hold 64 per cent of the issued shares in BMG), to make an application seeking to take advantage of the inherent jurisdiction of the Court to permit proceedings to be taken in the name of the company at the instigation of a member (or also I might add a creditor), even against the opposition of a liquidator. The cases are referred to in [59] of the primary judgment. I fully accept that issues of discretion would arise if the plaintiffs sought to pursue an action which could lead to either the appointment of a special liquidator or, alternatively, a favourable outcome in terms of the exercise of the inherent jurisdiction to which I have just made reference. But that is not an unusual feature of the judicial process and I am not satisfied that the plaintiffs have indicated that the views I expressed on balance of convenience were attended with sufficient doubt to warrant reconsideration by the Full Court.
30 There is another matter which is also relevant in this regard. Mr Jammy, who appears for the third defendant, has drawn attention to the fact that the plaintiffs have indicated that, were leave to be granted, they would seek a short injunction in order to permit preparation of the appeal. Mr Baird indicated to me that, were leave to appeal granted, the plaintiffs would be in a position to proceed with the appeal from as early as the start of next week. That is all well and good but there is a particular difficulty about the foreshadowed need for there to be a short injunction and it transcends the fact that the undertakings, which I have outlined above, will expire at 2 pm today. Of particular concern to the third defendant is the fact that its pre-emptive rights under clause 13.4 of the joint venture agreement will expire on Sunday. Any short injunction would deprive the third defendant of that right. That is an important matter when it comes to an assessment of the second broad consideration I outlined above, namely, whether substantial injustice would result if leave to appeal were refused or, equally, what the consequences of the grant of leave to appeal accompanied by an extension, albeit for a short time, of injunctive relief would have on other parties in the proceedings.
31 For completeness, on the issue of adequacy of the undertaking as to damages, I remain of the view expressed, albeit in obiter, and have not been satisfied by any of the plaintiffs' arguments that those obiter comments were of a nature which would warrant leave to appeal being granted.
32 For all those reasons therefore, and mindful as I am that my decision on the application for leave to appeal itself cannot be tested (a matter which has weighed heavily with me), I nevertheless find that the application for leave to appeal should be refused and the plaintiffs ordered to pay the defendants' costs of, and incidental to, that application.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.