William Timothy Cape v Redarb Pty Limited (Receiver & Manager Appointed); Robert John Yeomans; Junstamp Pty Limited; Olaks Pty Limited; G & L Warehouse Pty Limited; A J Garrard (A Male) Trading As Canberra Auto Parts & Accessories; T & K Peppas; Alsai Pty [1990] ACTSC 4 (2 February 1990)

SUPREME COURT OF THE ACT

WILLIAM TIMOTHY CAPE v. REDARB PTY LIMITED (RECEIVER & MANAGER
APPOINTED); ROBERT JOHN YEOMANS; JUNSTAMP PTY LIMITED; OLAKS
PTY LIMITED; G & L WAREHOUSE PTY LIMITED; A J GARRARD (a male)
trading as CANBERRA AUTO PARTS & ACCESSORIES; T & K PEPPAS; ALSAI
PTY LIMITED; SOWLIN PTY LIMITED; ROGER ANTHONY NORTON and ESTATE OF
THE LATE GEORGE ADAMS
S.C. No. 34 of 1990
Injunction

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Gallop J.(1)

CATCHWORDS

Injunction - application to restrain completion of sale of businesses - scope of power to give directions to Court appointed receiver

Fraud - standard of proof

Costs - discretion of the Court - test for granting costs on a solicitor/client or indemnity basis

Duffy v. Super Centre Development Corporation Limited (1967) 1 NSWR 382

Re Mineral Securities Australia Limited (In Liq) (1973) 2 NSWLR 207

Briginshaw v. Briginshaw [1938] HCA 34; (1938) 60 CLR 336

Australian Coarse Grain Pool Pty Limited v. Barley Marketing Board of Queensland (1982) 46 ALR 398

Re Fountain Select Meats (Sales) Pty Limited v. International Produce Merchants Pty Limited & Ors (1988) 81 ALR 397

HEARING

CANBERRA
2:2:1990

ORDER

(1) The interim orders made on 19 January 1990 be dissolved.

(2) The costs of the first, second and third
defendants be paid by the plaintiff, such costs to
include all costs except in so far as they are of
an unreasonable amount or have been unreasonably
incurred so that, subject to the above exceptions,
the first, second and third defendants will be
completely indemnified by the plaintiff for their
costs in resisting the application instituted by
Notice of Motion dated 18 January 1990.

DECISION

By writ of summons issued on 18 January 1990 the plaintiff instituted proceedings against the respective defendants for various forms of relief. The plaintiff is one of the two directors of Redarb Pty Limited (the first defendant). The other director is Robert George Maidment (Maidment). Robert John Yeomans (the Receiver) was appointed as the Receiver and Manager of Redarb Pty Limited by order of this Court on 8 August 1989. One of the business interests of Redarb Pty Limited was video hire outlets at Dickson and Erindale in the Australian Capital Territory known respectively as "Videoville Dickson" and "Videoville Erindale".

2. Junstamp Pty Limited (the third defendant) is a company duly incorporated and having its registered office in the Australian Capital Territory. Maidment is a director of Junstamp Pty Limited. The only other party which it is necessary to identify for present purposes is Alsai Pty Limited (the eighth defendant).

3. The business name "Videoville" was previously owned by Redarb Pty Limited. Pursuant to an agreement dated 7 August 1987 the business name was licensed to Alsai Pty Limited which sub-licensed to a number of businesses which now trade under the name "Videoville". The other parties are not directly affected by the present proceedings.

4. By written agreement executed on 12 January 1990 the Receiver sold to Junstamp Pty Limited the interests of Redarb Pty Limited in the video outlets at Dickson and Erindale together with all stock, plant, fixtures, fittings and chattels used therein and 2,000 shares in Alsai Pty Limited. The substantive relief claimed by the plaintiff is an order setting aside that transaction. Interlocutory proceedings to restrain completion of the sale have been instituted and heard on an urgency basis.

5. The endorsement on the writ of summons claims as follows:

(1) Against the First and Third Defendants an order setting
aside the purported sale on the 12th January 1990 from
the First Defendant to the Third Defendant of the
goodwill, stock-in-trade, leases and other assets of
two video hire shops trading under the name
"Videoville" conducted at premises being Shop 2 and the
rear part of Shop 3, Block 9 Section 32 Dickson in the
Australian Capital Territory ("Videoville Dickson") and
Shop 25 Erindale Shopping Centre, Wanniassa in the said
Territory ("Videoville Erindale") on the grounds that
the purported sale was conducted without authority and
in excess of the First Defendant's power to sell and
constituted a fraud on that power and was conducted
with the intent of both parties to defraud the
plaintiff of his full and proper entitlement to share
in the proceeds of sale and was a constructive fraud on
the plaintiff.
(2) Against the First Defendant an order pending suit and
permanently restraining the First Defendant from
assigning any sublease or underlease used in connection
with Videoville Dickson or Videoville Erindale to the
Third Defendant and from transferring the business name
"Videoville" or any other right title or interest of
the First Defendant in any of the businesses owned by
it trading under the name "Videoville" including but
without limiting the generality thereof the membership
list owned by the First Defendant in the Videoville
video outlets.
(3) Against the Third Defendant an order pending suit and
permanently restraining the Third Defendant from
selling, disposing of or dealing with any of the assets
the subject of the purported sale other than in the
normal course of business including but without
limiting the generality thereof restraining the Third
Defendant from accepting a transfer or licence of the
business name "Videoville", registering the business
name "Videoville", or assigning the business name
"Videoville" to any other person.
(4) Against the Third Defendant an order restraining it
from registering any assignment of a sublease or
underlease in respect of either Videoville Dickson or
Videoville Erindale or from transferring or
sub-licensing in any way the business name "Videoville"
or from disposing of any other interest previously held
by the First Defendant in any of the video outlets
previously or presently owned by it trading under the
name of "Videoville" including but without limiting the
generality thereof the membership list owned by the
First Defendant in the Videoville video outlets.

6. The endorsement also claims against Redarb Pty Limited and the Estate of the late George Adams (the tenth defendant) an order pending suit and permanently restraining them and each of them from selling, disposing of or dealing with any of the assets of the business trading under the name of "Videoville" at Weston other than in the normal course of business.

7. The endorsement also claims against Redarb Pty Limited an order that it does not pay and against the Receiver a declaration that it is not entitled to the costs of the receivership relative to the sale. In the alternative as against the Receiver the endorsement recites a claim for an order for damages, costs and interest.

8. The endorsement further claims various forms of interim and permanent injunctions in relation to dealing with the assignment of leases and underleases.

9. As mentioned above, by notice of motion dated 18 January 1990 and returnable on 19 January 1990 the plaintiff sought interim injunctions restraining various types of action which would have given effect to the sale purportedly executed on 12 January 1990. On 18 January 1990 I gave leave for short service of the documents and the matter came on for hearing before me again on 19 January 1990. At the end of the day the application was part-heard. I adjourned the further hearing of the matter until 29 January 1990 and made interim orders preserving the status quo in the meantime.

10. The application was heard again on 29 and 30 January 1990. In response to a request by counsel for Redarb Pty Limited and the Receiver and counsel for Junstamp Pty Limited respectively, written particulars of the allegations of fraud relied upon by the plaintiff were provided in a handwritten note by counsel for the plaintiff. Those particulars read as follows:

"1. Agreement for Sale was in fraud of the Plaintiff.
2. Agreement for Sale was not made in good faith in
relation to the Plaintiff.
3. The Sale was made with secrecy from the Plaintiff.
4. The Sale was made with secrecy from any other
potential or interested buyers.
5. The Sale was made with secrecy from Mr Ramsay
while Mr Ramsay was still preparing the offer the
Receiver's office had asked him to revise and resubmit.
6. The Sale was made in breach of the promise
undertaking or arrangement made between Mr Crossin
for the Plaintiff and Mr Chamberlain for the 1st Defendant.
7. The Sale was made contrary to the best interests
of the 1st Defendant.
8. The Sale was made at an undervalue.
9. The Sale was made prematurely.
10. The Sale was made suddenly.
11. The Sale was made by the 1st Defendant acting
beyond power.
12. The Sale was made by the 1st Defendant having
delegated powers and decisions contrary to his
obligations.
13. The Sale was made by the 1st Defendant in fraud of
his powers.
14. The Sale was made by the 1st Defendant in breach
of his duties.
15. The Sale was made by the 1st Defendant without any
or any proper reference to an expert as to the
best means of marketing and sale.
16. The Sale was made by the 1st Defendant without
exhausting all probable offers.
17. The Sale was made by the 1st Defendant without
making itself aware of the valuation which had
been obtained by the Plaintiff.
18. The Sale was made by the 1st Defendant of part
only of business without first having exhausted
offers for the whole of the business.
19. The 1st Defendant failed to act in an impartial manner.
20. The 1st Defendant acted to favour the 3rd
Defendant against the interests of the Plaintiff.
21. The 1st Defendant acted to favour Serendipity
Investments Pty Ltd (being a company of
Mr Maidment) against the interests of the
Plaintiff (those two being the beneficiaries of
the Redarb Unit Trust).
22. The Sale was made in furtherance of the improper
sale of the business name "Videoville" from the
1st Defendant to Alsai Pty Ltd a company which the
said Mr Maidment is a director and Mr Cape is not.
23. Each of the foregoing items was made either to the
knowledge of each or both or with a deliberate
failure to enquire or with reckless indifference
to the truth of the matter.
24. Further particulars will be relied on as further
material becomes available to the Plaintiff."

11. As previously mentioned, the order of this Court appointing the second defendant as Receiver and Manager of Redarb Pty Limited was made on 8 August 1989 and entrusted the Receiver with the following powers:

" (a) To enter into possession and take control of the
property of the company and of the Trust.
(b) To carry on the business of the company in its
capacity as trustee of the trust.
(c) To sell assets of the trust sufficient to enable
the debts of the company as trustee of the trust
to be paid and discharged.
(d) To pay and discharge, out of the proceeds of such
sale, such debts together with interest, if any,
due and payable thereon.
(e) To lease, let or hire or dispose of the said property.
(f) To grant options over the said property on such
conditions as he thinks fit.
(g) To borrow money on security of the said property.
(h) To insure the said property.
(i) To repair, renew or enlarge the said property.
(j) To convert the said property into money.
(k) To take on lease or on hire, or to acquire any
property necessary or convenient in connection
with the carrying on of the said business.
(l) To execute any document, bring or defend any
proceedings or do any other act or thing in the
name of and on behalf of the Company and to draw,
accept, make and endorse a bill of exchange or
promissory note, and to engage or discharge
employees on behalf of the Company.
(m) To appoint solicitors, accountants or other
professionally qualified persons to assist the
receiver and manager.
(n) To appoint agents to do any business that the
receiver and manager is not able to do, or that is
unreasonable to expect the receiver and manager to
do in person.
(o) Where a debt or a liability is owed to the
business to prove the debt or liability in
bankruptcy insolvency or winding-up, and in
connection therewith to receive dividends and to
ascent to a proposal for a composition or a scheme
of arrangement."

12. By further order made on 14 December 1989 the power set out in (c) above was enlarged so as to empower the Receiver to sell all of the assets of the Redarb Unit Trust.

13. It was further ordered on 28 September 1989 that the plaintiff have leave to amend the statement of claim, the details of which are not material for the purposes of the present application.

14. In order to understand the scope and intensity of the present application it is necessary to set the background to the dispute between the principal contenders, namely the plaintiff and Maidment. The plaintiff and Serendipity Pty Limited were the unit holders in the Redarb Unit Trust. A dispute had arisen in relation to what respective entitlements each had in relation to the Redarb Unit Trust and also in relation to how the Trust should be further administered. Serendipity Pty Limited is controlled by Maidment and its function is to act as trustee of a trust for the benefit of Maidment and his family.

15. Proceedings were instituted in this Court and heard by Lockhart J. on 13 June 1989. An order amalgamating proceedings was ordered by Lockhart J. on 13 June 1989. Such proceedings resulted in the appointment of the second defendant as Receiver and Manager on 8 August 1989. Once appointed, the Receiver had regard to the fact that the Redarb Unit Trust is solvent and that, so far as reasonably possible, it was in the interests of the Trust, the plaintiff and Maidment as the principal of Serendipity Pty Limited to proceed with the realisation of the assets of the Trust in an orderly way and, so far as possible, by consensus. Such consensus became and remains increasingly difficult to achieve.

16. Upon appointment, the Receiver made extensive verbal enquiry and interrogation of the plaintiff and Maidment of the nature, affairs, records, assets, structure and activities of the first defendant. He sought a valuation from Dennis Patrick Lovell, a duly qualified valuer, and on 27 September 1989 received a valuation of the Videoville businesses at $250,000. Relying on revised trading figures supplied by the Receiver's staff, the valuer later increased that valuation to $290,000 in December 1989. Subsequent to that valuation advertisements were placed in appropriate newspapers. The first offer received was from Junstamp Pty Limited. The salient features of the offer were that it was in respect of the whole of the businesses owned by the Trust including the interests in Kingston and Weston Videovilles. It included a requirement of acceptance within 14 days and 28 days for settlement at a price of $300,000.

17. Because of the obvious dispute between the plaintiff and Maidment, the Receiver sought this Court's approval to the acceptance of the offer. The application came on for hearing before Kelly J. on 27 October 1989 and was stood over until 10 November 1989 when it was stood over generally.

18. On 26 October 1989 an offer was received from the plaintiff. That offer was also in respect of all the businesses, not just Dickson and Erindale, for a higher sum of $325,000 and upon terms requiring a restrictive covenant from Maidment or any of his companies. That offer caused the adjournment of the application for approval by the Receiver which was granted on 27 October 1989. Maidment thereupon indicated to the Receiver that a restrictive covenant may be acceptable but only in exchange for a substantial premium to be negotiated.

19. Further advertisement was conducted on behalf of the Receiver. The office of the Receiver received a number of enquiries in response to those advertisements and, where requested, an information package was sent to each enquirer.

20. There was further progress in the endeavours of the Receiver to sell the assets of Redarb Pty Limited. It is unnecessary to refer to the details of that progress. It is sufficient to observe that I accept the facts as deposed to in the affidavit of Warwick Davis sworn 29 January 1990 in paragraphs 15-22 inclusive.

21. I find that the Receiver advertised the sale of the Trust's assets appropriately and furnished proper responses to interested parties.

22. On 24 November 1989 the plaintiff made application to the Court for removal of the Receiver. That application and an application by Maidment and his companies for clarification of the orders made on 8 August 1989 came on for hearing before Lockhart J. in Sydney on 27 November 1989 and was stood over until 14 December 1989. During the period of the adjournment Junstamp Pty Limited, through its solicitors, made an offer to purchase the Dickson and Erindale outlets for $275,000 subject to the offer being accepted by 8 December 1989. The Receiver had decided to delay accepting any offers until his powers had been clarified, but at the same time he was concerned that because of the December Christmas trading period offers that might be available could be lost once that period had passed. By that time the valuer had revised his valuation of Dickson and Erindale to $290,000.

23. When the applications came on for hearing before Lockhart J. on 14 December 1989, the plaintiff's application to remove the Receiver was not proceeded with and the order clarifying the Receiver's powers was made.

24. On or about 15 December 1989 a further offer of $350,000 was made by Junstamp Pty Limited in respect of the Dickson and Erindale businesses. The Receiver wished to accept that offer and the plaintiff's solicitors were informed of that fact on 15 December 1989. The plaintiff then made application to the Court to restrain that sale. The application came on before Kelly J. on 18 December 1989 and was adjourned until 20 December 1989. The application to restrain the sale was opposed by the Receiver but the order was made by Kelly J. to enable an offer to come from one Peter Ramsay by 29 December 1989, which was said to be the period of time necessary. At the hearing on 20 December 1989 counsel for Maidment informed the Court that Junstamp's offer was withdrawn.

25. On 20 December 1989 Kelly J. noted the undertakings and made the following orders:

"1. On the plaintiff's undertaking that should the
Receiver/Manager of Redarb Pty Limited,
Mr Yeomans, receive less than the sum of
$350,000.00 in respect of the assets of Redarb Pty
Limited referred to in the Affidavit of David
Joseph Crossin sworn the 18th day of December
1989, (paragraph 3), William Timothy Cape is to
pay to Mr Yeomans the amount by which the amount
received in respect of those assets is less than
$350,000.00.
2. William Timothy Cape is also to pay to Robert John
Yeomans (the said Receiver/Manager) such damages
(if any) as the Court may find to be payable in
respect of the injunction about to be granted
against Robert John Yeomans.
3. William Timothy Cape is also to pay to Mr Maidment
and/or Serendipity Pty Limited such amount of
damages (if any) as the Court may find to be
payable to them or to either of them as a
consequence of the injunction which is about to be made.
4. The 2nd Defendant is to be restrained from
disposing of any of the video outlet assets of the
Company until further order or by consent of the
parties until 4.00 p.m. on Friday the 29th day of
December 1989.
5. Liberty is given to apply in respect of the form
of the undertaking.
6. The matter is adjourned until the 5th day of January 1990.
7. The question of costs is reserved."

26. On 5 January 1990 Kelly J. set aside the injunctions made on 20 December 1989 and required that the undertakings given on that day continue in force until further order. On those orders having been made on 5 January 1990 the Receiver proceeded to endeavour to sell the businesses as soon as possible to the highest bidder, provided it could be done without delay and, further, that Dickson and Erindale not be sold for less than $350,000 without an order of the Court or the plaintiff's consent. In coming to that decision, the Receiver had regard to the undertaking of the plaintiff to make up the shortfall if Dickson and Erindale sold for less than $350,000.

27. On 5 January 1990 after the orders had been made by Kelly J., Warwick Davis (the managing clerk of the office of the Receiver), and the solicitor acting for the Receiver spoke to the solicitor acting for the plaintiff. Davis said to the solicitor for the plaintiff, "We are no longer giving notice of sale to any parties. No more 72 hours warning. We have no offers. Maidment's offer expired before Christmas and Ramsay's offer is not an offer. We are selling a Ford and he wants a Jag." The solicitor for the plaintiff, who was also acting for Ramsay, a party interested, said, "Of course it's an offer. I will talk to him on Monday. I do not act for him but I believe he is a serious buyer."

28. On Monday, 8 January 1990, Davis spoke to the solicitor for the plaintiff again about several matters and during the course of that conversation the solicitor suggested that Davis endeavour to negotiate with Ramsay about reshaping his offer. Davis also discussed the matter with the solicitor acting for the Receiver and left messages for Ramsay to telephone. At about 5.20 pm Ramsay telephoned Davis from Sydney and matters relevant to his offer were discussed. On Tuesday, 9 January 1990 Davis sent a letter to Ramsay and to the solicitor for the plaintiff. Further discussions took place between Davis and Ramsay on 10 and 11 January 1990.

29. In the conversation on 11 January 1990 Ramsay told Davis that he had not yet decided to vary the conditions of his offer, particularly that requiring a restrictive covenant from Maidment. Davis replied that the Receiver was still negotiating with another party and that time had expired for waiting for his offer. He then gave Ramsay details of the registered office of Alsai Pty Limited and told him that he should make any application for the name Videoville direct to the company and gave him particulars as to how to go about it.

30. Further negotiations took place on 11 January 1990 between the solicitors for Junstamp Pty Limited, Maidment and the solicitor for the Receiver and Davis. It is unnecessary to relate the details of those negotiations, except to say that so far as they are relevant, those parties discussed an offer by Junstamp Pty Limited for the purchase of Dickson and Erindale for $290,000 subject to acceptance by 10 January 1990 with settlement by 12 January 1990. At that meeting Maidment indicated a willingness to increase the offer further if he was allowed to draw against his trust funds. Davis indicated on behalf of the Receiver that the Receiver would not consider selling for any amount which would involve the plaintiff in having to comply with his undertaking to the Court to make up the shortfall. It was further indicated that if an offer of $350,000 were to be made by Junstamp Pty Limited it would probably be acceptable.

31. Davis continued negotiations with Maidment during the afternoon of 11 January 1990 in an endeavour to persuade Maidment to increase his offer from $290,000. The most Maidment would say at that stage was that he would be prepared to buy Dickson, Erindale and Weston with naming rights to Alsai Pty Limited and shares in Alsai for a total price of $390,000 on a $200,000 deposit in cash if the balance could be either on terms with interest and the principal to be repaid from distributions to unit holders in the trust or with a debit to Serendipity Unit Holders Account immediately on settlement with various security documents.

32. Davis discussed the matter with Glanville, a partner in the Receiver's firm, who indicated that the Receiver would not consider any sale which would produce less than $350,000 for Dickson and Erindale without referring the matter to the plaintiff for his approval.

33. The events of Friday, 12 January 1990 are critical to the plaintiff's allegations of fraud. It is necessary to consider the events from the point of view of the various participants. I accept the evidence of Davis that on the afternoon of 11 January 1990 he had related to Bruce Robert Glanville, a partner in the Receiver's firm, the possible offer that Maidment had indicated he might make, which was that he had been prepared to buy Dickson, Erindale and Weston with naming rights to Alsai and the shares in Alsai, having a total price of $390,000 on a $200,000 deposit in cash, if the balance could be either on terms with interest and principal to be repaid from distribution to unit holders, or with a debit to Serendipity Unit Holders account immediately on settlement with various security documents. Glanville's response was that he was not disposed to accept that offer without the consent of the plaintiff, having regard to the undertaking that the plaintiff had given to make up the shortfall in the event of a sale which produced less than $350,000 for Dickson and Erindale.

34. On Friday, 12 January 1990 Davis informed Maidment at about 9.00 am that he was taking steps to seek approval from the plaintiff for the offer involving vendor terms on an overall price of $390,000 for all of the interests of Videoville, excluding Kingston. Maidment responded that his solicitors would advise the renewal of the cash offer of $290,000 and immediate settlement. At about 10.30 am Davis spoke to the solicitor acting for the Receiver who told him of a conversation he had had with the solicitor for the plaintiff including that the plaintiff could not be contacted until the following Monday and that the solicitor for the Receiver had allowed until 5.00 pm on Monday, 15 January 1990 to obtain instructions from the plaintiff. Within a few minutes of speaking to the solicitor for the Receiver Davis spoke with the solicitor for the plaintiff and offered to discuss with him the proposal from Maidment and the details of finance calculations. The solicitor for the plaintiff replied, "No point. I have no instructions and won't have until Monday when I hope to see Cape".

35. The conversation between the solicitor for the Receiver and the solicitor for the plaintiff referred to above was to the following effect. The solicitor for the Receiver informed the other solicitor that an offer had been made to the Receiver on behalf of Maidment to purchase the Dickson and Erindale video interests of Redarb Pty Limited for $290,000. He said that the offer was less than the amount previously offered and the Receiver proposed to reject the offer. The solicitor for the plaintiff, who was also acting for Ramsay, replied that he had instructions from Ramsay to offer a higher amount than that for Dickson and Erindale but as the Receiver only proposed transferring the existing leases he would be contacting the landlords to try to get an extension on the leases. The solicitor for the Receiver then told the other solicitor that Maidment would probably come up to $350,000 for the two shops and perhaps offer another $40,000 for Weston, making $390,000 in all provided he could offset the purchase price against his drawings from the Redarb capital account. Details of the amount which he wished to offset were then discussed.

36. The solicitor for the plaintiff then told the Receiver's solicitor that the plaintiff was away and that he would be seeing him on Monday morning. He said he would also contact Ramsay on Monday and get instructions in regard to his offer. The Receiver's solicitor then asked when the solicitor for the plaintiff and Ramsay could let him know. The solicitor replied that he would have specific instructions and would let the Receiver's solicitor know by 5.00 pm on Monday whether or not further offers had been made by Ramsay or whether the plaintiff wished to make another offer himself. The Receiver's solicitor then said words to the effect that he would do nothing until the following Tuesday.

37. That was the state of affairs when Maidment made another offer later in the morning of 12 January 1990. The circumstances giving rise to that further offer were that at about 11.00 am that day Davis met Maidment and informed him that no decision on vendor terms would be made probably until Tuesday and they would then consider his cash offer of $290,000. Maidment replied to the effect that the receiver was obliged to sell the assets, and in more colourful language accused Davis of dithering because he was scared of the plaintiff. Maidment repeated that assertion at a later meeting at about 11.30 am with Davis, Glanville and Ezra, another member of the Receiver's firm. At that meeting Maidment reiterated his offer and his concern that the Receiver was scared to sell because of the anticipated reaction from the plaintiff. Glanville replied that a sale could proceed at $350,000 and not less. Glanville also repeated that the Receiver's policy was not to sell at a price at which the plaintiff might suffer loss because of his indemnity without first referring to the plaintiff.

38. Maidment then offered $350,000 for Dickson and Erindale in cash provided the sale was settled that day and the offer was kept private and confidential until settlement. The further terms were that the name was to go to Alsai and that Maidment take over a Mercedes motor car lease on assignment from the lessor. Maidment was then asked to leave the room so that the representatives of the Receiver could discuss the matter in private. The decision was taken to accept the offer. Davis then telephoned the Receiver's solicitor and informed him of the offer and its acceptance, and instructed him to prepare the draft contract. Settlement of the sale duly took place at about 4.15 pm that day at the office of the Receiver. Ezra executed the contract on behalf of the Receiver acting under a power of attorney from the Receiver. The decision to accept Maidment's offer and complete the sale for a cash sum of $350,000 were subsequently ratified by letter dated 29 January 1990 from the Receiver (Exhibit 1).

39. Pursuant to the agreement the handover of the businesses was done at close of business that evening and the Mercedes was delivered to Maidment. The solicitor for the plaintiff and Ramsay was informed of the sale having taken place at about 9.30 am on Monday 15 January 1990.

40. It was submitted on behalf of the plaintiff that the evidence established that Maidment and the Receiver agreed to act in secret in that they kept their decision concealed from the plaintiff and Ramsay and that such secrecy was a well known badge of fraud. It was submitted that the Receiver had not exhausted the market because Ramsay was still a potential purchaser. Ramsay was clearly trying to establish what he could in the week in which the sale was completed.

41. The scope of the Court's function in relation to the performance of a Court appointed Receiver was discussed by Street J., as he then was, in Duffy v. Super Centre Development Corporation Limited (1967) 1 NSWR 382 at 383. He said:

"The receiver and manager is appointed as an officer of
the Court to undertake in that capacity the management
of the business of the company as well, of course, as
undertaking the care of the company's assets. To the
extent to which he makes decisions from time to time,
they are in effect made under the authority of the
Court itself, and they are subject to review and
control by the Court should a proper case be made out
requiring such intervention. Whilst this Court does,
therefore, have an ultimate control over the day-to-day
actions of a receiver and manager, it is a control
which is not in my view to be too freely exercised.
If, of course, there can be shown to be some defect in
the manner in which the receiver and manager is
conducting his duties - a defect arising either out of
some want of good faith or out of some erroneous
approach in law or in principle - then that is clearly
a ground on which the Court would entertain an
application by one of the interested parties for
appropriate directions or some other form of remedial
order. Where, however, the challenge made is that
there has been an absence of prudence and wisdom in the
receiver's decisions, a far heavier onus rests upon the
party who seeks to challenge the decision in question.
The Court will not concern itself with minor and
ordinary decisions that he may have made it must be
shown that there is a decision of real significance in
the affairs of the company and as to which there are
real and substantial grounds for questioning its
correctness before the Court will embark upon an
investigation of what, if any, directions ought to be
given."

42. In Re Mineral Securities Australia Limited (In Liq) (1973) 2 NSWLR 207, Street CJ in Eq repeated what he had said in Duffy v. Super Centre Development Corporation Limited, supra.

43. The conduct of the application on behalf of the plaintiff was such as to reflect the allegations contained in the endorsement to the writ of summons and particulars furnished to the effect that the purported sale was conducted with the intent of the Receiver and Maidment to defraud the plaintiff. It is trite law that fraud is a very serious allegation and requires a high standard of proof. One need only refer to the dicta of Dixon J. in Briginshaw v. Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 362:

"The seriousness of the allegation made, the inherent
unlikelihood of an occurrence of a given description,
or the gravity of the consequences flowing from a
particular finding are considerations which must affect
the answer to the question whether the issue has been
proved to the reasonable satisfaction of the tribunal.
In such matters 'reasonable satisfaction' should not be
produced by inexact proofs, indefinite testimony, or
indirect inferences.
...
It is often said that such an issue as fraud must be
proved 'clearly', 'unequivocally', 'strictly' or 'with
certainty' (Cf. Mowatt v. Blake (1858) 31 LT (OS)
387; Kisch v. Central Railway Co. of Venezuela Ltd.
(1865) 12 LT 295; Lumley v. Desborough (1870) 22
LT 597). This does not mean that some standard of
persuasion is fixed intermediate between the
satisfaction beyond reasonable doubt required upon a
criminal inquest and the reasonable satisfaction which
in a civil issue may, not must, be based on a
preponderance of probability. It means that the nature
of the issue necessarily affects the process by which
reasonable satisfaction is attained."

The plaintiff thus has a heavy onus in establishing that there is a serious question to be tried (Australian Coarse Grain Pool Pty Limited v. Barley Marketing Board of Queensland (1982) 46 ALR 398).

44. I have come to the firm conclusion that, having regard to the gravity of the allegation, the plaintiff has not established a serious question such as to warrant the interlocutory relief sought. He no doubt has a grievance that the transaction was negotiated and completed in secrecy so far as he was concerned. But to some extent he brought that upon himself by making applications to this Court for removal of the Receiver and for an injunction to restrain the acceptance of a previous offer by Junstamp Pty Limited, neither of which was ultimately prosecuted and both of which delayed the realisation of the assets by the Receiver. It was a term of Maidment's offer on behalf of Junstamp Pty Limited that the offer be kept private and the sale completed in private. Neither the officers of the Receiver nor the solicitor had any alternative but to maintain the privacy once they had decided to accept the offer.

45. That it was a sound commercial decision is clearly established. The price was a proper price after proper and extensive advertisement and diligent endeavours to sell over a period of five months dating back to 8 August 1989 when the Receiver was appointed. The price also exceeded the latest valuation of $290,000. It is true that the plaintiff obtained a valuation from another valuer on 3 January 1990 for $375,000 but that was never disclosed to the Receiver at any relevant time. In fact it was the view of Glanville after the transaction had been completed that the price obtained may well have been excessive in all the circumstances.

46. I am also satisfied that the Receiver acted in everyone's interests, including those of the plaintiff, in accepting a price that was $60,000 higher than any other current offer. The acceptance relieved the plaintiff of his undertaking to the Court to make good any deficiency if the price obtained was less than $350,000.

47. On the whole of the evidence, I am satisfied that the Receiver acted responsibly and in good faith. He had no motive to do otherwise. I think there is much force in the submission made on behalf of the Receiver that the plaintiff has not at any stage said that he would have made a better offer or that Ramsay might have done so. There also seems to be much force in the proposition that if the Receiver had rejected the offer, which is in reality the plaintiff's contention on this application, the plaintiff would have had some grounds for requiring the Receiver to pay the $60,000 shortfall which the plaintiff would have been obliged to pay pursuant to the undertaking.

48. If it were necessary to do so, I would also reject the application on the balance of convenience. Junstamp Pty Limited is now running the businesses and must be permitted to continue to trade. If the injunctions were granted Junstamp Pty Limited could not dispose of stock or effect any improvements to the premises. Maidment possesses particular expertise in running video hire shops and if the completion of the sale was restrained Maidment could not be expected to continue to provide that expertise, in which case the Receiver would have to engage appropriate staff with the likely result of further dissipation of the assets of Redarb Pty Limited.

49. The interim orders that I made on 19 January 1990 are dissolved.

50. I turn to the question of costs.

51. Redarb Pty Limited, the Receiver and Junstamp Pty Limited applied for costs on an indemnity basis in the event of the interim orders made by me on 19 January 1990 being discharged. As I have dissolved those orders I turn to consider those applications.

52. Under s.15 of the Australian Capital Territory Supreme Court Act 1933 this Court has jurisdiction to award costs in all matters brought before the Court and the extent of the costs to be paid is within the discretion of the Court. Order 65, rule 1 vests the discretion in the Court or Judge. There is no express provision in the law or in the Rules of Court to that effect.

53. In Re Fountain Select Meats (Sales) Pty Limited v. International Produce Merchants Pty Limited & Ors (1988) 81 ALR 397, Woodward J. adopted as the test for awarding "solicitor/client" or "indemnity" costs whether an action has been commenced or continued in circumstances where the applicant properly advised should have known that he had no chance of success. His Honour said that in such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or the clearly established law.

54. I propose, with respect, to adopt that test for present purposes. In my opinion the plaintiff should have known that his application had no chance of success. In simple terms his contention was that the Receiver should not have accepted Maidment's offer on behalf of Junstamp Pty Limited. Such a contention was, in my opinion, untenable. I need not repeat what I have already said in refusing to continue the orders which I had previously made in order to preserve the status quo while the plaintiff's claim was fully litigated.

55. I am in no doubt that if the Receiver had refused what was a reasonable offer and, on one view, an excessive offer, he would have found himself defending that rejection at the instance of the plaintiff claiming from the Receiver the shortfall under the undertaking to this Court. The Receiver was alert to his obligation to the plaintiff not to accept an offer which would have attracted the implementation of the undertaking. At its highest the plaintiff's grievance is that neither he nor Ramsay was given an opportunity to match or better what was a commercially realistic offer, the acceptance of which was commercially sound and the result of careful decision. If it were necessary for me to do so, I would be prepared to presume that the plaintiff's application is motivated by bad feeling towards Maidment and a determination to obstruct Maidment in the legitimate purchase of the assets of Redarb Pty Limited. But I need not go that far. It is sufficient to rely upon the fact that the application on all the evidence had no chance of success.

56. It is ordered that the costs of the first, second and third defendants be paid by the plaintiff, such costs to include all costs except in so far as they are of an unreasonable amount or have been unreasonably incurred so that, subject to the above exceptions, the first, second and third defendants will be completely indemnified by the plaintiff for their costs in resisting the application instituted by Notice of Motion dated 18 January 1990.