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Forest Marsh Pty Ltd v Pleash [2011] FCA 134 (23 February 2011)

Last Updated: 24 February 2011

FEDERAL COURT OF AUSTRALIA

Forest Marsh Pty Ltd v Pleash [2011] FCA 134

Citation:		Forest Marsh Pty Ltd v Pleash [2011] FCA 134

Parties:		FOREST MARSH PTY LTD (ACN 009 545 733) and STEPHEN MICHAEL POWELL v BLAIR PLEASH and BIBBY FINANCIAL SERVICES AUSTRALIA PTY LIMITED (ACN 101 657 041)

File number:		NSD 1328 of 2009

Judge:		YATES J

Date of judgment:		23 February 2011

Catchwords:		CORPORATIONS – application to remove receiver and manager – appointment pursuant to charge – alleged breaches of statutory duties – alleged breach of general law duties - alleged breach of duty to act in good faith – alleged breach of duty to terminate receivership – discussion of duties of receiver to chargor – discussion of content of receiver’s duty to terminate receivership – whether breaches made out on facts relied on CORPORATIONS – application for inquiry into receiver’s conduct – alleged improper conduct in continuing receivership – whether inquiry would be ordered when grounds for inquiry have been fully litigated CONSUMER LAW – consumer protection – misleading or deceptive conduct in relation to payout amount – initial failure to notify of contingent claim – consideration of what constitutes relevant conduct – trifling, ephemeral and inconsequential conduct COSTS – indemnity costs – adjournment of hearing to replead case

Legislation:		Corporations Act 2001 (Cth) s 180, s 181, s 182, s 423 Competition and Consumer Act 2010 (Cth) Sch 2 s 18

Cases cited:		Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd [2006] FCA 1493; (2006) 64 ATR 524 Bank of New South Wales v Federal Commissioner of Taxation [1979] HCA 64; (1979) 145 CLR 438 Bowesco Pty Ltd v Cronin [2008] WASC 296; (2008) 223 FLR 21 Expo International Pty Ltd (Receivers and Managers Appointed) (In Liquidation) v Chant [1979] 2 NSWLR 820 Re S & D International Pty Ltd (In Liquidation) (Receivers and Managers Appointed) v MIG Property Services Pty Ltd [2009] VSC 225

Date of hearing:	29 July 2010, 23-24 August 2010

Date of last submissions:	24 August 2010

Place:	Sydney

Division:	GENERAL DIVISION

Category:	Catchwords

Number of paragraphs:	143

Counsel for the Applicants:	Mr S Cairns

Solicitor for the Applicants:	Bradfields

Counsel for the Respondents:	Mr R Glasson

Solicitor for the Respondents:	ERA Legal

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1328 of 2009

BETWEEN:	FOREST MARSH PTY LTD (ACN 009 545 733) First Applicant STEPHEN MICHAEL POWELL Second Applicant
AND:	BLAIR PLEASH First Respondent BIBBY FINANCIAL SERVICES AUSTRALIA PTY LIMITED (ACN 101 657 041) Second Respondent

JUDGE:	YATES J
DATE OF ORDER:	23 FEBRUARY 2011
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

The application be dismissed.
The second applicant pay, on an indemnity basis, the respondents’ costs thrown away by the adjournment granted on 29 July 2010.
Subject to the order made in paragraph 2, the applicants pay the respondents’ costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1328 of 2009

BETWEEN:	FOREST MARSH PTY LTD (ACN 009 545 733) First Applicant STEPHEN MICHAEL POWELL Second Applicant
AND:	BLAIR PLEASH First Respondent BIBBY FINANCIAL SERVICES AUSTRALIA PTY LIMITED (ACN 101 657 041) Second Respondent

JUDGE:	YATES J
DATE:	23 FEBRUARY 2011
PLACE:	SYDNEY

REASONS FOR JUDGMENT

In this proceeding the applicants allege that the first respondent, as receiver and manager of the first applicant, breached duties he owed to the first applicant under the Corporations Act 2001 (Cth) (the Corporations Act) and at general law, and contravened s 52 of the Trade Practices Act 1974 (Cth) (the Trade Practices Act): see now s 18 in Sch 2 of the Competition and Consumer Act 2010 (Cth) providing for the Australian Consumer Law.
The applicants seek orders that the first respondent cease to act as receiver of the first applicant and of certain other companies. The applicants also seek certain declaratory relief and damages against the first respondent.
Alternatively, the applicants seek an inquiry under s 423 of the Corporations Act into the conduct of the first respondent in continuing his receivership after 10 October 2008 and in respect of what they assert to be excessive and unreasonable fees incurred by the first respondent since that date.
The applicants do not plead any cause of action against the second respondent. They do, however, seek an order that the second respondent release and discharge all securities it currently holds over certain real property called the Forest Marsh land and a declaration that the applicants are not indebted to the second respondent.

BACKGROUND

On 21 December 2007 RR & SM Powell Holdings Pty Limited (Holdings) and Mountain Maid Pty Limited (Mountain Maid) entered into a factoring agreement (called a Full Service Factoring Agreement) with the second respondent. On the same day certain collateral securities were granted to the second respondent, specifically:

(a) a deed of guarantee and indemnity by Holdings, Mountain Maid, the first applicant and the second applicant;

(b) a fixed and floating charge by the first applicant (the charge);

(c) a mortgage over the Forest Marsh land by the first applicant (the mortgage);

(d) a fixed and floating charge by Holdings;

(e) a fixed and floating charge by Mountain Maid.

The second applicant is the sole director, secretary and shareholder of Holdings, Mountain Maid and the first applicant. It is convenient, therefore, to refer to these companies as the second applicant’s companies.
On 1 April 2008 a company called Business Expansion Capital Pty Limited (B E Capital) appointed Mr Rick Leighton and Mr Michael Gawler as joint and several managing controllers of Holdings pursuant to a Deed of Charge granted by Holdings to B E Capital on 1 November 2007. This charge was a first-ranking charge over the assets and undertaking of Holdings. Consequently, on 4 April 2008, the second respondent appointed the first respondent as receiver and manager of Holdings and the first applicant and, on 10 April 2008, as receiver and manager of Mountain Maid. These appointments were made pursuant to the collateral securities that had been granted to the second respondent by the second applicant’s companies in respect of the factoring agreement.
At the time the first respondent was appointed as receiver and manager of the first applicant, Holdings was engaged in the production and distribution of beverages. Under the factoring agreement, Holdings would invoice its customers at the time of supplying the beverages. A copy of the invoice would be sent to the second respondent. The second respondent would pay Holdings a percentage of the invoices and Holdings’ customers would pay the second respondent the full amount of the invoice. This business was sold in about June 2008 pursuant to the powers conferred on the first respondent in the charge granted by Holdings. However the funds derived from the sale were insufficient to discharge the debt due to B E Capital.
At the time of the first respondent’s appointment, Mountain Maid was the owner of certain trade marks. These were subsequently sold in June 2008 as part of the receivership. The first applicant was the owner of the Forest Marsh land. The land was comprised in a number of certificates of title issued under the provisions of the Land Titles Act 1980 (Tas). The land was subject to a registered mortgage in favour of National Australia Bank Limited (Mortgage No. C743450). It was also subject to a registered mortgage in favour of B E Capital (Mortgage No. C829979). The mortgage over the land granted to the second respondent (Mortgage No. C837779) ranked in priority to the mortgage granted to B E Capital but was subject to the mortgage granted to National Australia Bank Limited. Furthermore, the charge granted by the first applicant created a fixed charge over the first applicant’s freehold property, and hence over the Forest Marsh land.
In the course of his receivership the first respondent has attempted to sell the Forest Marsh land to satisfy the indebtedness of the second applicant and his companies to the second respondent. It is in that context that the events giving rise to the allegations now made by the applicants occurred. It is to those events that I now turn.
Much of the correspondence to which I will refer in that regard was personalised by the applicants’ solicitors to the second applicant, rather than to Holdings, Mountain Maid and the first applicant. This seems to have been because the second applicant, as sole director, secretary and shareholder, was the personification of those companies. The correspondence should be understood as referring to and dealing with the arrangements entered into by the second applicant and his companies with the second respondent, which I have described above.

FINDINGS IN RELATION TO EVENTS FROM JUNE 2008

The Forest Marsh land was listed for sale on 27 June 2008, with an auction scheduled for 18 August 2008. As events transpired, the auction scheduled for that date was postponed. Prior to the land being rescheduled for auction, the second applicant sought to have the land withdrawn from sale on the basis that the debts due to the second respondent under the factoring agreement and the collateral securities, including the costs of the receivership, would be paid. To this end, correspondence passed, variously, between the second applicant or the applicants’ solicitors and the first respondent or the respondents’ solicitors, including correspondence stipulating payout amounts at various times. The correspondence makes clear that, in each case, the payout amount would need to be updated when settlement was to occur.
On 1 October 2008 the applicants’ solicitors informed the respondents’ solicitors, by email, that they had funds in their trust account “sufficient to discharge any alleged liability or debt to your client”, no doubt intending to refer to the second respondent. On 7 October 2008 the respondents’ solicitors responded by letter. This letter assumes considerable importance in this case. The body of the letter was as follows:

I refer to your email of 1 October 2008 and confirm that you now have sufficient funds in your Trust account to discharge the liability to my client’s appointor Bibby Financial Services Pty. Limited (“Bibby”).

Accompanying this letter is a spreadsheet setting out the amount required for your clients to discharge the debt to Bibby as at 30 September 2008. The amount being $309,423.26.

As discussed in our telephone conversation on 29 September 2008, your client will need to determine whether or not it requires Bibby to simply retire the Receiver at this stage or requires a discharge of the securities that Bibby has over the companies and the real property.

If your client requires the securities to be discharged, then as a precondition of the discharge, your clients will be required to enter into a Deed of Release and Indemnity in terms similar to those particularised in the draft Deed which has previously been forwarded to your clients and their advisors. Attached is a copy of the current draft of the Deed.

Obviously, given that your clients are now paying out the indebtedness, there will need to be some amendments to the Deed. We do not wish to embark upon that process until such time as we receive your clients [sic] instructions as to how they wish to proceed, that is, by way of discharge or merely through the retirement of the Receiver at this stage.

As you will appreciate, as a result of the receivership process our client and Bibby may have accrued certain contingent liabilities. In the circumstances Bibby is not prepared to release the securities, unless and until it receives the indemnities and releases which are generally outlined in the draft Deed.

Would you please let us have your comments in this regard.

In the meantime, we advise that until such time as the amount required to payout Bibby as indicated above, $309,423.26 is paid into this firms [sic] Trust account, the Receiver intends to continue to [sic] with the marketing of the Forest Marsh property for sale. We note that the auction of the Forest Marsh property is currently scheduled for 16 October 2008.

Should you wish to discuss then please do not hesitate to contact the writer.

[Capitalisation, emphasis and definition in original]

The evidence discloses that a copy of this letter was sent by email to the applicants’ solicitors at 3.25pm on 7 October 2008. Having regard to the date of the letter, the sum of $309,423.26 stated as the amount to discharge the debt to the second respondent as at 30 September 2008 (the September payout amount) was indicative of the amount that would be required at settlement (whenever that came to be appointed) to discharge the then indebtedness of the second applicant and his companies to the second respondent. Objectively considered, the letter could not reasonably be understood as stating otherwise. Apart from anything else, in the context of the first respondent actively seeking to sell the Forest Marsh land, it could be confidently predicted at that time that costs and expenses were continuing to be incurred in relation to the receivership. There is in fact evidence before the Court as to the work being carried out by the first respondent in the period 30 September to 13 October 2008. Interest was also accruing. The sum identified as the September payout amount would need to be updated and finalised when settlement was actually appointed. Nevertheless, it was implicit in the letter of 7 October 2008 that, if the September payout amount was paid, the first respondent would desist from marketing the Forest Marsh land for auction. The auction date was fast approaching.
Later in the afternoon on 7 October 2008 (at 4.31pm) the respondents’ solicitors sent another email to the applicants’ solicitors confirming that the first respondent would continue to market the Forest Marsh land with a view to it proceeding to auction on 16 October 2008, pending payment of the September payout amount into the respondents’ solicitors’ trust account.
This particular email or its contents was apparently passed on to the second applicant. On 8 October 2008, he sought to engage in correspondence with the respondents’ solicitors directly, apparently in the absence of Mr Saric (the solicitor handling the matter on behalf of the second applicant and his companies) due to illness. In an email sent at 10.56 am on 8 October 2008, the second applicant informed the respondents’ solicitors (amongst other things) that:

Jim Saric also advised you that as a result of his holding adequate funds in Bradfield’s Trust Account that any further expenditure that you care to make on this matter prior to us settling your alleged debt (which WILL be before your proposed auction date) will need to be on your own account.

Trusting that you understand that with you furnishing your alleged account balance as of close of business yesterday, coupled with Jim’s unavailability today, that payment of said alleged amount will be expedited in order to finalise this stage of our relationship, without the need for further unnecessary costs to be incurred by you.

[Emphasis in original]

This email indicates that the second applicant was well aware of the likelihood that costs and expenses in relation to the receivership were being incurred on a daily basis, particularly in relation to the intended sale by auction of the Forest Marsh land. The reference to the “account balance” being “as of close of business yesterday” misstates the fact that the September payout amount was given as the amount that would have discharged the indebtedness as at 30 September 2008, not at a later date.
In the meantime, on 6 October 2008, the managing controllers appointed by B E Capital had written to the first respondent demanding payment of the sum of $116,650.77 (the managing controllers’ claim). This amount was said to represent payments made to the second respondent by Holdings’ customers arising from the sale of goods by Holdings during the appointment of the managing controllers which they (the managing controllers) claimed were payments properly due to B E Capital. Plainly any payment erroneously received by the second respondent which was required to be refunded to the customer or paid to B E Capital would result in a corresponding increase in the indebtedness of the second applicant and his companies to the second respondent. This claim (the managing controllers’ claim) was coupled with a threat to sue the second respondent for the claimed amount and to sue the first respondent personally for consequential costs incurred by B E Capital should the managing controllers’ administration be unnecessarily prolonged. This demand was sent by facsimile to the first respondent at 5.45pm on 6 October 2008.
When armed with this demand, the respondents’ solicitors sent an email to the applicants’ solicitors at 11.57 am on 8 October 2008 enclosing a copy of the managing controllers’ letter dated 6 October 2008 and advising that, as a result of the managing controllers’ claim, the amount required to discharge the indebtedness to the second respondent “will be increased by $116,650.77 to $426,074.03, plus the additional costs incurred by the Receiver and Bibby since 30 September 2008”.
Later on 8 October 2008 at 12.05 pm the respondents’ solicitors sent another email to the applicants’ solicitors, attaching a copy of the second applicant’s email to the respondents’ solicitors earlier on 8 October 2008 from which I have quoted. Amongst other things, the email confirmed that until the sum of $426,074.03 was paid into the respondents’ solicitors’ trust account, with a direction that it be unconditionally released to the second respondent, the marketing of the Forest Marsh land for auction would continue.
On 9 October 2008 the applicants’ solicitors responded by email. They advised the respondents’ solicitors that the sum of $116,650.77 claimed by the managing controllers on behalf of B E Capital was disputed and that there was an “ongoing legal dispute between our client and B E Capital which is currently before the Tasmanian Supreme Court”. The applicants’ solicitors proposed settlement on the following basis:

Therefore as a result of the above we believe settlement can be reached in a matter [sic] that protects both of our client’s [sic] mutual interests. We propose that we deposit the sum of $309,423.26 into your trust account. The receiver could then be retired. Furthermore the ongoing advertising regarding sale of Forest Marsh and the scheduled auction can both be cancelled. Your client can then retain the security it holds over Forest Marsh as security for any contingent liability which may arise as a result of this demand which has been made by Michael Gawler. That way your clients [sic] interests are protected, the receiver can be retired and for all intensive [sic] purposes our respective clients will have settled all matters between them up until and as at the date of settlement.

The reference in this email to “your client” retaining security over the Forest Marsh land was clearly a reference to the second respondent. The first respondent held no such security. The effect of this proposal was that, on payment of the September payout amount, the first respondent should retire as receiver and manager, notwithstanding that the September payout amount was only current as at 30 September 2008, and notwithstanding the existence of the managing controllers’ claim (which directly related to the amount of the indebtedness of the second applicant and his companies to the second respondent) and the threat to sue both the first and second respondents in relation to that claim.
The respondents’ solicitors responded by email on the same day (9 October 2008), saying (in part):

The ongoing legal dispute between your client and BE Capital is not a matter with which our clients’ [sic] wish to become embroiled. To do so will only add to the cost of the receivership and it is in everyone’s interest that same be avoided.

We acknowledge that your clients strongly disputes [sic] the demand being made by BE Capital. Similarly, BE Capital disputes your clients’ position – this is self evident from the fact that the dispute between your clients and BE Capital is still being litigated before the Supreme Court of Tasmania.

In the circumstances, my clients’ position is that until such time as the $426,074.03 referred to in my email of 8 October 2008 is paid into this firm’s Trust account, the receivership and the marketing campaign for the auction on 16 October 2008 will continue. However, as a partial compromise, my client will agree to this firm to hold [sic] $116,650.77 of the $426,074.03 in Trust pending the claim by BE Capital being properly reconciled and determined. In the absence of this occurring the receivership will continue.

[Capitalisation in original]

On 10 October 2008 the applicants’ solicitors responded by email. After recounting the history of the correspondence that had passed between 6 and 9 October 2008, and after stating again that the retention of the security over the Forest Marsh land would be more than adequate to cover the amount of the managing controllers’ claim, the applicants’ solicitors said:

The sum of $309,423.26 will be deposited into your firms [sic] trust account before the 16th of October 2008. We have firm instructions to issue proceedings in the Supreme Court of Tasmania seeking an injunction and damages against the receivers [sic] for this attempted sale. We will also be seeking costs of the application. We are in the process of drafting that documentation and also considering adding Bibby Financial as a third respondent. Please note that unless you confirm in writing that your client will accept the sum of $309,423.26 as sufficient to retire the receiver then proceedings will be filed without further notice to you. To that end could you please confirm whether or not you have instructions to accept service of the Court process with respect to the receivers Hall Chadwick [sic] and Bibby Financial.

If you do not confirm in writing that you accept our clients [sic] offer as listed above to have the receiver retired and/or alternatively confirm you have instructions to accept service of the Court process referred to above, we will do the following actions;

File the proceedings in the Supreme Court of Tasmania.
Have your client [sic] served personally.

We look forward to hearing from you.

The second applicant then sought to force the issue. On 10 October 2008 his solicitors deposited the September payout amount in the respondents’ solicitors’ trust account. In an email dated 13 October 2008, the respondents’ solicitors acknowledged the deposit and stated that, provided the funds were cleared, the auction of the Forest Marsh land would be called off, thereby obviating the need for any application for interlocutory relief restraining the sale of the land. However they made clear that, until such time as the additional sum of $116,650.77 was paid into their trust account or the managing controllers’ claim was withdrawn, the first respondent would not be retired. The auction scheduled for 16 October 2008 was subsequently called off.
I pause at this stage to make the following observations. At this time the respondents were in an unenviable position. The managing controllers had made a claim for a significant sum of money ($116,650.77) for which they sought immediate payment, failing which they had threatened proceedings, including against the first respondent personally for unspecified consequential damages. On the other hand, the second applicant disputed that claim and sought the immediate retirement of the first respondent as receiver and manager, upon payment of the September payout figure, leaving the respondents to deal with the managing controllers’ claim with recourse by the second respondent, if necessary, to the security it held with respect to the Forest Marsh land. The second applicant had then threatened to sue the first respondent in respect of the attempted sale of the Forest Marsh land and the second respondent should it fail to revoke the first respondent’s appointment as he (the second applicant) had required. It is clear on the correspondence that the legitimacy of the managing controllers’ claim was disputed by the applicants. But I am satisfied that, at that time, prudence and reason dictated that, failing agreement, the claim needed to be investigated and that such an investigation would require, as a minimum, a reconciliation of the invoices and receipts giving rise to it. Apart from anything else, the managing controllers’ claim needed to be resolved before the indebtedness of the second applicant and his companies to the second respondent could be determined. The issue at the heart of the present proceeding is: what were the respondents to do in these circumstances? Specifically, was the first respondent required, as a matter of legal obligation, to retire as receiver and manager on his own motion, simply because the September payout amount was paid into the respondents’ solicitors’ trust account? The second respondent’s position on that issue is clear: at the time, it instructed the first respondent to deal with the managing controllers’ claim. The respondents’ solicitors also advised the respondents that the first respondent should not be retired “until such time as a sufficient amount was isolated to cover that potential claim”.
On 24 October 2008 the applicants put forward another proposal to “settle matters between our clients”. The applicants proposed that: (a) the first respondent would retire as receiver and manager; (b) the second respondent’s security over the Forest Marsh land would be discharged except for one parcel which would stand as security in respect of the sum claimed by the managing controllers; (c) the applicants’ solicitors would prepare a deed providing for the retirement of the first respondent as receiver and manager, which would include a clause that provided that the first respondent would make his best efforts to cooperate in contesting the managing controllers’ claim, and (d) the second applicant would bear the legal costs of and be responsible for running any litigation with the managing controllers in respect of that claim.
This proposal was not acceptable to the respondents. On 31 October 2008 the respondents’ solicitors sent an email to the applicants’ solicitors stating this fact and stating that the first respondent would not be retired until the managing controllers’ claim was paid or withdrawn or the sum of $116,650.77 was deposited in the respondents’ solicitors’ trust account and the balance of the costs of the receivership paid in full. The email continued:

Furthermore, we have made plain that the Securities will not be discharged until Bibby is satisfied that all contingent liabilities accruing to it or its Receiver have been met, or, it is otherwise appropriately indemnified in relation to same. We note that your client’s constant threats to sue our clients only fortify them in their resolve that this is necessary in order to protect their interests in the matter.

[Capitalisation in original]

The email noted that no details had been given of the terms of the proposed deed and stated that the respondents would not under any circumstances agree to any litigation between the managing controllers and the respondents being “run” by the second applicant. The email also advised that the second respondent was continuing to determine the validity of the managing controllers’ claim and that the applicants’ solicitors would be advised of progress in that regard.
On 7 November 2008 the second applicant commenced a proceeding in this Court against the first respondent’s firm (Hall Chadwick), seeking an order that the first respondent be removed as receiver. Following a mediation the proceeding was, by consent, discontinued on 15 December 2008 with an order for costs against the second applicant. The second applicant’s own evidence is that it was agreed at that time that the first respondent “would look into” the managing controllers’ claim.
It would seem that, at this time, resolution of the managing controllers’ claim was the only substantial remaining matter delaying the retirement of the first respondent as receiver and manager. The respondents’ solicitors pursued resolution of the claim by letter to the managing controllers dated 18 February 2009, seeking further particulars of the claim.
Despite their persistence, this letter and other correspondence from the respondents’ solicitors to the managing controllers seem to have fallen on deaf ears until 3 April 2009, when the managing controllers wrote directly to the second respondent informing it that the claim was now for $122,469.20, covering 70 separate alleged debtors who were said to have incorrectly paid the second respondent. In this correspondence the managing controllers advised that 11 debtors represented 87.01% of the total sum allegedly paid in error. Rather than seeking to deal with the respondents (either directly or through their solicitors) in respect of that revised claim, the managing controllers stated that they had been advised to commence debt recovery proceedings in an appropriate court or tribunal in Tasmania against each of the alleged debtors, informing those debtors that they should commence their own proceedings against the second respondent or otherwise join the second respondent in the proceedings commenced by the managing controllers. The managing controllers also told the second respondent that, in Tasmania, debts under $5,000 were dealt with in a Small Claims Tribunal in which representation was not permitted, company representatives were required to attend, and costs could not be recovered. The managing controllers then said that they proposed to write immediately to all the alleged debtors informing them of the advice that the managing controllers had received.
The managing controllers made clear in their letter that they were informing the second respondent of this intended strategy to induce it to explore “the potential for a commercial solution” to the dispute. Plainly enough, if the managing controllers’ threat was carried out, the second respondent would be exposed to multiple legal proceedings in respect of multiple small claims, at obvious cost and inconvenience.
By letter dated 7 April 2009, the respondents’ solicitors again pressed the managing controllers for the information they had previously sought in respect of the claim “so that our clients may assess the legitimacy of your claim”. However, it would seem that, after initially agreeing to provide particulars, the managing controllers then wrote to the alleged debtors as they had originally threatened to do.
The managing controllers did, in fact, commence proceedings in the Magistrates Court of Tasmania against some of those who had allegedly incorrectly paid the second respondent rather than the managing controllers or their appointor, B E Capital. By way of illustration, one debtor was sued for $3,645.89 in respect of 17 invoices issued between 14 April 2008 and 30 June 2008 that were said by the managing controllers to have been unpaid. It would seem that the defendant to that claim had also unsuccessfully sought particulars from the managing controllers of their claim before the commencement of that proceeding. Unfortunately the particulars only came to be provided as particulars in the initiating process served on that defendant. That defendant advised the respondents’ solicitors that, unless the claim could be resolved, the second respondent would be joined as a party to the debt recovery proceedings. A broadly similar pattern emerges with respect to other proceedings brought by the managing controllers against other alleged debtors.
The evidence shows that, inexplicably, at no time did the managing controllers provide the respondents with the particulars that they had sought in order to assess the managing controllers’ claim. Rather, the managing controllers left the respondents to deal with individual debtors after the managing controllers had either commenced or threatened to commence recovery proceedings against those debtors.
On 15 October 2009 a barrister and solicitor acting on behalf of the managing controllers sent a letter of demand to the first respondent seeking payment of the sum of $49,133.00 in relation to one debtor (Berri Limited) who was said to have erroneously deposited that sum in an account controlled by the first respondent as receiver and manager. This resulted in the respondents’ solicitors again seeking details of all payments alleged by the managing controllers to have been incorrectly received by one or other of the respondents.
In the meantime, and despite his discontinuance of the proceeding commenced in the Court on 7 November 2008, the second applicant continued to press for the retirement of the first respondent as receiver and manager. In a letter dated 5 March 2009 the applicants’ solicitors sought: (a) a full reconciliation of receipts and payments; (b) a “formal and acceptable document” showing a payout figure; and (c) a detailed explanation as to the status of the managing controllers’ claim. In that letter the applicants’ solicitors continued to assert that that claim was “vehemently denied” and that “it would seem fair, reasonable and prudent if the $116,000.00 [sic] which had been allowed for by Hall Chadwick as a contingent liability be deducted from the final payout figure”.
The evidence indicates that, during March 2009, discussions occurred between the applicants’ solicitors and the respondents’ solicitors. It was proposed that the second applicant’s companies would pay approximately $240,000.00 and enter into a Deed of Release and Indemnity. In return, the first respondent would retire and the second respondent would discharge its security, with the sum of $116,650.77 being “isolated” in case the managing controllers’ claim was “made out”. Apparently by email dated 3 April 2009, the applicants’ solicitors advised that payment of the $240,000.00 could be made “within 10 working days”. However, it seems that no further communication was made to arrange settlement.
In a letter dated 11 September 2009 the respondents’ solicitors informed the applicants’ solicitors of the difficulties that they had faced with the managing controllers, including the fact that the managing controllers had not provided the respondents with details of the claims but had embarked on a strategy of simply commencing proceedings against alleged debtors. They put forward a proposal whereby: (a) the sum of $162,000.00 be paid to discharge the obligations of the second applicant and his companies to the second respondent (which included the first respondent’s costs); (b) the sum of $116,650.77 (or such other sum claimed by the managing controllers) be paid to the first respondent so that he could then pay that amount to the managing controllers, and (c) a Deed of Release and Indemnity be entered into with the respondents.
In putting forward this proposal the respondents’ solicitors said:

Both Bibby and the Receiver are anxious to extricate themselves from the matter as soon as possible. Given the belligerence of the Managing Controllers and in particular their refusal to communicate with either this firm, the Receiver, or Bibby, in any sensible manner, our clients consider that the only way that they can effectively extricate themselves from the matter and avoid as far as possible any further litigation with the Managing Controllers’ [sic] is for the amount claimed by the Managing Controllers’ [sic] to be paid.

The respondents’ solicitors concluded by saying:

If the arrangement proposed above is not acceptable to your client then the Receiver will have little alternative but to proceed to realise the remaining security to discharge the balance of the debt due to it, with the amount claimed by the Managing Controllers’ [sic] being paid into court.

[Capitalisation in original]

The letter enclosed a reconciliation statement.

The applicants’ solicitors responded in a letter dated 14 September 2009, saying:

Thank you for your letter and attached reconciliation of 11 September last. We along with our client are sympathetic to your plight regarding correspondence, negotiations and reasonableness not being forthcoming from the Managing controllers in any way, shape or form. We agree with your aforementioned correspondence that it is certainly not in our mutual clients’ interests for your client to commence proceedings in a superior Court with respect to the allegations made by the Managing Controllers. Could you please forward us copies of the correspondence which give rise to your comments in the aforementioned correspondence. We would be grateful for the same. As you are aware our client has at all times disputed the ambit claim made by the Managing Controllers. We also note the contents of your aforementioned correspondence in that the Managing Controllers have failed to provide you with any particulars or evidence with respect to the alleged outstanding sums owing to the Managing Controllers. Our client’s position has not changed with respect to the attitude [sic] of the claim and allegations made by the Managing Controllers. That is, the claim remains disputed. Notwithstanding the above, our client certainly is of the view that he wishes to work with you in order to negotiate a mutually beneficial outcome.

[Capitalisation in original]

After seeking clarification of the reconciliation statement that had been earlier sent, the applicants’ solicitors then put forward a counterproposal whereby: (a) a Deed of Release and Indemnity would be entered into with the respondents; (b) the amount of $162,000.00 would be paid to discharge the obligations to the second respondent (including the first respondent’s costs); (c) the first respondent would retire as receiver and manager; and (d) the second respondent would discharge its security over the Forest Marsh land.
The apparent rationale for this proposal was that, if the managing controllers were successful in obtaining judgment in respect of their claim, that judgment “could be enforced as per their existing charge on Forest Marsh in their favour”. However, that proposal ignored the fact that any such judgment would be one (presumably) against the second respondent personally. The fact that the managing controllers (or, more accurately, B E Capital) had a charge in respect of the Forest Marsh land would be of little comfort to the second respondent, especially when the second respondent was being asked by the second applicant to discharge its own security in respect of that land. The proposal also ignored: (a) the fact that the managing controllers had urged others to sue the second respondent in respect of allegedly incorrect payments; (b) the fact that the managing controllers had threatened separate proceedings against the first respondent for consequential loss and damage; and (c) the fact that the position remained that the amount of the indebtedness of the second applicant and his companies to the second respondent depended on finalisation of the managing controllers’ claim.
The respondents rejected that counterproposal. In a letter to the applicants’ solicitors dated 23 October 2009 the respondents’ solicitors resubmitted the proposal of 11 September 2009, and stated:

The Receiver and Bibby are not prepared to wait any longer to resolve the matter. Both the Receiver and Bibby are keen to conclude the Receivership and in the circumstances intend to proceed with the sale of the remaining security, including the land. If your client wishes to take up the Receivers [sic] offer and a final settlement can be agreed upon prior to a sale of the land being concluded then our clients are happy to work with your clients to achieve same.

[Capitalisation in original]

The respondents’ solicitors subsequently forwarded copies of their correspondence with various parties (including the managing controllers) in respect of the managing controllers’ claim, to the applicants’ solicitors.
This proceeding was commenced on 23 November 2009. I will say something more about the conduct of the proceeding in a later part of these reasons. The matter of present relevance is that, both before and after the commencement of this proceeding, the respondents sought to resolve the managing controllers’ claim as best they could. Without descending into detail, that claim has now been resolved in relation to three debtors on the basis of the second respondent making certain refunds to those debtors. The total amount refunded was $28,442.94.
On 30 April 2010 the respondents’ solicitors wrote to the managing controllers informing them of the resolution of the three claims to which I have referred. They asked whether the managing controllers sought to maintain any other claim, including the one that had already been threatened in relation to Berri Limited. They raised the prospect that, in the absence of a response, they would seek to join the managing controllers as parties to the present proceeding. The managing controllers made a somewhat Delphic response. The respondents’ solicitors wrote again to the managing controllers on 20 May 2010. The managing controllers later advised that they did not intend “to make any claims of the kind and against the claimants specified in the first two paragraphs of your letter of 20 May 2010”. Significantly, that position was only achieved well after the commencement of the present proceeding and shortly before the commencement of the hearing of the matter.

THE FACTORING AGREEMENT AND CHARGE

It is convenient at this stage to record some of the more relevant provisions of the factoring agreement and of the relevant charge. The parties did not draw my attention to any particular clause of the mortgage as bearing on the claims made in this proceeding.
The Full Service Factoring Agreement entered into between Holdings and Mountain Maid (as “the Client”) and the second respondent was for a minimum term of 24 months commencing on 21 December 2007. It provided for the assignment by Holdings and Mountain Maid of certain debts to the second respondent and the payment by the second respondent to Holdings and Mountain Maid of a purchase price for those debts under detailed and complex arrangements which I do not need to describe.
Under clause 15.6, the second respondent had a right to resolve disputes with customers. Clause 15.6 provided as follows:

At all times (whether before or after proceedings) [the second respondent] has the right, at the expense of the Client, to resolve any dispute with a Customer on such terms as [the second respondent] may in its absolute discretion consider appropriate and the Client will be bound by such resolution.

By clause 26(a), Holdings and Mountain Maid granted a general indemnity to the second respondent, in the following terms:

(a) The Client must indemnify [the second respondent] from any loss, expense, cost, damage, loss of profit or contingent or actual liability which [the second respondent] may incur which arises either directly or indirectly from:

(i) any default in payment of any amount due under this Agreement;

(ii) the occurrence of any Termination Event; and

(iii) otherwise as a consequence of [the second respondent’s] entry into this Agreement.

The applicants accept that the charge was granted by the first applicant to secure the obligations of Holdings and Mountain Maid under the factoring agreement.
It is not necessary for present purposes to descend to the detail of the complex inter-related clauses in the charge that create various liabilities on the part of the first applicant to the second respondent. It is sufficient to note the following matters.
First, by definition, Holdings and Mountain were “Security Providers” and the factoring agreement was a “Collateral Security” for the purposes of the charge.
Secondly, by clause 5(a) of the charge, the first applicant guaranteed the due and punctual payment of moneys from time to time owing by any Security Provider to the second respondent and the due and punctual performance and observance of “each and every covenant, provision and obligation contained or implied in any Collateral Security on the part of any Security Provider to be performed or observed”. This plainly included the covenant in clause 26(a) of the factoring agreement to indemnify the second respondent in respect of “any loss, expense, cost, damage, loss of profit or contingent or actual liability” arising directly or indirectly from or as a consequence of the second respondent entering into the factoring agreement with Holdings and Mountain Maid.
Thirdly, by clause 5(b) of the charge, the first applicant covenanted to indemnify the second respondent against “any loss, costs, charges and expenses it might incur by reason of breach, neglect or non-performance by any Security Provider in the terms and conditions of any Collateral Security”. Clause 5(b) expressly included an indemnity in respect of “the due and punctual payment” to the second respondent of “all moneys from time to time owing to” the second respondent “under any Collateral Security”.
Fourthly, by clause 7.1, the first applicant agreed to observe and perform “all the covenants, agreements, stipulations and obligations expressed or implied under each and every Collateral Security...”.
Fifthly, clause 7.10 of the charge provided that the first applicant would pay to the second respondent a range of costs and expenses, including “costs and expenses arising from or caused by any default by ... any Security Provider” and costs and expenses in relation to “the exercise, purported or attempted exercise, preservation or aid of any of [the second respondent’s] rights or powers under this Deed or any Collateral Security”.
Sixthly, the first applicant covenanted to pay the second respondent the “Secured Money”. Clause 1.1 of the charge defined “Secured Money” in very wide terms. Secured Money included, for example, “all money which is or may become payable” by the first applicant “under this Deed or any Collateral Security”; “costs, charges and expenses” which the second respondent might incur or become contingently liable to pay “in the defence or in aid of its rights and powers under ... any Collateral Security”; and all money which the first applicant “may now or in the future actually or contingently be indebted or liable to” the second respondent “on any account whatsoever, including without limitation by guarantee, indemnity or otherwise”.
Clause 3.2(a) of the charge, dealing with the application of payments made by or on behalf of the first applicant, provided as follows:

[The second respondent] may appropriate any payment towards satisfaction of any money due by the [first applicant] under this Deed as it sees fit in its absolute discretion.

Clause 4.6 of the charge, dealing with discharge, provided as follows:

Upon the [first applicant] paying to [the second respondent] the whole of the Secured Money and provided that the [first applicant] has performed and observed all obligations under this Deed and any Collateral Security, [the second respondent] will at the cost of the [the first applicant] discharge the charge and execute all documents prepared by the [first applicant] as it may reasonably require to effect the discharge.

The charge also provided for a plenary grant of power to any receiver appointed by the second respondent. For example, by clause 12(c) the first respondent was granted “all the powers and authorities vested in” the second respondent by the charge. However, by clause 12(d), the first respondent was required “in the exercise of his powers authorities and discretion” to “conform to the regulations and directions from time to time made and given by” the second respondent.
Clause 12(e) of the charge provided as follows:

The Receiver is entitled to receive and to deduct and retain from moneys from time to time in his hands disbursements properly made and expenses properly incurred by him and also the remuneration for his services as may from time to time be fixed or approved by [the second respondent].

Clause 12(h) provided as follows:

[The second respondent] may pay over to the Receiver any moneys constituting part of the Mortgaged Property to the intent that they may be applied for the purposes of this Deed by the Receiver and [the second respondent] may from time to time determine what funds the Receiver is at liberty to keep in hand with a view to the performance of his duties as Receiver.

Clause 12(i) provided as follows:

The Receiver will be the agent of the [first applicant] and the [first applicant] will be solely responsible for his acts and defaults and for his remuneration.

Finally, clause 12(k) provided as follows:

[The second respondent] may at any time by an instrument in writing revoke wholly or partially the appointment of any Receiver and appoint another Receiver in his place.

THE APPLICANTS’ CLAI MS

The Corporations Act claims and related claims

By an amended statement of claim filed on 23 August 2010 (the amended statement of claim) the applicants allege that the first respondent owed the first applicant the duties imposed by ss 180, 181 and 182 of the Corporations Act (the statutory duties).
Section 180 provides as follows:

Care and diligence—directors and other officers

(1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

(a) were a director or officer of a corporation in the corporation's circumstances; and

(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

Business judgment rule

(2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:

(a) make the judgment in good faith for a proper purpose; and

(b) do not have a material personal interest in the subject matter of the judgment; and

(c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and

(d) rationally believe that the judgment is in the best interests of the corporation.

The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.

(3) In this section:

business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.

Section 181 provides as follows:

Good faith—directors and other officers

(1) A director or other officer of a corporation must exercise their powers and discharge their duties:

(a) in good faith in the best interests of the corporation; and

(b) for a proper purpose.

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

Section 182 provides as follows:

Use of position—directors, other officers and employees

(1) A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a) gain an advantage for themselves or someone else; or

(b) cause detriment to the corporation.

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

It may readily be accepted that, as an “officer” of the first applicant (see s 9 of the Corporations Act), the first respondent owed the duties imposed in ss 180, 181 and 182.
The applicants also allege that the first respondent owed the first applicant certain general law duties, which they defined in paragraph 13 of the amended statement of claim as follows:

(a) “a duty to pay over to the second Respondent the amount secured by the mortgage, and to pay over, or surrender, to the mortgagors [sic] any surplus money or other assets”;

(b) “to exercise his powers in good faith and for a proper purpose, including the duty not to sacrifice the mortgagor’s interests recklessly”;

(c) “a duty to act strictly within, and in accordance with, the conditions of his appointment”;

(d) “to account to the mortgagor after the mortgagee [sic] security has been discharged, not only the surplus money or other assets, but also for his conduct of the receivership”;

(e) “a duty to terminate the receivership by handing over the money and other surplus assets to the mortgagor as soon as the debt of the mortgagee has been paid”.

[Capitalisation in original]

The applicants’ formulation of these duties appears to be based on the observations of Needham J in Expo International Pty Ltd (Receivers and Managers Appointed) (In Liquidation) v Chant [1979] 2 NSWLR 820 at 828 and 834.
At 828 Needham J said:

The receiver has a duty both to the mortgagee and the mortgagor. He is appointed for the purpose of enforcing the security. He has a duty to the mortgagee to pay over to it the amount secured by the mortgage; he has a duty to the mortgagor to pay over or to surrender to it the surplus assets...

At 834 Needham J said:

... The conclusion I draw from the authorities to which I have referred is that the receiver in a case such as the present (as distinct from a case where the receiver is appointed by the court, and, possibly, a case where he is the agent of the mortgagee) has certain duties towards the mortgagor which are enforceable by the latter directly against the receiver. Those duties include the duty to exercise his powers in good faith (including a duty not to sacrifice the mortgagor’s interests recklessly); to act strictly within, and in accordance with, the conditions of his appointment; to account to the mortgagor after the mortgagee’s security has been discharged, not only for the surplus assets, but also for his conduct of the receivership. The latter duty, in my opinion, involves the duty to terminate the receivership by handing over the surplus assets to the mortgagor as soon as the interests of the mortgagee have been satisfied. I think the receiver would be acting outside his powers, or mala fide, if he failed to terminate the receivership because of some extraneous or collateral consideration...

The duties articulated in Expo have been referred to in more recent times as “well established”: see Re S & D International Pty Ltd (In Liquidation) (Receivers and Managers Appointed) v MIG Property Services Pty Ltd [2009] VSC 225 at [161].
Although pleading five general law duties, the applicants allege that only two of those duties have been breached by the first respondent in the present case, namely those set out in (b) and (e) above: see paragraph 25 of the amended statement of claim.
The duty of a receiver to exercise his or her powers in good faith set out in (b) would now seem to be subsumed by the duty imposed by s 181 of the Corporations Act. It is most unlikely that a breach of the duty pleaded in (b) would not equally be a breach of the duty imposed by s 181.
The duty stated in (e) to terminate the receivership requires closer attention. The statement of the duty by the applicants is an embellishment of what Needham J actually said in Expo. In Expo Needham J at 834 conditioned his statement of that duty on the interests of the mortgagee having been satisfied. His Honour gave colour to this state of affairs by the further observation that a receiver would be acting outside power in failing to terminate a receivership because of “some extraneous or collateral consideration”. By expressing himself in terms of satisfaction of the mortgagee’s interests, his Honour (unlike the applicants) was not conditioning the duty simply on payment of the secured debt. Rather, his Honour was invoking a wider set of considerations affecting the mortgagee’s or chargee’s interests, including what the security document itself might provide in that regard. It is the security document that sets out the expressly agreed rights, powers and responsibilities of the receiver affecting the mortgagor or chargor. It represents the formal bargain made between the mortgagor or chargor and the secured creditor: Bank of New South Wales v Federal Commissioner of Taxation [1979] HCA 64; (1979) 145 CLR 438 at 454. The security document may well impose or provide for, as here, a broad range of liabilities and obligations on the part of the mortgagor or chargor for the benefit of the secured creditor extending beyond what might be ordinarily understood as being “the secured debt”. Indeed, as I will later describe, the applicants’ submissions, in effect, give the expression “the secured debt” (as used by them) a somewhat limited meaning in light of the liabilities and obligations that were actually imposed on the first applicant by the charge. And, plainly, the primary duty of the receiver is to the mortgagee or chargee under the mortgage or charge in respect of which he or she has been appointed: Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd [2006] FCA 1493; (2006) 64 ATR 524 at [39]. If, therefore, by their formulation, the applicants seek to allege the existence of a duty that differs in scope to the duty stated by Needham J in Expo, then I would reject the applicants’ formulation of the duty.
There is, however, another matter. In Bowesco Pty Ltd v Cronin [2008] WASC 296; (2008) 223 FLR 21 at [12]- [17] Master Sanderson identified what his Honour saw to be a difficulty with Needham J’s formulation of the duty, namely that, absent a contractual right to do so, it may not be within the power of a receiver to terminate unilaterally his or her appointment and that, although a receiver might take that step, he or she might do so at the risk of being sued by the appointor: see also O’Donovan J, Company Receivers & Administrators (Lawbook Co., subscription service) at [15.50] (update 81) to the same effect. Thus, on this reasoning, the receiver may be confronted with a legal dilemma.
In the present case neither the charge nor the instrument actually appointing the first respondent as receiver and manager of the first applicant confers any contractual right on the first respondent to resign his appointment. Clause 12(k) of the charge confers on the second respondent (and on no other person) the power to revoke the first respondent’s appointment. The second respondent has not exercised that right.
In my respectful opinion, there may be no necessary inconsistency between Needham J’s formulation of the receiver’s duty to the mortgagor or chargor to terminate the receivership and a receiver’s duty to his or her appointor. It is significant that Needham J saw the receiver’s duty to the mortgagor or chargor to terminate the receivership as an incident of the duty to account to the mortgagor or chargor after the security has been discharged. In my view, Needham J’s formulation of the duty carries with it that necessary limitation. After that time it is difficult to see what legitimate interest of the appointor the receiver could possibly serve by continuing the receivership. Arguably, the receiver would be acting “because of some extraneous or collateral consideration”: Expo at 834. Plainly the contractual position between the receiver and his or her appointor will be governed by the instrument of appointment. But, as a practical matter, it is difficult to conceive of circumstances where the instrument of appointment would stipulate that the receivership was to continue after the security has been discharged.
In the present case it is clear that, under the terms of the instrument by which the first respondent was appointed by the second respondent as receiver and manager of the first applicant, the appointment was only in relation to the property of the first applicant while that property was encumbered by the charge: see clause 2.1 and Schedule 1 of the Deed of Appointment of Receiver and Manager dated 4 April 2008. The Forest Marsh land is still encumbered by the charge. Clause 4.6 of the charge provides for the right of the first applicant to obtain a discharge of the charge. It is not argued by the applicants that, at any relevant time, circumstances existed which required the second respondent to discharge the charge under clause 4.6, although the evidence plainly reveals that the second applicant had sought to negotiate a discharge. Thus the dilemma referred to in Bowesco does not exist in the present case. Nevertheless these considerations provide another reason to reject the applicants’ particular formulation of the first respondent’s alleged duty to terminate the receivership in the present case.
In paragraph 25 of the further amended statement of claim the applicants rely on the following particulars of conduct as constituting breaches of the duties on which they rely:

(a) “Failing to utilise the money paid by the Applicants, Mountain Maid and R R & S M Powell on 10 October 2008 first to discharge the entire indebtedness of the Applicants to the second Respondent”;

(b) “Allowing the outstanding debt to the second Respondent to continue to accrue interest when it should have been discharged in full on or about 10 October 2008”;

(c) “Retaining all or part of the said sum of $112,579.00 for his own benefit”;

(d) “Failing to retire on or about 10 October 2008 and thereafter incurring or purporting to incur unnecessary and unreasonable fees”;

(e) “Continuing the receivership on the basis of an extraneous or collateral consideration, and/or for a collateral purpose, namely the furtherance of his own interests, and the interests of Mr Gawler, at the expense of and contrary to the interests of the applicants and the second Respondent”.

[Capitalisation in original]

As to the matter referred to in particular (e), the applicants separately allege that the first respondent knew or ought to have known that the managing controllers’ claim for $116,650.77 “was without reasonable foundation, and vexatious, and/or made for a collateral purpose, namely to prolong the receivership and to thereby prevent the applicants from regaining control of their property”: see paragraph 19 of the further amended statement of claim.
The applicants allege that, as a consequence of the pleaded breaches, fees should not have been incurred by the first respondent since 10 October 2008. Alternatively, they allege that the fees that have been incurred are excessive and unreasonable.

Consideration

It is convenient to make the following preliminary observations before dealing with the particularised conduct on which the applicants rely for the alleged breaches of duty.
First, it can be assumed that the second applicant caused the first applicant to enter into the charge on terms which he, as sole director, secretary and shareholder, considered to be acceptable and in the first applicant’s interests. Secondly, there is no challenge to the validity of the factoring agreement or of the charge or of any of the other collateral securities identified in the charge. Thirdly, the applicants do not dispute the validity of the first respondent’s appointment by the second respondent as receiver and manager of the first applicant. Fourthly, the applicants do not bring a case that the second respondent has acted contrary to the terms of the factoring agreement or of the charge or of any of the identified collateral securities. Fifthly, the applicants do not bring a case that involves any allegation that the first respondent acted in breach of the terms of his appointment by the second respondent or has acted contrary to any direction or instruction given to him by the second respondent.
In the course of submissions the applicants accepted that the matters identified in particulars (a) to (c) went hand-in-hand. They were aspects of a broader contention. The broader contention, simply put, was that the payment of the September payout amount into the respondents’ solicitors’ trust account on 10 October 2008 was sufficient to discharge the first applicant’s indebtedness to the second respondent as at that date.
In my view there are a number of difficulties which stand in the way of the acceptance of that contention, not the least of which is that the applicants have not established that the September payout amount was sufficient to discharge the first applicant’s indebtedness under the charge at the date it was paid.
The applicants’ contention focussed on the fact that, when the September payout amount was provided in the 7 October 2008 letter, it was accompanied by a spreadsheet showing, as a separate item, that the outstanding debt to the second respondent as at 30 September 2008 was $286,000.00. The gravamen of the applicants’ argument was that the sum of $309,423.26 was sufficient to pay that debt, as itemised. However, this argument ignores the fact that the spreadsheet also showed, as separate items, significant outstanding amounts, as at 30 September 2008, for the first respondent’s remuneration and disbursements, legal fees and disbursements, selling costs and insurance costs, all of which were debts due under the charge as part of the Secured Money.
In any event, it is clear on the evidence that, as at 10 October 2008, not even the sum of $309,423.26 was sufficient to discharge the first applicant’s indebtedness under the charge because, by that time, further interest had accrued and further costs and expenses had been incurred. That would continue to be the case while any indebtedness by the first applicant to the second respondent under the charge remained.
Moreover, the respondents were faced with the managing controllers’ claim. If the second respondent was contingently liable to B E Capital for $116,650.77 then so too was the first applicant contingently liable to the second respondent for the same amount. All money for which the first applicant was contingently liable to the second respondent was, by definition, part of the Secured Money. Any sum properly due to B E Capital was a sum that the second respondent had erroneously applied in reduction of the first applicant’s indebtedness under the charge and remained owing.
Another aspect of the applicants’ argument is that, when the sum of $309,423.26 was paid into the respondents’ solicitors’ trust account on 10 October 2008, the first respondent was thereafter required to apply it in discharge of the itemised debt of $286,000.00. What in fact happened was that, from the amount deposited, $179,218.23 was paid to the second respondent and the balance was retained by the first respondent for existing and future costs and expenses.
The difficulty that confronts the applicants with this aspect of their argument is that, by clause 3.2(a) of the charge, the second respondent had the right to appropriate, in the manner it saw fit, all payments made towards satisfaction of the indebtedness under the charge. Furthermore, under clause 12 of the charge, the second respondent was entitled to determine what funds the first respondent was at liberty to keep in hand with a view to the performance of his duties as receiver, and the first respondent was entitled to retain moneys in hand for his remuneration and expenses. It is not suggested by the applicants that, in retaining the funds he did, the first respondent was acting otherwise than in accordance with the directions of the second respondent who, the evidence shows, had also instructed the first respondent to deal with the managing controllers’ claim. Moreover, by 10 October 2008, the first respondent was threatened with the prospect of separate legal proceedings being brought against him personally by the second applicant and B E Capital, with all the cost that that would involve. This aspect of the applicants’ argument therefore fails at the outset, given the specific powers of appropriation under the charge and the first applicant’s liability under the charge not only for costs and expenses relating to the exercise, preservation or aid of the second respondent’s rights and powers under the charge, but also for the first respondent’s costs and expenses as receiver, as well as his remuneration.
Related to this aspect of the applicants’ argument is the further allegation that the first respondent retained a sum of $112,579.00 “for his own benefit”. This argument also fails at the outset. The first respondent did not, in fact, retain the sum of $112,579.00. This amount refers to the amount of the first applicant’s indebtedness to the second respondent as at 9 September 2009. The applicants’ reasoning appears to be that, because payment of the September payout amount should have discharged the first applicant’s indebtedness to the second respondent under the charge as at 10 October 2008, any subsequent indebtedness should be treated as money that had been paid by the first applicant to the first respondent but retained improperly by the first respondent. I reject that reasoning.
For these reasons it seems to me that particulars (a) to (c) proceed upon a misapprehension of the facts, as I have found them to be. These particulars also proceed upon a misapprehension of the rights and powers of the second respondent under the charge, and of the first respondent as the receiver and manager of the first applicant.
The allegation in particular (d) is also related to the allegations in particulars (a) to (c). In my view, on the facts which I have found, the first respondent was under no duty to the first applicant, as at 10 October 2008, to retire as receiver and manager simply because the second applicant, in furtherance of his own apparent strategy to seek that outcome, caused the September payout amount to be paid into the respondents’ solicitors’ trust account. In cross-examination, the applicants obtained the first respondent’s acceptance of the proposition that the first respondent could have retired as receiver and manager once the September payout amount had been paid. This was on the basis that the second respondent’s “vulnerability” in relation to the managing controllers’ claim could have been met by the second respondent’s security over the Forest Marsh land. It seems to me, however, that that proposition misses the point. The first respondent had been validly appointed by the second respondent as receiver and manager of the first applicant because of the first applicant’s default under the charge. The first applicant remained indebted to the second respondent under the terms of the charge. For so long as that position remained, the second respondent was entitled to have the first respondent act as receiver and manager of the first applicant, and the first respondent was entitled to continue to so act. Indeed, the second respondent required him to do so in order to deal with the managing controllers’ claim.
As to the allegation that the first respondent incurred unnecessary fees, the applicants’ contention appears to be that the fees incurred by the first respondent after 10 October 2008 were unnecessary because the first respondent should have retired, as a matter of legal obligation, on 10 October 2008. For the reasons I have given, I reject that contention.
As to the allegation that the fees incurred by the first respondent were unreasonable or excessive, the applicants have not demonstrated how, why or in what respect or respects the first respondent’s fees after 10 October 2008 were unreasonable or excessive. The first respondent made an affidavit summarising the amounts paid and payable by the second applicant and his companies under the factoring agreement and the collateral securities, including his fees and disbursements (rendered and unrendered) and the respondents’ solicitors’ fees and disbursements (rendered and unrendered). Both the first respondent and the respondents’ solicitor, Mr Anderson, were cross-examined, but not on any of these matters. The applicants’ allegation in this regard rests simply in assertion and fails for want of proof.
The allegation in particular (e) calls into question the purpose for which the receivership was conducted from 10 October 2008. At the heart of the allegation is the contention that the managing controllers’ claim was “without reasonable foundation”, “vexatious” and “made for a collateral purpose” (to prolong the receivership) and that this was known by the first respondent. That contention has not been made good.
As I have found, in the circumstances in which the respondents were placed, prudence and reason dictated that the managing controllers’ claim be investigated. The second applicant asserted that the managing controllers’ claim was without substance, but the evidence does not reveal whether, and if so how, he sought to substantiate that position at the time. Certainly, despite their efforts, the respondents’ solicitors were unsuccessful in obtaining from the managing controllers proper particulars of payments to enable the respondents to properly investigate the managing controllers’ claim. Unfortunately, on the face of the evidence, the managing controllers adopted a belligerent and unhelpful stance, manifested by the threat of commencing multiple small claims proceedings against alleged debtors, encouraging them at the same time to sue the second respondent. This threat became a reality when the managing controllers commenced proceedings against some of those debtors. I have no doubt that this strategy delayed the receivership significantly and subjected the respondents (and ultimately the second applicant and his companies) to cost and expense (including legal costs) that could well have been avoided had a more helpful and conciliatory attitude been displayed by the managing controllers. As it turns out, the commencement of proceedings by the managing controllers against those debtors provided the only real opportunity to the respondents to investigate and consider that part of the managing controllers’ claim, because it was those debtors who apparently supplied the respondents with the necessary particulars to enable that to occur. The evidence shows that, when provided with those particulars, the respondents, through their solicitors, dealt with those claims in an appropriate manner. I have no reason to doubt that those claims were handled as expeditiously as circumstances then allowed. Moreover, far from revealing that those claims were spurious, the respondents determined that, in those cases, certain sums that had been paid to the second respondent were properly due to B E Capital. Refunds were made accordingly.
The applicants have not sought to demonstrate that those particular refunds were not properly made. Moreover, they have failed to make good the allegation that the first respondent “knew or ought to have known” that the managing controllers’ claim was “without reasonable foundation”, “vexatious” and “made for a collateral purpose” at the time it was made. As it turns out, the refunds made by the second respondent were significantly less than the amount originally claimed by the managing controllers. But the respondents, and the first respondent in particular, had no means of knowing that outcome in advance.
The evidence enables me to conclude that, as things transpired, the managing controllers’ claim was, in part, well-founded. However, because of the strategy adopted by them, the respondents were only able to deal with that claim on a piecemeal basis that was dependent, in large measure, on the managing controllers bringing individual claims against debtors in a time and manner of their own choosing, over which the respondents had no control.
The applicants have failed to establish the bases on which they allege the first respondent acted in breach of the statutory duties they have pleaded. The same conclusion follows in relation to the general law duties they allege the first respondent to have breached. As I have discussed, I do not accept that, on payment of the September payout amount on 10 October 2008, the first respondent was then under any duty to the first applicant to terminate his receivership, as the applicants have pleaded. Any duty that the first respondent might have owed in that regard was the one identified by Needham J in Expo, as I have discussed. However, that duty was not engaged in the circumstances of this case.
For completeness I should add that, in the course of submissions, the applicants sought to advance additional arguments that went beyond their pleaded case. Throughout this matter I have made it clear to the applicants that they would be bound by their pleaded case. It was for this reason that, during the course of the hearing, the applicants were granted leave to amend their statement of claim to bring it into line with the case they sought to make. I have decided this aspect of the applicants’ case accordingly. Nevertheless I wish to record my view that, had the statement of claim pleaded a foundation for these additional arguments, I would have rejected them in any event. The additional arguments centred on the contention that the first respondent breached his duties to the first applicant (as pleaded) by failing to retire after the second applicant offered alternative arrangements to the second respondent to secure any liability that it might have in respect of the managing controllers’ claim. The simple fact is that the second respondent rejected those arrangements as offered, as it was entitled to do. There could be no viable argument that, by failing to retire in such circumstances, the first respondent breached any of the pleaded duties.

The Trade Practices Act claim

Although the Competition and Consumer Act 2010 (Cth) is now in force and affects (although not in any materially substantive way for present purposes) a number of provisions of present relevance, for ease of reference in light of the applicants’ pleadings, I will continue to refer to this aspect of the applicants’ case as the Trade Practices Act claim and to the relevant provisions as provisions of the Trade Practices Act, by their pre-amendment section numbers.
The applicants allege that, by the respondents’ solicitors’ letter of 7 October 2008, the first respondent made a representation which had the following components:

(a) “the indebtedness of the Applicants, Mountain Maid and R R & S M Powell to the second Respondent as at 30 September 2008 was $286,000.00”;

(b) “the total receiver and manager’s remuneration over [sic] the Applicants, Mountain Maid and R R & S M Powell as at 30 September 2008 was $222,588.30 with a further $62,332.33 outstanding”;

(c) “payment by the Applicants of 309,423.26 (“the payout figure”) to the first Respondent would be sufficient to discharge the indebtedness of the Applicants, Mountain Maid and R R & S M Powell to the second Respondent as at 30 September 2008”;

(d) “the second Respondent would not release its securities over the Forest Marsh property and Mountain Maid until it received indemnities and releases as outlined in a draft deed”.

[Capitalisation and definition in original]

The applicants allege that, by making this representation, the first respondent engaged in conduct that was misleading or deceptive or likely to mislead or deceive:

(a) “By failing to advise contemporaneously of Gawler’s claim despite the fact that the first Respondent was aware of the same since on or about 16 July 2008”;

(b) “By never intending to apply and by failing to apply money required to be paid and in fact paid by the Applicants to satisfy the entirety of the indebtedness of the Applicants, Mountain Maid and R R & S M Powell to the second Respondent”;

(c) “By never intending to and by failing to retire as receiver upon the payment of the payout figure”;

(d) “By retaining the sum of $112,579.00 in whole or in part for their own benefit rather than using it, in whole or in part, to discharge the indebtedness of the Applicants, Mountain Maid and R R & S M Powell to the second Respondent”.

[Capitalisation in original]

In advancing their claim the applicants relied on the extended operation of the Trade Practices Act to individuals provided by s 6(2)(h) and s 6(3)(a), in the latter case because sending the letter containing the alleged representation involved the use of postal, telegraphic or telephonic services. The applicants also called in aid s 51A of the Trade Practices Act, inferentially on the basis that the alleged representation was with respect to a future matter and that the first respondent did not have reasonable grounds for making the representation: see now s 4 of the Australian Consumer Law.

Consideration

It may be accepted that the letter of 7 October 2008 contained each of the several components identified by the applicants. But the spreadsheet accompanying that letter also showed that there were a number of other payments (beyond the first respondent’s remuneration) that were outstanding as at 30 September 2008. To that extent the representation pleaded by the applicants is selective and incomplete and does not accurately convey the full particulars of the indebtedness (as at 30 September 2008) referred to in the letter.
In substance, the applicants’ case in this regard has two elements. First, the letter of 7 October 2008 did not refer to the managing controllers’ claim and was, therefore, misleading or deceptive or likely to mislead or deceive as to the true amount required by the respondents to discharge the indebtedness of the second applicant and his companies to the second respondent. Secondly, the letter of 7 October 2008 was not a genuine step towards the possible retirement of the first respondent as receiver and manager and that the first respondent was, for his part, duplicitous, never intending to retire as receiver and manager and never intending to apply the sum of $309,423.26 as and when paid to discharge the indebtedness of the second applicant and his companies to the second respondent. No similar allegation is made against the second respondent, on whose behalf the letter of 7 October 2008 was also sent.
As to the first of these elements, it is true that the letter of 7 October 2008, although referring generally to the possible accrual of contingent liabilities, did not refer to the managing controllers’ claim, even though the first respondent had been aware of that claim (or at least of one in substantially similar terms) since 16 July 2008. The evidence is silent on whether the second applicant was aware of that claim at the time the letter of 7 October 2008 was sent by the respondents’ solicitors.
The second applicant’s email to the respondents’ solicitors sent at 10.56 am on 8 October 2008 shows that the second applicant had either read the letter of 7 October 2008 or had been informed of its contents by that time. In an affidavit sworn on 4 March 2010, the second applicant gave the following evidence as to his understanding at that time:

I took this payout figure provided by the legal advisers of Hall Chadwick and explicitly understood that payment of $309,423.26 by me to Mr Anderson would be expressly applied to discharge the liability of myself and my companies to Bibby in its entirety and that the sum of $286,000.00 would be paid by Hall Chadwick directly to Bibby. It was further my explicit understanding that the balance sought of $23,423.26 would be full payment of the account of Hall Chadwick together with its disbursements.

The second applicant was not cross-examined. There was, therefore, no direct challenge to this evidence. Even so, I do not accept the unqualified or absolute terms in which it was given.
First, as I have already stated, it is plain from the circumstances in which the letter of 7 October 2008 was sent that the September payout amount was no more than indicative of the amount that would be required to be paid at settlement, whenever that came to be appointed. The letter did not represent that payment of the September payout amount would be sufficient to discharge the indebtedness of the second applicant and his companies to the second respondent whenever they chose to pay it. At the time the September payout amount was given it was already an historical figure.
Secondly, as I have already noted, the second applicant’s email of 8 October 2008 indicates that he was well aware of the likelihood that costs and expenses in relation to the receivership were being incurred on a daily basis, particularly in relation to the intended sale by auction of the Forest Marsh land. It is tolerably clear from that email that the second applicant was trying to engineer circumstances so that those costs would not be borne by him or his companies. Moreover, the fact that interest was accruing could not have escaped his attention, let alone the fact that legal costs were being incurred while he and his solicitors were corresponding with the respondents’ solicitors on the subject of the possible retirement of the first respondent and the possible discharge of the securities. In this respect a draft deed had been submitted under cover of the letter of 7 October 2008, with advice that the respondents’ solicitors would engage in the process of amending the draft on receipt of further advice from the second applicant as to how he wished to proceed.
Thirdly, the letter of 7 October 2008 has to be viewed in the light of other correspondence sent to the second applicant on the same subject, to which I now refer.
In an affidavit sworn on 20 August 2010, the second applicant gave the following evidence under the heading “Private loan for October 10 2008 payment”:

On or about 29 September 2008 I perused an email from Mr Anderson dated 29 September 2008 indicating the payout figure as at 5 September 2008 with respect to both Respondents was $280,239.71. I note this correspondence is referred to in the Affidavit of J Saric filed 9 Marsh [sic] 2010 at paragraph 7.

I relied on the figures referred to above and in that correspondence from Mr Anderson and obtained a private loan from Trones Investments Pty Ltd (“the loan”).

[Capitalisation and definition in original]

The reference to the email dated 29 September 2008 is to one sent by the respondents’ solicitors to the second applicant personally. In that email the respondents’ solicitors referred to an enclosed spreadsheet particularising a payout amount as at 5 September 2008. With respect to that amount the respondents’ solicitors said:

You will note that the amount required to payout [sic] Bibby as at 5 September 2008 was $280,239.71. As you will appreciate this figure will need to be updated when the precise payout date is known.

In a letter dated 16 July 2008 the first respondent provided a payout amount as at 10 July 2008 to the second applicant, in response to an earlier request. In that letter the first respondent stated:

Upon payment of the abovestated amount (as updated on the day of the proposed payout) my appointor has indicated that it will retire me from my appointment as Receiver and Manager of the Companies ...

[Capitalisation in original]

In light of this earlier correspondence, the letter of 7 October 2008 cannot reasonably be read as departing from the basis on which earlier payout amounts had been provided.
For these reasons, I do not accept that the second applicant understood the letter of 7 October 2008 as giving anything more than an indicative payout amount which would need to be updated when the precise settlement date was known. It follows from this conclusion that I do not accept that the second applicant understood the letter of 7 October 2008 as giving anything more than an indicative statement of how any discharge sum would be applied. Plainly enough, how any discharge sum would be applied in specific terms depended on circumstances at the time of settlement. It would not be reasonable to read the letter otherwise.
I am prepared to assume that the second applicant was ignorant of the managing controllers’ claim as at 7 October 2010. In these circumstances, he may reasonably be taken to have been led to believe by the letter that no such specific claim had been made. The applicants’ case is that, acting in reliance on the pleaded representation, finance sufficient to pay the September payout amount was obtained and, in ignorance of the claim, the payment on 10 October 2008 was made: see paragraph 29 of the amended statement of claim. However, the evidence shows that that could not possibly have been the case.
First, the second applicant’s affidavit of 20 August 2010, to which I have already referred, makes clear that the finance obtained by the second applicant to make the payment on 10 October 2008 was obtained as a result of the payout amount provided as at 5 September 2008. The fact that the second applicant had already obtained funds before the letter of 7 October 2008 had been sent is made clear by an email sent on 1 October 2008 to the respondents’ solicitors, in which the applicants’ solicitors say:

Further to our email to you dated 29 September 2008 and our telephone conversation of even date, we can now confirm that as of the 30th of September 2008 we now have funds in our trust account sufficient to discharge any alleged liability or debt to your client.

That advice from the applicants’ solicitors is, in fact, acknowledged in the letter of 7 October 2008.
Secondly, on the morning of 8 October 2008, the respondents’ solicitors sent their email advising the applicants’ solicitors of the managing controllers’ claim. Whilst that email may have conveyed unwelcome news and raised a contentious claim so far as the second applicant was concerned, he could have been left in no doubt about the fact that the amount required by the second respondent to discharge the indebtedness to it had increased by the amount of the contingent liability raised by the managing controllers’ claim plus the additional costs incurred by the respondents since 30 September 2008. That position was the subject of correspondence passing between the applicants’ solicitors and the respondents’ solicitors over the ensuing days before the sum of $309,423.26 was deposited into the respondents’ solicitors’ trust account. Clearly that payment was not made in ignorance of the managing controllers’ claim or of the second respondents’ attitude towards that claim and its consequences for discharging the indebtedness of the second applicant and his companies to the second respondent.
Given that the applicants’ claim of misleading or deceptive conduct in this regard is one based on omission referable to the sending of the letter of 7 October 2008, the most that can be said on the evidence is that: (a) the second applicant can be taken to have been ignorant of the managing controllers’ claim when the letter of 7 October 2008 was sent by email at 3.25 pm on that day, but was disabused of any misconception when the email of 8 October 2008 was sent at 11.57 am on that day; and that (b) the respondents could have informed the second applicant of the managing controllers’ claim at the time that the letter of 7 October 2008 was sent. But that omission was, in all the circumstances, trifling and ephemeral, given that the communications on 7 October and 8 October 2008 were so closely connected in time. It was also completely without consequence. Such an omission, if amounting to conduct that is, for the purposes of s 52 of the Trade Practices Act (or its present counterpart), misleading or deceptive or likely to mislead or deceive, is not such as would attract the granting of relief.
However, it would be artificial in the extreme to assess the first respondent’s conduct by reference to the letter of 7 October 2008 alone, divorced from the other correspondence of which it forms a part. The letter of 7 October 2008 should be seen for what it truly was: one step towards the possible discharge of the indebtedness of the second applicant and his companies to the second respondent in respect of which a number of matters were still required to be agreed or resolved, including the actual payout amount that would be required on settlement. The simple fact is that the applicants did not act on the letter of 7 October 2008, other than in combination with the email of 8 October 2008 and other correspondence from the respondents’ solicitors to the same effect. That chain of correspondence from the respondents’ solicitors, considered as a whole, constitutes the relevant conduct. When so considered, that correspondence plainly informed the applicants of the managing controllers’ claim and its consequences for settlement.
I should add that at no time in the course of that correspondence was it ever suggested that the applicants were misled or deceived on account of the letter of 7 October 2008 not advising of the existence of the managing controllers’ claim. Indeed, no such suggestion was made by the applicants in the months following the payment of the $309,423.26, when the second applicant continued to negotiate with the second respondent on the question of the retirement of the first respondent as receiver and manager.
The second element of the applicants’ claim concerns, as I have noted, alleged duplicitous conduct on the part of the first respondent. That case fails for want of proof. The first respondent was not even cross-examined on this aspect of the applicants’ case. In the absence of evidence to the contrary, I have no doubt that, in so far as the first respondent was concerned, the letter of 7 October 2008 was a genuine step taken towards providing for his retirement as receiver and manager once the indebtedness of the second applicant and his companies to the second respondent had been discharged. However, events changed on 8 October 2008 when the applicants were told that it was necessary to deal with the managing controllers’ claim. The applicants were clearly and consistently advised on and from 8 October 2008 of the respondents’ position on that matter: that the amount required to discharge the indebtedness had increased by the amount of the managing controllers’ claim (and thus, by clear implication, that the sum of $309,423.26 would not be sufficient to discharge the indebtedness) and that the first respondent would not be retired as receiver and manager until the full indebtedness to the second respondent had been discharged. The respondents acted genuinely and transparently in that regard. The second applicant took his own course with full knowledge of the respondents’ position and, no doubt, with the benefit of legal advice on that matter.
Both elements of the applicants’ Trade Practices Act claim fail. For completeness I should add that, on the factual findings I have made, s 51A of the Trade Practices Act (or its present counterpart) provides no material assistance to the applicants.

THE CONDUCT OF THE HEARING

On 23 August 2010 I indicated that I would make an order that the second applicant pay, on an indemnity basis, the costs thrown away by an adjournment that I granted on the first day of the hearing of the proceeding.
At a case management conference on 24 May 2010 I appointed a hearing date for the proceeding and made directions providing for (amongst other things) the service (in advance of the hearing) of a short written outline of opening. At that time, the second applicant was the only applicant named in the proceeding. The first respondent was the only respondent named in the proceeding.
During the case management conference the solicitor acting for the first respondent (Mr Anderson) pointed out what he perceived to be a disconformity between the second applicant’s case, as then pleaded, and the affidavits which the second applicant proposed to read in support of that case. I made clear my position that the hearing would be one defined by the pleadings. A question also arose as to the need to join the second respondent as a party. I therefore made an order which would provide for that to be done. As a result, an amended application was filed joining the second respondent.
When the matter came on for hearing it was plain that the applicants’ opening submissions (an outline of which had then been served) did not match the then statement of claim but went further, asserting breaches of duty not pleaded in the statement of claim. Moreover, the breaches then foreshadowed did not appear to be breaches of duty owed to the second applicant.
After hearing submissions, I reiterated that I proposed to deal only with the pleaded case. The second applicant then sought an adjournment to enable him to formulate, by way of a draft amended statement of claim, the case he sought to bring in light of the written outline of opening. I granted that adjournment but indicated the provisional view that the second respondent would be responsible for costs thrown away, on a basis that remained to be determined.
On the adjourned day the respondents raised a number of objections to what was then a further draft amended application and a further draft amended statement of claim. However, after hearing the parties, I granted leave to the second applicant to file the draft amended application and draft amended statement of claim, subject to certain other amendments being made. The consequence of filing the amended application (in the form of the draft) was that the first applicant was joined as a party to the proceeding.
The effect of granting the adjournment was that the first day of the hearing was effectively wasted. The responsibility for that lies entirely at the feet of the second applicant who had clearly been on notice for some months that there was, in the first respondent’s view, a disconformity between the case that had been pleaded and the case that was foreshadowed by the affidavits that had then been filed. In these circumstances it is appropriate, in my view, that the second applicant be responsible for those costs on an indemnity basis, and I propose to so order.

OTHER MATTERS

As I have noted, the applicants also seek by way of relief an inquiry under s 423 of the Corporations Act into the conduct of the first respondent in continuing his receivership after 10 October 2008 and in respect of his fees incurred since that date. The applicants accepted, however, that the subject matter of any such inquiry would be coextensive with the claims they have made concerning the alleged breaches of duty and alleged contravention of the Trade Practices Act, all of which have been fully litigated in this proceeding. In light of the findings I have made there is, in my view, no basis for conducting any such inquiry, nor any utility in doing so.

DISPOSITION

The applicants have failed in their claims. The application should be dismissed. The second applicant is to pay, on an indemnity basis, the respondents’ costs thrown away by the adjournment granted on 29 July 2010. Other than in relation to those costs, the applicants are to pay the respondents’ costs.

I certify that the preceding one hundred and forty-three (143) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.

Associate:

Dated: 23 February 2011

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