National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] HCA 10; (1990) 169 CLR 271 (28 March 1990)

HIGH COURT OF AUSTRALIA

NATIONAL AUSTRALIA BANK LTD. v. BOND BREWING HOLDINGS LTD. [1990] HCA 10; (1990) 169 CLR 271
F.C. 90/011

Companies

High Court of Australia
Mason C.J.(1), Brennan(1) and Deane (1) JJ.

CATCHWORDS

Companies - Receiver and manager - Appointment by court - Ex parte application of unsecured creditor - Whether undertaking as to damages required.

HEARING

1990, March 28. 28:3:1990
APPLICATION for special leave to appeal from the Supreme Court of Victoria.

DECISION

MASON C.J., BRENNAN AND DEANE JJ. This is an application for special leave to appeal from a judgment of the Full Court of the Supreme Court of Victoria setting aside orders made by Beach J. on 29 December 1989 and 9 February 1990. On 29 December 1989 Beach J., on the ex parte application of the applicants, appointed receivers and managers of the respondent companies until further order. On 2 January 1990 the respondents moved to vacate or rescind those orders. After a lengthy hearing, Beach J. refused that application, along with another application to remove the receivers on the ground of unsuitability. His Honour made ancillary orders requiring the receivers to give security and varying their powers, and directed that the receivership continue pending the trial of the action or further order. The applicants had by then commenced an action in which they seek a declaration that the first respondent is indebted to the applicants in the sums of money stated in Sched.2 to the applicants' statement of claim and judgment for those amounts. The applicants concede that the action is in essence a claim for money due by an unsecured creditor and for recovery of the debt.

2. In allowing the respondents' appeal from the orders made by Beach J., the Full Court pointed to a number of undesirable features of the ex parte application, including the circumstance that it was made ex parte when notice could have been given. The principal factor which induced their Honours to set that order aside was that it operated unfairly by reason of the primary judge having failed to require the applicants to give an undertaking as to damages. The applicants did not offer such an undertaking before the primary judge, either on the ex parte application or on the subsequent contested hearing. Nor did they offer such an undertaking before the Full Court.

3. Their Honours expressed the view that there were limitations on the exercise of the power of the court to appoint receivers which, having regard to the way in which the applicants' case had been presented, would inhibit the appointment of receivers to a company at the suit of an unsecured creditor. None the less, the court posed for itself as the critical and primary question for determination:
"whether, on the findings of fact except
insofar as these have been successfully
assailed, there is such a danger of future
breaches of covenant proved as made it
appropriate in all the circumstances to
appoint receivers and managers".

"We find it unnecessary to determine whether
his Honour was wrong in concluding that it
was strongly arguable that sidestreaming and
upstreaming had continued since 15 November
1989, for even on his Honour's finding here
we would not ourselves be satisfied that an
injunction would not meet the case. We say
this despite the highly unfavourable view
formed by the learned Judge of the behaviour
of some at least of those who controlled the
Bond group. We would regard the danger of
the carrying into effect of the agreement for
the sale of the Australian brewing assets as
not sufficient in all the circumstances,
including the undertakings, to warrant even
an injunction, but if any relief was to be
given an interlocutory injunction was
sufficient. The right conferred on the banks
in November 1989 to have Peat Marwick
Hungerfords monitor and review the day to day
activities and affairs of the B.B.H. group is
important here."

4. As has been indicated, their Honours attached great importance to the absence of an undertaking as to damages which they described as the "usual undertaking" to be required, clearly having in mind contested applications as well as ex parte applications for the appointment of receivers and managers. This led their Honours to conclude that the primary judge was incorrect in refusing on 9 February to set aside his earlier order. The Full Court's conclusion in this respect is expressed in these terms:

"In any event, if any case for the
interim or interlocutory appointment of
receivers and managers of the undertakings
and assets was made out, the usual
undertaking would have to be exacted, and
justice would require that the undertaking
attach to the original appointment as well as
to any order modifying the original order.
The argument on the appeal has proceeded on
the basis that the respondents are not
willing, in order to keep the receivers in
possession, to give an undertaking as to
damages which will protect the appellants
against the consequences of the orders of
29 December and 9 February. To preserve the
receivership without a satisfactory
undertaking as to damages is unthinkable."

5. The applicants seek special leave to appeal on four grounds, namely:

1. That the Full Court erred in principle
in treating as settled law or practice
that a party obtaining the appointment
of a receiver pending trial, after a
contested hearing, is required to give
an undertaking as to damages;
2. That the Full Court erred in saying that
a receiver could only be appointed if an
injunction would not afford sufficient
protection;
3. That the Full Court was wrong in
concluding that there was power to
appoint a receiver to a financially
embarrassed company at the instance of a
hostile creditor, but the power would
not be exercised; and
4. That, in addition to the matters already
mentioned, the Full Court misapprehended
the nature of the applicants' case, the
way in which the primary judge had
treated the case and the fact that an
undertaking to commence proceedings had
been given to the primary judge.

As will appear, it is unnecessary for us to deal with these grounds seriatim. We are prepared to assume, for the purposes of this application, that circumstances could arise in which the appointment of a receiver of the assets of a company which is not expressly alleged to be insolvent would be justified even on the application of a plaintiff who claims to be an unsecured creditor: cf., e.g., Derby & Co. Ltd. v. Weldon (1989) 2 WLR 412; (1989) 1 All ER 1002.

6. Even on that assumption, however, we do not think that the proposed appeal in the present case would enjoy sufficient prospect of achieving a restoration of the primary judge's orders. For one thing, it is clear that a contrary view to that involved in such an assumption was not part of the ratio decidendi of the decision of the Full Court. To the contrary, the members of the Full Court expressly emphasized "that there was no attempt at any stage in the present case to make a Mareva-type case of apprehended danger of dissipation of assets". We would note that we do not read their Honours' reference to a Mareva-type case as involving a mistaken view that a Mareva injunction cannot be obtained in the absence of a positive intention to frustrate any judgment: see Jackson v. Sterling Industries Ltd. [1987] HCA 23; (1987) 162 CLR 612 at p 623.

7. Further, and more importantly, the primary issue on the appeal to the Full Court was whether the primary judge had been in error in refusing to vacate or rescind the orders of 29 December 1989 appointing receivers. Those orders had been made ex parte and without any undertaking as to damages being proffered or required. It is clear that they should not have been made in those circumstances. The orders should have been rescinded or vacated when the matter came again before the learned primary judge, in the continued absence of any proffered undertaking as to damages even at that stage.

8. The damage to be apprehended by the making of an order for the appointment of a receiver and manager is not so much that the receiver and manager may so exercise his powers as to occasion loss in the business to which he has been appointed. It consists of the consequences flowing from the fact of appointment and of the defendant's loss of "its title to control its assets and affairs" (the phrase of Viscount Haldane LC. in Parsons v. Sovereign Bank of Canada (1913) AC 160 at p 167).

9. Where damage of those kinds is to be apprehended as flowing from the appointment of a receiver by interlocutory order, consideration must be given to requiring, from the party seeking the order, at least some appropriate undertaking as to damages in the event that the appointment is ultimately shown to be unjustified.

10. In the present case, where the judge at first instance was prepared to appoint receivers and managers over the whole of the assets and undertakings of the respondent companies on the application of unsecured creditors, it was clear that some such undertaking was an essential condition to the making or the continuation of an order.

11. In the result the application for special leave to appeal is refused.

ORDER

Application for special leave to appeal refused.

Order that the applicants pay the respondents' costs of the application except the costs of the affidavit filed by the respondents.