CATCHWORDS
BANKRUPTCY - application to set aside bankruptcy notices - counter-claim set-off or corss demand against all judgment creditors - must show a prima facie case - whether loss could be established - discharge of judgment debts - duty of receivers owed to shareholders and creditors - duty of receiver owed to debtor
Bankruptcy Act 1966 s 40(1)(g), 41(2)(a)
Corporations Law ss 432, 434
Chesson v Smith (1992) 35 FCR 594 Refd
Australian Workers' Union v Bowen (1945-6) 72 CLR 575 Cons
Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 Refd
Gould v Vaggelas (1983) 157 CLR 215 Refd
Groom v Abela (1992) 37 FCR 277 Refd
Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 Refd
Re Excel Finance Corporation (Receiver and Manager Appointed); Worthley v Australian Securities Commission (1993) 41 FCR 346 Cons
Re B Johnson & Co (Builders) Ld [1955] Ch 634 Refd
Re Anthony James Johnson and Re Francis Edward Johnson Ex parte Equus Financial Services Ltd Phillip Arthur Hennessy Michael Joseph Dwyer Nick Russo and Alexander Robert Mackay Macintosh
No BN 99 of 1995 and No BN 132 of 1995 and No BN 683 of 1995 and No BN 684 of 1995 and No BN 686 of 1995 and No BN 686A of 1995
Kiefel J Brisbane 7 September 1995
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT
OF THE STATE OF QUEENSLAND No. BN 99 of 1995
No BN 132 of 1995
No BN 683 of 1995
No. BN 684 of 1995
No BN 686 of 1995
No BN 686A of 1995
RE: ANTHONY JAMES JOHNSON
AND RE: FRANCIS EDWARD JOHNSON
Judgment Debtors/Applicants
EX PARTE: EQUUS FINANCIAL SERVICES LTD PHILLIP ARTHUR HENNESSY MICHAEL JOSEPH DWYER NICK RUSSO AND ALEXANDER ROBERT MACKAY MACINTOSH
Judgment Creditors/Respondents
JUDGE MAKING ORDER: Kiefel J.
DATE OF ORDER: 7 September 1995
WHERE MADE: Brisbane
MINUTES OF ORDERS
THE COURT ORDERS THAT:
1. The applications numbered BN 686 and BN 686A of 1995 be dismissed.
NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT
OF THE STATE OF QUEENSLAND No. BN 99 of 1995
No BN 132 of 1995
No BN 683 of 1995
No. BN 684 of 1995
No BN 686 of 1995
No BN 686A of 1995
RE: ANTHONY JAMES JOHNSON
AND RE: FRANCIS EDWARD JOHNSON
Judgment Debtors/Applicants
EX PARTE: EQUUS FINANCIAL SERVICES LTD PHILLIP ARTHUR HENNESSY MICHAEL JOSEPH DWYER NICK RUSSO AND ALEXANDER ROBERT MACKAY MACINTOSH
Judgment Creditors/Respondents
JUDGE MAKING ORDER: Kiefel J.
DATE OF ORDER: 7 September 1995
WHERE MADE: Brisbane
MINUTES OF ORDERS
THE COURT ORDERS THAT:
1. The applications numbered BN 683 and BN 684 of 1995 be dismissed.
NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT
OF THE STATE OF QUEENSLAND No. BN 99 of 1995
No BN 132 of 1995
No BN 683 of 1995
No. BN 684 of 1995
No BN 686 of 1995
No BN 686A of 1995
RE: ANTHONY JAMES JOHNSON
AND RE: FRANCIS EDWARD JOHNSON
Judgment Debtors/Applicants
EX PARTE: EQUUS FINANCIAL SERVICES LTD PHILLIP ARTHUR HENNESSY MICHAEL JOSEPH DWYER NICK RUSSO AND ALEXANDER ROBERT MACKAY MACINTOSH
Judgment Creditors/Respondents
JUDGE MAKING ORDER: Kiefel J.
DATE OF ORDER: 7 September 1995
WHERE MADE: Brisbane
MINUTES OF ORDERS
THE COURT ORDERS THAT:
1. The applications numbered BN 99 and BN 132 of 1995 be dismissed.
NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT
OF THE STATE OF QUEENSLAND No. BN 99 of 1995
No BN 132 of 1995
No BN 683 of 1995
No. BN 684 of 1995
No BN 686 of 1995
No BN 686A of 1995
RE: ANTHONY JAMES JOHNSON
AND RE: FRANCIS EDWARD JOHNSON
Judgment Debtors/Applicants
EX PARTE: EQUUS FINANCIAL SERVICES LTD PHILLIP ARTHUR HENNESSY MICHAEL JOSEPH DWYER NICK RUSSO AND ALEXANDER ROBERT MACKAY MACINTOSH
Judgment Creditors/Respondents
CORAM: Kiefel J.
DATE: 7 September 1995
PLACE: Brisbane
REASONS FOR JUDGMENT
Mr Anthony James Johnson and Mr Francis Edward
Johnson apply to set aside bankruptcy notices served upon them. They, together with a number of companies,
are plaintiffs in proceedings in the Supreme Court of Queensland of which I
have some knowledge. They have been on
foot since 1991. In those proceedings
the principal plaintiff is Rural Finance Pty Limited ("Rural
Finance"). The defendants are that
company's former financier, Equus Financial Services Ltd ("Equus"),
and an officer of that company, Russo, together with the receivers appointed by
Equus to Rural Finance and to some of the other plaintiff companies. The action concerns agreements concerning the
loan or advance of monies by Equus to Rural Finance which were supported by
securities although to so describe it understates the complexity of the
matter. Amongst those were charges given
by the two judgment debtors over their property. In those proceedings, orders are sought to
have the transactions set aside as unconscionable and as resulting from
misrepresentations and to declare the appointment of the receivers invalid,
together with claims for damages for breach of contract. Pleadings have been delivered in the action
and numerous interlocutory proceedings heard and determined together with
appeals from some orders. In the result,
three orders for costs were made against each of the judgment debtors.
The three sets of bankruptcy notices, as I shall refer to them, are Nos. 686 and 686A of 1995 and they refer to a sum of around $29,000 which the Messrs Johnson were ordered to pay by way of costs thrown away on the adjournment of a trial and on applications including one for discovery. This set (the "first set") of notices are issued by all defendants to the Supreme Court of Queensland proceedings in whose favour that order was made. The notices in proceedings No. 683 and 684 (the "second set") concern some $14,000 by way of costs ordered to be paid following an unsuccessful appeal and in favour of Equus only. The notices in proceedings No. 99 and 132 (the "third set") relate to some $27,000 by way of costs ordered to be paid in favour of Equus and Russo, but not the receivers.
The basis for the applications, in respect of which particulars had been given, was that the debtors had a counter-claim set-off or cross demand which they could not have set up in the Supreme Court proceedings.
For reasons which shall shortly appear, it is
convenient to refer to the debtors' contentions regarding the first set. The submissions were, until the last day,
made by Mr Anthony Johnson himself. His
brother, Mr Francis Johnson, save in a few respects to which I shall refer,
adopted those submissions as his. Both
judgment debtors appeared without legal representation, although it was clear
throughout the proceedings that they were, or at least Mr Anthony Johnson was,
receiving legal advice. They have said
however that they could not afford lawyers to represent them on this hearing,
which was lengthy and involved, although considerable sums, in the order of
some $700,000, have thus far been expended in their legal costs in the Supreme
Court of Queensland proceedings. Mr
Anthony Johnson, no doubt by reason of his experiences in the litigation in the
Supreme Court of Queensland and the advices he has received, appeared to have a
reasonable grasp of the requirements of s.40(1)(g) of the Bankruptcy Act
1966 and was alert to issues as they arose throughout the hearing. In the latter respect he showed an ability to
appreciate and attempt to meet the matters raised and at the conclusion of the
proceedings sought further time to advance a ground not previously contended
for but which might have proved important.
It could not be said however that he had the ability of a qualified
lawyer and the complexity of the matter
required one of experience. It was of
great concern to me that lawyers, apparently sufficiently aware of the
background of the matter were advising the parties but not appearing for them. In the end however I
was unable to form a concluded view as to why this course was
taken. The proceedings highlight
difficulties not only for litigants in person but for the Court and its
resources.
The principal claim referred
to in the submissions by Mr Anthony Johnson was that Equus and Russo had been
guilty of breach of agreement and of fraud in that the monies which it had been
assumed, for the purposes of the Supreme Court proceedings, had been advanced
by Equus to Rural Finance had never actually been paid. He submitted that that company, the officer
and later the receivers all concealed the fact of non-payment from him and no
one brought it to his attention while the proceedings were on foot. It does seem somewhat extraordinary after all
this time, and no doubt with substantial discovery, that his legal
representatives had never been alert to this point before. Perhaps it indicates how difficult it is to
ascertain what did occur. He says that
it is only in recent months that it came to his attention although when and how
it emerged was not made clear to me.
Certainly by 2 June, when the particulars of the cross-claim were filed
it was and may have been some months earlier when these applications were
filed. It is said however that a full
understanding was not arrived at until quite recently, when affidavit material
was received from Equus. The pleadings
in the Supreme Court action have not yet been amended to reflect this and it is
not clear when this will be undertaken.
It is proposed to plead it as an alternative claim to that already on
foot. The step which Mr Johnson and his
brother appear to have next in mind is a summons to have the loan agreements
construed. Whilst I have some difficulty
following that course it may be that different views are held as to how the
obligations of Equus under the Loan
Agreement were to be performed and then whether the transactions which the
solicitor for Equus deposes to suffice.
Mr McMurdo QC for all of the judgment creditors made two concessions. Firstly he did not contend that the various claims advanced by the Messrs Johnson could have been set up in the proceedings in which the order for costs was obtained: see Chesson v. Smith (1992) 35 FCR 594 and this appears to be correct. Secondly, it was conceded for the purpose of these proceedings that the material disclosed an arguable case as to whether the monies, some $4.6M, had been provided by way of finance. Mr McMurdo submitted however that even if there was other material from which the Court could be satisfied as to the other elements of the claims, and that the claims might sound in the requisite amount of money, this would avail the Johnsons only with respect to the second and third sets of bankruptcy notices. It was no answer to the first set, in which not only Equus and Russo, but the three receivers, had a right to issue execution or enforce the order for costs. That right was vested in the five judgment creditors jointly: Australian Workers' Union v. Bowen (1945-6) 72 CLR 575, 583, 590, 591. It follows in his submission, and I accept, that the debtors must satisfy the Court that they have a counter-claim set off or cross demand against all of those creditors.
The question which then arises with respect to the
first set of notices is, assuming for the moment that the debtors are able to
make out a prima facie case against Equus and Russo, whether they can do so
against the receivers. Nothing in the
pleading in the Supreme Court of Queensland amounts to a claim against the
receivers personally
and sounding in damages. It is alleged
that the receivers could not have lawfully been appointed by Equus and
necessarily that they would have to account for their dealings with the
company. Of the other eight cross-claims
set out in the affidavit of the debtors' then solicitor, Mr Campbell, there are
only three said to be referrable to the receivers.
Cross-claim No. 3 is a claim for damages against each judgment creditor for misrepresentation, by silence, in that they concealed the fact of Equus' failure to deposit the $4.6M agreed to be advanced. To that is added a further misrepresentation to the effect that the monies were in fact available and held by the State Bank of South Australia when that was not the case, but this is not said to affect the receiver Macintosh who was later appointed in 1993. With respect to the first mentioned representation it is said that the proceedings in the Supreme Court of Queensland were brought on a wrong basis.
Whilst it is not necessary for the judgment
debtors to adduce all the evidence which they would rely upon at the hearing of
proceedings to determine the issues raised in a final way, nevertheless they
must show that they have a prima facie case:
Ebert v. The Union Trustee Co of Australia Ltd (1960) 104 CLR 346-350. The material to which I was taken does not
disclose a case of fraud against the receivers.
The fact that monies may not have been provided by way of finance, the
subject of the concession, does not take the matter very far even if I take it
that the receivers at least some time after their appointment came to
understand the transactions recorded in the accounts. It assumes at the least that there can be
only one view of the obligations of Equus and of the transactions undertaken in
performance of them and it was not clear to me how this could
be so. That different views are held
appears from Equus' solicitor's affidavit.
Whilst the applicants only need show an arguable case, that would
require them to show that it might be concluded that the receivers were aware
of a wrong, not of differing interpretations or methods of financing. There is nothing to point to the receivers
knowledge or belief that what was undertaken was a fraud on the companies and
the applicants and that they deliberately concealed the transaction. That they and Equus have admitted the
plaintiffs' allegation in the Supreme Court proceedings that monies were
advanced does not, of itself, show any such design and is consistent with an
understanding or belief the obligations had been performed.
I should add further that the loss which is said to flow from any such conduct on the part of the respondents, namely costs incurred in the Supreme Court proceedings, would not seem to me to necessarily arise in any event given that it is proposed to retain the existing action as an alternative, which is to say that it is seen presently to have value. A conclusion that these costs were wasted would depend principally upon success in the alternative case and in the allegation of "fraudulent concealment".
It is convenient at this point to refer to the debtors other methods of quantifying their losses subject of the proposed cross-claim.
Loss by debtors of entire value of net worth of companies, some $15M. I take this to refer to all companies who are co-plaintiffs in the Supreme Court of Queensland action. Rural Finance has been in receivership since 1991 but appears to be still trading and, Mr Anthony Johnson informed me, the receivers are still attempting to sell the business conducted by it. The position of the other companies, some of which are in receivership, is unclear. It is not apparent to me what loss has been suffered by the companies as a result of the actions of Equus in calling up the loan monies and appointing receivers. In any event there is the problem that any such loss would not give rise to a right in the individual shareholders to damages: Gould v. Vaggelas (1983) 157 CLR 215, 219-20, 245, 253, 269.
Loss of increase of value of the debtors' shareholdings (by the same conduct) in the order of $10M. This allegation stands as a bare assertion.
Loss of business reputation of judgment debtors, and in particular Mr Francis Johnson. The affidavit material refers to some problems but whether it has been causative of loss in the amount of any such loss is no more than generally alleged.
Debtors' personal liability to Equus and to Westpac
The difficulty in the argument based upon their liabilities under the guarantees is that, on either view of their proper action, liability is said not to arise, on the new ground because Equus did not advance the monies. And, even if they argued that the debt to Equus is or would likely be a particular sum, that would not provide them with the same by way of cross demand or counter-claim.
The applicants do point to a liability to Westpac, about $0.5M, which arises because of a shortfall on the sale of the assets of the company they guaranteed, Mobari Pty Limited. They do not however show how that can be attributed to the respondents.
Loss of Salary of each of the Messrs Johnson. The amount of any loss is not referred to nor is the relationship between the loss and the conduct complained of.
Monies held in trust. This matter was raised by Mr Francis Johnson. It appears that the sum of approximately $77,000 from the sale of property of Mobari Pty Limited is held in trust or other account pending the resolution of a priority dispute between Equus and Westpac. It is not relevant to these proceedings.
Mr Francis Johnson also submitted that Equus has
in fact been paid monies equivalent to the sums claimed in the notices. There is no
suggestion however of payment by the judgment debtors themselves. In so far as Equus is said to have been paid
the "receivables" referred to in the agreements (monies due to Rural
Finance and assigned to Equus), but to which it had no entitlement, the result,
it would seem to me, would be that the property in the receivables is to be
treated as that of Rural Finance and that Equus would hold any such monies on
constructive trust for it. It cannot be
said to be payment by way of discharge of the judgment debts: Halsbury 4th ed Vol 42 paras 437, 438.
Similar comments apply to the submission which at one point I thought Mr
Anthony Johnson was making, but which he appeared not to proceed with, as to
the payment of the receivers own costs and outlays out of monies belonging to
Rural Finance. At no point can the
payment be traced to the judgment debtor.
The other matter to which Mr Francis Johnson referred, namely that Equus
holds other security, but which has not been shown to have resulted in the
payment of the judgment debts, would not afford a cross-claim to him: see Groom v. Abela (1992) 37 FCR 277.
By cross-claims 7 and 8 the judgment
debtors contend that if there had not been the alleged fraudulent concealment
they would not have participated in the interlocutory applications and the
appeals in the Supreme Court of Queensland and incurred a liability for costs. The liability for costs however arises
because the steps
taken and arguments made were found to be wrongly based or because of the
conduct of the judgment debtors, for example, in causing the other parties'
costs to be wasted on the adjournment of the trial. This liability cannot be sheeted home to the
judgment creditors for the reason that it was not their actions which caused
the loss.
Of the cross-claims, that under cross-claim 9, came the closest in outline to a claim against the receivers personally. The judgment debtors here contend that the receivers are liable to them for a failure to ascertain and calculate the true financial position of Rural Finance, which would have disclosed that that company had not received the amounts to be advanced by Equus. It would also have shown, it was said, that contrary to agreement monies which were to be retained and deposited in "hold-back" accounts for the benefit of Rural Finance had not been. At the outset it would appear that any loss is in any event that of the company Rural Finance, and not the shareholders in it. The duty under ss.432 and 434 of the Corporations Law also relied upon is not enforceable by the shareholders to support a claim for damages.
An additional ground raised in reply by Mr Anthony
Johnson was that the receivers had, by their notice of appointment, been
appointed to his own property (and it would follow to his brother's). An adjournment was granted so that he might
obtain legal advice as to the matter. On
the return date Mr Anthony Johnson advised me that he had received that advice
and wished to pursue the point but he was not in a position to proceed then and
there. A further adjournment was
granted, partly because Mr Francis Johnson, who was then ill, did not appear
that day. It later appeared that legal
representatives, indeed the firm who had been the solicitors on the record for
the Messrs Johnson and their companies in the Supreme Court action, had been
approached but they did not then appear for him. They assured me later through counsel that
they had not become actively involved in these proceedings until they were so
approached. Mr Francis Johnson however
had solicitors in New South Wales who were acting for him and his companies in
another action. When I adjourned the
matter it was only upon the basis that this point, and any other outstanding
matters of reply, would be argued and only for a period which I fixed. In the result Mr Bain QC instructed by that
firm appeared, but only for Mr Francis Johnson, for reasons not clear to me.
At the outset of the hearing on that fifth day Mr
Bain QC made oral application for an order or declaration that the sums
referred to in the bankruptcy matters had been secured to the satisfaction of
the respondents or of the Court:
s.41(2)(a) Bankruptcy Act. A
hearing of this new application would have necessitated oral evidence and
submissions of some length. The point
had only recently occurred to the legal representatives although the applicants
had, as I have said, solicitors acting for them earlier this year when the
matter came before me for directions and it was that solicitor who settled the
grounds of cross-claim. Whilst I formed
a provisional view as to the point it was just that, and it was not a matter
which particularly influenced my decision not to entertain the
application. The consequences for the
applicants and the fact that they were largely unrepresented was impressed upon
me. I was mindful of that as I have been
when the two earlier adjournments were granted.
It seems to me that since these applications were filed in April every
opportunity has been afforded to the applicants to
articulate the grounds upon which they relied and this was further extended at
the hearing. It was relevant also, I
considered, that the matter involved a hearing extending into a third day, most
of which was taken by Mr Anthony Johnson.
Whilst conscious of the possibility of the fact that the applicants
might have been under some disadvantage in obtaining advice (though I was by no
means satisfied this was so) there remains a limit to how far the Court can
extend its resources beyond those which would be given to any other
litigant. The matter, if properly
argued, should have taken no more than a day on the basis of material of at
least one-quarter of the volume of what was presented to the Court but not
read. (I should add, in this respect,
that as indicated to the parties during the hearing and when it became clear
that the applicants did not intend to take me to the hundreds of pages of
affidavits and documents, copies of those used in other proceedings, I did not
have recourse to documents other than those specifically referred to). I therefore confined the applicants to a
reply on the basis as indicated. Even so
it included a fresh point but no objection was taken to that course.
The Duty owed by the Receiver to the Applicants This duty, the content of which I shall later
refer to, was said to be owed to them either as shareholder, as creditors of
the various companies to whose property the receivers were appointed or because
the receivers were also appointed to their property. The later point, unusual in a sense, has
never been raised in the interlocutory proceedings in the Supreme Court brought
against the receivers. Nevertheless the
Notice of Appointment concerning the company Rural Finance dated 26 July 1991
does raise such a question. Two
documents are referred to in
it, a Debenture and the Loan Agreement.
With respect to the Loan Agreement it provided in part:
"AND TO BE the Receivers and Managers of the property charged by the Loan Agreement being all the right title and interest of the Mortgagor in the loan agreements described in the Loan Agreement and/or the Securities and/or any other property or entitlement of the Mortgagor to which the Mortgagee is entitled pursuant to the provisions of the Loan Agreement or any Loan Security/including without limitation those matters described in Clause 2.1 of the Loan Agreement and where the contexts permits, the property mortgaged or charged to the Mortgagee as security for the obligations of the Mortgagor or the Guarantors under the Loan Agreement, the Loan Securities or otherwise."
(The underlining is mine).
The property charged as security for the obligations of the mortgagor and guarantors under the loan agreement did extend to the applicant's property. Mr McMurdo QC for the respondents argued that the clause ought to be read as if words were implied limiting it to the mortgagor's property only. That might be a proper approach but I consider that the construction for which the applicants contend is clearly arguable and I shall proceed upon the basis that the appointment does refer to their property.
That property comprises shares held by the applicants in Rural Finance and a number of the other companies and real property owned by Mr Frank Johnson. A caveat has been lodged over his land, but by Equus, not the receivers. The receivers say that they have not acted as receivers and managers with respect to any of the applicants' property and the applicants do not point to any step taken directly with respect to their property.
The duty, if any, owed by the receivers to the
applicants arising by their appointment to the applicants' property must
necessarily be the same as that owed to the companies in respect of whose
property the receivers are also appointed.
The extent of that obligation is not however akin to that owed by a
trustee or fiduciary. A receiver is
obliged to act within the terms of the appointment and to exercise the powers
given in good faith and to make available any surplus monies after the security
has been discharged: Expo
International Pty Ltd v. Chant [1979]
2 NSWLR 820, 827-834. In the latter
respect it may be that, once the receiver had surplus funds, a trust arises for
the mortgagor (Expo 830) but
that is not the position here. Prior to
that point the duty is as stated.
Contrary to the applicants' submission, that a different view might be
considered to be now taken in Australia given an extension of the circumstances
in which fiduciary obligations are seen to be owed, none of the more recent
cases referring to the particular situation of a receiver in any substantial
way alters the position stated in Expo. In Re Excel Finance Corporation (Receiver
and Manager Appointed); Worthley v
Australian Securities Commission (1993) 41 FCR 346, 363-364 O'Loughlin J. considered the duty to the
company might be described as one compatible with the receivers' statutory
duties under the Corporations Law (which is not however to say that a
right to an action for damages accrues to the company or the shareholders as I
have earlier discussed) and that the receiver must not misuse his or her
position. His Honour referred, as
Needham J. did in Expo, to the point made in the earlier decision of the
Court of Appeal in Re B Johnson & Co (Builders) Ld [1955] Ch 634, that when one speaks of a duty owed to a company
over whose assets a receiver is appointed, it is only in the context of a
receiver with powers of management for the debenture holder. The receiver is not appointed to manage
the company's affairs for the benefit of the company. It follows in my view that whilst a receiver
might be obliged to fully inform the debenture holder or those who had appointed
him or her, that obligation would not extend to the company the shareholders or
general creditors. Further, at least in
Australia, the view seems to be maintained that a receiver shall not be liable
in negligence so long as the receiver has acted honestly.
The receivers here were not obliged by reason of any relationship they had with the companies or the applicants to inform the applicants of what the position was with respect to the financing by or payments by Equus and of the dealings in the hold-back deposit account. That is not to say that if the receivers' conduct was such as to amount to fraud that they would not be liable. As earlier indicated, however, this is simply not shown. Indeed the assertion that the receivers acted in a manner fraudulently and to conceal this information does not stand well with the other allegations made by the applicants that they failed to make appropriate enquiries and failed to impart "such information as they had".
Then there is the question of what loss, in any event, would flow from such a claim. I have dealt with this above. Whilst the further argument raised, potentially, some question as to effects upon the applicants' property to which the receivers were appointed none has been referred to and I am not able to infer, absent any evidence, that the shares have been diminished in value.
That the Claim has been Paid
It was submitted that I should assume that the legal costs, the subject of the orders, have been paid and paid out of the monies of Rural Finance or the other companies managed by the receivers. I might easily infer that payment has been made since the taxation of them would have required a receipt. That proves that the solicitors have been paid but I do not see how I can assume that they were not paid by Equus itself. In any event, it is not the solicitors whose claim has been satisfied, who are entitled to execute on the order and who were applicants for the issue of bankruptcy notices.
That the beneficial right to payment of the debt enures only to Equus
In this event, it is
submitted, I could disregard the receivers as parties to the notice. Reliance was placed upon a passage from the
judgment of Dixon J. in Australian Workers' Union v. Bowen
(588-9) where it appeared that the
AWU, by reason of its payment of all of the costs in question, was the only
party beneficially entitled to whatever was later received in satisfaction of
the decree or order. His Honour went on
to deal with the law relating to the use of names of the other parties named in
the orders. It may also be the case
here, if Equus only has paid the solicitors' costs, that it is so
entitled. But, as his Honour's reasons
later confirm (590) the right to enforce the judgment was a different question
and that right was vested in all those persons jointly. Mr Bain QC also submitted that equity would
somehow oblige Equus to only itself rely upon the security, although how this
could be done and yet fulfil the requirement that the other judgment creditors
bring the proceedings was not made clear to me.
It may be that what was sought to be advanced in the argument was that
the receivers or Equus were
somehow obliged not to require the applicants' counter-claim set-off or cross
demand to relate to the receivers. But that is a statutory requirement. With respect to Equus, and the suggestion
that it is under some equitable duty in pursuing this procedure, I cannot
agree. As a judgment creditor seeking to
execute, but not having received property, it is required to act lawfully.
The applications with respect to the first set of notices Numbered 686 and 686A of 1995 must be dismissed.
Mr McMurdo QC pointed out that the other two sets of notices only assume practical importance if the first set are satisfied by the judgment debtors, and this seems unlikely. They are however before me and ought to be the subject of determination.
The judgment creditors do not contend that an
arguable case, for breach of contract against Equus and for misrepresentation
against it and Russo, might not be pointed to.
But the question then is whether a loss can be shown to have been
suffered by the applicants by the non-payment, or misrepresentation. That would arise even if the
misrepresentation was found to be fraudulent.
I have dealt with the question of the applicants' personal
liability. What they seek to establish
is not an entitlement to damages but an order or declaration to the effect that
they were not obliged to pay. The
alternative action, that already pleaded, does include a claim for damages, but
for breach of contract referrable to Rural Finance. The injury also spoken of in the Statement of
Claim is with respect to the companies not the judgment debtors personally. Their interests are in the
declarations sought with respect to the invalidly of the receivers' appointment
and the order to set aside the agreements.
And, whilst I accept substantial sums have been paid for costs, notably
some $350,000 by Mr Anthony Johnson, a claim for them cannot now be said to be
properly raised for the reasons I have earlier outlined.
These applications with respect to the second and third sets of notices (Nos. 683 and 684 of 1995 and Nos 99 and 132 of 1995) will also be dismissed.
I certify that this and the preceding eighteen pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.
Associate
Date: 7 September 1995
Applicant: Mr A Johnson
Applicant: Mr F Johnson
Counsel for the respondent: Mr P D McMurdo QC
Solicitors for the respondent: Gadens Ridgeway
Date of Hearing: 28 August 1995
Applicant: Mr A Johnson
Applicant: Mr F Johnson
Counsel for the respondent: Mr P D McMurdo QC
Solicitors for the respondent: Gadens Ridgeway
Date of Hearing: 29 August 1995
Applicant: Mr A Johnson
Applicant: Mr F Johnson
Counsel for the respondent: Mr P D McMurdo QC
Solicitors for the respondent: Gadens Ridgeway
Date of Hearing: 30 August 1995
Applicant: Mr A Johnson
Applicant: Mr F Johnson
Counsel for the respondent: Mr P D McMurdo QC
Solicitors for the respondent: Gadens Ridgeway
Date of Hearing: 1 September 1995
Applicant: Mr A Johnson
Counsel for the applicant: Mr R Bain QC for Mr F Johnson
Solicitors for the applicant: Clayton Utz
Counsel for the respondent: Mr P D McMurdo QC
Solicitors for the respondent: Gadens Ridgeway
Date of Hearing: 5 September 1995
Place of Hearing: Brisbane
Date of Judgment: 7 September 1995
