Bride, Edward James v Australian Securities Commission & Anor [1997] FCA 213

C A T C H W O R D S

CORPORATIONS - registered liquidator - security bond - liquidator de-registered at his own request - subsequently applied for discharge of security - applicant objected to such discharge - objection based on alleged misfeasance by liquidator in respect of two companies associated with applicant - liquidator appointed by secured creditor as receiver of the assets of those companies, but never appointed as liquidator to either of them - applicant alleged liquidator acted as "de facto liquidator" of both companies - whether security bond available in respect of losses said to have been suffered by the conduct of a person who has never been appointed as a liquidator of a relevant company.

Corporations Law s.1284

Corporations Regulations reg.9.2.05(1)

EDWARD JAMES BRIDE v. AUSTRALIAN SECURITIES COMMISSION and

DAVID JAMES YOUNG

No. WAG 126 of 1996

CARR J

PERTH

8 APRIL 1997

IN THE FEDERAL COURT )

OF AUSTRALIA )

WESTERN AUSTRALIA )

DISTRICT REGISTRY ) No. WAG 126 of 1996

GENERAL DIVISION )

On appeal from the Administrative Appeals Tribunal

B E T W E E N : EDWARD JAMES BRIDE

Applicant

and

AUSTRALIAN SECURITIES COMMISSION

First Respondent

and

DAVID JAMES YOUNG

Second Respondent

CORAM: CARR J.

PLACE: PERTH

DATE: 8 APRIL 1997

MINUTE OF ORDERS

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The applicant pay the first respondent's costs, to include the costs of the directions hearing on 17 September 1996.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT )

OF AUSTRALIA )

WESTERN AUSTRALIA )

DISTRICT REGISTRY ) No. WAG 126 of 1996

GENERAL DIVISION )

On appeal from the Administrative Appeals Tribunal

B E T W E E N : EDWARD JAMES BRIDE

Applicant

and

AUSTRALIAN SECURITIES COMMISSION

First Respondent

and

DAVID JAMES YOUNG

Second Respondent

CORAM: CARR J.

PLACE: PERTH

DATE: 8 APRIL 1997

REASONS FOR JUDGMENT

Introduction

This is an appeal, under s.44 of the Administrative Appeals Tribunal Act 1975 (Cth), from a decision of the Administrative Appeals Tribunal (constituted by Deputy President T.E.Barnett) given on 31 July 1996. The Tribunal affirmed a decision of the first respondent, Australian Securities Commission ("the Commission"), made on 24 August 1995. That decision was to discharge the security bond of Mr David James Young, the second respondent (who until 7 May 1992 had been a registered liquidator), "on the basis that the legislation provided for the security bond to apply
only in respect to duties performed as a liquidator". In particular, the Tribunal decided that even if a registered liquidator, while acting in the capacity of receiver and manager, in some manner conducted himself or herself as a "de facto liquidator", the security would not be available in relation to pecuniary loss caused by that conduct. Put slightly differently, the question of law to be decided is whether a security lodged by a registered liquidator, in accordance with s.1284(1) of the Corporations Law, for the due performance of that person's duties as a liquidator, is available only to satisfy claims in relation to the conduct of that person in his or her capacity as a liquidator appointed to a particular corporation or corporations.

Factual Background

The second respondent (to whom I shall refer also as "Mr Young") was registered as a liquidator on 26 November 1982 under s.20 of the Companies (Western Australia) Code ("the Code"). He may have previously been registered as a liquidator under the Companies Act 1961 because it is not clear from the evidence whether his appointment was under s.20(1) or s.20(2) of the Code. At all material times Mr Young was a partner in the firm of Messrs Peat Marwick or its successor Messrs KPMG Peat Marwick. On 8 April 1992 Mr Young, in accordance with s.1290 of the Corporations Law, requested the Commission to cancel his registration as a liquidator. On 7 May 1992 the Commission cancelled Mr Young's registration as a liquidator. On 31 August 1994 Mr Young gave notice (by advertisements published in "The Australian" and "The West Australian" newspapers) of his application to the Commission for the discharge of the security which he had lodged in relation to the performance of his duties as a liquidator. That security was lodged in accordance with s.22(1) of the
Code but took effect, with some modifications, under the Companies Law - see s.1284A(2) of the latter. On 12 September 1994 the applicant wrote to the Commission objecting to the security being released. Over ten years earlier, on 9 August 1984 Mr Young (together with a Mr.J.D.Anderson) had been appointed by Australian Bank Limited ("the Bank") as joint receiver and manager of all of the assets of the applicant, the applicant's wife, and two companies associated with the applicant, Bride Foods Pty Ltd and Swan Stock Foods Pty Ltd ("the Companies"). Each of the Companies had in December 1982 executed debenture charges in favour of the Bank. Both those charges were registered by the Commissioner for Corporate Affairs on 31 December 1982. Mr Young was never appointed as a liquidator of either of the Companies. Although sued as a respondent in these proceedings, Mr Young took no part in them.

The Statutory Framework

Section 1284 of the Corporations Law relevantly provides as follows:

"1284(1) Where the Commission grants an application by a person for registration as a liquidator or as a liquidator of a specified body corporate, the person shall lodge and maintain with the Commission a security for the due performance of his or her duties as such a liquidator in such form and for such amount as is, from time to time, determined by the Commission in relation to that liquidator and with such surety or sureties (if any) as the Commission, from time to time, requires.

1284(2) Where a security is lodged in accordance with subsection (1), the security may be applied by the Commission in such circumstances, for such purposes and in such manner as is prescribed."

Regulation 9.2.05(1) of the Corporations Regulations provides that:

"For the purposes of subsection 1284(2) of the Corporations Law, a security lodged by a liquidator or a liquidator of a specified body corporate may be applied by the Commission in accordance with this regulation to compensate a person who has suffered pecuniary loss due to the failure of the liquidator, or liquidator of the specified body corporate, as the case may be, to carry out his or her duties adequately and properly."

In evidence before the Tribunal the applicant claimed that although Mr Young had never been appointed as liquidator of either of the Companies, he believed that Mr Young, in his capacity as receiver and manager, had acted secretly and fraudulently in conspiracy with officers of the Bank and partners in the Bank's solicitors to effect the transfer of his business assets to the Companies which then sold them to what he described as "Southern Foods Unit Trust". The applicant maintained that Mr Young's actions showed that he was really acting as what he described as a "de facto liquidator" of the Companies and had in fact achieved their liquidation. The applicant alleged that this was done in gross violation of Mr Young's duties as a receiver or as a liquidator and contrary to the Corporations Law.

The essence of the applicant's argument was that Mr Young could not have been appointed as a receiver and manager of the Companies unless he had been a registered liquidator. That is true - see s.323 of the Code and s.418(1)(d) of the Corporations Law. The next leg of the applicant's argument was that the Corporations Law requires a liquidator to act within the law, whether his duties and activities were as a liquidator or as a receiver and manager. Accordingly, so it was put, the security lodged and maintained by Mr Young under s.1284(1) of the Corporations Law may be applied by the Commission to compensate the applicant for pecuniary loss due to Mr Young's failure to carry out his duties adequately and properly.

Before the Tribunal the parties agreed to limit the proceedings to the following question of law:

"Whether or not the Corporations Law, properly interpreted, would allow a claim to be brought against the security bond of a registered liquidator who was not acting as an appointed liquidator in respect of the wind up (sic) of a company to which he has been appointed liquidator but who was in some way acting as a de facto liquidator."

The Tribunal held that regulation 9.2.05(1) of the Corporations Regulations, when read in the context of s.1284(1) of the Corporations Law, limits the claims that can be made against a liquidator's security deposit to claims arising from the actions of the liquidator in performing the duties of a liquidator in respect of a corporation to which he or she has been appointed as liquidator. The basis for the Tribunal's conclusion was twofold. First, it referred to the provisions of ss.472 and 495(1) of the Corporations Law which deal respectively with Court-appointed liquidators and liquidators appointed by a company in general meeting. The Tribunal noted that each of these sections specifically provide for methods of appointing liquidators in respect of a particular company. The Tribunal then drew the conclusion that a registered liquidator's duties as a liquidator of a company do not arise until he or she is appointed by one of the methods set out in the Corporations Law. Accordingly, the Tribunal held that it followed that the references to the duties of a liquidator in regulation 9.2.05(1) of the Corporations Regulations and s.1284(1) of the Corporations Law were references to the duties of a person after appointment as liquidator of a particular corporation. The term "duties" in those provisions, so the Tribunal reasoned, meant something that a liquidator was required by law to do, and not something that a registered liquidator is merely qualified to do. The Tribunal expressed its satisfaction
that the requirement under s.418(1) of the Corporations Law that, to be qualified for appointment as a receiver, a person must be a registered liquidator was "simply a stipulation as to qualification". Secondly, the Tribunal turned to the statutory context of s.1284(1). The Tribunal noted that the Corporations Law appears to draw a "clear distinction" between a "registered liquidator", being a person registered as a liquidator under s.1282 and a "liquidator" being a person appointed as a liquidator of a corporation under ss.472, 495 or 499. Finally, the Tribunal referred to the fact that receiver managers and liquidators perform different functions and owe different duties. The Tribunal said that had Parliament intended that a claim could be brought pursuant to s.1284 of the Corporations Law and regulation 9.2.05(1) of the Corporations Regulations against the security bond of a registered liquidator who had not been appointed as liquidator of the particular corporation, it would have used appropriately broader words and not the narrow phrase "duties as a liquidator".

Did the Tribunal Err in Law?

There does not appear to be any authority on the question decided by the Tribunal. No case in point was cited to me in argument. The applicant appeared in person, but the Commission was represented by counsel. My subsequent research has not disclosed any authority.

The term "liquidator" is not defined in the Corporations Law. The term "official liquidator" is defined as meaning:

"... a person registered as an official liquidator under section 1283 or deemed to be registered as an official liquidator under this Law."

Implicit in Mr Bride's submissions (although not essential to them) is the proposition that the reference [in the fourth line of s.1284(1)] to "... his or her duties as such a liquidator ..." is a reference, respectively, to duties as a registered liquidator regardless of whether he or she has been appointed as a liquidator of any company, and is also a reference to duties as a registered liquidator "... of a specified body corporate" whether or not he or she has been appointed as a liquidator of that company. On first impression that construction has some appeal. But apart from the requirement to lodge a notice in the circumstances referred to in s.1287(4) and an obligation to file a triennial statement (see s.1288 and Form 907), one searches in vain for any duties which are imposed upon a liquidator, merely upon his or her registration as such. Registration as a registered liquidator of a specified body corporate would seem to have the effect of permitting the successful applicant to act as a liquidator (if so appointed) in the voluntary winding up of the body corporate specified in the certificate of registration. Once again, the duties which arise merely upon such registration appear to be confined to those referred to immediately above.

The reference to "... his or her duties as such a liquidator ..." in s.1284(1) is, in my opinion, a reference to the performance of the various duties which arise when:

. a person, who has been registered as a liquidator, is appointed as a liquidator of any company; or

. a person, who has been registered as a liquidator of a specified body corporate, is appointed as a liquidator of that specified body corporate.

The applicant's complaint in the present matter is that Mr Young allegedly intermeddled with certain assets (many of which he claims were not assets of the
Companies) and, acting somehow as a "de facto liquidator", wrongly dealt with those assets. If that were the case, the Companies and others might well have some remedy against Mr Young for conversion, or as a trustee de son tort. However, in my view that behaviour would not constitute a failure on his part to carry out his duties adequately and properly as a liquidator. The question in this matter is not whether, if all Mr Bride's allegations against Mr Young are well-founded, there is a remedy available for those shown to have suffered loss thereby. [In that regard Mr Bride has referred me to two actions in the Supreme Court of Western Australia in each of which he is plaintiff. In one of those actions the defendant is Messrs Peat Marwick Mitchell. In the other the defendants include the Bank. Mr Bride told me that those actions were nearing a hearing.] Rather, the issue is a narrower one relating to the extent of the security provided by Mr Young.

The fact that Mr Young would not have been qualified to be appointed as a receiver if he had not been a registered liquidator does not mean that his conduct, after being appointed as a receiver, is to be characterised as carrying out his duties as a liquidator. Registration as a liquidator simply provided him with a qualification to be appointed as a receiver. The legal functions of a receiver on the one hand and a liquidator on the other hand are separate and distinct. There is no reference in the Corporations Law to a "de facto liquidator" nor was counsel able to cite me any case in which the expression has been used. It was used by Heerey J in Home v. White & Ors (1993) 11 ACLC 782 at p.787 in a very different context. It seems to me that a person is either a liquidator in law or not a liquidator at all. Parliament has, in the context of cancellation or suspension of the registration of a liquidator, distinguished
between a person carrying out or performing adequately and properly [the similarity of that phrase to the language of regulation 9.2.05(1) is striking] the duties of a liquidator as such, as distinct from any duties or functions required by an Australian law to be carried out or performed by a registered liquidator - see s.1292(2)(d). Where Parliament wants to refer to both the duties of a liquidator and other duties required by law to be carried out or performed by a registered liquidator, it refers expressly to the two sets of duties. As Mr M.J. Gething, counsel for the Commission pointed out, on Mr Bride's argument s.1292(2) (d)(ii) would be otiose.

I agree with the Tribunal's conclusion that a security lodged under s.1284 of the Corporations Law by a registered liquidator for the due performance of his or her duties can only be the subject of a claim under that section and regulation 9.2.05(1) in relation to the registered liquidator's conduct as a liquidator duly appointed to a particular corporation. For the foregoing reasons the appeal will be dismissed with costs.

I certify that this and the preceding eight

(8) pages are a true copy of the Reasons for

Judgment of Justice Carr.

Associate:

Date: 8 April 1997

The Applicant appeared in person

Counsel and Solicitor Mr M.J.Gething

for the First Respondent: Regional General Counsel (W.A.)

Date of Hearing: 2 April 1997

Date of Judgment: 8 April 1997

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