FEDERAL COURT OF AUSTRALIA

CORPORATIONS – receiver and manager- whether grant of powers of sale and realisation appropriate.

MERCATOR PROPERTY CONSULTANTS PTY LTD (ACN 008 737 022) v CHRISTMAS ISLAND RESORT PTY LTD (ACN 009 160 123) AND ORS

WG 3017 of 1998

R D NICHOLSON J

PERTH

7 OCTOBER 1998

NO QUESTION OF PRINCIPLE

THE COURT ORDERS THAT:

1.                  The Receiver and Manager have leave to sell, realise or otherwise dispose of such of the following assets of the first respondent (“CIR”) as are necessary to pay or provide for the receiver and manager’s present and anticipated costs, expenses, liabilities and disbursements or the present and anticipated liabilities of CIR and of the applicant incurred by it in relation to these proceedings, including but not limited to the costs of obtaining the appointment of the receiver and manager:

(a)                the property known as Seaview Lodge;

(b)               the property known as Christmas Island Lodge;

(c)                the property known as the Poon Saan settlement;

(d)               motor vehicles;

(e)                construction equipment;

(f)                 aeroplanes;

(g)                investment in Christmas Island laundry;

(h)                surplus plant and equipment.

which are more particularly described in paragraph 6 of the affidavit of Jeffrey Lawrence Herbert sworn 25 September 1998 and filed herein.

2.                  The Receiver and Manager have leave to seek or consent to be appointed as and act as provisional liquidator or liquidator of CIR or administrator of CIR and administrator of a Deed of Company Arrangement of CIR.

3.                  The Receiver and Manager have power:

(a)                to borrow or raise money in respect of the receivership and management of CIR on behalf of or as agent for CIR and without limiting the generality thereof with respect to any such borrowing or raising, draw, make, accept, endorse, execute and issue bills of exchange;

(b)               to pay or appropriate to his own use absolutely, the Receivers and Managers costs, expenses, liabilities and disbursements; and

(c)                to grant a mortgage and/or charge over any of the assets and undertaking of CIL to secure repayment of any money’s borrowed or raised pursuant to Order 4(a) above.

4.                  The Receiver and Manager be entitled to the costs of this application provided for out of the funds of the first respondent.

5.                  There be liberty to apply.

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

NO QUESTION OF PRINCIPLE

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR: This is a notice of motion brought on behalf of the receiver and manager for certain orders.  If made those orders would give him leave to sell, realise or otherwise dispose of certain assets.  The power of such sale or realisation or disposition was, by decision of the court on the prior application leading to the appointment of the receiver and manager, deliberately withheld, because at that stage the assets of the first respondent and the wisdom of the exercise of any such power were not known to the parties or the court.  The consequence of the appointment of the receiver and manager is that he has been able to fully investigate the position of those assets.  In the affidavit material before me he has divided those into the core and non-core assets, the core assets being those related to the continuation of the principal business of the first respondent.  The proposed first order containing the power of sale, realisation or disposition of assets would relate to assets falling into the non-core category.

The receiver and manager also seeks leave to seek or consent to be appointed as provisional liquidator or liquidator or administrator and administrator of a deed of company arrangement.  That appears to be a consequential possibility to the development of the management of the affairs of the first respondent.

The receiver and manager seeks also to borrow or raise money and to grant security for the purpose of meeting the costs, expenses and liabilities and disbursements which he has incurred as an officer of the Court in his capacity as receiver and manager.

When the motion was first brought on it was apparent that there had not been effective service upon each of the second respondents, although it did appear that the fourth-named second respondent had duly received proper notification of the proceedings and indeed had signified in writing to the receiver and manager that the directors intend to appoint a legal representative to represent them in relation to the motion.  The directors are the second respondents so it appeared therefore that the fourth-named second respondent sought to speak on behalf of all the second respondents.

However, at the last hearing the court required that an opportunity be given to the second respondents to appear and be represented and that service take place upon them in the manner ordered by the court.  There are before the court today fresh affidavits relating to service and I am satisfied that service has taken place in accordance with those orders.  Although the fourth-named second respondent has again been served and again there is evidence that he accepted service on behalf of all the directors by an endorsement on the process served upon him, there is no appearance for the second respondents.  That is contrary to advice received through the representatives of the receiver and manager that the second respondents would be represented by a certain firm.  In my opinion, in all these circumstances the second respondents have had a reasonable opportunity to appear and be heard in relation to this motion.

There are reasons of urgency why the motion should be dealt with and not allowed to be held over.  They are reasons of economic circumstance arising from the position in which creditors of the company find themselves and the desire to realise realisable assets as soon as possible and, in the case of the receiver and manager, to remove himself from the position of personal jeopardy which he presently stands in relation to the costs which he has incurred.  In my opinion the motion should now be dealt with by the court.

The applicant does not oppose the orders sought, although as a consequence of submissions for the applicant, two amendments have been made to the form of orders.  The applicant fully supports the findings which I have made concerning the position of urgency, the applicant of course being the minority shareholder with a large investment in the first respondent.

In my opinion it is appropriate that the receiver and manager be provided with the power of sale, realisation and disposition in respect of the named non‑core assets.  That would not authorise the sale, realisation or disposition of core assets, nor is it sought to do so.  That would require further reference to the court should it be necessary.

I also consider that the other two proposed main orders are appropriate in all the circumstances.

Accordingly I am prepared to make the orders in the notice of motion as amended in the minute before me today and after submissions on behalf of the applicant. 

Associate:

Dated: