FEDERAL COURT OF AUSTRALIA

The Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Ltd (subject to a Deed of Company Arrangement) [2004] FCA 393 

PRACTICE & PROCEDURE – whether disposition by consent constituted an issue estoppel or whether subsequent proceedings amounted to an abuse of process.

CORPORATIONS – claim for specific performance against company – whether not maintainable when company enters into scheme of arrangement.

Corporations Law

Arnold v National Westminster Bank plc [1991] 2 AC 93 cited

Brash Holdings Ltd v Katile Pty Ltd (1994) 1 VR 24 discussed

Commissioner of Taxation v GIO (NSW) (1993) 45 FCR 284 referred to

Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 referred to

Fisher v Madden as Receiver and Manager of Dataflow Computer Services Pty Ltd (2001)  54 NSWLR 179 cited

Freevale Ltd v Metrostore (Holdings) Ltd [1984] 1 Ch 199 referred to

Hamilton v National Australia Bank Ltd (1996) 66 FCR 12 referred to

Holroyd v Marshall (1862) 10 HLC 191 referred to

In re Kayford Ltd (in liquidation) [1975] 1 WLR 279 referred to

In re Lind (1915) 2 Ch 345 referred to

J & B Records Ltd v Brashs Pty Ltd (voluntary administrator appointed) (1995) 36 NSWLR 172 referred to

Lam Soon Australia Pty Ltd (Administrator Appointed) v Molit Pty Ltd (1996) 70 FCR 34 referred to

MYT Engineering Pty Ltd v Mulcon Pty Ltd (1999) 195 CLR 636 referred to

Re Reis;  Ex parte Clough (1904) 2 KB 769 cited

Sonenco (No 77) Pty Ltd v Silvia (1989) 89 ALR 437 referred to

Swiss Bank Corp v Lloyds Bank Ltd [1979] 1 Ch 548 cited

Zambena Pty Ltd v Capitol Laundry Pty Ltd  (1996) 14 ACLC 241 distinguished

Carter on Contract, Butterworths

Spencer Bower, Turner and Handley, The Doctrine of Res Judicata, 3^rd ed, Butterworths, London (1996) 0

A Keay, McPherson: The Law of Company Liquidation, 4^th ed, LBC Information Services, Sydney, 1999

THE AIRTOURER CO-OPERATIVE LIMITED V MILLICER AIRCRAFT INDUSTRIES PTY LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) AND MICHAEL JAMES HUMPHRIS AND LAURENCE ANDREW FITZGERALD IN THEIR CAPACITY AS DEED ADMINISTRATORS OF MILLICER AIRCRAFT INDUSTRIES PTY LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT)

N 1599 OF 2003

BEAUMONT J

7 APRIL 2004

SYDNEY

THE COURT ORDERS THAT:

1.                  The applicant’s claim for declaratory relief made in par 1 of its Application dated 23 October 2003 be struck out.

2.                  Paragraph 12 of the respondents’ Defence be struck out.

3.                  There be no order for costs in relation to the separate question.

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

REASONS FOR JUDGMENT

(ON SEPARATE QUESTION)

Beaumont J:

Introduction

1                     Before describing the separate question considered in these reasons, it will be necessary to explain the nature of the principal proceedings.

2                     By its statement of claim filed on 10 November 2003, and bearing that date, the applicant alleged the following:

·                    On or around 5 December 1997, the applicant and the first respondent entered into a contract (‘the Contract’) for the sale of certain property and aircraft rights, including four Certificates of Type Approval and other intellectual property and some manufacturing jigs (‘the Airtourer Property’), owned by the applicant.  (Under cl 3 and cl 4 of the Contract, the first respondent promised to pay the applicant the sum of $30,000 as consideration for the sale of the ‘whole of the [applicant’s] estate and interest in the [above] property ... ’.  Upon payment of the consideration, ownership in the (above) property would vest in the first respondent, ‘to the intent of both parties that the [first respondent] thereafter shall have sole ownership of the design and manufacturing rights of all the Air Tourer range of aircraft’.)

·                    Pursuant to the Contract, the Airtourer Property was transferred to the first respondent.  (The Certificates of Type Approval were transferred to the first respondent on or about 5 April 1998.)

·                    It was a term of the Contract (cl 16) that the first respondent warranted that it would make an application for a Certificate of Type Approval for a 125 hp engined version of the Air Tourer aircraft.  (Clause 16 further provided that if such an approval were granted by the Civil Aviation Safety Authority Australia, the first respondent warranted that it would manufacture and market the aircraft under the name ‘Air Tourer’.)

·                    In the period from 5 December 1997 to date, the first respondent has not made an application for a Certificate of Type Approval for a 125 hp version of the Air Tourer aircraft.

·                    It was a term of the Contract (cl 17) that, if the first respondent failed to produce an Air Tourer aircraft for sale within five years of the date of the transfer of the Certificates of Type Approval (i.e. by April 2003), the first respondent would return the property sold under the Contract to the applicant and would forfeit the whole of the purchase price.

·                    In the period from 5 December 1997 to date, the first respondent has not produced an Air Tourer aircraft for sale.

·                    In the premises, the first respondent is required to return the Airtourer Property sold under the Contract to the applicant.

·                    The applicant has demanded the return of the Airtourer Property from the respondents and these demands have been refused.

3                     The applicant, by its Application previously filed on 24 October 2003 (but bearing the date 23 October 2003), claimed the following substantive relief:

‘1.        A Declaration that the First and Second Respondents have no right, title or interest in the design and manufacturing rights and intellectual property associated with the Victa Airtourer aircraft type.

2,         An order for specific performance of clause 17 of the Agreement between the Applicant and the First Respondent dated 5 December 1997 (“Agreement”) requiring the First Respondent to do, and the Second Respondents to cause the First Respondent to do, all things necessary to return the aircraft rights to the Applicant.

3.                  An order that the First Respondent deliver up of all manufacturing jigs, tooling and other equipment referred to in paragraph 3 of The Second Schedule to the Agreement.’

4                     By their Defence, the respondents plead, inter alia, the following:

‘12.      In answer to the whole of the Applicant’s claim, the First and Second Respondents say that:

(a)               the First Respondent is currently subject to a deed of company arrangement executed on behalf of the First Respondent and by the Second Respondents on or about 2 February 2000 (“Deed”);

(b)               the Applicant may not begin or proceed with these proceedings in the absence of a grant of leave from the Court, which the Applicant has not obtained;

(c)               to the extent that the Applicant has any claim against the First Respondent (which is denied) the Applicant;

(i)                 is a creditor of the First Respondent;

(ii)               is bound by the Deed;  and

(iii)             may not begin or proceed with these proceedings.’

The separate question

5                     In my opinion, this plea was in the nature of a ‘demurrer’ or, at least, a preliminary point that should be dealt with, before addressing the merits of the applicant’s claim.  Accordingly, with the consent of the parties, on 5 March 2004, I ordered that there be determined, as a separate question, whether the defence pleaded in par 12 of the respondents’ Defence is an answer to the applicant’s claim.

THe first respondent’s arrangement

6                     At a meeting of the directors of the first respondent held on 18 August 1999, it was resolved that the first respondent was insolvent, or likely to become insolvent at some future time; and that an administrator of the first respondent should be appointed pursuant to s 436A of the Corporations Law (‘the Law’).  Accordingly, Michael James Humphris (one of the second respondents) was appointed administrator.

7                     At another meeting of directors of the first respondent held on 7 January 2000, it was resolved that the first respondent execute (pursuant to s 439C of the Law) a deed of company arrangement as set out in the (administrator’s) report dated 23 December 1999 and that the second respondents be appointed joint and several administrators.  The meeting was convened by virtue of s 439A of the Law.

8                     (Section 439C provides:

‘At a meeting convened under section 439A, the creditors may resolve:

(a)       that the company execute a deed of company arrangement specified in the resolution (even if it differs from the proposed deed (if any) details of which accompanied the notice of meeting); or

(b)       that the administration should end; or

(c)        that the company be wound up.’)

9                     On or about 28 January 2000, the first respondent executed, with the second respondents, a Deed of Company Arrangement (‘the Arrangement’) (which noted the appointment of the second respondents by virtue of s 444A(2) of the Law).  The Arrangement was, relevantly, to the following effect:

·                    The Arrangement was to be administered by the second respondents, whose powers included making interim or other distributions out of the Distributions Fund;  and determining Claims (cl 2(b)).

·                    It was agreed by all persons bound by the Arrangement that the second respondents shall not be liable for any liability (etc.) of the first respondent incurred or arising on or after the Commencement Date (i.e. the date of its execution, viz. 28 January 2000) (cl 2(d)).

·                    As and from the Commencement Date until the termination of the Arrangement, the business of the first respondent shall be carried on by the second respondents, as administrators on behalf of the first respondents (cl 3(a)).

·                    All ‘Creditors’, and other persons bound by the Arrangement pursuant to the provisions of the Law, shall be deemed to have covenanted with the first respondent and the second respondents that he, she or it will not, after the Commencement Date institute any legal proceedings against the first respondent, or exercise any right of cross-action (in respect of any) charge or lien (cl 4).

·                    A ‘Creditor’ is defined (by cl 1(a)) to mean a person, company or other legal entity who, at the ‘Appointment Date’ (i.e. 18 August 1999) had a ‘Claim’, and includes any person who would have been entitled to prove in the winding up of the first respondent, had an order been made for the winding up of the first respondent on the Appointment Date.

·                    A ‘Claim’ means (by cl 1(a)) a debt payable or owing by, and all claims against, the first respondent arising out of, or having its origins in, any matter which occurred on or before the Appointment Date, or arising out of any transaction, act or omission of the first respondent, or by any other person on or before the Appointment Date, howsoever arising, whether the debt or claim was at the Appointment Date a present, future, actual or contingent, liquidated or unliquidated debt or claim, and whether arising under contract, tort, equity, statute or otherwise, and includes a debt or claim that would have been a debt or claim provable in the winding up of the first respondent pursuant to s 553 of the Law had an order been made for the winding up of the first respondent on the Appointment Date.  (Section 553 provides for the proof of a claim that is present or future, certain or contingent, ascertained or only sounding in damages.)

·                    The Arrangement may be pleaded by the first respondent against any creditor in bar of, inter alia, any proceeding or legal action taken against the first respondent (cl 6).

The provisions of the Law

10                  The Arrangement must also be read in the context of the relevant provisions of the Law (see MYT Engineering Pty Ltd v Mulcon Pty Ltd (1999) 195 CLR 636 at 649), as follows:

·                    The instrument setting out the terms of the Arrangement must specify, inter alia, the ‘Property’ of the company that is to be available to pay creditors’ claims (s 444A(4)(b)).

(By the Arrangement, ‘Property’ is defined, by cl 1(a), to mean, inter alia, any real or personal property of whatever description.)

·                    The instrument is to include the ‘prescribed provisions’.  (It seems that it is not necessary to mention them here.)

·                    A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day there specified (s 444D(1)). 

·                    But s 444D(1) does not prevent a secured creditor from realising or otherwise dealing with the security, except so far as the deed so provides in relation to a secured creditor who voted in favour of the creditors’ resolution (and the applicant did not vote) (s 444D(2)(a)). 

·                    Further s 444D(1) does not affect a right that an owner or lessor of property has in relation to the property, except (relevantly) if the Court so orders under s 444F(4) (s 444D(2)(b)).  (However, it has been held that a secured creditor may, pursuant to these provisions, exercise only ‘self-help’ or extra curial enforcement or recovery procedures (see J & B Records Ltd v Brashs Pty Ltd (voluntary administrator appointed) (1995) 36 NSWLR 172 at 181).  That is to say, should a secured creditor, owner or lessor, as the case may be, require assistance from the Court in order to realise or otherwise enforce its rights in relation to the property in which it has an interest, then leave will be required under s 444E (see  Hamilton v National Australia Bank Ltd (1996) 66 FCR 12).)

·                    Until a deed terminates (and the ‘Arrangement’ has not yet), a person bound cannot (a) begin or proceed with a proceeding against the company or in relation to any of its property;  or (b) begin or proceed with enforcement process in relation to the property of the company;  except (c) with the Court’s leave;  and (d) in accordance with such terms (if any) as the Court imposes.  (‘Property’ includes property used or occupied by, or in the possession of, the company (s 444E).)

·                    The Court may order a secured creditor not to realise or otherwise deal with the security, except as permitted by the order (s 444F(2)).

·                    Such an order may only be made if the Court is satisfied (a) that for the creditor to realise or otherwise deal with the security would have a material adverse effect on achieving the deed’s purposes;  and (b) that the creditor’s interests will be adequately protected (s 444F(3)).

·                    The Court may order the owner or lessor of property that is used or occupied by, or is in the possession of, the company not to take possession of the property or otherwise recover it (s 444F(4)).

·                    The Court may only so order if satisfied (a) that for the owner or lessor to take possession of the property or otherwise recover it would have a material adverse effect on achieving the deed’s purposes;  and (b) that the owner’s or lessor’s interests will be adequately protected (s 444F(5)).  An order may be made subject to conditions (s 444F(6)).

·                    A deed releases the company from a debt only in so far as (a) the deed provides for the release;  and (b) the creditor concerned is bound by the deed (s 444H).

THe applicant’s demurrer

11                  The applicant, in effect, demurs to the plea made by par 12 of the Defence on two alternative bases:

(1)               No leave of the Court is required under s 444E(3)(c) in the present circumstances;  or

(2)               The respondents are estopped from raising this defence, or it is an abuse of process to raise it.

12                  It will be convenient to consider the second demurrer ground first.

Are the respondents estopped from pleading par 12, or is it an abuse of process?

13                  The procedural history of this aspect of the matter is as follows:

·                    On the return date of the Application, the respondents raised the question of leave to proceed.  The applicant’s solicitor responded by letter dated 7 November 2003, contending that leave was not required.  The Court then directed that the respondents file and serve a motion raising the leave issue.

·                    On 8 December 2003, the respondents filed a notice of motion, returnable on 6 February 2004, seeking an order that the Application  be dismissed.

·                    But, by orders made on 6 February 2004, by consent, that notice of motion was itself dismissed, with costs.

14                  Yet, as noted, by their Defence dated 4 March 2004 (filed 5 March 2004), the respondents now plead par 12.

Issue estoppel?

15                  On behalf of the applicant it is submitted that the issue of whether, in the light of the Arrangement, the Court’s leave is required before the claims made in the principal proceedings can be instituted, has already been determined by the Court in its dismissal of the motion on 6 February 2004, and an issue estoppel prevents the re-litigation of the same issue, as now sought to be raised in par 12 of the Defence.

16                  I cannot accept the applicant’s contention.

17                  As Spencer Bower, Turner and Handley, The Doctrine of Res Judicata, 3^rd ed, Butterworths, London (1996) point out (at 39, [38]):

‘The extent to which a consent judgment, order or award may give rise to issue estoppels, however, has not been finally determined.   A consent judgment for payment of an agreed amount as damages consented to by the defendant without admission of liability did not preclude the defendant from later suing the plaintiff on a cause of action inconsistent with the existence of any liability of the defendant to the plaintiff in the original action.  The efficacy of a consent judgment to found a res judicata may depend upon the capacity of a party to enter into the underlying transaction or give consent.  It may also depend on the power of the court to make the orders in question.’  (Emphasis added.)

18                  As has been seen, the present matter is not merely a private dispute between individual parties.  The interests of the general body of creditors are necessarily involved here;  and the second respondents, as administrators of the Arrangement, obviously owe fiduciary duties to all creditors and, in some circumstances, to the first respondent’s shareholders.  It is not suggested that the second respondents sought the views of the first respondent’s creditors before consenting to the dismissal of its motion.  Nor is it suggested that the second respondents sought judicial advice in this connection.

19                  Moreover, an issue estoppel is not an absolute doctrine – there can be exceptions:  ‘One of the purposes of estoppel being to work justice between the parties, it is open to Courts to recognise that in special circumstances inflexible application of it may have the opposite result’ (per Lord Keith in Arnold v National Westminster Bank plc [1991] 2 AC 93 at 106 – 107;  see also Handley, above, at 94, [189]).

20                  In my opinion, given the interests of the general body of creditors in the dismissal of the motion, it would be inflexible to apply the doctrine of issue estoppel here upon the mere agreement of the second respondents.

Abuse of process?

21                  It is further submitted, for the applicant, that it is an abuse of process for the respondents to seek to revisit an issue already decided against them, from which no appeal was brought.

22                  For reasons essentially similar to those mentioned in rejecting the issue estoppel claim, I would reject this argument also.

Is the plea raised in par 12 of the defence demurrable?

23                  It will be recalled that the context of this plea, made in answer to the whole of the applicant’s claim, is, first, the applicant’s claim for a declaration that the first and second respondents ‘have no right, title or interest in’ the relevant property;  and, secondly, the applicant’s claim for an order for specific performance of cl 17 of the Contract, requires the respondents to do all things necessary to return the rights and to deliver up the equipment.  However, as will be seen, the applicant has focussed  attention on the specific performance claim only.  I will return to the significance of declaration 1, as asked, when considering relief.

24                  By letter to the respondents’ solicitors dated 7 November 2003, the applicant’s solicitors stated that the grounds for their demurrer to the plea, that is to say, that leave of the Court is not required prior to the commencement of the principal proceeding, are as follows:

·                    The applicant is not a creditor of the first respondent in relation to any debt;  the applicant only claims its proprietary right to the return of the property.

·                    No amount of money would be acceptable, to satisfy the applicant’s claim;  only the return of the property can do so.

·                    Even if (and this is disputed) the applicant were a creditor, its right to take possession of property is not affected by the Arrangement by virtue of the provisions of s 444D(3).

25                  In argument, counsel for the respondents further submitted:

·                    The terms of the Arrangement are no less binding upon the applicant by virtue of its not voting in favour of the Arrangement.  By s 444D(1), it ‘binds all creditors ... so far as concerns claims arising on or before 18 August 1999’.  The obligations arising under the Arrangement ‘stem from the combined operation of the [Arrangement] and the Law, not from any contractual bargain between the persons bound, and are imposed on all creditors – not just those who voted in favour ...’ (citing MYT, above, at 649).

·                    Even if the applicant can assert a proprietary interest in the relevant property (and this is not admitted), s 444D(2) and (3) do not relieve a secured creditor, or an owner or lessor of property in the possession of the first respondent from the obligation to obtain leave to proceed to enforce their rights (citing J & B Records;  Hamilton and Lam Soon Australia Pty Ltd (Administrator Appointed) v Molit Pty Ltd (1996) 70 FCR 34).

·                    The applicant’s claim is for specific performance;  thus, by definition, the alleged rights which it seeks to vindicate require the Court’s assistance.  It must follow that leave must be sought, and obtained, before the principal proceedings could commence.  Yet the applicant has never sought such leave.  Reference is made to Zambena Pty Ltd v Capitol Laundry Pty Ltd  (1996) 14 ACLC 241, where Capitol Laundry Pty Ltd sold certain assets to Zambena Pty Ltd, which promised, but failed, to discharge certain mortgages.  Capitol Laundry Pty Ltd obtained an order for specific performance.  It was held that, for the purposes of a deed of company arrangement, Capitol Laundry Pty Ltd was a contingent creditor because ‘[t]here could be no question about the amount of damages which must have been the amount required to discharge the mortgages ... ’ (at 243).

26                  On the question whether the applicant has any proprietary interest, the respondents make these submissions:

·                    The terms of the Contract (cited above) make it plain that the parties’ intention was that the applicant convey to the first respondents the whole of the applicant’s substantive interest in the aircraft rights and property.

·                    Clause 17(d) of the Contract conferred upon the applicant ‘a mere contractual right’ to ‘return of the property’ and forfeiture of the purchase price, in the event mentioned.  However, there was no reservation in favour of the applicant of title in the property transferred to the first respondent.  Thus, no proprietary interest was vested in the applicant before that event did, or did not, occur.

27                  On behalf of the respondents, it is also contended that any claim asserted by the applicant under the Contract (which is not admitted) could, if established, be characterised as a ‘contingent claim’ as at the Commencement Date (18 August 1999) for proof and adjudication by the second respondents for these reasons:

·                    A deed of company arrangement binds all persons who have, on the day specified in the deed, a future or contingent debt or claim against the company (citing Brash Holdings Ltd v Katile Pty Ltd (1994) 1 VR 24;  and Lam Soon at 40).

·                    As mentioned, s 553 of the Law relevantly provides for:

‘... all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages) being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof ….’

·                    In Brash, it was held (a) (at 33) that the expression ‘all creditors’ in s 444D(1) is not confined to those having claims for money sums due and payable on the day specified in the deed, but extends also to those who would have been creditors had the company gone into liquidation;  and the ‘relevant date’, for s 553 purposes, was the day specified in the deed;  (b) (at 34) that the use of the single expression ‘claims’ in s 444D(1) encompasses both ‘debts’ and ‘claims’ as used in s 553, and in respect of which creditors may be bound by the deed;  and (c) (at 34) the temporal limitation specified in s 444D(1) (‘claims arising on or before the day specified …’) does not operate to exclude future or contingent debts from proof, but to fix a date as at which the existence of the claim (whether future, contingent or otherwise) is to be determined.

·                    The Arrangement expressly mandates the admission to proof of contingent claims, which are significantly wider than the concept of a debt (citing Kitto J in Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 (at 459):  ‘…a claim which might never accrue or which might accrue upon the happening of a future event as a result of an existing contractual obligation’).

·                    Nor does the description of ‘Claim’ in the Arrangement (cited above) suggest a different result.

Conclusion on the validity of the plea

28                  It is clear that the essential question here is whether, as at 18 August 1999, the applicant was a ‘Creditor’ of the first respondent for present purposes.  It is common ground that a contingent right to payment is provable.  However, it is submitted for the applicant that a right to seek an order for specific performance is not.

29                  Reliance is placed by the applicant upon Re Reis;  Ex parte Clough (1904) 2 KB 769, where it was held that liability under a covenant to transfer after-acquired property pursuant to a marriage settlement was not a provable debt and was not released by bankruptcy.

30                  Cozens-Hardy LJ said (at 777):

‘When once it has been decided that the covenant is one of which specific performance can be obtained, it follows that the right to specific performance is not barred by the bankruptcy.  The covenant is not ancillary to a debt which was released by the bankruptcy;  and there is no evidence of any breach of the covenant before the bankruptcy was closed.’

31                  Stirling LJ said (at 781):

‘[T]he covenant in the present case is one in which specific performance is the appropriate remedy, and it ought not to be held barred by the order of discharge in the first bankruptcy.’

32                  Vaughan Williams LJ said (at 787):

‘[T]he marriage settlement does not fall within this definition of liability.  It is a contract which has been made with a different object from the payment of money in any contingency.  I wish to add, by way of caution, that no amount of difficulty in the estimate of the value would justify the exclusion in this Court [of Appeal] of a proof of debt, because, in my judgment, the plain words of the statute shew that if once the debt or liability, as the case may be, is shewn to come within the definition, the only Court which can exclude that debt from the operation of bankruptcy and its consequent discharge in freeing the debtor is the Court of Bankruptcy, and the Court of Bankruptcy dealing with the particular bankruptcy which has occurred.’

33                  The applicant submits that Reis is consistent with the established rule of equitable assignments (citing Holroyd v Marshall (1862) 10 HLC 191).  Reference is also made to In re Lind (1915) 2 Ch 345;  and to Commissioner of Taxation v GIO (NSW) 1993) 45 FCR 284 to similar effect.

34                  The applicant further referred to (obiter) observations in Lam Soon (at 44) that, although a claim for rent payable in the future was an existing right, not a mere expectancy, ‘[a] right to sue for damages for a particular future breach of [a] covenant [for repair] … is … not even acontingent claim:  it is a mere expectancy and could not be the subject of proof’.

35                  Finally, the applicant relies upon Fisher v Madden as Receiver and Manager of Dataflow Computer Services Pty Ltd [2001] 54 NSWLR 179 where it was held that because an employee’s right to apply to the Industrial Relations Commission for an order of priorities (retrospectively) existed, it did not follow that the employee was a ‘contingent’ creditor’.

36                  Meagher JA said (at 184):

‘[O]ne cannot accurately categorise Miss Fisher’s rights (if any) as a “contingent” debt or claim.  She has the bare right to make a claim, nobody knowing whether it will succeed or not, or if so in what amount, or subject to what terms or conditions.’

37                  Sheller JA (Beazley JA agreeing) said (at 193):

‘…[A]t the relevant date Dataflow was under no existing obligation to pay a sum of money by way of a retrenchment payment to Ms Fisher immediately or on a future event.  Ms Fisher had only a right to take proceedings in the Industrial Relations Commission to vary the contract to that end.  In Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1991) 28 NSWLR 443 at 461, Mahoney JA, speaking of s 88F of the Industrial Arbitration Act 1940, the predecessor of s 106 of the Industrial Relations Act, said:

“In my opinion, s 88F, as such, is not inconsistent with the Federal Act.  Section 88F does not, by its own operation, create any rights or obligations.  Its function is to grant jurisdiction to the Industrial Commission.”’

38                  Although the point for present determination has not been dealt with by any square authority, I am in general agreement with the applicant’s submissions, based, in my view, upon truly analogous contexts.

39                  That is to say, insofar as the applicant’s claim is now propounded (that is, after 18 August 1999 (indeed, after April 2003)) as a claim for specific performance which, it contends, is based upon a valid claim of an equitable assignment of specified property sustained by the passing of consideration, this claim is not, in my opinion, a claim made, or capable of being made, as at 18 August 1999, as a claim of a ‘Creditor’, contingent or otherwise.  The character of the claim is quite different, since the proceeding for specific performance has no connection with any debt, liquidated or unliquidated.  The present case, in my view, may be distinguished from Zambena, where the underlying transaction was one of indebtedness.

40                  Further support for the applicant’s approach may be found in the established principle that, if a company goes into receivership, that fact, of itself, cannot affect the rights of any party to an action for specific performance, whether as applicant or respondent, vendor (seller) or purchaser (buyer) (see, e.g. Freevale Ltd v Metrostore (Holdings) Ltd [1984] 1 Ch 199). 

41                  In Swiss Bank Corp v Lloyds Bank Ltd [1979] 1 Ch 548, Browne-Wilkinson J said (at 566 – 567):

‘[T]he court can and should order specific performance of an obligation of an insolvent company if that obligation was contracted before any insolvency, even if such specific relief will adversely affect third parties, the unsecured creditors of the company.  In this regard I can see no relevant distinction between the position of an insolvent company and a bankrupt individual.’

42                  (See also In re Kayford Ltd (in liquidation) [1975] 1 WLR 279;  Sonenco (No 77) Pty Ltd v Silvia (1989) 89 ALR 437 at 445 – 446; 457;  and McPherson, The Law of Company Liquidation (1999) 4^th ed at 362, fn 364.)

43                  It will be recalled that, under cl 3(b) of the Arrangement, the second respondents were to continue to conduct the first respondent’s business, a role similar to that of receiver.

44                  It needs to be emphasised that the applicant’s claim for specific performance, which is clearly discretionary relief (especially in respect of goods – see Carter on Contract at 45-040) must stand apart from the Arrangement in every sense.  That is to say, if specific performance relief is granted, no claim under the Arrangement is available;  likewise, if that relief is refused, no claim under the Arrangement is open.

45                  Accordingly, I propose to order that par 12 of the Defence be struck out.

46                  I have mentioned the applicant’s claims for specific performance, that is, orders 2 and 3, as asked, in the application.  However, it will be recalled that order 1, as asked, sought different relief, that is, a declaration that the respondents had no interest in the property.  Presumably, this is not sought as a free-standing relief, but rather as a basis for granting specific performance.  It is preferable in my view, that any risk of its free-standing character be removed.  That claim is not necessary for orders 2 or 3 to be pursued.  Accordingly, I propose to order that the claim for declaratory relief sought in declaration 1 be struck out, without prejudice to the making of the claims sought in orders 2 and 3.

47                  As to costs, in all of the circumstances, no order should be made on the separate question.

Orders

48                  I order that:

1.         The applicant’s claim for declaratory relief made in par 1 of its Application dated 23 October 2003 be struck out.

2.         Paragraph 12 of the respondents’ Defence be struck out.

3.         There be no order for costs in relation to the separate question.

Associate:

Dated:              7 April 2004