CATCHWOROS BANKRUPTCY - Bankruptcy Notices - application to set aside - counter-claim in conversion against Receivers and Managers of creditor company - counter-claim not 'mutual and due in the same right' - whether counter-claim could not have been set up in the action in which the judgments were obtained - whether a bona fide claim - liability of Receivers and Managers appointed by the Court discussed. Bankruptcy Act 1966 (Cth) ss.40(1)(g) and 41(7). ERNST ABRAHAM SIEWERTSZ VAN REESEMA Judgment Debtor AUSTRALIAN GROWTH RESOURCES CORPORATION PTY. LTD. (Receivers and Managers Appointed) Judgment Creditor Fisher J. Adelaide RECHA rey 30 MAR 1987 FEDERAL co AUSTRALIA. OF PRINCIP, REGISTANE 27 March 1987 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA Re: Ex Parte: No.1167 of No.1168 of No.1169 of No.1170 of No.1171 of ERNST ABRAHAM SIEWERTSZ 1986 1986 VAN REESEMA Judgment Debtor AUSTRALIAN GROWTH RESOURCES CORPORATION PTY. LTD. (Receivers and Managers Appointed) Judgment Creditor MINUTES OF ORDER JUDGE MAKING ORDER WHERE MADE DATE OF ORDER THE COURT ORDERS THAT: on FISHER J. ADELAIDE 27 MARCH 1987 1. The applications to set aside the bankruptcy notices be dismissed. 2. Pursuant to sub.s.41(7) of the Bankruptcy Act 1966 (Cth) time for compliance with the bankruptcy notices be extended to and including 27 March 1987. 2. 3. The debtor do pay to the creditor its costs of the proceedings, the same to be taxed if not agreed. Note: Settlement and entry of order is dealt with in Bankruptcy Rule 124. :1% « ' ' Me . 7 Fs J toy " ' Fy . ' 1 ' - ont ' ie ' , ' "see ' My ° ' ~ ' \ aot ' os wt ' ' 1 ' a ran , \ \ . aa L \ " . IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY No.1168 of 1986 No.1169 of 1986 No.1170 of 1986 No.1171 of 1986 BANKRUPTCY DISTRICT OF THE STATE ) ) ) ) GENERAL DIVISION ) No.1167 of 1986 ) ) ) ) OF SOUTH AUSTRALIA Re: ERNST ABRAHAM STEWERTSZ VAN _REESEMA Judgment Debtor Ex Parte: AUSTRALIAN GROWTH RESOURCES CORPORATION PTY. LTD. (Receivers and Managers Appointed) Judgment Creditor REASONS FOR JUDGMENT FISHER J. : 27 MARCH 1987 This matter concerns 5 bankruptcy notices issued on the application of Australian Growth Resources Pty. Ltd. (Receivers and Managers appointed) ("the company") directed to Ernst Abraham Siewertsz Van Reesema ("the debtor"). Each of the bankruptcy notices was based ona separate certificate of judgment of the Supreme Court of South Australia for costs which the debtor was ordered in Action No.1504 of 1985 to pay to the company. Time for compliance with the bankruptcy notices was fixed for 14 days from the date of service. On 13 November 1986, within the said period of 14 days, the debtor filed with the Registrar in respect of 2. each bankruptcy notice an application to set aside such notice and an affidavit in support. It was contended that this affidavit satisfied the requirements of sub.s.41(7) of the Bankruptcy Act 1966 (Cmwith) ("the Act") which subsection can provide an extension of the time for compliance by a debtor with the bankruptcy notice. The debtor sought the following orders in the application: "1. To set aside the Bankruptcy Notice herein, or in the alternative, 2. To extend the time for compliance with the Bankruptcy Notice until proceedings to set aside the judgment or order in respect of which the Bankruptcy Notice was issued which have been instituted by the Judgment Debtor in the Supreme Court of South Australia in Action No. 2944 of 1986 are finally determined." In the penultimate paragraph of his affidavit the debtor asked "that any hearing in this matter be heard in the first week of December 1986 or in the first week of February 1987 as I shall be unavailable on any other date prior to Monday March the 30th, 1987". When the matters first came before the court on 24 November 1986 they were fixed for hearing as requested in the first week of February 1987. These considerations became relevant when the debtor made a number of applications to adjourn the hearing beyond the first week in February 1987 which applications were refused. The hearing commenced on Wednesday 4 February 1987 after a number of further interlocutory applications and the debtor was in fact available up to and including 18 February 1987 when the hearing concluded. The amounts claimed under the 5 bankruptcy notices totalled $22,663.40, in each instance for orders for costs in 3. proceedings No.1504 of 1985 in the Supreme Court of South Australia. This amount of $22,663.40 was made up as follows: "Bankruptcy Notice 1167/86 $6,604.23 pursuant to the order of White J. of 5/7/85. " " 1168/86 $12,182.69 pursuant to the order of White Jd. of 5/7/85. " " 1169/86 $1,247.09 pursuant to the order of O'Loughlin J. of 5/9/85. " " 1170/86 $1,730.63 pursuant to the order of the Full Court of 1/4/86. " " 1171/86 $898.76 pursuant to the order of O'Loughlin J. of 26/9/85. The parties agreed that the applications in relation to each of the bankruptcy notices should be heard concurrently and it was seldom necessary to differentiate between the various notices. The hearing was generally complex and confused, to a considerable extent in consequence of the fact that on many occasions both in the Supreme Court and this Court the debtor was, except on the hearing before me, unrepresented. He drafted his own documents. There were numerous proceedings and applications in the Supreme Court and also in the District Court of Adelaide. The debtor is, to say the least, avery experienced litigant and took every point which could possibly be open to him under para.40(1)(qg). It is also quite apparent that I was not made aware of all aspects of the proceedings and applications in the Supreme Court doubtless because of their irrelevance to the matters before me. The litigation in which the orders for costs were made was initiated by the Corporate Affairs Commission ("the Commission"). Application was made to the Supreme Court of South 4. Australia on 3 May 1985 pursuant to s.573 of the Companies (South Australia) Code. That section provides as follows to the extent relevant: "673(1) Where (a) an investigation is being carried out under this Code in relation to any act or omission by a person, being an act or omission that constitutes or may constitute an offence against this Code; (b) a prosecution has been instituted against a person for an offence against this Code; or (c) a civil proceeding has been instituted against a person under this Code, and the Court considers it mecessary or desirable to do so for the purpose of protecting the interests of any persons to whom the person referred to in paragraph (a), (b) or (c), as the case may be (in this section referred to as the 'relevent person'), is liable or may be or become liable to pay any moneys, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for any securities or other property, the Court may, on application by the Commission, make one or more of the following orders: (d) 4... (e) an order prohibiting, either absolutely or subject to conditions, a person holding money, or securities or other property, on behalf of the relevant person or on behalf of any person associated with the relevant person from paying all or any of the money, or transferring, or otherwise parting with possession of, the securities or other property, to, or to another person at the direction or request of, the person on whose behalf the money, or the securities or other property, is5 or are held; (£) wae (gq) aan (h) an order appointing - (i) aa. (ii) where the relevant person is a hody corporate - a receiver or receiver and 5. Manager, having such powers as the Court orders, of the property or of part of the property of that person; Cj) sae (k) aa." A subsequent provision {5.573 (1A)) is of sone relevance- "573(1A). Where an application is made to the Court for an order under sub-section (1), the Court may, if in the opinion of the Court it is desirable todo 650, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application." The Supreme Court exercised jurisdiction under sub.s.573(1) upon being advised of an investigation by the Commission of a possible breach of Part IV Division 6 of the Code by the Company. This Part relates to the issue by a company to the public of "prescribed interests". At all relevant times the debtor, his son and his daughter were directors of the company. The management of the company was however exercised exclusively by the debtor. The application by the Commission named the company, the debtor and his son and daughter as respondents and sought the following orders ~ "Ll. An order prohibiting Ernst Abraham Siewertsz Van Reesema, Martine Ludowici Siewertsz Van Reesema and Nicholas Anthony Siewertsz Van Reesema holding money, or securities or other property on behalf of Australian Growth Resources Corporation Pty. Limited. 2. The appointment of a receiver and manager over all of the property of Australian Growth Resources Corporation Pty. Limited with power to:- 3. On Tuesday 6. (a) Enter upon or take possession of or receive the said property of Australian Growth Resources Corporation Pty. Limited. (b) Carry on the business of Australian Growth Resources Corporation Pty. Limited or any part thereof with ail the power of an absolute owner. (c) Do any such acts, assurances and things as, in the opinion of the receiver and manager, are necessary or incidental to the proper performance of his duties pursuant to this order. Such further or other order which the Court may deem fit and proper." 7 May 1985 White J. in the Supreme Court, in the absence of the debtor and his son and daughter who had not been served, made the following interim orders pending determination of the application on 10 May 1985 - oe a That upon service of this order upon Ernst Abraham Siewertz Van Reesema, Martine Ludowici Siewertsz Van Reesema and Nicholas Anthony Siewertsz Van Reesema, the said Ernst Abraham Siewertsz Van Reesema, Martine Ludowici Siewertsz Van Reesema and Nicholas Anthony Siewertsz Van Reesema cease holding money, or securities or any other property on behalf of Australian Growth Resources Corporation Pty. Limited. That Michael Jaunay Mount and Fredrick Charles Perkins be appointed jointly and severally as receivers and managers over all of the property of Australian Growth Corporation Pty. Limited with power to:- (a) Enter upon or take possession of or receive the said property of Australian Growth Resources Corporation Pty. Limited. (b) Carry on the business of Australian Growth Resources Corporation Pty. Limited or any part thereof with all he powers of an absolute owner. (c) Do any such acts, assurances and things as, in the opinion of the said receivers and Managers, are necessary or incidental to the proper performance of their duties pursuant to this order." 7. Thereafter a very considerable volume of litigation was conducted and still is being conducted in the Supreme Court, both in Action No. 1504 of 1985 and in separate actions. In many instances the debtor was ordered to pay to the company its costs, and in particular was ordered to pay the costs of the company of various applications in Action No. 1504 of 1985. It is the costs of these applications which are the subject of the various bankruptcy notices before me. In the affidavit which initiated the proceedings in this Court the debtor, unrepresented at the time, sought orders setting aside the bankruptcy notices on a number of grounds. At the hearing, however evidence and argument were only directed to the debtor's contention that, in accordance with para.40(1)(qg), he had a counter-claim, set-off or cross demand (hereinafter called a "counter-claim") exceeding the amounts claimed by the company, which counter-claim he could not have set up in the proceedings in which judgments were obtained against him. Other contentions were made in his affidavit, namely (i) that the orders for costs were of no force or effect because they were made consequent upon orders of White J. which were obtained by fraudulent misrepresentation or surprise or mistake, (ii) that the amounts specified in the bankruptcy notices exceeded the amounts in fact due and (iii) that the orders were not final judgments or orders. These latter grounds For setting aside the bankruptcy notices were abandoned prior to trial, and in consequence a number of paragraphs in the initial affidavit and a subsequent affidavit of the debtor were struck out upon objection by counsel for the company. Iwas also asked ona number of 8. occasions to go behind the certificates of judgment of the Supreme Court. However no evidence was produced to support such a submission and I refrained from doing so except to the extent referred to hereafter, namely to compare the orders of the Supreme Court judges with the certificates of judgment upon which the bankruptcy notices were based. Two provisions of the Act fall for consideration in these proceedings. Paragraph 40(1)(g), to the extent relevant provides as follows: "40(1) A debtor commits an act of bankruptcy in each of the following cases:- (g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not - (i) where the notice was served in Australia - within the time fixed by the Registrar by whom the notice was issued; or comply with the requirements of the notice or satisfy the Court that he has a counter-clain, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment or order was obtained;" Subsection 41(7) is in the following terms: "41(7) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, 9. that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied." In a complex matter such as this, andin particular because I am troubled by much of the evidence given by the debtor, it is pertinent to note the extent to which the debtor must fulfill the obligations imposed on him by para.40(1)(g). He is specifically required to "satisfy the Court that he has" such a counter-claim as is therein referred to. In Ebert v The Union Drustee Co. of Australia Ltd. (1960) 104 C.L.R. 346 the High Court cited on page 350 the dicta of Street J. in Re Duncan, Ex parte Modlin (1917) 17 S.R. (N.S.W.) 152, namely that the debtor need only satisfy the Court that he has a bona fide claim which he is fairly entitled to litigate. The High Court said of this dicta on the same page: "This perhaps is expressed too favourably to the debtor. In Re A Debtor (€1958] 1 Ch.81 at p.99) Roxburgh J. said: 'But not every demand will suffice. A demand made in bad faith would not be good enough. The debtor must satisfy the court that he has a genuine demand... But in my opinion the demand must be more than bona fide: the court must be satisfied that it has a reasonable probability of success.' Perhaps the standard may be expressed by saying that the debtor must show that he has a prima facie case, even if then and there he does not adduce the admissible evidence which would make out a prima facie case before a Court trying the issues that are involved in his counter-claim set-off or cross demand." It is in my view necessary that the debtor satisfy the Court to this extent in respect of all of the requirements of para.40 (1)(g). In particular he must show a prima facie case 10. that he has a counter-claim against the company in the same right as its judgment against him. Likewise he must show that he could not have set up the counter-claim in Action 1504 of 1985 being the action in which the orders for costs were obtained against him. I consider first the nature of the debtor's counter- claim. It is to be exclusively found, as his counsel conceded, in paragraph 4(a) of the debtor's statement of claim in action No.149 of 1987. This statement of claim was filed on 27 January 1987 and accompanied the writ which on that day initiated the proceedings. The company was the defendant and the debtor after relating the appointment of the receivers stated his claim in Paragraph 4(a) as follows: "4. After the 7th day of May 1985 the said receivers and managers purported to take possession of the property of the said company and purported to take control of the said company and proceeded to conduct the said company in breach of its agreements and obligations to the plaintiff in that (a) The Receivers and Managers of the said company unlawfully and improperly took possession of the Plaintiff's property to the value of §30,000 and failed and refused to return the said property to the Plaintiff; 5. And the Plaintiff claims from the Defendant as follows:- Pursuant to paragraph 4(a) $30,000. It was accepted that, at best for the debtor, his claim was in conversion for §30,000 being the value of his property allegedly converted by the receivers and managers. 11. The Facts upon which the debtor relied to establish the conversion can at this stage be briefly stated. Prior to 30 April 1985 the company had been carrying on business under the name, inter alia, "Australian Home Nurseries". It acquired from the debtor on 30 June 1984 the right to use this name "for such period as permitted by Ernst Van Reesema". The nature of the business was described as a "home nursery pragram" pursuant to which the company sold to growers as recited in a Standard form of agreement certain plant and goods and agreed to supply certain horticultural services. Little turns on these agreements except to note that it appears that the possibility that they were covered by the expression "prescribed interests" prompted the investigation by the Commission. The debtor told the Court that he became aware of this investigation during 1985 and the possibility that the company alternatively would be prosecuted. He said that this possibility prompted him for whatever reason to acquire from the company the business conducted under the name "Australian Home Nurseries". A meeting of directors of the company was held on 30 April 1985 commencing at 11.45 p.m. and concluding at 12.45 a.m. the following day. The unconfirmed and unsigned Minutes of the meeting indicate that it was attended by the debtor, his son and daughter as directors and Heather Reynolds as secretary. The relevant Minutes were as follows: "AUSTRALIAN HOME Ernst van Reesema advised the meeting NURSERIES: that he had received advice from five and Homegrowers from time to time from HOMEGRO : the middle of February 1985 that they had been contacted by a Mr. Mark Wheaton an Investigator of the 12. Corporate Affairs Commission and requested to cooperate and lodge complaints and or produce their Grower agreement and or sign affidavits and or appear in Court to give evidence. The order in which the Homegrowers had contacted Ernst van Reesema were: Anna Ocalewicz Peter Barnfield Hope Whiffin Frank Tynski Marilyn Evans Mr. Peter Barnfield had further advised that he had been contacted several times and Mr. Wheaton had confirmed that prosecution was to take place. All five Homegrowers had confirmed that they advised Mr. Wheaton that they had no complaint. Mr. Ernst van Reesema advised the meeting that in the circumstances 'Australian Home Nurseries' and 'Homegro' be transferred to him, and he tabled a draft agreement setting out the terms. Resolved: That the Agreement be entered into. CLOSURE The Agreement transferring D 'Australian Home Nurseries' and Homegro to Ernst van Reesema was executed and the relevant Form 6 Notices to be lodged at the Corporate Affairs Commission by Mr. Ernst van Reesema as Transferree were executed and there being no further business the meeting was closed off at 12.45am." The agreement which was executed at the meeting on 1 May was almost certainly drafted by the debtor and provided that the business names, the plant and equipment and the rights to occupy premises of the company be sold to the debtor for three sums each of $1. It is unnecessary to set out the terms of this agreement. 13. Six days after the execution of this agreement the Supreme Court made the order of 7 May 1985 anter alia appointing Receivers and Managers. They acted immediately upon this order and changed the locks on the business premises in the Toorak Village Arcade at 375 Greenhill Road, Toorak Gardens in which the bulk of the company's stock was held. The debtor reacted vigorously, claiming that the stock was his as a result of the sale to him by the agreement of 1 May 1985. He arranged for the landlord, Je Maintaindrai, to change again the locks and to levy distress for arrears of rent on certain chattels on the premises. Further he claimed that various items of office furniture were and had always been his property. The matter came before the Supreme Court again on 17 May 1985 when orders were made restraining the debtor and the other directors from dealing with or disposing of the property of the company and requiring them to deliver up such property to the receivers. The debtor and the other directors were also directed to deliver up to the receivers whatever property and goods were the subject of the agreement of 1 May. It would appear from the somewhat sketchy evidence that in a number of respects the debtor Failed to comply with this order and also another order made on 31 May 1985. On 25 June 1985 a writ of attachment was issued against the debtor and Was apparently executed. The debtor spent a number of days in gaol having on 5 July 1985 been found guilty of contempt of Court on anumber of occasions and ina number of ways all of which were specified in the order of that date. On 21 June 1985 the receivers removed from the premises at 375 Greenhill Road, Toorak Gardens the stock, plant and furniture in the shops and offices 14. in those premises. The above is only a short and doubtless inadequate recitation of the frenetic activity which appears to have taken Place both within the Supreme Court and on the premises during this time. The crucial fact is that it was activity of this nature which produced the orders for costs made in the Supreme Court in favour of the company. The debtor relied upon the locking of the shop premises, the ultimate removal of the stock in trade from these premises and from the dwelling house occupied by him at College Park and also certain furniture and books from Suites 10 and 11, 375 Greenhill Road, as the basis of his cause of action in conversion. He placed a total value of approximately $27,000 on these assets and contended that I should be satisfied that he has a counter-claim for this amount, which amount exceeds the sum of the judgment debts. Further he contended he could not have set up the claim for conversion in Action No.1504 of 1985 in the Supreme Court in which the judgments were obtained. There are a number of grounds upon which I conclude that I am not sufficiently satisfied. In the first instance there is authority for the proposition that the debtor's counter-claim "must be mutual and due in the same right e.g., in answer to a judgment obtained against him by executors the debtor cannot set up a claim against their testator's estate" (per Long Innes J. in Re Anderson (1927) 15. 27 S.R. N.S.W. 296 at p.298). This principle was referred to by Starke J. in Voqwell v Vogwell (1939) 11 A.B.C. 83 at p.89 as follows: "Further I think it would be found upon examination that the counter-claim which the appellant puts forward is against her brother as an executor whilst his claim is upon a judgment debt due to him in his own right. In order that debts or claims may be set-off they must be due respectively in the same right." I gave more detailed consideration to this proposition in James v Abrahams (1981) 34 A.L.R. 657 at pages 666 et seq. It is also referred to in Ebert v Union Trustee supra. In the present matter the debtor contends that he is entitled to counter-claim in respect of the alleged conversion of his goods and chattels, which assets he maintains he acquired from the company by virtue of the agreement of 1 May 1985. He says he is entitled to damages arising out of the tortious acts of the receivers and managers of the company which claim can be set-off against the judgment debts by him due to the company. In my opinion there is not in this matter the mutuality of debts which is an essential prerequisite of a counter-claim as required by para.40(1)(g) of the Act. The debtor's claim must fail because the receivers are potentially liable only in their personal capacity. They are personally liable and no liability can attach to the company as judgment creditor. In this instance the receivers have been appointed hy the Supreme Court and as such they are officers of the Court and 16. not the agents of the company. The author of Kerr on Receivers 16th Edit. p.219 states the position as follows: "Receivers and Managers appointed by the Court (except the so-called receivers appointed by the Court of Protection, and probably receivers and managers of statutory undertakings) are personally liable to persons dealing with them in respect of liabilities incurred... but subject toa correlative right to he indemnified out of the assets in respect of liabilities properly incurred; for receivers are not agents for any person but principals,..." At page 305 the author deals particularly with tortious liability when he says: "If the receiver interferes with the rights of third parties, however innocently, he is personally liable as a trespasser..." The same comment was made by Phillimore J. in Re Goldburg (No.2) C1912] 1 K.B. 606 at p.6i1 - "That which the receiver takes possession of, as a trespasser, he must account for, and he cannot set up any claim for anything that he has usefully done." The position of a receiver and manager appointed by the Court is aptly stated by Lord Esher M.R. in Burt Boulton & Hayward v Bull £18951 1 Q.B. 276 at p.279 when speaking of a receiver and manager appointed by the Court to manage the business of a company. He said: "What is the position of such a receiver and manager? He is not the agent of the company. They do not appoint him; he is not bound to obey their directions; and they cannot dismiss him, however much they may disapprove of the mode in which he is carrying on the business. Only the Court can dismiss him, or give him directions as to the mode of carrying on the business, or interfere with him, if he is not carrying on the business properly. The incidents of his relation to the Court are such as would, if they existed as between him and an ordinary person, constitute him an agent for such person; but it is of course impossible to suppose that the relation of agent and principal exists between him and the Court. What is the inference that necessarily arises? It must be that the intention 15 that he shall act in pursuance of his appointment on 17. his own responsibility and not as an agent, because otherwise nobody will be responsible for his acts. The company cannot be liable, for he is not their agent, and the Court clearly cannot be liable. Therefore any orders which he may give under such circumstances as manager must prima facie be taken to be orders given on his own responsibility and credit. How far he may be bound to give such orders it is not now necessary to determine. It may be that, if his relation to the Court implies that he must within the bounds of reason carry on the business, as between him and the Court it would be his duty to give the necessary orders; but I apprehend that, if he finds himself thereby placed in a difficulty, and is unwilling to give orders, he may apply to the Court and the Court would protect him." It seems fairly plain that the debtor's claim in conversion against the receivers 15 a claim against them in their personal capacity and in respect of which they are, if at all, personally liable. It is not a claim against the company which it would or could otherwise be if they were acting on behalf of the company as its agent. There was no argument to the contrary advanced on behalf of the debtor. In these circumstances it is mecessary to see whether the company's judgment against the debtor is in the same right, namely a judgment in favour of the receivers in their personal capacity. On the face of it, the judgments are not in any way judgments in favour of or for the receivers, they are judgments in favour of the company, albeit "Receivers and Managers appointed". The only argument advanced by counsel for the debtor was that, if one looked behind the certificates of judgment to the orders actually made, these orders were in some instances orders in favour of the receivers and not the company. On this point If was prepared to admit into evidence the applications 18. which preceded the orders for costs and these orders themselves. It is desirable to consider these applications and orders in respect of each bankruptcy notice. The certificate of judgment in respect of Bankruptcy Notice No. 1167/1986 is based on an order made by White J. on 5/7/85. In this instance the company applied for leave to issue a Writ of Attachment against the debtor. The application was made in matter No. 1504 of 1985, in which proceedings the company was a party but not the receivers and managers. The order for costs was on that date made in the following terms: "That the respondent (the debtor) do pay to Kelly & Co (the solicitors for the company) of 55 Waymouth Street, Adelaide within 3 calendar months of service of the relevant allocator the taxed costs of the receiver as between solicitor and client in relation to the contempt proceedings, including in such costs as a disbursement to be taxed the costs and expenses of the Receiver and the Receiver's staff." Bankruptcy notice 1167/1986 is based on a certificate of judgment in respect of the taxed costs of "the receiver" and bankruptcy notice 1168/86 is based on the taxed costs and expenses of the receiver and receiver's staff. In each instance the costs were taxed pursuant to the aforementioned order. Bankruptcy notice No. 1169/86 arose out of an application by the debtor on the hearing of which the company was represented. On 5 September 1985 the application was dismissed and an order for costs made against the debtor in favour of the company. The certificate of judgment named the company a5 judgment creditor, as in fact does every certificate of judgment relevant to this matter. 19. Bankruptcy notice No. 1170/86 arose out of an appeal to the Full Court of the Supreme Court by the debtor which appeal was dismissed. The order for costs of the appeal provided that the debtor pay to the receiver and managers of the company their costs of the appeal although by name they were not before the Court. The recital to the order specified that counsel appeared on the hearing for the company (Receivers and Managers appointed). The final bankruptcy notice 1171/86, arose out of an application by the debtor and the order for costs provided that "two-thirds of their costs of and incidental to this applicatiion... be paid by the said Ernst Abraham Siewertsz Van Reesema to the Receivers and Managers of Australian Growth Resources Corporation Pty. Ltd." It is my opinion, notwithstanding the variations in terminology, that each of the orders for costs was made for the benefit of the company. The receivers were before the Court only as the persons appointed by the Court to take charge, as against the directors, of the assets of the company. They were not before the Court in their personal capacity, the capacity in which they are allegedly liable to the debtor in conversion. In each instance the receivers were not named as parties to the proceedings and were not represented on the application separately from the company. In addition to establishing the requirement of mutuality, in the sense discussed, the debtor is obliged by 20. para.40)(1)(g) to prove that he could not have set his counter-claim in matter 1504 of 1985. (See per Judge Lukin in Re Stokvis (1933-34) 7 A.B.C. 53 at p.57). In this respect also I am not satisfied that the debtor can succeed on the evidence before me to date. The debtor argued that he could not as a matter of law have taken proceedings in conversion or in detinue against the receivers in matter No.1504. Alternatively he contended that he was expressly denied this right by O'Loughlin J. on 26 September 1985. The author of Kerr on Receivers supra at page 147 states the position: "Nobody can bring an action against a receiver in his capacity as such without the leave of the court and if such an action is brought without leave its further prosecution will be restrained. In general, a party to an action in which the receiver was appointed may (like any other injured party) obtain any relief to which he is entitled against the receiver by applying in the action,but there may be cases where on such application being made the court decides that the best course for disposing of the issue is for an acbion to be brought against the receiver." On page 136 the author makes the following comments in respect of a receiver appointed by the Court: "A man who thinks he has a right paramount to that of the receiver must, before he presumes to take any steps of his own motion, apply to the Court for leave to assert his right. If the receiver has done anything wrong, the party who has suffered the wrong must apply to the court which appointed the receiver, and he will get full justice done. But where a claim cannot be made in the original action, or in any other case where it is convenient to bring a separate action against the receiver, leave to bring an action must first he obtained From the court." in Pollnuw vo Garrlen Mews - St. Leonard's Pty. Ltd. C1984] 2 A.C.L.C. 511, McLelland J. stated at p.515; 21. "Normally however any alleged liability of a receiver for default of any kind would be pursued in the proceedings in which he was appointed, but there also appears to he authority for the view that an independent action may be brought against such a receiver, provided however, at least if his appointment still subsists, the leave of the Court which appointed him is first obtained..." In Searle v Choat (1884) 25 Ch.D 723 Cotton L.J. said on page 726: "The second queastion is, whether the conduct of the Piaintiff in bringing a separate action is the right way of prosecuting his remedy. As I read the judgment of the Vice-Chancelior he proceeded on the ground that the Plaintiff was wrong in making the application before him. The question is whether the Plaintiff was right in bringing this action against the receiver without the leave of the Court which appointed him. In my Opinion whether he would have been wrong or not before the passing of Judicature Acts, he is clearly wrong now. Under the present practice, if he had applied to the Judge who appointed the receiver he would have obtained all that he is entitled to; the Judge would have directed the receiver either to withdraw or to rectify his notice, so as not to interfere with the first incumbrancer. That was the proper course for the Plaintiff to adopt. I give no opinion as to what would have been the proper course before the Judicature Acts, but I think that the Court of Chancery would have obliged the person aggrieved to come to the Court for leave before taking any proceedings. But it is not necessary to go into that, because the whole tenor of the Judicature Acts is to require all proceedings as far as possible to be taken in one action, and I am of opinion in the present case that as there was a pending action in the Queen's Bench Division the proper course for the Plaintiff would have been to make his application in that action." These authorities establish that not only was it permissible for the debtor to bring his complaint against the receiver before the Court in matter 1504 of 1985 but so to proceed was his proper course. At least in the first instance the debtor should have applied in the latter proceedings even if for reasons of convenience he was in these proceedings directed and granted leave to initiate fresh proceedings. 22. The debtor's contention was however that it was appropriate for him to proceed by way of fresh action , he being the person entitled to paramount possession. In this regard he relied upon the following passage in Kerr on Receivers at page 133: "If persons with paramount rights, who are not parties to the action, are actually in possession of those rights, the appointment of a receiver does not prejudice them in the enjoyment of those rights. But if they are not actually in possession, then after a receiver has heen appointed, they must come to Court for leave to exercise those rights, in which case their application can not be refused." This passage hardly assists the debtor, in that he was a party to matter 1504 of 1985 and the very question in issue is whether he has paramount rights. Likewise the fact that the debtor claimed to be in possession of the chattels in the business premises with rights paramount to those of the receivers does not avail him, against the receiver here appointed by the Court. The above passage from Kerr and another passage cited by the debtor's counsel being paragraph 685 in Halsburys Laws of England 3rd edit. vol.32 do not indicate grounds for distinguishing the principles in Searle v Choat supra. In the alternative he submitted that he had made application in matter 1504 of 1985 which application had heen refused and he was directed to commence fresh proceedings. This it was said was the consequence of the order of O'Loughlin J. made on 26 September 1985. This order was made onan application by the debtor by summons dated 5 September 1985, in which he sought, inter alia, the following two orders: "4. A declaration that the agreement between the first 23. named (the company) and the second named (the debtor) respondents dated the lst May 1985 is and has always been a valid and subsisting agreement. 5. An order directing the receivers and managers to deliver up to the second named respondent all of the assets the subject of the said agreement dated the lst May 1985." In his order made on 26 September 1985 O'Loughlin J. dismissed the application for a declaration in paragraph 4 and for an order under paragraph 5. That Judge said in making the orders: "T have a number of alternatives open to me, which are to make orders in these procedings that a claim be filed within a certain number of days, followed by points of defence within a certain number of days. The other alternative I have is to stand your application dismissed on the premise that you will institute fresh originating proceedings and a writ of summons and statement of claim. It's a question of balancing the convenience of those two competing policies. Normally one would go for the first - thay is the points of claim, followed by points of defence in these particular proceedings. I'm going to opt for the second course for a practical reason - and that is that action No. 1504 of 1985 is now measured in feet rather than in inches, let alone documents. And if these proceedings which are separate, distinct and self-contained were added to the existing file, every time something occured in the separate and distinct procecdings, you and counsel for the other parties and the court officials would have to be going through this mammoth file. I think as a matter of practicality, it's better to stand this particular application dismissed upon the premise that you institute fresh and separate proceedings in terms consistent with Paragraphs 4 and 5." It was contended by the debtor that it was not open to him to bring his claim which he seeks to set up under para.40(1)(g) before the Court in proceedings 1504/85 because he had been denied that entitlement by O'Loughlin J. However in my opinion the claim which the debtor sought 24. to set up before O'Loughlin J. and which was in the circumstances abovementioned dismissed is not the counter-claim which he contends for under para.40(1)(g). The former claims were claims for a declaration in respect of the agreement and an order for the receivers to deliver up the assets the subject of the agreement. The latter claim, specified in paragraph 4(a) of the statement of claim in action No.149 of 1987, was a claim for damages for conversion. It is not correct to say that he was denied the right to bring that latter claim in matter No. 1504 of 1985 even though of course affirmative orders in his favour on paragraphs 4 and 5 of his summons dated 5 September 1985 would have greatly advanced a successful claim in conversion. Iam not satisfied that the claim in conversion could not have been set up in matter 1504 of 1985. In my opinion it could have been so set up and properly should have been brought, at least in the first instance, in these proceedings. The final ground which I should consider is whether the debtor has satisfied me that he has a bona fide claim for conversion which has a reasonable probability of success. On the question of bona fides I was far from satisfied with the evidence given by the debtor. His version of the circumstances in which the agreement of 1 May 1985 came about seemed to raise more questions than it answered. However in this regard Ido not propose to say more, as I am informed that the validity of the agreement and the conduct of the directors will be considered shortly in action No.3988 of 1985 in the District Court of Adelaide. 25. However there are two matters which I regard as Significantly militating against a successful claim by the debtor in conversion . The first 15 that the receivers purported to act in locking the shop premises at 375 Greenhill Road pursuant to he first order of White J. of 7 May 1985. In that order the receivers were not anly given wide powers as officers of the Court to take possession of the property of the company and to carry on its business. They were also given power to "do any such acts, assurances and things as, in the opinion of the said receivers and managers, are necessary or incidental to the proper performance of their duties pursuant to this order". In my opinion it was reasonably open to the receivers to form the view that it was necessary to preserve intact the assets in the shops at least until the true ownership was ascertained or until further order of the Court. Subsequently a further and more specific order was made by the Supreme Court prior to the receivers removing the assets from the shops. On 17 May 1985 White J. made the following orders: "1. That until further order the said Ernst Abraham Sewertsz Van Reesema, Martine Ludowici Sewertsz Van Reesema, Nicholas Anthony Sewertsz Van Reesema and each of them be restrained and an injunction is hereby granted restraining them whether by themselves, their agents, servants, workmen or otherwise from dealing with, disposing of or encumbering any property goods or securities of Australian Growth Resources Corporation Pty Limited (receivers and managers appointed). 2. That upon service of this order the said Ernst Abraham Sewertsz Van Reesema, Martine Ludowici Sewertsz Van Reesema, Nicholas Anthony Sewertsz Van Reesema and each of them cease holding moneys or securities or any property on behalf of Australian Growth Resources Corporation Pty Limited (receivers and managers appointed) and deliver up to the 26. receivers and Managers of Australian Growth Resources Corporations Pty Limited (receivers and managers appointed), any such moneys, securities or property, by 5 pmon Friday the 24th day of May 1985. 3. That the said Ernst Abraham Sewertsz Van Reesema, Martine Ludowici Sewertsz Van FReesema, Nicholas Anthony Sewertsz Van Reesema do by Spm on Friday the 24th day of May 1985 deliver up to the office of the receivers and managers of Australian Growth Resources Corporation Pty Limited at 80 King William Street, Adelaide, or any other place so nominated in writing by the receivers and managers of Australian Growth Resources Corporation Pty Limited (receivers and managers appointed) the property and goods the subject of an agreement attached hereto and dated the ist day of May 1985." At the time the goods were removed by the receivers the debtor had failed to comply with any of these orders, and in particular the obligation imposed on him under order 3. It is my opinion that in these circumstances the debtor has na reasonable prospects of successfully claiming damages for conversion. Each of the debtor's applicatioms to set aside the bankruptcy notices must be dismissed with costs. I am prepared to find that the debtor's affidavit of 13 November 1986 complied with the requirements of sub.s.41(7) of the Act and thus the time for compliance with each of the bankruptcy notices is extended until this day. The order of the Court is that the debtor's applications are dismissed and the debtor must pay the costs of the company, the same to be taxed if not agreed. I certify that this and the2S preceding pages are a true copy of the Reasons for Judgment of Mr Justice Fisher. Associate C114 . Dated: 27 March 1987 27. Counsel for the Judgment Debtor Solicitors for the Judgment Debtor Counsel for the Judgment Creditor Solicitors for the Judgment Creditor Mr. R.W. Evans Fardone & Co. Me. M.L. Robertson Q.C. with Mr. M. Barrett & Mr. D. Jenkin Kelly & Co.