Sipad Holdings & Anor v Popovic, Nikola & Ors [1995] FCA 1075

NOT FOR DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. NG3192 of 1995 GENERAL DIVISION ) IN THE MATTER OF SIDEX AUSTRALIA PTY LIMITED (RECEIVER AND MANAGER APPOINTED) (A.C.N. 000 828 606) BETWEEN: SIPAD HOLDING d.d.p.o. First Applicant PERO VLADIC Second Applicant AND: NIKOLA POPOVIC First Respondent DRAGAN KARAC Second Respondent MILAN JOVICIC Third Respondent JOSEPH JOHN GILLES Fourth Respondent AUSTRALIA FURNITURE PTY LIMITED Fifth Respondent SIDEX AUSTRALIA PTY LIMITED (RECEIVER AND MANAGER APPOINTED) Sixth Respondent SIPAD EXPORT IMPORT d.d.p.o. Seventh Respondent CORAM: Lehane J PLACE: Sydney DATE: 24 November 1995 EXTEMPORE REASONS FOR JUDGMENT LEHANE J: What I propose to do now is to give my decision in relation to the question whether, in principle, the receiver should be withdrawn or his appointment terminated and then to hear submissions on matters which will follow as a consequence. By an order made by Beaumont J on 9 June 1995, Mr M.G. Jones was appointed as receiver and manager of the sixth respondent. The order thus made replaced certain orders made by the Court earlier in these proceedings which, among other things, had frozen certain bank accounts and imposed certain requirements in relation to the preservation and inspection of books and records of the sixth respondent. The proceedings involved a contest as to the ownership of a majority of the shares in the sixth respondent and, therefore, the right to control its management through the appointment and removal of directors. I think it may be inferred that, given that the proceedings were of that character and given also the previous course of the proceedings, Beaumont J concluded that, pending a resolution of the contest, it was more appropriate that the sixth respondent be managed by a receiver rather than by any of the contestants. Consistently with that, his Honour's order did not limit the powers of the receiver who accordingly had all the powers conferred by s 420 of the Corporations Law. My judgment in these proceedings, delivered on 13 November 1995, has not dealt finally with all matters in issue between the parties but it has, subject of course to any appeal, disposed of the main contest. I have held that the first applicant is the holder of the majority of the shares in the sixth respondent and I have declared to be valid certain resolutions of the members of the sixth respondent, one effect of which was to reconstitute its board of directors. The first, second and third respondents have filed a notice of appeal against my decision and the first respondent has submitted for himself and, I think, also on behalf of the second and third respondents, that the receiver should remain in office pending the decision on the appeal. The applicants submit that that is not an appropriate course and that the receiver's appointment should be terminated. The receiver neither supports nor opposes the termination of his appointment but submits, and I agree, that the Court should - if it terminates his appointment - make appropriate provision for securing his claim to an indemnity against liabilities properly incurred by him. It is suggested also, on the receiver's behalf, that in the circumstance that I have given judgment on the main question there could now be no occasion for the appointment of a receiver if one were not already in office and that, accordingly, there is no occasion for the continuation of the present appointment. I think it is appropriate to deal with this question by applying principles similar to those which would be applied on an application for a stay pending an appeal. I say that because if a stay were granted it would probably be correct to conclude that the circumstances which justified the receiver's initial appointment still existed. That could not, I think, very easily be said in the absence of the stay. Approaching the matter in that way, it must be accepted, first, that the applicants are, prima facie, entitled to the benefit of the judgment in their favour. Secondly, although it may be accepted that exceptional circumstances are no longer required to justify a stay pending an appeal- see for example Alexander v Cambridge Credit Corporation Ltd reported in (1985) 2 NSWLR 685 - nevertheless the respondents bear the onus of establishing grounds to displace that prima facie conclusion. Thirdly, there is nothing before me that suggests - subject to some matters to which I shall return - that to withdraw the receiver would render an appeal nugatory. Fourthly, in addition, though there is no direct evidence before me as to the costs of the receivership, it has been put to me and I accept that to leave the receiver in office pending an appeal would be costly. There is no obvious reason why an appeal from my judgment would be expedited: particularly given the time of the year, it is likely to be some months before an appeal is heard, let alone decided. Plainly that would result in considerable expense and I do not see any grounds justifying the imposition of that expense or the deprivation of the control of the sixth respondent to which I have held the first applicant to be entitled. Accordingly, subject to the settling of appropriate conditions I propose to make orders for the termination of the receiver's appointment. That leaves the question of conditions. There seemed to me to be at least two possible groups of those. One is the group to which reference was made this morning, that is the question of protecting the receiver against liabilities. It may be, and I invite submissions upon this, that pending an appeal it would be appropriate to impose other conditions relating, for example, to notice to be given to the respondents of any action which might in some way render their appeal nugatory such as, for example, any substantial change in the nature of the business carried on by the company, the incurring of substantial additional liabilities, any proposal to place the company under any form of external administration or, possibly, any substantial payment to the company I have held to be its parent or other companies related to it. The purpose of such notice would be, of course, to give the respondents the opportunity to make a further application should they be so advised. That, I appreciate, is a matter on which thare has been no argument, and I will hear submissions on it. I certify that this and the preceding 4 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane. Associate: Dated: 8 December 1995 Heard: 24 November 1995 Place: Sydney Decision: 24 November 1995 Appearances: Mr J E Sexton of counsel instructed by Mallesons Stephen Jaques appeared for the applicants. The first and second respondents appeared in person. Mr S G Finch of counsel instructed by Phillips Fox appeared for the sixth respondent. Mr M R Petrucco of Parish Patience appeared for the seventh respondent.