VANGSNES v DUNN, KKL'S LIQUIDATOR SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P and SHELLER JA 11 May 1998 [1998] NSWCA 246 Mason P The Court has heard today two applications by Mr Vangsnes in which he seeks to challenge orders made by Einstein J in a judgment given on 13 November 1997 as to the substance of the matter and a judgment of the same date in relation to questions of costs. We have heard the matter at more length than usually applies in relation to an application of this nature, not because Mr Vangsnes who appeared for himself was under any difficulty in explaining the issues to us, but because of the complexity of those issues and the need to be satisfied that we fully understood those issues. The Court had the opportunity of reading the submissions which were embodied in the summons for leave to appeal which was filed by Mr Vangsnes. It is not normally the practice of the Court to give reasons in relation to an application of this nature but again, out of deference to some of the matters raised, I think we should do so, but briefly. Mr Vangsnes is a creditor of KKL Kangaroo Line Pty Ltd, a company which went into liquidation with Mr Dunn being appointed its liquidator. The liquidation has been completed in the sense that the company has been ordered to be dissolved. The fact that a dissolution order has been made and not stayed was drawn to our attention by Mr Kerr, who appeared on behalf of Mr Dunn to assist the Court. Mr Kerr frankly conceded that were it appropriate to do so, the dissolution order could be set aside. Accordingly, I have not regarded that as any impediment to the relief which is sought. At the time when a provisional liquidator had been appointed, proceedings were commenced in the Commercial List of the Common Law Division, being matter number S10780 of 1986 against Beaufort Shipping Agency Pty Ltd and Croxford Ltd. Those proceedings raised a complex commercial dispute. On 28 May 1986 the liquidator sought orders that he be authorised to compromise the various claims on a number of conditions. Rogers J, after hearing the solicitor for the plaintiff company in liquidation and counsel for the defendants, gave leave to discontinue on various conditions. One of those conditions involved being satisfied that a threatened claim against Mr Vangsnes for alleged breach of duty would itself not be prosecuted. Subsequently, the orders of the Court pronounced by Rogers J were entered. They gave Mr Dunn, in his capacity as liquidator of KKL, the authority to compromise the various claims brought in those proceedings on the terms and conditions set forth in certain agreements made on 14 May 1986. Mr Vangsnes was party to at least one of those agreements. However, he was or became dissatisfied with the settlement of the proceedings and effectively challenged the liquidator for having effected the settlement. He made application for various orders seeking access to records of the liquidation and seeking to have the liquidator provide an audit in relation to the liquidation. The liquidator 2 UNREPORTED JUDGMENTS countered in effect by applications that the assets of the liquidation, which were not very substantial, be distributed and ultimately that the company be dissolved. Various matters came before Master McLaughlin in December 1996. The Master dismissed Mr Vangsnes' application for an order pursuant to s387 of the Companies Code and for an order that he be granted leave pursuant to s416 of the Code to inspect all such proper books as were kept by the liquidator, including items of correspondence and other documentation. From those orders of the Master, rejecting Mr Vangsnes' claims, Mr Vangsnes appealed and the appeal was heard by Einstein J. In a very comprehensive judgment, spanning eighty six pages in its revised version, his Honour addressed the various complaints that were raised in connection with the Master's decision and the application for inspection. The Master concluded that the basis for the various applications being brought by Mr Vangsnes was in support of his foreshadowed wish to consider whether he should challenge the settlement of the proceedings. The learned judge addressed seriatim the various challenges that were made. The ones that are pressed here are the rejection of the order made in connection with s416 of the Code and the order under 382 of the Code for the preparation of a report. Mr Vangsnes also seeks leave to challenge the costs order that was made by Einstein J. As regards s416, the judge concluded that Master McLaughlin had been in error in construing s416 as being confined to the record of a meeting of the liquidation. This had been conceded to be an error when the matter was before Einstein J. Nevertheless, his Honour faced with the application for an order to enforce the rights under s416 entertained an application on the liquidator's behalf for an order that inspection of the wider class of documents be refused. S416 permits this to occur if the Court otherwise orders. His Honour clearly addressed this discretion as a separate matter and his reasons for exercising it in favour of the liquidator are set out in summary form at p77 and p78 of his judgment. The reasons for refusing the application for an auditor's report are summarised at p84 and p85 of the judgment. The applications that were made to Einstein J are interlocutory in the sense that they relate to the substantive order of winding up of the company. Leave to appeal is required even in relation to the challenge to a winding up order and it is required in relation to a challenge to an interlocutory order of the Court. I mention this because one of Mr Vangsnes' applications is to an extension of time because he was a day late in filing a notice of appeal. I would not in any way base my decision upon that default, because the real issue is whether leave to appeal should be granted. That in turn depends upon whether an arguable case has been shown for Einstein J having erred in making the orders which he made. As I have already indicated, his Honour's orders in relation to s416 turned ultimately upon the exercise of the discretion which that section clearly gives. His Honour was entitled to proceed that way, even though the application for such exercise of discretion was only made for the first time before him. I have carefully considered his Honour's reasons and I can see no error in the reasoning he gave for exercising the discretion that way, nor is there any error in relation to the rejection of the application made under s382 concerning a report. Mr Vangsnes did not in his oral argument address the question of his challenge to the order for indemnity costs that was made, but I understand that challenge to be maintained and I have had regard to the written submissions that were URJ VANGSNES v DUNN, KKL'S LIQUIDATOR (Sheller JA) 3 made. His Honour's reasons for making that order are set out at some length in his second judgment that was given on 14 November and I see no error in that judgment. It is important I think to emphasise that this Court is only concerned with considering whether an arguable case has been made out for leave to appeal in relation to the orders made by Einstein J. We are not entertaining an appeal from the order of Rogers J, nor are we considering the propriety of the discontinuance of those proceedings. In saying that, I am not suggesting any basis for doubting the propriety of it, but simply to emphasise that what is before the Court today is an application for leave touching the orders of Einstein J which I have referred to. I propose that the application be refused. Sheller JA I agree. KERR: I seek costs, your Honour. MASON P: I don't know that we can do that if the company has been dissolved. KERR: Only to the extent your Honour that I'm here as I said for the liquidator. He's been served with this material and is the obvious person to be here. SHELLER JA: Who is the party to these proceedings? Mr Dunn is mentioned as the respondent. KERR: That's correct, your Honour and as I say Mr Dunn was served through his solicitors, the solicitors who have acted for him for the duration of the liquidation and those are the solicitors who instruct me today. I might say your Honour it would have been rather bold if I might suggest for the liquidator not to turn up today, not to instruct counsel and not to be ready to deal with Mr Vangsnes' application. In my submission an order for costs in favour of Mr Dunn is an appropriate order. MASON P: He is the actual opponent that has been joined in the summons? KERR: That's correct, he's named in the summons. MASON P: Mr Vangsnes, you joined Mr Dunn as the opponent, the ordinary consequence of the refusal of leave would be that the claimant pays the opponent's costs. Why shouldn't we make such an order? VANGSNES: I have stated my reasons your Honour in my summons. The order for costs are supplied by the Court. It's a very, very rare application I understand from the documents submitted. I believe the question before the Court is whether or not a creditor as I am has the right to ask for documents without having been so severely penalised as I've been by this Court for having made such an application. That's all I have done, your Honour, I've just asked for application to see certain documents pursuant to 416 which is according to law is a right of any creditor. Why should I have to pay costs of the liquidator on an indemnity basis? Similarly, the other matters before this Court pursuant to s382, that is an automatic right of any creditor. The law says that courts shall consider objections by the creditors. Einstein J has not even addressed once in his judgment the objections by the majority of KKL's creditors. He has to a certain extent addressed the objection by myself. But my question is to this Court and of course I have to abide by what this Court says, should I for having applied for leave to inspect the books pursuant to 416, which is my right, should I be penalised by the costs on an indemnity basis. I think it's grossly unfair, with respect your Honour. 4 UNREPORTED JUDGMENTS MASON P: The summons for leave will be dismissed with costs. Application refused. Summons for leave dismissed with costs.