New South Wales Supreme Court CITATION : Evalena Pty Ltd v Rising Sun Holdings Pty Ltd [2003] NSWSC 306 HEARING DATE(S) : 11/04/03 JUDGMENT DATE : 11 April 2003 JURISDICTION: Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Motion dismissed with costs. CATCHWORDS : CORPORATIONS [290]- Provisional liquidator- Powers and Duties. LEGISLATION CITED : Corporations Act 2001, ss 233, 477(2) CASES CITED : Carapark v Carapark Industries Pty Ltd (No 1) [1967] 1 NSWLR 337 Re Rothwells Ltd (1989) 7 ACLC 545 Evalena Pty Limited as trustee for the Chapple Family Trust (P) Rising Sun Holdings Pty Limited as trustee for the Colosseum Hotel Trust (D1) Brian Muir (D2) PARTIES : Kaoru Hamasaki (D3) Ronald Bentley Brown as Receiver appointed to the trustee for the Colosseum Hotel Trust (D4) Yoshiko Hamasaki (D5) MLC Nominees Pty Limited (D6) FILE NUMBER(S) : SC 1192/03 COUNSEL : A I Tonking (D1, 3 & 5) S A Benson (D4) SOLICITORS : Matthews Folbigg (D1, 3 & 5) Kemp Strang (D4) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Friday 11 April 2003 1192/03 – EVALENA PTY LTD v RISING SUN HOLDINGS PTY LTD JUDGMENT 1 HIS HONOUR: This is a motion filed by the third and fifth defendants for an injunction to prevent the fourth defendant, who is the provisional liquidator of the first defendant company, and also the receiver of a trust known as The Colosseum Hotel Trust, from bringing, defending or compromising any legal proceedings in the name of the first defendant company. 2 The court's file is already a thick one, but basically the dispute appears to be that the plaintiff, a company apparently controlled by a Mr Chapple, alleges that he was entitled to a substantial proportion of the units in a unit trust, which purchased The Colosseum Hotel. When the hotel was sold it is common ground that the whole of the proceeds were paid to the third defendant, a Japanese gentleman, and found their way into superannuation funds of the third defendant and his wife, the fifth defendant. 3 The third defendant's basal defence is that Japanese law knows no such thing as a trust, there was never any trust, and that the hotel was purchased solely with his own funds. 4 There are some collateral proceedings which are currently before the court on 2 May as to whether the first defendant should be wound up because of moneys owing to a third party, which may have been insured with HIH and may be underwritten by the HIH claim support scheme, although I know very little about this generally. 5 The third defendant seeks the injunction because he feels that the provisional liquidator may consent to the winding up on the basis that the provisional liquidator has already filed an affidavit, which says that if the statement of affairs is to be believed the company is insolvent. 6 The argument that has been put before me is based on the proposition that a provisional liquidator, generally speaking, has power only to hold the reins of the company, he does not have the authority to lead the company into the stable and wind it up, or go out on to the open highway and get involved in new ventures, and that there is a reasonable fear that the provisional liquidator is doing more than he should. 7 The submissions are based on Carapark v Carapark Industries Pty Ltd (No 1) [1967] 1 NSWLR 337 and Re Rothwells Ltd (1989) 7 ACLC 545. As is pointed out in the fourth edition of McPherson on Company Liquidation (LBC, Sydney, 1999) pp 208 and following, those decisions were made in an era of less complex commercial relationships and may need to be re-examined in the 21st century because the activities of provisional liquidators are now far more complex than they once were. 8 However, Mr Benson, for the provisional liquidator, accepted the general thrust of the decisions, that is, that the provisional liquidator should not be, to use the usual metaphor, leading the horse one way or the other, but he says that there is no fear that his client would do anything other than his duty, he is a professional liquidator and he would make any necessary application to the court for directions should it become necessary. 9 I do not consider that there is sufficient material here to displace the powers that are conferred on the provisional liquidator by the Corporations Act 2001, s 477(2). Nor is there sufficient material for me to hold that the provisional liquidator would act otherwise than neutrally. 10 In particular, a thing that concerns me is that despite the fact this case has now been going for a few weeks, the third defendant's solicitors are still only prepared to say that they are "considering" whether cross-claims should be commenced against Mr Chapple and various other people. 11 The principal defence is that there is no trust. The cross-claims appear to have something to do with Mr Chapple's activities as an accountant for the first defendant, but how that is related to the investment of the plaintiff, which appears to sue as trustee for the Chapple Family Trust, is completely obscure. 12 The court does not favour the extension of litigation into peripheral issues. Although it may be that the third defendant had control of the company during its main trading life, and may have directed it to retain lawyers to do what he wanted to do, generally speaking, people should only be able to use the company's name to promote their own claims against the third party under strictly controlled conditions; see s 233 of the Corporations Act. 13 In the absence of any concrete details as to the cross-claims, it would not seem to me to be appropriate to put the litigation in the hands of the third defendant, as opposed to the hands of an officer of the court. It is, of course, open to the third defendant, if he so wishes, to give full particulars of the material facts on which these proposed cross-claims are said to be based, and if that happens, and if the provisional liquidator needs to get the direction of the court, doubtless he will seek to do so. 14 Accordingly, in my view, the present motion should be dismissed with costs. ************************* Last Modified: 04/15/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.