Case: Corporate Affairs Commission v Smithson (1984) 3 NSWLR 547
Outcome: cited
The provisional character of the judgments upon which the orders for the appointment of the receivers were based informs consideration of the question whether the receivers' costs of discharging their functions under those orders should be borne by the defendants. It is not the object of the orders made under s 1323 to punish the defendants. Their object is to preserve their assets and thereby protect the interests of persons to whom they may have a liability. A secondary object is to ascertain the extent of the assets. This understanding of the purpose of such orders is well established in case law relating to s 1323 and its predecessors. In Corporate Affairs Commission v Smithson (1984) 3 NSWLR 547, Waddell J said of the like provisions of s 573 of the Companies (New South Wales) Code (at 553): '... the purpose of appointing a receiver is to provide security for the moneys which the relevant person is, or may become, liable to pay.' See also Corporate Affairs Commission v Transphere (1988) 15 NSWLR 596 at 611; Corporate Affairs Commission v ASC Timber Pty Ltd (1992) 10 ACSR 525 at 531. 21 The point was well made by Waddell J in Corporate Affairs Commission v Smithson in which the appointment of receivers under s 573 of the Corporations (New South Wales) Code was considered. The section was, in the relevant parts, similar to s 1323. Waddell J pointed to the 'severe effects' that the appointment of a receiver might have upon a defendant noting that the court was precluded from requiring the Commission to give an undertaking as to damages as a condition of appointing a receiver. Unjustified and irrecoverable damage could be suffered where the relevant person was subject to the appointment of receivers as security for claims which might not be made out. Waddell J further said (at 556): 'If a receiver is appointed on terms which permit him to take his remuneration out of the assets received by him, the unjustified damage caused to the relevant person would be so much greater. It should not be thought that in every case the property of a relevant person may be taken over by a receiver and his financial affairs investigated in order to provide security for claims against him, which may or may not succeed, on the basis that in any event the relevant person will have to pay the receiver's remuneration. It may well be that in a particular case, in order to avoid such a consequence, no order should be made permitting the receiver to take his remuneration out of the assets received, thus leaving it to the Commissioner to be responsible for such remuneration pending a determination of the liability of the relevant person.' In Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, Hill J cited the passage from the judgment of Waddell J including that quoted above, and said (at 204): 'I am in complete agreement with what is said by Waddell J.' 56 In my opinion the Court has the power to order the examination of a party on the adequacy of a disclosure affidavit provided pursuant to an order of the Court under s 1323 of the Corporations Act . In Corporate Affairs Commission v Smithson, Waddell J said (at 554): 'What then can be done to enforce an order made under s 573 for the appointment of a receiver of all of the property of a relevant person? Such an order should, I think, ordinarily be accompanied by an order having the effect of requiring the relevant person to file in court an affidavit listing all his property and a further order having the effect of requiring him to transfer or deliver all of it to the receiver. If the relevant person fails to comply with such orders proceedings could be taken against him for contempt of court or, in my opinion, an order could be made under the Supreme Court Rules 1970 , Pt 43 , r 1, for him to attend before an officer of the court and be orally examined on such questions concerning or in aid of the enforcement of the order as may be specified in the order for examination. Under that rule he can also be required to produce documents.' 57 The Court may make such ancillary orders in support of its disclosure requirements as are necessary to enable the receivers it has appointed properly to discharge their functions. The power to do so derives from s 23 of the Federal Court Act , if from no other source. That power may well have a wider application than the power to make orders ancillary to a Mareva or other injunction in proceedings between private parties. The Court could, as an incident of its power to appoint receivers, require a relevant person to present himself or herself for examination by the receivers or ASIC before a Registrar in order to ascertain the extent and nature of the person's assets. The use of a disclosure affidavit is not required in every case. It is simply a mechanism to the same end. The Court is not confined to directing the filing of a disclosure affidavit and only if that is inadequate directing oral examination of the deponent. 58 In my opinion there is a real possibility that the disclosure affidavits sworn by Mr Carey have failed to disclose the full extent of assets and property owned or controlled by him or in relation to which he has an interest. The term 'control' used in Order 4 is to be interpreted according to its ordinary meaning and not limited to property in which he has a legal or beneficial interest.