Case: Re GB Nathan and Co Pty Ltd (in liq) (1991) 24 NSWLR 674
Outcome: followed
In Re GB Nathan and Co Pty Ltd (in liq) (1991) 24 NSWLR 674 ( Nathan ), McLelland J (as McLelland CJ in Eq then was) discussed the principles that govern an application by a liquidator for directions under the then s 479(3) of the Corporations Law (Cth). That provision is now found in s 479(3) of the Act, and was (and is): "The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up". His Honour traced the historical background to s 479(3) and concluded (at 679): The historical antecedents of s 479(3) , the terms of that subsection and the provisions of s 479 as a whole combine to lead to the conclusion that the only proper subject of a liquidator's application for directions is the manner in which the liquidator should act in carrying out his functions as such, and that the only binding effect of, or arising from, a direction given in pursuance of such an application (other than rendering the liquidator liable to appropriate sanctions if a direction in mandatory or prohibitory form is disobeyed) is that the liquidator, if he has made full and fair disclosure to the court of the material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him in accordance with the direction. His Honour said that modern Australian authorities, to which he referred, also confirmed the view that s 479(3) did not enable the court to make binding orders in the nature of judgments, and that the purpose of a liquidator's application for directions was "to give [the liquidator] advice as to his proper course of action in the liquidation; ... not to determine the rights and liabilities arising from the company's transactions before the liquidation" (at 679 680, authorities cited omitted). 14 In Australian Securities and Investments Commission v Tasman Investment Management Ltd [2006] NSWSC 943 ; (2006) 202 FLR 343 ( ASIC v Tasman Investment ), Austin J approached an application under s 601EE of the Act for directions concerning the distribution of assets of an unregistered management investment scheme along similar lines. His Honour considered (at [29]) that, on balance, on the authorities, it seemed that binding orders affecting third party rights were not authorised by s 479(3) of the Act. His Honour said that even if they were, the decided cases showed that directions under the section were usually made in the limited form described by McLelland J in Nathan (that the office holder is "justified" in acting in the manner specified in the order). Austin J added that one reason for making directions in that limited form is that even if authorised by the section, binding orders would not in fact be made unless all affected parties or their representatives were properly before the Court. 15 It would have been possible for the Court to decline to give directions unless, with Stacks' consent, the Court converted the present proceeding into an inter partes proceeding by appointing and joining as a party, a representative of the members entitled to the First Mortgage Interest Portfolio (see below) on the one hand, and a representative of the members entitled to the High Yield Income Portfolio (see below) on the other hand: see Nathan at 680 per McLelland J and authorities there cited by his Honour. This course would have had the advantage that the members having interests in the remaining assets of those respective Portfolios would have been bound by the result.