Case: Deputy Commissioner of Taxation v Best &amp; Less (Wollongong) Pty Ltd (1992) 7 ACSR 245
Outcome: discussed
A number of cases indicate that a direction under s 424 of the Corporations Act has the limited force I have described. In Deputy Commissioner of Taxation v Best &amp; Less (Wollongong) Pty Ltd (1992) 7 ACSR 245 (' Best &amp; Less' ), Lockhart J said that the extent to which directions of the court under s 424 and similar sections can bind anyone is a matter of considerable doubt: at 246. His Honour said that the court plainly cannot give directions as to the rights of persons who are not parties to the hearing of the application. Moreover, even if persons are joined as parties to the application, his Honour said that it is doubtful they can be bound in a sense that can give rise to an issue estoppel. Lockhart J added at 246 that: '[i]t would still be open for a company or person to sue a receiver and manager... for breach of duty, even if he had followed the court's instruction, although he could rely upon the giving of those directions if he seeks relief under s 1318 of the Corporations Law.' 23 Similar views have been expressed in other cases. In One.Tel , Austin J said that there is some doubt as to whether directions of a court given under a section of this kind can bind anyone, even a party to the application, citing Best &amp; Less : at 93 [37]. In Vartex , Hodgson J was less equivocal, stating that a direction would not bind a director of the company who was represented before the court. 27 Other limits on the court's power to give directions under s 424 have been discussed in the authorities. In particular, the authorities make it clear that it is not appropriate for the court to give directions about the commercial propriety or reasonableness of a transaction that the receiver proposes to enter into: see One.Tel at 91 [30], 92 [33] and 93 [38]; and Best &amp; Less at 247, 249 and 250. In Franbridge Pty Ltd v Societ&eacute; &amp; Generale Finance Corporation Pty Ltd (1994) 14 ACSR 304 (' Franbridge') , Einfeld J refused to make directions to the effect that a particular transaction was not improper and, more particularly, that the receiver had acted reasonably: at 308, 309. 35 The cases decided under s 424 show a distinct disinclination on the part of courts to make any direction that approves, or appears to approve, the undertaking of a commercial transaction by a receiver. Likewise, the courts have resisted the notion that they should make a direction under s 424 that a receiver has acted reasonably in the performance of his duties pursuant to s 420A. There is a good reason for this caution. Unless directions are carefully worded, they might give a false public perception that the court is placing its imprimatur upon a particular transaction: see Lockhart J in Best &amp; Less at 249 and Franbridge , where Einfeld J said at 308: 'The court should not be asked to make orders, give directions or make declarations that would convey to the public, quite wrongly, for the reasons Lockhart and Hodgson JJ point out, that the court is giving judicial approval to the sale after due consideration in accordance with regular procedures when, however the words are hedged, in fact it is not doing that at all.'