Gartner v Ernst & Young [2003] FCA 152

Gartner v Ernst & Young [2003] FCA 152

Directors of a company in receivership retain a residual power to institute proceedings in the company’s name unless expressly overruled by receivers; absence of receiver consent or indemnity before commencing proceedings does not, in law, invalidate the institution or maintenance of litigation, particularly where receivers do not oppose or object to the proceedings; the legal effect of receivership does not totally abolish the authority of directors unless the actions of directors would threaten the legitimate objectives of the receivers or debenture holder.

Jurisdiction
Australia
Judgment Date
14 March 2003
Procedural Posture
Corporations – Civil Motion / Interlocutory Application to Dismiss Proceedings by Certain Applicants (companies in Receivership) Against Respondents
Outcome
Application to dismiss proceedings by applicants in receivership is refused; notice of motion otherwise adjourned.
Legal Topics
['authority of Directors Post Receivership' 'company Proceedings During Receivership' 'requirement for Receiver Consent to Litigation' 'indemnity for Costs in Receivership Litigation']
['corporations Law' 'receivership' 'civil Procedure'] ['authority of Directors Post Receivership' 'company Proceedings During Receivership' 'requirement for Receiver Consent to Litigation' 'indemnity for Costs in Receivership Litigation']

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Procedural Posture

Corporations – Civil Motion / Interlocutory Application to Dismiss Proceedings by Certain Applicants (companies in Receivership) Against Respondents

Legal Issues

  1. 1 ["Whether directors of companies in receivership may institute proceedings in the company's name without the prior consent of receivers" "Whether prior consent or satisfactory indemnity to receivers is necessary before litigation may be commenced in the company's name" 'Whether lack of receiver consent invalidates proceedings commenced by directors']

Ratio Decidendi

Directors of a company in receivership retain a residual power to institute proceedings in the company’s name unless expressly overruled by receivers; absence of receiver consent or indemnity before commencing proceedings does not, in law, invalidate the institution or maintenance of litigation, particularly where receivers do not oppose or object to the proceedings; the legal effect of receivership does not totally abolish the authority of directors unless the actions of directors would threaten the legitimate objectives of the receivers or debenture holder.

Court Disposition

Application to dismiss proceedings by applicants in receivership is refused; notice of motion otherwise adjourned.

Orders

  • ['The application by the first and second respondents for the proceedings brought by the third to eleventh applicants to be dismissed is refused.' 'The notice of motion of the first and second respondents is otherwise adjourned to a date to be fixed.']