Ansett Australia Ground Staff Superannuation Fund Pty Ltd v Ansett Australia Ltd
[2003] VSCA 117
•21 August 2003
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 2115 of 2001
| ANSETT AUSTRALIA GROUND STAFF SUPERANNUATION FUND PTY. LTD. |
| Appellant |
| v. |
| ANSETT AUSTRALIA LTD., MARK ANTHONY KORDA |
| Respondents |
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JUDGES: | ORMISTON, CALLAWAY and BATT, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATES OF HEARING: | 11 & 12 August 2003 | |
DATE OF JUDGMENT: | 21 August 2003 | |
MEDIUM NEUTRAL CITATION: | [2003] VSCA 117 | 1st Revision – 30 September 2003 |
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COURTS - Practice and procedure - Corporations - Insolvency - Application to Supreme Court for declarations regarding priority under Corporations Act 2001, s.556 - Application of that section later excluded by deed of company arrangement - Proceeding commenced in Federal Court to vary or terminate deed - Declarations sought in Supreme Court rendered advisory and merely ancillary to Federal Court proceeding - Declarations inappropriate - Costs where appellant unnecessarily fragments proceedings between two courts - Respondents co-operating in that course but warning against it - Corporations Act 2001, ss.444A, 556.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J.G. Santamaria Q.C. | Minter Ellison |
| For the Respondents | Mr S.P. Whelan Q.C. Ms B. McMahon | Arnold Bloch Leibler |
ORMISTON, J.A.:
The Court has been very conscious of the large number of former Ansett employees who are awaiting the outcome of the litigation between, on the one side, the respondents Ansett Australia Ltd. (“Ansett”), which since 2 May 2002 has been subject to a deed of company arrangement, and its administrators and, on the other side, the trustee of one of its superannuation funds, the appellant, Ansett Australia Ground Staff Superannuation Plan Pty. Ltd. (“the trustee”)[1]. It has made orders expediting both the appeal and the cross-appeal presently before us. It has endeavoured to find a means and justification for hearing them and bringing them to a satisfactory conclusion. Regrettably, notwithstanding the earnest endeavours of counsel, in particular counsel for the appellant, to persuade us to do so, we have concluded that it is not appropriate to resolve the issues said to be before the Court, except to the extent of allowing the appeal so as to answer the relevant questions (in para.14 of the originating motion): “It is inappropriate to answer these questions in the present circumstances”, and to adjourn the cross-appeal to a date to be fixed.
[1]Trustees of other Ansett superannuation funds were also party to proceeding No. 2115 of 2001 in the Trial Division, from which the present appeal and cross-appeal have been brought. Issues affecting those trustees and funds have been either resolved, abandoned or adjourned for various reasons.
In short the primary reason why the Court feels compelled to take this course is that, especially in the present changed circumstances to which I will refer, the question raised by the appeal was both advisory and hypothetical in that it asked, in substance, whether certain contributions alleged to be payable to the fund[2] should be paid in priority to unsecured claims by reason of paras.(a), (c), (dd) or (e) of s.556(1) of the Corporations Act 2001 (“the Act”)[3], applicable to companies “in winding up”[4], whereas Ansett has not at any stage been wound up, nor has s.556 been otherwise applicable to it. Since 12 September 2001 the company has been, in the first place, under administration pursuant to Part 5.3A of the Act and, secondly, since 2 May 2002, it has been subject to a deed of company arrangement. Neither of these statuses incorporates directly the provisions of s.556, though, but not in the present case where the deed provides to the contrary, s.444A of the Act, regulation 5.3A.06 of the Corporations Regulations 2001 (“the regulations”) and para.4 of Schedule 8A of the regulations would have made the s.556 priorities applicable to such a deed “except so far as [the deed] provides otherwise”: see sub-s.(5) of s.444A.[5] In other words the issue on this appeal had no legal basis.[6]
[2]Which expression shall be used to describe the relevant fund, namely that of the superannuation scheme known as the Ansett Australian Ground Staff Superannuation Plan, which is held by the trustee on behalf of a large number of ground staff formerly employed by Ansett and the majority of whom were retrenched after 12 September 2001. We were told that only one such employee was still engaged by the administrators.
[3]Fortunately the relevant version of the Act is the original print as assented to on 28 June 2001, since it has “suffered“ no less than eleven amending acts in the period of shortly over two years since that date, so that the latest reprint (No. 1) extends into three volumes.
[4]By reason of s.513 of the Act the expression “winding up” applies to the winding up of any company “whether in insolvency, by the Court or voluntarily”. Section 556 makes reference to no other form of administration.
[5]Strictly the relevant clause of the deed, clause 18.2, partly incorporates by reference s.556, in that it requires four (only) classes of creditors to be paid “in the order of priority set out in s.556”: see clause 18.2.4 of the deed, but the order of payment of creditors as set out in clause 18.2 is differently set out and expressed. See also clause 16.
[6]See also the problem raised in fn.24.
Not only was the question for determination on the appeal expressed in terms of priority under the presently irrelevant s.556, but the originating motion itself and the orders and reasoning of the learned judge were likewise expressed upon the assumption that the section was applicable. In particular para.14 of the amended originating motion explicitly asked for a declaration whether the relevant contribution was an “expense”, or a “debt”, or a “contribution” (as the case may be) “within the meaning” of paras.(a), (c), (dd) or (e)[7] “of s.556(1) … of the Act”. A desperate attempt was made to reformulate the question during the second day of hearing before this Court but, even then, the draft produced after some discussion with the Court failed to avoid seeking answers about priorities under s.556.
[7]On appeal no attempt was made to justify priority within para.(c).
Many of the present difficulties arise because the appellant, with the concurrence of the other parties, seems to have persuaded the learned judge, despite the inapplicability of s.556 to the claims being drawn to her attention, to deal with the matter on the assumption that s.556 was presently relevant to the order of payment of the company’s debts. The appellant must be seen to be largely responsible in that it formulated an inapposite question and failed to make sufficiently clear why it asserted that a question of the kind should be answered. Some explanation was required and, for the reasons stated, that cannot be found in the judge’s extensive 161 page judgment[8]: indeed, on the even more extensive materials presented to them (18 volumes in all), the members of this Court could not glean such an explanation after several days’ reading, although there was a brief and incomplete reference to the real problem facing the parties.
[8]Only clause 16 was drawn to her attention, almost as if it were an eccentricity. Clause 18 seems to have been overlooked, for that doubtless might have provoked some comment from her Honour, despite the parties’ agreement.
The explanation for seeking answers to question 14 may not have been the same at the time the originating motion was taken out, on 21 December 2001, as it was when it came on for hearing before the learned judge in late July and late August 2002. When first taken out the second respondents were sued as administrators appointed by the company pursuant to Part 5.3A of the Act, which had the necessary consequence that the unsecured creditors of the company were subjected to a moratorium in respect of their debts pursuant to ss.440D-440G of the Act[9]. In practice it is assumed that no past debts of a company should be paid during this stage of an administration, which ordinarily will be very short, and that they will be paid pursuant to a subsequent deed of company arrangement, or, if that cannot be agreed upon, in the course of the consequential winding up. The priorities sections, especially s.556, simply do not apply at the administration stage and so did not apply in this case when the proceeding was issued. In the present case, it was only late in the piece and in effect after the proceeding was set down for hearing that the respondent administrators became administrators pursuant to the deed of company arrangement executed on 2 May last year. As already stated, s.556 does not here provide the order of priority for payment of Ansett’s unsecured debts, except to a limited extent, for it is controlled by clause 18 of the deed. Not only does that clause express priorities in different terms from those found in s.556, but explicitly, by clause 18.2.4.3, the deed purports to exclude the critical claims in this case which are there described as “Top Up Retrenchment Benefit Claims”. To add insult to injury clause 16.1.1 also states that these “Top Up Retrenchment Benefit Claims” by the trustee should be treated as “ordinary unsecured claims” without priority, “even if a court determines that all or any of such claims rank to priority in a liquidation of the Company”.
[9]Further, pursuant to s.440A, a creditor could not obtain an order that the company be wound up voluntarily except under s.446A. Moreover, by s.440B secured creditors were likewise prevented from enforcing their rights except with the administrator’s consent or by leave of the Court. Further the administrators became liable personally for the debts they incurred as administrators pursuant to s.443A, for which they obtained a right of indemnity pursuant to ss.443D-443F.
The seeds of a real dispute between these claimants (together with the appellant as trustee for the fund providing for such claims) and the administrators (and the other unsecured creditors) may be seen in these clauses. Doubtless drafts of such a clause were put forward early in the process of putting the deed of company arrangement to the creditors as a whole, albeit that the deed was not approved by the creditors in a general meeting until late March 2002 and not executed until 2 May. Relatively soon thereafter, on 19 June 2002, the appellant as trustee issued an application in the Federal Court seeking to terminate the deed or amend it so as to delete or vary those provisions which deny the trustee priority in respect of the “Top Up Retrenchment Benefit Claims”. The basis for that application, not surprisingly, is an assertion that the explicit denial of the claims defeats a legitimate right or expectation in the trustee (and indirectly in those claimants) which could otherwise expect to have the benefit of the priorities stated in the various ways claimed in para.14 of the originating motion. That application has proceeded but has been adjourned, as we were told, to await the outcome of this appeal and cross-appeal. As I would understand it, the Federal Court application does not directly seek an answer to the priority of the Top Up Retrenchment claims, for the issue is substantially as to the fairness of the provisions which would purport to exclude them. It can, however, be understood that, as part of the chain of reasoning leading to a conclusion in favour of the applicant trustee, it might be thought necessary to satisfy the judge that a real right, benefit or privilege was being taken away, so that the Court might find it necessary to reach some conclusion that the right, benefit or privilege would have existed if the company had gone into liquidation. Doubtless it would have been convenient to have had a ruling from this Court on which to found the argument, but I am unable to say, as it was not argued before us, that the Court hearing the termination etc. application would have to be satisfied as to the existence of the potential right. It may be sufficient to show in the circumstances that there was a deliberate exclusion of a class which had a potential or arguable right to claim priority, especially where the exclusion is as blatant as that contained in the present deed. Some of the relevant principles were said to have been authoritatively expounded by the Full Federal Court in Lam Soon Australia Pty. Ltd. v. Molit (No. 5) Pty. Ltd.[10], but there are a number of bases for termination raised in s.445D and in the related sections. Without wishing in any way to suggest how that application might properly be dealt with, it may not be found necessary to examine the priority issue in the detail thought appropriate to the issues raised in the present litigation.
[10](1996) 70 F.C.R. 34.
Sufficient has been said to show how the problem arose. It is unnecessary to set out more of the background than that which appears in the detailed reasons of the learned judge[11]. At each stage the questions in para.14 of the originating motion should be seen to have been truly hypothetical. There was some redrafting of that paragraph so as to make it rather more elaborate but in essence it asked the same kind of questions throughout. At the first stage it must have been hypothetical in that during the moratorium no question could arise as to payment of the relevant debts or as to their priority, so that the question could only have been relevant to circumstances which had not yet occurred, namely either in relation to priority in the course of a future liquidation or in relation to priority under a deed of company administration which incorporated by default or explicitly the provisions of s.556. The paragraph was at that time hypothetical because the company may not have gone into liquidation at all, say if there had been a satisfactory sale of the business as a going concern, and because a deed of company arrangement might not have included provisions as to priority which were the same or similar in substance to those in s.556. As to the position and relevance of the questions in para.14 after the deed had been entered into, the issue of priorities under s.556 was and is not relevant to the administration of the deed as it stands, because of its special provisions as to priorities, particularly in clause 18, so that for present purposes paragraph 14 is hypothetical because it asks a question or a series of questions about priorities which might arise only in the course of liquidation, an event which is presently unlikely to occur, unless by chance termination results from the Federal Court application.[12] It seeks answers to questions which are in effect based on the hypothesis or condition “if the company were to be wound up”. Those questions are not relevant to any existing or imminent set of circumstances, although they may well be seen to be relevant as part of the enquiry necessary to be embarked upon by the judge to determine the application in the Federal Court.
[11][2002] VSC 576.
[12]Another theoretical possibility is that the application may lead a variation of the deed in a form which results in s.556 applying by default (under Schedule 8A) or by explicit inclusion.
It is, however, no part of this Court’s function to give advice to another court, however convenient that may seem to the appellant or to the parties generally in this proceeding. The Federal Court may have been content to accept a decision of this Court or the parties might have agreed that they would not challenge it, but having regard to the nature of the questions posed, I think it highly doubtful that an answer to para.14 would in ordinary circumstances bind the parties to the present litigation and certainly not others who may be affected, such as the beneficiaries of the trust. Moreover, even if it were treated as binding for the purposes of the application before the Federal Court judge, it may not be seen in the same light on any appeal therefrom. It is one thing to be bound by a decision which relates to existing rights but it is quite another for res judicata or issue estoppel to apply to an answer to a question as to what might happen in the future if certain events take place, especially as there is no clear likelihood of those events occurring.[13]
[13]See further at para.[16].
There is a further significant complication which came to light during the course of the hearing before us, or at least after the judgment was given by the learned trial judge. The questions asked in para.14 of the amended originating motion were directed to “any such further contribution”, which referred back, as I would understand it, to contributions in particular to the ground staff superannuation plan, declarations as to which were sought and obtained pursuant to paragraph 12 of the originating motion, which is the subject of the cross-appeal. The answers in fact given to the questions in paragraphs 12(a) and 14 each referred to further contributions for membership groups 1 and 3 held to be payable pursuant to a particular funding and solvency certificate dated 24 April 2002 and known as “FSC 5”. Consequently the negative declarations made pursuant to paragraph 14 of the amended originating motion were confined not only to the ground staff plan but also to that which was required, so it was alleged but is still disputed, pursuant to a specific certificate. I shall not elaborate on the exceptionally complicated Commonwealth statutory scheme which effectively requires employer contributions to be made in particular specified ways, nor on the complex trust deed which sought to give effect to those requirements and which is administered by the appellant. What has happened, however, is that, since the order was made, the actuary whose responsibility it is to issue the various funding and solvency certificates has declared, under reg.9.18 of the Superannuation Industry (Supervision) Regulations 1993, that the ground staff plan is “technically insolvent” within the meaning of Part 9 of those regulations. This largely flowed from the finding pursuant to paragraph 12 of the judge’s order that Ansett was under such an obligation and Ansett’s subsequent failure to pay the certified contributions, presumably because the administrators, relying on the terms of the deed of company arrangement, had no available funds to pay unsecured debts. The further consequence was that, under the regulations, the actuary issued what was called a “special funding and solvency certificate”, operative from 25 March 2003, which was stated to “replace FSC 5” and required minimum contributions by Ansett in a form set out in the appendix which were different in form and substance from those required under FSC 5, in particular requiring payment of a lump sum of $130m.
Not only does the new certificate have a bearing on the outcome of the cross-appeal, or at least on the rights of the parties and of the members of the plan affected by the existing order, but it may well have also a bearing on the answer to the paragraph 14 questions, since they are at present also confined to liability for the further contributions under FSC 5. As I understand it, the appellant maintains that FSC 5 still has some currency but it certainly desires an order in its favour from this Court in respect also of the contributions due under the special funding and solvency certificate. Not only has that not yet been the subject of any ruling by the trial judge, but the argument on the appeal, at least from a number of perspectives, requires a proper characterisation of the nature of the liability to pay contributions and the class of priority claim said to be applicable. The respondents assert that the new certificate completely controls the liability, if any, of Ansett to pay contributions, but it is sufficient to say that it is not presently possible to reach a conclusion about the effect of the new certificate. The appellant suggested that it might raise merely a question of law, but the respondents said that they wished to test the validity of the certificate, as in substance they tested the validity of certificate FSC 5, by cross-examining the actuary and requiring some further evidence from him than presently has been made available to the Court in an affidavit filed during the present hearing. In substance it would appear that neither cross-appeal nor appeal is ready to proceed, unless they were to be confined to the obligations under FSC 5, a course which would make any answers given on the appeal even more hypothetical.
What then was it appropriate for this Court to do? Counsel for the appellant maintained that this Court should still hear the appeal (and cross-appeal) for the answers would be useful to the parties. Counsel for the respondents, though indicating that they were willing to defend their position and so remain proper contradictors to the appellant’s arguments on appeal, said that it was not appropriate to allow the appeal to proceed and in that case it would be preferable for the cross-appeal to be adjourned. As to the cross-appeal I note that there is strictly no hypothetical or advisory element to that issue or to the issue argued before the judge, for the question raised by paragraph 12 of the originating motion sought declarations as to whether the respondent Ansett “is obliged to make further contributions”? The only difference now is that the factual basis has changed.
The appellant, notwithstanding these changes, maintains that, although the questions to be answered on the appeal are hypothetical, that is not a bar to giving relief by way of declaration, nor is it an objection that they are advisory. In particular it relied on Brash Holdings Ltd. v. Katile Pty. Ltd.[14], in which the Full Court determined an appeal brought by four companies in administration for declarations as to what would be the effect on certain creditors of a proposed deed of arrangement which had not yet been resolved upon. It is sufficient to say that that was a quite different application made pursuant to the unusually expressed s.447A of the Act which permits the Court to make orders “as it thinks appropriate about how the Part is to operate in relation to a particular company”. It was brought by the companies under administration, for that right is given specifically by sub-s.(4)(a) of the section, but it is clear from the judgment that it was brought at the instigation of the administrators because of their concern as to the possible effect of a deed of company arrangement. Although the Court pointed out that the application had not been brought by them pursuant to s.447D, permitting an administrator to seek directions, it must be seen as advisory in the special circumstances contemplated by that part of the legislative scheme. The Court expressed its concern as to the procedure adopted[15], but gave what was in effect advice to the administrators, inasmuch as the Court even refused to make a substituted declaration on the ground that it would have to be cast in terms which made allowance for the rights of particular owners or lessors who were not all before the Court. It was a very special exercise of jurisdiction, which answered a question in general terms in relation to any proposed deed of company arrangement. Doubtless it was hypothetical, but, in the context of administrations the only hypothesis was that some deed of arrangement would be entered into, a matter of high likelihood if the companies were not to be placed in liquidation.
[14][1996] 1 V.R. 24.
[15]See at 26-27.
There are no similar certainties in the present case. The deed already has provisions which both in general and specific terms exclude the appellant’s rights in relation to a particular kind of contribution. Moreover the application in the Court below cannot be characterised as one where advice was properly sought from the Court, at least in relation to the matters raised by paragraph 14. If advice were sought in relation to priority, it should have been sought by the administrators under s.447D, but, whatever might have been the position before the deed was entered into, it would have been inappropriate for those administrators to have asked a question upon an hypothesis that was by then quite inapplicable to the deed. In truth the appellant sought adversary relief against the company and its administrators, albeit that it chose to do so by originating motion. Whatever was appropriate for it to do in relation to the liabilities and obligations of the fund and of the appellant as trustee, it sought here, first, to recover moneys, or to obtain a declaration as to their recoverability, and, secondly, to obtain orders as to the priority upon which they should be paid by the company and its administrators. Counsel for the appellant, though asked several times, clearly denied any intent to seek advice, so the application and appeal should be looked at on the basis that it sought declarations of right.
I would not wish to lay down any rule which would trammel the usefulness of declaratory relief, which has been demonstrated over at least the last 100 years. Nevertheless, there are limits to what courts of highest authority have seen to be the discretionary power to grant declaratory relief, which are perhaps best summarised in the judgment of six members of the High Court in Bass v. Permanent Trustee Co. Ltd.[16]. As was there said[17] it is central to the purpose of judicial determination that there is a “notion that such a determination includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy”. It followed[18], that “courts have traditionally refused to provide answers to hypothetical questions … or to give advisory opinions”.
[16](1999) 198 C.L.R. 334. See especially at pp.355-360 paras.[44]-[59] per Gleeson, C.J., Gaudron, McHugh, Gummow, Hayne and Callinan, JJ. Kirby, J. dissented: see esp. at 370-371 paras.[87]-[89].
[17]At 355 para.[45].
[18]At 355-356 para.[47].
One should be cautious about the meaning of the word “hypothetical” in this context. From time to time and in particular contexts it has been held to be appropriate for courts to decide the legal consequences of certain events, when precisely defined, which either have not occurred or, more especially, when they may be affected by the occurrence of some future event, if that is a real likelihood which has led to a present and genuine controversy between the relevant parties which there is a practical need to resolve. For years courts exercising equitable jurisdiction have been prepared to answer questions arising under wills, trusts and the like as to what the rights of beneficiaries etc. will be when a life interest falls in or some other clearly predictable event occurs in the future, albeit some caution must be still applied: see the well-known dictum of Dixon, C.J. in Trustees of Church Property of the Diocese of Newcastle v. Ebbeck[19]. Further, declarations are frequently made as to rights of indemnity when certain moneys are yet to be paid or called up and likewise, in limited circumstances, where it is asserted by some party in authority that some proposed conduct will amount to a breach of statute: see Commonwealth v. Sterling Nicholas Duty Free Pty. Ltd.[20], referred to in Bass[21]. Usually, however, the Court’s willingness to exercise the jurisdiction to make such a declaration is predicated upon the likelihood of the specific defined event occurring, whereas in the present case, even assuming the question to be reformulated in a hypothetical form, that is by no means likely.
[19](1960) 104 C.L.R. 394 at 400.
[20](1972) 126 C.L.R. 297 at 305 per Barwick, C.J.
[21]At 356 para.[47].
The vice in asking the present questions is rather that the answers to them would be advisory. As was said in Bass[22], “one crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising res judicata between parties”. Moreover, as pointed out in the same paragraph, one critical test is whether the declaration will settle the dispute finally. That certainly will not occur here; indeed the facts as found by the learned judge may no longer be the appropriate basis for the asking of any question whether now or in the future, because of the coming into existence after her judgment of the special funding and solvency certificate. The real objection, however, is that, at least since the deed of company arrangement came into effect, the answers given to the questions posed and answered by paragraph 14 will not settle the real dispute finally. That dispute is, as it must now be, whether it is appropriate for the deed to be terminated or for it to be amended so as to delete the provisions which deny the right of the appellant in relation to the “top up” claims. That dispute is being heard in another court but, as I have already said, any form of declaratory relief as to paragraph 14 in this Court will not even resolve any factual issue in that court, but will only be a step in a chain of legal reasoning which may lead to the appellant gaining the relief it desires there.
[22]At 356 para.[48].
It is quite inappropriate for one court to determine a matter which is relevant to the decision in another court, though in this respect I am talking of courts of plenary jurisdiction, not where the issue is raised in some lower court or tribunal: cf. Forster v. Jododex Australia Pty. Ltd.[23] Apart from the fact that, as a matter of comity, one court should not interfere in the resolution of disputes properly brought before another court, the division of disputes between jurisdictions was the principal vice which the introduction of the Judicature Act system was designed to overcome. Sometimes it is inevitable, especially since the invalidation of the cross-vesting legislative scheme, but it ought to be avoided as far as is humanly possible. One fundamental reason for this is that it poses great difficulties at appellate level. For example, to what extent would an acceptance of this Court’s decision by a judge of the Federal Court preclude an appeal on that issue to the full Federal Court or to the High Court? Moreover one may ask to what extent was the decision of the trial judge here interlocutory, albeit it appeared to answer the posed question finally, for if it is, then the parties are deprived of an automatic right of appeal and are dependent on the granting of leave.
[23](1972) 127 C.L.R. 421.
The position is all the worse in this case because it was the appellant who was responsible for creating this division of jurisdiction. The appellant was entitled under the Corporations Act to bring the proceedings presently in the Federal Court to terminate or amend the deed in the Trial Division of this Court, but chose not to. One may say equally that it was entitled to have this question resolved in the Federal Court, if that Court would have entertained a case involving a hypothetical dispute leading to an advisory opinion. Each proceeding could have been discontinued in one or the other court and started again elsewhere and the proceedings consolidated so as to avoid difficulties, but that did not occur. We were told that the decision to bring the proceeding in the Federal Court was not made on the advice of the solicitors presently acting in this Court for the appellant or of counsel presently instructed by them and it was the decision of different solicitors and different counsel, albeit that the solicitors were at that time acting in this proceeding. It has led to an inordinate and unnecessary expenditure on the preparation of an appeal in a court which can now only give half an answer to the issues between the parties.
Notwithstanding all these matters, for myself I would in the very special circumstances facing the Court have endeavoured to find a solution which would have enabled the questions to be resolved. At the least that would have required the reformulation of each question asked and answered by the insertion of the hypothesis which should have been expressed in terms “in the event that the Federal Court of Australia in proceeding V3107 of 2002 orders the termination of the deed of
company arrangement dated 2 May 2002[24] or in the event that the deed of company arrangement is amended so as to incorporate expressly or by default the provisions of s.556 of the Corporations Act”, or words to like effect.
[24]In which case, by s.446B and reg.5.3A.07 the company would be taken to have passed a special resolution that the company be wound up voluntarily. That may well have brought into operation s.553(1B), by which the “relevant date” would be taken to be the “date on which the deed terminates”, but the parties and the judge assumed the relevant date was 12 September 2001.
What has finally brought me to the conclusion, most unwillingly because of the expense incurred on behalf of persons no longer directly represented before the Court, is that the question, even corrected in that form, may no longer pose the right question because the vague term in the original paragraph “such further contribution” (now at least identified in the judge’s answers) will have to be varied so as to take account of the contribution required, prima facie, to be made by the first respondent under the recent special funding and solvency certificate. As raised by the respondents as cross-appellants that would certainly require a reconsideration of the answer to the question in para.12(a) and, to be of any use hypothetically or otherwise, the priority of that contribution would necessarily have to be considered in answering the questions in para.14. Again, as already stated, the evidence is presently inadequate, nor has it been suggested that it could be easily made the subject of an application for the reception of fresh evidence because of the asserted desire to cross-examine the actuary as to certain aspects of that certificate. All that would have to be resolved before any useful “answer” could be given for the purpose of the parties in the Federal Court proceeding, regardless of the vices that course had, as outlined above.
In effect both appeal and cross-appeal are not ready to proceed and, because of the changed circumstances and the hypothetical nature of the questions posed in para.14, it is not useful to answer the present questions. The matter would have to go back to the trial judge for the finding of any necessary further facts and the making of any necessary decisions arising from the new certificate and its effects. There is therefore no point in now proceeding with either appeal or cross-appeal. However, I should make it clear that, whatever I would have overlooked to enable the appeal to proceed in these exceptional circumstances, they did not justify the raising of the questions in para.14 before the trial judge, nor was it appropriate for the judge to answer them. I accept that she may have been persuaded by the appellant, with the concurrence of the other parties, to take that course in relation to only one group out of a considerable number of live questions before her, but the answers given and the reasons for them are most unfortunately misleading in that they appear to assert conclusions based on fact and relevant applicable law. The proper answers, if any answers were to be given, though they would not have pleased the appellant, nor would the respondents have found them useful, would have been: “No, by reason of the fact that none of the paragraphs of s.556(1) of the Corporations Act 2001 applies to the rights of the appellant to be paid any such contribution.” However, since what the parties wanted, or at least the appellant wanted, was an answer to a hypothetical question, I would therefore have reformulated but still answered it: “Inappropriate to answer in present circumstances”.
Although there was a good deal of uncertainty as to the parties’ attitude to the issue at first the cross-appellants wished to persist with the cross-appeal. After the factual uncertainties were discussed, it seemed to me that they acquiesced in the view that it was not now appropriate for the cross-appeal to proceed in present circumstances, having regard to the disposition of the appeal and the potential impact of the new evidence. Although I am not entirely clear how far the cross-respondent acceded to that, and, although I would otherwise be inclined to think that a similar answer might have to be given to the question raised on the cross-appeal, I have concluded that it would be sufficient simply to order that the cross-appeal be adjourned to a date to be fixed.
The form of orders has posed some problems. When the Court tentatively announced that it would not proceed further with the appeal, except to make orders allowing it by substituting orders that it was inappropriate at present to answer the relevant questions in para.14, it directed counsel to bring in appropriate orders to that effect. The orders so provided by counsel for the appellant and agreed to by counsel for the respondent do not reflect that intention. The Court’s concern was primarily to ensure that no part of the order made by the trial judge, which was not the subject of the appeal, should be affected by any proposed substituted answer to question 14. The Court’s intention was to bring to an end the hypothetical and advisory questions relating to priorities under s.556, so the question of amendment, referred to in the draft minutes, is of no consequence. Therefore, with considerable regret, I would propose that the whole of the order made in answer to the questions in paragraph 14 of the fourth amended originating motion be set aside and in lieu thereof there be substituted the order: “It is inappropriate to answer these questions or make any declaration in the present circumstances”. Lest there be any doubt about the Court’s intentions, I would not contemplate the issue being raised in the future in the present proceeding, so that I would not order in that respect that the originating motion be adjourned for further consideration. The cross-appeal should be adjourned to a date to be fixed. In the case of the appeal, since the true lis is being heard in the Federal Court, leave to appeal may well have been required, so that leave should be granted, if leave be needed, in order to make the proposed orders.
There remains the question of costs. The Court invited both parties to put in written submissions on this subject and detailed submissions have been received from them. Much information has been relied upon but none of it throws a great deal of light on the issue. Both sides protest that the other is responsible and, in particular, the respondents maintain that they have warned the appellant frequently and in many places as to the possible outcome, or more precisely, of an absence of outcome, to the appeal. Unfortunately, when it came to the hearing before the learned judge, there was a lack of protestation and indeed, as it seems, explicit acquiescence in the issue being put before her. At one stage, early in the hearing, counsel for the appellant explained the relationship between s.556 and Part 5.3A of the Act, though not in terms which made clear that s.556 was largely ousted by the terms of this deed of company arrangement. What counsel said was that the Court was being asked to “proceed upon an assumption” that the priorities in s.556 applied to the “Top Up Retrenchment Benefit Claims” although clause 16 of the deed explicitly stated that they should not “rank to priority” in the ordinary way. Again, counsel said that all parties were “agreed” that the judge “should disregard” clause 16 for the purposes of the hearing. It is not suggested that that statement was denied in any way by any of the other counsel present, including those representing the respondents. In those circumstances it may be thought unreasonable for the respondents now to criticise the appellant for persisting in the course that it took, so that the die was effectively cast, even though it has now moved to the stage of an appeal from the original judgment. However, they have uttered warnings at various stages, especially at interlocutory stages, that this Court may not see fit to consider the questions raised by the appeal. They have done so several times by correspondence and it has been raised explicitly at the interlocutory stages of the Federal Court application. They directed the appellant’s attention to the very problem raised by this Court, so much so that the appellant’s solicitors sought an assurance that the respondents would not take any point that the questions were hypothetical. Their solicitors replied by saying that they would not make any formal application to this Court, but they repeated their warning and said it could well arise. It may be said that they acquiesced in this course and certainly the respondents raised none of these matters when the appeal was called on. However, they had little choice. The real author of the disaster was, unfortunately the appellant, especially when it chose to split the two proceedings. It should therefore bear the costs. However, I would not award solicitor-client costs, as sought.
I should add parenthetically that it may otherwise have seemed strange that the learned judge made no reference in her reasons to the assumption referred to in the last paragraph, nor to clauses 16 and 18 and their purported effect. However, from the materials provided to this Court, it does not seem that she had her attention drawn to clause 18 of the deed which, for the purpose of s.444A, effectively provided to the contrary so far as the application of the whole of s.556 was concerned, except to a limited extent. I add also that it is consequently not appropriate to express any
opinion on the merits of the appeal but equally it should not be taken that we agree with the judge’s reasoning.
In those circumstances I think it appropriate to make an order that the appellant pay the costs with respect to the appeal. As to the cross-appeal, since that is to be adjourned, the costs with respect to that must be reserved. There remains only the question of the costs in the Court below. They have not yet been decided, for some reason or another, and therefore the judge will no doubt be informed by these reasons as to how her discretion should be exercised.
CALLAWAY, J.A.:
I agree in the orders proposed by the learned presiding judge and, subject to the following, for the reasons his Honour gives. I add something on my own account because of the importance of the matter to the parties and out of respect for the learned primary judge.
First of all, I am not persuaded, and it was but faintly contended, that her Honour exercised a discretion to make the declarations sought in paragraph 14 of the originating motion. She was made aware of the application in the Federal Court and was encouraged, as we were informed, by counsel on both sides to make those declarations; but it is tolerably clear that the issue that has proved fatal in this Court was not fully exposed, let alone submitted for her decision. It is therefore unnecessary to consider whether the principles in House v. R.[25] inhibit appellate intervention. It is easy to understand why her Honour endeavoured to accommodate the parties in an expedited commercial matter.
[25](1936) 55 C.L.R. 499 at 504-505.
Secondly, it is important to emphasize the basis on which Mr Santamaria argued that it would now be appropriate for this Court to make the declarations. It was that the answers to the questions propounded in paragraph 14 of the originating motion would be a "critical premiss" in the proceeding in the Federal Court: if the
appellant would be entitled to priority, it was more likely that that Court would vary or terminate the deed of company arrangement. The utility of the declarations was not put on any other basis.[26] The vice is therefore immediately apparent. In the Federal Court it is likely that the question of priorities will have to be determined in order to decide the application. If this Court determined that question, it would be no more than an opinion for the assistance of the Federal Court in the resolution of a principal cause.[27] The application in the Federal Court is in no way comparable with the proceeding before the mining warden in Forster v. Jododex Australia Pty Ltd.[28]
[26]Accordingly this case is not authority for the proposition that it would always be inappropriate to answer a question about priorities in the event of a hypothetical winding up. The declarations sought in paragraph 14 of the originating motion may have been appropriate before the deed of company arrangement supervened. Much depends in such a case on the identity of the person propounding the question, the source of jurisdiction to answer it and its present importance to the parties.
[27]For that reason it is strongly arguable that the order below was an order in an interlocutory application within the meaning of s.17A(4)(b) of the Supreme Court Act 1986. I agree with Ormiston, J.A. that leave to appeal should be granted if such leave be needed.
[28](1972) 127 C.L.R. 421. See especially 438-439 per Gibbs, J.
That being the sole basis on which the declarations were sought, the vice to which I have referred is not capable of cure by re-wording paragraph 14 of the originating motion in either of the ways suggested by counsel in argument or, I venture to think, at all. Even if there would be jurisdiction to provide the Federal Court with our opinion, or to affirm the learned primary judge's opinion, as to what the position would be if the Federal Court made one of a number of alternative orders that it has been asked to make (which question of jurisdiction I do not decide), it would be an inappropriate exercise of our discretion to do so. The questions should be answered, if at all, by the court in which their resolution is said to be relevant to the granting or withholding of relief.
Thirdly, no satisfactory explanation was provided as to why the application to vary or terminate the deed was made in the Federal Court.[29] A proceeding was already on foot in the Supreme Court. The utility of the declarations sought in paragraph 14 of the originating motion was put in doubt by the deed, which was executed after that proceeding had been commenced. The obvious course was to apply to the same judge in the Supreme Court to terminate the deed and then, if appropriate, to make the declarations sought. It was conceded that termination would be just as advantageous to the appellant as variation. It was not contended that such an application was, or could be, foreclosed by the terms of the deed or that the Supreme Court lacked jurisdiction to determine the whole, or substantially the whole, controversy. Indeed, we were told that originally it had been intended that the entire matter be resolved in the Federal Court but that that course was not followed because of a doubt as to whether the Federal Court had jurisdiction to answer all the questions propounded in the originating motion.
[29]It is only fair to record that different counsel and solicitors acted in the proceeding in the Federal Court and that they have not been heard.
Where either of two courts has jurisdiction to resolve all the issues between the parties, it is a matter for professional judgment in which court to institute proceedings. The kinds of issue that are taken into account by counsel and their instructing solicitors are well known. They need not be rehearsed in these reasons. Whatever decision is taken, the dual system of courts exercising federal jurisdiction will occasion no injustice, because the whole controversy will be dealt with in whichever court is chosen. Where, however, one court has complete jurisdiction and the other does not, a powerful reason is required to institute proceedings in the latter court with the result of immediate, or the risk of subsequent, fragmentation. The departure from the autochthonous expedient[30] must be accepted, but that does not excuse practitioners from taking decisions on behalf of their clients that will minimize costs and expedite the delivery of justice. For justice delayed is justice denied and so too is justice obtained only at unnecessary expense.
[30]R. v. Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 C.L.R. 254 at 268.
The last two paragraphs are one of my reasons for agreeing that the appellant should pay the respondents' costs of the appeal. The other reason is that, although they co-operated in letting the appeal go forward, the respondents repeatedly warned of the risk that materialized when the appeal was called on for hearing. I would not, however, accede to their application for costs on a solicitor/client basis.
The costs below, including the costs attributable to paragraph 14 of the originating motion, should be left to the learned primary judge, especially as the respondents may have been jointly responsible at first instance for the declarations having been made.
BATT, J.A.:
I agree in the orders proposed by Ormiston, J.A. and with his Honour’s reasons. I agree too with Callaway, J.A.’s reasons.
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