Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited

[2008] HCATrans 33

[2008] HCATrans 033

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M123 of 2007

B e t w e e n -

AUSSIE VIC PLANT HIRE PTY LTD

Appellant

and

ESANDA FINANCE CORPORATION LIMITED

Respondent

GLEESON CJ
KIRBY J
HAYNE J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 6 FEBRUARY 2008, AT 10.20 AM

Copyright in the High Court of Australia

MR J.M. SELIMI:   May it please the Court, I appear for the appellant.  (instructed by Starnet Legal Pty Ltd)

MR D.G. COLLINS, SC:   If the Court pleases, I appear with my learned friend, MR N.A. FRENKEL, for the respondent.  (instructed by Gadens Lawyers)

GLEESON CJ:   Yes, Mr Selimi.

MR SELIMI:   May it please the Court.  For more than 10 years corporations in this country have been denied justice by reason of a misinterpretation of the relevant provisions of the Corporations Act which are in question in this appeal.

KIRBY J:   So you rest your whole case on justice, do you?

MR SELIMI:   It is a good starting point, your Honour.

KIRBY J:   Yes, it usually is a good starting point, but maybe a little wobbly in your case if you read Justice Ashley’s reasons.  I thought you were dealing with a matter of construction that had divided the courts, a technical question rather than the justice of the case.

MR SELIMI:   Yes.  The only reason I refer to the notion of justice, your Honour, is that one of the essential elements of justice is that every person, be they natural person or illegal person, is entitled to the benefit of the correct construction and application of the law.  My submission from the outset is that the majority of their Honours in the court below applied a construction which, in my respectful submission, is incorrect and in respect of which two of the members of the Court of Appeal did not agree that it was in fact the preferable construction.

Justice Ashley and Justice Nettle both indicated that the preferable construction to be placed upon the Act was indeed that which was advanced by the appellant and, indeed, accepted and applied by President Maxwell and her Honour Justice Neave.  However, both Justice Nettle and Justice Ashley declined to apply the preferable interpretation by reason of their Honours’ desire to conform to a construction which their Honours in fact did not believe was the correct construction to be placed, in any event.

KIRBY J:   That is a little unfair to their Honours, is it not?  They simply conform to what this Court has said an intermediate court should do in the Marlborough Case.

MR SELIMI: That raises an interesting question itself, your Honour. In my respectful submission, as indeed President Maxwell and Justice Neave said in their dissenting judgment at paragraph 75 of their Honours’ judgment which appears at pages 319 to 320 of the authorised report, being 63 ACSR 300. Their Honours said:

As Nettle JA points out, the Livestock Traders interpretation has stood for more than 10 years.  Its correctness has been assumed, both at first instance and on appeal, throughout that period.  For the reasons we have given, however, we consider that the interpretation is clearly wrong and should no longer be followed.  It is an interpretation which can lead to injustice, as this case illustrates.  There being no considered decision of an intermediate appellate court on the question, we regard ourselves as free – indeed, bound – to apply what we consider to be the correct interpretation.

That, of course, is in contradistinction to the approach adopted by Justice Nettle and also Justice Ashley where, indeed, Justice Ashley referred to this notion of tangential authority bearing on the question and, of course, Justice Nettle also referred to the dicta in the Full Federal Court.

However, the question which arises, in my respectful submission, is to what extent should an intermediate appellate court in this country follow dicta of a previous intermediate appellate court in circumstances where that previous intermediate appellate court was not indeed called upon to decide the very question of interpretation raised in this case, and you might ‑ ‑ ‑

GLEESON CJ:   I am not sure how that question arises.  You have special leave to appeal to this Court and you are now before this Court.  The question is, what is the true construction of the Act, is it not?

MR SELIMI:   It certainly is.  That is the ultimate question and, indeed, I am mindful of what your Honour Justice Kirby said most recently in the case of Foots v Southern Cross Mine Management where your Honour indeed indicated at paragraph 96 of the judgment, which at present is reported at [2007] HCA 56, a decision of this Court of 7 December last year:

To the extent that advocates and courts continue to address themselves to judicial remarks (often obiter dicta) in earlier cases, they run the risk of failing to perform their proper functions as the Constitution envisages within the integrated Judicature of the Commonwealth -

Now, in my respectful submission ‑ ‑ ‑

HAYNE J:   So can we get to the Act?

MR SELIMI:   Yes.

HAYNE J:   That is where we start.

MR SELIMI:   That certainly is the correct starting point for any analysis in respect of statutory interpretation, it is the language of the statute itself.  Perhaps if I can turn to that directly, your Honours.

KIRBY J:   Is it relevant at all for us to look, maybe not immediately, but at the predecessor to the statutory provisions in the Corporations Act, or not?

MR SELIMI:   In my submission, in terms of ‑ ‑ ‑

KIRBY J:   I did not see that in the written submissions.  Is there any place – perhaps you should do what Justice Hayne said and look at the Act and I will save that one up for you later on.

MR SELIMI:   Yes.  The only point I would make about the previous provisions, your Honour, is this.  It is quite proper, particularly in light of the modern purposive approach to construction of statutes, and, indeed, consistent with the Acts Interpretation Act section 15AB, it is quite proper to have regard to the mischief which particular legislation was designed to address.  In that respect it is, of course, significant to have regard to the history of legislation.

What is significant about the previous legislation, your Honours is that there was no separate procedure for the setting aside of statutory demands.  Commonly, contractual disputes in relation to whether a debt was or was not owing were raised during the course of the hearing of the winding‑up application itself, which led to interminable delays with the imposition of contractual disputes in the winding‑up process itself.  Indeed, that was one of the chief reasons for the introduction of the Corporate Law Reform Act which included this special scheme.

GLEESON CJ:   Is it a good idea to identify the question of construction?

MR SELIMI:   Yes.

GLEESON CJ:   Is the question of construction whether section 70 applies to section 459(f)?

MR SELIMI:   Yes, your Honour, that is the question of construction.  In my submission, it is a critical question to be asked, particularly in circumstances where, with great respect to Justice Jenkinson in Livestock Traders and all of the judges who have subsequently applied the Livestock Traders’ interpretation, it is a question which should be looked at with great care.

HAYNE J:   Maybe so, but the question of whether section 70 applies in the fashion indicated is affected by, perhaps governed by, section 6(1), is it not?

MR SELIMI:   Yes, your Honour.  Indeed, I was going to refer your Honour to that section.  Section 6(1) indicates:

The provisions of this Part have effect for the purposes of this Act, except so far as the contrary intention appears in this Act.

My submission at the outset is that there is no contrary intention for the purposes of section 6(1) such that section 70 does not in fact apply to the provisions in question in this case.  In fact, if I may also refer your Honours, as indeed I propose to in due course – it is particularly important in terms of a proper construction of section 459F(2)(a)(i) of the Act, which of course is the primary critical provision in this case, to have regard to the definition of “extend” which appears in the dictionary section of the Corporations Act.  Section 9 defines the word “extend” as follows:

Unless the contrary intention appears . . . 

“extend”, in relation to a period:

(a)      includes further extend -

which, of course, is particularly apposite here in terms of the facts of this case, and –

(b)has a meaning affected by section 70.

So, in my submission, on a proper construction of the Corporations Act having regard to the definition of “extend”, and indeed specifically incorporating the meanings affected by section 70, it is all the more reason for accepting the correctness of the interpretation placed upon the Act by the dissenting members of the Court of Appeal.

The key point, your Honour, is this.  Justice Jenkinson in Livestock Traders applied the reasoning of this Court in David Grant and held that section 70 was not applicable and, indeed, relied substantially upon the reasons of this Court in David Grant in so concluding.  Likewise, if I can turn directly to the decision of Justice Chernov who, in truth, was the only member of the majority who ‑ ‑ ‑

HAYNE J:   Again, you are about to dive into what judges have said about the Act.  Just understand what provisions of the Act are in play.

MR SELIMI:   Yes, certainly.  If I may return to ‑ ‑ ‑

HAYNE J:   Section 459F is in play because it is that provision that fixes when a company is taken to fail to comply with a statutory demand.  Is that right?

MR SELIMI:   Yes, correct.

HAYNE J:   Do we need not also to have regard to 459C and 459G.  Section 459C is important because it is that which identifies the consequence of failure to comply.  Is that right?

MR SELIMI:   For the purposes of the applications specifically mentioned in subsection (1), yes.

HAYNE J:   Which include, relevantly, an application to wind up an insolvency ‑ ‑ ‑

MR SELIMI:   Correct, pursuant to section 459P ‑ ‑ ‑

HAYNE J:   ‑ ‑ ‑ which is the kind of application we are concerned with.

MR SELIMI:   Yes.

HAYNE J:   The only consequence of failure to comply is a shift in the burden of proof.  Is that not right?  The only consequence of failure to comply with a statutory demand is identified in 459C(2) and (3).  It is presumed insolvent, but you can always come along and say, “Well, that may be the presumption, but have a look at our balance sheet.  We are solvent”.

MR SELIMI:   Strictly speaking, that is correct.  However, the whole point of this appeal, with respect, is this.  A corporation should not have to face the consequences prescribed in section 459C if, in fact, the statutory demand which is the trigger mechanism for the entire scheme should have been set aside at first instance.  That, indeed, gives rise to the second question which arises in this case, that is, the utility point.  That is irrespective of the proper construction of section 459F(2)(a)(i).  Was there any utility in considering the merits of the appeal irrespective of whether time may or may not have been extended?  My submission, your Honours, is that a corporation should not have to face the consequences prescribed and, indeed, should not have to, as your Honour puts it, rebut the presumption of insolvency.

GLEESON CJ:   By “the consequences” do you mean having to show that it is solvent?

MR SELIMI:   Yes.

GLEESON CJ:   A corporation should not have to show that it is solvent.

MR SELIMI:   In circumstances where the statutory demand should be set aside the trick ‑ ‑ ‑

GLEESON CJ:   That is the sort of thing a corporation has to show every time it wants to borrow some money from its bank, is it not?

MR SELIMI:   Yes, but, your Honour, the question here is, should a corporation be compelled to divulge its financial details to the world, as it were, all as a consequence of a statutory demand which activates the entire scheme?  My submission, your Honours, is that if the ‑ ‑ ‑

HAYNE J:   Which is why we need to then go into 459G because the demand process contemplated by 459E and F has an amelioration in Division 3 of Part 5.4, 459G and following, where you can apply to set aside, you can raise questions of disputes or offsetting claims, but you may do so within the very limited time.

MR SELIMI:   That is precisely what David Grant decides, but David Grant was decided for the simple reason that the argument that was sought to be raised by the appellant in that case was completely contrary to the express, clear legislative policy underlying section 459G(2) which was to compel corporations to raise disputes promptly.  Indeed, there was no section, that is, no provision in section 459G, in respect of which section 70 could operate.  The temporal operation of section 70 of the Act can only operate in circumstances where there is a power prescribed by the Act in respect of which section 70 can operate.  Indeed, in David Grant itself ‑ ‑ ‑

GLEESON CJ:   What is the reference to that, Mr Selimi?

MR SELIMI:   Yes, pardon me.  In David Grant, in the concluding ‑ ‑ ‑

KIRBY J: It is (1995) 184 CLR 265.

MR SELIMI:   Yes, I beg your pardon.  Thank you very much, your Honour.  The particular page is page 278 which was, in my submission – perhaps I should say from 276 to 278 but the relevant point is this.  His Honour Justice Gummow in that case, of course, set out the relevant provisions of section 459G and was particularly conscious of the specific time limits created by section 459G and at page 278 his Honour said:

These reasons lead also to the rejection of the reliance by the appellants upon ss 70 and 467A of the Law.

The critical part is this, your Honours:

Section 70 provides that, where the Law “confers power to extend the period for doing an act”, an application for the exercise of the power may be made and it may be exercised even if the period has ended.  However, the Law does not confer a power to extend the period within which an application may be made under s 459G.

That, indeed, was one of the principal reasons why David Grant was decided as it was, the key point being, in 459G(2) it was clear that an application to set aside may only be made within the 21‑day period. 

There was no power created by section 459G to extend that time.  Hence, there was no provision which could attract the operation of section 70.  In contradistinction, in this particular case the key point is that section 459F(2)(a)(i) does in fact confer an express power upon the court to extend and, indeed, further extend the period within which one may comply with the Act.  Hence, that directly attracts the operation of section 70 of the Corporations Act.

GLEESON CJ:   Your argument is that David Grant is distinguishable because section 459F(2) gives you a foot in the door?

MR SELIMI:   Yes.  Not simply a foot in the door, with respect, but the other important point is this.  The clear legislative policy of section 459G was to address the mischief which Parliament had indeed identified relying on the Harmer Report in particular that disputes in relation to winding‑up proceedings were interminably delayed by the interposition of contractual disputes during that very process.  Hence, Parliament created a two‑stage process, the first of which was the setting aside process in relation to demand, and the second process being the winding‑up process.  The new provisions were designed to ensure that the contractual disputes, if you like, were not interposed in the winding‑up process.  The provisions were clearly designed to compel parties, as indeed indicated by paragraph 689 of the explanatory memorandum which is set out at page 270 of the decision of Justice Gummow in that case.  Paragraph 689 quite clearly indicates that disputes in regard to the statutory demand ought be brought:

at an early stage –

the key words –

rather than after winding up proceedings have commenced.

To allow an extension of time within which to make an application to set aside a statutory demand would be completely contradictory, inconsistent, to that legislative policy, whereas, in my submission, Justice Nettle in fact was perfectly correct – somewhat ironical that I rely upon a member of the majority in this case.  But the point is four members of the Court of Appeal ‑ ‑ ‑

KIRBY J:   You have made that point.

MR SELIMI:   Yes, and Justice Nettle, in particular, noted that the procedural regulation of the proceeding has been left to the court.  The court is vested with the jurisdiction to extend time within which a corporation may comply with the statutory demand and, indeed, that is perfectly consistent with the doctrine of separation of powers.  The Parliament has prescribed the relevant legislation and it has empowered the court to extend the time for compliance in order to ensure that indeed commercial justice may well be promoted.  Might I indicate that my submission is it is a complete fallacy to suggest that Parliament intended to create a scheme which was intended to wreak unjust consequences.  Parliament relied upon ‑ ‑ ‑

KIRBY J:   The other argument is that the justice, if we are talking about that, is a justice to the public, to investors, to small contractors who deal with insolvent companies, and with all the other people out there, and that that requires urgency of action and speed and not going back once things have happened.  That is the other side of justice.  But could I have your help in analysing 459F and how you say that the provisions there are to be distinguished from the provisions that were considered in David Grant.

MR SELIMI:   Yes, your Honour.

KIRBY J:   I would like, as Justice Hayne asked earlier, that you start really with the statutory construction, which is our problem.

MR SELIMI:   Yes, certainly, your Honour.  The first point to note, in terms of David Grant and section 459G – if I can take your Honour to section 459G, because frankly this is where the authorities have taken the wrong turn, to use the words of Justice Ashley.

KIRBY J:   That is what I would like you to demonstrate, if you could, by reference to the text.  That is really the starting point in the case.

MR SELIMI:   It should also be the ending point, if the words of the statute govern.  Section 459G(2), which was the section considered in David Grant, stated:

An application may only be made within 21 days after the demand is so served.

That provision is perfectly unambiguous and, indeed, the result followed, necessarily, in David Grant.  I would interpolate there, however, that section 459G does not contain a power to extend time.  If one turns to section 459F, however – subsection (2) being the critical provision – subsection (1) states:

If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.

Subsection (2) elaborates upon the meaning of the “period for compliance” and defines it as follows:

The period for compliance with a statutory demand is:

(a)if the company applies in accordance with section 459G for an order setting aside the demand:

(i)if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand–the period specified in the order, or in the last such order, as the case requires, as the period for such compliance -

It was that provision, that particular subsection which had application in this case, your Honours, because, of course, the learned Master at first instance, indeed, exercised the power pursuant to subsection (2)(a)(i) on the determination, that is, upon the determination of the hearing of the application under section 459G.  Master Efthim, of course, heard the application under section 459G and dismissed it.

Concurrently, however, he, in accordance with an application pursuant to section 459F(2)(a)(i), extended the time for compliance and subsequent to that time, of course, subsequent to that decision being handed down, the appellant filed an appeal within a prescribed period of time which subsequently came on for hearing before Justice Whelan who refused to exercise the power which, I submit, existed by virtue of section 459F(2)(a)(i), the key point being, your Honours, as indeed recognised in David Grant itself, section 459F(2)(a)(i) clearly contemplates that there may be multiple extensions of time granted in aid of the hearing of the application to set aside a demand.

Indeed, in accordance with that legislative policy, the key point is the legislative policy of conferring a power to extend the time for compliance is in aid of the hearing of the application for the order under section 459H, that being the setting aside of the statutory demand, and, indeed, as held by President Maxwell and Justice Neave, it is also in aid of the hearing of an appeal arising from a decision of the Master at first instance.  So, in my submission, the words appearing after “459G” in subparagraph (i), that is, “or on an application by the company under this paragraph”, quite clearly that is in contradistinction to an application being made upon the conclusion of the hearing of the application under section 459G.  There is a clear, in my submission, unambiguous express power to extend time even after the Master at first instance has dismissed the application.  In my submission, it is quite simple and quite unambiguously indicated by Parliament that in circumstances, for instance, where a corporation exercises a statutory right of appeal pursuant to the rules of the court, in those circumstances it is perfectly just in order to ensure that the appeal is not rendered otiose and nugatory, it is perfectly just for a judge upon the hearing of the appeal to extend the time for compliance even if the previous period for compliance has lapsed.  That effectuates the legislative policy of this specific provision and, in my submission ‑ ‑ ‑

KIRBY J:   Well, your point is that whether the judge does extend it or not, whether the justice of the case requires it be extended, if the power is there it has to be exercised by reference to the existence of the power and not the denial of the power.

MR SELIMI:   Precisely, your Honour.  Indeed, Justice Ashley made the point in his judgment that the mere fact that one recognises the unambiguous existence of an express power does not necessarily mean that the power ought be exercised.  Whether the power, as a matter of justice in terms of the peculiar facts of the case should be exercised, is a question quite obviously of discretion and the judge can decide to exercise it or not in terms of the intrinsic merits of the case.

But, in my submission, to effectively deny the existence of an express power created by Parliament explicitly, and to misapply David Grant, which dealt with a completely different legislative provision, has led to a miscarriage of justice in numerous cases in the past, as indeed in this case.  I use the word “justice” in the sense that everyone is entitled to an application of the law, a correct interpretation of the law and, indeed, I read with great interest your Honour Chief Justice Gleeson’s remarks in a speech delivered by your Honour at the Judiciary of the Commonwealth of the Bahamas on 4 January 2008 entitled, “The Role of a Judge in a Representative Democracy”.  Indeed, during the course of that paper your Honour said that it is “grossly illegitimate” for a judge to misinterpret legislation.  Now, the point I make, your Honours, is that in this particular case we had four justices in the Court of Appeal ‑ ‑ ‑

HAYNE J:   Before you embark on that ‑ ‑ ‑

KIRBY J:   That is the third time.

HAYNE J:   ‑ ‑ ‑ stay with the Act.

MR SELIMI:   Yes, all right.  Now ‑ ‑ ‑

HAYNE J:   No, just a moment.  An argument which I suspect you may have to meet is this.  An argument for the contrary intention to the application of section 70 seems to be that 459F(1) has already been engaged, if you like, has already bitten, by the time the application for further extension is made.  That is, the argument against you is one which says section 70 cannot apply because the company is already to be presumed insolvent.  It is to be presumed insolvent because the period for compliance has expired.  What is the answer you make to that argument?

MR SELIMI:   The answer is this.  Section 459C, which creates the presumption of insolvency, itself is subject to the definition of what a company fails to do to comply with the statutory demand as defined by section 459F.

In other words, whether there has been a failure to comply must be taken to mean a failure to comply within the meaning of the period of compliance as defined by subsections 459F(2)(a)(i) and (ii).  So, in my submission, the argument that has been mooted or may be put by the respondent and, indeed, has been put, suffers from circularity in reasoning, in my submission.  In my submission, section 459F simply states:

the company is taken to fail to comply with the demand at the end of that period.

But the question begs itself, what is that period?  Now, that period is the period of compliance as defined in paragraph (a) of the Act. 

HAYNE J:   But your argument has to be, does it not, that there is explicit reference to the last such order?

MR SELIMI:   Yes, or in the last such order ‑ ‑ ‑

HAYNE J:   Section 70 contemplates that the last such order may be made before or after time of compliance.

MR SELIMI:   That is precisely the case, but even one step further, section 9 is extremely significant in terms of the definition of “extend” because it states two things.  It includes “further extend” and (b) have a “meaning affected by section 70”.  Section 70 sheds light on the circumstances in which the power may be exercised.  It is quite obvious the power to extend the period for doing an act may be exercised even if the period or the period as last extended has ended.

GLEESON CJ:   Is it a part of your argument that the power to grant an extension of time nunc pro tunc granted by section 70 will almost always be exercised in circumstances where some consequence of some kind has attached to the failure to act within time?

MR SELIMI:   It may.  However, whether it applies depends on whether there is a section in an Act which confers a power to extend the time for doing an act.  So section 70 has no application where the Act does not confer a power to extend the period for doing an act.  That is the very basis of David Grant.  There was no power to extend the period for filing an application to set aside a statutory demand under section 459G in contradistinction to the power to extend the period for doing an act within the meaning of 459F.  The doing of the act is the payment of a sum of money in respect of the statutory demand.

So that if upon the conclusion of an appeal, for instance, hypothetically – let us say the appellant was heard on its merits before Justice Whelan, Justice Whelan could have extended the time for compliance with the statutory demand for such time as his Honour saw fit to allow a reasonable indulgence in respect of the payment of a statutory demand in circumstances where the appellant has simply exercised a right of appeal.

GLEESON CJ:   The question may be, when you seek to repel the argument that subsection (1) has already bitten, – that would usually be the case, but is this, in this legislative context, the kind of consequence that is meant to be irreversible?

MR SELIMI:   In my submission, it is not meant to be irreversible and, indeed, in terms of answering that specific question one must have regard to the words of the statute and the words of the statute in subsection (2)(a)(i) quite clearly contemplate multiple potential extensions of time.  The words “the period specified in the order” being perhaps the order of the Master at first instance, “or in the last such order, as the case requires” which may well be, for instance, the time period set by a justice hearing the appeal, upon the conclusion of the appeal.

So the point, your Honour, in my respectful submission, is that Parliament has in section 459C tied the presumption to the definition of section 459F.  Section 459F is inherently elastic, it is flexible.  So if Parliament has envisaged that orders may be made extending the period for compliance even after the lapse of a previous period, then the exercise of that power may well operate, indeed does operate to undo the prima facie consequence of a failure to comply with a first order, but that is precisely what Parliament has envisaged.  The procedural regulation of an application to set aside a statutory demand and any procedural regulation upon the filing of an appeal has been left with the Supreme Court.  Parliament has not sought to intrude or to do violence to the doctrine of separation of powers by purporting to limit the period of time within which an application may be made to extend the period for compliance.

KIRBY J:   That would not be an interference with the separation of powers.  That would be a particular exercise of the separation of powers.  Parliament is saying courts have the right to extend, but in the particular urgent circumstances and public policy reasons of the company insolvency, we are going to limit the time in which the court can extend time.

MR SELIMI:   Indeed.  I accept that wholeheartedly, your Honour.  Indeed, that is precisely what Justice Ashley referred to in terms of Parliament’s intention in section 459R(2) of the Act, which is a very important provision to have regard to when considering the proper construction of section 459F(2)(a)(i).  If Parliament wished to confine the period within which an application for an extension of time to comply may be made, Parliament could have done so.  In section 459R, which states “Period within which application must be determined”, this, of course, is an application for a company to be wound up in insolvency:

(1)An application for a company to be wound up in insolvency is to be determined within 6 months after it is made.

Now, your Honours, section 459F does not contain a similar provision, or 459G for that matter, does not contain a similar provision.  Parliament could have said, if it wished, an application by a company to set aside a statutory demand must be determined within three months after it is made.  It could have said so.  It did not.  Likewise, in subsection (2):

The Court may by order extend the period within which an application must be determined but only if . . . 

(b)the order is made within that period as prescribed by subsection (1) –

that is, six months after it is made –

or as last extended under this subsection, as the case requires.

But that particular provision – subsection (2)(b) – quite clearly contemplates that the order for an extension must be made within the period as last extended.

GLEESON CJ:   Mr Selimi, the question I am about to ask I do not think goes to the heart of either argument, but I would just like to understand the context at the moment.  Is it right to say that, where an application is made under section 459G, the kinds of issue that will arise in that application are indicated by 459H and 459J?

MR SELIMI:   Yes.

GLEESON CJ:   So there may be an issue about whether the debt is owing or there may be an issue about whether there is a counterclaim that exceeds the amount of the debt ‑ ‑ ‑

MR SELIMI:   Or a set‑off, yes.

GLEESON CJ:   There may also be an issue about whether there is some defect in the demand, which causes a substantial injustice.

MR SELIMI:   Yes, correct.

GLEESON CJ:   That is the kind of issue that will be litigated under section 459G.

MR SELIMI:   Indeed.  Might I add, your Honours, in terms of the day‑to‑day practice in running these applications under section 459G, it is not a particularly difficult hurdle to meet – that is to satisfy that there is a genuine dispute in relation to the existence of a debt.

GLEESON CJ:   I was wondering, in that context, whether a consideration that might have been influential in the reasoning of some of the judges who have looked at this in the Court of Appeal in the present case was that the kind of issue that will be litigated under 459H or 459J might sometimes give rise to a substantial appeal point.  They seem to have been impressed by the consideration that an unappealable refusal to extend the time pending the determination of that appeal point will produce the practical consequence that the decision at first instance is, for practical purposes, unappealable.

MR SELIMI:   Yes.

GLEESON CJ:   Is that part of your argument?

MR SELIMI:   Your Honour, my argument is that in terms of the proper construction of section 459F(2)(a)(i) and section 70 which is attracted in this case, my submission is that a judge hearing an appeal arising from the original determination of an application under 459G must ‑ in order to ensure that the appeal is effectively exercised and given effect, that is ‑ have the power to extend the time for compliance with the statutory demand.  Now, it may well be as, your Honour as indicated – well, the effect of the authorities in terms of Livestock Traders has effectively been to make the original determination unappealable.

HAYNE J:   That depends, does it not, on how that stream of authority in Wilson v Church culminating in Erinford Properties and other such cases would be engaged.  Wilson v Church is, I think, 12 Ch D, which speaks of the grant of relief to ensure preservation of a right of appeal.  Now, you see some reflection of that in this Court in Burgundy Royale (No 1) 161 CLR, but the central contention that you are presently addressing is one which would have to take account of the undoubted power of a court to preserve the utility of a right of appeal and the authorities which govern when that jurisdiction should be exercised.

MR SELIMI:   Yes, your Honour, but my submission ‑ ‑ ‑

HAYNE J:   So that if a company has an arguable case ‑ true it is resolved at first instance against it, but raising a substantial point – it would be open either to the court from which the appeal is brought or the court to which the appeal is to be brought as of a right to make interim orders that would preserve the subject matter of the appeal.

MR SELIMI:   Yes, indeed, your Honour.  Indeed, that is the very crux of the reason why the application for an extension of time is made.

GLEESON CJ:   The best example I can think of of a case that would raise the problem Justice Hayne mentioned is this.  Suppose there is an application under 459G and the ground of the application is a denial of the existence of the debt.

MR SELIMI:   Yes.

GLEESON CJ:   Suppose the issue concerning the existence of the debt is an issue of law on which the primary judge is bound by the authority of an appellate decision and the person challenging the debt really wants an opportunity to challenge the correctness of the appellate decision.  In other words, it is a case where the person challenging the existence of the debt is bound to lose, or very likely to lose, at first instance on a legal ground, but there is an arguable point of law that will be the subject of an appeal.  Now, in that circumstance, if the person applying under 459G fails to persuade the primary judge to grant an extension of time under 459F, for example, until 14 days after the determination of the appeal, the practical consequence will be, will it not, that the appeal will have no utility. 

MR SELIMI:   The practical consequence depends upon whether (a) the power of extension is granted but, secondly, depends upon the power of the court to consider the intrinsic merits of the appeal whether or not the period for compliance has expired.  That is the second point of the appeal in this case, your Honours, which I will address in due course.  But my submission, your Honours, is that a corporation must have the legal right, indeed must have the right to effectively exercise a statutory right of appeal.  Now, in this case what I would bring to your Honours’ attention is quite simply this.  An appeal to a judge in this case, to Justice Whelan in particular, was not confined to an error of law.

GLEESON CJ:   Yes, the present case might not provide the most vivid example of the kind of problem that I was intending to advert to, but from the point of view of the construction of the statute, all you have to do is point to some vivid example.

MR SELIMI:   In my submission, that is a vivid example, and, in my submission, Parliament has well recognised and, indeed, created a flexible ‑ in terms of the procedural regulation of this application under section 459G, Parliament has not sought to circumscribe the period of time within which an application may be made to extend the time for compliance.  It has not even limited the period of time within which an application to set aside the statutory demand must be determined.

GLEESON CJ:   In the example I gave, even where the right of appeal was rendered practically nugatory, the debtor is not shut out from contesting the debt, is it?

MR SELIMI:   Your Honour, the answer to that is generally, yes, he is or it is, rather, unless leave is granted to the contrary. 

GLEESON CJ:   On the hearing of the winding‑up proceeding?

MR SELIMI:   Yes, but that is only if leave is granted and one need only look ‑ ‑ ‑

HAYNE J:   Section 459S.

MR SELIMI:   Correct, 459S(1), and in terms of the practical difficulties of getting leave, well, I need not go there.  The point, however, your Honours, in my submission, is that in terms of the critical question of construction before this Court a proper interpretation, indeed, the very interpretation referred to by four members of the Court of Appeal is that which ought be upheld by this Court.

KIRBY J:   That is the fourth time you have said that, but you do have to grapple, do you not, with Justice Chernov’s reasons?  Justice Chernov was the only judge in the Court of Appeal who embraced what I might call the Jenkinson approach and he said, “The trouble with your submission is, it is too old-fashioned.  You are back there in the ark just looking at the statutory language.  You are not applying what the High Court has repeatedly said is the modern way of looking at things, to look at its purpose, to look at its history, to look at the way it all fits together and if you look at the way it all fits together, this all has to happen quickly because unless it does, public interests and small people dealing with insolvent companies will lose out and, therefore, the pressure is on and that is how you should construe the statute, therefore it is spent”.  What is your answer to that?  You have to answer it because very clever judges have supported that over the years.

MR SELIMI:   The answer to that question, in my submission, raises an anterior question and that is, what was the mischief and what was the purpose of bringing in a separate scheme for dealing with disputes in relation to alleged debts. 

KIRBY J:   Where do I find the best description?  Is it in a textbook of what the pre-existing regime was?  The other judges will probably know all that, but I do not and I would like to be familiar with what the previous scheme was.  Is it in the Harmer Report?  Is it in the ALRC Report?

MR SELIMI:   Well, it is in the Harmer Report, but ‑ ‑ ‑

KIRBY J:   Do we have extracts from the Law Reform Commission Report, or not?

MR SELIMI:   I do not think your Honours do.

KIRBY J:   Well, I think we may need those or at least reference to them.  I think we can get them, but I would like reference to where Mr Harmer and the Law Reform Commission dealt with this, because it may be that that gives us a very good clue as to what the mischief was.

MR SELIMI:   Your Honours, Justice Gummow in David Grant ‑ ‑ ‑

KIRBY J:   He set out the explanatory memorandum.  I realise that.  You have taken us to that, but anterior to that was the Law Reform Commission Report on company insolvencies?

MR SELIMI:   Yes.

KIRBY J:   If you do not have that now you can perhaps send it in.  I do not want to hold you up.  You can send a note with the leave of the Court on that.  I think you are being tendered gifts.  There is an old Greek saying about this, or Roman saying, that you should perhaps consider.  I think the other side might have extracts from the Harmer Report.

MR SELIMI:   Your Honour, the Harmer Report, which of course was the Law Reform Commission Report No 45 headed “General Insolvency Inquiry”, undertook an investigation of the inadequacies of the previous legislation which ultimately led, of course, to the preparation of the explanatory memoranda.  In my submission, the explanatory memoranda is relevant to have regard to in addressing the question of the proper construction, if indeed it is suggested that there is any ambiguity.  Secondly, of course, consistent with the modern approach to construction ‑ ‑ ‑

KIRBY J:   We know all that.  The extract from the explanatory memoranda in Justice Gummow’s reasons in David Grant, was that ‑ ‑ ‑

MR SELIMI:   That is at page 270.

KIRBY J:   ‑ ‑ ‑ addressed to a 459G or to the whole package?

MR SELIMI:   It was essentially addressed to ‑ ‑ ‑

KIRBY J:   See his Honour says at the top of 270 of David Grant 184 CLR 265, it:

became Div 3 of Pt 5.4 (ss 459G-459N).

So he is not addressing himself to 459F, which is the one that is before us.

MR SELIMI:   That is precisely my submission, your Honour.  My submission is, what has happened in this case ‑ ‑ ‑

KIRBY J:   All right.  That is established.  David Grant was about 459G but we are about 459F.  Where are the explanatory memoranda or the Harmer Report provisions in relation to 459F, which is our concern?

MR SELIMI:   Yes, 459F is dealt with at paragraph 149 of the Harmer Report, in particular, the recommendation in relation to the periods for compliance, which reads:

A company should be able to apply to set aside a statutory demand before time for compliance with it expires. The application should have to be supported by an affidavit setting out the reasons for objection.  Once the application is filed, time for compliance should be automatically extended by seven days or until such later time as the court determines.

There is no, as it were ‑ ‑ ‑

KIRBY J:   Sudden death provision.

MR SELIMI:   That is correct but, more so, there is no literature, there is no discussion as to the policy reasons underlying the need for an extension of time and the like.  My critical submission, in answer to the ‑ ‑ ‑

KIRBY J:   Do you have the explanatory memorandum provisions in relation to 459F?  If you do not, say so and we can give you time to put them before us.

MR SELIMI:   The explanatory memorandum in relation to 459F, paragraph ‑ ‑ ‑

KIRBY J:   You are doing this on the run.

MR SELIMI:   No, no, I have it front of me, your Honour.

KIRBY J:   I realise that, but this requires very careful examination of the text.

MR SELIMI:   Yes.  Paragraph 684 of the explanatory memoranda ‑ ‑ ‑

KIRBY J:   Do we have that?  Has that been put into the Court papers or not?

MR SELIMI:   No, your Honours.

KIRBY J:   I think you should do a copy of it, if I can say so for myself, before you leave the Court building.

GLEESON CJ:   Could you just give us a hint about what is in it?

MR SELIMI:   Yes.  It essentially states as follows, your Honour ‑ ‑ ‑

KIRBY J:   We are tantalised.

MR SELIMI:   Yes.

684.    459F(2) provides for periods within which the demand must be complied with.  Generally, the period will be 21 days after the demand is served.  Where, however, a company applies in accordance with proposed section 459G for an order setting aside the demand, the period is that specified in a Court order extending the period for compliance or otherwise, the period ending 7 days after the application to set aside the statutory demand is finally determined or otherwise disposed of.

So, your Honours, the provisions relied upon by the respondent and, indeed, by the various judges who have applied the Livestock interpretation are based essentially upon the provisions in the explanatory memoranda which more specifically relate to section 459G, that is, the mischief to be addressed is to create a two-tiered system, the first system which requires that disputes be brought at an early stage, that is, promptly, rather than at some later period.

KIRBY J:   Why does not that same policy apply to 459F?  This is all urgent stuff.  It has to be dealt with quickly.

MR SELIMI:   But your Honour there is a distinction.

KIRBY J:   It is not just your interests.  There are investors, there is the public, there are the contractors and employees.

MR SELIMI:   Yes, but the mischief that this legislation was designed to address was having the winding‑up proceeding itself interminably delayed by raising contractual disputes during the course of the winding‑up proceeding itself.  Hence, the underlying policy of section 459G was to create an inflexible time limit within which disputes might be brought promptly.  But the Act did not go that step further and state after a dispute has been brought promptly it must be determined within a fixed period of time.

The great leap – the leap that the respondent is seeking the Court to make is to extend the specific legislative policy underlying 459G to 459F.  In my submission, that ought not be accepted because it means that it completely, with respect, seeks to curtail or inhibit the jurisdiction of the Supreme Court to properly consider matters that are brought before it within time limits that are not even specified in the Act, within time limits that are not even specified in the explanatory memoranda.

CRENNAN J:   Can I ask you this.  You have said before that one necessary consideration is the preservation of the utility of an appeal, and I think you have referred to a statutory right of appeal.  Justice Chernov seems to approach the matter on the basis that, once the period for compliance or any extension given has expired, there is no determination of any rights but simply the presumption of insolvency.  As he reads the scheme, once that occurs, the next chance for the company to contest the demand is on the winding up.  As you have pointed out, under 459S, leave may be given in relation to that.  It probably turns on whether or not a contest about the statutory demand is relevant to the issue of insolvency.

MR SELIMI:   Yes, your Honour, but if I may address, as indeed I must, the reasons of Justice Chernov, in my submission, with great respect to Justice Chernov, Justice Chernov’s analysis and conclusions are based upon a misinterpretation of the plain and unambiguous provisions of section 459F(2)(a)(i).

CRENNAN J:   Just getting back for a moment, though, to the specific question I asked you, his reading of the scheme is premised on the proposition that there is no determination of rights once the period of compliance or any extension given has expired.

MR SELIMI:   Yes, there is no determination of rights.  Indeed, that goes back I think to what Justice Hayne had held in a case of Mibor previously.

CRENNAN J:   Yes.

MR SELIMI:   But my submission, however, your Honour, is that in terms of the question of statutory interpretation, the question is does the Act of Parliament confine the period of time within which a corporation may make an application to extend a period for compliance with the demand?

CRENNAN J:   But just before we get to that, where do we find the statutory right of appeal in respect of a decision like Master Efthim’s?

MR SELIMI:   The right of appeal is provided under Order 77.05 of the Supreme Court Rules, your Honour, which provides that ‑ ‑ ‑

KIRBY J:   You better speak into the microphone please and identify that section again.

MR SELIMI: I beg your pardon. To answer your Honour’s question, the right of appeal is conferred by rule 77.05(1) of the Supreme Court (General Civil Procedure) Rules 2005.

KIRBY J:   It is not an order, it is just that rule, is it?

MR SELIMI:   Well, it appears in Order 77, your Honour, but the relevant provision is Order 77.05:

(1)Subject to paragraph (2), any person affected by any judgment given or order made by a Master under any Chapter of the Rules of the Supreme Court may appeal to a judge . . . 

(7)The appeal shall be by re‑hearing de novo of the application to the Master but each party may –

et cetera.

CRENNAN J:   There is no need to keep reading it.  I understand what your argument is.

HAYNE J:   Now, as to appeals as of right and preserving the subject matter, it would be necessary to consider the application of Wilson v Church (No 2) (1879) 12 Ch Div where, at least a view of the authority is that a court should, absent special circumstances, such, for example, if an appeal appears not to be bona fide, make such order for staying proceedings under a judgment appealed from, here extend time, as would prevent the appeal if successful from being nugatory.  See the further discussion of Wilson v Church in Erinford Properties v Cheshire County Council [1974] Ch Div 261, the decision of Justice Megarry about granting interlocutory injunction pending appeal where the primary judge refuses injunction simply to preserve the subject matter of the appeal.

MR SELIMI:   Yes, indeed, your Honour.  That policy is quite clearly upheld by President Maxwell and Justice Neave in this case.

HAYNE J:   It would mean that, absent application to preserve the subject matter of the appeal and absent success in that application by obtaining an order extending time, once time has gone, there is an engagement of 459F(1).  That is the knife in the napkin that you need to deal with.

MR SELIMI:   My submission in relation to that, your Honour, is that 459F(1) does not in any way form some obstacle to the appellant per se, because 459F(1) is simply a general provision which in turn depends upon the definition of the period for compliance in subsection (2) of that provision.

HAYNE J:   You have made your submissions about that and I think I understand them.

MR SELIMI:   If I may address Justice Chernov’s reasons briefly, Justice Chernov, at page 326 of the authorised report at paragraph [92], dealt very briefly with the application of section 70 of the Act.  In my submission, it is obvious that section 70 really lies at the heart of this entire appeal – that being whether the temporal operation of section 70 can or cannot be attracted.  In paragraph [92] his Honour very briefly deals with section 70 by saying:

I also think that neither ss 70 nor 1322(4)(d) enables the court to do so ‑

that is to extend time after it has expired.  His Honour simply says, with great respect:

I say that essentially for the reasons that were given by Gummow J in David Grant for concluding that the provisions do not apply to permit an extension of time that is prescribed by s 459G(2).

That is the extent of his Honour’s reference to section 70.  In my respectful submission, it is quite obvious from the footnote which his Honour gives - footnote 121 – his Honour is there referring to the reasons given by Justice Gummow at pages 275 to 278 of David Grant. Most of that discussion by Justice Gummow – in fact all of it – dealt with the construction of section 459G(2). More particularly, as I have already indicated to your Honours, what Justice Chernov has failed to refer to, with great respect, is the concluding paragraph of Justice Gummow’s judgment at page 278 which says in respect of section 70:

the Law does not confer a power to extend the period within which an application may be made under s 459G.

Once one realises – or accepts – as indeed four members of the Court have in the court below, that section 459F(2)(a)(i) does in fact create a power to extend the period for compliance even on multiple occasions, the reliance upon David Grant is completely inapplicable.  In my submission, if one is true to the commandment that the words of the statute govern, then one must not ignore section 70.  The temporal operation of section 70 is to give life to section 459F(2)(a)(i) and to enable, consistent with fundamental policy purposes, a corporation to exercise a right of appeal which otherwise would be rendered nugatory.

KIRBY J:   Why, on your theory, did the Court in Grant hold that section 70 did not have that operation in 459G?

MR SELIMI:   Expressly because section 459G did not contain a power to extend the period within which an application may be made under section 459G.

GLEESON CJ:   I thought it went further.  I thought in subsection (2) he had denied the existence of any such possibility.  The words “may only”.

MR SELIMI:   Yes, your Honour is perfectly correct.  Yes, for those reasons.  Now, what I would refer to your Honours in relation to Justice Chernov – I have dealt with the relevant sections of his Honour’s judgment in my written submissions.  However, paragraphs [89] and [90] quite clearly expose the fallacy of his Honour’s assumptions.  His Honour states at paragraph 89 of his Honour’s judgment:

It is apparent that a recurrent motivation for the changes recommended by the Harmer report in respect of statutory demands was the confinement to the prescribed times of any disputation concerning the validity of the demand. 

Now, if by that his Honour is meaning the confined prescribed time of 21 days within which an application may be brought, then that is perfectly correct.  But the words, “disputation concerning the validity”, are much broader than what indeed the explanatory memoranda refer to.  Likewise, paragraph [90] of his Honour’s judgment, his Honour says, after referring to David Grant:

Thus, the legislation specifies, in quantitative terms, the limited period within which the validity of statutory demands can be challenged in court in the first instance, and for the disposition by the court of a winding-up application. 

There quite clearly is a limited period within which it may be challenged, and there are self-executing time limits for taking steps to set aside the statutory demand.  However, there are no specific unalterable time limits, as it were, in relation to section 459F of the Act.

What I would emphasise finally in relation to this point is that even in the case of David Grant the principal submission that was accepted unanimously by the court in David Grant was the submission made by a Mr Archibald, QC at page 267 that:

The aim and effect of Pt 5.4 of the Law is that once a demand is made, there is a specified and immutable outer limit of time for raising any dispute as to the debt upon which reliance is placed. 

That quite obviously was a correct submission.  There was a specified and immutable outer time limit, but the High Court in David Grant was not called upon to consider the proper construction of section 459F.  Indeed, on the contrary.  Indeed, quite interestingly even the respondent’s counsel in David Grant made reference at page 268 of his argument:

As the legislation has specific provisions concerning the extension of time (eg ss 459F(2)(a)(i) and 459R(2)), the omission of such a provision in connection with s 459G is a clear indication that the twenty‑one day period is deliberately rendered immutable.

There is no such similar immutability in connection with 459F(2)(a)(i) and, in my submission, it has been completely erroneous to misapply David Grant in the course of the last 10 years.

GLEESON CJ:   Mr Selimi, I have just been looking at that Federal Court case of Vista Commercial Construction (1997) 79 FCR 288. Was that on a slightly different point, that is to say, whether the power to extend time to the extent to which it exists depends upon the existence of a concurrent challenge under 459G?

MR SELIMI:   That is correct, your Honour, it did.

GLEESON CJ:   Did Justices Burchett, Hill and Emmett express an opinion bearing on the question with which we are concerned?

MR SELIMI:   No, your Honour.

GLEESON CJ:   Thank you.  Is there Federal Court authority on the question with which we are concerned, that is, the application of section 70 to section 459F?

MR SELIMI:   There is Federal Court authority and, indeed ‑ ‑ ‑

GLEESON CJ:   Is that Justice Ryan?

MR SELIMI:   Justice Jenkinson is the first case, Livestock Traders.

GLEESON CJ:   And Justice Ryan, but has the Full Court of the Federal Court considered this?

MR SELIMI:   Not specifically, no, and, indeed, President Maxwell and Justice Neave and, indeed, Justice Ashley and Justice Nettle have all acknowledged that there has been no decision of the Full Federal Court dealing with the proper interpretation in terms of its facts, in terms of ratio decidendi, there is no decision of the Full Federal Court on point.

GLEESON CJ:   How does that other issue with which Vista was concerned, that is to say, whether you need, as it were, a base in 459G before you can make an order under 459F, affect the present case?  Was there in the present case at all material times a challenge under 459G?

MR SELIMI:   There was, your Honour, at all material times there certainly was.

KIRBY J:   Did Justice Ryan follow Justice Jenkinson?

MR SELIMI:   Yes, your Honour.

KIRBY J:   Or did he say, as Justice Chernov did, that that is the correct construction of the policy and language of the Act?

MR SELIMI:   As I recall, your Honour, Justice Ryan followed Justice Jenkinson.

KIRBY J:   What is your attack on Justice Jenkinson’s reasons?  Is there anything additional to be said?  Do not forget Justice Nettle said specifically “But whatever I think of this, this has been around for 10 years.  Parliament has not changed it and if it is to be altered it should be altered by Parliament or by this Court”.  It is a long time for a ruling to be around and for Parliament not to have changed it in an Act that is quite frequently amended and it is not a tiny little Act.  It is an Act with a lot of detail in it.

MR SELIMI:   Yes, your Honour, in terms of Justice Nettle’s approach to the matter, it is quite important to note that Justice Nettle did not subscribe to the views in Livestock Traders and, in fact, at paragraphs [119] through to [121] his Honour, in fact, entirely rejected the reasoning in Livestock Traders.

KIRBY J:   Justice Jenkinson was an experienced judge.  What was the line of his reasoning?  Is it anything different from what we have already seen, or not?

MR SELIMI:   The essence of Justice Jenkinson’s reasoning was summarised and set out by President Maxwell at paragraph [41] of President Maxwell’s judgment.  Indeed, Justice Chernov essentially adopted the reasoning of Justice Jenkinson in Livestock Traders in terms of this concept of unalterability of time.  Paragraph [41] of President Maxwell’s judgment which appears at page 311 of the authorised report sets out the relevant provisions of Justice Jenkinson’s judgment and his Honour President Maxwell then says at paragraph [42], which I respectfully adopt:

With great respect to his Honour, we consider that both the reasoning and the conclusion are erroneous.  The analysis overlooks the critical distinction between ss 459G and 459F(2)(a)(i) to which we have referred, the former containing no power to extend time, the latter containing an express power to do so.  It was simply not correct to posit – as his Honour did – that ss 459F and 459C(2)(a) “premise unalterability of the time as at which a company is to be taken to have failed to comply with a statutory demand once the period for compliance has ended at a time when the demand is still in effect”.  When s 459F(2)(a)(i) is read with s 70 – as it must be – it can be seen that the Act’s premise is the alterability of that time.

Likewise, Justice Nettle dealt with that point.

So the arguments that we advance based on the provisions of Part 5.4 of the Corporations Act could not apply to the Bankruptcy Act.  It is a different code.  Just to give an example, I have emphasised that section 459C operates by reason of a past fact, not a failure to comply, that is, a non-compliance, but the fact that there has been a failure to comply at an earlier time.  That can be contrasted, for example, with section 40(1)(g), the operative provision in the Bankruptcy Act which…..an act of bankruptcy occurs if the debtor does not comply with the requirements of the notice.  So that if the time within which compliance can occur is extended, then there could be compliance.  It is quite a different thing to see whether there could prospectively be compliance.

The question on the construction of these provisions favoured by Justices Deane and Ellicott could operate and section 459C which asks a question, has within a previous period there been a failure to comply as defined, which requires addressing the specific language of section 459F in that context.  They are our submissions on the construction of sections 459F and 459C.

I then move to address the order that the appellant seeks in the notice of appeal.  I am sorry, I have not dealt with one thing, which was your Honour Justice Gleeson’s question about whether there was any consideration of the construction issue in any decision of the Full Federal Court.  There has been, although not in the context of a ratio, but there have been obiter observations in Vista Commercial v Commissioner of Taxation (1997) 79 FCR 288. At page 296G – in fact, at the paragraph commencing halfway between points F and G the Court noted:

As noted earlier, there have been a number of judgments of single judges of this court which have considered generally the question of extending time for compliance after the hearing of the application to set aside has concluded.

There is reference to Livestock and the decision of Justice Jenkinson.  Then the observation is made in the last two lines of the page:

That there could be no utility in extending the time for compliance with a demand, once the time for compliance had passed, and no jurisdiction to do so would seem self‑evident.

That was that Court’s observation.  In Equuscorp Pty Ltd v Perpetual Trustees WA Limited 25 ACSR 675, the court, without really considering the arguments either way, observed at line 43:

Provided an application for an extension is brought before the expiry of the period fixed for compliance, that period can be further extended even if the s459G application has been determined -

A number of the single judge decisions and the High Court decision in David Grant are then cited, but there is no consideration of the arguments in that case.

KIRBY J:   Will you give me the citation of that again.

MR COLLINS: It is 25 ACSR 675 at 701, commencing at line 43. What can be said is that the decisions in the Court of Appeal go through the previous authority in a comprehensive way.

KIRBY J:   You only carried one.

MR COLLINS:   We only carried one there.

KIRBY J:   On the merit.

MR COLLINS:   No judge who considered it had formed a view other than the same view as Justice Jenkinson until that time.  Justice Kenny had not simply adopted the reasoning that Justice Jenkinson had considered it separately, as had Justice Ryan.  We have referred to the relevant passages in our written submission and they are also referred to in the Court of Appeal judgment.  We accept that ultimately they are arguments and reasons that inform the court as to what the proper construction is, rather than determining it, unless the matter was so finely balanced that the court said, “It’s so finely balanced, we can see no reason to depart from previous authority”.  But there would have to be, it is accepted, a very fine balance indeed once we are in this Court.  I wish to move on to the second question.  The question does arise because of the terms ‑ ‑ ‑

KIRBY J:   Is there any discussion in any of the Company Law Reviews about this problem?  One would have thought that this is the type of matter that would excite some young academics.

MR COLLINS:   Not that we have discovered.

KIRBY J:   Assume ones comes to a point where there are arguments both ways, as the very learned judges who have considered it have come to different views, what works best in the company law situation?  Is it to reserve residual powers to allow individual justice, or is it to have a strong rule in defence of a high public policy of corporate solvency?

MR COLLINS:   The legislature formed a clear view about that, it is submitted, which is clear from the provisions in the Code – for example section 459G.

KIRBY J:   But is a “clear view” differentially expressed?

MR COLLINS:   With respect, no.  A consistent legislative intention operating consistently through the regime - you have the statutory regime and once a time for compliance has been reached with an extant notice and it is not complied with, that is it – the statutory presumption.

KIRBY J:   Are there any articles on Justice Jenkinson’s original decision?

MR COLLINS:   Not that I am aware of ‑ ‑ ‑

KIRBY J:   What is happening to the young academics nowadays?

MR COLLINS:   There has not been a controversy about it, your Honour.  Can I take the Court to the notice of appeal which is at page 125 of the appeal book and under the orders sought at page 126, the third order sought ‑ ‑ ‑

KIRBY J:   You do not have a notice of contention on, have you?

MR COLLINS:   No, I have not.

KIRBY J:   You have not sought to get us to have a plunge into Justice Ashley’s consideration of the merits and say all of this is a waste of time, in this case it is entirely futile and ‑ ‑ ‑

MR COLLINS:   We do.

KIRBY J:   You do?  How can you do that without a notice of contention?

MR COLLINS:   Because it arises on the orders sought by the appellant, with respect, and the notice of contention is not required, because we do not say the Court of Appeal was required to determine that question.

HAYNE J:   But do you seek to uphold the orders made below on a ground other than ‑ ‑ ‑

MR COLLINS:   We do, but we do not say that the court erroneously failed to find it.  The Court of Appeal was not asked by our learned friends to make the order that our learned friend asked this Court to make.  In the Court of Appeal our learned friend asked for the matter to be sent back, and so the question of whether or not there was any substance in the appeal or whether it was hopeless arose on the question of whether there was substantial injustice on the question of whether leave to appeal should be granted.  So it arose in that context and was fully argued as to whether there was any merit in the Court of Appeal but in that context.

Now, we do not say the court erroneously failed to decide it, so the operation of the rule relating to notice of contentions does not rely and even if it did, it is procedural and the justice of this case, it is submitted, does require the question to be determined if the Court can do so without improper inconvenience to the Court and consumption of its time.  We would accept if it is a matter that there are weighty arguments either side, the Court would send back, but ‑ ‑ ‑

KIRBY J:   Is that not the correct relationship between the High Court and the intermediate courts on a matter of this kind where for years there has been a line of authority and then suddenly it is questioned and it involves a consideration of detailed facts and it has not yet been done except by Justice Ashley and Justice Nettle I think agreeing with Justice Ashley.

MR COLLINS:   He did not agree with him on that point.  He did not address it.  The only member of the Court of Appeal who addressed whether there were any prospects of the appeal succeeding was Justice Ashley, but it is only being considered by two judicial officers.  Master Efthim said there is no genuine dispute ‑ ‑ ‑

KIRBY J:   But it was not by the corporate decision of the Court of Appeal because of the different streams that they went in.

MR COLLINS:   No, that is true.  It has not been determined.

KIRBY J:   No.

MR COLLINS:   But this Court is in a position to determine it, just as Justice Ashley said the Court of Appeal was.  All the relevant material is there.  It is not as though you have finally determined the matter of the debt or the validity of the statutory demand.  As Justice Hayne observed in Mibor, it does not require and warrant lengthy consideration.  You have the advantage that there are detailed consideration of what the actual material was and why the contentions of the appellant that there was an arguable appeal, it was not a finely balanced thing.  I will just take you to some of Justice of Appeal Ashley’s conclusions at appeal book 107, paragraph 135:

Aussie was only deprived of the opportunity of advancing a hopeless contention that there was a genuine dispute about the existence or amount of the debts the subject of the demand; or that it had a genuine offsetting claim.  To deprive Aussie of that opportunity would work no injustice, still less substantial injustice.

136     This Court is equipped and is able to reach the conclusion which I have just expressed.

KIRBY J:   But if it is hopeless, why would this Court grant special leave, and if that is the line this Court goes down, that is a reason for revoking special leave.  Instead of giving a lot of obiter on – what is that?

MR COLLINS:   With respect, no.  Special leave was granted notwithstanding those observations and without examining whether the application for an extension of time and whether the application ‑ ‑ ‑

KIRBY J:   It was granted to let this Court resolve a matter on which the Court of Appeal had divided and in respect of which there was a decade of fairly settled authority.

MR COLLINS:   Of course, that was the special leave question that attracted this Court’s attention.

KIRBY J:   I must admit I am affected by the fact that Justice Nettle and Justice Ashley ultimately decided the case on the basis of the settled authority and that it should be left to this Court to resolve it.  On that footing, armed with the decision of the President and Justice Neave, the proper course in the absence of a notice of contention seems to be for us to resolve the point of principle then send it back to the Victorian courts.  That is respectful of their right to decide matters of substance which have not yet been decided.

GLEESON CJ:   Are you not embarking on a contention that the judgment ought to be upheld on the ground that the court below has failed to decide some matter of fact?

MR COLLINS:   With respect, it has erroneously failed to decide.

GLEESON CJ:   Yes, it has failed to decide a matter of fact.

MR COLLINS:   But there was no error in failing to do so in the Court of Appeal.

HAYNE J:   You are injecting a word into the rule, Mr Collins, which is not there – “has erroneously decided, or has failed to decide”.

GLEESON CJ:   “[H]as erroneously decided” comma, I think, “or has failed to decide” comma.

HAYNE J:   Yes.  You are sliding two thoughts together, I think.  The rule is 42.08.5:

has erroneously decided, or has failed to decide, -

You are at least alleging there has been a failure to decide, are you not?

MR COLLINS:   But they did not need to.  It was not before them, and the question here is an appeal seeking an order, amongst other things, that the extension of time be granted.  That is the application.  The material is all before the Court.  If our learned friend – we have a statutory demand that is dated March 2006.  There could be no criticism ‑ ‑ ‑

GLEESON CJ:   We will not deal with this argument in the absence – there being no notice of contention, we do not think that this argument arises for our decision.

MR COLLINS:   As the Court pleases.  That only leaves for me to address the contention that even if our contention is accepted that there is no power to extend time, that there would still be utility in considering the appeal from the decision refusing to set aside the statutory demand and we submit there would not be, for the reasons advanced, that is, that you could not disturb the presumption of insolvency and the appeal would therefore have no utility.  That conclusion is entirely consistent, whereas the appellant’s contention is entirely inconsistent with the decision of the Victorian Court of Appeal in Buckland at the conclusion of paragraph 9 that I have taken the Court to, and would mean that effectively, contrary to the decision in Buckland as well, an appeal effectively extended the time even though that was contrary to the statutory provision.

Thirdly, it is inconsistent with the prospective operation of section 459K which is if an order is set aside it only operates while the order setting aside under section 459H or 459J operates, so the statutory demand would still have had effect until that time.

The decisions such as Wilson v Church and Erinford cannot give the court power to undo what arises by operation of the statute because it does not arise by reason of any error of the court - the statutory presumption - it arises by the operation of the Act.  Unless there are any other matters that the Court would wish me to address, they are our submissions.

GLEESON CJ:   Thank you, Mr Collins.  Yes, Mr Selimi.

MR SELIMI:   Just very briefly in reply, your Honours.  My learned friend submits that section 70 does not have effect once the time for compliance has expired.  In my submission, such a submission is entirely inconsistent with the plain meaning and effect of section 70 itself.  The time for compliance may be extended even after the expiry of a previous period of time and that is clear from the very definition of the word “extend” which specifically incorporates section 70 within the definition section.

Secondly, your Honours, in my submission, my learned friend referred somewhat selectively to the decision of this Court in David Grant, in particular my learned friend referred to page 278, the second paragraph, but omitted reference to the second part of the second paragraph – this is at page 278 where their Honours – in that case his Honour Justice Gummow - dealt with the text of section 459F. But what Justice Gummow was mindful to note after setting out the effect of section 459F was:

On the other hand, if an order has been sought setting aside the demand, the period may be a longer one, as detailed in sub-pars (i) and (ii) of par (a).  However, this will only be so if, in the terms of par (a), the company itself “applies in accordance with section 459G” -

which, of course, is precisely what the appellant did.  Of course, secondly, your Honours, it is quite clear from his Honour’s judgment from page 277, it is quite clear, in my respectful submission, that it was germane to the High Court’s decision in David Grant that the statutory scheme within Part 5.4 contained its own powers and procedures for the court to extend time thereby introducing a degree of flexibility to mitigate hardship or unfairness which may otherwise result from a strict application of section 459G, and in that regard I rely upon the passage at page 277 where Justice Gummow said in the second‑last paragraph:

Further, it is significant that the scheme established by the new Pt 5.4 itself contains specific provisions conferring upon the court an express power to extend time.  First, the court may make an order extending the period for compliance with the statutory demand.  If the company applies “in accordance with section 459G” to set aside the demand, then an order extending the time for compliance may be made.  The order may be made either on the hearing of the application under s 459G or on an application by the company under par (a) of s 459F(2).  Such an extension may itself be extended on further application (par (a)) -

which is precisely what my client has done, with great respect.

Finally, your Honours, if I may refer, or perhaps penultimately, if I may refer to the judgment of President Maxwell and Justice Neave where their Honours dealt with this concept of undoing of consequences and unalterability, at paragraphs [53] and [54] at page 314 of the authorised report their Honours said:

The construction which we consider must be given to para (a)(i) and s 70 does mean that the consequence prescribed by s 459F(1), having once attached, may subsequently be undone, because of an exercise of the power to extend the time for compliance.  The present case can be used to illustrate this point.  The time for compliance, as extended by the master, expired on 4 July.  At that point, the effect of s 459F(1) was that the company was taken to have failed to comply with the statutory demand.  If, subsequently, in aid of the hearing of the appeal, the judge had exercised the power under para (a)(i) to extend the time for compliance, that consequence would have been undone.  This follows from the words “the last such order” in para (a)(i).  The putative order made by the judge would have been “the last such order” and the date fixed by that order would have become the relevant date for the purposes of s 459F(1).

Finally, their Honours concluded at paragraph [54]:

That this “undoing” may occur is simply the consequence of the operation which must be given to para (a)(i) when read with s 70.  It is no function of this court to decide whether the “undoing” of the s 459F(1) consequence is a good or a bad thing, when parliament has enacted provisions which, unambiguously, enable that to occur.  Were it necessary to decide, however, we would have thought that the “undoing” of the consequence was entirely unobjectionable, given that the putative extension of time enables the company to pursue its ordinary appeal rights in respect of its application to set aside the statutory demand.

Finally, your Honours, in relation to this question of Buckland, Buckland, of course, dealt with the proper construction of section 459F(2)(a)(ii) rather than (i), and it was in that context that their Honours concluded, in particular President Maxwell and Justice Neave, at paragraph [55]:

In Buckland, by contrast, the court was considering two competing interpretations of the phrase “finally determined”, in (a)(ii), one narrower and one broader.  The court preferred the narrower interpretation, so as to avoid the “undoing” of the s 459F(1) consequence.  No such question arises in this case.

So their Honours did not need to address the question of whether Buckland had been correctly decided.  However, my learned friend submitted to your Honours that Buckland was not challenged. In fact, that is not correct. The grounds 5 and 6 of the notice of appeal to the Court of Appeal, which is at page 49 of the appeal book, directly challenged Buckland, but their Honours felt no need to reverse Buckland or to consider its correctness because it dealt with an entirely different subsection.

GLEESON CJ:   Thank you, Mr Selimi.

MR SELIMI:   If it please, your Honours.

GLEESON CJ:   We will reserve our decision in this matter and we will adjourn until 10 o’clock tomorrow.

AT 3.32 PM THE MATTER WAS ADJOURNED