Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd
[2007] VSCA 121
•14 June 2007
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No 5534 of 2006
| AUSSIE VIC PLANT HIRE PTY LTD |
| v |
| ESANDA FINANCE CORPORATION LIMITED |
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JUDGES: | MAXWELL P, CHERNOV, NETTLE, ASHLEY AND NEAVE JJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 2 February 2007 | |
DATE OF JUDGMENT: | 14 June 2007 | |
MEDIUM NEUTRAL CITATION: | [2007] VSCA 121 | 2nd Revision – 19 June 2007 |
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CORPORATIONS – Winding-up – Insolvency – Statutory demand – Application to set aside statutory demand refused by Master – Appeal to Judge from Master’s decision - Time for compliance with statutory demand extended by Master but expired before hearing of appeal from Master’s decision – Whether power to extend time may be exercised after expiry of time for compliance – Corporations Act 2001 ss 70, 459F, 459G.
PRECEDENTS – National legislation – Corporations Act 2001 – Decisions of other courts at first instance – Dictum of another intermediate court of appeal – Whether decisions should be followed.
PRACTICE AND PROCEDURE – Leave to appeal – Whether order dismissing appeal from refusal to set aside statutory demand an “order in an interlocutory application” – Supreme Court Act 1986 s 17A(4)(b).
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J M Selimi | Starnet Legal |
| For the Respondent | Dr C L Pannam QC with Mr N A Frenkel | Gadens Lawyers |
MAXWELL P,
NEAVE JA:
Esanda Finance Corporation Limited (“Esanda”) is a creditor of Aussie Vic Plant Hire Pty Ltd (“Aussie”). Esanda served a statutory demand on Aussie, as it was entitled to do under s 459E of the Corporations Act 2001. Aussie applied under s 459G to set aside the demand. A Master of the Court dismissed the application on its merits, but extended the time for compliance with the statutory demand to 4 July 2006.
Aussie exercised its right of appeal to a judge of the Trial Division. An appeal from a decision of a Master is a hearing de novo of the application to the Master.[1] Ordinarily, therefore, the judge would have re-heard Aussie’s application on its merits. In the event, his Honour upheld a preliminary objection by Esanda and dismissed the appeal as incompetent.
[1]RSC 77.05(7).
The preliminary objection, and his Honour’s decision, turned on the fact that the time for compliance with the statutory demand (as earlier extended by the Master) had expired. The notice of appeal from the Master had been filed before time expired on 4 July, but the matter did not come on for hearing before his Honour until 28 July. Aussie’s appeal was accompanied by an application for an extension of the time for compliance. His Honour dismissed that application and the appeal itself, holding that he was bound by the decision of this Court in Buckland Products Pty Ltd v Deputy Commissioner of Taxation (“Buckland”) [2] to do so.
[2][2003] VSCA 85.
Aussie filed a notice of appeal to this Court. On 5 October 2006[3], we granted Aussie’s application for an order restraining Esanda from taking any further step in the winding-up proceeding pending the hearing and determination of the appeal. As Counsel for Esanda pointed out that the authorities were unclear as to whether Aussie required leave to appeal, we referred that question for consideration on the hearing of the appeal. Because counsel for Aussie foreshadowed a challenge to the decision in Buckland, a bench of five was convened to hear the appeal. Because the question is one of general importance, the appeal was brought on for hearing as a matter of priority.
[3]The application was heard by Maxwell P and Neave JA.
Leave to appeal
In our opinion, leave to appeal is required as the order sought to be appealed was an “order in an interlocutory application”, within the meaning of s 17A(4)(b) of the Supreme Court Act 1986.
As this Court restated in Dodoro v Knighting:[4]
“The general rule is that an order is interlocutory unless, in the words of Windeyer J in Hall v Nominal Defendant,[5] it ‘finally determine[s] the rights of the parties in a principal cause pending between them’. Whether it does so is determined by the legal, not the practical, effect of the order.”[6]
[4](2004) 10 VR 277, 281 (Callaway JA).
[5](1966) 117 CLR 423, 443.
[6]The Court here referred to Licul v Corney (1976) 180 CLR 213; Carr v Finance Corporation of Australia Limited (No 1) (1981) 147 CLR 246; Little v State of Victoria [1998] 4 VR 596, 597-8; Bienstein v Bienstein (2003) 30 Fam LR 488, 493; Re Luck (2003) 78 ALJR 177, 178.
In Mibor Investments Pty Ltd v Commonwealth Bank of Australia (“Mibor”)[7], Hayne J held that an application to set aside a statutory demand was an interlocutory proceeding. In that case the nature of the proceeding was relevant not to the question of leave to appeal but to the admissibility of hearsay evidence under r 43.03(2). The test is, however, very similar (“whether the application will decide the rights of parties”), and what his Honour said is equally applicable to the present question:
“[T]he present proceeding [under s 459G] determines only whether a demand may stand or not. If the demand stands, the consequences are serious but there is no final determination of any right. All that follows from the demand not being set aside is that the company will have a further perhaps short period within which it must meet the demand or face a conclusion that it is to be presumed insolvent (unless it proves the contrary). No order can be made under s 459G which finally determines the rights of parties.”[8]
[7][1994] 2 VR 290.
[8]Ibid 296-7.
We respectfully adopt his Honour’s conclusion and the reasons for it. The same conclusion was arrived at by the Full Federal Court in Vista Commercial Construction Pty Ltd v Deputy Commissioner of Taxation (“Vista”),[9] on the cognate question of whether an order refusing an extension of time for compliance with a statutory demand was interlocutory or final. The Court said the order was clearly interlocutory “in the sense that it did not decide finally the rights of the parties to any issue”.[10]
[9](1997) 79 FCR 288.
[10]Ibid 286.
Counsel for Esanda drew attention to a number of interstate decisions which were said to be inconsistent with this conclusion.[11] The leading decision is that of the New South Wales Court of Appeal in A-Pak Plastics Pty Ltd v Merhone Pty Ltd (“A-Pak Plastics”).[12] The Court held that the only proceeding on foot was the application under s 459G and that the order setting aside the statutory demand “finally determined the rights of the claimant concerning the statutory demand”.[13] The West Australian Full Court in Asian Century Holdings Inc v Fleuris Pty Ltd[14] followed A-Pak Plastics, while conceding that there was “some attraction in the contrary view“ as expressed by Hayne J in Mibor.[15]
[11]A-Pak Plastics Pty Ltd v Merlone Pty Ltd (1995) 17 ACSR 176, 180; Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59, [7], [57]; Keylink Physical Care Pty Ltd v Ergoline (Aust) Pty Ltd [1999] SASC 483, [20]-[27]; Gabstone Pty Ltd v Gumina Investments Pty Ltd [2000] WASC 149, [17]; Infact Consulting Pty Ltd v Kyle House Pty Ltd [2005] NSWSC 1092.
[12](1995) 17 ACSR 176.
[13]A-Pak Plastics (1995) 17 ACSR 176, 180 (Sheller JA); see also AMP General Insurance Ltd v VWA [2006] VSCA 236 (Maxwell P and Neave JA).
[14][2000] WASCA 59, [7].
[15]Note that this also concerned an order setting aside a statutory demand. See also Terranora Group Management Pty Ltd v Terranora Lakes Country Club Ltd (in liq) (Unreported, Supreme Court of New South Wales, Santow J, 1 December 1997) [5].
In our view the decision in A-Pak Plastics does not determine the issue before us. As Nettle JA says, it may be accepted that an order setting aside the statutory demand is final, because it means that the creditor can no longer rely on the demand to have the company wound up on the ground of its insolvency.[16]
[16]That is, the demand could not be “used to establish a presumption of insolvency” under s 459C(2) while the order is in force. The decision in A-Pak Plastics was reversed by legislation in NSW – see Supreme Court Act 1970 (NSW) s 101(2).
The issue in the present case is whether an order dismissing the application to set aside a statutory demand is a final order. As Dodoro emphasised, the question whether an order is final or interlocutory depends on its legal rather than its practical effect.[17] As Hayne J said in Mibor, if the demand stands, the consequences are serious but there is no final determination of any right.[18]
[17]Licul v Corney (1976) 180 CLR 213, 219-220 (Barwick CJ), 225 (Gibbs J); Debis Financial Services (Aust) Pty Ltd v Allied Bellambi Collieries Pty Ltd (2000) 35 ACSR 371.
[18]Mibor [1994] 2 VR 290, 296–297.
As Nettle JA also points out, the fact that an order setting aside a statutory demand is final (as in A-Pak Plastics) does not mean that an order dismissing an application to set aside a statutory demand must be characterised in the same way. There is ample authority for the proposition that an application may give rise to a final order if it is decided in one way, even though if it were decided the other way the order would be interlocutory, because it would not have finally determined the rights of the parties.[19]
[19]See for example Hall v Nominal Defendant (1966) 117 CLR 423, 443 and other cases cited in LexisNexis Butterworths, Civil ProcedureVictoria, Vol 1 (at 5688.101), I64.01.440.
If (contrary to our view) the decision in A-Pak Plastics were to be viewed as inconsistent with the view of Hayne J in Mibor, we consider that the reasoning in Mibor is to be preferred. That reasonable minds can differ on the question whether an order is interlocutory or final only underlines the continuing uncertainty which attends this distinction. As Lord Denning MR said decades ago:
“This question of ‘final’ or ‘interlocutory’ is so uncertain that the only thing for practitioners to do is to look up the practice books and see what has been decided on the point.”[20]
[20]Salter Rex & Co v Ghosh [1971] 2 QB 597, 601.
That the uncertainty persists in 2007 – and this Court has seen several recent instances of it – suggests that it may be time for the legislature to consider adopting a different criterion for deciding whether leave to appeal is required in a given case.
The statutory scheme
The relevant provisions fall within Part 5.4 of the Corporations Act 2001, which is headed “Winding Up in Insolvency”. As Gummow J explained in David Grant & Co Pty Ltd v Westpac Banking Corporation (“David Grant”) [21], the provisions of Part 5.4:
“constitute a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly.”[22]
[21]David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265.
[22]Ibid 270.
Under s 459E a creditor may serve a statutory demand on a company. Failure by the company to comply with the demand within the period for compliance may found an application that the company be wound up in insolvency. If, during or after the three months ending on the day when the application is made, the company fails to comply with the demand, the Court must presume that the company is insolvent.[23]
[23]Section 459C(2)(a).
The period for compliance is 21 days after the demand is served: s 459F(2)(b). If, however, the company applies in accordance with s 459G for an order setting aside the demand, the applicable period is that specified in s 459(2)(a) which provides:
“(2)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; or
(ii)otherwise – the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; ...”
Under s 459G(2), the application to set aside a statutory demand “may only be made within 21 days after the demand is ... served”. In David Grant, the High Court unanimously ruled that this 21 day period was not capable of extension. In the view of the Court, the effect of the words “may only” was:
“to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G [to apply to set aside the demand]. An integer or element of the right created by s 459G is its exercise by application made within the time specified.”[24]
[24]David Grant (1995) 184 CLR 265, 277 (Gummow J).
The decision of the Court of Appeal in Buckland
In Buckland, the company had made application, within time, to set aside a statutory demand served on it. As in the present case, the company’s application was dismissed by a Master at first instance. An appeal to the Trial Division was dismissed on the ground that, by the time the appeal came on for hearing, the time for compliance with the demand had expired so that, without examination of the merits, the appeal had to fail.[25] The Court of Appeal upheld the decision of the Trial Division.[26]
[25][2001] VSC 286.
[26][2003] VSCA 85.
No order had been made extending the time for compliance under s 459F(2)(a)(i). (An earlier application for extension had been refused by a single judge). The period for compliance therefore expired on the date fixed by paragraph (a)(ii), that is, seven days—
“after the application under section 459G is finally determined or otherwise disposed of”.
The question which the Court of Appeal had to decide was when the company’s application under s 459G could be said to have been “finally determined”. The Court agreed with the trial Judge that the application had been finally determined when it was dismissed by the Master. The Court rejected the company’s submission that the application under s 459G could not be said to be “finally determined” within the meaning of paragraph (a)(ii) until the appeal from the Master to the judge had been finally determined.
This conclusion was explained by Phillips JA[27] in the following terms:
“...The concept that the determination of the Master is not final so long as it remains amenable to appeal, even an appeal as of right, introduces a significant qualification on what otherwise appears to me to be a fixed and certain regime prescribed by s 459F and s 459G. (As to the latter, see especially David Grant). It would mean that a company, by exercising rights to appeal first to the judge and then from the judge to the Court of Appeal, might delay the characterisation of the Master’s order as a final determination for more than a year and, at the end of the day, what then? If both appeals fail, the Master’s order is then to be seen, at long last, as having been a final determination, but as at what date does that character attach? [Counsel for the company] found it difficult to give an answer that was wholly satisfactory and that is not surprising. For the regime prescribed by s 459F is relatively simple and straightforward and it does not admit of the construction of ‘finally determined’ that [counsel] was urging.
Application under s 459G to set aside the statutory demand was ‘finally determined’ within the meaning of 459F(2)(a)(ii) when the Master’s order was made on 21 June 2001 and the fact that that order was liable to appeal was nothing to the point. If the company was wishing to appeal it could do so, but unless the appeal was heard and determined before the expiry of the period for compliance otherwise fixed, an extension of the time for compliance had to be obtained. Without it, there could be no point in the continued prosecution of the appeal, for, the period of compliance having ended before the appeal was heard and determined, the consequence prescribed by s 459F(1) attached, with all that followed under the statute. There can be no occasion, in my opinion, for adopting a construction of s 459F(2)(a)(ii) that would require that the consequence prescribed by sub-s (1), having once attached, should then be undone because of the exercise of some right of appeal. Once that consequence attached, it remained attached (as indeed Gummow J was disposed to suggest in David Grant, albeit in a slightly different context).” [28]
[27]With whom Chernov and Eames JJA agreed.
[28][2003] VSCA 85, [8]–[9] (emphasis added).
In dismissing Aussie’s appeal in the present case, the Judge said:
“I think I am bound by the decision in Buckland Products to find that this appeal must fail. The point is not whether an extension of time can or should be granted. The point is that the consequence provided for by s 459F(1) has already attached (to use the words of Phillips JA) and no order which I make can or should purport to undo that.”[29]
His Honour went on to say that, even if an extension of time could have been granted consistently with the legislation, the court should not take that course because to do so would be “to alter the substantive rights of parties” and would be “an attempt to render undone something which has already been done”.[30]
[29][2006] VSC 306, [9] (footnotes omitted).
[30]Ibid [10].
The reference in Buckland – adopted by the learned Judge – to “the consequence prescribed by s 459F(1)” was a reference to the company being taken to have failed to comply with the statutory demand. Subsection (1) provides:
“(1)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.”
The decision in Buckland, as applied by the Judge in the present case, was that once the company had been “taken to fail to comply with the demand”, that consequence could not be “undone because of the exercise of some right of appeal”. We will return to this issue in due course.[31]
[31]See [52]-[58] below.
There is a critical difference between this case and Buckland. In Buckland, the Court was concerned with – and only with – the interpretation of paragraph (a)(ii). No question arose under paragraph (a)(i). There had been no extension of the time for compliance.[32] In the present case, we are concerned with – and only with – the interpretation of paragraph (a)(i). No question arises under paragraph (a)(ii).
[32]As noted in [19] above, the company had earlier applied, unsuccessfully, to a single judge for an extension of time. There was no appeal from that decision.
Here, as noted earlier, the Master did exercise the power conferred by paragraph (a)(i) to extend the time for compliance with the demand. Plainly enough, once an order has been made under paragraph (a)(i), the determination of when the time for compliance expires is governed exclusively by paragraph (a)(i). Paragraph (a)(ii) has no application at all. That the paragraphs are mutually exclusive is clear from the use of the word “otherwise” at the commencement of paragraph (a)(ii). This has been accepted since the decision of Jenkinson J in Livestock Traders International Pty Ltd v BUI (“Livestock Traders”).[33]
[33](1996) 22 ACSR 51, 53; followed by Kenny J in G & J Gears Australia Pty Ltd v Brobo Group Pty Ltd [2006] FCA 330, [47].
This critical difference between the present case and Buckland has the consequence that the Court of Appeal in Buckland had no occasion to consider the question which arises here, namely, whether the power to extend time conferred by s 459F(2)(a)(i) ceases to be exercisable if the time for compliance has expired before the application for extension of time is heard and determined.
Aussie contends that the power is exercisable notwithstanding the expiry of the time for compliance (whether or not previously extended). In our opinion, for the reasons which follow, that submission must be upheld.
Although, as will appear, reliance was placed by Esanda on certain considerations adverted to by the court in Buckland, it is unnecessary for the disposition of this appeal to consider the correctness of the decision in Buckland. As the present case raises no question under paragraph (a)(ii), there is no occasion for this court to reconsider Buckland, which was a decision on that paragraph alone.
The power to extend time
As already noted, the power to extend the time for compliance conferred by paragraph (a)(i) is exercisable by the court—
“...on hearing the [company’s] application under section 459G, or on an application by the company under this paragraph ...”
As first pointed out by Jenkinson J in Livestock Traders, and accepted ever since, the phrase “the period specified... in the last such order” in paragraph (a)(i) shows that the power to extend time is exercisable from time to time as occasion requires.[34] The High Court in David Grant noted that an extension effected by an order under paragraph (a)(i) “may itself be extended on further application”.[35] Nor is there any doubt that the power is available to a court exercising an appellate function.[36]
[34]Livestock Traders (1996) 22 ACSR 51, 54; Graywinter Properties Pty Ltd v Dyer (1997) 15 ACLC 302, 306 (Ryan J); G & J Gears Australia Pty Ltd v Brobo Group Pty Ltd [2006] FCA 330, [48]. See also Acts Interpretation Act 1901 (Cth) s 33(1).
[35]David Grant (1995) 184 CLR 265, 277.
[36]Vista (1997) 79 FCR 288. See further [35]-[36] below.
The critical question is whether the power to extend – and further extend – the period for compliance can be exercised after the time for compliance has expired. It has been held, in a series of single judge decisions to which we will refer, that it cannot. For reasons which follow, we respectfully consider that those decisions were wrong and should not be followed.
The question is one of statutory construction, to be resolved by applying orthodox principles of construction. The paramount rule of construction, as the High Court has reaffirmed more than once recently, is that the words of the statute govern.[37] There is no substitute for giving attention to the precise terms in which the relevant provision is expressed.[38]
[37]Weiss v The Queen (2005) 224 CLR 300, [9]; Stingel v Clark (2006) 80 ALJR 1339, [26]-[27] (Gleeson CJ, Callinan, Heydon and Crennan JJ), [43] (Gummow J), [117] (Kirby J); Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 80 ALJR 1509, [81]-[84] (Kirby J) and the cases there cited.
[38]Weiss v The Queen (2005) 224 CLR 300, [31] and the cases there cited. Fleming v The Queen (1998) 197 CLR 250, 256 also referred to.
Put shortly, the proposition that the power to extend the time for compliance is not exercisable once the period for compliance has expired (which we will for convenience call “the expiry rule”) is incompatible with the words of the statute. The expiry rule:
(a) requires the court to read into paragraph (a)(i) words of limitation which Parliament did not use;
(b) ignores s 70 of the Act, which when read with paragraph (a)(i) produces the opposite result; and
(c) misapplies the High Court’s decision in David Grant.
We deal with these points in turn.
Impermissible to read in words
First, the power conferred by paragraph (a)(i) is not expressed to be subject to any limitation as to the time of its exercise. To read in words imposing a significant time limit on a power conferred in unqualified terms is to rewrite paragraph (a)(i). To do so would exceed “the proper bounds of statutory interpretation”.[39] As Lord Mersey said in the well-known passage from Thompson v Goold & Co[40] “[i]t is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do”.[41]
[39]Smith v The Queen (1994) 181 CLR 338, 346 (Mason CJ, Dawson, Gaudron and McHugh JJ).
[40][1910] AC 409, 420.
[41]See also BP Refinery Pty Ltd v Hastings Shire Council (1977) 53 ALJR 20, 25; Director-General of Education v Suttling (1987) 162 CLR 427, 433.
As the High Court said in David Grant itself:
“As a general precept, it is inappropriate to read provisions which confer jurisdiction or grant powers to a court by the making of implications or imposition of limitations not found in the express words of the legislative provision.”[42]
More recently, in Mansfield v Director of Public Prosecutions for Western Australia,[43] the High Court approved the following passage from the judgment of Gaudron J in Knight v FP Special Assets Ltd:[44]
“It is contrary to long-established principle and wholly inappropriate that the grant of power to a court (including the conferral of jurisdiction) should be construed as subject to a limitation not appearing in the words of that grant. Save for a qualification which I shall later mention, a grant of power should be construed in accordance with ordinary principles and, thus, the words used should be given their full meaning unless there is something to indicate to the contrary.”
[42]David Grant (1995) 184 CLR 265, 275-276 (Gummow J), citing Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404, 421. See also Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270, 279; Mansfield v Director of Public Prosecutions for Western Australia (2006) 80 ALJR 1366, [10].
[43](2006) 80 ALRJ 1366, [10] (Gleeson CJ, Gummow, Kirby, Hayne and Crennan JJ).
[44](1992) 174 CLR 178, 205.
Not only is there no “clear necessity”, but there are compelling reasons for not reading in a time limit. The implication of such a time limit conflicts with the clear policy of paragraph 459F(2)(a), which is to extend the time for compliance in aid of the company’s application to set aside the statutory demand. As the introductory words to paragraph (a) make clear, it is only when such an application is on foot that the company may apply for an extension of time under paragraph (a)(i). As the Full Federal Court said in Vista[45]:
“[W]here the recipient of a demand bona fide believes there are grounds for setting aside the demand, and in consequence commences proceedings in the court to that end, the time for compliance is automatically extended until, at the earliest, seven days after the application to set aside the demand has been fully determined or dealt with.”[46]
[45](1997) 79 FCR 288.
[46]Ibid 294-295.
The question before the Full Court in Vista was whether an extension of the time for compliance could be granted under (a)(i) even after the company’s application to set aside the demand had been heard and rejected. The Court held that it could:
“[T]here is no reason as a matter of language, or for that matter as a matter of policy, why an application could not be made at a time after the hearing, for example, after an appeal against a decision at first instance on the application to set aside the statutory demand had been decided adversely to an applicant.
In our view there is no reason why there should not be power in an appropriate case to extend the time for compliance after the Court had determined to dismiss an application to set aside a demand, and indeed every reason to construe the section as permitting such a course, provided that it is borne in mind that the purpose behind permitting an extension of time is not as such to permit the creditor to obtain time to pay the demand beyond that initially contemplated in the legislation of 21 days, but in the context that the company has instituted proceedings to set aside the demand on one or other of the grounds in s 459H or s 459J and that this application has in the result terminated adversely to the creditor.”[47]
[47](1997) 79 FCR 288, 295 (emphasis added).
Consistently with this policy, the power to extend time should also be exercisable in aid of any appeal from an adverse decision at first instance on the application to set aside. The decision of the Full Court in Vista established that the power was indeed exercisable in aid of an appeal. The power was there held to be available following a single judge’s dismissal of an appeal from a Registrar, who had refused the company’s application to set aside.[48] But, as the present case demonstrates, the expiry rule – which reads a time limit into paragraph (a)(i) – operates to defeat that policy in a case where the time for compliance expires before the appeal is heard. In that event – so his Honour found – time could not, or should not, be extended and, hence, there was no utility in considering Aussie’s appeal on its merits.
[48]See also A-Pak Plastics Pty Ltd v Merhone Pty Ltd (1995) 17 ACSR 176, 180-1 (Sheller JA); Infact Consulting Pty Ltd v Kyle House Pty Ltd [2005] NSWSC 1092, [2].
The application of s 70
Secondly, and in any event, there is an express provision of the Act which, when applied to paragraph (a)(i), produces precisely the opposite result. Section 70 of the Act provides as follows:
“Where this Act confers power to extend the period for doing an act, an application for the exercise of the power may be made, and the power may be exercised, even if the period, or the period as last extended, as the case requires, has ended.”
Plainly, s 70 is capable of applying to paragraph 459F(2)(a)(i), since the paragraph “confers power to extend the period for doing an act” viz the period for complying with a statutory demand. When s 70 is read with s 459F(2)(a)(i), it follows, as a straightforward matter of statutory construction, that the prior expiry of the period for compliance is no barrier either to:
· the making of an application by the company for the exercise of the power to extend the period; or
· the exercise by the Court of the power to extend, or further extend, the period.
Esanda argues, however, that the application of s 70 to paragraph (a)(i) is excluded as a matter of necessary implication. Reliance is placed on the High Court’s decision in David Grant. It will be recalled that David Grant concerned the time fixed by s 459G(2) for the commencement of an application to set aside the statutory demand. The company sought to rely on s 70 as a source of power for an extension of the 21 day period fixed by that sub-section. The Court rejected that submission. Section 70 could not apply because—
“... the [Corporations Act] does not confer a power to extend the period within which an application may be made under s 459G.”[49]
[49]David Grant (1995) 184 CLR 265, 278.
The vital point of distinction between David Grant and the present case is thus exposed. Whereas s 459G does not confer a power to extend time, paragraph (a)(i) does confer such a power. The existence of that power in (a)(i) attracts the operation of s 70, just as the absence of such a power from s 459G precluded its application to that provision.
Livestock Traders was the first case to lay down the expiry rule. Jenkinson J rejected an argument advanced by the company that s 70 allowed for the exercise of the power to extend time notwithstanding the prior expiry of the period. His Honour said:
“No express ‘specific limitation’ is attached as to the time within which an applicant may make application under s 459F(2)(a)(i) for an extension of the time for compliance. But s 459F(1) and s 459C(2)(a) can in my opinion be seen, in the context which the rest of Pt 5.4 affords, to operate to fix both the time at which a company on which a statutory demand has been served is taken to fail to comply with the demand and the period during which that failure is to have the forensic significance which s 459C ordains. …
Like s 1322, s 70 is a general provision and s 459F is a later and more specific provision with respect to the definition and the extension of a period upon the expiration of which important legal consequences occur in the operation of what is said in the explanatory memorandum concerning the Bill for the 1992 Act to have been a complete code for the resolution of disputes involving statutory demands: see the David Grant case, at CLR 269-70. Section 459F and s 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. If s 70 were to be allowed an operation in respect of the power of extension conferred by s 459F(2)(a)(i) uncertainty, after the end of the period for compliance, as to whether the presumption specified in s 459C(2)(a) was to be available would ensue. That presumption was described by the High Court in the David Grant case as ‘an important element of the scheme of Part 5.4’ (at CLR 278). My conclusion is that s 70 has no such an operation.”[50]
[50](1996) 22 ACSR 51, 54–5 (emphasis added).
With great respect to his Honour, we consider that both the reasoning and the conclusion are erroneous. The analysis overlooks the critical distinction between s 459G and s 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 s 459F and s 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.
It is true, as his Honour pointed out, that s 70 is a general provision and that it pre-dated the enactment of s 459F, a more specific provision dealing with the time for compliance with a statutory demand. But, far from justifying a conclusion that s 459F is therefore to be regarded as unaffected by s 70, those circumstances entail the opposite conclusion. When a specific provision like s 459F(2)(a)(i), conferring a power to extend time, is inserted into an Act which already contains a general provision like s 70 dealing with powers to extend time, Parliament must be taken to understand and intend that the general rule established by s 70 will apply to the specific instance constituted by paragraph (a)(i). This conclusion is inescapable once it is recognised that paragraph (a)(i) confers a power of precisely the kind contemplated by s 70. Had it been Parliament’s intention that s 70 should not apply to paragraph (a)(i), express provision to that effect would have had to be made.
In Graywinter Properties Pty Ltd v Dyer (“Graywinter Properties”)[51], Ryan J came to the same conclusion as Jenkinson J had in Livestock Traders. Having noted that paragraph (a)(i) envisaged more than one order extending time, his Honour went on:
“[T]he scheme of the section requires, I consider, that the second or subsequent order be made during the time extended by the first order. It is not sufficient merely for an application for the further extension to have been made during that time. Once the time for compliance as fixed by the statute or extended by order has expired, the presumption specified in s 459C(2)(a) is immediately available and there is no longer any scope for bringing, reviving or continuing an application to set aside the statutory demand.”[52]
His Honour then set out a passage from David Grant dealing with s 1322(4), which had earlier been cited by Jenkinson J in Livestock Traders.[53] Without further analysis, his Honour then said:
“Accordingly, the time limits which I have spelled out of s 459F are not to be overridden by an exercise of the broad general authority conferred by s 1322(4)(d).”[54]
[51](1997) 15 ACLC 302.
[52]Ibid 306.
[53]David Grant (1995) 184 CLR 265, 275-6; Livestock Traders (1996) 22 ACSR 51, 54.
[54]Graywinter Properties (1997) 15 ACLC 302, 306.
It appears that his Honour’s attention was not drawn to s 70 at all. With great respect, we consider his Honour’s reasoning and conclusion to be incorrect, for the reasons already given. Paragraph 1322(4)(d) had also been relied on – and rejected – in David Grant. That provision confers on the court—
“a broad authority to extend the period for the taking of any step under the [Act] or any step in relation to a corporation.”[55]
[55]David Grant (1995) 184 CLR 265, 275.
In its summons before the judge seeking a further extension of the period for compliance, and again on the appeal, Aussie did rely on s 1322(4)(d). Such reliance is unnecessary in view of the applicability of s 70.
The argument from uncertainty
Esanda relied heavily on considerations of commercial certainty, of the kind referred to by Jenkinson J in Livestock Traders and by this Court in Buckland. Counsel for Esanda submitted that, if the Aussie argument were correct, there would be a continuing state of uncertainty as to when the time for compliance with the statutory demand had come to an end. This, he argued, was directly contrary to the clear intent of Parliament, as expressed in Part 5.4 of the Corporations Act and, more particularly in 459F(2), that there be certainty as to the expiry of the date for compliance with a statutory demand. Counsel referred to the fact that the provisions are based on recommendations in the Harmer Report, which were intended to limit a company’s reliance on technical defects in a statutory demand in order to delay its involuntary winding up on the ground of insolvency.[56]
[56]Australian Law Reform Commission, General Insolvency Inquiry, Report No 45 (1988) Part 4.
To the extent that those recommendations could properly be brought to bear on the question of construction,[57] they do not support this contention. The Harmer Report recommended the adoption of a presumption of insolvency arising from failure to meet a statutory demand and recognised the need to:
“avoid winding up proceedings against a company being dismissed for technical and minor defects when the company is clearly insolvent.”[58]
But the Harmer Report also said that a company should be able to apply to set aside a statutory demand before the time for compliance expired and that, once an application was filed, the time for compliance should be extended for a fixed period or until such later time as the court determined.[59]
[57]As to which, see Stingel v Clark (2006) 80 ALJR 1339; cf General Motors Acceptance Corp Australia v Southbank Traders Pty Ltd [2007] HCA 19, [32].
[58]Australian Law Reform Commission, above n 56, [137].
[59]Ibid [148]–[149].
The fact that a company can apply to set aside the demand within the period for compliance as extended – or further extended – by the court is already productive of some uncertainty as to when the time for compliance will expire. Interpreting s 459F(2)(a)(i) so as to allow the time to be extended after the period for compliance has expired will not add significantly to that uncertainty.
In answer to Aussie’s submission that the expiry rule had the unjust effect in the present case of denying the company its substantive right of appeal, counsel for Esanda drew attention to the recognition by the High Court in David Grant that Part 5.4 might indeed operate harshly. The company had there emphasised:
“...the drastic commercial consequences which may follow the issue of process for winding up and to the inability of a company, which for good reason had been late in filing or serving an application to set aside the statutory demand, to prevent the issue of that winding up process. The damage to the commercial reputation of the company in the meantime might not be answered by the eventual success of the company in defeating the application to wind it up as insolvent.”[60]
The High Court disposed of the argument as follows:
“No doubt, in some circumstances, the new Part 5.4 may appear to operate harshly. But that is a consequence of the legislative scheme which has been adopted to deal with perceived defects in the pre-existing procedure in relation to notices of demand.”[61]
[60]David Grant (1995) 184 CLR 265, 279.
[61]Ibid.
Once again, in our view, the reliance on David Grant is misplaced. That case concerned the stringency of the time limit for making an application to set aside a statutory demand. As the High Court said, the clear policy of s 459G was that those challenges should be brought promptly. The decision in David Grant vindicated that policy. But, as counsel for Esanda properly conceded, the conclusion that s 70 had no application to s 459G was based not on any judicial view about the desirability of such applications being made promptly but, quite simply, on the absence from s 459G of a power to which s 70 could attach. That the consequences of the Court’s having no power to extend the time under s 459G might seem harsh was, as Gummow J pointed out, simply the consequence of the legislative intention as reflected in the unambiguous language of s 459G.
The present case involves different legislative provisions, equally unambiguous, which reflect a different legislative intention. Paragraph (a)(i) contains an express power to extend time, being a power of precisely the kind which engages s 70. Sections 459G and 459F were enacted at the same time. The difference in the statutory language means that Parliament must be taken to have intended that, while the time limit in s 459G was to be unalterable, the time for compliance with the statutory demand would be alterable at any time, once an application to set aside the statutory demand had been initiated within the time prescribed by s 459G.
“The consequence for which s 459F(1) provides”
As noted earlier, this court in Buckland declined to adopt a construction of paragraph (a)(ii):
“that would require that the consequence prescribed by sub-s (1), having once attached, should then be undone because of the exercise of some right of appeal. Once that consequence attached, it remained attached...”[62]
Also noted earlier, it was this notion of the irreversible consequence that led his Honour to dismiss Aussie’s appeal as incompetent.
[62][2003] VSCA 85 [9].
The construction which we consider must be given to paragraph (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 paragraph (a)(i) to extend the time for compliance, that consequence would have been undone. This follows from the words “the last such order” in paragraph (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).
That this “undoing” may occur is simply the consequence of the operation which must be given to paragraph (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.
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.
The efficacy of appeal
Counsel for Aussie put at the forefront of his submissions an argument that, even if the time for compliance had expired and could not be extended, the company could not be denied a hearing of its appeal on the merits or – if the appeal were successful – the fruits of that success. That is, if on appeal the application to set aside the statutory demand succeeded, then the appeal court must be able to undo any consequences which had followed upon the failure of that application at first instance. Counsel for Aussie relied on the principle that a successful appellant is entitled to restitution, that is, to be restored to the position he would have been in had the correct decision been made at first instance.[63]
[63]See Commissioner for Railways (NSW) v Cavanough (1935) 53 CLR 220; Commonwealth of Australia v McCormack (1984) 155 CLR 273, 276-7; A-Pak Plastics (1995) 17 ACSR 176, 180. See generally DM Gordon “Effect of Reversal of Judgment on Acts Done between Pronouncement and Reversal” (1958) 74 LQR 517.
Counsel for Aussie also relied on the decision of the High Court in Guss v Johnstone.[64] In that case, the judge at first instance had rejected the debtor’s argument that he had a counter-claim, set-off or cross-demand, as referred to in s 40(1)(g) of the Bankruptcy Act. The effect of that decision was that an act of bankruptcy had been committed. The relevant question before the High Court was whether, the act of bankruptcy having occurred, there was any utility in an appellate court considering whether the primary judge’s decision was correct. The Court unanimously held that there was utility:
“It is true that there is no statutory grant of power to annul an act of bankruptcy,[65] or to extend the time for compliance with a bankruptcy notice other than in a case where the conditions of s 41(6A) have been satisfied.[66] Suppose, however, that it had been demonstrated to the Full Court that the decision at first instance was based upon an error of law, perhaps involving a misapprehension as to the test to be applied in considering whether the judge was satisfied within the terms of the statute. In such a case, the Full Court may well have set aside the declaration.
We are unable to accept that whenever, in a proceeding under s 40(1)(g) and s 41(7), a judge at first instance has determined that he or she is not satisfied of the matter referred to in s 41(7), and has declined to interfere with the process initiated by a creditor, no appellate reversal of that decision, whether by the Full Court or by this court, can alter the consequences of the decision. In a proper case it would have been within the power of the Full Court to set aside the declaration made by Sundberg J. The consequences for proceedings and events that had occurred in the meantime would vary with the circumstances, but they could include the same consequences as flowed from the order in Streimer v Tamas,[67] where the statutory power to extend time for compliance with a bankruptcy notice, given by s 41(6A), was exercised after an act of bankruptcy had been committed.”[68]
[64](2000) 74 ALJR 884.
[65]King v Henderson [1898] AC 720, 728.
[66]James v Abrahams (1981) 51 FLR 16.
[67](1981) 54 FLR 253.
[68]Guss v Johnstone (2000) 74 ALJR 884, 893-894.
Given that the time for compliance can be extended under s 459F(2)(a)(i) notwithstanding its prior expiry, no similar question arises here. It must be said, however, that the High Court’s strong affirmation of the efficacy of the appeal process, and in particular of the appeal court’s capacity to undo the adverse consequences of an earlier decision shown on appeal to have been erroneous, is consistent with the conclusion we have reached.
The weight of contrary authority
The written submission for Esanda contended that “the central question” in this appeal had been considered – and decided adversely to Aussie – by –
(a) three judges of the Trial Division;
(b) the Court of Appeal, twice;
(c) four judges of the Federal Court at first instance;
(d) the Full Federal Court; and
(e) the New South Wales Supreme Court, on three separate occasions.
According to Esanda’s submission:
“Every Judge who has considered the question has held that once an extended period of time delineated under s 459F(2)(a) has expired then the court has no jurisdiction to extend the period for compliance with a statutory demand served under the provisions of s 459E of the Corporations Act 2001.”
Were this submission accurate, the task confronting the court on this appeal would be considerably more difficult than it actually is. In particular, were there in truth multiple decisions of the Court of Appeal and of an appellate court of co-ordinate jurisdiction upholding the expiry rule, this Court could scarcely contemplate adopting any other view, however compelling the arguments might be. As Esanda correctly submitted, an intermediate appellate court should not depart from a decision of another intermediate appellate court in any area – such as the Corporations Act – where uniformity is desired, unless the court is convinced that the reasoning is plainly wrong.[69] The court should be especially reluctant to depart from earlier decisions of the same court.[70]
[69]Australian Securities Commission v Marlborough Gold Mines Limited (1993) 177 CLR 485, 492.
[70]Avco Financial Services Limited v Abschinski [1994] 2 VR 659, 663, 668-669; R v Tate [1996] 1 VR 662, 666.
But the submission is seriously inaccurate. A review of the authorities cited reveals that there are only four decisions – all of single judges – in which the question in issue on this appeal has been considered on its merits. The first two are the decisions to which we have already referred, of Jenkinson J in Livestock Traders and of Ryan J in Graywinter Properties. The other two – of Hansen J in Burwood Retail Pty Ltd v Deputy Commissioner of Taxation (“Burwood Retail”)[71] and of Kenny J in G & J Gears Australia Pty Ltd v Brobo Group Pty Ltd (“G & J Gears”)[72] – are, essentially, applications of the earlier two decisions.
[71]Burwood Retail (2002) 170 FLR 76.
[72][2006] FCA 330.
Crucially, there is no decision of an intermediate appellate court on the question. As we shall explain, there are references in decisions of the Full Federal Court to the single judge rulings, but this is the first occasion on which an intermediate appellate court has been called on to decide for itself whether or not the expiry rule is correct. No issue arises, therefore, of uniformity between intermediate appellate courts.[73]
[73]cf. Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485, 492; Deputy Commissioner of Taxation v Woodhams (1998) 148 FLR 230, 231 (Callaway JA).
The other cases said to have decided this question did no such thing. The two decisions of the Victorian Court of Appeal relied on by Esanda – Buckland and Burwood – dealt only with the meaning of “finally determined” in (a)(ii). They said nothing about (a)(i). Nor did the present question arise in any of the three decisions of Barrett J in the New South Wales Supreme Court on which Esanda relies. Two were concerned only with (a)(ii).[74] In the third, Barrett J actually exercised the power under (a)(i) to extend the time for compliance, remarking that the Court of Appeal’s decision in Buckland “starkly illustrated” that an appeal would be rendered nugatory unless an extension was granted.[75]
[74]Shakespeares Pie Co Australia Pty Ltd v Multipye Pty Ltd [2005] NSWSC 1338 [28]–[30]; Marthas T Market Pty Ltd v Reliance Financial Services Pty Ltd [2002] NSWSC 931, [4].
[75]Australian Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd (2004) 50 ACSR 544, 546.
Of the three judges of the Trial Division said to have decided this question adversely to the argument advanced by Aussie, one was the judge in the present case who, as we have noted, regarded himself as bound by Buckland to dismiss the company’s appeal. As the reasons indicate,[76] his Honour did not regard it as necessary to decide whether the power to extend time was available.
[76]See above [21].
The others were Warren J in Buckland at first instance,[77] and Hansen J in Burwood Retail at first instance.[78] Warren J’s decision concerned only paragraph (a)(ii). No application for an extension of time had been made, either before the Master or to her Honour,[79] and her Honour’s statement that “no extension may now be granted”[80] was obiter. Hansen J in Burwood Retail was principally concerned with the meaning of “finally determined” in (a)(ii), but it appears that an application for an extension of time under (a)(i) was sought in the alternative.[81] His Honour followed the decisions in Livestock Traders[82] and Graywinter Properties[83] in concluding that no extension of the time for compliance was possible, the time having already expired.[84]
[77]Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2001] VSC 286.
[78](2002) 170 FLR 76.
[79]Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2001] VSC 286, [5], [9], [11].
[80]Ibid [12].
[81]Burwood Retail (2002) 170 FLR 76, [33].
[82]Ibid [20].
[83]Ibid [22].
[84]Ibid [43].
So far as appellate decisions are concerned, Esanda relied on the decision of the Full Federal Court in Equuscorp Pty Ltd v Perpetual Trustees WA Limited (“Equuscorp”)[85]. It is quite clear, however, from the Full Court’s reasons that the present question did not arise. At first instance, an order had been made under (a)(i), on the company’s application, extending the time for compliance:
“until the determination of the appeal by the Full Court of the Federal Court or as otherwise ordered by the Full Court ...”.
On appeal, that order was attacked on the ground that the judge had failed to specify a period when extending the time for compliance. The Full Court rejected the argument, holding that:
“the period of the extension is defined with precision by the order. It runs from the date on which the order speaks ... until the date upon which this court gives judgment on the appeal.”[86]
[85](1997) 25 ACSR 675.
[86]Ibid 701.
The Full Court then made this statement:
“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 s 459G application has been determined.”[87]
The court cited Graywinter Properties, Livestock Traders and David Grant as authority for this proposition. But, as counsel for Esanda properly conceded, the Full Court had not been called on to consider the time limit question. What the Full Court said was an accurate recitation of what the earlier cases had held, but it did not reflect any consideration by the Full Court of the issue. As the High Court has made clear:
“[W]here a proposition of law is incorporated into the reasoning of a particular court, that proposition, even if it forms part of the ratio decidendi, is not binding on later courts if the particular court merely assumed its correctness without argument.”[88]
[87]Ibid.
[88]CSR Ltd v Eddy (2005) 226 CLR 1, 11 (Gleeson CJ, Gummow and Heydon JJ).
The same may be said of the almost-contemporaneous decision of a differently-constituted Full Federal Court in Vista.[89] In that case, as noted earlier, the Full Court held that the power under (a)(i) to extend time could be exercised even after the application under s 459G (to set aside the statutory demand) had been finally disposed of, adversely to the company. Their Honours referred in passing to the decisions in Livestock Traders and Graywinter Properties, and noted the views expressed in those decisions (that the power to extend time could not be exercised after the time for compliance had expired). But – as in Equuscorp – the Full Court had no occasion to consider, and did not consider, that question.[90]
[89](1997) 79 FCR 288.
[90]Ibid 296-7.
Finally, we deal with the decisions of the four single judges of the Federal Court relied on by Esanda. Reference has already been made to Livestock Traders and to Graywinter Properties. The two other decisions were, respectively, those of Finn J in Graywinter Management Limited v DCT (“Graywinter Management”)[91] and of Kenny J in G & J Gears. Finn J was not called on to decide the present question. His Honour was instead dealing with the same question as arose in Vista, namely, whether the power to extend time was exercisable notwithstanding that the application to set aside the statutory demand had already been heard and determined adversely to the company. His Honour held that the power was exercisable in those circumstances.[92] As in Equuscorp and Vista, his Honour noted the proposition from Livestock Traders and Graywinter Properties – that the power to extend time was only exercisable “provided the application for an extension is brought before the effluxion of the period fixed for compliance”[93]. But – as in both those cases – his Honour was not called on to consider, and did not consider, that question.
[91](1996) 22 ACSR 636.
[92]Ibid 638.
[93]Ibid.
In G & J Gears, Kenny J did deal with the present question. There was an application before her Honour under s 459G to set aside a statutory demand. This was a rehearing of an application to the Registrar of the Court (equivalent to a Master in this Court). The company had also made application for an extension of the time for compliance. Her Honour dismissed the application to extend time, holding that –
“The Court has no power to extend the time for compliance with the statutory demand because the time for compliance has expired. G & J Gears is deemed to be insolvent because it has failed to comply with the demand within the time required, as extended by the registrar. A review of the registrar’s decision is therefore nugatory.”[94]
[94]G & J Gears [2006] FCA 330 [46].
Her Honour then set out a number of propositions which she described as “well-settled”, as follows:
“This limitation upon the power to extend time is implicit in the terms of ss 459F and 459C. Section 459F(1) operates to fix the time when a company on which a statutory demand has been served is taken to fail to comply with the demand. The significance of a failure to comply with a statutory demand is the subject of s 459C(2)(a), which provides that the Court must presume that a company is insolvent if, during or after the 3 months ending on the day when the application is made, the company fails to comply with the statutory demand. The effect of ss 459F(1) and 459C(2)(a) is that the Court can only make an order under s 459F(2)(a)(i) extending the time for compliance prior to the end of the period for compliance, i.e., before the company is presumed to be insolvent. Within this period, an order extending the time can be made where a s 459G application has been rejected and that rejection is the subject of review or appeal. This is now well-settled. … As Jenkinson J said in Livestock Traders …, ss 459F and 459C(2)(a) of the Corporations Law “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.” This is equally true of the equivalent sections of the Corporations Act. The power to extend time after the end of the period for compliance would introduce a degree of uncertainty incompatible with the statutory regime: see also Buckland Products at [8] per Phillips JA.”[95]
[95]Ibid [49].
For the proposition that the law was now “well-settled”, her Honour relied on Vista, Graywinter Management, Graywinter Properties, Buckland, Shakespeares Pie and Australian Beverage. As already explained, of these decisions only Graywinter Properties stood as authority for the expiry rule.
As regards the concluding reference to Buckland, her Honour was evidently applying to (a)(i) – by analogy – what the Court in Buckland had said about uncertainty when construing paragraph (a)(ii). For the reasons we have already given, the “argument from uncertainty” does not apply to paragraph (a)(i), in view of the unambiguous language of s 70 and paragraph (a)(i).
Conclusion
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.
In our view, for the reasons we have given, the learned Judge did have power under paragraph (a)(i), on the application made by Aussie, to extend the time for compliance with the statutory demand, notwithstanding that the time (as previously extended by the Master) had already expired. Moreover, in our opinion, that power should have been exercised in aid of the hearing de novo of the company’s application to set aside the statutory demand. That is, as we have said, the purpose for which the power to extend time was evidently conferred.
We would grant leave to appeal, and order that the appeal be treated as having been heard instanter and allowed. We would set aside his Honour’s order dismissing Aussie’s appeal and order instead that the time for compliance be extended until 21 days after the determination of the company’s appeal, which we would remit to his Honour for hearing.
CHERNOV JA:
In this appeal the principal issues that arise for determination are the following:
(a)Is leave to appeal required from the order of the judge below dismissing as incompetent an application to set aside the statutory demand served by the respondent, Esanda Finance Corporation Ltd, on the appellant, Aussie Vic Plant Hire Pty Ltd, pursuant to Part 5.4 of the Corporations Act 2001 (“the Act”)?
(b)If yes to (a), should leave to appeal be given in the present case?
(c)If yes to (a) and (b):
(i)was his Honour bound by the decision of this Court in Buckland Products Pty Ltd v Deputy Commissioner of Taxation[96] (“Buckland”) so to dismiss the appeal merely because the time for compliance with the statutory demand had expired before the matter came on for hearing before him;
(ii)in any event, does the court have power to extend the time for compliance with the statutory demand pursuant to s 459F(2)(a)(i), or s 70 or s 1322(4)(d) of the Act, notwithstanding that the time for compliance has expired?
[96][2003] VSCA 85.
I state at the outset my conclusions on these matters and then provide my reasons. First, I consider that his Honour’s order is an interlocutory order and, therefore, leave to appeal is required under s 17A(4)(b) of the Supreme Court Act 1986 if it is to be challenged by way of an appeal. Secondly, I think that the required leave should be granted to the appellant. I am also of the view that his Honour was not bound by Buckland to dismiss the appeal, although I consider that, because the time for compliance with the statutory demand had expired before the appeal came on for hearing, the judge did not have power to extend the period so that, in the circumstances, the hearing of the appeal would have been futile. Consequently, I would dismiss the appeal. I now turn to consider each of the above matters.
Interlocutory order
In Hall v Nominal Defendant[97] Windeyer J made it plain that an order is interlocutory unless it finally determines the rights of the parties in the principal cause between them. In that case, the court below dismissed an application for an extension of time within which to bring a proceeding against the nominal defendant. The majority of the High Court considered that the order was interlocutory. Taylor J, with whom Owen J agreed, said[98] that the impugned order was made in a proceeding that was:
[97](1966) 117 CLR 423, 443. See also Dodoro v Knighting (2004) 10 VR 277, 281 (Callaway JA).
[98]Hall v Nominal Defendant, 440.
“… preliminary to the bringing of an action and although it deprived the appellant of the benefit of the order of the learned judge of first instance, it did not operate to prevent him from making a further application for an extension of time. …
In my opinion, the order in question was not final in the sense in which that term is used in relation to judgments and was interlocutory only so that the appeal was, to say the least, incompetent without leave.”
Windeyer J was of the view that the decision was interlocutory because it did not finally determine the principal cause between the parties. His Honour said:[99]
“In most cases the test that seems to be most satisfactory, and the one that accords most nearly with what has been said on the subject in this Court, is it seems to me to look at the consequences of the order itself and to ask does it finally determine the rights of the parties in a principal cause pending between them. It is never enough to ask simply does the order finally determine the actual application or matter out of which it arises; because, subject to the possibility of an appeal, every order does that, unless it be an order that is expressly declared to be subject to variation.”
Importantly, whether the decision finally determines such rights of the parties is to be decided by the legal, and not the practical, effect of the order.[100]
[99]Ibid, 443.
[100]See Licul v Corney (1976) 180 CLR 213, 225 (Gibbs J); Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246, 248 (Gibbs CJ); Little v State of Victoria [1998] 4 VR 596, 597-8 (Callaway JA).
It seems to me that the decision dismissing an application to extend the period for compliance with a statutory demand does not determine a principal dispute between the parties, more particularly, whether the amount claimed is in fact owing. As I explain later, I consider that this is to be determined either upon an application to set aside the notice or in the course of the winding up proceeding of the corporate debtor (where the matter bears on solvency). At least theoretically, the unsuccessful debtor company can make a fresh application to extend the compliance period. A like conclusion, namely, that an order refusing to set aside a statutory demand was interlocutory because it did not finally determine the rights of the parties, was reached by Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia[101] in relation to a proceeding to set aside a statutory demand. Thus, I consider that leave to appeal must be obtained if the proposed appeal in this case is to proceed.
[101][1994] 2 VR 290, 296-7. To like effect, see also Vista Commercial Construction Pty Ltd v Deputy Commissioner of Taxation (1997) 25 ACSR 285, 286.
Leave should be granted
The general rule is that, in order to obtain leave to appeal against an interlocutory decision, the applicant must demonstrate that the decision is attended with relevant doubt and that substantial injustice will result if it were to remain.[102] But as Phillips JA pointed out in Secretary to the Department of Premier and Cabinet v Hulls[103] that is only a general rule that does not purport to inhibit the wide discretion that the Court has to grant leave. His Honour said:
“The discretion to grant leave, which is conferred by the statute in untrammelled terms, cannot be fettered, and should not be fettered, by judicial decision. From time to time a case will arise in which any preconceived guidelines will be found not wholly sufficient. In the end, whether leave is granted or not must always depend on the justice of the case, as it appears to the court from whom leave is sought.”
[102]See, eg, Niemann v Electronic Industries Ltd [1978] VR 431.
[103][1999] 3 VR 331, 335.
In this case, it is plain enough that the issue that is sought to be raised on appeal is of considerable public importance. Moreover, the central issue in the case is to be resolved in the context of conflicting authorities on the matter in the various jurisdictions in Australia. In all the circumstances, and notwithstanding that the material shows that the applicant’s substantive case as to whether the debt is due and owing to the respondent is weak, I consider that justice requires that leave to appeal against the impugned decision should be granted.
Buckland not determinative
As Maxwell P and Neave JA explain in their reasons in this case, the essential issue with which Buckland was concerned was whether a Master’s decision, made in the context of a s 459G application, to refuse to extend the period of the statutory demand “finally determined” the application for the purposes of s 459F(2)(a)(ii). The Court held that it did, having rejected the debtor’s submission that an application was not “finally determined” within the meaning of the above provision until the appellate process from the impugned decision has been determined. The reason for this conclusion is explained in the reasons of Phillips JA[104] (with whom the other members of the Court agreed). Thus, Buckland was not concerned with whether the power to extend time for compliance conferred by s 459F(2)(a)(i) ceases if the period in question had expired. Moreover, in that case, as here, there was no application to extend the relevant period so that when the matter reached the judge in the Practice Court the period had expired. Nevertheless, Phillips JA implicitly considered[105] that any appeal from the refusal to extend time, to be effective, would have to be heard and determined before the expiration of the period for compliance. To that extent, it might be said that the decision in Buckland is consistent with the claim of the respondent here that once the relevant period expires, the court has no power to extend it under s 459F(2)(a)(i). It is plain, however, that the ratio in Buckland did not establish this, so that, strictly, his Honour below was not precluded by that decision from considering whether he had the power to extend the period for compliance notwithstanding that it had expired by the time the matter came on before him.
[104]Buckland, [8]-[9].
[105]Ibid, [9].
No power to extend time after period expires
In my view, however, his Honour’s above error was not material because it would have been futile to proceed with the appeal given that the period of the statutory demand had expired and, as I explain, on a proper construction of s 459F(2)(a), in those circumstances the court did not have power to extend the period for compliance. My reasons for this conclusion are these.
In construing s 459F(2)(a)(i) in order to determine if it empowers the court to extend the period for compliance of a statutory demand after the time of its expiration, it is necessary to have regard to the policy of Part 5.4 of the Act, of which it forms a part, and in particular the mischief that it seeks to abrogate. As their Honours said in CIC Insurance Ltd v Bankstown Football Club Ltd:[106]
“…the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses “context” in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.”[107]
[106](1997) 187 CLR 384, 408 (Brennan CJ, Dawson, Toohey and Gummow JJ) (citations omitted).
[107]See also Newcastle City Council v GIO General Ltd (1997) 191 CLR 85, 99-100 (Toohey, Gaudron and Gummow JJ), 112-3 (McHugh J), in which the court had regard to the explanatory memorandum that disclosed the particular mischief that the legislation was enacted to remedy.
As I explain below by reference to its provisions, the mischief that Part 5.4 sought to abrogate was the ability of insolvent companies to continue trading by defeating, or delaying, applications for their winding up that were brought on the basis of their failure to comply with the statutory demand, by raising at the winding up proceedings, technical, unmeritorious, defences that did not call into question the solvency of the debtor company. As I mention later, prior to the introduction of Part 5.4, the opportunity to challenge a statutory demand was in effect limited to the time of the hearing of the winding up application, or to injunctive proceedings to restrain such an application, so that if the demand could be successfully set aside at that stage, the winding up proceeding would necessarily collapse. It was in order to overcome such difficulties that Part 5.4 was enacted. It prescribed a procedure whereby a statutory demand may be challenged, but essentially only prior to the hearing of the winding up proceeding and then only within the time limits that were prescribed in quantitative terms. A critical provision of the statutory scheme is the automatic presumption of insolvency of the debtor company where there is a failure to comply with the demand within the prescribed time frame. That presumption can only be rebutted at the hearing of the winding up application where the sole issue for determination is not the validity of the statutory demand but the solvency of the debtor company.
To construe s 459F(2)(a)(i) as giving the court power to extend the period for compliance in a statutory demand notwithstanding that it has expired would, I think, produce the unintended result of defeating the principal aim of the statutory scheme to which I have referred. In the circumstances, I consider that it is necessarily implicit that the court’s power in that regard is limited to situations where the period for compliance has not expired. I now turn to a more detailed analysis of the legislation.
Part 5.4, together with Parts 5.4A and 5.4B, was inserted into the legislation by the Corporate Law Reform Act 1992. The provisions effectively restructured the then existing legislation that dealt with the winding up of companies, reflecting the recommendations of the Harmer Report[108] which highlighted, amongst other matters, the need to distinguish between the winding up of solvent and insolvent companies. The Report recognised that the great majority of applications for winding up on the ground of inability to pay debt were based on the failure to comply with statutory demands[109] and that winding up proceedings would often falter by reason of technical and unmeritorious defences, such as assertions that the claim did not reflect precisely the amount actually due to the creditor. As a result, it was said, many windings up failed or were materially delayed and companies continued to trade notwithstanding that they were insolvent. Part 5.4 introduced a complete code for the winding up of insolvent companies and in particular, a code, or a “new and different statutory regime”,[110] for the resolution of disputes involving statutory demands. It is significant, as was noted by the court in Equuscorp, that prior to the enactment of Part 5.4 there was no statutory procedure for the setting aside of a notice of demand[111] and, effectively, a company could only contest a notice of demand by way of an interlocutory injunction to restrain the presentation of the winding up petition.
[108]Law Reform Commission Report No 45, General Insolvency Inquiry.
[109]Harmer Report, [144]; Explanatory Memorandum, Corporate Law Reform Act 1992, [678].
[110]Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 25 ASCR 675, 693 (“Equuscorp”) (French, Kiefel and Sundberg JJ).
[111]Ibid.
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. To that end, the legislation sought to provide for the speedy resolution of “disputes in relation to the existence or amount of a debt … in a way that will not impede the resolution of an application for the winding up of a company in insolvency”.[112] As the Explanatory Memorandum says, the scheme “provides a means of dealing with statutory demands in such a way that an alleged defect in [it] does not have the effect of prolonging proceedings leading to the commencement of a winding up, by requiring debtor companies to raise genuine disputes at an early stage, rather than after winding up proceedings have commenced.”[113] That such policy considerations underpin Part 5.4 has received judicial recognition. For example, Gummow J said in David Grant & Co Pty Ltd v Westpac Banking Corporation[114] (“David Grant”):
“The provisions of the new Pt 5.4 constitute a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly.”
Similar, albeit more general, views were expressed by Brooking and Phillips JJ in David Grant when the matter was before the Appellate Division of the Supreme Court.
[112]Explanatory Memorandum, [665]. See also David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] 2 VR 495, 506 (Smith J).
[113]Explanatory Memorandum, [689].
[114](1995) 184 CLR 265, 270.
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. The provisions prescribe self-executing time limits for the taking of steps to set aside statutory demands, failing which the debtor company is to be presumed insolvent if the demand had been left unsatisfied. More particularly, Part 5.4 specifies the period of 21 days as the period of demand[115] and as the period within which an application may be made to have it set aside.[116] Consequently if no such application is made within this period, and there has been non-compliance, the debtor company is taken to have failed to comply with the demand at the expiration of the 21 days[117] so that the court must presume that it is insolvent. This will not necessarily prevent the debtor company from rebutting the presumption, but that can only be done in a winding up proceeding and in the context of demonstrating that it is solvent.[118]
[115]Section 459E(2)(c).
[116]Section 459G.
[117]Section 459F(1), (2)(b).
[118]Section 459S.
The limited exception to this strict and self-executing regime occurs in circumstances where a timely application has been made by the debtor company under s 459G to set aside the statutory demand. In those circumstances, the period is extended either to that ending seven days after such an application has been determined[119] or the period ordered by the court under s 459F(2)(a)(i), whichever is the later. But even if an application under s 459G has been made, once the period has expired under either limb of s 459F(2)(a), the period for compliance has run its course and the company is presumed to be insolvent.[120] It seems to me that, on a plain reading of s 459F(2)(a)(i) in the context of the policy of Part 5.4, once such a situation has been reached the statutory demand is no longer extant, so that the period of the “spent” demand cannot be extended by the court under s 459F(2)(a)(i), or otherwise. In other words, once the prescribed time for complying with the demand, or any permitted extension of it, has run its course the statutory demand ceases to play a relevant role in the scheme underpinning Part 5.4. Although the debtor can later challenge the demand as has been mentioned, this can only occur at the hearing of the winding up application and subject to the limitations imposed by s 459S. At that point, the focus will be on the question whether the debtor company is insolvent and, unless the attack on the statutory demand is relevant to that issue, there would be no point in permitting such a challenge to proceed.
[119]Section 459F(2)(a)(ii).
[120]Section 459C(2).
Upon the issue of principle, the decisions in Mibor and A-Pak may well prove to be irreconcilable; so that, depending upon which analysis is correct, an order should be regarded as interlocutory – or the converse - regardless whether a demand is set aside or sustained. Even so, the leading decisions are nominally reconcilable along the lines previously indicated; and for that reason, though doubtfully, I prefer an approach which holds that A-Pak and Asian Century are distinguishable from Mibor; and that Mibor should be preferred to Keylink, which extrapolated from A-Pak.
No substantial injustice
Reflecting much authority, Callaway JA said in King v Lintrose Nominees Pty Ltd[175] -
“Leave to appeal from an interlocutory order is ordinarily granted only where the applicant shows (1) that the decision below was attended with sufficient doubt to warrant its being reconsidered on appeal and (2) that substantial injustice would be caused if the order made were allowed to stand.”
In a footnote, his Honour noted that he -
“ … include(d) the word ‘ordinarily’ in the formulation, partly as a reminder that the grant or refusal of leave is ultimately a question of discretion and partly to take account of exceptional circumstances such as are illustrated by Composite Buyers Ltd v JC Taylor Constructions Pty Ltd [1983] 2 VR 311.”
[175](2001) 4 VR 619, 627 [22].
In my opinion, there is a substantial point for consideration whether authorities have taken a wrong turn insofar as they have concluded that time for compliance with a statutory demand made under s 459E of the Corporations Act 2001 (Cth) (“the Act”) cannot be extended under s 459F(2)(a)(i) of that Act once the period of compliance has ended; a fortiori when the period has come to an end after a right of appeal from refusal to set aside the demand has been invoked but the appeal has not yet been heard and determined. For that reason, I consider that Aussie Vic Plant Hire Pty Ltd (“Aussie” or “the company”) has satisfied the first circumstance which must ordinarily be present in order that there should be grant of leave to appeal.
All thing being equal, however, I would hold that Aussie has not shown that substantial injustice would be caused if the impugned order was allowed to stand. That is for the reasons which follow.
The judge ordered that Aussie’s appeal from the Master’s order should be dismissed on the footing that it was incompetent. That deprived Aussie of the re-hearing de novo to which it would otherwise have been entitled. The judge also made a costs order adverse to Aussie. The effect of the dismissal of the appeal was that the time for compliance with the statutory demand remained at an end, with the consequences set out in s 459C(2)(a) of the Act, though subject to the “safety net” of s 459S.
Generally, in such circumstances, the party affected would establish that substantial injustice would be caused if the order producing that outcome was allowed to stand. But in this proceeding, in my opinion, if the judge was wrong about the effect of s 459F, 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.
This court is equipped and is able to reach the conclusion which I have just expressed. It is to be remembered that, by Rule 77.05(7) of Chapter I, a party on appeal may –
· Rely upon any affidavit used or oral evidence given before the Master or;
· By special leave of the judge, rely upon an affidavit or oral evidence not used or given before the Master.
In the present case, the hearing before the Master was wholly conducted on affidavit evidence. There was the affidavit of Bruno Strangio sworn 3 April 2006 in support of Aussie’s application; and the affidavits of Glenn Price sworn 16 May 2006[176], Patrick Walsh sworn 17 May 2006, Mary Toh sworn 18 May 2006 and Jordan Orfanos sworn 18 May 2006 in opposition. A few documents were exhibited to Mr Strangio’s affidavit; and many documents to Mr Price’s affidavit of 18 May.
[176]In addition to his formal affidavit sworn 8 March 2006. See s 459E(3) of the Act.
Going forward to the anticipated hearing of the appeal on the merits, the solicitors for Aussie filed two further affidavits: of James Tzouvelis and of Joseph Nicolazzo, each sworn 19 July 2006.[177] The judge might have granted Aussie special leave to rely upon those affidavits. For the purposes of considering whether leave to appeal from the impugned order should be granted, I assume that his Honour would have done so.
[177]In addition, on 26 July 2006 Mr Strangio swore a second affidavit. It pertained to the application to further extend time for compliance, and added nothing to the substance of the matter.
In the event, there being nothing to suggest that any deponent was to have been called for cross examination,[178] the material available for consideration by the judge had he considered the substance of the appeal is not in doubt. That material is before this court, as are detailed submissions by Esanda as to the absence of genuine dispute or genuine offsetting claim.
[178]Consistently with the nature of an application to set aside a statutory demand, cross-examination would rarely be appropriate.
Before considering that material, and explaining my conclusion, I should mention two pertinent considerations. First, it is for the company served with a statutory demand to show that it should be set aside.[179] Second, in deciding whether a company has established that there is a genuine dispute about the existence or amount of the debt to which the demand relates, or has established that it has an offsetting claim, at least in most cases, it is not for a court to embark upon an extended enquiry, and certainly not attempt to weigh the merits of the dispute[180]. Nonetheless, as McClelland CJ in Equity observed in Eyota Pty Ltd v Hanave Pty Ltd:[181]
“In my opinion [the expression ‘genuine dispute’] connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the ‘serious question to be tried’ criterion… This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit ‘however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be’ not having ‘ sufficient prima facie plausibility to merit further investigation as to [its] truth’ (cf. Eng Mee Yong v Letchumanan [1980] AC 331 at 341], or ‘a patently feeble argument or an assertion of facts unsupported by evidence’: cf. South Australia v Wall (1980) 24 SASR 189 at 194.
But it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute.”
[179]See, for example, Moyall Investment Services Pty Ltd v White (1993) 12 ACSR 320, 324 (Ryan J, Federal Court).
[180]Mibor [1994] 2 VR 290, 295 (Hayne J).
[181](1994) 12 ACSR 785, 787.
I turn to the affidavit material. It is necessary to review it in some detail – not to analyse it in an impermissible manner, but simply to illuminate the fact that there was nothing behind the façade erected by Aussie, this bespeaking absence of either a genuine dispute or of a genuine offsetting claim.
It is convenient to note some uncontroversial matters at the outset. First, Aussie was registered on 25 January 2002. Its business, as its name implies, was plant hire. The equipment which was the subject of the eleven offer to hire and chattel mortgage contracts with Esanda, those contracts having been entered into variously between 18 February 2002 and 8 February 2005, gives an indication of the kind of plant which was the subject of Aussie’s business: earthmoving equipment and related vehicles.
Second, Mr Bruno Strangio was the sole director of Aussie, and its secretary. He was also its sole shareholder until his two shares were transferred to a company the registered office of which was Aussie’s registered address. That company was referred to in an exhibited document as “the children’s company”.
By his affidavit sworn 3 April 2006, Mr Strangio deposed his belief that the statutory demand was defective. He listed five matters. All but the first of them took as its starting point an assumption that the demand was required to state matters which are not required to be stated by s 459E(2) of the Act. In any event, if there were any of the defects complained of, they were inconsequential,[182] because book, line and verse of the inadequacies complained of was addressed by exhibits to Mr Price’s affidavit sworn 16 May 2006.
[182]See s 459J.
It may be the first of the alleged defects was present. The solicitor who signed the demand on Esanda’s behalf did not identify himself as a partner in the solicitor’s firm. But that error, if it existed, was also inconsequential. The solicitor, Mr Walsh, swore an affidavit in which he deposed to having been a partner at the pertinent time.
Mr Strangio then deposed a denial that Aussie was indebted to Esanda in the amount claimed.[183] The first basis of that denial was as follows:
“ … it appears that not all payments made by the plaintiff have been correctly credited to the various facilities entered into between the parties. I am currently seeking to reconcile all payments made by the plaintiff and propose to file a further Affidavit in this regard in due course.”
[183]It represented the total amount allegedly payable on the 11 discrete finance contracts.
But that was no more than puffery. Three points should be made. First, exhibited to Mr Price’s affidavit of 18 May 2006 were details of every payment made by Aussie on each of the 11 contracts. Second, confronted by that material, Mr Strangio did not put on a further affidavit seeking to contravene those details, or to suggest that he was in any way disabled from doing so. Indeed, his proposed further affidavit never saw the light of day. Third, also exhibited to Mr Price’s affidavit were statements sent to Mr Strangio from time to time in the latter months of 2005. They detailed, inter alia, the amount of arrears on each contract. Also exhibited were note of discussions between Mr Price and Mr Strangio, and between Mr Price and Mr Nicolazzo. It is plain that at no time over that period of months did Mr Strangio dispute Esanda’s statement as to the amount of arrears on each contract, the amount then due thereon, or the pertinent payout figure. Rather, from mid-September 2005, Mr Strangio was attempting to arrange re-financing through his finance brokers, apparently on the basis of figures supplied by Esanda.
Mr Strangio further deposed in his affidavit of 3 April 2006 that “when [Aussie] experienced difficulties in meeting its monthly payment obligations” he commenced negotiations with Mr Price “in and around November 2005”. The negotiations, on Mr Strangio’s account, involved him telling Mr Price that Aussie would be seeking to refinance its borrowings and pay out Esanda, Mr Price assuring him that he would provide an accurate payment history in response to any third party enquiries about Aussie, and Mr Price agreeing to provide Aussie with an indulgence in respect of further instalment payments “until the re-finance package came through.”
Against the background of those negotiations, Mr Strangio deposed, he had been informed by Aussie’s finance broker that a proposed new lender had contacted Esanda, and had been provided with “an entirely negative and false account of [Aussie’s] payment history”, Aussie being falsely described a “high risk debtor” which had been in default “for over a period of 6-8 months.” It was this false picture, Mr Strangio deposed, which had caused the proposed new lender to decline to grant final approval of the re-finance package; and no other lender had been found. But for Esanda’s conduct, Aussie “would have settled its accounts with [Esanda] on or about 30 November 2008.”
In consequence, Mr Strangio deposed, he believed that there was a genuine dispute “as to whether [Esanda] had any right to terminate the relevant hire contracts and chattel mortgages.” He believed that Esanda was “estopped and precluded from purporting to exercise its legal rights in light of its unconscionable conduct.” In addition, he believed Aussie had a right to seek relief against Esanda for “defamation, misleading, deceptive and unconscionable conduct.” He had instructed Aussie’s solicitors to “file legal proceedings against [Esanda] arising out of its conduct.”
Finally, Mr Strangio deposed to the solvency of Aussie, and to his belief that Aussie would be able to refinance its facilities once Esanda withdrew “its defamatory imputations” and undertook not to repeat them.
The blackguarding of Aussie by Esanda to which Mr Strangio deposed was at best second-hand hearsay. Neither the broker or the proposed lender were identified. Further, Mr Strangio’s conclusion that the allegedly false picture painted by Esanda had caused the proposed lender to decline to re-finance Aussie was bald assertion, as was his statement that but for Esanda’s conduct Aussie would have settled its accounts on or about 30 November 2005.
The wafer-thin character of this material was the subject of supplementation by the late-sworn affidavits of Messrs Tzouvelis and Nicolazzo. These gentlemen were at pertinent times directors of Consolidated Securities & Investments Ltd, an Oakleigh finance broker.
Mr Tzouvelis deposed that in mid December 2005 Ms Julie Fyffe, a representative of a company named Paramount, had informed him that Paramount had rejected Aussie’s application for re-finance because of an adverse credit reference provided by Esanda. He had been informed, and believed, that “credit representatives” of Esanda had reported that Mr Strangio and his company had a very cloudy credit history, were high risk, and that Mr Strangio was dishonest and deceitful by hiding the equipment and refusing to return it. Ms Fyffe, according to Mr Tzouvelis, had informed him that she had been ordered not to assist “due to the fear of [Paramount] being black-banned by [Esanda] and other financial institutions.”
Further according to Mr Tzouvelis, he had been unable to procure any other funds notwithstanding numerous applications. He believed that Esanda’s adverse credit rating had “acted as a major impediment to obtain re-finance.”
Mr Nicolazzo deposed that he had communicated with Mr Price in the period September to November 2005 – initially to tell him that he was lodging an application to re-finance, later to tell him that he was able to secure a re-finance package with Paramount Leasing Services subject to a satisfactory credit clearance for Aussie. But, he deposed, “due to an unsatisfactory credit report provided by [Esanda’s] credit officers to Paramount [as described by Mr Tzouvelis], Paramount did not proceed with the refinance package.”
Mr Nicolazzo, like Mr Tzouvelis, deposed also an inability to secure other refinance despite numerous applications; and to his belief that Esanda’s credit reporting had “acted as a major impediment to obtain refinance to [Aussie].”
Apart from bold assertions by Messrs Tzouvelis and Nicolazzo as to their belief why numerous finance applications had been rejected, unsupported by any specification of the entities to which, and the times at which, application had been made and rejected, or by any statement as to the grounds for their belief, the affidavits of those gentlemen focused upon what was said to be Paramount’s rejection of a refinance application on the basis of a very adverse credit report provided by Esanda. Keeping that assertion to the forefront, and also the matters deposed to by Mr Strangio,[184] I turn to the affidavits sworn by Esanda employees. The following matters are to be noted.
[184]That is, other than as to the alleged defects in the statutory demand.
First, between 11 August 2005 and 8 December 2005 Mr Price wrote to Mr Strangio at least nine times concerning escalating total arrears on the 11 contracts.
Second, by 11 August 2005 there was already a substantial arrears on nine of the 11 contracts. Some contracts were about a month in arrears, another contract about two months in arrears, and another still many months in arrears.
Third, from 18 October 2005, though not in all instances, details of Aussie’s position were sent to Mr Tzouvelis as well as to Mr Strangio and sometimes to “Jo”- presumably Joseph Nicolazzo.
Fourth, a fax sent by Mr Strangio to Mr Price dated 13 September 2005 shows that it was then that Mr Strangio first raised the issue of refinancing, and sought an indulgence with respect to arrears.
Fifth, a file note made by Mr Price on 26 September 2005 shows that he and Mr Nicolazzo first had contact on that day. Mr Nicolazzo advised him that refinancing would be sought from a “non-traditional” lender, because a “traditional” lender would not do a deal. He, Mr Nicolazzo, had all the information required, was reasonably confident of approval, and would know the situation by 28 September. If approved, he would expect settlement within 2 weeks.
Sixth, on 10 October the broker advised Mr Price, as the latter noted in a file note made that day, that refinancing had been approved in principle. The broker expected to have unconditional approval by 14 October, with settlement some time in the following week.
Seventh, on 21 October 2005, as recorded in a file note made by Mr Price, Mr Strangio advised him that final approval had been obtained. The broker also advised him that he had approval, and later said that settlement would be on 27 October.
Eighth, in truth there could not have been “final approval,” for settlement did not take place on 27 October. The next recorded development is that Mr Nicolazzo emailed Mr Price on 29 November, saying that he had been advised that “the funder is settling tomorrow.” He added that “unfortunately some lenders let you down when it comes to settlement times and time lines which are not met.”
Ninth, Mr Price informed Mr Strangio on 8 November 2005 that the indulgence on payment of arrears would be extended only to 21 November. If the arrears were not cleaned up by then, Esanda required return of the equipment the subject of the contracts. So much was recorded by Mr Price in a file note made that day, and repeated in a letter of that date addressed to Mr Strangio.
Tenth, the file note further shows that on 7 November 2005 the broker advised Mr Price that Paramount required documents from Aussie confirming its ownership of unencumbered goods, and that Mr Strangio was sole director and shareholder. But this might be difficult because a company - said to be the “children’s company” – was now the shareholder, it having a fixed and floating charge over the assets.
Eleventh, on 5 December Mr Strangio telephoned Mr Price to say that the deal appeared to have fallen through. He also refused to deliver up the equipment, which according to a note made by Mr Price he had agreed to do in a conversation on 1 December 2005. Those matters were recorded by Mr Price in a file note made that day.
Twelfth, the file note also shows that on 5 December 2005 Mr Strangio asserted that the lender was “reconsidering approval due to adverse credit references from financiers.” He “believe(d) Esanda to blame”. He was advised that “no one has contacted this office for a reference.” Mr Price, I interpolate, deposed that in or about November 2005 he told Mr Strangio that, in accordance with ordinary practice, he would provide “accurate historical information to any third party who enquired about [Aussie].”
Thirteenth, Esanda’s records show that on two occasions requests for a credit check were made by an entity known as “Profinance Limited”. One was on 10 November 2005, one was on 20 December 2005. In each instance a report was provided, according to Mr Price, in accordance with guidelines established by a National Credit Reference Scheme. The persons who required the information respectively identified themselves as “Karen” and “David Morris”.
Fifteenth, the two Esanda employees who responded to the credit check requests – Mr Orfanos and Ms Toh – deposed to responding in accordance with the protocol by providing a summary total of the outstanding balance payable, a summary of monthly repayments, and advice as to Aussie’s credit rating. The last-mentioned was “slow”, this indicating that on average it had accrued over 14 days of arrears in respect of its contractual obligations at the date of enquiry. According to Mr Price, it reflected a situation dated from at least June 2005 – an assertion supported by the historical payment statements exhibited to his affidavit.
The contemporaneous material makes it abundantly clear that a number of the key assertions made by Mr Strangio and his brokers are insupportable.
First, contrary to assurances, dating from 26 September 2005, that finance would soon be, or had been, arranged, there was never final approval of a refinancing package. The sequence of events bespeaks a continuing inability, long before any credit reference was sought from Esanda, to get such an approval.
Second, the only credit reference sought before 5 December 2005 – on which date Mr Strangio advised that the deal appeared to have fallen through - had been sought on 10 November 2005. But in the period between 10 November and 5 December the brokers had reported a problem to do with ownership of the equipment. Also in that period, the brokers had advised the settlement was to proceed – though it did not – on 30 November.
Third, Julie Fyffe of Paramount, referred to by Mr Tzouvelis and Mr Nicolazzo, evidently did not speak with an Esanda representative. The pertinent request had been made by “Karen” of Profinance; and the report had been made to it. Even if, which is opposed to the sequence of events, Paramount had decided to refuse to refinance the equipment simply because of an adverse credit reference, there is nothing to show that the content of the reference was other than Mr Orfanos deposed.
Fourth, the material in any event shows that Mr Orfanos was well-entitled to describe Aussie as a slow payer.
Fifth, Mr Tzouvelis deposed that Esanda had reported to Ms Fyffe that Mr Strangio was dishonest and deceitful by hiding the equipment and refusing to return it. But the only request for a reference which could relate to Paramount’s rejection of Aussie’s finance application was made on 10 November 2005; and it was not until 5 December 2005 that Mr Strangio refused to give up the equipment. The matter thus deposed to by Mr Tzouvelis was an impossibility.
Sixth, Mr Tzouvelis deposed that he was informed by Ms Fyffe “in or about mid December 2005” of the reason why Paramount had rejected the application for refinance. But that makes no sense when the application had been rejected early in December.
Seventh, Mr Strangio’s assertion that Mr Price had offered, in effect, an open-ended indulgence is at odds with contemporaneous material.
To those consideration I should add, in considering whether a genuine dispute or genuine offsetting claim has been disclosed, that I put to one side Mr Strangio’s assertions as to the legal consequences of Esanda’s alleged misconduct – “defamation, misleading, deceptive and unconscionable conduct.” It is, however, to be noted that, at least as at June 2006, the threatened “legal proceedings” had not eventuated.
I should also add that Mr Strangio’s assertion that Aussie was solvent, unsupported by any financial records, sat ill with the company’s increasing indebtedness to Esanda in the later half of 2006, and with statements made by Mr Strangio to Mr Price, file-noted by the latter, in which Mr Strangio described a falling-off in business and poor cash flow.
The operation of s 459F
In light of my conclusion, in the circumstances described, that leave to appeal should be granted, I should address, though briefly, the merits of the issue sought to be agitated.
In my opinion, for the reasons given by Maxwell P and Neave JA, and by Nettle JA, and notwithstanding the weighty considerations adverted to by Chernov JA, the proper construction of Part 5.4 of the Act should yield the result that a court has power under s 459F(2)(a)(i), in conjunction with s 70, to extend time for compliance, despite the last date for compliance having passed, in order that a right of appeal not be rendered nugatory.[185] That seems to me to be the ordinary meaning of the pertinent provisions. Further, as explained by their Honours, on close analysis there are very few authorities to the contrary; and such authorities, being decisions of single judges, involve departure from the relevant language of the statute.
[185]So to conclude does not mean that there must inevitably be grant of extension of time only because an appeal, or an application for leave to appeal, has been launched.
To what their Honours have said, I would add two matters: First, Esanda laid considerable emphasis upon the contention that the purpose of Part 5.4 of the Act is to achieve a speedy disposition of demands for payment made on companies that are probably insolvent. But it cannot be said that the working-out of s 459F(2)(a)(i), even on the construction contended for by Esanda, will always produce a day certain in the near future at which the time for compliance will expire. In that connection, on any view, it is unlike the situations which result from the operation of s 459F(2)(b), and from the operation of s 459F(2)(a)(ii) as construed in Buckland Products Pty Ltd v Deputy Commissioner of Taxation.[186]
[186][2003] VSCA 85.
Second, s 459F(2)(a)(i) may be contrasted with s 459R(2)(b). The two provisions, inserted into the Act at the same time, differ significantly. In the case of s 459R, the legislature appears to have settled upon a form of words that would have the effect for which Esanda contended in respect of s 459F(2)(a)(i).
But what should be done? Despite the force of the matters adverted to by Maxwell P and Neave JA, in my opinion the proper course is that proposed by Nettle JA. The proliferation of authority, a little of it directly in point, most of it tangential, tells in favour of such an outcome. A similar outcome, of course, would necessarily follow from the analysis undertaken by Chernov JA, an analysis which calls in aid, but which is not necessarily dependent upon, the various authorities considered by his Honour and by the other members of the Court.
Order
In my opinion, the application for leave to appeal should be granted, but the appeal should be dismissed.
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