Bell Group Ltd v Westpac Banking Corp

[2000] FCA 439

FEDERAL COURT OF AUSTRALIA

THE BELL GROUP LTD v WESTPAC BANKING CORPORATION

[2000] FCA 439

WAG 3067 of 1995

SUMMARY

Introduction

In accordance with the practice of the Federal Court in certain cases of public interest, I have prepared a brief summary to accompany the reasons for judgment that are being delivered today in relation to six motions in this matter.  But the only authoritative pronouncement of my reasons is that contained in the full reasons for judgment.  This summary is necessarily incomplete.

Summary of Judgment

The applicants comprise some 29 companies (all in liquidation) in what was formerly known as ‘The Bell Group” and two liquidators who, between them, are individual liquidators of 21 of those companies.  The respondents are numerous banks (“the Banks”), many of whom lent money to various companies in the Bell Group over a period stretching back to the early 1980s.

At that time the Banks were prepared to lend money to the Bell Group on the basis of what were called “negative pledge” arrangements.  That is, the borrowers agreed not to charge their assets by way of security to any other lenders.

The Bell Group also raised money during that period from other sources, principally in Europe.  Those debts were evidenced by the issue of bonds.  Between 1985 and 1987 the Bell Group issued bonds to the value of $400 million and £75 million.  $150 million of that amount was borrowed from Heytesbury Securities Pty Ltd, a company associated with the late Mr Robert Holmes à Court.  Generally speaking, the bonds were either redeemable for cash or could be converted into shares. 

The extent to which the rights of the present holders of those bonds were and are subordinated, or shall remain subordinated, to all other creditors of the Bell Group, and in particular the Banks has become a major issue, not only in this case but also in certain proceedings before the Supreme Court of Western Australia.

In 1990 the applicant companies charged all of their assets to the Banks to secure repayment of various loans.  Those loans then totalled about $260 million.  In the judgment I have described the security documents as “the Securities”.  I shall do the same in this summary.  When the applicants failed to repay the loans, the respondent Banks exercised their rights under the Securities and realised approximately $300 million upon the sale of the assets which were the subject of such security.

In the principal application in this matter (which has yet to be heard) the applicants seek to set aside the Securities and to obtain orders from the Court that the Banks pay to the liquidators of the applicant companies amounts equal to the total of such realisation, plus interest.

The applicants make their claims on numerous bases. I shall not try to summarise all of them. The main basis is that the applicants claim that some of their former directors and the respondent Banks wrongly caused the Bell Group of companies to execute the Securities in favour of the Banks at a time when the applicant companies were insolvent or nearly insolvent. They also rely upon those provisions of the former Companies Code and the Corporations Law which, by reference to bankruptcy principles, provide for certain transactions to be void against a liquidator.

The applicants instituted these proceedings in this Court in late 1995.  It was then commonly thought that this Court had jurisdiction to hear and determine claims of this sort under the Commonwealth and State cross-vesting legislative scheme. 

Numerous procedural steps were taken to prepare the matter for hearing.  It was first set down for hearing (for a period of four months) in August 1998.  Early that year the Banks made a major set of amendments to their defence and cross-claim.  In briefest summary, the key part of those amendments raised the issue of the degree to which moneys raised by the issue of the bonds, which I have described above, and on-lent to other companies in the Bell Group were subordinated to other unsecured creditors of (and within) the Bell Group, including the Banks.  As a consequence of those amendments, the applicants sought an adjournment of the hearing.  I rejected that application, but postponed the start of the hearing by one month.  A Full Court of this Court (on appeal from my decision not to adjourn the hearing date) vacated that hearing date.  Later I fixed a new hearing to start in October 1999.  However, on 17 June 1999, the High Court of Australia handed down its decision in a case known as Re Wakim.  That decision held that a major relevant part of the cross-vesting legislation was constitutionally invalid.  The result was that the applicants’ claims, when viewed on their own, did not raise any federal matter within the jurisdiction of this Court. 

However, the respondents contended that this Court had what is known as “accrued” jurisdiction. They pointed to the fact that their amended cross-claim was, in part, based upon conduct during the 1980s by the applicants being conduct by which, on the Banks’ case, the applicants contravened s 52 of the Trade Practices Act i.e. that certain of the main companies in the Bell Group had engaged in misleading or deceptive conduct.  The respondents argued that the factual basis for that part of their cross-claim had so much in common with the factual basis of the claims raised by the applicants that all of the disputes formed part of the one “matter”.

In the meantime, in October 1996, the Banks had sued the applicants and others in the Supreme Court of Western Australia to prevent the execution of certain supplementary deeds which were intended to vary the terms of some of the convertible bonds.  That action is identified as “CIV 2061 of 1996”.  An examination of the pleadings in that Supreme Court case and the defence and cross-claim in this case reveals, as I have found in the judgment delivered today, a very substantial degree of common factual allegations on the Banks’ part.

Immediately after the High Court’s decision in Re Wakim, procedural steps were taken in the Federal Court to decide whether this Court had jurisdiction to hear and decide the applicants’ case against the Banks and the Banks’ defence and cross-claim, and, even if this Court did have jurisdiction, whether it should transfer the proceeding to the Supreme Court of Western Australia.

The parties filed six notices of motion with a view to resolving those questions.  Four of them were filed on behalf of the applicants and two on behalf of the respondents.  Many affidavits were also filed.  At various stages it appeared that constitutional questions had arisen.  Some six notices to that effect were issued and served on the Attorneys-General for the Commonwealth, the States and the Territories.  In the end, only two Attorneys intervened in the proceeding.  The Attorney-General for Western Australia intervened to argue for the validity of what is known as the Western Australian “remedial” legislation which has been passed in relevantly identical terms by the various States since Re Wakim.  As it turned out, it was not necessary for that issue to be decided.  The Attorney-General for the Commonwealth intervened to argue for the constitutional validity of certain provisions of the Commonwealth Cross-Vesting Act, in particular the provisions which enable the transfer of a proceeding from this Court to a Supreme Court and a section which states that there shall be no appeal in relation to such a transfer decision.

The parties filed about 350 pages of written submissions in relation to the various motions.  The hearing of the various motions took four days, the last such day being on 10 March 2000.

I will now summarise my conclusions.  They are that:

·the Banks have, by their cross-claim, validly invoked the jurisdiction of this Court;

·leave was validly granted to the respondents to begin and proceed against the applicant companies by way of the cross-claim;

·the question whether the relevant part of the Banks’ cross-claim is statute-barred is something which should be decided after a hearing;

·the applicants’ claims fall within this Court’s accrued jurisdiction, basically because they arise out of what is known as a “substratum of facts” which is common to the substratum from which the Banks’ federal cross-claim arises;

·the Banks’ cross-claims are not what is termed “colourable” i.e. obviously without substance, seeking only to attract this Court’s jurisdiction;

·those parts of the Commonwealth Cross-Vesting Act which the Banks challenge as being unconstitutional, are valid;

·the proceeding in this application arises out of or is related to various proceedings in the Supreme Court of Western Australia, and in particular CIV 2061 of 1996, and

·one Court only should decide the issues in dispute;

·it is more appropriate that this proceeding be heard and determined by the Supreme Court of Western Australia.  I have published fairly full reasons for that conclusion.  They include the following:

(a)the case raises mainly matters of “State” law;

(b)there is a very substantial overlap between the proceeding in this Court and action No CIV 2061 of 1996 in the Supreme Court;

(c)there is the strong possibility of substantial cost savings if this case is heard either at the same time or at about the same time as the Supreme Court proceedings;

(d)there may still be doubts about this Court’s accrued jurisdiction which could be the subject of an appeal by the unsuccessful party at the trial of the matter; and

(e)there are no doubts about the Supreme Court’s jurisdiction to hear all of the matters; the risk of wasting millions of dollars in costs can be avoided.

CARR J
7 APRIL 2000

FEDERAL COURT OF AUSTRALIA

Bell Group Ltd v Westpac Banking Corp [2000] FCA 439

FEDERAL COURT OF AUSTRALIA – jurisdiction – applicants invoked supposed jurisdiction of Federal Court under cross-vesting legislation – respondents, two years later, raised cross-claim based on s 52 of Trade Practices Act 1974 (Cth) – applicants in liquidation – cross-claimants did not, initially, apply for leave to begin cross-claim – Federal Court later granted leave nunc pro tunc to begin and proceed with cross-claim – whether Federal Court’s orders granting leave were within its jurisdiction – whether the Federal Court was a “Court” within the meaning of s 58AA of the Corporations Law able to grant leave to the respondents/cross-claimants pursuant to s 471B of that law – whether cross-claimants had validly invoked the Federal Court’s jurisdiction – whether failure to obtain such leave an impediment to the invocation of Federal Court’s jurisdiction – whether respondents’ cross-claims were statute-barred or colourable – whether the applicants’ claims (all of which were non-federal) fell within the Court’s accrued jurisdiction consequent upon the filing of the respondents’ cross-claim – whether the proceeding in this application arose out of or was related to certain proceedings in the Supreme Court of Western Australia – whether it was “more appropriate” that the proceeding be determined by the Supreme Court of Western Australia – whether the proceeding should be transferred to that Court in the interests of justice.

CONSTITUTIONAL LAW – whether ss 5(4) and 13 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) are constitutionally valid.

The Constitution (63 & 64 Vict. C.12), s 73
Judiciary Act 1903 (Cth) ss 79, 80, 39B(1A)(c)
Corporations Law ss 58AA, 471B, 565
Trade Practices Act 1974 (Cth) ss 52, 82, 86(1), 87(1), 87(1CA)
Corporations (Western Australia) Act 1990 (W.A.) s 42
Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) ss 5(4), 11, 13

Re Wakim; Ex parte McNally (1999) 73 ALJR 839 referred to
Westpac Banking Corporation v Paterson (1999) 167 ALR 377 followed
Elders Ltd v Swinbank [2000] FCA 56 distinguished
Dorrough v Bank of Melbourne Ltd (unreported, Federal Court of Australia, Cooper J, 1 August 1996) distinguished

Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328 distinguished
Hooper v Kirella Pty Ltd (1999) 167 ALR 377 referred to
Emanuele v Australian Securities Commission (1997) 188 CLR 114 followed
Cameron v Cole (1944) 68 CLR 571 referred to
Re Testro Bros Consolidated Ltd [1965] VR 18 followed
Gray v Raper (1866) LR 1 CP 694 followed
Re Sydney Formworks Pty Ltd [1965] NSWR 646 followed
BHG Nominees Pty Ltd v Ellis Young Investments Pty Ltd (1998) 16 ACLC 1,539 referred to
Re Saunders Ch [1997] 61 followed
Edensor Nominees Pty Ltd v Australian Securities and Investments Commission [1999] FCA 1722 referred to and distinguished
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 referred to

L Grollo Co Pty Ltd v Nu-Statt Pty Ltd (No.2) (1980) 47 FLR 44 referred to
Seymour v Southern Districts Video Pty Ltd (1985) 4 FCR 596 referred to
Trade Practices Commission v Manfal Pty Ltd (1990) 27 FCR 22 referred to

Abebe v The Commonwealth (1999) 162 ALR 1 referred to
Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group Ltd (1998) 193 CLR 502 referred to
Smith v Smith (1986) 161 CLR 217 distinguished
Turner v Official receiver in Bankruptcy [1999] FCA 1817 distinguished
Suehle v The Commonwealth (1967) 116 CLR 353 referred to

Sydlow v T G Kotselas Pty Ltd (1996) 144 ALR 159 referred to
Churcher v Edwardstown Carpets (reg) (1993) 11 ACLC 393 referred to
Putnin v Jenka Pty Ltd (1994) 12 ACLC 282 referred to
Queensland Steel & Sheet Pty Ltd v Clout (1994) 12 ACLC 444 referred to

Burgandy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 applied
National Union of Workers v Davids Distribution Pty Ltd (1999) 165 ALR 595 referred to
Wardley v State of Western Australia (1992) 175 CLR 514 followed
Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91 referred to
Calmao v Stradbroke Waters  Co-owners C-operative Society Limited (1989) 21 FCR 28 referred to

Bate v International Computers (Aust) Pty Ltd (1984) 2 FCR 526 referred to
Dorfler v Australia and New Zealand Banking Group Ltd (1991) 103 ALR 699 referred to
Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 referred to
ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248 Marks v GIO (1998) 73 ALJR 12 referred to
Accounting Systems 2000 (Developments) PtyLtd v CCH Australia Ltd (1993) 42 FCR 470 referred to
Fencott v Muller (1983) 152 CLR 570 followed
Stack v Coastal Securities (No. 9) Pty Ltd (1983) 154 CLR 261 followed
Cockle v Isaksen (1957) 99 CLR 155 applied
Re McJannet; Ex parte Minister for Employment, Training and Industrial Relations (Queensland) (1995) 184 CLR 620 referred to
Sue v Hill [1999] HCA 30 referred to

Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 referred to
McGinty v Western Australia (1995) 186 CLR 140 referred to
Pidoto v Victoria (1943) 68 CLR 87 at 130-131 applied
Victoria v The Commonwealth (1996) 187 CLR 416 applied
Rex v Commonwealth Court of Conciliation and Arbitration (1910) 11 CLR 1 applied

Crandell v Servier Laboratories (Aust) Pty Ltd [1999] FCA 1461 referred to
Delta Car Rentals Australia Pty Ltd v Bamco Villa Pty Ltd [2000] FCA 72 referred to
Overall v Permanent Trustee Co Ltd [1999] FCA 1385 referred to
Re Hamilton-Irvine (1990) 94 ALR 428 applied
Hoddell v Hoddell Pty Ltd [1999] WASC 156 referred to
Fox Enterprises Pty Ltd vFox (1995) 13 ACLC 573 at 576 referred to
McIntosh v National Australia Bank Ltd (1988) 17 FCR 482 distinguished
Gould v Brown (1998) 193 CLR 346 referred to
Coutts v Ronstan International Pty Ltd (unreported, FCA 4 June 1996) applied
Poignand v NZI Securities Australia Limited (1992) 109 ALR 213 referred to
Activate No 1 Pty Ltd v Equuscorp Pty Ltd [1999] FCA 619 referred to
Bristile Holdings Ltd v Giacci Brothers Pty Ltd [2000] WASCA 48 referred to
Charter Pacific Corporation Ltd v Commonwealth Scientific and Industrial Research Organisation (1998) 42 IPR 453 referred to

THE BELL GROUP LIMITED & ORS v WESTPAC BANKING

CORPORATION & ORS

WAG 3067 of 1995

CARR J
7 APRIL 2000
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAG 3067 OF 1995

BETWEEN:	THE BELL GROUP LIMITED ACN 008 666 993 (IN LIQUIDATION) & ORS 1st-9th Applicants
AND:	WESTPAC BANKING CORPORATION ACN 007 457 141 & ORS 1st-3rd Respondents
JUDGE:	CARR J
DATE OF ORDER:	7 APRIL 2000
WHERE MADE:	PERTH

A.       The Respondents’ Motion Filed on 1 July 1999

The Court orders and declares that:

1.It has jurisdiction to hear and determine the matters in the proceedings on the applicants’ seventh amended application and seventh amended statement of claim and the proceedings on the first, second and third respondents’ minute of amended defence and cross-claim dated 11 March 1999.

2.Costs of the motion be costs in the cause.

B.The Applicants’ Two Motions Filed on 15 July 1999

The Court orders and declares that:

1.The facts alleged in the application and statement of claim together with the facts alleged in the defence do not give the Court jurisdiction to hear and determine the matter constituted by the application, statement of claim and defence.

2.The Court has jurisdiction to hear and determine the matter constituted by the application, statement of claim, defence and cross-claim.

3.Costs of the motion be costs in the cause.

C.       The Applicants’ Motion Filed on 15 October 1999

The Court orders that:

1.The motion be dismissed.

2.Costs of the motion be costs in the cause.

D.       The Respondents’ Motion Filed on 8 December 1998

The Court orders and declares that:

1.For the purposes of these proceedings, the Federal Court of Australia is, and always has been, capable of granting leave under s 471B of the Corporations Law.

2.The motion be otherwise adjourned to a date to be fixed.

E.        The Applicants’ Motion Filed on 23 December 1999

The Court orders that:

1.Pursuant to s 5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) and s 86A(1) of the Trade Practices Act 1974 (Cth), Federal Court of Australia proceeding No WAG 3067 of 1995 and the matters for determination in that proceeding be and are hereby transferred to the Supreme Court of Western Australia.

2.Costs of the motion be costs in the cause.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAG 3067 OF 1995

BETWEEN:	THE BELL GROUP LIMITED ACN 008 666 993 (IN LIQUIDATION) & ORS 1ST-9TH Applicants
AND:	WESTPAC BANKING CORPORATION ACN 007 457 141 & ORS 1st–3rd Respondents

JUDGE:	CARR J
DATE:	7 APRIL 2000
PLACE:	PERTH

REASONS FOR JUDGMENT

Introduction

1. The Court has before it six motions on notice.  Five of those motions are concerned with whether the Court has jurisdiction to hear this application.  In the sixth motion the applicants seek orders that the application be cross-vested or transferred to the Supreme Court of Western Australia.

   Factual and Procedural Background

2. The applicants comprise some 29 companies (all in liquidation) in what was formerly known as “The Bell Group” and two liquidators who, between them, are the individual liquidators of 21 of those companies.  As a matter of convenience I shall refer to the corporate applicants as “the applicants” and I shall refer to the other applicants as “the liquidators”.

3. The first, second and third respondents are numerous banks grouped into two syndicates, being an Australian syndicate and a European syndicate.  There is another respondent, but I shall refer to those banks as “the respondents”.

4. On various dates in January and February 1990 the applicants executed 36 instruments to secure payment of various monies to the respondents.  I shall refer to those documents as “the Securities”. 

1. In the principal application, the applicants claim that some of their former directors and the respondents wrongly caused the applicants, at a time when they were insolvent or nearly insolvent, to execute the Securities and thereby give security over their assets in favour of the respondents.  The respondents subsequently realised approximately $300 million upon the sale of the assets over which they took such security.

2. The applicants claim that the Securities were taken in breach of their former directors’ duties, being a breach or breaches in which the respondents knowingly participated or assisted.  The applicants also rely upon those provisions of the former Companies Code and the Corporations Law which, by reference to bankruptcy principles, provide for certain transactions to be void against a liquidator.  It is common ground that the application, when viewed on its own, does not raise any federal matter.

3. By 24 December 1997 the pleadings had progressed to the stage where the applicants had, with appropriate leave, filed and served their sixth amended statement of claim and had served on the respondents four progressively revised versions of their proposed seventh amended statement of claim.  The respondents had, on 19 May 1997, filed a defence and cross-claim.  In essence, the cross-claim, at that stage, simply sought declarations that the Securities were valid. 

4. On 25 June 1997 an order was made, by consent, in the following terms:

   “The cross-claimants have leave to begin and proceed with the cross-claim against the first, second, fourth, fifth and sixth cross-respondents nunc pro tunc provided that the cross-claimants shall not attempt to enforce any judgment arising out of or in relation to the cross-claim without first obtaining leave to do so.”

5. On 27 January 1998 the solicitors for the respective parties agreed to an arrangement whereby the respondents would have leave to amend their defence and cross-claim by 6 February 1998 and that the applicants would have the right to object to any amendments to the cross-claim within 14 days. On 30 January 1998 the respondents filed and served an amended defence and cross-claim. By the amendments in both the defence and the cross-claim the respondents made some new pleas, raising (in the defence) issues of breach of contract and estoppel and (in the cross-claim) those same two issues plus allegations of the contravention by the applicants of s 52 of the Trade Practices Act 1974 (Cth). It is necessary to digress a little to understand the nature of these pleas.

6. At the time when the Securities were granted by the applicants, there were four main groups of external creditors of the Bell Group. The first group was the respondents, being owed approximately $262 million. The second group was known as the “BGNV Bondholders” (BGNV is an abbreviation for one of the companies in the Bell Group which acted as a financier). The BGNV Bondholders were owed approximately $400 million by BGNV which had virtually no other debts, being essentially a conduit for the on-loan of those funds to two other companies in the Bell Group whose names are abbreviated to “TBGL” and “BGF”. BGNV did in fact on lend those funds as contemplated. An issue between the parties is whether the debts thus owed to BGNV were subordinated to the debts owing to other creditors of companies in the Bell Group and, in particular, the debts owing to the respondents. The companies referred to as TBGL, BGF and BGNV are, respectively, the first, third and sixth applicants in this matter. The third group comprised the TBGL and BGF Bondholders. TBGL and BGF borrowed about $150 million from Heytesbury Securities Pty Limited, a company associated with the late Mr Robert Holmes à Court, (“Heytesbury”). The fourth group comprised other unsecured creditors who were owed money for goods and services. It seems to be common ground that the rights to repayment arising out of the bonds issued by TBGL and BGF to Heytesbury (of approximately $150 million) were, and still are, subordinated to the rights of other creditors, including the respondents. It is also common ground that the rights of the BGNV Bondholders were similarly subordinated. By their amendments to the defence and cross-claim the respondents claimed that the monies owing by TBGL and BGF to BGNV (“the on-loans”) also were, in 1990 (when the Securities were granted) and still are, subordinated to the debts owing to the respondents. [There are other pleas in relation to guarantees provided by TBGL, but the common theme is that repayment of any moneys owed to BGNV, the trustee for the BGNV Bondholders or the BGNV Bondholders themselves were all thus subordinated.] That claim was put as a matter of contract, as a matter of estoppel and (additionally in the cross-claim) in reliance upon s 52 of the Trade Practices Act. In so far as the respondents sought to rely upon s 52 of the Trade Practices Act in their cross-claim, they pleaded that if the BGNV on-loans were not subordinated, then the applicants had misled and deceived them (the respondents) in that regard, contrary to s 52. They further pleaded that by reason of such contravention, the applicants should only receive relief “which is predicated upon the basis that the loans are and were subordinated”.

7. On 18 May 1998 the applicants filed a notice of motion to strike out those amendments to the defence and cross-claim. One of the bases for that motion was that no leave of the type referred to in s 471B of the Corporations Law had been obtained by the respondents to bring the cross-claim against the applicants, all of whom were in liquidation.  On 23 June 1998 the respondents filed a motion seeking leave nunc pro tunc to amend the defence and cross-claim in terms of the document filed on 30 January 1998 and to begin and proceed with that cross-claim. 

8. On 24 June 1998 that motion was heard.  The applicants did not oppose the grant of leave of the type referred to in s 471B.  Orders were then made as follows:

   “The first to third respondents have leave nunc pro tunc to amend the defence and crossclaim in terms of the defence and crossclaim dated and filed on 30 January 1998.

   The first to third respondents have leave nunc pro tunc to begin and proceed with the crossclaim set out in the amended crossclaim dated and filed 30 January 1998 against the first, second, fourth to sixth cross-respondents provided that the cross-claimants shall not attempt to enforce any judgment arising out of or in relation to the crossclaim without first obtaining leave to do so.”

9. On 8 December 1998, the respondents filed a further notice of motion seeking orders that they:

   ·     have leave, if it be necessary, to begin and proceed with the crossclaim dated 3 December 1998 against the [applicants] provided that the cross-claimants shall not attempt to enforce any judgment arising out of or in relation to the crossclaim without first obtaining leave to do so; and

   ·     have leave to amend the defence and crossclaim in terms of a minute of proposed amendment dated 3 December 1998.

10. On 11 March 1999 the respondents filed another minute of proposed further amended defence and cross-claim bearing that date.

11. On 12 March 1999, on the respondents’ motion of 8 December 1998, the following orders were made:

    “6.  The respondents’ motion dated 8 December 1998, for leave to proceed with the cross-claim, to the extent that leave is required, be listed for hearing on 17 June 1999 at 9.15 am.

    . . .

    10.  The respondents have leave to amend their defence and, subject to leave to proceed with the cross-claim being granted, the cross-claim in terms of the minute of proposed amended defence and cross-claim dated 11 March 1999.”

12. As will be seen below, a major issue, raised in the motions which are at present before the Court, is whether by filing and serving that proposed further amended defence and cross-claim, or the preceding amended defence and cross-claim, the respondents have validly invoked the jurisdiction of this Court.

13. On 16 June 1999 I heard part of a motion by the applicants seeking leave to amend their statement of claim in terms of an eighth amended statement of claim of that date.  A week had been set aside for hearing that and other motions.

14. On the next day, 17 June 1999, the High Court of Australia handed down its decision in Re Wakim; Ex parte McNally (1999) 73 ALJR 839.

15. Shortly thereafter various directions were made with a view to resolving the question whether this Court has jurisdiction to hear this matter. 

    The motions before the Court

16. I shall first describe, briefly, the five motions concerning the jurisdictional issues.  They are as follows:

    (a)The respondents’ motion of 1 July 1999 for a declaration that this Court has jurisdiction to hear and determine the matters in these proceedings on the applicants’ seventh amended application and seventh amended statement of claim and the proceedings on the respondents’ minute of amended defence and cross-claim dated 11 March 1999.

    (b)Two motions filed by the applicants on 15 July 1999.  In the first such motion the applicants move for orders that the Court has no jurisdiction over the matter the subject of this proceeding, or, in the alternative, that the Court has jurisdiction over that matter.  In the second motion the applicants ask that the following questions be decided separately and before trial, namely:

    ·     Question 1: whether the facts alleged in the application and statement of claim with the facts alleged in the defence give the Court jurisdiction to hear and determine the matter constituted by the application, statement of claim and defence; and

    ·     Question 2: if the answer to question 1 is no, whether the facts alleged in the cross-claim give the Court jurisdiction to hear and determine the matter constituted by the application, statement of claim, defence and cross-claim.

    (c)A further motion filed by the applicants on 15 October 1999 seeking the setting aside of the orders granting leave (to begin and proceed with the cross-claim) on 25 June 1997, 24 June 1998 and 12 March 1999, and an order permanently staying, or, alternatively, dismissing or striking out the proceedings for want of jurisdiction.

    (d)The respondents’ motion, filed on 8 December 1998 and amended on 11 November 1999, seeking a declaration that, for the purposes of these proceedings, the Federal Court of Australia is a “Court” as defined in s 58AA of the Corporations Law capable of granting leave under s 471B of the Corporations Law, and an order that the respondents have leave, if it be necessary, to begin and proceed with the cross-claim dated 11 March 1999.

17. From the respective written submissions of the parties it became apparent that constitutional issues arose in these motions.  In short, the applicants contended that, to the extent that the respondents relied upon the Federal Courts (State Jurisdiction) Act 1999 (WA) (“the Validating Act”) as validating the orders granting them leave to begin and proceed with the cross-claim, that Act was invalid because it was inconsistent with Chapter III of the Commonwealth Constitution. Notices were served on the Attorneys as required by s 78B of the Judiciary Act 1903 (Cth). Only the Attorney-General for Western Australia (henceforth “the State Attorney”) indicated that he would intervene. The State Attorney’s submissions raised (as a further issue) a question of inconsistency between the Trade Practices Act and s 471B of the Corporations Law, to the extent that the latter purported to require leave for the bringing of proceedings under the Trade Practices Act against companies in liquidation. Further notices were served on the Attorneys under s 78B of the Judiciary Act, but no other Attorney intervened.  I now turn to the issues to be decided.

    Whether the respondents have invoked this Court’s jurisdiction

18. The respondents contended that when, on 30 January 1998, they filed their amended cross-claim, they invoked the procedures of this Court in a matter in respect of which jurisdiction had been conferred on the Court by s 86(1) of the Trade Practices Act and s 39B(1A)(c) of the Judiciary Act. Section 86(1) confers jurisdiction on this Court “… in any matter arising under this Act in respect of which a civil proceeding has … been instituted under this Part” [Part VI]. Section 39B(1A)(c) of the Judiciary Act has, since 17 April 1997, conferred jurisdiction upon this Court in any matter arising under any laws made by the Parliament.  It operates as a general conferral of jurisdiction in respect of such matters. 

19. The applicants argued that the filing by the respondents of their amended cross-claim on 30 January 1998 was not by agreement of the parties (because their agreement was not an informed agreement in that they were not told the nature and extent of the proposed amendments) and was done without leave of the Court.  The respondents contended that, at the very least (i.e. assuming, contrary to the respondents’ contentions, there was no such agreement or leave) the amended cross-claim stood as the record of their assertion of a federal claim which they wished the Court to hear.   That assertion was, so it was put, sufficient to found jurisdiction. 

20. The respondents further contended that on 24 June 1998, when this Court made the orders referred to above, it exercised federal jurisdiction by permitting the respondents’ claims to be litigated under the amended cross-claim. 

21. The applicants submitted in summary, that, as revealed by Re Wakim, they have not, in their application, invoked the original jurisdiction of this Court either at or since filing the application.  At the time when the amended cross-claim was filed, and again at the time when leave was granted to file that amended cross-claim, so the applicants submitted, this Court had no jurisdiction.  Federal jurisdiction, so the applicants contended, could not be attracted by the amended cross-claim in those circumstances.

22. Secondly, the applicants contended that the federal jurisdiction of this Court could not be enlivened until a valid order, under s 471B of the Corporations Law for leave to proceed, had been made by the appropriate Court in respect of the cross-claim.

    My Reasoning

23. In my view, the first of these arguments can be disposed of by reference to the recent decision of a Full Court of this Court in Westpac Banking Corporation v Paterson (1999) 167 ALR 377. In that case Westpac had sued Mr and Mrs Paterson in the Supreme Court of New South Wales, seeking possession of their home by reason of their default under the terms of a mortgage.  Mr and Mrs Paterson defended those proceedings and brought a cross-claim seeking relief under the Contracts Review Act 1980 (NSW). The proceedings were then transferred by the Supreme Court of New South Wales to the Federal Court, because they were thought to be related to other proceedings then pending in the Federal Court in which Mr and Mrs Paterson and others were applicants. After such transfer, Mr and Mrs Paterson filed an amended cross-claim raising a plea of contravention of s 52 of the Trade Practices Act.  In the wake of Re Wakim, a judge of the Federal Court, having heard the matter and reserved judgment, declared that the Court lacked jurisdiction to determine the Paterson proceedings.  Her Honour rejected the applicant’s submission that the Court had acquired jurisdiction by reason of the filing of the cross-claim which raised federal issues. 

24. The Full Court allowed the appeal and (at par 13) said this:

    “As a matter of principle, there is no reason why the court cannot acquire jurisdiction in a matter arising under a law of the Commonwealth by the filing of a cross-claim which asserts a claim founded on the Commonwealth legislation.  The filing of the cross-claim asserts the right and makes the claim to enforce the right part of the justiciable controversy between the parties.  Provided the cross-claim is not “colourable”, it attracts federal jurisdiction.”

25. The applicants made a formal submission to the effect that the decision of the Full Court in Westpac was wrong.  They also sought to distinguish that case from the present matter.  The essence of that distinction was said to be the clear common substratum of facts in Westpac, contrasted with what was said to be the separate and distinct nature of the cross-claim in this matter.

26. At this stage of my reasoning, all I propose to do is confirm that I regard Westpac as having decided that the fact that there may have been no federal claim before the Court before a cross-claim is filed, does not prevent the Court from obtaining jurisdiction, both in relation to the cross-claim and the applicants’ claims, subject to the latter being shown to fall within the accrued jurisdiction under the well-recognised principles.  I do not think that Westpac can be distinguished, in relevant principle, from this case.  Accordingly, I reject so much of the applicants’ contentions as depend on the proposition that this Court had to have jurisdiction at the commencement of the proceedings (i.e. when the applicants filed their application) and could not acquire it upon the filing of the respondents’ amended cross-claim.  In my view, applying Westpac, on the filing of the amended cross-claim, subject to the various issues discussed below, the jurisdiction of this Court was invoked to decide the cross-claim and so much of the subject matter of the application as fell, in accordance with the usual principles in that regard, within its accrued jurisdiction.

27. In further submissions, filed on 18 February 2000, the applicants sought to rely on another decision of a Full Court of this Court subsequent to Westpac.  That case was Elders Ltd v Swinbank [2000] FCA 56. In that case the applicants had sued a group of insurance companies in this Court seeking indemnity from them as the underwriters named in a contract of insurance. Orders had been made, under Order 29 rule 2 of the Federal Court Rules, for the separate decision of questions as to the liability of the respondent underwriters to indemnify the applicants under that insurance contract. Mansfield J answered those two questions in favour of the applicants and, but for the delivery subsequent to his Honour’s judgment, of the decision in Re Wakim, he would have proceeded to determine the outstanding issues in the application that would have included an assessment of damages.

28. After the High Court had delivered its decision in Re Wakim, the respondents sought leave to appeal against the declarations (that they were liable to indemnify the applicants) and other orders pronounced by Mansfield J.  Leave was required as, due to the outstanding issue remaining, his Honour’s determinations on the two separate issues were interlocutory.  The Full Court was asked to deal with the respondents’ motion only in so far as they sought leave to appeal on the ground that his Honour had no jurisdiction to deal with the proceeding.  That motion, so the Full Court noted, provoked an application by the applicants for leave to amend their statement of claim in order to raise issues under the Insurance Contracts Act 1984 (Cth).

29. The Full Court first dealt with a contention advanced by the applicants that a claim under the Insurance Contracts Act had been from the outset an issue in the application as originally framed.  It noted that, subject to the validity of that contention, it was clear enough that the Court only had jurisdiction to deal with the application by force of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (SA) and that, in view of the decision in Re Wakim, this Court had to be taken never to have had jurisdiction to entertain the application.

30. The applicants maintained that a claim to interest under s 57 of the Insurance Contracts Act had already been sufficiently raised in the proceedings as to make the application, from the outset, one within the Court’s original jurisdiction. 

1. The Full Court found that this had not been the case. The applicants had claimed damages on one basis only (loss of profits) which, so the Full Court held, was a basis inconsistent with any reliance on s 57 of the Insurance Contracts Act. Furthermore, it could not be said that the only compensation available to the applicants for loss caused by being kept out of the indemnity monies would be by way of an award of interest under s 57. The subject matter of the application to amend, a proposed claim based on s 13 of the Insurance Contracts Act, was also held by the Full Court not to have already arisen so as to have enlivened the Court’s original jurisdiction from the inception of the proceeding.

2. The applicants in the present matter relied heavily on the following paragraph (para 40) from the Full Court’s reasons:

   “Federal jurisdiction not having already been enlivened, there is no basis upon which the Court has any authority to exercise the power of amendment under O 13 r 2(2) and (6).  It is not to the point that, if this Court’s original jurisdiction is properly enlivened and application is then made to amend the proceedings to include a non-federal claim, one of the matters governing whether such an amendment should be allowed is whether the non-federal claim forms part of the entire controversy of which the federal claim is also a part.  It is a fallacy to say, as the applicants have, that the institution of any proceeding in this Court, though confined in express terms to non-federal claims, necessarily invokes this Court’s original jurisdiction to determine any federal claim not explicitly raised in the proceeding, just because it might be found, on analysis, to be part of the whole controversy of which the non-federal claims explicitly raised in the proceedings are themselves part.”

3. The Full Court held that it was clear that the orders made by Mansfield J were made without jurisdiction, that the Full Court lacked jurisdiction to take any further action in the proceedings other than to recognise the want of jurisdiction by setting aside the orders on that ground.  It proceeded to do so.

4. In my opinion, the Elders decision is to be distinguished from the present case and from the decision in Westpac.  In Westpac, as in the present matter, an amended cross-claim was filed raising pleas which included a plea of contravention of s 52 of the Trade Practices Act. As the Full Court noted in that case (at para 10) until the filing of that amended cross-claim the proceedings in the Federal Court were liable to be dismissed for want of jurisdiction.  The filing of the cross-claim, however, invoked federal jurisdiction.  Neither Westpac nor the present matter was or is one in which the respondents were or are contending that they require leave to amend their pleading in order to attract federal jurisdiction. 

5. It would seem, with respect, that the Full Court in Elders recognised that Westpac was a different sort of case when they referred to it briefly at para 13 of their reasons. 

6. In my view, nothing decided in Elders casts any doubt upon what was decided in Westpac and, as I have mentioned above, I propose to apply Westpac  to resolve this part of the argument in the present case.

7. The applicants placed some reliance on cases such as Dorrough v Bank of Melbourne Ltd (unreported, Federal Court of Australia, Cooper J, 1 August 1996) and Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328 for the proposition that this Court cannot give a respondent leave to amend its pleading and to file a cross-claim if there is no proceeding involving a matter within its jurisdiction at the time when the cross-claim is to be filed pursuant to the application for leave to do so and when such application is made. I did not read the applicants’ written submission in that regard as taking the point any further than the issue which I have discussed above and to which I have applied Westpac to resolve.  However, in oral argument it appeared (see page 19 of the transcript of 18 November 1999) that a formal point was being taken about the cross-claim not being filed in accordance with the Federal Court Rules.  The point taken was that although the claims made in the cross-claim might have been within this Court’s jurisdiction if they had been made in an originating application, they could not have been made in a cross-claim.  In my view, that submission ought not to be accepted.  By the document filed (the amended defence and cross-claim) the respondents invoked the Court’s jurisdiction.  If there was any defect or irregularity, it was one which the Court could remedy and did not go to jurisdiction.  Dorrough is distinguishable (as the Full Court noted in Crayford at 335) on the basis that in that matter the principal application had been settled at the time when the cross-claim was filed.  In my view, subject to the reservations which I have mentioned above, when the respondents filed their amended cross-claim they asserted a claim arising under a law of the Parliament, viz the Trade Practices Act – cf Hooper v Kirella Pty Ltd (1999) 167 ALR 358 at paras 55-59 (another decision of a Full Court of this Court).

8. The next issue is whether, as the applicants contend, obtaining leave under s 471B of the Corporations Law was a pre-requisite to the invocation by the respondents of this Court’s jurisdiction.

   Whether leave under the Corporations Law was a pre-requisite to the invocation of this Court’s jurisdiction

9. The applicants submitted that s 471B of the Corporations Law placed “a bar in front of the right to commence an action”, so that it was necessary to obtain an order from a court of competent jurisdiction to remove that bar before commencing a relevant action.  An action commenced without such leave was, so it was submitted, on the authorities, illegal.  The applicants contended that this Court could not have jurisdiction unless the requisite leave had first been obtained.

10. The respondents contended that the leave requirement was procedural and did not constitute a jurisdictional bar. 

    My Reasoning

11. Section 471B of the Corporations Law provides as follows:

    “471B   While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

    (a)a proceeding in a court against the company or in relation to property of the company; or

    (b)enforcement process in relation to such property;

    except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.”

12. A similar provision can be found in s 459P of the Corporations Law which deals with who may apply to the Court for a company to be wound up in insolvency. Section 459P(2) provides as follows:

    “(2)   An application by any of the following, or by persons including any of the following, may only be made with the leave of the Court:

    (a)a person who is a creditor only because of a contingent or prospective debt;

    (b)a contributory;

    (c)a director;

    (d)the Commission.”

13. In Emanuele v Australian Securities Commission (1997) 188 CLR 114 at 150 Kirby J described the language of s 459P as “unusually emphatic” and referred to the language of subsection (2) as suggesting an element of strictness in compliance. The question in Emanuele was whether a Full Court of this Court had erred in granting leave nunc pro tunc to the Australian Securities Commission to apply to the Federal Court for orders winding up certain companies in insolvency. The Commission had not either applied for or obtained leave before making that application or at the hearing at first instance when the application had been granted. It would appear that s 459P(2) had not been referred to the primary judge. On appeal to the Full Court, that Court made an order that the Commission have leave nunc pro tunc pursuant to s 459P(2) to apply to wind up the relevant companies.

14. The High Court of Australia, by majority, held that an order granting leave under s 459P(2) could be made nunc pro tunc.  Brennan CJ was one of the two dissenting judges, holding that the failure to obtain leave was a fundamental irregularity, the result of which was, on application of the principles explained in Cameron v Cole (1944) 68 CLR 571, that the order made without leave could be set aside ex debito justitiae on the application of a person with a sufficient interest – see p 124. At the same page his Honour made the following observation, which I consider to be helpful in the present matter:

    “It is a false dichotomy to divide all statutory provisions affecting the commencement of legal proceedings into provisions that deny jurisdiction and provisions that are procedural.  Whatever may be the position in courts of inferior jurisdiction, it is not the true dichotomy in courts of superior jurisdiction where an order made in proceedings irregularly commenced or conducted will not be held to be a nullity though it might be set aside ex debito justitiae on the application of a person with a sufficient interest.”

15. His Honour had previously made it clear (see p 122) that he considered that leave could not be granted nunc pro tunc after an application to wind up a company in insolvency had been made. 

16. Gaudron J, who was also in dissent, differed from Brennan CJ in that regard.  At p 139 her Honour said this:

    “It follows, in my view, that although leave to make a winding up application may be granted at any point prior to, or simultaneously with, the making of a winding up order, it may not be granted thereafter, whether by the judge who made the order or by a court exercising appellate jurisdiction.”

17. Toohey J (with whom Dawson and Kirby JJ agreed) expressly adopted (see p 129) the approach taken by Sholl J to the interpretation of s 199 of the Companies Act 1961 (Vic) in Re Testro Bros Consolidated Ltd [1965] VR 18. Section 199 of the Companies Act provided that no action should be commenced or continued without the leave of the Court after the service of the notices which comprised the first step in proceedings to appoint an official manager under Part IX of the Companies Act.  Sholl J in Testro Bros reviewed authorities stretching back to Gray v Raper (1866) LR1 CP 694.  At p 33 his Honour said this:

    “There is … a uniform set of authorities in Australia, extending over seventy years, for the granting of leave under such sections, nunc pro tunc … Before the Judicature Acts, it was held that the omission to obtain leave to continue a common law action after a winding-up order could not be made the subject of a plea in defence to the action, but that application for a stay must be made to the Court having winding-up jurisdiction … Since the Judicature Acts, no doubt an application to stay could be made in the Court in which the action is pending, and it may be that the absence of leave could also be pleaded as a defence.  But clearly the absence of leave is not a matter going to jurisdiction…”

18. This passage from Sholl J’s reasons in Testro was set out in Toohey J’s reasons in Emanuele at 128. At 129 Toohey J, after noting that Sholl J’s approach had been followed by McLelland CJ in Eq in Re Sydney Formworks Pty Ltd [1965] NSWR 646 said:

    “I respectfully adopt what is said by Sholl J as the approach to be taken to the legislation now under consideration.  To the extent that National Mutual Fire Insurance Co Ltd v The Commonwealth [1981] 1 NSWLR 400 takes a different view, it should not be followed.”

19. I think it is helpful to note his Honour’s reference to Re Sydney Formworks Pty Ltd, because in that case McLelland CJ in Eq (whose expertise in this field and the like expertise of Sholl J was given due recognition by Kirby J at 153) had to consider whether leave could be granted nunc pro tunc under s 218 of the Companies Act 1936 to commence an action for damages for personal injury against a company in liquidation. Section 218 may be regarded as a predecessor of s 471B of the Corporations Law.  McLelland CJ followed a line of authorities which included Testro and the cases considered in Testro and held that the Court administering the liquidation could grant leave nunc pro tunc to continue an action which had been commenced without leave under the section. 

20. The assistance which I see the decision in Re Sydney Formworks Pty Ltd and the reasoning in Emanuele providing to the resolution of the issue before me derives from the fact that it appears to be accepted that the principles applicable to the significance or otherwise of instituting proceedings without leave are the same, whether the underlying principal application or other proceedings be in the nature of a petition to wind up a company in insolvency (as in Emanuele), an action against a company in respect of which proceedings have begun to appoint an official manager (as in Testro) or an action against a company in liquidation (as in Re Sydney Formworks Pty Ltd).  There is nothing in the reasoning in Emanuele which suggests any difference whether of principle or in policy considerations between the various types of leave application. 

21. Although, technically speaking, none of the authorities would appear to be binding on me in the present matter, I think that they point sufficiently clearly in favour of the proposition that a failure to obtain leave under s 471B of the Corporations Law did not preclude this Court from having jurisdiction.  I note that in the passage cited above, Brennan CJ observed that such proceedings, irregularly commenced or conducted, would not be a nullity.

22. I note also that in BHG Nominees Pty Ltd v Ellis Young Investments Pty Ltd (1998) 16 ACLC 1,539 an order was made nunc pro tunc granting leave to institute and proceed with an application under the Trade Practices Act against a company being wound up.  Weinberg J, in an ex tempore judgment, regarded the approach adopted in Emanuele and Testro as being applicable (see p 1543).  Counsel for the party opposing the grant of leave in that matter conceded that the Court had power to make the orders asked. 

23. If further reassurance be required on this issue, I think that it is to be found in the reasons for judgment of Lindsay J in Re Saunders Ch [1997] 61.  In that case, proceedings in tort and contract for damages had been brought against the defendants before it was discovered that they had been made bankrupt.  The plaintiffs then sought leave under s 285(3) of the Insolvency Act 1986 (UK) nunc pro tunc to commence the proceedings.  Section 285(3) is expressed in terms very similar to s 471B of the Corporations Law.  Lindsay J reviewed an extensive range of decisions, both English and from several Commonwealth jurisdictions, and (at 83) held that leave might, in appropriate circumstances, be given notwithstanding that the proceedings had already been commenced.

24. For the foregoing reasons, in my view, even though the respondents had not obtained leave before filing their amended cross-claim, that factor was not a bar to the invocation of this Court’s jurisdiction.

    The Status of the Orders Granting Leave

25. As the decision in Re Wakim has now revealed, if the orders of 24 June 1998 and 12 March 1999 respectively, granting leave to the respondents to begin and proceed with their cross-claim, had as their only jurisdictional basis s 42(3) of the Corporations (Western Australia) Act 1990 (WA) or any other corresponding or like State provision, those orders would have been made without jurisdiction. Even then, the orders would not be nullities – see the authorities discussed above. They could, as Brennan CJ observed in Emanuele, be set aside as a matter of right on the application of a person with a sufficient interest.  I now turn to the question whether those orders had any other jurisdictional basis.

    Whether this Court had jurisdiction and power to grant to the respondents leave to proceed

    Applicants’ Contentions

26. In summary, the applicants contended that the orders granting leave were made without jurisdiction or power and were thus nullities. This was because, “…the “Court” which must give leave to proceed under section 471B can by definition only be the Federal Court ‘… when exercising the jurisdiction of Western Australia’.” This was a reference to the definition of “Court” in s 58AA(1) of the Corporations Law (set out below). The Federal Court could not, so the applicants submitted, exercise the jurisdiction of Western Australia and never could have done so. The Federal Court, like the High Court, could only exercise federal judicial power, and must do so in conformity with the Constitution.

27. The applicants contended that an order giving leave to proceed against a company in liquidation is a civil matter arising under the Corporations Law of Western Australia.  Section 42(3) of the Corporations (Western Australia) Act purported to confer jurisdiction on the Federal Court with respect to civil matters arising under the Corporations Law of Western Australia and was invalid.  The result was that no jurisdiction had been conferred upon the Federal Court with respect to civil matters arising under the Corporations Law, including jurisdiction upon an application for leave to proceed under s 471B.  Where an insolvent applicant was incorporated and/or wound-up in Western Australia, the Supreme Court of Western Australia was, so the applicants submitted, the only court able to grant leave under s 471B.

    Respondents’ Contentions

28. The respondents filed two sets of written submissions on this point.  The first set, filed on 8 November 1999, pre-dated the decision of a Full Court of this Court in Edensor Nominees Pty Ltd v Australian Securities and Investments Commission [1999] FCA 1722, delivered on 10 December 1999. In those submissions the respondents contended that s 58AA of the Corporations Law, which defines the expressions “Court” and “court”, was not a section which conferred jurisdiction and, for that reason, did not offend against the constitutional principles explained in Re Wakim.

29. Section 58AA relevantly provides as follows:

    “SECT 58AA Meaning of “court” and Court”

    58AA  (1)  Subject to subsection (3), in this Law:

    “court” means any court when exercising the jurisdiction of this jurisdiction;
    “Court” means any of the following courts when exercising the jurisdiction of this jurisdiction:

    (a)     the Federal Court;
         (b)     the Supreme Court of this or any other jurisdiction;
         (c)     the Family Court of Australia;  
         (d)     …

    (2)Except where there is a clear expression of a contrary intention (for example, by use of the expression “the Court”), proceedings in relation to a matter under this Law may, subject to the Acts mentioned in subsection (3), be brought in any court.        

    (3)The jurisdiction that courts have in relation to matters under this Law is dealt with in Part 9 of each of the following:

    (a)the Corporations Act 1989;

    (b)the Corporations (New South Wales) Act 1990 of New South Wales;

    (c)the Corporations (Victoria) Act 1990 of Victoria;

    (d)the Corporations (Queensland) Act 1990 of Queensland;

    (e)the Corporation (Western Australia) Act 1990 of Western    Australia

    (f)     the Corporations (South Australia) Act 1990 of South Australia;

    (g)the Corporations (Tasmania) Act 1990 of Tasmania;

    (h)the Corporations (Northern Territory) Act 1990 of the Northern Territory.

    (4)The matters dealt with in those Parts of those Acts include the applicability of limits on the jurisdictional competence of courts.

30. Section 42(3) of the Corporations (Western Australia) Act1990 (WA) provides that jurisdiction is conferred on the Federal Court with respect to civil matters arising under the Corporations Law of Western Australia.  I interpolate to observe that as Re Wakim shows, the subsection cannot achieve that result.

31. The respondents submitted that the purpose of s 58AA was to distinguish between superior courts, being those which were defined to be “Courts” and courts generally which were defined to be “courts”.

1. Further, so the respondents contended, in the phrase “when exercising the jurisdiction of this jurisdiction”, the word “jurisdiction” first occurring had its ordinary meaning of “authority to decide”, whereas the words “this jurisdiction”, as defined in s 9 of the Corporations Law, meant Western Australia, including its coastal sea.  I omit, at this stage, any reference to the extensive citation of authorities by the respondents in their submissions. 

2. The next stage in the respondents’ first set of written submissions was to submit that s 79 of the Judiciary Act1903 (Cth) “picked up” s 471B of the Corporations Law so as to be binding upon all courts exercising federal jurisdiction in Western Australia.

3. The respondents argued that when, on 25 June 1997 and 24 June 1998 respectively, this Court granted leave pursuant to s 471B to proceed with their claims under the Trade Practices Act, it was exercising federal jurisdiction conferred by s 86(1) of that Act and s 39B(1A) of the Judiciary Act. There was a procedural requirement to obtain such leave; the source of that requirement being s 471B of Corporations Law of Western Australia. That procedural requirement was picked up by s 79 of the Judiciary Act. The Federal Court, when granting leave on each of those occasions, was exercising its authority to decide an issue whose source was a law of Western Australia. Accordingly, so it was submitted, the Federal Court was and is a “Court” exercising the jurisdiction of the jurisdiction of Western Australia within the meaning of s 58AA, because it was and is adjudicating on an immunity from suit given to a company in liquidation by a law of Western Australia which was made applicable by s 79 of the Judiciary Act.  The respondents submitted that nothing in Re Wakim affected these contentions because, so it was submitted, Re Wakim was concerned with the purported conferral of jurisdiction, not the distinction between superior and inferior courts which was the work carried out by s 58AA of the Corporations Law. 

4. The respondents acknowledged that this part of their submissions (i.e. the part relating to Re Wakim) was affected by the Full Court decision in Edensor, a decision to which I now turn. 

5. Edensor was the quite well-known case concerning a takeover by Yandal Gold Pty Ltd (“Yandal”) of Great Central Mines Ltd (“Great Central”). The Australian Securities and Investments Commission brought proceedings in this Court for declarations and other relief on the basis that Yandal and others had contravened s 615 of the Corporations Law.  As a result of subsequent amendment to the pleadings, declarations and ancillary relief were also sought under the Trade Practices Act on the basis that Yandal and other respondents had also contravened s 52 of that Act. The learned primary judge found that there had been breaches of s 615 of the Corporations Law and, among other provisions, s 52 of the Trade Practices Act.  One of the respondents, Edensor Nominees Pty Ltd, appealed to a Full Court of this Court.  A preliminary point arose on the appeal as a result of the High Court decision in Re Wakim. The appellant challenged orders, made under ss 737 and 739 of the Corporations Law, that it pay to shareholders in Great Central an amount of $28.5 million. Both of those sections conferred upon “the Court” power to make the orders to which they refer. The appellant contended that s 58AA by defining “Court” as including the Federal Court “when exercising the jurisdiction of this jurisdiction” purported to confer State jurisdiction on this Court which, under the principles explained in Re Wakim, was not constitutionally possible. 

6. The Full Court agreed with the primary judge that there was a common substratum of fact which conferred on the Federal Court jurisdiction to decide the whole “matter”, i.e. including the claims made under the Trade Practices Act and to decide whether there had been a contravention of s 615 of the Corporations Law.  The Full Court then turned to what it described as “the real question”.  It said (at paragraph 24):

   “So the real question, in our opinion, is not whether the reference to the Federal Court in s 58AA is invalid as such, but whether, when this Court is seised of a “matter” by force of the accrued jurisdiction conferred upon it by the Parliament of the Commonwealth, this Court then exercises the jurisdiction of the State in which the relevant corporation is incorporated.”

7. The Full Court recognised (at paragraph 25 of its reasons) that when a federal court exercises accrued jurisdiction it is exercising federal jurisdiction.  In that paragraph, the Full Court set out a passage from the reasons for judgment of McHugh J in Re Wakim at para 293-294.  That passage included the following two sentences:

   “But the jurisdiction which the legislation in the present proceedings [those provisions of the Corporations Act 1989 (Cth) and the Corporations (New South Wales) Act 1990 (NSW) which purported to give the Federal Court of Australia jurisdiction to exercise state judicial powers] purports to confer upon the federal courts is not accrued federal jurisdiction.  It is an attempt to confer State jurisdiction in respect of controversies that fall outside the realm of federal jurisdiction.”

8. The Full Court in Edensor then observed as follows:

   “The last two sentences of this passage are an apt description of the present case. Section 58AA of the Corporations Law, when read with the substantive provisions to which it attaches, including ss 737 and 739, purports to confer on this Court the jurisdiction of the State of Victoria. It empowers the Court to make orders under provisions such as ss 737 and 739 only when it is “exercising the jurisdiction” of that State. That is not accrued federal jurisdiction but State jurisdiction.”

9. The Full Court then assumed, for the purposes of argument, that the Commission was the Commonwealth and rejected an alternative submission that s 39B of the Judiciary Act applied so as to give the Federal Court jurisdiction to make orders under ss 737 and 739. It did so by stating that the alternative submission had “the same vice” as the principal submission, i.e. that:

   “…the Court would be exercising the jurisdiction of the State of Victoria purportedly conferred by a State Act.”

10. The Full Court then considered and excluded s 22 of the Federal Court of Australia Act 1976 (Cth) as being a source of power for the orders made at first instance. The Court concluded its reasoning (in paragraph 33) in the following terms:

    “There may be cases, the present is not one of them, where the power in a State statute is expressed in general terms or in ways which permit the Court to exercise the power that a State statute confers. Whether that is the case is a question of construction. It may involve considerations such as those that arise when s 79 of the Judiciary Act 1903 is invoked.  Cf Davies v Federal Commissioner of Taxation (1989) 89 ATC 4377 and the cases there discussed.”

11. In further submissions filed after the Full Court decision in Edensor, the respondents submitted that, essentially for the reasons advanced in their first set of submissions, the decision in Edensor was clearly wrong.  The respondents contended that Edensor is authority only where s 79 does not apply, and that s 79 had to apply, to make s 471B of the CorporationsLaw applicable at all.  The respondents pointed out that in Edensor ss 737 and 739 of the Corporations Law could only ever have applied by reason of s 79 of the Judiciary Act.

12. The respondents submitted that if they had applied to the Supreme Court of Western Australia for leave to proceed with their claims under the Trade Practices Act, the Supreme Court would be exercising federal jurisdiction.  They relied upon Hooper and Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457, and Re Wakim at paragraphs 138-140.

13. The respondents further submitted that if, as the Full Court held in Edensor, a court is only “exercising the jurisdiction of this jurisdiction” when it is exercising State jurisdiction, then in the circumstances referred to in the immediately preceding paragraph the Supreme Court would not be a “Court” within the definition contained in s 58AA. The result would be that, assuming Edensor to be correct and that s 471B was “picked up” and made applicable to the present proceedings by s 79 of the Judiciary Act, there is no court able to grant leave pursuant to s 471B in respect of the present matter, or indeed in any other matter in federal jurisdiction. Accordingly, so the respondents contended, s 471B could not be picked up by s 79 because s 86 of the Trade Practice Act and s 39B(1A)(c) of the Judiciary Act “otherwise provide(s)”. The respondents submitted that such a result i.e. that leave can be obtained from no court whatsoever, was inconsistent with, and irreconcilable with, the jurisdiction conferred on the Federal Court by s 86 of the Trade Practices Act and s 39B(1A)(c) of the Judiciary Act.  But, on the hypothesis that Edensor was correct, the respondents argued that s 79 does not apply to s 471B, and there was no requirement to obtain leave.

    My Reasoning

14. Sections 79 and 80 of the Judiciary Act provide as follows:

    “State or Territory laws to govern where applicable

    79. The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.

    Common law to govern

    80.  So far as the laws of the Commonwealth are not applicable or so far as their provisions are insufficient to carry them into effect, or to provide adequate remedies or punishment, the common law in Australia as modified by the Constitution and by the statute law in force in the State or Territory in which the Court in which the jurisdiction is exercised is held shall, so far as it is applicable and not inconsistent with the Constitution and the laws of the Commonwealth, govern all Courts exercising federal jurisdiction in the exercise of their jurisdiction in civil and criminal matters.”

15. When the respondents filed their amended cross-claim they thereby invoked federal jurisdiction by asserting claims arising under the Trade Practices Act – see the Full Court decisions in Westpac at paragraphs 11-14 and Hooper at paragraphs 55-59. I have already held, earlier in these reasons, that the fact that the respondents had not obtained leave under s 471B of the Corporations Law was not a bar to such invocation of jurisdiction.  I have also held that leave may be granted nunc pro tunc. In my view, by the operation of s 79 of the Judiciary Act, s 471B of the Corporations Law became binding on this Court in its exercise of the jurisdiction thus invoked, see L Grollo Co Pty Ltd v Nu-Statt Pty Ltd (No.2) (1980) 47 FLR 44; Seymour v Southern Districts Video Pty Ltd (1985) 4 FCR 596; Trade Practices Commission v Manfal Pty Ltd (1990) 27 FCR 22.

16. The next question is whether s 79 may be applied in such a manner that this Court may grant the leave referred to in s 471B? That question did not arise in the cases which I have cited immediately above, because the corresponding section in those cases specified the Supreme Court of the relevant State as being the Court whose leave was required to begin or proceed with a proceeding.

17. Section 58AA makes it clear that the reference to the Court in s 471B includes the Federal Court. But that reference is, as discussed above, qualified so as to read “the Federal Court when exercising the jurisdiction of this jurisdiction”. I shall refer to that qualification as “the qualifying phrase”.

18. The Full Court in Edensor (at paragraph 33) expressly put to one side cases in which s 79 of the Judiciary Act was invoked.  It has been invoked in this case.  Accordingly, I do not consider that I am bound to apply in this matter the construction given to the qualifying phrase by the Full Court in Edensor.

19. Furthermore, I think that there is a significant and relevant distinction in the character of the powers conferred by ss 737 and 739 of the Corporations Law (being the relevant sections in Edensor) on the one hand and the power to grant leave which is referred to in (but not, in my opinion, conferred by) s 471B. Incidentally, I would not regard ss 737 and 739 of the Corporations Law as sections which purport to confer jurisdiction on this Court.  The purported conferral of jurisdiction is to be found in s 42(3) of the Corporations (Western Australia) Act, one of the provisions struck down in Re Wakim. 

20. The reasoning in the line of cases cited above, starting with Grollo, and the reasoning in the three Full Court cases of Hooper, Westpac and Edensor and the obvious intent of s 471B can, I think, all be reconciled by taking an approach along the following lines. Section 79 of the Judiciary Act picks up s 471B to impose a procedural bar on beginning or proceeding with proceedings against companies being wound up in insolvency or by the Court or in respect of which a provisional liquidator is acting, without the leave of the Court. The reference to “a proceeding in a court” in s 471B can be seen (in s 58AA(1)) as meaning any court when exercising the jurisdiction of this jurisdiction. The same qualification applies to the term “Court” in s 58AA(1).

21. The term “jurisdiction” when first used in the qualifying phrase must, I think, have its ordinary meaning of “authority to decide”: Abebe v The Commonwealth (1999) 162 ALR 1 at para 24 and the other authorities there cited. The term “jurisdiction” when secondly used must be used in a geographical sense, otherwise the reference to “…the coastal sea of the State” in the definition of “jurisdiction” in s 9 of the Corporations Law would not make sense. There is no contrary intention to be found in s 58AA. Kirby J, in Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group Ltd (1998) 193 CLR 502 at paragraph 22, thought that that was clearly the case and that the expression “the jurisdiction of this jurisdiction” meant the jurisdiction of Australia in which the Law was relevantly operating i.e. the jurisdiction of a component part of the Commonwealth such as New South Wales.

22. The qualifying phrase should be construed, for the purposes of deciding this case, as meaning “when exercising authority to decide in Western Australia”.  I would distinguish cases such as Smith v Smith (1986) 161 CLR 217 and Turner v Official Receiver in Bankruptcy [1999] FCA 1817 on two bases. First, because in the present matter when granting leave to the respondents to proceed with their cross-claim under s 52 of the Trade Practices Act, this Court was exercising federal jurisdiction. Secondly, in s 31 of the Family Provision Act 1982 (NSW) and the relevant part of the Real Property Act 1900 (NSW) in which s 138 is to be found (being the respective relevant sections in those cases), only the Supreme Court of New South Wales was specifically referred to.

23. Accordingly, so construed, s 471B (as picked up by s 79 of the Judiciary Act) operates as a stay of proceedings, in this case, in the Federal Court, without leave of a “Court”. If and when the Federal Court grants leave for proceedings in this Court to be begun or proceeded with, then s 471B is given effect as required by s 79 of the Judiciary Act. The discretionary principles or factors to which a State Court would normally give consideration would, again by virtue of ss 79 and 80 of the Judiciary Act, in like manner be taken into consideration by the Federal Court when deciding to grant leave, with or without conditions – see Suehle v The Commonwealth (1967) 116 CLR 353 at 356. In this case, leave was granted on the usual condition preventing enforcement of any judgment without further leave. There was no need to have recourse to any purported conferral of State jurisdiction or power on this Court to grant leave to proceed. The granting of leave is the exercise of a power, or possibly merely a dispensation, in the course of exercising jurisdiction. Here there was no doubt, in my opinion, that once the respondents filed their amended cross-claim, this Court’s federal jurisdiction was invoked. But its exercise was conditioned by “picked up” State law. The question is whether this Court fell within the description of the courts which, by exercising the power or dispensation, satisfied that condition. As a matter of statutory construction, I think that it is quite clear that it did. It is possible that, when invoking federal jurisdiction, in this case under s 86 of the Trade Practices Act and s 39B(1A)(c) of the Judiciary Act, against a corporation in liquidation leave is not required, although it has traditionally been sought and granted.  It is not necessary for me to decide that issue.  I have worked on the assumption that such leave is required. 

24. The applicants contended that the respondents (as cross-claimants) also required leave to begin or proceed with the cross-claim (and amendments) against the liquidators. They did not contend that such leave was required under s 471B of the Corporations Law.  I do not propose to review the authorities in detail here.  First, because in my view the point does not go to jurisdiction, for the reasons which I have already given.  Secondly, the authorities relating to proceedings brought against a liquidator personally do not, in my opinion, clearly demonstrate that leave is required before such proceedings may be brought, but that such proceedings will be stayed where they wrongfully impede the processes of winding up – see for example Sydlow v T G Kotselas Pty Ltd (1996) 144 ALR 159 at 165, a case in which the cross-claimants took the precaution of applying for leave. Thirdly, valid orders have been made for leave to proceed against the corporate applicants which, in practical terms would bind the liquidators. If I am wrong, and leave is required, it can be obtained nunc pro tunc without affecting the issue of this Court’s jurisdiction.

25. In my view, each of the orders granting leave to begin and proceed with the cross-claim is and always has been valid.

26. In those circumstances there is no need for me to consider the State Attorney’s submissions that s 471B of the Corporations Law was inconsistent (within the meaning of s 109 of the Constitution) with those provisions of the Trade Practices Act which permit a litigant to commence proceedings against another party for a breach of that Act. This was part of a submission that, if s 471B were thereby rendered inapplicable, there would be no need to consider the constitutional validity of the Validating Act. It was an interesting vignette to hear a State Attorney-General arguing (for perfectly understandable reasons) that a State law was inoperative for direct inconsistency with a Commonwealth law.

    Is There a Further Jurisdictional Bar?

27. During the course of submissions on the third day of the hearing of these motions, junior counsel for the applicants raised the question whether, even if I held that the applicants’ claims were within the accrued jurisdiction of this Court, there might be a further jurisdictional bar.  This was said to arise out of a line of cases including Churcher v Edwardstown Carpets (reg) (1993) 11 ACLC 393, Putnin v Jenka Pty Ltd (1994) 12 ACLC 282 and Queensland Steel and Sheet Pty Ltd v Clout (1994) 12 ACLC 444. This line of cases concerned proceedings brought initially in inferior courts. Putnin (a decision of the Full Court of the Supreme Court of Western Australia) and Queensland Steel (a decision of the Queensland Court of Appeal) were each cases where a liquidator was suing to recover preferential payments as being void as against him under s 565 of the Corporations Law.  The proceedings had been brought in the District Court of Western Australia and in a Magistrates Court in Queensland respectively.  The Full Court of the Supreme Court of Western Australia and the Queensland Court of Appeal held that such a proceeding was a matter arising under the Corporations Law and fell within s 42 of the respective Corporations Acts.  The Supreme Court of Western Australia held (at 287) that s 42 was:

    “… an exhaustive denomination of the courts having jurisdiction to deal with civil matters arising under the Corporations Law.”

1. In my opinion, it is more appropriate, within the meaning of s 5(4)(b)(i) that this proceeding be determined by the Supreme Court of Western Australia. I reach this conclusion after balancing the various arguments raised for and against the transfer motion. I should make it clear that there was weight on both sides of the scale. My reasons for reaching that conclusion are as follows.

2. All of the applicants’ claims are of a type which, so far as corporations are involved, would normally have been brought in a State Court until it was thought that this Court had been vested with jurisdiction under the Corporations Law. I acknowledge that s 565 of the Corporations Law, and its predecessors, incorporate by reference some of the principles of bankruptcy, an area of law which has long been federal in its nature.  However the essential nature of all of the applicants’ claims is that each claim is what Northrop J described in Coutts as “a State claim”.  I appreciate that Northrop J was considering transfer of that case under the “interests of justice” test in s 5(4)(b)(iii).  At p 7 of his reasons, his Honour said this:

   “In order to enable the cross-vesting legislation to operate fairly and justly it is important, in my opinion, that the background to the legislation be remembered.  In cases of the kind presently before the Court, in the interests of justice, it is important to ensure that the State Courts deal with those matters which, essentially, are State matters, while the Federal Court deals with those matters which are, essentially, federal matters.  Otherwise the problem sought to be resolved by the cross-vesting legislation will rise again.”  [The problem previously identified by his Honour was that more and more cases were coming to the Federal Court in reliance upon the accrued jurisdiction and thus having an adverse effect on the Supreme Courts of the States and Territories.]

3. This proceeding is, as I have held, within this Court’s jurisdiction only by reason of the third basis of the respondents’ cross-claims. It will be recalled that the first two bases were breach of contract and estoppel. The third basis, the claim based on s 52 of the Trade Practices Act, validly invokes this Court’s jurisdiction and, as I have held, brings the applicants’ claims into its accrued jurisdiction. The factual platform for the estoppel claim is virtually the same as that for the s 52 claim. But the first two of those bases are not federal in their nature and furthermore they are, as I have explained above, in large measure common to the WA Proceeding. That is not to suggest that the s 52 claim is to be regarded as subordinate to the other two claims. However, it does serve to accentuate the extent to which the claims on both sides of the case are State claims.

4. If the matter were to proceed in this Court, it would be open to the unsuccessful parties to appeal, as of right after trial, to the Full Court and, subject to obtaining special leave, to the High Court of Australia on grounds which could include a complaint that my decision on the jurisdiction issues was wrong and this Court never had any jurisdiction to hear and determine this matter.  Several million dollars have already been expended by the parties on these proceedings.  There is evidence (see paragraph 62 of Mr S R  Paterniti’s affidavit sworn 28 January 2000) from which I infer that that figure to date is not less than $18 million.  My firm impression is that there will be many more interlocutory motions to be heard (there are two pending, one on either side, relating to extensive amendments to pleadings).  My assessment is that many more millions of dollars will be expended in bringing this matter to trial and on the actual hearing of it.  There will also be a substantial allocation of this Court’s resources.  Virtually all of that prospective expenditure will be wasted if a jurisdictional challenge were to be mounted by the parties against whom judgment is entered after trial in this Court.  The respondents argued that doubts about jurisdiction should not be a relevant factor when deciding which Court was the more appropriate to determine the proceeding.  They relied upon the observations of Gummow J in McIntosh v National Australia Bank Ltd (1988) 17 FCR 482 at 483-484. In that case his Honour was considering a motion by the respondent for an order under s 86A of the Trade Practices Act that the proceedings be transferred to the Supreme Court of New South Wales.  There were no parallel proceedings pending in that Court.  The basis for the respondents’ motion was what it contended was a real doubt as to whether the accrued jurisdiction of the Court had been attracted in respect of certain non-federal claims brought against it by the applicant.  His Honour said this (at 483-484):

   “To remit or transfer a proceeding is to exercise jurisdiction in respect of it: Johnstone v Commonwealth (1979) 143 CLR 398, Pozniak v Smith (1982) 151 CLR 58. It follows, in my view, that s 86A is not to be construed as authorising the transfer of matters for determination in a proceeding in this Court on the footing that uncertainty as to existence of jurisdiction in this Court makes the transfer “in the interests of justice”.

5. In that case his Honour reached the conclusion that there was no uncertainty as to the jurisdiction of this Court in respect of the non-federal claims.  The respondents’ counsel had indicated in address that if his Honour reached that conclusion, then the interests of justice did not favour transfer and the application for transfer would not be further pressed. 

6. I think McIntosh can be distinguished from the present case.  First, the doubt was the sole basis for the respondent’s motion in that case.  In this application it is simply one, although an important one, of several factors which in my view make it more appropriate that the proceeding be determined by the Supreme Court.  Secondly, the doubt about jurisdiction was very narrowly confined in McIntosh and easily resolved by Gummow J on an examination of the pleadings.  The present matter is far more complex, even labyrinthine, as the above reasons may demonstrate.  There are so many different computations of circumstances, any one of which might, on appeal, disclose a jurisdictional deficiency.  There would be no such problems in the Supreme Court.

7. These proceedings are not simply “related to” the WA Proceeding.  There is, as the applicants submit, a real and very significant overlap between the two sets of proceedings.  The respondents’ motion, filed on 11 February 2000, whereby in effect they seek to have most of the matters presently being litigated before the Supreme Court in the WA Proceeding brought into their cross-claim, is a further clear indication of the common issues.  I refer also to my analysis above of the common ground in the pleadings in the two sets of proceedings, and the other matters showing the degree of overlap. 

8. The Supreme Court (on 20 January 1998) has stayed the WA Proceeding in anticipation that this Court’s decision in this application may determine whether the WA Proceeding will ever need to go ahead.  The proceeding in this Court has become much more protracted than was to be expected when that stay order was made.  The Supreme Court cannot be expected to stay proceedings before it indefinitely.  There is evidence before me that the defendants in the WA Proceeding have, on 28 February 2000, filed a chamber summons seeking a partial lifting of the stay orders made on 20 January 1998, so that an injunctive order may be made restraining the respondents from commencing any further actions in this Court which seek against the defendants in the WA Proceeding any of the relief sought in that proceeding.

9. I think that it is undesirable for such a situation to continue, because it tends to bring the justice system into question. It is even more undesirable, to the point of being unthinkable, that two sets of proceedings with so much in common might go ahead in the two courts with the risk of inconsistent findings. The logical course is for one set of proceedings to be heard by the same judge. The respondents seek to do this by their proposed further amendments to their cross-claim. In view of the preponderance of State claims compared to the respondents’ claim under s 52 of the Trade Practices Act, it seems to me much more appropriate that the disputes be resolved in the Supreme Court. In making that assessment, I have not ignored what, on the respondents’ case, can be described as the potential “knock out” effect of their s 52 claim i.e. that even if the applicants are successful in all their claims, success by the respondents in their claim under s 52 of the Trade Practices Act has at least the potential to render the applicants’ victories not only pyrrhic but worthless.

10. My assessment is that the bulk of the evidence in the case will be concerned with the applicants’ claims relating to the taking of Securities at a time of insolvency or near insolvency, the breach of the former directors’ duties and the like, whether the sale proceeds can be traced, and the respondents’ defences to those allegations. The evidence in respect of the s 52 claim is likely to emerge as part of the breach of contract and estoppel claims. Its status as an independent case, in evidentiary terms, is likely to be relatively minor.

11. I accept the applicants’ submission that if they are successful in this proceeding, there is bound to be a further application under s 564 of the Corporations Law to the Supreme Court on behalf of the funding creditors to obtain a degree of priority in the liquidation of TBGL and BGF. There is, if this proceeding is transferred to the Supreme Court, at least the potential for the same judge who hears the principal proceedings to determine the application under s 564 of the Corporations Law.  This is a relevant factor, but not one to which I would attribute as much weight as I do to the foregoing factors.

12. On the other hand, I have recognised the strength of the respondents’ submissions.  Usually applications for transfer are brought very early in the course of proceedings.  The delay is not quite as long as the respondents’ claim (the applicants’ made a cross-vesting application in December 1998, which remains undetermined) but it is considerable.  However, the circumstances are unusual, to say the least.  It was not until comparatively recently that it became apparent that the cross-vesting legislation was in real constitutional peril.  There was the equal division in the High Court (on 2 February 1998) in Gould v Brown (1998) 193 CLR 346 and then, of course, Re Wakim was handed down on 17 June 1999.  In such exceptional circumstances, delay does not, in my opinion weigh as heavily as it would in a normal case.

13. The same reasoning tends to reduce what would otherwise have been the significance of the extensive exercise by this Court of its jurisdiction, including the hearing of some 68 separate interlocutory proceedings and two appeals to the Full Court.  But any benefit which may have been derived from those interlocutory skirmishes will carry through when this application is transferred to the Supreme Court of Western Australia.  I acknowledge that I have acquired, as the respondents assert, a knowledge of this matter.  I would not describe it (as they do) as “an intimate knowledge”.  The proceedings have been dragged out for so long, that I have had to re-familiarise myself with the matter on each occasion when it came before me.  I have no doubt that any Supreme Court Judge will be able to familiarise himself or herself very readily with the history of the matter and the issues which are raised in it. 

14. One of the factors relied upon by the applicants in support of the transfer of the proceedings was their proposal, foreshadowed in a version of the proposed eighth amended statement of claim, to sue the respondents under s 574 of the Companies Code for damages for what was said to be their knowing involvement in contraventions of the Companies Code. The applicants contended that the Federal Court would not have jurisdiction over those claims, but that the Supreme Court would have jurisdiction, and that the claims could be added by the foreshadowed amendment to their statement of claim if this proceeding were transferred to the Supreme Court. The respondents submitted that such a course would confer a significant forensic advantage upon the applicants and a concomitant forensic disadvantage upon them. The applicants had chosen not to institute the proposed proceedings in the Supreme Court and might avoid statutory time bars by relying upon the fact that the principal application had been commenced in this Court in 1995. I have decided not to give any weight to the applicants’ submissions on this point as demonstrating (on their case) the appropriateness of transferring this proceeding to the Supreme Court. The applicants have had plenty of opportunity to bring the foreshadowed claims either in the Supreme Court or in this Court. I do attach some weight to the respondents’ submissions about prejudice as affecting the appropriateness or otherwise of such transfer. However, I am confident that when the Supreme Court deals with the application to amend, it will take into account the matters raised by the respondents. There are conditions which can be attached to the granting of leave to amend in circumstances such as these. In the overall context of the matters in issue, I consider that this issue is a relatively minor one. In my view, it does not cause the balance to tilt against the appropriateness of the transfer of this proceeding to the Supreme Court.

15. The main factor which has concerned me is whether the respondents will suffer prejudice by the application of the State Evidence Act rather than the Federal Evidence Act and, if so, the extent of such prejudice. The respondents submitted that they had prepared their evidentiary material for the trial of this case on the footing that the Commonwealth Evidence Act would apply, and that there are significant differences between the provisions of the State Evidence Act and the Commonwealth Evidence Act. The respondents’ evidence on this point can be found in the affidavit of Mr S R Paterniti sworn 28 January 2000 (which contains submissions also) between paragraphs 63 and 97.  The respondents also deal with this matter of prejudice in their written submissions dated 11 February 2000, which were further developed in oral submissions on 10 March 2000. 

16. There was a dispute between the parties as to whether s 11(1)(c) of the Cross-Vesting Act (or its Western Australian equivalent) would be likely to alleviate any difficulties encountered by the respondents. Section 11 (1) relevantly provides as follows:

    “Conduct of Proceedings

    11(1)  [Law to be applied]  Where it appears to a court that the court will, or will be likely to, in determining a matter for determination in a proceeding, be exercising jurisdiction conferred by this Act or by a law [of ^* the Commonwealth or] a State relating to cross-vesting of jurisdiction –
      (a)    . . .
      (b)    . . .

    (c)the rules of evidence and procedure to be applied in dealing with that matter shall be such as the court considers appropriate in the circumstances, being rules that are applied in a superior court in Australia …”. 

    [The provisions in the two Acts are identical save that the State Act has the additional words which I have inserted in parenthesis near the asterisk above].

17. I think that it is clear that when this proceeding is transferred to the Supreme Court of Western Australia, that Court will not be exercising jurisdiction conferred by the State Cross-Vesting Act.  I think it is also sufficiently clear that it will not be exercising jurisdiction conferred by the Commonwealth Cross-Vesting Act.  That is because s 4 of the Commonwealth Cross-Vesting Act contains the condition, in s 4(1)(b), that the Supreme Court would not, apart from that section, have jurisdiction with respect to that matter – see Poignand v NZI Securities Australia Limited (1992) 109 ALR 213 at 219. Accordingly, I do not think that s 11 will have any application. In that regard I differ, respectfully, from Tamberlin J’s assessment to the contrary in Activate No 1 Pty Ltd v Equuscorp Pty Ltd [1999] FCA 619 at para 15. The reality is that the Supreme Court would have jurisdiction under s 86(2) of the Trade Practices Act. Even if s 11(1)(c) of the Cross-Vesting Act applied, there would be no guarantee that the Commonwealth Evidence Act would be applied at the hearing in the Supreme Court.  It would be a matter in the Supreme Court’s discretion depending upon which rules the Court considered to be appropriate in the circumstances.

18. I accept that there are significant differences between the two Evidence Acts.  I do not propose to rule upon each of the series of legal arguments raised on either side about the extent, in practical terms, of those differences. My impression is that they are not quite as significant as the respondents maintain but somewhat more significant than the applicants contend. The applicants submitted that I should take into account proposed amendments to the State Evidence Act which are at present being considered by the Western Australia Parliament. I do not think that, when considering the appropriateness or otherwise of the transfer of this proceeding, it would be proper to do so. It would be simply too speculative. Some of the evidentiary problems (with s 79C of the State Evidence Act, one of the sections here relevant) surfaced in a fairly recent decision of a Full Court of the Supreme Court of Western Australia, Bristile Holdings Ltd v Giacci Brothers Pty Ltd [2000] WASCA 48. In the reasons for decision of the Court (comprising two judges, Owen and Steytler JJ) their Honours said this (at para 34):

    “In our opinion s 79C is hopelessly inadequate for modern commercial litigation.  In the absence of a legislative solution perhaps O29 r2(1) provides a mechanism for overcoming some of the deficiencies in the section.  But it cannot be ignored.  We think that this application should have been approached as if it were an application for orders ahead of trial to facilitate proof of matters under the section.  That this course is open is clear on the authorities …” 

19. Unfortunately the authorities (reviewed in Bristile) suggest that Order 29 rule 2(1) of the Rules of the Supreme Court of Western Australia can only be used to facilitate proof of matters in issue which are largely peripheral, although not completely, formal.  However, there does appear to be some glimmer of hope, arising from their Honours’ observations in Bristile, for parties who find themselves in the respondents’ situation.

20. As to the degree of prejudice, the respondents have, for understandable reasons, largely tendered their evidence of prejudice by way of examples rather than on an exhaustive basis. 

21. While I accept that, to a degree, the respondents will have to review their evidence to accommodate the requirements of the State Evidence Act, I am not satisfied on their evidence that the degree of prejudice will be such as to outweigh the factors which I consider make it more appropriate that this case should be determined by the Supreme Court.

22. Most of the foregoing reasoning is based on the relationship between the proceeding in this Court and the WA Proceeding.  I have also found that this proceeding arises out of and is also related to the various winding up proceedings and is also related to the proof of debt proceedings.  I would have found in favour of transfer even without having made those findings.  However, those findings together with the degree of the relationship between the various sets of proceedings makes it even more appropriate, in my opinion, that this proceeding should be determined by the Supreme Court of Western Australia.

    Whether the transfer order should be made under the Cross-Vesting Act

1. The applicants submitted, in effect, that the transfer order should be made under the Cross-Vesting Act because such a transfer would have “… the added benefit of lessening the risk of there being further resources expended on the jurisdiction issues and questions”.  That is because s 13(a), as discussed above, precludes an appeal in relation to an order to transfer pursuant to the Cross-Vesting Act.  

2. The respondents submitted that, if I were minded to make a transfer order, I should make it under s 86A of the Trade Practices Act which is in somewhat similar terms to s 5(4) of the Cross-Vesting Act.  The respondents contended that, in those circumstances, they would have a right to appeal against the transfer order.

3. I have decided not to accede fully to the respondents’ submissions. Section 86A was inserted into the Trade Practices Act by the Jurisdiction of Courts (Miscellaneous Amendments) Act 1987.  I shall refer to that Act as “Act No 23 of 1987”.  A perusal of Act No 23 of 1987 shows that the question of appeals was certainly in the Parliament’s mind when it caused amendments to be made to the various other acts amended by it.  The Cross-Vesting Act was passed at much the same time as Act No 23 of 1987. Both Acts were assented to on 26 May 1987. Parliament decided not to bar appeals from transfer orders made under s 86A of the Trade Practices Act when it inserted that provision by enacting Act No 23 of 1987. But it chose to exclude appeals in relation to decisions to transfer made under s 5(4) of the Cross-Vesting Act.  My task is to give effect, as best I can, to Parliament’s intention.  I approach the matter on the following basis.

4. The applicants, by their motion filed on 23 December 1999, have exercised their right to invoke the power conferred by s 5(4) of the Cross-Vesting Act.  That section is expressed in mandatory terms i.e. it uses the word “shall”.  It provides that where the circumstances described in it exist, the Court “shall transfer the relevant proceeding” to the Supreme Court in which the other proceeding is pending.  Relevantly in this matter, once a Court finds that it is more appropriate that the relevant proceeding be determined by the Supreme Court, it is, in my view, under a duty imposed by Parliament to transfer that proceeding to the Supreme Court.  The consequence of that course is that, by virtue of s 13(a) no appeal lies from that decision.

5. On the other hand, s 86A of the Trade Practices Act is expressed in discretionary terms.  In Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 137 ALR 47 at 62-63 a Full Court of this Court described these two pieces of legislation as having been enacted by the Commonwealth in order to provide “… separate, albeit overlapping, but additional sources” (relevantly) of power to transfer matters arising under Commonwealth legislation to Supreme Courts. The Full Court referred to the fact that s 13(a) of the Cross-Vesting Act precluded appeals (see p 60), but it did not have to decide the question which I have to decide in this case.  The parties to this case have not cited any decision involving a choice of powers to transfer under one or other of the two respective pieces of legislation, being a choice made on the basis of whether an appeal was available.  I note that in Charter Pacific Corporation Ltd v Commonwealth Scientific and Industrial Research Organisation (1998) 42 IPR 453 Cooper J made a transfer order under both s 5(4)(b)(ii) of the Cross-Vesting Act and s 86A(1) of the Trade Practices Act. However, his Honour did so on the basis that the considerations which persuaded him that the Supreme Court of Victoria was the more appropriate Court to hear and determine that matter also called for the exercise of the discretion under s 86A. No question about the availability or otherwise of an appeal appears to have been discussed in that case.

6. In Crandell, Sackville J chose to make a transfer order under s 86A(1). The parties jointly supported the transfer. His Honour, in making that choice, appears to have been influenced by the fact that any judgment in the matters would be enforceable throughout Australia as provided for in s 86A(3)(b) – see para 11 of his reasons.

7. In view of my finding that it is more appropriate that the proceeding in this Court be transferred to the Supreme Court of Western Australia I shall do so in accordance with s 5(4) of the Cross-Vesting Act.

8. I am also satisfied that s 86A(2) applies, for the same reasons. To ensure that not only the proceeding but also all matters for determination in this proceeding are transferred to the Supreme Court of Western Australia, I shall make the transfer orders under both s 5(4) of the Cross-Vesting Act and s 86A(1) of the Trade Practices Act.

I certify that the preceding two hundred and thirty-five (235) numbered paragraphs are a true copy of the Reasons for Judgment of Justice Carr.

Associate:

Dated:             7 April 2000

Counsel for the Applicants:	Mr D E Horton QC with Mr J T Svehla
Solicitors for the Applicants:	Messrs Blake Dawson Waldron
Counsel for the Respondents:	(On 18/11/99, 14/12/99 and 15/12/99 Mr J L B Allsop QC with Mr M C Goldblatt and Mr M J Leeming. (On 10/3/00 Mr T M Jucovic QC with Mr M C Goldblatt and Mr M J Leeming
Solicitors for the Respondents:	Messrs Freehill Hollingdale & Page
Counsel for the Attorney-General of Western Australia, intervening on 14/12/99	Mr R J Meadows QC, Solicitor-General for the State of Western Australia, with Ms J C Pritchard
Solicitor for the Attorney-General of Western Australia, intervening	Mr Peter Apostolos Panegyres, Crown Solicitor for the State of Western Australia
Counsel for the Attorney-General of the Commonwealth of Australia, intervening on 10/3/00	Mr D M J Bennett QC, Solicitor-General for the Commonwealth of Australia, with Mr C R Horan
Solicitor for the Attorney-General of the Commonwealth of Australia	Australian Government Solicitor
Date of Hearing:	18 November 1999, 14, 15 December 1999, 10 March 2000
Date of Judgment:	7 April 2000