Bell Group N.V. (In Liquidation) & Anor v State of Western Australia; W.A. Glendinning & Associates Pty Ltd v The State of Western Australia; Maranoa Transport Pty Ltd (in Liq) & Ors v State of Western Australia & Ors
[2016] HCATrans 80
[2016] HCATrans 080
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S248 of 2015
B e t w e e n -
BELL GROUP N.V. (IN LIQUIDATION) ARBN 073 576 502
First Plaintiff
MR GARRY TREVOR AS LIQUIDATOR OF BELL GROUP N.V. (IN LIQUIDATION) ARBN 073 576 502
Second Plaintiff
and
THE STATE OF WESTERN AUSTRALIA
Defendant
Office of the Registry
Perth No P63 of 2015
B e t w e e n -
W.A. GLENDINNING & ASSOCIATES PTY LTD (ACN 008 762 721)
Plaintiff
and
THE STATE OF WESTERN AUSTRALIA
Defendant
Office of the Registry
Perth No P4 of 2016
B e t w e e n -
MARANOA TRANSPORT PTY LTD (IN LIQ) (ACN 009 668 393)
First Plaintiff
ANTHONY LESLIE JOHN WOODINGS
Second Plaintiff
ANTONY LESLIE JOHN WOODINGS IN HIS CAPACITY AS TRUSTEE UNDER A DEED OF SETTLEMENT DATED 17 SEPTEMBER 2013 IN RESPECT OF THE INTERESTS OF BELL GROUP (UK) HOLDINGS LIMITED (IN LIQ) AND MARANOA TRANSPORT PTY LTD (IN LIQ) (ACN 009 668 393)
Third Plaintiff
and
STATE OF WESTERN AUSTRALIA
First Defendant
THE BELL GROUP LIMITED (IN LIQ) (ACN 008 666 993) AND ALBANY BROADCASTERS LIMITED (IN LIQUIDATION) AND AMBASSADOR NOMINEES PTY LTD (IN LIQUIDATION) AND BELCAP ENTERPRISES PTY LTD (IN LIQUIDATION) AND BELL BROS HOLDINGS LTD (IN LIQUIDATION) AND BELL BROS PTY LTD (IN LIQUIDATION) AND BELL EQUITY MANAGEMENT LTD (IN LIQUIDATION) AND BELL GROUP FINANCE PTY LTD (IN LIQUIDATION) AND BELL PUBLISHING GROUP PTY LTD (IN LIQUIDATION) AND DOLFINNE PTY LTD (IN LIQUIDATION) AND DOLFINNE SECURITIES PTY LTD (IN LIQUIDATION) AND HARLESDEN FINANCE PTY LTD (IN LIQUIDATION) AND INDUSTRIAL SECURITIES PTY LTD (IN LIQUIDATION) AND NEOMA INVESTMENTS PTY LTD (IN LIQUIDATION) AND TBGL ENTERPRISES LTD (IN LIQUIDATION) AND THE BELL GROUP LTD (IN LIQUIDATION) AND WANSTEAD PTY LTD (IN LIQUIDATION) AND WANSTEAD SECURITIES PTY LTD (IN LIQUIDATION) AND WAON INVESTMENTS PTY LTD (IN LIQUIDATION) AND WIGMORES TRACTORS PTY LTD (IN LIQUIDATION)
Second Defendants
FRENCH CJ
KIEFEL J
BELL J
GAGELER J
KEANE J
NETTLE J
GORDON J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 7 APRIL 2016, AT 10.15 AM
(Continued from 6/4/16)
Copyright in the High Court of Australia
____________________
FRENCH CJ: Yes, Mr Solicitor.
MR DONALDSON: If your Honour please. Your Honours, before returning to the submissions in relation to section 39(2) of the Judiciary Act, may I correct an answer that I gave to your Honour Justice Gordon yesterday? Your Honour asked me a question in relation to section 254(1)(h) of the Income Tax Assessment Act. I gave your Honour an incomplete answer, as it were.
The answer, your Honours, as to why that particular provision is not, we say, inconsistent with the Bell Act is as follows: the section does not apply to companies in liquidation, that is because in respect of companies in liquidation there is no attachable property and that is, for the reason explained by Justice Wigney in the case to which I referred your Honour yesterday, that is essentially by operation of section 468(4) of the Corporations Act. The effect of that provision is that there is no attachable property to which section 254(1)(h) of the Income Tax Assessment Act would operate.
What I did not go on to say to your Honour is section 468(4) of the Corporations Act is a displaced provision by the Bell Act and that is by reason of the displacement that has occurred inter alia by the displacement of Chapter 5. So, the money has transferred to the authority. Section 254(1)(h) does not operate in relation to the authority, your Honour, because 254(1)(h) relates to the rights of the Commissioner in respect of attachable property held by an entity as agent or trustee. The authority does not hold as agent or trustee.
In any event, your Honours, we say there would be no inconsistency between the Bell Act and the operation of this provision in respect of companies in liquidation, which is the only operation that is relevant to these proceedings because the Tax Commissioner is, in relation to the Bell Act, in exactly the same position as the Commissioner was prior to the enactment of the Bell Act in relation to any right exercisable under 254(1)(h). So no, we say to the extent there is a conflict there is no real inconsistency.
Your Honours, could I then return to section 39(2). I dealt yesterday, your Honours, with section 25(5) of the Bell Act and I have put my submissions in relation to that. The other matter, largely in relation to inconsistency with section 39(2) of the Judiciary Act, concerns section 73 of the Bell Act and it is contended that section 73 is, in reality, a direction to the Court to not permit an application to proceed on the basis that there would never be a circumstance in which leave would or could be granted.
Your Honours, could I say, with the greatest respect to the plaintiffs, that perhaps the clearest explication of that submission is in the submissions of the Commonwealth. So they are the submissions of the Attorney‑General intervening, your Honour, not the Tax Commissioner, and at paragraph 15(b) of my friend, Mr Gleeson’s submission. If your Honours have that, you will see that it is expressed really as follows:
Section 73(1) in effect establishes a general rule that the court’s jurisdiction will not be exercised . . . subject to the applicant demonstrating that the commencement or continuation of the proceedings is justified against certain unexpressed criteria.
So that is the first proposition, that there are unexpressed criteria in 73. Can I deal with that, your Honours? There are many provisions that provide for leave in matters where there are unexpressed criteria – section 471B of the Corporations Act is perhaps the most obvious. So the fact that there are no unexpressed criteria does not, in our submission, result in invalidity.
But the second point, I think, your Honour, is the more substantial one, and that is that the requirement for leave is, in effect, illusory because there can be no circumstance in which that leave might ever be granted, and I think my learned friend, Mr Gleeson, said that he struggled to envisage a circumstance in which leave might be granted.
I can give your Honours a circumstance in which leave might be sought and in which there may be – this is not an invitation – but in which it can be demonstrated that there is an operation of 73(1) and that circumstance is this. There may be a person who has a claim or an assertion of an interest in property that is the subject of the Bell Act regime. That person may wish to have determined or clarified prior to lodging a proof under the Bell Act regime whether as against another individual that person has a particular right or interest, or did have a particular right or interest, and one could envisage an application for leave being sought in that circumstance and 25(5) of the Act would not preclude such an action if it were brought, say, against another person who may have a possibly competing right or interest.
GORDON J: Litigation of that nature would need to bind somebody. Who is going to bind? It is completely illusory.
MR DONALDSON: It would bind the parties to it, your Honours, and it would be, in essence ‑ ‑ ‑
GORDON J: It is not going to bind the liquidator.
MR DONALDSON: No. The effect that it would have under the Bell Act regime, your Honour, is that that would be a matter that could form the basis of a submission by such a person pursuant to the Bell Act. It does not give rise to an entitlement to any distribution. It simply clarifies a matter that such a person may wish to have clarified prior to, as it were, lodging a proof under the Bell Act regime. So there is a circumstance, in our submission, in which it can be envisaged an application being made under 73 and, perhaps, leave being granted.
FRENCH CJ: So, does section 73 operate to prevent a person from commencing proceedings in the Federal Court without leave of the State Court – the Supreme Court of Western Australia?
MR DONALDSON: I am just about to deal with that, your Honour. My learned friend Mr Penglis’ argument from yesterday we say, your Honour, is a matter – and your Honour the Chief Justice might recall you raised this issue with my learned friend, Mr Gleeson. We say as a matter of construction of the provision it applies only to State courts – so small “c” court is State courts, and we say that, your Honour, because we do not assert that the Parliament of Western Australia has direct legislative power to direct to legislate in respect - directly in respect of the Federal Court. So the provision simply as a matter of construction would be read in that way.
That does not end the inquiry though, your Honour, for this reason. Were proceedings commenced in the Federal Court, sections 25 and 73, we say, would be picked up by reason of section 79 of the Judiciary Act. So, even though they do not apply directly as a matter of Western Australian legislative power, they would be picked up pursuant to section 79.
We say, or will say shortly, that for the same reasons as exist in relation to section 39 Commonwealth law, or federal law, does not otherwise provide to sections 25(5) and 73, therefore they will be picked up by 79 and applied in the Federal Court proceedings, plainly not as a matter of direct legislative power of the Western Australian Parliament but by reason of section 79.
Can I say to your Honour the Chief Justice, it is similar to the way in which an equivalent provision was dealt with in a case in which your Honour sat on in the Federal Court, a case of Manfal. It is not on our list, I am terribly sorry, your Honours, but we have made copies available to your Honours. So that is Trade Practices Commission v Manfal (No 2) (1990) 27 FCR 22.
GORDON J: I think we have the Australian Law Reports version.
MR DONALDSON: I am very sorry for that, your Honours. In any event, the correct citation is as I have given it to your Honours. If I could ask your Honours to turn to, in the judgment of Justice Wilcox – Justice Northrop agreed with Justice Wilcox. Your Honours will see in the first paragraph of Justice Wilcox’s judgment, the issue is presented and that is whether section 371(2) of the Western Australian Companies Code which prohibited commencement of proceedings without leave of the Supreme Court applied to an action that was brought in the Federal Court.
Ultimately, the case was decided on the basis that the provision was picked up and applied by reason of section 79, but it did not have an operative effect in this matter because it was not found to bind the Commonwealth in the guise of the Trade Practices Commission. But the issues in relation to section 79 were considered both by Justice Wilcox and by the Chief Justice. If I could ask your Honours to turn, please, to the heading in Justice Wilcox’s judgment, which is “Section 79 of the Judiciary Act.”
GORDON J: The bottom of page 242.
MR DONALDSON: I am grateful to your Honour. As your Honours will see the reference is page 34 of the authorised report. Your Honours will see that his Honour sets out section 79 and then in the next paragraph says:
all parties accept that s 371(2) is a law of Western Australia “relating to procedure” -
So it was picked up. Then his Honour’s third proposition:
they also agree that the previous proposition is subject to the qualification that, in construing a relevant law, the assumption must be made that federal courts lie within the field of application of a State law on the topic to which it refers; otherwise s 79 would be rendered virtually ineffective.
I then pause there to make this observation. What that means is if a State law provides, as a matter of construction, that this provision does not and cannot operate in the Federal Court, then it cannot be picked up and have its nature changed by that reason. Then his Honour goes on to say:
Fourthly, despite the fact that s 371(2) was drafted with an eye to proceedings in a State court, the effect of s 79 is to apply to most proceedings in the Federal Court, including proceedings under the Trade Practices Act, the restriction imported by that sub‑section.
That follows logically. So what that would have meant but for the status of the party was that proceedings could be commenced in the Federal Court but with leave of the Supreme Court and if your Honours turn over the page, it is at page 244 at point 7:
However, the State companies legislation relevant to the present case . . . is intended to bind the Crown in right of the Commonwealth “so far as the legislative power of the [Western Australian] Parliament permits”.
So, unlike other provisions, it was in fact not picked up and applied – sorry, it was picked up but not applied in the case or in the action because as a matter of construction it did not apply to the Commonwealth. Then, over the page ‑ the paragraph, your Honours, at the bottom of the page, three lines from the bottom:
Whilst I accept that it would have been within the competence of the Commonwealth to pass legislation subjecting itself and its instrumentalities to this, as with any other, State law, it has not done so. Section 79 can do no more than pick up, and apply to litigation in federal jurisdiction, a State law which would operate against a party in State jurisdiction.
So, your Honours, what we take from what his Honour Justice Wilcox has there said is that the leave requirement could have been and would have been picked up in a Federal Court proceeding and leave of the Supreme Court would have been required prior to a Federal Court proceeding going on.
Your Honour the Chief Justice dealt with this matter and, relevantly, at the bottom of page 248, your Honour there quotes a passage from the Grollo decision, a decision of Justice Smithers, where his Honour had said:
“The Victorian Parliament cannot legislate to prevent the bringing in a federal court, even in its Victorian Registry, of a claim based on a Commonwealth statute which has no counterpart either in Victorian common law or statute. Accordingly, s 263(2) of the Companies Act cannot apply directly to the current proceedings.”
So, your Honour outlines that and then your Honour went on to say in the two paragraphs on:
That is not to say that the section may not validly operate as a conditional prohibition directed to litigants requiring that they seek the leave of the Supreme Court before commencing or continuing proceedings in this court against a company under a winding‑up order. So characterised, it faces the considerable objection that it is, in substance if not in form, a qualification upon this court’s jurisdiction and is for that reason invalid.
Now, pausing there, what your Honour is saying is, with respect, that if the provision is in fact a prohibition upon the exercise of jurisdiction, it is not picked up. But if it is not characterised as a, as it were, a prohibition upon the exercise of jurisdiction, then section 79 would pick it up.
For the reasons that we have articulated in relation to section 39(2) and as I have dealt with in relation to section 73, your Honours, we say that they are not, as it were, an exclusional prohibition on jurisdiction. So they would be picked up by section 79 and applied in a Federal Court proceeding. So, your Honour, it is a rather longwinded way of answering my friend, Mr Penglis’, question which was really a matter of construction.
Your Honours, can I say one further thing about section 79 of the Judiciary Act and it is really a point touched upon only by the Commonwealth. Section 79 in this matter, your Honours, adds really very little, in our submission, other than the matter I have just dealt with, to the contentions in relation to section 39(2). In terms of section 79 of the Judiciary Act, if sections 25 and 73 of the Bell Act are inconsistent with section 39(2), then section 39(2) being a Commonwealth law does otherwise provide and they are not picked up by section 79.
If sections 25 and 73 of the Bell Act are not inconsistent with section 39, then nothing in Commonwealth law otherwise provides and section 79 would in that circumstance pick them up. That is why we say, your Honours, in our submissions that the argument in relation to section 79 and 39(2) are really two sides of the one coin.
Could I move on then, your Honours, please if I might to the Chapter III contentions which have been advanced. In our submission, your Honour, other than one of them which is put only by the WA Glendinning party, they are all resolved by reason of Duncan and my friend, Mr Penglis, yesterday articulated the WA Glendinning matter. So if I could deal quickly, your Honours, with the other contentions that are put in relation to infringement of Chapter III. By all of the plaintiffs it is
contended that section 22 renders current proceedings in the Supreme Court inutile, or dissipates their legal basis.
We say, your Honours, that those matters are dealt with squarely by Duncan, and Duncan is a complete answer to that, as it is a complete answer to the contention in relation to section 73 as 73, to use the terminology, directly targets or is directed at particular legislation. Duncan, your Honours, recognises that State Parliaments routinely legislate in respect of matters that affect pending proceedings and there is no issue with that.
Your Honours, finally, my friend, Mr Penglis’, contention from yesterday which is that the Bell Act has the effect of quelling a matter that is before the Supreme Court of Western Australia and it has removed, in effect, removed that matter and vested it in the Executive, being the authority and the process established under the Act. A short answer, if I might say, with respect to my friend, is this. One was a matter and what is occurring in the authority and pursuant to the Bell Act is not an exercise of judicial power and it is not the same matter as was being dealt with previously, and that goes to the answers I was giving to your Honour Justice Keane’s questions yesterday.
And, your Honours, to the extent that it is contended that what is occurring in the authority or pursuant to the Bell Act is an exercise of judicial power, with respect, it plainly is not for the reasons that were gone through in detail yesterday and, your Honours, without taking your Honours to it could I simply refer your Honours to a decision of this Court in Precision Data which dealt with the matter – it is in our submissions, your Honour – (1991) 173 CLR 167, and the relevant passage in the joint judgment of all of their Honours is at page 190.
Precision Data was a case about the Takeovers Panel, your Honours. Shortly, what their Honours said is that applying for a declaration under the corporations legislation then and seeking a decision of the takeovers tribunal was not seeking the vindication of any right or obligation and that differentiated it from an exercise of a judicial power. We say that the same differentiation applies here. May it please your Honours, they are our submissions.
FRENCH CJ: Thank you, Mr Solicitor. Solicitor‑General for New South Wales.
MR SEXTON: If the Court pleases. Your Honours will appreciate from our written submissions that we make submissions in relation to only two issues. One is subsection 5G(8) and the second issue is taking them together, subsections 5F(2) and 5G(11) of the Corporations Act. In relation to the first of those, section 5G(8), we say that the administrations contemplated by the Bell Act constitute a winding up or another external administration for the purposes of that section. I should say in line 2 of paragraph 2 it should read “5G(8)”, not “5F(8)”.
On this issue, we rely on our written submissions, on Western Australia’s written submissions and on Western Australia’s oral submissions, subject to one small point which is that Justice Nettle yesterday asked a question as to whether, for example, a receivership under State law would necessarily entirely displace the provisions of Chapter 5. We would say that they would do so only to the extent necessary to allow the receivership to be carried out. It might be of course that a more comprehensive scheme of external administration would entirely displace the provisions of Chapter 5.
In relation to subsections 5F(2) and 5G(11), we say that contrary to the plaintiff’s submissions the operations of those provisions are not impliedly limited to provisions of the corporations legislation which have, to use the words of Justice Barrett in HIH clear territorial attributes or a distinct and separate territorial operation. In our submission, Justice Barrett’s approach results in an unlikely construction of the legislation, particularly in the context of the history of the referral of power by the States in this area.
As for the meaning of the word “in” in the phrase “in the State or Territory” in 5F(2) or “a State or Territory” in 5G(11), we would adopt the submission advanced by the Commonwealth Solicitor‑General to the effect that when those provisions are engaged, the corporations legislation does not apply as part of the body of law of the relevant State or Territory. Those submissions were made, to some extent orally, but we would adopt particularly the formulation that was made in paragraphs 17 to 19 of Mr Gleeson’s outline of oral argument which was handed up yesterday.
GAGELER J: Mr Solicitor, might there be a difference, in that respect, between 5F(2) and 5G(11)? You focus on the word “in” but putting it in a slightly larger context, 5F(2) refers to legislation applying in the State. Section 5G(11) refers to legislation operating in a State. There could be a different connotation.
MR SEXTON: It is possible, your Honour. There seems to us a considerable degree of overlap between all of these provisions in this part of the legislation. It may not be entirely surgical drafting and, for that reason, it seems to us that there may be positions that are covered by more than one aspect of these provisions and that may be so in the case of 5F(2) and 5G(11). Whether the point that your Honour raises would make a difference in any particular situation is not easy to say, I think, in the
abstract. Unless there are any other matters, your Honours, those are our submissions.
FRENCH CJ: Thank you, Mr Solicitor. Solicitor‑General for South Australia.
MR HINTON: If the Court pleases. With respect to our oral hand‑up, I propose to say nothing about point 1. That was emphatically dealt with by my learned friend, the Solicitor‑General for the Commonwealth. I move quickly to point 2 and point 3 to put them in a context where your Honours can – should you choose – understand them against our written submissions.
Your Honours may have had the opportunity of reading those submissions. You may recall that we divide, because we are primarily concerned with section 5F – we offer three possible constructions, the third of which, we say, the broad is what we favour. Justice Barrett’s construction is what we deem the narrow for the reasons already given by my learned friend, the Solicitor‑General for the Commonwealth, for Western Australia and, indeed, moments ago, for New South Wales. We submit, with respect, that your Honours should reject Justice Barrett’s construction of section 5F.
We provide therein a very hopefully pithy and summary way the four primary objections or points of objection to that construction. I do not propose to go through them now. Either by my learned friends or in the course of argument they have in one way or another been covered.
Can I deal with point 3? That is intended to deal with what the Commonwealth calls its intermediate construction. What the Commonwealth calls its intermediate construction, in my submission, does not differ, with respect, to our broad construction that we set out in our written submissions at paragraphs 26 to 32. So the conversion, their “intermediate” equals our “broad”. I think if you go one step further, I think it also equals Victoria’s alternate construction.
The Commonwealth says “in the State” or “in a State” for the purposes of section 5F(2) and 5G(11) should be read as meaning the body of law of the State. We prefer to use the language of John Pfeiffer and Sweedman and say where you see “State” it means the law area of the State. Our intention is the same, 5F results in a law area being vacated in which the State can then, if it chooses, enact its own legislation.
In response to your Honour Justice Gageler’s question to my learned friend, the Solicitor‑General for New South Wales, moments ago, in our submission, applying in or operating in makes no difference. In either case the Commonwealth withdraws from the law area and the State is free to act in the law area. That gives rise to the possibility of overlapping laws where you have overlapping law areas and conflict.
In our submission, we adopt the submissions of the learned Solicitor‑General for the Commonwealth at paragraphs 17 to 19 of his oral hand‑up as to how those conflicts are to be resolved. We add one. We do say, and your Honours will see paragraph 5 of our oral hand‑up, that if the conflict occurs in the law area of State 2 where 5F has been invoked in State 1 and in State 2 it is a conflict between the State law of State 1 and federal law operating in State 2 then if each law purports to govern the matter then section 109 resolves the conflict. To that extent, I think, we agree with Mr Penglis’ ultimate submission in answer to questioning from your Honour Justice Kiefel. Can I address quickly ‑ ‑ ‑
GAGELER J: My question was really suggesting, I suppose, that in that particular scenario, that is, the conflict occurring between the Commonwealth law and the State law, not in State 1 but in State 2, it may be that section 5G(11) could, if triggered, in accordance with 5G(3) have something to say where section 5F(2) did not. That was my point.
MR HINTON: In our additional permutations of how you deal with conflict in paragraph 5(b) of our oral hand‑up, that question would arise in determining whether - an antecedent question before you get to actually how you resolve the conflict - in determining whether both laws in fact apply to the particular matter in the court in State 2. That is where, as I understand my learned friend, the Solicitor‑General for the Commonwealth, a question of choices of laws issues may arise antecedent to determining what laws purport to apply, and it is there that that issue might arise. But once both laws purport to apply and one is a federal law, then section 109 carries the day.
FRENCH CJ: Section 51(1) disapplies, in reliance on 5F, the Corporations Act in relation to WA Bell Companies. Those companies derive their legal existence in Australia from the Corporations Act. Do you accept that they continue to exist by virtue of the Corporations Act?
MR HINTON: In what law area?
FRENCH CJ: Throughout Australia.
MR HINTON: They continue to exist in the – well, I put it this way. There are now two law areas, one where it is disapplied and then there is the greater. The greater law area is that in which the federal law continues to apply and in that law area they continue to exist.
FRENCH CJ: And provisions of the Corporations Act relating to their winding‑up throughout the rest of Australia would continue to exist?
MR HINTON: Yes.
FRENCH CJ: Or apply to them, I am sorry?
MR HINTON: Yes. So you then have the stage set for a conflict, you either resolve it in a way that we suggest in paragraph 5 coupled with paragraphs 18 of the Commonwealth Solicitor‑General’s oral hand‑up, or alternately a practical way around the problem is dealt with in paragraph 19 of the Commonwealth Solicitor‑General’s oral hand‑up giving three options where the State seeks, in effect, coverage throughout Australia including a regulation under 5I.
FRENCH CJ: And the liquidators of those companies continue to have throughout the rest of Australia the same duties and functions?
MR HINTON: Yes, your Honour.
FRENCH CJ: By virtue of Commonwealth law?
MR HINTON: Yes, your Honour.
KIEFEL J: Putting aside the point at which there is a potential conflict between two State regimes, one State regime being called that which imports the Corporations Act, of itself what you call the replacement law, do you say section 109 does not simply apply as between it and the Commonwealth law?
MR HINTON: At the level of principle we put in an antecedent step and that is ‑ ‑ ‑
KIEFEL J: I should say subject to, in particular, section 5G of course, but why would it simply not apply in its own terms?
MR HINTON: We leave open the possibility that, as a matter of construction, one law does not in actuality purport to apply. But once it is determined that a federal law and a State law purport to apply to the same matter, then 109 applies.
Lastly, Mr Penglis yesterday made submissions – and I think I am correct in understanding him that his alternative position was to advocate for what we call our intermediate construction. His intermediate construction purported to limit the legislative power of the State, once 5F is invoked, to filling the space only within its territorial boundaries. The way
in which he arrived at that, as I understood his submission conclusion, was that section 109 would prevent you travelling beyond your boundary. So it was a practical approach to the limit on State legislative power.
With respect to him, if I have correctly understood him, then that in actual fact is an application of our broad position because the State’s legislative power to legislate with extraterritorial effect throughout its law area is maintained but, to the extent that its law area then comes into conflict with a federal law, 109 carries the day. If I understood him correctly – and I am sure he will correct me in reply if I am wrong – in actual fact, with respect to him, he embraced the broad construction and not our intermediate construction.
If your Honours please ‑ I am grateful to Mr O’Leary. Returning to your Honour Justice Gageler’s question, section 5G(11), one small point. It may serve to wind back Commonwealth law but, ultimately, it could not wind back section 109 if there were a conflict. If the Court pleases.
FRENCH CJ: Thank you, Mr Solicitor. Solicitor‑General for Queensland.
MR DUNNING: May it please the Court. Your Honours, in relation to the first three matters on our oral outline, can I simply observe without dwelling on the fact that as with the other interveners we have identified their submission is that were the Bell Group Act to fail by reason of inconsistency of the tax legislation, your Honours would not, and we would respectfully submit, ought not deal with the 5F and 5G position.
Secondly, we adopt, gratefully with respect, the formulation by the Solicitor‑General for the Commonwealth as to the operation of 5F. We have endeavoured to set out in paragraph 2 from the transcript our learned friend’s formulation of that and where it can be found in the outlines, submissions of the intervening parties consistent with that. Again, in paragraph 3 our learned friend’s formulation yesterday of the operation of 5G(8), including the caveat that was put on it in answer to a question of Justice Keane on an earlier day, we have endeavoured to set out in paragraph 3 where it might be found in the written submissions.
Your Honours, beyond that, we wished only to very briefly address the topic of 5G(8) and only to this limited extent. Moving now to point 6 of our outline, the first matter we would like to develop is that, in our respectful submission, when one looks at 5G(8) the point of inquiry of the external administration – if I can use that as a generic expression – is the external administration that has been created by the law of the State in question. So, when one asks if 5G(8) has been engaged and whether it would cause the Corporations Act not to apply, the question is has a State law created an external administration and then after that to what extent has that taken away the operation of Chapter 5 of the Corporations Act.
Might we then move please to what we develop at points 7 and 8? Each of the plaintiffs make the submission that, in effect, there should be a tight correlation between these expressions “scheme of arrangement”, “receivership” and “winding‑up” and that, therefore, the Bell Group Act failed because it takes what was windings‑up under the Corporations Act and commutes them into the method of external administration one finds in the Bell Group Act.
In our respectful submission, that is not the proper approach to 5G(8). But, in fact, those expressions in 5G(8) of “scheme of arrangement”, “receivership” and “winding‑up” are really simply using what were – by the time of the enactment of 5G(8) – time‑honoured expressions to reflect well‑settled concepts of external administration. We have really amplified that point in 8 and I will not repeat all of those matters to your Honours.
KIEFEL J: One might test that, perhaps, in a minor way by inquiring whether or not under the Bell Act creditors are not actually being dealt with as creditors. Or, are they being dealt with as some kind of applicant for compensation at the absolute discretion of someone who is handling a lot of money?
MR DUNNING: Justice Kiefel, I agree with that. The point I was endeavouring to make at the moment was a little antecedent to that and that is to say that when one looks to see whether something is – it is a separate question of even if the submission I am presently making is right, whether nonetheless what the Bell Group Act constitutes is an external administration.
KIEFEL J: Can it really be called an external administration if you are not recognising the relationships between the corporation and those persons or entities that have dealt with the corporation, both in their respective capacities and having regard to the rights and entitlements that have grown up between them?
MR DUNNING: In our respectful submission, your Honour, yes, but it would require acceptance on this basis. Prior to the winding‑up of any of these Bell Group companies, the creditors had a suite of rights, in effect to vindicate their claim to a debt and then to take such enforcement proceedings as they might be advised. Upon the winding‑up, those entitlements were replaced with what might be fairly said to be an inferior set of entitlements, or an inferior ‑ ‑ ‑
KIEFEL J: A possibility, a possibility of payment.
MR DUNNING: That is right, an inferior set ‑ ‑ ‑
KIEFEL J: In their capacity as what?
MR DUNNING: As creditors. I accept ‑ ‑ ‑
KIEFEL J: As a claimant, not creditors. They are not being recognised as creditors. They are claimants.
MR DUNNING: Sorry, your Honour, I was talking of them, prior to the Bell Act. I apologise.
KIEFEL J: I am sorry.
MR DUNNING: No, I did not make it clear enough. So, if one sees this progression, at the point of winding‑up, their previous rights are replaced with a set of inferior rights which is a right to prove in the winding‑up and for its due administration and the proceeds of that, if any, at the end.
KIEFEL J: I think if you are undertaking a comparison, you have to actually say what occurs under the Bell Act. They are not proving in a winding‑up.
MR DUNNING: And I was about ‑ ‑ ‑
KIEFEL J: They are making a claim with the prospect of some possibility that they might receive some money and not in recognition of their capacity as creditors but in some other capacity.
MR DUNNING: Yes, and without repeating in fact, if I adopt that as the characterisation of the Bell Act, the submission we would make ‑ and it would need to be accepted for the point we are seeking to make ‑ is that what happens then is those already inferior rights that they had as a creditor in the winding‑up have become even more inferior rights now, to simply have an entitlement to be considered for the exercise of the discretion under the Act.
Now, they might be said to be very inferior to the rights they had as creditors in a winding‑up but the fact that the operation of the Act is to impair their rights to the recovery of their debt is as a matter of principle, in our submission, unremarkable because that in fact happens at the winding‑up stage as well. Justice Kiefel, that is our answer to your Honour’s question.
Can I just return briefly though to what is at 7 and 8. Where our friends for the plaintiff say, winding‑up can only mean winding‑up as it appears in Chapter 5 and scheme of arrangement can only mean what it says in Part 5.1 of Chapter 5, in our respectful submission, that is just not borne out and we will give just two examples, and in particular we give them here, let us take scheme of arrangement which is in terms referred to in 5G(8).
As your Honours will appreciate, scheme of arrangement is not an expression used in Part 5.1 of Chapter 5. Rather, it is plainly a reference to what was a well‑settled understanding of a mechanism that varied from place to place and from time to time, according to its statutory formulation that allowed a company to either reconstitute its equity or make a compromise or compact with its creditors.
The second issue, and perhaps even more tellingly, is at the time 5G(8) was enacted, Chapter 5 in the new Corporations Act, as it had in its predecessor the Corporations Law, now contained Part 5.3A, which dealt with voluntary administration, which was a reasonably new phenomenon in insolvency arrangements. If it was meant to have that tight operation the plaintiffs would allege, one would have expected that 5G(8) would have talked in terms of scheme of arrangement, voluntary administration, receivership, winding‑up or other administration.
Your Honours, can we then move to what we set out in paragraphs 10 and 11 of our written outline and that is whether what is occurring here constitutes a winding‑up, and the submissions I am about to make obviously should be heard together with the answer I gave Justice Kiefel a little earlier and the concerns her Honour raises about whether this would meet a description of a winding‑up. We accept that our submissions, the submissions of other parties, and for the fact that what the Bell Act does nonetheless constitutes a winding‑up, would reflect a variant of winding‑up that is quite radically different to that which we have been customarily used to under the Corporations Act and its predecessors in Australia.
To make good the point, though, that it is ultimately a matter for the legislature to terminate the terms of how a corporation might be wound up, may we ask your Honours please to take up the decision of Mier v FN Management Pty Ltd (2006)1 Qd R 339. I naturally approach this matter with the caution of addressing a judge as to what his reasons meant. Can I ask your Honours please to take up the reasons of Justice Keane, then on the Court of Appeal. They start at paragraph [5]. I can tell your Honours that President McMurdo and Justice Douglas agreed on the reasoning. Can I simply turn your Honours’ attention to these aspects of the decision.
At paragraph 9, your Honours will find Justice Keane set out section 601EE of the Corporations Act and, relevantly, subsection (2). As your Honours will recollect, the legislative response to the unregistered managed investment schemes was this winding‑up regime and the power and the terms of the winding‑up were set out in that terse way there:
The Court may make any orders it considers appropriate for the winding up of the scheme.
Your Honour Justice Keane went on to consider how that applied to this particular scheme. Can we simply draw attention to these passages. In paragraph [15], your Honour, in the third sentence records:
The precise way in which this process may be undertaken is usually a matter for the legislature.
Your Honour then refers to Justice McPherson’s reasoning in Crust ‘N’ Crumb, and then in paragraph [16], your Honour said:
It follows, in my view, that where the statute makes reference, without more –
and we emphasise the words “without more”:
to the “winding up” –
it refers to that process. Then if we take your Honours to the passage in paragraph [17] where your Honour Justice Keane quotes Justice Barrett in Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd, and your Honours will see in the second paragraph of the quote from Justice Barrett’s reasoning, his Honour says:
it must be accepted that the court has jurisdiction to settle or prescribe any aspect or element of the basis for winding up or the winding up process which it is necessary to supply –
Now, we should observe at once in paragraph 18 your Honour Justice Keane put a caveat upon that but relevantly for present purposes that caveat was directed to the context in which 601EE appeared. Now, we do not naturally go so far as to say that Parliament can do absolutely anything, brand it a winding‑up and it will be a winding‑up. It will still require that process which Parliament has stipulated to meet what we say are those essential characteristics of a winding‑up, but, in our respectful submission, Parliament does have the legislative power to nominate a method for the calling in and realisation of assets, the distribution of them amongst creditors within a wide scope.
KEANE J: Of course, that is dealing with the - winding up the assets of a – winding up the company and dealing with its assets.
MR DUNNING: Yes.
KEANE J: When you think of radical differences, one might think it is a radical difference to expropriate the assets of the company or the scheme and then, rather than to have them distributed by reference to the entitlement of people as creditors, to distribute them in accordance with, not a judicial discretion, but an executive discretion to which different considerations apply.
MR DUNNING: We would agree with that, Justice Keane.
KEANE J: The question is whether there is not a point reached where the process no longer answers the description of a winding‑up as it is understood or an external administration of a company as that term is understood, bearing in mind that that term is usually used in relation to the administration of a company’s assets.
MR DUNNING: Yes, and I hope I have not put our case really outside the ambit of what your Honour has just put to me. In the end, the question is does one characterise the Bell Group Act as taking it outside – is it, in a sense, too radical, it might be radical but is it too radical? Can I deal with the expropriation point in this way? As my earlier submissions, I trust, make clear, we accept that this is radically different to the customary arrangements out of the Corporations Act yet, as I endeavoured to demonstrate in the answer I gave Justice Kiefel a little earlier, at the time of the winding‑up of any one of these Bell Group Companies there was a loss of rights at that stage. Whether one would describe them as an expropriation, I am not sure, but nonetheless ‑ ‑ ‑
KEANE J: There was perhaps a devaluation of the rights but the rights of being a creditor might not have meant a hundred cents in the dollar but, nevertheless, the scheme operates or a winding‑up operates on the basis that a creditor is a creditor and one has a bunch of legal provisions that operate recognising that status and the extent to which that status is resolved in money terms depends on how much money there is.
MR DUNNING: Correct, yes.
KEANE J: But that is a very different situation from one in which, first of all, there is a divestment from the company and then, secondly, the creditors – people who were creditors, people who previously had that status no longer do.
MR DUNNING: I accept all of that, Justice Keane, and in the end it is a question of is that a bridge too far for what constitutes a winding‑up.
KEANE J: In relation to that, is there any case or textbook where that process has been called a winding‑up?
MR DUNNING: This precise case, no. But if we were to return to the situation under 601EE – and that which your Honour was considering in Mier and the one Justice Barrett was – there, there was a discretion in the Court to determine, as Justice Barrett put it, the basis for the winding‑up. If you have a discretion to determine the basis for the winding‑up, you do have the capacity to seriously affect its operation.
In no way are we trying to downplay the significant departure from the usual rules. But if I can put that in perspective, the loss of the creditors’ right at winding‑up of the ability to sue an enforced judgment at the speed at which that creditor thinks appropriate and in lieu of that to have the decision‑making as to whether, and in what way, that debt can be ultimately accounted for is itself a radical loss of rights because you lose the ability to say I would actively pursue the company and I would try and attach that asset.
KEANE J: But in a winding‑up it is well settled that the creditors, who enjoy the status as creditors, enjoy as well the right to the due administration of the winding‑up.
MR DUNNING: Absolutely.
KEANE J: That means they are in a position to go to a court and get orders to protect the process which recognises them as creditors for whatever it is worth in terms of money.
MR DUNNING: For that formulation, we would respectfully entirely agree, including those concluding words “for whatever it is worth”. It is not to say ‑ ‑ ‑
KEANE J: But here, under the Bell Act, that has ceased to be the case.
MR DUNNING: Yes.
KEANE J: The creditors of the WA Bell Companies who previously had an entitlement to insist on the due administration of the winding‑up as creditors, no longer do.
MR DUNNING: That is right. That is right. Just like at an earlier time they lost their right to pursue their debt as they might have thought most expedient to do so by, let us say, attachment. I am not saying that the relativities of them are identical but the point I am wishing to make is that the fact that the relativities might be different is not, in our submission, to the point within reason. The fact that a method of the realisation and distribution of assets amongst persons who have a claim on them occurs is something with which Parliament enjoys a wide legislative power. But we accept it has a limit and if it is outside what can be characterised as winding‑up, yes.
FRENCH CJ: Section 5G(8) assumes the existence of a genus of external administration of which, it seems to me, winding‑up - “scheme of arrangement”, “receivership” and “winding‑up” are species ‑ ‑ ‑
MR DUNNING: Correct.
FRENCH CJ: ‑ ‑ ‑ but it is not limited to that species. But obviously there is a question of characterisation as to whether something is within or outside the genus and it must plainly have some correlation to what is being displaced.
MR DUNNING: Absolutely, the Chief Justice is undoubtedly right. If one looks at that genus of external administration, what is that? That is taking the control of the company typically out of the hands of the directors but ultimately out of the hands of its equity holders, one asks, well, is that what has happened here? Yes, the fate of the value of these Bell Group Companies is being managed by somebody other than the equity holders.
FRENCH CJ: Well, the question is whether it is sufficient that the companies are administered as the Act asserts by the authority, that it manages their affairs as the Act asserts, does that, as it were, labelling of administration get you across the line? I suppose the question is given that the other features of the legislation, including those which Justice Keane has drawn to your attention or been referring to, whether as a matter of characterisation this is so different that it falls outside, that it is really about the taking control of the assets, not just taking control, taking ownership of the assets.
MR DUNNING: Yes, and if we looked at that point, there must be a wide scope in which Parliament might say, well, the assets of ‑ ‑ ‑
FRENCH CJ: Well, I understand your position. That is really what you just put.
MR DUNNING: Yes, thank you. Then there was only one other matter that is not on our written outline but we would agree respectfully with the submissions made by our learned friend, the Solicitor‑General for New South Wales, in relation to the question that Justice Nettle had asked yesterday, and that is that if there were a State enactment under 5G(8), did it need to, as it were, clear the complete operation of Chapter 5 and we share the submissions given by our learned friend and we would give this as just an illustration.
It may well be that a particular State has decided that the voluntary administration regime under the Corporations Act is not having the desirable effect it was thought it would have and a State Parliament might decide to make alterations in relation to that, at least for certain companies, under 5G(8) but fully intend that if the voluntary administration did not work that company would revert to the winding‑up regime under the Corporations Act. We give that simply as another illustration of the point, our concurrence in what Mr Sexton said. They are our submissions, thank you, your Honours.
FRENCH CJ: Thank you, Mr Solicitor. Solicitor‑General for Tasmania.
MR O’FARRELL: May it please the Court. Your Honours, can we firstly adopt the submissions of each of New South Wales, South Australia and Queensland in paragraphs 1 of their oral outlines regarding the manner in which the Court might consider disposing of this matter. Secondly, your Honours, as we say in our outline of oral argument, we support the oral submissions of the Commonwealth in relation to the operation of sections 5F and 5G and there is really, I think, your Honours, nothing further we can usefully add to the debate. If your Honours please.
FRENCH CJ: Thank you, Mr Solicitor. Solicitor General for Victoria.
MR NIALL: If the Court pleases. My oral submissions will be directed to paragraph 2 and paragraph 8 of the outline and are entirely directed to section 5F of the Corporations Act. Dealing with paragraph 2, it is our submission that section 5F allows for the segmentation of the Corporations Act not by jurisdiction but by subject matter.
My learned friend, Mr Walker, said that segmentation can only occur by way of withdrawal and not through section 5F. Now, in terms of the consequences of segmentation, much turns on which provisions are withdrawn in relation to a particular matter and if it is a corporation and it is all of the provisions it is necessary to focus on two aspects. One is registration, which is inherently territorial, and the other one which is incorporation which is more universal.
To make that point a bit clearer, can I take your Honours to section 119A of the Corporations Act? Your Honours will find it in a couple of places but volume 1 tab 7 page 203. Your Honours will recall that Justice Barrett in HIH regarded this as the starting point, in effect, the controlling provision of section 5F but, in our respectful submission, it is a provision that has to be applied in the context of section 5F. So, if all of the provisions of the Act are removed under section 5F in relation to a company which is a body which fits within section 5F, one sees 119A(1) a relatively straightforward operation. It says:
A company is incorporated in this jurisdiction.
But that provision does not apply in the State which is the declaring State. So it is not incorporated in that State but it remains incorporated in the balance of the jurisdiction. It becomes more difficult or more complicated when one turns to section 119A(2) because the way the scheme operates, and this is also discussed by Justice Barrett at paragraph [90], registration is singular and territorial.
Now, if a country – sorry, if a State declares a company that none of the provisions apply in that State and one looks at the language of 119A(2), if it was taken to be registered, for example, in Western Australia, it is no longer taken to be registered in Western Australia.
The significance of that, in our submission, is that it is not registered anywhere. That is not an unusual or striking consequence because it allows a State to deal with companies registered in its own jurisdiction in a particular way, but it does not allow a State to deal with a company registered in a different part of the country in the same way. So the consequences for Victoria, which has two companies - it declares that none of the provisions apply, the consequences will be different if the first company is registered in Victoria and the second company is registered in New South Wales. The significance of that, in our submission, is it reflects the scheme.
If your Honours turn to Justice Barrett’s judgment in HIH 202 ALR 610, at paragraph [90], his Honour, in the middle of paragraph [90], draws the distinction, by reference to section 1378, which is the transitional registration provision:
By virtue of s 1378, the registration of the particular company under Pt 2A.2 of the Corporations Law of a state or territory existing immediately before commencement of the Corporations Act on 15 July 2001 became, on that day, the equivalent of registration . . . with the result that the company was, at that point, taken to be “incorporated in this jurisdiction” –
So it is incorporated at large, but it is registered in the State or Territory in whose Corporations Law it commenced.
FRENCH CJ: How does 119A(4) operate?
MR NIALL: It operates differently in relation to a withdrawal of jurisdiction because it maintains registration. If this line analysis which we are urging the Court to adopt in relation to the application to all of the provisions is right, the significance is that the Corporations Law continues to apply outside of the referring State but the nature of the entity has changed because “company” is defined to mean a body registered under the Act. Such a body corporate would not continue to be a company but it would continue to be a body corporate and regulated under the Corporations Act as such.
NETTLE J: It is a fairly powerful argument in favour of Justice Barrett’s interpretation ‑ ‑ ‑
MR NIALL: We would submit not, your Honour, because it replicates precisely the existence or the type of arrangements that operated before the referral – that is, it allows a State to bring within its own jurisdiction a particular body corporate which is registered in its own State and deal with it, subject of course to the Commonwealth excluding it. But it does not allow the State to reach into a body corporate that is registered outside.
The question that your Honour Justice Nettle asked the learned Solicitor for Western Australia about how you could not wind up a company in Western Australia law that had been registered in Victoria, that remains the case. So it is part of the scheme, it is part of the method, we would say, that the Act allows effect to be given to the plain language of section 5F, which is all of the provisions withdraw from or disengaged in relation to the body corporate.
GORDON J: Is that right in relation to 119A(2). It starts that:
A company is taken to be registered –
and I had understood that what had happened was that the split between registration and incorporation was to enable the States to pass legislation which imposed additional obligations upon entities and as a result they could impose additional obligations and confer powers by reference to entities that were registered in their State and that was the reason for the split between registration and incorporation.
MR NIALL: But it is difficult as a matter of ‑ ‑ ‑
GORDON J: That is why it says “is taken to be”.
MR NIALL: But it is only registered in one; it is not, in our submission, registered anywhere else.
GORDON J: Does that sit with 124?
MR NIALL: In our submission, it does because it remains all the powers of a body corporate.
GORDON J: Well, it:
has the legal capacity and powers of an individual both in and outside this jurisdiction. A company also has all the powers of a body corporate –
MR NIALL: That remains the case. But, of course, if the Corporations Act is not applying to the body corporate it has to find its corporate authority elsewhere. Now, of course this would not apply to a foreign company which is registered in all of the States.
GORDON J: Which is what 124 permits and outside of the jurisdiction.
MR NIALL: And it would not apply to a company which is registered in another State. Now, that does no violence to either the language or the scheme, in our respectful submission, but it does enable the State capacity to keep within it entities that operate within its own jurisdiction and, of course, if the body corporate operates outside of its home jurisdiction, there are provisions of the Corporations Act which would apply to it which would require it to be registered under this Act, referring in particular to 601CA.
It would remain a registrable Australian body and it could not carry on business outside its home State. So there are a number of means, in our respectful submission, by which the scheme of the Act allows that degree of autonomy of the State, at least in relation to its own home registered companies.
That leaves, of course, the position identified by the Commonwealth that the terms of section 5F necessarily allow for the Corporations Act to operate in accordance with its terms outside of the jurisdiction and where that occurs we adopt the submissions of the Commonwealth as to how that would be resolved, but the process that I have been identifying is really first part of the construction exercise as to how the Corporations Act might apply to such an entity.
KIEFEL J: Well, the Corporations Act would continue to apply in the State jurisdiction except in relation to the excluded matter.
MR NIALL: That is so and it is a question ‑ ‑ ‑
KIEFEL J: I mean, one tends to get, in the arguments, there is a little confusion perhaps between what section 5F does and whether or not a reference has been terminated. The reference has not been terminated.
MR NIALL: No, that is so, but legislatively the Commonwealth allows and we would ‑ ‑ ‑
KIEFEL J: An opt out, in effect.
MR NIALL: In relation to the matter.
KIEFEL J: That matter, yes, but it nevertheless continues as part of the State law generally.
MR NIALL: That is so, and the question that our submissions prompt is whether if you withdraw the provisions which pick up registration, that can affect the body itself so as to ‑ ‑ ‑
KIEFEL J: I understand your submission.
MR NIALL: ‑ ‑ ‑ operate in relation to the matter. But there will always be room for the operation of the balance of the Corporations Act to apply outside of the Territory and that will inevitably lead to a potential for conflict and we would adopt the submissions in relation to the Commonwealth as to how that would be resolved. May it please the Court.
FRENCH CJ: Thank you, Mr Solicitor. Yes, Mr Walker.
MR WALKER: Your Honours, my friend, the Solicitor for the Commonwealth, and I have discussed this possibility. If he needed leave to put submissions in reply we would urge that leave in his favour, particularly in relation to what I will call the 5F, 5G and Cigamatic in particular which would come better from a Solicitor‑General than from a private litigant, and I would also seek that that happen before I reply.
FRENCH CJ: Sorry, you are suggesting that he put his oral reply?
MR WALKER: Yes.
FRENCH CJ: Yes, we are happy with that.
MR GLEESON: May it please the Court. Could I just commence with a few observations on the construction of the Taxation Act and then come to the Cigamatic question that was mentioned by Mr Walker. Your Honours, with section 215, Mr Donaldson’s first burden is to persuade you that you should read in the word “voluntary” so that it only applies to voluntary partings with the assets, transcript pages 96 to 97. He has identified nothing in the text, context, purpose or the authorities which would suggest that limitation of the provision so that it only applies to voluntary partings.
If the Court rejects that argument the inconsistency case is established and the rest is simply additions to the same effect. I would also identify that even if one made that limitation of the section it really does not remove the inconsistency because what has happened here is the substratum of the fund has been removed and the liquidator can never comply with the obligation even in the voluntary case.
We would also adopt, with respect, the matter Justice Nettle put to Mr Donaldson which is when one looks at section 23(6) one, in fact, sees a directly inconsistent command. It says you shall part with the assets in favour of the authority. Section 215 says, on our construction, you shall not.
Your Honours, could I then move to the second point which is the concept of “setting aside”, page 101 of the transcript. Mr Donaldson’s argument is that although the statute says the liquidator shall do the setting aside, it is not inconsistent if State law says our officials shall do the setting aside. The inconsistency is fairly self‑evident at that point and that is the second ground upon which inconsistency is established.
The “setting aside” they speak of is done by a person not permitted under the Commonwealth statute and Mr Donaldson has confirmed he is not contending that either the authority or the Governor becomes a liquidator who is bound by section 215 to do the setting aside.
Your Honours, the third point arising from Justice Gageler’s question is that he has not really addressed that there is a requirement to set aside a specified amount calculated in an identified manner and the amount, as we know, is the proportionate amount of the ordinary assets after any priority debts have been dealt with in accordance with subsection (3C).
Subsection (3C) is far more than definitional, as Mr Donaldson put it. It actually allows one to tell when it is, if at all, that a State law can interfere with the payment of the tax debt. It can only do so if it is a law which establishes a priority and if it is a law which otherwise survives section 109. Since 2001, there has been no such State law. Accordingly, what the liquidator must set aside is the amount ascertained in accordance with the duties in paragraph (b). That is the third problem.
The fourth, your Honours, is when he comes to the liability as trustee in paragraph (c), we ask you to treat that as merely a cap but not an identification of a liability to pay any particular amount of money. That is wrong because what (c) does is to say, your liability as trustee is to pay:
to the extent of the value –
you have been:
required to set aside –
under (b). So it is not enough to say the liquidator has $168 million sitting somewhere in a bank account. What the liquidator – so that the Authority has it. What this section requires is that the liquidator do the exercise and then set that amount aside and then pay that amount, first as trustee and then your Honours will see from subsection (4) that in the fall‑back personal liability, it hinges off a failure:
as trustee duly to pay the tax for which –
there is a liability above. So it is a liability to pay in that amount, and those critical provisions of the current section 215 are radically different to that considered in the earlier cases, which is one of the many grounds of distinguishing them.
Your Honours, in respect to section 254, Mr Donaldson has skipped over some of its key provisions which the Court considered in Australian Building Systems. It does not address the duty under (a) for the liquidator to be answerable as taxpayer for all things, including the payment of the tax. There is the central purpose of the section and the duty on the liquidator to pay the tax. It is not a provision, as he would say, which is simply silent on whether any amount of tax ends up being paid. Subsection (b) is the assessment, and (d), it is very difficult to see how he gets “voluntary” into (d).
He seems to be asking the Court to say “He or she is hereby authorized and required to retain”, in the sense of not engaging in any voluntary partings with money – rather strained reading – and what he really leaves out is the purpose evident in (d) which is the liquidator retains that money which “is sufficient to pay tax which is or will become due”. So the whole purpose is the liquidator becomes the tax collector to that amount.
In respect to paragraph (h), your Honour Justice Gordon asked a question and there was an answer yesterday and one this morning. It is clear if one reads (h) on its face, it is another indication that these assets are to remain in the “control or management” of the liquidator so that there can be remedies against them in the attachable property sense. Mr Donaldson says that if the Bell Act is effective, the Corporations Act provisions are displaced and yet he says (h) can have no work to do. On that scenario, (h) would have very powerful work to do.
Your Honours, could I then deal with what is described as the Cigamatic issue. The submission which Mr Donaldson put based on his analysis of the cases is found at ultimately pages 121 to 123 of the transcript. At page 123 he said that these cases leading up to and including Cigamatic establish – this is line 5235:
that, to the extent that the Commonwealth is to receive anything in relation to its 215 tax liabilities, that can be a matter which is dealt with by State law and such State law, whatever priority or otherwise it provides to Commonwealth tax liabilities, is not inconsistent with 215 and, by parity, 254.
Your Honours will recall elsewhere he said since Federation, up until 2001, State law has controlled the priorities for payment of Commonwealth tax and implicitly he said that has been done validly. Now, what is wrong with that analysis of the cases is this. Firstly, none of the cases concerned a State law taking the assets away from the liquidator.
Farley concerned no relevant State law, as was pointed out yesterday. Uther and Cigamatic concerned the State‑based Companies Act, which imposed duties on the liquidator. So that is the first critical distinction. Secondly ‑ ‑ ‑
NETTLE J: Just pausing there, obviously in those earlier times it was always open to a State to amend its winding‑up legislation, even in the course of winding‑up being carried out. Had it done so it would have been acting within the scope of its legislative power. If it had so amended a winding‑up legislation back then in a way which is comparable to what is purported to be done here, would it have been inconsistent with 215?
MR GLEESON: Yes. The reason is that, if one looked at the language, for instance, in the statute considered in the second case in the trio, Uther, the language of section 215 then attached the setting aside obligation to the amount available for the payment of tax – that was the language. The Court said well, if you have a State‑based winding‑up regime which creates priorities and then pari passu sharing of the unsecured debts, we regard that regime as apt to tell you for Commonwealth law what is the amount available for tax. It is telling you the State‑based priority debts are paid first and then you come in behind that sharing in the pari passu assets.
However, had the Bell Act been in force at that point in time, it would not even as a textual matter have fit within that language in the Commonwealth Act because it is not an Act to say some debts get paid in priority over others in an ordered process. It is an Act which says debts are in fact not to be treated as debts; they are mere claims on executive discretion.
So, had the Court had to consider in Farley, the Bell Act as a matter pure inconsistency, the Court would have said that is not the type of State provision which the Commonwealth Act is apt to allow to operate and so the two commands could not have been obeyed at the same time. But then the final problem is once Cigamatic establishes the correct position – as your Honours see even the headnote in Cigamatic really says it all.
The critical effect of Cigamatic was that, prior to 1980, State‑based regimes, whether of the conventional kind or the Bell kind, could not have any operation within the Federation unless the Commonwealth, by statute, consented to interference with the priority for the tax debt. So where Mr Donaldson’s history goes wrong is that immediately prior to 1980, and following Cigamatic, the result was that under 215 and 254 there was no scope for the State‑based legislation to cut down the Commissioner’s rights to have his debt paid.
GAGELER J: Is that not confusing the statute with the constitutional immunity, or at least conflating them?
MR GLEESON: No, no, I accept, your Honour, they are separate things. So my first proposition is taking the statute, immediately prior to 1980 the then language of section 215 was apt to pick up the State‑based winding‑up Acts for the reasons I mentioned that they could be treated as Acts which helped you identify what are the assets available for tax.
However, Cigamatic said that where there was such a State Act it would have to pass a further hurdle which is the Commonwealth would have had to have relevantly consented to that Act cutting down the prerogative and there was no such consent. So they are two separate questions. That is the background to the 1980 settlement where the Commonwealth said in order to allow the Uniform Companies Acts to be enacted in 1981 across the States and the Territories and in order to pull back our claims to some extent we will amend section 215 so that we will accept that the tax debt will be shared, paid proportionately out of the ordinary assets after any relevant priorities have been determined by Commonwealth, State or Territory law.
So, that is why I have said the 1981 amendment to section 215, amongst other things, is an important consent for Cigamatic purposes, a limited but important consent saying to the extent the State‑based Companies Acts provide for priority payments as part of the orderly winding‑up, they come first. When that is done we have a pool of assets. The Commissioner then shares proportionately out of the pool.
So, on that understanding of the current form of section 215 from 1981, there was no Cigamatic problem. Cigamatic had been addressed by that interaction between section 215 and the State‑based Acts.
GAGELER J: Cigamatic is addressed specifically in the Crown Debts (Priority) Act. That is the Cigamatic point; it is a Crown immunity.
MR GLEESON: It is addressed in two places, your Honour. It is addressed certainly there. That is the general addressing of the Cigamatic issue. The specific addressing is in the amendment to section 215 that your Honour referred to yesterday, which brought in subsection (3C) which has within it the proposition provided the State‑based laws are doing the right thing, which is creating a priority for some debts over ordinary debts they can be given effect to. So it is a more specific treatment of problem.
The Act your Honour referred to, the 1981 Act, is the more general treatment. It is at tab 91. The effect of it is to recognise more generally that if a State Act relates to the order in which debts are to be paid, then the Commonwealth has consented to the prerogative being cut back to that extent.
The effect of the 1981 Act is relevant to how section 254 operated between, say, 1981 and 2001, during that period, because of this consent and, because of the provisions in the State‑based laws, it was appropriate to look at section 556 to see whether some debts were given priorities over others.
Now, as your Honour Justice Gordon analysed in ABS Systems, in fact when one went there to the State‑based Acts, one got essentially the same answer as one got from section 254, save only that as a first‑ranking priority debt the 254 debt would have to share proportionately with other debts of that character, such as the liquidator’s expenses. So in that period between this Act in 1981 and 2001, the effect was that section 254 operated in its terms but together with the State‑based section 556 to identify a precise amount that would ultimately be paid to the Commissioner.
Now, if one pauses in that period, the Bell Act would never have been able to be picked up in that period had it been passed at that time because the Bell Act is not contended to be and is not an Act relating to the order in which debts of a body are paid. It is an Act rather different saying your debts have been reduced to mere claims on the whim of State officials.
So had the Bell Act been attempted in that period, the Bell Act would have been inconsistent with section 254. That is the first point, and secondly, it would have also failed as being outside the consent in this section. So the final step in the analysis is when one comes to 2001, the State‑based Acts are repealed, to put it briefly. The Commonwealth law comes in. From that period of time, if one is looking at section 215, section 215 tells you to look at sections 556 and 555 of the Corporations Act (Cth) to work out the priority and section 254 allows you to look at those provisions.
At no point in that history or structure has there ever been scope within the statutory language of the Commonwealth provisions to allow for a State Act which destroys any concept of rights or debts or order, and that is so just as a pure 109 issue and that is what the case is before the Court on and is decided on. It is unnecessary to decide the case on a pure constitutional Cigamatic basis, but Cigamatic would not authorise an Act like the Bell Act unless there was a Commonwealth consent to it and there is none.
So, your Honours, the final aspect of the tax is sections 208, 209 and 177. Western Australia’s position is that there would be an inconsistency with at least 177 unless they can do the exercise they call reading down or we had other descriptions yesterday including “offering up”. I need add nothing to the Court’s questions and the observations yesterday about that. But, Mr Donaldson did not identify for you any acceptable legal technique by which his alteration to the Act occurs and he, of course, did not suggest that he alters the Act in a way which allows those provisions to operate at the stage of recommendation and payment.
Your Honours, there were two final matters that I wished to mention. Firstly, if I might be just permitted to deal with the question of sections 25 and 73 of the Bell Act in terms of the section 39(2) inconsistency? As to section 73, Mr Donaldson gave you this morning his example of what he says is a case where you might get leave. The example he gave was not an example of a case in federal jurisdiction. It was a request for an advisory opinion between two persons as to who was the owner of some property for the purpose, apparently, of submitting the Court’s opinion to the authority for it to give it such weight or little weight as it deserves.
If that is the example, it would tend to underscore the point that the unexpressed criteria for leave, against the objects of this Act, make it almost illusory to think that there could ever be leave, in which event it is a withdrawal of jurisdiction.
Your Honours, the other point, if I could ask you to go to section 25 of the Bell Act and perhaps also to have the decision relied upon - TheCommonwealth v Rhind (1966) 119 CLR 584 - the proposition Mr Donaldson sought to extract from Rhind and apply to this case is that section 25 does not cut down the jurisdiction of the courts in federal jurisdiction in this range of matters. It is merely a defence, he said. It is a defence. He says Rhind stands for the propositions if the State Parliament is merely establishing a defence which may or may not be available that may not be inconsistent with section 39(2) of the Judiciary Act.
So, the initial question would be would it be a fair construction of section 25(5) that it is not speaking to the jurisdiction of the Court, it is merely creating a defence which could be availed of by the persons named in the section? We would submit not, not only is there the preclusive language, no action can be made or maintained against the range of people, but if one thinks of the liquidator, for example, would the liquidator meaningfully, under this Act, and lawfully, decide to waive that provision? Very hard to think the liquidator is permitted to do that under this Act. If I indicate four sections which would make that impossible.
Firstly, under section 29 he has been sterilised from all his powers or functions as an officer of the company unless the authority consents. So, his ability even to give instructions to lawyers to not take the point is compromised by section 29. Then one goes to section 54 where it would be an offence for the liquidator to be party to any scheme for preventing “the operation of this Act or the achievement of its objects”.
So, the liquidator purporting to say to the creditor, I will not take the defence, we will run this action as if section 25 was not there, would run squarely against section 54, and one can see from 54(6) that the carve‑out is for “proceedings in a court” contemplated by the Act and the example is 73 and 74. So, there is no carve‑out for 25. So, the liquidator would most probably be guilty of that offence with a criminal penalty attached, including prison.
Thirdly, section 58, the liquidator would be failing to comply with the requirement of the Act and it is hard to identify what a reasonable excuse he could have. That is a further criminal offence. Under, finally section 66, he could be injuncted from doing all these things. So, it is fairly clear that if one takes a substantive approach to section 25 it is not contemplating mere optional defences, it means what it says, the action shall not be brought.
GAGELER J: Why would it make any difference that the defence was optional or not?
MR GLEESON: One is attempting to characterise whether this speaks to the jurisdiction which is being vested by 39(2) and says that has been withdrawn. That is the exercise we are engaging in.
GAGELER J: As distinct from a change of substantive rights and liabilities.
MR GLEESON: As distinct from either a change of substantive right of liabilities or a mere permissible shrinking of jurisdiction as might occur, for instance, with a reasonable limitation period. Our initial point is section 25. One only needs to read it to see what it is saying is no court actions. Why no court actions? Because any court actions are going to be inconsistent with what the scheme is meant to do which is pay the money out in the next few weeks. So the notion that it is intended to somehow allow for litigation to continue is illusory.
Your Honours, what I wanted to say in respect to Commonwealth v Rhind was that – there is a couple of things. The provision itself in that case, which Mr Donaldson says is analogous, is found at page 608. It is not analogous; it is merely a provision saying that, where there are actions of ejectment in respect to tenancies where the rent falls below a certain threshold, 12 pounds, then they are not to be brought in the Supreme Court or the District Court and under the Act they are brought somewhere else. So really it is a provision allocating the jurisdiction in respect to the matters between different tribunals by reference to monetary limit. One could understand why that is all it is doing. It is not inconsistent with section 39(2).
But secondly, the critical passage which was not read, from Chief Justice Barwick, was at the top of page 599, where, having taken the view as a matter of construction that the section did not bind “the Crown in the right of the Commonwealth” it was unnecessary to consider it further, but his Honour went on to say:
If it had sought to do so in relation to the Commonwealth, it would, in my opinion, have been plainly attempting to do something beyond the power of the State legislature, namely, to determine who should have access to a court invested with federal jurisdiction and, in particular, to determine that the Commonwealth should not have such access where the federal jurisdiction to be exercised was dependent upon the presence of the Commonwealth as a party.
Now, that is exactly what section 25 does insofar as it purports to prevent the Commonwealth in the Commissioner of Taxation pursuing the liquidator under section 215 or 254 and Justice McTiernan agreed with Chief Justice Barwick. So the general vice with 25 is it is there to eliminate all federal jurisdiction in matters under the Act. A more specific vice is it prevents the Commonwealth coming before the Court for the purpose of 75(iii).
Your Honours, the final matter allocated to me by Mr Walker was sections 5F and 5G and there is little I need to say to supplement my two attempts on that topic. The fact that some States have chosen to agree with the submission I had humbly sought to put is pleasing. The submission does not solve all the problems before the Court because the Commonwealth has not taken a position on how 5G(8) applies to the Bell Act. That issue is clearly joined between all the parties and that is there but that is not something we have chosen to join issue on.
Apart from seeking to reject Western Australia’s proposition that when 5F says “in the State” means “in every State”, we have really just been offering the next step down which is what that means is that the Bell Act would otherwise be disapplied as part of the body of law of Western Australia but remaining as part of the body of law of the rest of Australia, and as your Honour Justice Kiefel pointed out, the Corporations Act remaining as part of the body of law of Western Australia, save in respect to these matters.
So what that does is then provide the entry point for the final step in this case which is, now that the Corporations Act has shrunk in force, how does one then apply that to the particular features of the Bell Act, and on that we did not take a position in‑chief and I do not wish to take a new position in reply. Obviously, it requires a working through of this concept that the Corporations Act remains a part of the body of law of the whole of Australia and binding under covering clause 5, save for the carve‑out where it is not a law in force in Western Australia, and the burden for Western Australia is to grapple with that.
NETTLE J: Mr Solicitor, may I just ask, you take the point that it is the body of law rather than a geographic limitation as the entry point, as you put it.
MR GLEESON: Yes.
NETTLE J: Does that difference necessitate any difference then in the sort of reasoning Justice Barrett applied in concluding that because the proof of debts in a winding‑up is, as it were, nationwide, one could not conceive of 5G(8) applying?
MR GLEESON: It is possible; although they are different entry points they reach the same conclusion.
NETTLE J: Yes, thank you.
MR GLEESON: And in many cases, they will certainly reach the same conclusion. So in a case where everything is intra‑territorial, then you get the same answer whether you think geography or you think body of law. The areas where you might get a different case – it is not this case, but take an example where a winding‑up is in every respect about a Western Australian company, it was established there a long time ago, registered et cetera, but one asset happens to be in Queensland and there is a need to approach the Supreme Court of Queensland for orders to get in that asset.
Now, if Western Australia has disapplied the Corporations Act, the judge in Queensland has a question. I opened covering clause 5. Ordinarily I know the Corporations Act binds me, I am a judge, but in this particular case I have to give some effect to the notion that the Corporations Act has reduced its reach in respect to matters which, as I would put it, are governed by the body of law of Western Australia, and in that case it is perhaps a little similar to one of your Honour’s examples yesterday.
It may not be very hard for the Queensland judge to say, well, this is in every sense a Western Australian winding‑up, I am acting ancillary to that, I am assisting that by my orders, I would apply the rule that is now in force in Western Australia. So in a sense that is another, I would submit, relatively easy case at the other end of the spectrum. One gets to the meaty end of it when one purports to disapply the Act in respect to creatures which are very hard to regard as other than operating across the nation and bound by the ordinary body of law under the Corporations Act. May it please the Court.
FRENCH CJ: Thank you. Yes, Mr Walker.
MR WALKER: May it please the Court. In relation to sections 215 and 254, we adopt the first part of my learned friend, the Solicitor for the Commonwealth, in his reply this morning ‑ that is up to the Cigamatic matter about which we will say nothing ‑ and simply add this observation about what appeared to be an aspect of the argument for Western Australia.
Your Honours will recall those parts of that argument which said of sections 215 and 254 that they looked forward to and did not conclude - did not themselves deal with what was variously called the ascertainment or fixing of the tax liability itself. So far as it goes, that is true but trivially so because what matters, for the purposes of the section 109 argument with which we are concerned, is whether they are part of the law of the Commonwealth, which they manifestly are.
We accept the books are not overbrimming in examples of this. We accept that inconsistency within the meaning of section 109, as within in it the notion that there can be differences which are not inconsistency on account of what might be called the seriousness, perhaps magnitude, perhaps subject matter seriousness - it is a relatively unplumbed area in terms of what will suffice to bring about inconsistency - but we did not hear any argument and it is quite impossible, seriously, to maintain an argument that there is not the requisite seriousness, that is reality of inconsistency between the presence – that is, the operation or application of sections 215 and 254 – and their absence.
It does not need authority, though it has the authority of Justice Evatt, that there is an evident, self‑evident, perceived protection that is enhancement of the position of the Commonwealth and its revenue by the enactment of such provisions. Adopting colloquialisms such as “security for judgment” is a way of actually demonstrating that our learned friend’s point has nothing in it - be it assumed, do not know the amount yet, there is yet to be a debt action between the Commonwealth and the taxpayer, the punitive taxpayer.
They have the security for judgment. Section 215 is manifestly something, the deprivation of which is a kind of difference if sought to be brought about by a State regime, which is a section 109 inconsistency with the inexorable invalidity as a result.
In relation to set aside it is quite plain, with respect, that there is no functional similarity between what section 215 mandates in that regard and what is the position of the authority. There is no setting aside in the completely mixed fund upon which there are no claims, except those of petitioners and in relation to which there is no severance or partial division, let alone different treatment with respect to the powers of an owner, imposed upon the authority.
On no view, and contrary to our learned friend’s argument, can there be seen to be any functional equivalent of setting aside. Indeed, and with the virtue of boldness but boldness only, my learned friend, in effect, says the authority has the money and, accordingly, it is as good as set aside. That, in our submission, flies in the face of the deliberately distinct obligation with respect to be set aside – imposed by the word “set aside” in relation to a liquidator. A liquidator would not comply by saying, “I have the money”. The liquidator has to set it aside. There is nothing in the proposition that the authority holds a set‑aside amount as my learned friend’s outline for address put it in paragraph 4 in the same way that it was putatively held by a liquidator.
The provisions, in particular, of section 22(10) and (11), combined with what one sees from sections 43(8) and 44(5) and (7) of the Bell Act, make it impossible, in our submission, to suppose that there is any such equivalence at some unarticulated functional level as to remove the inconsistency that would operate for the purposes of section 109.
In relation to the so‑called – see our learned friend’s outline for address, paragraph 5 – process to distribute the amount re tax liability being, as it is called there, the Bell Act, that, in our submission, entirely passes over what is the obvious issue dividing the parties. It does not answer the problem raised by the evident distinction between an administration including, and, perhaps, culminating in distribution according to rights as opposed to a dealing with the authority’s property as the authority, the Minister, and the Governor on Minister’s advice, chooses to do so.
We need, in our submission, therefore, simply to rest in effect on the proposition that if we are correct about sections 215 and 254, then in terms of section 109 the whole of the Bell Act is invalid, that is, the pro tanto operation which is part and parcel of section 109 must operate to bring down the whole because the most evident clash is between section 22 – not only – but between section 22 and sections 215 and 254, and it need hardly be said that if section 22 cannot do its work then the Bell Act cannot possibly survive in an acceptable form. There is no rump that can operate.
Thus we come to the question of reading down. I have little to add to what my learned friend, the Solicitor‑General for the Commonwealth, has said about that. It is clear, with respect, the so‑called reading down is not the only way in which such a process can proceed which is to except from the impugned wording an operation necessary to permit that wording with that exception nonetheless to operate. That is why it is called reading down.
It is reducing what would be the semantic import of the impugned enacted wording so as to leave operative an unobjectionable rump. It has itself, as your Honours appreciate, problems to which we have drawn attention as to whether that rump is an acceptable vestige, bearing in mind tests such as whether or not this is a statute of a form that ought to be understood as intended if necessary to stand.
But before you get to orthodox considerations of that kind in reading down, you first have to have as the first stage that what is being done is the carving out of an exception, and as became clearer and clearer, moving from the written submissions for Western Australia through the address and responses to questioning from the Bench yesterday, this is not the carving out of an exception but the creation of a special regime by the imposition of obligations that simply do not exist in the enacted words.
There is no carving out of exceptions so as to leave obligations imposed upon the authority, there is simply a rewrite and it is, of course, in a most glaring fashion an invitation to the Court to legislate. Now, that means, in our submission, that the Act is invalid because of the Tax Act questions. Your Honours have heard the pleas, partly perhaps political, in the best sense of that word, that you should not get to the 5F and 5G issues and, with respect, though we do not appear for a polity, one can see the force of that.
There is another way of putting that same point and that is that the Court should not get to constitutional questions, not just federal compact questions of a political kind, but one should not get to constitutional questions unless you have to. That is an accepted practice in this Court.
Why do we say 5F, 5G are constitutional questions? At first, of course, they are, I guess, the background of an understanding assisted by 51(xxxvii) in particular of sections 5 and 5F and 5G. That is perhaps reason enough to appreciate that this is constitutional and legal and not simply in relation to fidelities of historical relations between the polities and the federation.
Your Honours, I am going to have some short remarks to make about what I will call the prepositional component of section 5F and section 5G(11) in which I will make some brief remarks about the matter of 51(xxxvii) but before coming to that can I note that there is, perhaps, another conundrum‑style constitutional question engaged in moving onto the 5F/5G point? That is the amending Act which, I think, is now being mentioned for the first time today.
Now, the amending Act does not even purport to touch the tax question. How could it? So, I repeat, if the tax point is good, then nothing needs to be done or said about the amending Act. The amending Act we know, plainly from the way which some of its fall‑back provisions are expressed, was enacted with an acute awareness of its possible deployment in a section 109 argument. That is what it is for, clearly.
Now, a section 109 argument is premised of course on an inconsistency and any sufficient inconsistency invalidates that there has not been any serious severance argument or read down, I should say, a pro tanto argument about 109 and the Tax Act. So that if the tax point is good and there is invalidity, the amending Act ex hypothesi purports to amend an Act which, to use the language of gloss in this Court of section 109, is in abeyance or is inoperative. “Inoperative” is the usual expression but “in abeyance” is another one.
So, it has to be accepted that such an Act is not nothing, not least because if the Commonwealth acts so as to remove an inconsistency, section 109 being essentially temporal in what might be called a kind of eclipse notion, then the State Act will revert to operate, but simply according to its terms, whatever they were.
It means, I think to answer a question the Chief Justice asked my learned friend, that if there is what is sometimes called reading down but is really simply the operation pro tanto as required by section 109 of a State Act, to use a silly example, so that whereas it was enacted to apply to ducks and chickens, the Commonwealth moves so as to cover the question in relation to chickens so that the State Act applies only to ducks, then so soon as the Commonwealth chicken regime is abolished, the State Act automatically will continue to, or will thereafter operate according to its tenor to cover ducks and chickens.
Now, what happens if, during the eclipse by the Commonwealth chicken regime, the State Parliament, as it probably can, though I cannot find any precedent for this, amends its 109 invalid Act to remove chickens so that, as it were, the populace in New South Wales knows that this New South Wales Act exposes them to liabilities or imposes duties only with respect to ducks, a kind of good order, decent dealing with the public, in terms of knowledge of the law approach.
Clearly enough, when the Commonwealth regime is abolished, the State Act then raises a question as to whether that was an effective amendment and there are strong reasons of public policy concerning the enactment of laws, the nature of the statute book and relations with the people governed by it for such an amendment to have been effective, notwithstanding it was accomplished during the period of eclipse. It still raises, as I say, a conundrum as to what it means to amend an Act which is invalid when there was no application of the State Act in relation to chickens when the amendment was made, if made, so as to use that reference.
Now, in our submission, when one looks at the amending Act in this case, on the hypothesis upon which it is sensible to address anything about the amending Act fixing up a 109 problem, there was an inconsistency or is an inconsistency. The Act does not even purport to address the Tax Act aspects of that, although if we are right on that, it continues to operate and what has been amended in relation to what I will call the 5F and 5G parts of the case, the companies part of the case, has been the amendment of an invalid Act and it follows that the amendments themselves – that is, the provisions introduced by way of amendment – are themselves invalid and they are invalid the moment they go in.
As to the amending Act, there are puzzles about what it is actually doing when it is not, as it were, restoring what is on a State statute book to a printed position whereby it bespeaks law that actually operates. All it will do here is alter the printed form of an Act which will not operate.
FRENCH CJ: I suppose this goes to the question I think Justice Gageler might have put yesterday about this being not a question of limitation of State legislative power as distinct from the operation of 109 and, as you said, in a temporal sense.
MR WALKER: Yes, quite so.
FRENCH CJ: The notion of invalidity has a somewhat different connotation.
MR WALKER: It certainly does and we, with great respect, embrace the critical distinction that Justice Gageler drew to attention. What I am saying has nothing to do with ultra vires; it really has to do with what is the effect of this purported amending act and also of the purported amendments, given the continued ex hypothesi operation of 109. It need hardly be said that these are, on any view of it, matters involving the Constitution and its interpretation, to which section 78B of the Judiciary Act applies.
So that is another way of coming to the proposition that the Tax Act points, which would not be precluded if being dealt with by this Court by the delay required by section 78B, do invite themselves as being, as it were, separately and sufficiently for the case as matters for decision.
There is one aspect – if your Honours will forgive me for descending, as it were, to practicalities which are of great importance to my client. The practicalities are that while so ever the possibility in advance of this Court’s judgment exists as, with respect, it must, that the Bell Act is valid, as your Honours appreciate, there are pretty smart timetables, that is, pretty tight timetables imposed upon – that is probably the most successful submission I have ever put. I am halfway through this first sentence and my learned friend says he will deal with that in Court. So I can spare your Honours that.
FRENCH CJ: You have been given an indulgence.
MR WALKER: Could my friend deal with that now so that I know whether or not I have to say anything further?
FRENCH CJ: It is good to get it on the record, I think, rather than ‑ ‑ ‑
MR WALKER: Yes.
FRENCH CJ: Yes, Mr Solicitor.
MR DONALDSON: I am grateful to your Honour. Your Honour, the issue that my friend was going to get onto was this. As he indicated, there are timeframes within the Bell Act for things to occur. Prior to the commencement of these proceedings, an undertaking was given by the State that there would not be a submission to the Governor of a report of the authority under section 38(3) of the Act as permitted by section 41(1) or section 38(1) of the Act as required by section 42(1), without giving to the parties 14 days notice.
The issue that has been raised by my learned friend relates to that particular undertaking. I have instructions, your Honours, to provide an undertaking on behalf of the State and the relevant Minister who exercises power pursuant to the provision which I have indicated that those powers which I have indicated to your Honour will not be exercised prior to the handing down of judgment.
FRENCH CJ: Yes, thank you, Mr Solicitor.
MR WALKER: Thank you, your Honours. I am obliged to my friend. It leads naturally to a matter which – I do not think it is covered in any of the written submissions for which I apologise – in this Court, in the happy event of any success by us that produces invalidity, then we would respectfully seek liberty to apply in this Court lest there be some need for what I will call loosely restitutionary consequential orders, but there may never be any such necessity but, in our submission, that ought to be in that event part of the Court’s disposition of the matter.
Your Honours, one final observation in relation to the Bell Act which I should have made when talking about the reading down and, in our submission, the hopelessness of that attempt, is to draw to your Honours’ attention, lest it was not obvious yesterday, that in going through the provisions to be read down, as my friend was putting it, the exercise stopped after section 39.
But, of course, it is after 39 that the possibility of benefit is held out and understandably, with respect, it is extremely difficult to understand how one could impose by way of a supposed exception obligations that accommodate 215, 254 against the regime of absolute discretion, to use the repeated expression of the critical points of the Bell Act.
In relation to the Judiciary Act point, just one small observation, the parties and the interveners having, in their various ways otherwise completely joined issue in argument. Really, one way of describing the way we put this is that what Justice French and the Full Court in Manfal suggested might be “a considerable objection” is manifest in this case and it is a considerable objection and it is an insuperable objection when one considers the effect that has been sufficiently argued on our part already in relation to section 25(5) and section 73, et cetera, of the Bell Act in the face of section 39(2) say of the Judiciary Act.
One small point only in relation to the section 5G(8) matter upon which otherwise no reply is called for given the joining of issue in argument. The words “winding up” and “administration” are, we accept, words calling to be interpreted in light of the evident prospect contemplated by the provisions of there being differences, of course, between the Commonwealth position and the putative State position.
In particular, we reject the notion that any of our argument has been to the effect that there has to be identity or even to use a less strong word “similarity” of the putative State regime to what happens to be at the time the Commonwealth regime. The Commonwealth regime can change too, of course.
I hope our argument is not susceptible of being spotted as a kind of platonic essences notion but there is something of that in it, that is, you have to give meaning to what Commonwealth Parliament means when it says of the putative State regime that it is for, say, winding‑up or administration, external administration.
We would simply add these observations, that you will recall that not all the property of the WA Bell Companies is expropriated by section 22. I drew that to attention in‑chief, and I will just call them group shares as an inexact but I think handy paraphrase for what is left in the hands of the owners, the corporate owners. One sees in particular sections 22(4) and (5) in that regards.
One contemplates as well dissolution under section 30 and the ultimate fate of fund moneys under section 48, and then you focus in particular upon the provisions of section 27 which is the, with respect, merely colourable attempt to call this an administration, and section 28 which is where it very much comes to land because section 28 reads as if this is an Act for administration if you put 27 and 28 together.
But it is a curious administration of these companies. It gives the authority control of their property and affairs. Now, this obviously is operating just for this rump of other property because otherwise everything is section 22 expropriated. The authority while it is administering the companies’ affairs can manage the property and affairs, can dispose of any of that property and can perform any function, et cetera, and, lest that was not clear enough, those items do not limit the generality of any of the others of them - section 28(2).
Now, that then is it. There is no direction as to what is to happen to these assets, except insofar of course as ultimately, it would appear, everything goes to the State. That is not, in our respectful submission, administration in any recognisable form at all and is nothing other than cosmetic because non‑substantive provisions concerning what was and remains a form of expropriation, staged, it is true, with respect to what might be regarded as commercially very unimportant assets but of course at the outset in relation to section 22.
Your Honours, finally, we come to the issue concerning the, if you like, the prepositional argument. In our submission, all that matters for the dispute to be resolved by decision of this Court is whether or not the Bell Act with its repeated and overt extraterritoriality raises a section 109 question, with respect for this part of our argument, to the Corporations Act.
Now, it is by no means clear whether Western Australia’s position, be it primary or alternative does not matter for present purposes, whether any aspect of its position in this Court, claims that the Bell Act has, particularly if amended in the fashion now attempted, driven the Corporations Act from the mainland and, indeed, from all the other relevant stipulated parts of Australia, because its extraterritoriality is plain and if it is simply ‑ to use the linguistic elision of the Commonwealth Solicitor‑General ‑ it is enough to substitute for the word “in” the word “of”. The expression “body of” does not add anything; “law”, “body of law” does not matter, just recognise that there is more than one source of law that obtains in a law area or a law district.
If the Commonwealth Solicitor‑General be correct and “in” simply means “of” and by dint of our emancipation from the status of inferior legislature when we were colonies, and the truth is understood in Union Steamship, then the body of law of New South Wales includes, of course, all that which is effectively extraterritorial. You can run through and say that for every one of the former colonies, and obviously enough it leaves open conflicts which are not dealt with by section 109, conflicts of a kind which, to put it mildly, would tend, one would have thought uncontrolled, to explode rather than support a national scheme of company regulation.
So when one considers section 5 and 5F and 5G together – as they must all be considered together – plainly enough, one would unless driven to it inexorably by the clear words in, particularly, 5F and 5G(11), not construe the words as apt to give to the States severally – and it would not only be the first movers, mostly with legislation it is the last person to speak who prevails and there is no constitutional law on how you deal with this ‑ but gives the States the power to promulgate, including extraterritorially with arguable acceptable degrees of nexus no doubt being thrown up as the way they shuffle between themselves in this Court as to whose law governs a dispute, the choice of law is by no means established by pre‑existing rules, let alone of constitutional import.
Of course you would resist all of that and, in our submission, you do so simply by saying that what 5(3) says, having taken account of who are referring – and in this case, happily, everyone is referring – 5(3) simply says, it applies throughout the jurisdiction, meaning, throughout Australia. The preposition “throughout” is particularly apt for what might be called unlocalised, that is, within that jurisdiction non‑segmented, pervasive effect. “Universal” I think is a word that one of my friends has used. It is universal only within that limited area, of course.
Now, that is, with respect, the foundational premise of Justice Barrett’s approach which is, as with great respect one might expect, intensely practical and reflective of familiarity with and need to apply a practical national scheme. Now, according to at least a corollary of the Commonwealth’s argument ‑ query whether it is part of the Commonwealth’s argument ‑ extraterratorial aspects of Western Australia’s Bell Act are within the scope of its operation under, say, 5F or 5G such as to disapply the Commonwealth law.
In our submission, that is a disapplication in – that is what the words of those provisions say ‑ and it turns out apparently, according to that supposed corollary of the Commonwealth’s approach, that it is a disapplication both in and out of WA if, as has happened, the WA law in question has expressed itself to be extraterritorial.
Now, there is no mystery about “in” and “out” as there is no mystery about “intra” and “extra” territorial. They are still elementary aspects of an understanding of the reach of the law. We are not talking about legislative competence, we are talking about just what is the reach of this law, what does it do? There was a time where there were simple canons of interpretation about the presumed territorial effect, the territorial limitation, so that what we are proposing is not alien to judicial method in relation to interpreting statutes, a perfectly understood technique which is, in our submission, well picked up by the simple preposition “in” that you find in those provisions.
It is for those reasons that because subsection 5(3) is, for heaven’s sake, not abolished by ad hoc State actions invoking 5F or 5G, because 5(3) continues, you have as a matter of Commonwealth law ‑ to which of course 109 speaks ‑ of Commonwealth law saying, it is the Commonwealth Act that applies throughout Australia with the exception that is conveyed by the preposition in those provisions.
It is for those reasons, in our submission, that this case again yields to a simple analysis, does the Bell Act purport to apply provisions in places where the Commonwealth Act says it applies and the short answer to that is, yes, presumably deliberately so. Then the question is, does the wording of 5F and 5G relevantly mean that the Commonwealth Act not only has thereby ceased to apply in Western Australia but has also by that extraterritoriality in the Western Australian provisions ceased to apply throughout Australia as well and that, in our submission, is an impossible piece of dislogic. May it please the Court.
FRENCH CJ: Thank you. Mr Colvin, how long do you expect to be?
MR COLVIN: We expect to be 10 minutes, your Honours.
MR PENGLIS: If it assists the Court, your Honour, the Chief Justice, I too seek to reply and I will be 10 to 15 minutes as well.
FRENCH CJ: Yes, I was going to add you on, Mr Penglis. We will come back at two o’clock.
MR PENGLIS: If it please the Court.
AT 12.45 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.00 PM:
FRENCH CJ: Yes, Mr Colvin.
MR COLVIN: May it please your Honours. Our first point concerns the particular tax consequences for Mr Woodings. At transcript 117, Mr Donaldson accepted that no one has an entitlement for even one cent under the Bell Act regime. Under section 254(1)(d) of the Income Tax Assessment Act, Mr Woodings as liquidator is expressly authorised to retain money to pay tax. Mr Woodings has lost the benefit of that entitlement or statutory right to retain the property of the companies for that purpose. He can, of course, “prove” we would say, for his liability but he is not entitled to one cent.
So, in our submission, there is in addition to the way in which the matter has been described by others, there is an inconsistency between a law that affords him the right to retain, in this case about $300 million, and the Bell Act which takes the money from him and puts him in a position where he cannot retain anything to pay tax for which he may be personally liable. That is an inconsistency of the most fundamental kind. It is a direct collision because of the removal of a statutory right.
The second matter that we raise concerns matters in relation to the conflict of law points raised at transcript 145 and following in the course of submissions for the State of Western Australia. One of the authorities that we rely upon at footnote 117 in the matter of International Tin Council (1987) Ch 419 at 446 to 447, Justice Millett, as he then was, dealt with the way in which conflict of law provisions apply in relation to liquidations. The propositions are that the status of a foreign corporation is a matter of private international law and is governed by the law of the country of incorporation – not surprising.
Winding‑up is a matter that is a change to the status of a corporation for those purposes so it attaches to the place of incorporation for private international law purposes. Finally, a winding‑up order, once made, according to the law of the place of incorporation, applies extraterritorially, that is, outside the place of incorporation.
Those principles then, if they are looked at in the context of section 5F, lead to these consequences, in our submission. Assume that Western Australia used section 5F to exclude the winding‑up law as it applied to a particular company and against the proposition that we advance that section 5F permits that exclusion to operate to the full extent of the law‑making power of the Commonwealth.
The law‑making power of the State, to the extent that it had excluded and therefore reduced the scope of the Commonwealth law, would not extend in our submission ever as far as the law‑making power of the Commonwealth, that is to say, there would always still be a law of the Commonwealth that would apply in respect of companies and, as we know, that law provides that a company is incorporated throughout Australia.
So if such a law was enacted, there would be inconsistent laws as to the place of incorporation of a company. That is fundamentally inconsistent with the understanding and notion of a company that it has a place of corporation, the law as to its status affects choice of law rules and, to the extent that choice of law rules are called in aid here, as soon as one articulates the issue as one in which there will be two laws as to the place of incorporation one can see that choice of law does not deal with the problem. The issue is a 109 inconsistency, in our submission.
The winding‑up further, as to private international law principles, would extend extraterritorially. So if, according to what I might describe as the remnant Commonwealth law, an application was made and obtained for a winding‑up order in respect of a company, then that winding‑up order would extend with authority extraterritorially and the liquidator could be in Western Australia and could undertake activities in relation to that winding‑up, according to applicable principles.
So, in our submission, that leads to the construction for which we contend that, irrespective of whether the State simply removes the applicable law in relation to a winding‑up or enacts its own law to the extent of its law‑making power, or whether it takes the extra step of creating a new law in its place, in either case the law removing – that is, removing the application of the winding‑up – leaves in place a position where the State law is inconsistent with the Commonwealth law.
So one does not even need to have the additional law, as one has here in relation to the Bell Act, and that is the fundamental insight in HIH by Justice Barrett, that there is a fundamental difficulty in having two laws in relation to dealings in relation to companies which have places of incorporation and their winding‑ups have to be connected to that law as to the status of the company.
The third point that we address is the one raised today in relation to 119A, which is in the book at page 203. It was said that by some mechanism section 5F could cause 119A to have the consequence that there would be no company for the purposes of the Corporations Law (Cth).
In fact, what a law of a State would do if it excluded the matter of a particular named company is that it would make the law in respect of that company to the extent, we would say, of the geographical confines of Western Australia but assuming against us to the extent of the law of the State of Western Australia, it would make the law of that company a law to which 119A did not apply.
It would not amend or change the Commonwealth law which would continue to apply either outside of Western Australia or in the proposition against us, outside the extent of the law‑making power of the State of Western Australia. That law would still exist. The Commonwealth law would provide that a company is incorporated throughout Australia and the Commonwealth law would say that the company is taken to be registered in the State or Territory as described in 199A(2). So, it is not the case that there would not be a company for the purposes of the application of the Commonwealth law. There would be and there would be the inconsistency of the kind that we had already described.
The fourth matter which we wish to address concerns the submissions about the character of a winding‑up. In our written submissions, our principal submissions, at paragraph 97, we ‑ ‑ ‑
FRENCH CJ: I am sorry, just before you leave 119A(2), does a company where there is a disapplication outside the State of registration, the State disapplies, the State in which the company is registered - outside the State of registration, does the company continue for the purposes of the Commonwealth law to be taken to be registered?
MR COLVIN: Yes, in our submission, it is. So, it is taken to be registered in a particular State or Territory ‑ ‑ ‑
FRENCH CJ: That is for the purposes of the application of the Commonwealth law in other parts of Australia.
MR COLVIN: Yes. It is not to interfere - well, in our submission, all these roads lead to the State law being invalid by reason of 109, by reason of direct inconsistency but the operation of the law under 119A(2), that is the Commonwealth law, would be to identify the place of registration and that place of registration would be as described in subsection (2). But even if that were not the case, the company is still incorporated throughout Australia and, in our submission, this just drives you to the point that one cannot use 5F to create a Commonwealth Corporations Law of reduced field of application but which is still operative.
That is directly inconsistent with the State law and having regard to the character of laws about companies and their winding‑up, that will be an inherent consequence of a law that seeks to remove, or seeks to provide that there is an excluded matter in respect of the winding‑up provisions for a particular company. All such laws will be 109 inconsistent because that is what they leave behind.
Then the fourth matter in relation to the character of a winding‑up, at paragraph 97 of our principal submissions, we gather together a number of authorities in relation to 601EE of the Corporations Act and, in our submission, those authorities establish clearly that one cannot override existing proprietary rights as part of the character of a winding‑up. One cannot create new substantive obligations and one cannot have the release of funds to persons who have no legal entitlement to them.
Those matters are fundamental to the character of winding‑up which is essentially a mechanism by which people with rights are reduced in respect of the amount that they can secure by way of payment or discharge of those rights but otherwise in all respects the winding‑up recognises those rights and allocates as between all of those competing parties their entitlements. It is not a mechanism by which you deprive parties of those entitlements irrespective of whether you confer upon them the type of discretionary provisions that are expressed in the Bell Act.
The final point we seek to address is the position in relation to the amending Act. As has been noted, one of the major focuses of the amending Act is the position of Maranoa. In our submission, none of Maranoa’s contentions fall away as a result of the amending Act. The amending Act in terms purports to roll back the application of the Corporations Act to Maranoa by retrospectively invoking section 5F and 5G.
In our submission, firstly, as a matter of proper construction of those provisions, they may only be invoked with prospective effect. That accords with usual principles applicable, well known and, in our submission, there is nothing about the subject matter that would lead to a different result and there are no express words that would support such a retrospective application.
Further, the law of a State made for the purposes of those provisions, is a law of a character that is likely to alter rights and liabilities retrospectively and that is a further reason why it should not be construed as a law which empowers action to be undertaken retrospectively.
The second reason, of course, is about the constitutional aspects and whether, in our submission, according to current authority, even if on its proper construction, 5F and 5G would be invoked with retrospective effect, their purported application here would be invalid because it would operate to validate a law that has been made invalid by section 109 inconsistency.
Now, we recognise, of course, until yesterday we did not know that we were here to meet a law of that character. The law was passed and we were told of it yesterday. So we have not been in a position to issue the requisite notices in relation to Metwally form of challenge to the legislation.
In those circumstances, we seek leave, if necessary – or seek liberty, I would apprehend is a better expression – to support the issue of those notices if required. In this matter there are a large number of challenges to the law, all of which, if upheld, would be a full and complete reason why the Bell Act would be invalid.
This is a matter that would affect the validity of the Act insofar as it applied only to Maranoa and, having regard to the stage of the proceedings in which it has arisen, we wish to reserve the point which we have identified. But, in our submission, it may be appropriate only to reserve the liberty to apply in the event that it is required – which we do.
FRENCH CJ: Get that nailed down.
MR COLVIN: So then the issue of course is can these points be answered by saying, well, the law applies prospectively, the retrospective issues are interesting but moot because the law could be read down to the extent of its retrospective application. Then in relation to that, in our submission, the difficulty is that the prospective application of the key provision of the legislation cannot occur and that is because of the terms in which section 22 of the Bell Act are expressed. Section 22 provides that:
At the beginning of the transfer day the following are transferred to, and vested –
It speaks at a point in time related to the transfer day. The transfer day is defined and fixed in time by the definition provisions as to mean the day on which Part 3 comes into operation and we know that is 27 November last year.
So section 22 is in a form whereby, whenever it is enacted, it purports to speak in respect of things that operate at the beginning of a single date. So to the extent that section 22 is sought to be enacted at any time after the transfer day, it is inherently a law which speaks retrospectively. “Speaks” is the wrong word; “operates” retrospectively. So although our learned friends rely upon, it would seem, provisions in the legislation to say, well, in any event, it can take effect now, if not retrospectively, in our submission, in relation to the key provision about the taking of property that cannot occur.
Then there are two provisions in the amending Bill that deal with validity that are relied upon by our learned friends for the State of Western Australia. Firstly, section 53A introduced by section 12 of the amending Bill provides that:
If on the day –
when this amendment Act:
comes into operation section 22 is not valid because of section 109 of the Constitution . . . but, afterwards becomes valid, this Act has effect ‑
That then means that it must – this provision only operates if section 22 afterwards becomes valid. In our submission, it cannot afterwards become valid because it is a law which has an inherent retrospective character because of the way in which it is expressed. Then, in relation to section – the new provision introduced as section 85(6), it has the same character in relation to – the key words are in about the sixth line:
this Act has effect in relation to the matter on or after that day ‑
So that provision, to the extent that it would confer some authority, would suffer from the same defect, in our submission. Those are our submissions.
FRENCH CJ: Yes, thank you. Yes, Mr Penglis.
MR PENGLIS: If your Honours please. WA Glendinning adopts the oral submissions in reply on behalf of the plaintiffs as well as on behalf of the Commonwealth parties insofar as the Commonwealth party submissions dealt with the taxation issues and the Judiciary Act. That reduces us to nine fairly narrow points that we wish to make in reply and the first two relate to the taxation legislation. So, the first point is that we wish to, with respect, amplify a point made by Mr Walker. Mr Walker submitted, and we adopt, that there is no functional similarity between the regime provided by sections 215 and 254 of the Income Tax Assessment Act and the regime provided in the Bell Act.
Mr Walker made the observations that the Bell Act contains no provisions for the benefit of the Commissioner requiring the authority to set aside and retain any assets referable to the tax claimed by the Commissioner. We wish to add two further points. The first point we add is that there are no provisions in the Bell Act akin to section 215(3)(c), section 215(4) and section 254(e), all of which impose a liability on the part of the liquidator which you have heard about and I will not go over. But there, of course, is no like obligation on the authority.
The additional point we wish to add is this. Even if there were obligations, or supposed obligations, imposed upon the authority under the Bell Act to do so, those obligations would be illusory, not real, and that is because we invite your Honours’ attention to section 72(2)(d) of the Bell Act which, in effect, provides that:
The State, the Authority and the Administrator are not liable to any action, liability or demand arising from –
. . .
(d)the doing of, or omitting to do, any other act, matter or thing under, or for the purposes of, this Act.
So not only are there no obligations on the authority but, even if there were, they would not be real obligations in the sense of the real obligations that exist and the real entitlements that exist under the Income Tax Assessment Act.
Our second proposition deals with the issue of reading down. When asked, Mr Donaldson responded that the source of his reliance for the reading down of the provision said to be inconsistent was section 7 of the Interpretation Act. In that regard, we refer the Court to an authority on BGNV’s list, Sportsbet Pty Ltd v NSW & Ors (2012) 249 CLR 298, a decision of the plurality at page 317, paragraph 13 of section 31 of the New South Wales Interpretation Act, which said:
It will be apparent that s 31 of the Interpretation Act does not speak to the situation where the issue is not one of the absence of State legislative power, but is one of the extent of inconsistency, by operation of s 109 of the Constitution, of a State law made in exercise of concurrent power.
Your Honours, section 31 of the Interpretation Act of New South Wales is in a different form but we submit in substantively the same as section 7 of the Interpretation Act of Western Australia and that the different wording provides no basis of distinction for not applying those same observations to this case.
Your Honours, our third point deals with the Corporations legislation and section 5G. Starting with 5G(11), at transcript page 150 Mr Donaldson said this:
We say that a State, or the State in the commencement of 5G(11), is not the State or not necessarily the State which enacts the displacement provision.
I invite your Honours to turn to the language of section 5G(11). Our submission, your Honours, is that on the proper construction of section 5G(11) the State or Territory first referred to is, and only is, the selfsame State and Territory referred to in subparagraph (b). We say that for two reasons. First, and from a textural point of view, we refer to the reference to the word “the” in subsection 11(b). My learned friend would seek to have that read as if it referred to “a” State or Territory. We submit that there is no proper textural reason to do so.
We submit, as a matter of policy, there is no reason to do so because the consequence of my learned friend’s submission would be that a State – “a” – could enact State legislation which causes the Corporations Act to be modified or contract and that is the way that section 5G operates in all Australian States and Territories. We say, as a matter of policy, that would require clear words and we submit to the contrary the clear words here support our construction.
I then take your Honours to our fourth proposition; that deals with section 5G(8). At transcript page 157, Mr Donaldson asserted that our construction, our preferred construction of the subsection required something to be read into the provision that is not there. We dispute that proposition. We submit it is not a matter of reading anything into the section. It is a question of how one construes the language which is present.
At transcript page – fifth proposition – 158, Mr Donaldson submitted that to the extent – sorry, the next proposition is this. Your Honours, we have submitted that our construction should be preferred, firstly because of the reference in the third line to “the scheme”, but we do not rest solely on that. We also rely upon the words “to the extent”. In other words, there is not an absolute disapplication of Chapter 5 if a scheme of arrangement or winding‑up is being carried out under a State Act. It is only to the extent that it is so carried out.
Now, what Mr Donaldson said almost in a flourish but without explanation at transcript page 158, he said that is really a drafting technique, and so it really is if. We submit there is absolutely no warrant to read those clear words in the manner in which Mr Donaldson has submitted that you do. Moreover, can I invite your Honours when construing subsection (8) to also have regard to the similar language used in subsection (7).
Now, the sixth point we seek to make takes us to page 158 of the transcript and from line 6855 onwards Mr Donaldson made the point that in effect what he said:
unless it is interpreted in the way that we have indicated, is that if the State regime does not displace the whole of Chapter 5 in relation to all forms of receivership and the like, then what you would have is, say, a State winding‑up which is taking place in the absence of Chapter 5 but the same assets are subject to a receivership or a scheme of arrangement or some other form of external administration under Chapter 5.
We say, yes, that is right. We say there is nothing odd in that result. We make the observation, your Honour, that the different forms of external administrations are dealt with in different parts of Chapter 5. We also make an obvious trite observation, but an important one in light of what Mr Donaldson submitted, that, of course, those different forms of administration can operate concurrently. They are not mutually exclusive. We say there is no reason, either texturally or in policy, why one cannot be taken under a State Act whilst other forms of administration which have not been taken up by the State Act may be available for application under the Commonwealth Act.
We also make the observation in this regard that the construction suggested for by the State, the Commonwealth and most other States would give rise to a potential of a vacuum in the law applying, say, a winding‑up – and I think I have made this observation, so I do not want to take time repeating myself. I think I will simply leave it on the basis that we deal with this in our reply submissions at paragraphs 28 to 32.
Your Honours, our last three points deal with the Judiciary Act. Point 7 deals with Rhind’s Case. Can I take the opportunity of, with respect, reinforcing Mr Gleeson’s observations that Mr Donaldson did not take the Court to what Mr Gleeson described as the critical observations of the Chief Justice at page 599 by noting that in the decision handed up today in Manfal your Honour the Chief Justice in that case quoted only one passage from Rhind and it was that passage that Mr Donaldson did not refer to.
The penultimate proposition we seek to make, your Honours, is that my learned friend, Mr Donaldson, yesterday made reference to the State Commercial Arbitration Act and the International Arbitration Act. He did that at transcript page 164. He said such provisions “are in the nature of section 25”. We submit that is wrong. We do it in this way.
First, we respectfully adopt the submissions of Mr Gleeson as to section 25. We recognise that the Court touched, albeit not directly, on this point in its decision in TCL Air Conditioner Co Ltd v Judges of Federal Court of Australia [2013] HCA 5. Justices Hayne and Crennan and your Honours Kiefel and Bell touched on it at paragraph 76. But we want to also bring to your Honours’ attention a decision of the Supreme Court of Western Australia, the Court of Appeal, in Straits Exploration (Aust) Pty Ltd vMurchison United NL (2005) 31 WAR 187.
This case dealt with the question of whether or not a contractual arbitration clause or expert determination clause was an improper ouster of jurisdiction. What the court held was that it was not an improper ouster of the court’s jurisdiction by looking at the arbitration provisions and the
purpose of arbitration clauses and culminating in paragraph 15. The court there draws a distinction that we seek to draw in relation to section 25 and the suggestion that it is simply an example of the sorts of clauses that appear in the different legislation that the defendant relies upon. The court effectively said that arbitration clauses ordinarily:
“postpone” but “not annihilate the right of access to the court” –
referring to the decision of the Master of the Rolls, Lord Hanworth, in Freshwater v Western Australian Assurance Co Ltd. In our respectful submission, section 25 and section 73 annihilate the right of access to the court in respect of the matters to which they refer.
The final point we wish to make, your Honours, is to deal with section 22. We are alone, we recognise, in regard to this submission. My learned friend in his written submissions and today on his feet continues to raise a straw man. We have eschewed the proposition that the authority is exercising judicial power. We do not so contend. The point that we make ‑ and we have dealt with this at paragraphs 37 to 43 of our reply submissions ‑ is that as the defendant itself accepts in its submissions at 151, this is a situation where the matter that was before the court continues. It continues but the court cannot hear it, and the continuation of that matter, albeit not through the exercise of judicial power, is what has been invested in the authority. May it please the Court.
FRENCH CJ: Thank you, Mr Penglis. The Court will reserve its decision. The Court adjourns until 10 o’clock tomorrow morning.
AT 2.38 PM THE MATTER WAS ADJOURNED
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