David Grant & Co Pty Ltd v Westpac Banking Corp- Ferndell Development v Westpac Banking (38,39,40-95) App

[1995] HCATrans 245

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne  No M38 of 1995

B e t w e e n -

DAVID GRANT & CO PTY LIMITED (Receiver Appointed)

Appellant

and

WESTPAC BANKING CORPORATION

Respondent

Office of the Registry
  Melbourne  No M39 of 1995

B e t w e e n -

FERNDELL DEVELOPMENT PTY
  LIMITED (formerly TOWNSHEND
  DEVELOPMENT PTY LTD)

Appellant

and -

WESTPAC BANKING CORPORATION

Respondent

Office of the Registry
  Melbourne  No M40 of 1995

B e t w e e n -

FENDALL FARMS PTY LIMITED
  (Receiver Appointed)

Appellant

and

WESTPAC BANKING CORPORATION

Respondent

BRENNAN CJ
DAWSON J
GAUDRON J
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON WEDNESDAY, 23 AUGUST 1995, AT 10.19 AM

Copyright in the High Court of Australia

________________________

MR W.J. MARTIN, QC:   If the Court pleases, I appear with my learned friend, MR N. PANE, for the appellants in each appeal. (instructed by D.M. Townshend)

MR A.C. ARCHIBALD, QC:  If the Court pleases, I appear with my learned friend, MR P.J. COSGRAVE, for the respondent in each appeal. (instructed by Dunhill Madden Butler)

MR S.D. RARES, SC:   If the Court pleases, I seek leave to appeal with my learned friend, MR N. PERRAM, as amicus curiae on behalf of the Australian Securities Commission. (instructed by Mr P.J. Stepek, Solicitor for the Australian Securities Commission NSW Regional Office)

BRENNAN CJ:   If you were granted leave to appeal as amicus curiae would you be supporting the applicant of the respondent?

MR RARES:   Substantially the respondent, your Honour.

BRENNAN CJ:   Substantially the respondent, yes.  Mr Rares, perhaps we should hear you first as to why you wish to be of such assistance to the Court.

MR RARES:   Well, your Honours, the question of the interpretation of the statutory demand provisions is one of general public importance.  The Commission has assisted the Court of Appeal in New South Wales in the judgment in J & E Holdings Pty Ltd.  It seeks to advance the proposition that the construction placed by the appeal division in this case and the Court of Appeal in New South Wales is correct on the relevant sections, but if your Honours were to take a different view then we would seek to persuade your Honours that there should be some strict guidelines as to how an extension ought to be granted.

Your Honours, we had sent across last night an outline of our argument, but the Senior Registrar informed me that she construed a note I had written on the top of the fax as indicating that it should not be given to your Honours.  I can hand that up if that assists.  Your Honours, we have a statutory right to intervene under section 1330, but ‑ ‑ ‑

McHUGH J:Well that is if that section can validly apply in this Court.

MR RARES:   It is in any proceedings, your Honour.

McHUGH J:Well, I know, but can the Parliament legislate to give a person a statutory right of intervention in proceedings in this Court or is it inconsistent with the judicial power which the Constitution vests in this Court.

MR RARES:   Your Honour, it is, in our submission, not inconsistent with the judicial power; it is a right under the legislation which your Honours are construing for the Commission, representing what is perceived to be both the national interest and the interests of each of the separate States.

McHUGH J:Well I appreciate that, but it purports to direct federal courts as to who they can hear.

MR RARES:   Yes, your Honour.  Your Honour, there has been no section 78B notice; I am reminded to suggest that this was ‑ ‑ ‑

GUMMOW J:   What is the section you rely on, Mr Rares.

MR RARES:   Section 1330, your Honour.  I only rely on this if your Honours are not minded to hear us.

BRENNAN CJ:   Let me understand clearly, Mr Rares.  I thought you were going to put an argument as to why you should be allowed to appear amicus curiae.

MR RARES:   Yes, your Honour.

BRENNAN CJ:   Now if you are putting it on the basis of section 1330 ‑ ‑ ‑

MR RARES:   I was only going to put that on the basis that your Honours refuse leave to appear as amicus.  Now, your Honours, we wish to draw the Court’s attention to authorities that the other parties have not and to draw your Honours’ attention to parallel considerations that arise in the administration of the Bankruptcy Act in relation to bankruptcy notices, which are not covered in the outlines of argument which my learned friends have given us and which we have exchanged between ourselves, which may assist in the construction of the provisions.  I mean I can seek to hand up, if your Honours like, what we have got in our outline and your Honours can see whether or not your Honours would regard it as matters of assistance or not.  I am sorry that it was not able to be communicated last night; we did not send it.

BRENNAN CJ:   Mr Rares, before you get to that, we will see whether there is any objection to you appearing amicus from the bar table.  Do you have any objection, Mr Martin.

MR MARTIN:   If the Court pleases, it is fair to say to my learned friend and we did not have any objection to his appearing amicus curiae.  It is clear that he does seek to make some arguments which may on one view be relevant, but nevertheless, obviously from what he said earlier, we will be seeking to discount them.

BRENNAN CJ:   Yes, I appreciate that.  Mr Archibald.

MR ARCHIBALD:   We have no objection to our friends appearing.

BRENNAN CJ:   Yes, you have leave to appear amicus curiae.

MR RARES:   I am indebted to your Honours and my friends.

BRENNAN CJ:   Yes, Mr Martin.

MR MARTIN:   If the Court pleases.  At the outset can I hand up the copies of the outline of our submission.

BRENNAN CJ:   Yes, Mr Martin.

MR MARTIN:   If the Court pleases, the facts are simple in this case.  On 4 July 1994, the appellant companies are served with statutory demands bearing that date.  On 26 July, on the 22nd day after service of the statutory demands, the motions which are in the appeal book page 2, were filed seeking to set aside the statutory demands and for such further or other orders as may be necessary.  The motions were, as the Court knows, dismissed, appeals of a single judge were dismissed and the appeal to the Full Court was dismissed; so much appears in the appeal papers.

GUMMOW J:   Were all three corporations incorporated in Victoria?

MR MARTIN:   I am instructed yes, your Honour.  I thought it might be useful to take the Court to the main relevant provisions and some supplementary provisions, because it is important to have a thorough understanding of the legislation and despite the usual familiarity with it, if that is convenient.

Under section 459A, on an application under section 459P, the court may make an order that an:

insolvent company be wound up in insolvency.

Section 459P, in turn, provides who can apply for applications to wind up; the company, creditor, contributory director, and so on.  For the purposes of section 459C, however, there is the statutory presumption of insolvency.  Section 459C(1) provides:

This section has effect for the purposes of:

(a)      an application under section 260, 459P, 462 or 464; or
(b)      an application for leave to make an application under section 459P.

Section 459C(2) is the crucial section for the arguments made by our learned friend and for the reasons of the Full Court:

The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made:

(a)      the company failed (as defined by section 459F) to comply with a statutory demand;

I do not need to take the Court to the other subsections there set out.  Subsection (3):

A presumption for which this section provides operates except so far as the contrary is proved for the purposes of the application.

Section 459E itself deals with the statutory requirements for the demand, who may serve it in subsection (1), the contents of the demand.  Subsection (3), the demand is to be accompanied by an affidavit verifying the debt and complying with the rules, and so on.

Section 459F, however, is, for the purposes of this appeal, the crucial provision.  Subsection (1) provides:

If, as at the end of the period for compliance with a statutory demand, the demand is still in effect -

and those words relate to another section which I will come to -

and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.

Subsection (2), the section which the Full Court relied on heavily:

the period for compliance with a statutory demand is:

(a)  if the company applies -

and may I stress -

in accordance with section 459G for an order setting aside the demand:

(i) if, on hearing the application under section 459G -

and can I interrupt to say that the following words present difficulty on any view -

or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand - the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or

(ii) otherwise - the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of;

or

(b) otherwise - 21 days after the demand is served.

Section 459G is the section in question in this appeal:

A company may apply to the Court for an order setting aside a statutory demand served on the company.

I should stress, the “may” in subsection (1) -

Subsection (2):

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

Subsection (3):

An application is made in accordance with this section only if, within those 21 days:

(a) an affidavit supporting the application is filed with the Court; and

(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.

Thereafter follow provisions which enable disputes to be determined.  Section 459H deals with what occurs if there is a genuine dispute or offsetting claim where there is an application - can I stress the words used here are “under” section  459G, not in accordance with section 459G.

Section 459J also uses the words:

On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or

(b) there is some other reason why the demand should be set aside.

Section 459J(2) (Mere defect)

Except as provided in section (1), the Court must not set aside a statutory demand merely because of a defect.

The next section to which I wish to refer is the following section, section 459K:

A statutory demand has no effect while there is in force under section 459H or 459J an order setting aside the demand.

So that the presumption in section 459C would not apply.

GUMMOW J:   Is not section 459F really a definition section?  Is that not made clear in section 459C(2)(a)?  It is really the link that explains what this is all about.  It is all about establishing a presumption of insolvency.

MR MARTIN:   Yes, there is no doubt there is a link between the two sections, but the sections can still operate on our argument, we would be submitting.

GUMMOW J:   I just think, the starting point may be section 459C(2)(a), which is not the starting point, it is the destination.

MR MARTIN:   Yes.

GUMMOW J:   And that uses the words “as defined by section 459F”.  If you look at section 459F that then may make sense.  It tells you when the company is taken to fail to comply

MR MARTIN:   Yes.  Section 459K, I have dealt with.  Now section 459L:

Unless the Court makes, on an application under section 459G, an order under section 459H or 459J, the Court is to dismiss the application.

BRENNAN CJ:   Are there any other provisions apart from the general time extension provisions we need to cover?

MR MARTIN:   There is - cases have referred, your Honour Chief Justice, to section 459R and 459S.  If:

an application for a company to be wound up in insolvency relies on a failure by the company to comply with a statutory demand -

the application must set out various details.  Section 459R:

an application for a company to be wound up in insolvency is to be determined within 6 mnonths after it is made.

(2)  (Extension of period)  The Court may by order extend the period within which an application must be determined, but only if:

(a)  the Court is satisfied that special circumstances justify the extension; and

(b)  the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.

Section 459R(3)  (Application automatically dismissed)

And section 459S:

Company may not oppose application on certain grounds

That is said to be a provision which works so that contested notices of dispute are not to be dealt with at the application stage of the court proceedings; that it is intended that there should be a prior application to set aside, and that should be dealt with.  Also relevant to this argument is section 467A:

An application under Part 5.4 or 5.4A must not be dismissed merely because of one or more of the following:

(a)  in any case - a defect or irregularity in connection with the application;

(b)  in the case of an application for a company to be wound up in insolvency - a defect in a statutory demand;

unless the Court is satisfied that substantial injustice has been caused that cannot otherwise be remedied -

There are the provisions of section 1322 obviously, the extension provision, and it is that language that we, needlessly say, heavily rely upon.  This first subsection provides that:

In this section,unless the contrary intention appears:

(a)  a reference to a proceeding under this Law is a reference to any proceeding whether a legal proceeding or not; and

(b)  a reference to a procedural irregularity includes a reference to:

inter alia in subsection (ii) -

(ii)  a defect, irregularity or deficiency of notice or time.

Subsection (2):

A proceeding under this Law is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.

Subsection (4), to which I draw attention to the opening words:

Subject to the following provisions of this section but without limiting the generality of any other provision of this Law, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:

(a)  an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been       instituted or taken, under this Law or in relation to a corporation is not invalid by reason of any contravention of a provision of this Law or a provision of the constitution of a corporation.

“Contravene” is defined in section 9 to mean “fail to comply with”.  Subsection (d):

an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Law or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;

And subsection (6):

The Court shall not make an order under this section unless it is satisfied -

of certain things, including no substantial injustice.

The other section I need to draw attention to is section 70, which has not been referred to in the cases before as far as we are aware.  Section 70 provides that:

Where this Law confers power to extend the period for doing an act, an application for the exercise of the power may be made, and the power may be exercised, even if the period, or the period as last extended, as the case requires, has ended.

If I could come onto the argument itself.  In our submission, section 1322(4)(d) of the law in its very terms confers a wide discretion to grant orders which is subject to the prescriptions in subsection (6) including:

that no substantial injustice has been or is likely to be caused to any person.

Section 70, when read in conjunction with (4)(d), makes clear that both an application to extend may be made and the power to extend may be exercised even if the relevant period has ended.  In no other cases, as far as we are aware, section 70 has been considered.  Although the language  ‑ ‑ ‑

DAWSON J:   Well what does section 70 add to (d)?

MR MARTIN:   I think nothing, your Honour Justice Dawson.  We also pray in aid and see no reason why subsections (1) and (2) are not available, although we can see that on certain arguments it may be said that this is not procedural irregularity, but in subsection (1)(a) a “reference” is:

a reference to a proceeding under this Law is a reference to any proceeding ‑

not qualified whether it is in accordance with or whether it is under, for instance, section 459G, it is:

any proceeding whether a legal proceeding or not; and

(b) a reference to a procedural irregularity includes a reference to:

.....
(ii) a defect, irregularity or deficiency of notice or time.

Now, we say that those two clauses could operate in such a way as to overcome the procedural irregularity that an application under section 459G may have been issued outside the 21 day period limit.

GUMMOW J:   But is 459G(2) not a precondition, to use that loose term, of the existence of a proceeding?  These two sections, 459 and 1322, are all about courts, and they are creating new rights, and there is another provision somewhere else in this structure which specifically deals with investment of jurisdiction in relation to these new species of matters.  Is 459G(2) not a precondition to action, as it were?

MR MARTIN:   Yes, but ‑ ‑ ‑

GUMMOW J:   There is no proceeding unless you have met 459G(2).

MR MARTIN:   That is ultimately the question.  You see, if one issues a proceeding under section 459G outside the period of time, there will be, within subsection (1), a proceeding under the law ‑ sorry, there will be a proceeding ‑ ‑ ‑

GUMMOW J:   Well, that is the question.

MR MARTIN:   There will be a proceeding, but it may be defective, and if the defect can be overcome by the operation of the section, it is not to say that there is no proceeding; there is a proceeding, and that is the argument which we say can overcome the argument that is made the other way.

GUMMOW J:   Another aspect I think you have to think about is this: the time frame for all of this.  Part 5.4 goes in later as a special provision, does it not?  Section 1322 has been there since the beginning of this statute.

MR MARTIN:   Yes, your Honour.  We accept that proposition, but we say that there is no reason, notwithstanding that goes in later, that 1322 should not apply.  That gets down to the argument that if the Parliament had intended that by the inclusion of section 459G afterwards, section 1322 should not apply, it ought to have said so.  The two can be read together, and, with respect to the argument to the contrary, it is our submission that there is no reason, except arguably in the language, why the two sections cannot work together, and that there is no overwhelming inference by the reason of the fact that the legislation is passed later.  Parliament must have been presumed to have known section 1322 was there at the time it passed section 459G. 

Can I move on to the argument about subsection (4)(a).  In our submission, there is no reason why (4)(a) cannot also apply to the situations that occur in respect of defective applications under section 459G:

Subject to the following provisions of this section but without limiting the generality of any other provision of this Law, the Court may ‑

and we say the court could make an order that the proceeding ‑ that is the section 459G application ‑ notwithstanding it is outside the time ‑

(a) .....purporting to have been instituted or taken....is not invalid by reason of any contravention ‑

or any failure to comply with, the 21 day time limit.  The argument about (4)(d) is clear, and can we draw attention to the words in parenthesis?  Can I deal with the main arguments to the contrary? 

McHUGH J:   Before you do that, is this not simply a case of the rule of construction that you cannot make use of a general provision in legislation to do something that is covered by a more specific provision in the same legislation, when that specific provision is conditioned by various matters?

MR MARTIN:   With respect, we say no.  That depends upon the construction argument.  If section 459G is a specific provision so that it precludes the operation of section 1322, of course it follows, but on one view, you could say section 1322 is a specific provision dealing with what should happen when there are irregularities.  Notwithstanding that it is in general terms., it is, in one sense, a specific provision dealing with what should happen when there are irregularities, when things go wrong, whether there is an application within time or an application outside of time.

McHUGH J:   I appreciate that, but the general principle I have got in mind was formulated in the joint judgment of Chief Justice Gavan Duffy and Justice Dixon in Anthony Hordern, 47 CLR and the passage is at page 7:

When the Legislature explicitly gives a power by a particular provision which prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed, it excludes the operation of general expressions in the same instrument which might otherwise have been relied upon for the same power.

Now, 459G gives the company the right to apply.  It states the conditions under which that application can be made and you then seek to rely on section 1322, which gives a court a general power on an application by an interested person, to extend the time for doing so.

MR MARTIN:   Yes, but the line of authority that those cases depend on, first of all, the cases, with respect, are distinguishable in so far as it was clear that there were two particular jurisdictional sections that could have operated.  In other words ‑ the passage is at page 7, your Honour.

BRENNAN CJ:   It sounds rather good.

MR MARTIN:   It does sound rather good, but the point of the principle, with respect, is this: that if there were arguably two equivalents of a method of setting aside a statutory demand, so, in other words, if there was another section in which could found jurisdiction for section 459G applications to be set aside, if there was another general section to say where it was said ‑ I mean, the cases of injustice - a company may set aside a statutory demand.  And then if you have section 459G operating in tandem with that, obviously the rule would apply, but with respect, this argument and this Gordian knot can only be broken by deciding the true meaning of section 459G, and it is for that reason that we say the principle does not apply, namely that the true operation of the principle is where you have a truly special provision and truly general provision that can operate on exactly the same facts.  Now here, section 1322 cannot operate by itself to empower the bringing of an application to set aside a statutory demand, and that is why we say the rule does not apply.

GUMMOW J:   But you have got to consider this too:  within Part 5.4 there are specific provisions for extension, are there not? Mr Archibald says in his written submissions - he points to 459F, which you have taken us to.  Section 459F has extension provisions in it, and he points to 459R as well ‑ ‑ ‑

MR MARTIN:   Who points to is, your Honour?

GUMMOW J:   Mr Archibald, his written submissions, which we had in advance of the argument.

MR MARTIN:   I understand I have to deal with that problem.

GUMMOW J:   So it is not a case that the new regime set up by Part 5.4 was blind to the question of extensions, as it were.

MR MARTIN:   No, but with respect, just because there is an express provision in one section that deals with how you can extend time does not mean necessarily that the other section ‑ section 1322 ‑ should be displaced, for this reason:  that that will be a case where there is a special provision dealing with exactly the same subject matter as section 1322 does, namely, can there be an extension of time for bringing of the application?  And the specific sections say, ‘No, this is how you do it”.  The Gordian knot is only broken by deciding what the true meaning of section 459G is, because you could have had two powers; you could have relied on the power in S, and it says, “No, you can’t do that”, and it is its special provision where there truly could be brought into power the jurisdiction under section 1322 if a maximum did not otherwise operate.  And that is, with respect, the answer to that problem.

Can I deal with the “may only” argument in 459G, and it is the crucial argument.  With respect, wde adopt what was said principally by the Full Court in Cavetina ‑ I do not want to go to the passages set out ‑ and also what was said by Mr Justice Santow in Sydar, which really, with respect to the argument to the contrary, clearly makes clear how “may only” does work within section 459G ‑ ‑ ‑

DAWSON J:   Is not the problem the problem that was adverted to by Justice Gummow a little while ago, that the application of the word “only” means that 459G really defines an application in terms of the time in which it is made?  It is not a question of saying “You may make an application and you must make it within a certain time”.  You do not have an application at all unless it is made within that time specified.  That is the effect of the word “only”.

MR MARTIN:   That is to state the argument that either one adopts the strict interpretation that section 459G does do that, or one adopts the contrary argument, and that is, with respect, Justice Dawson, to state the argument.  One has to decide, does “only” exclude 1322 or not?

DAWSON J:   It is not a matter of excluding it.  It is not a matter of extension of time, it is a matter of not having an application at all unless it complies with that section.

MR MARTIN:   Yes, but the two can still work together.  Prima facie the ‘‘may only” does what the Full Court in Cavetina said; it puts a time limit on the brining of an application, but that is not to say that that time limit cannot be extended by the operation of section  1322, unless ‑ ‑ ‑

BRENNAN CJ:   Mr Martin, put it the other way around.  If section 1322 has the operation for which you contend in relation to applications under 459G, what effect, if any, is given to the word “only”?  What does it do?

MR MARTIN:   “Only” fixes a time limit with which an application under 459G must be brought. 

BRENNAN CJ:   But that would be fixed without the word “only” at all.

MR MARTIN:   With respect, your Honour, it would not.  It would be totally permissive if “may” was omitted:

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

And that is the point that the Court of Appeal in Queensland pointed out.

BRENNAN CJ:   What about “only” in 459G(3)?

MR MARTIN:   That is to say how one brings such an application.  That is, if you could bring one in accordance with this section, you must comply by having an affidavit and a copy and the papers must be served.

BRENNAN CJ:   Let me take you back to subsection (2).  If it had the operation for which you now contend, what would the words “within 21 days after the demand is so served” add to 459G(1)?

MR MARTIN:   If “only” were omitted?

BRENNAN CJ:   As I understand your argument, you say that 459G(2) fixes the time within which the application is to be made, is that right?

MR MARTIN:   Yes.

BRENNAN CJ:   “Only” adds nothing to that.

MR MARTIN:   No, no we are at cross purposes.  “Only” fixes the time for the bringing of the application under 459G(1).

BRENNAN CJ:   And if “only” were not there?

MR MARTIN:   It would be totally permissive.  You would not know ‑ you could bring it within 21 days of some other time.  You would not know.

BRENNAN CJ:   That is why I am asking you ‑ the latter words of it would have no effect at all.  You could bring it within 21 days or any other time you liked?

MR MARTIN:   Yes, and that is why you have to insert the word “only”.

BRENNAN CJ:   That would be an extraordinary provision, would it not?  “You may bring an application”, says subsection (1); subsection (2) then says, “You may bring an application within 21 days, or after 21 days”.

MR MARTIN:   Yes, it would be an extraordinary provision ‑ ‑ ‑

BRENNAN CJ:   It would be meaningless.

MR MARTIN:   It would be meaningless, but the question, as has been pointed out ‑ what it does is to make clear the time within which an application under section 459G(1) must be made.  It could have said ‘shall” or “must”, but, with respect, that is the way in which the Parliament has said you bring an application.  This is the method; it is the time for fixing of the bringing of such an application, but it is not to exclude - in our submission, too much emphasis has been placed on what follows from the use of the word “only” because it can truly be clarificatory of the time.

BRENNAN CJ:   How do you mean “clarificatory”; the time it is fixed ‑ ‑ ‑

MR MARTIN:   It is clarificatory of the operation of subsection (1).

GAUDRON J:   In ordinary usage it indicates that what follows is exhaustive and exclusive, does it not, ordinarily?

MR MARTIN:   With respect, in ordinary parlance, used by itself, we concede the correctness of that argument, your Honour, but the question is, having used it in that way, does it exclude section 1322?  Is it strong enough?  Was that the intention?

GAUDRON J:   How else would you say it if that was the intention?

MR MARTIN:   You could say “shall” or “must”, which, in our respectful submission, would be arguably no stronger.

BRENNAN CJ:   That is your proposition; is there anything to add to it?

MR MARTIN:   No, your Honour.  Paragraph 4.8 of our outline, we say, I do not need to go through this, I think, with respect ‑ it is said by the Full Court, at appeal book page 52 to 61, that section 459G is inexorable, based on the interpretation of section 459F.  That is because of the defeasible nature according to the argument that the operation of 459F(2) would have, but, with respect, what we say is that if truly section 1322(2) can be used to extend the time, then section 459F(2) can operate for all the relevant exigencies.  Subsection F(2)(a)(i):

if the company applies in accordance with section 459G ‑

say, because there has been an order extending the time for compliance, there is then an application in accordance with section 459G.  (2)(a)(i) would deal with cases where the court orders the extension of the period of time for compliance.  Subsection (ii) would deal with cases of an application to set aside whether made within the 21 day period, or as extended, and the other cases would be dealt with by subsection (b).

Can we point out the anomaly in this; that there is no time for bringing of the application for extension of time for compliance with the statutory demand under subsection (2)(a)(i).  The words after 459G are ‑

on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand ‑

Now, there is no time limit set anywhere for the operation of an application to extend the time for compliance with the demand in these provisions and, with respect to the argument to the contrary, we say it is therefore anomalous that in respect of an application to set aside, one should be limited to 21 days.

GUMMOW J:   I am not sure I follow that.  Paragraph (a) assumes that someone has come along, having applied under 459G, so they are within time.

MR MARTIN:   It does, yes.

GUMMOW J:   Then if that application is on foot, subparagraph (i) speaks, and it speaks, first, on the hearing of the application, something happens, or alternatively, on the hearing of, as it were, a supplementary or additional application under this paragraph itself which might, for example, be heard and disposed of before the principal application under 459G.  Is that not how it works?

MR MARTIN:   Yes, not necessarily.  We would read this section - we do not see why you could not make an application under this paragraph for, just go to the end of the line, an order that extends the period for compliance with a demand.  This is the only section in the code, these few words here, that empowers the bringing of an application to extend the time for compliance of the demand, and the point we make is that there is no time limit for that.  There is nothing that says you cannot bring that after the 21 days, and it is a very odd result that you could bring an application after the 21 day period to extend the time for compliance but, yet, on the true interpretation of section 459G, be compelled to bring your application to set aside within the 21 days.

Our argument, in a nutshell, in respect of 459F is this:  that if the Court extends time for compliance, then there will be an application in accordance with section 459G because the power has been exercised and, therefore, the criticism falls to the ground.  There has been an application within subsection (1) and that the provision can then work. 

I am conscious of the time.  Can I move onto the next point?  It has been argued that Part 5.4 is a code in a number of the cases.                     Reference to the sections that we have set out makes clear that it is not a code.  The argument has been accepted in Bartex and Sydar for the reasons which are set out therein, there are clearly sections which impinge upon the operation of Part 5.4 

The final point we want to make is that the cases may have taken comfort from the Harmer Report in the explanatory statement, but they need to be examined closely, and the language used in the Harmer Report which, conveniently, is set out in the appeal book at page 68, it is submitted, does not address the question of what is to happen if the 21 day time limit has expired.  The middle of the page:

A company should be able to apply to set aside a statutory demand before time for compliance would have expired.

That is to be expected:

The application should have to be supported by an affidavit setting out the reasons for objection.  Once the application is filed, time for compliance should be automatically extended by seven days or until such later time as the court determines.  This is set out in legislative form in s.WU8(1), (2) and (3).”

And below that the legislation is set out:

“WU8(2)   The application (to set aside the demand) must -

(a) be made before the end of the time for compliance with the demand;

(b) . . .; and

(c) be served with the affidavit on the creditor within 21 days after service of the demand.”

Now, if “may only” truly means something like “must”, then it is clear that the intention was not to exclude the operation of section 1322.  The recommendation is, when one reads it, actually silent about whether time can be - the power to set aside under 459G can be exercised outside the period.  Likewise, the explanatory memorandum, which is set out at the foot of page 66, line 25 and following, is silent about the point:

“The provisions in relation to the setting aside of a statutory demand are intended to be a complete code for the resolution of disputes involving statutory demands, and to do so on the basis of the commercial justice of the matter, rather than on the basis of technical deficiencies -

a statement which would favour our position, with respect:

In particular it is intended to remove the present difficulties which are experienced where difficulties in estimating the extent of the debt may lead to an invalidating of the statutory demand on the basis of a minor overstatement of the amount due.

This issue is highlighted in the two cases set out.  In our submission, it is clear that Hassgill was a case about the deficiency in the petition, in other words, problems with the application itself and the propriety of making amendment, and Ataxtin dealt with this question of conflicting authorities about misstatement of the statutory demand.  So, on a true reading, we say, nor does the explanatory statement deal with what is to happen if the 21 day period has elapsed.

There is one point that we want to make, which is a strong one, and it is the last one.  The policy underlying section 459S is this, that disputes about the statutory demand should be dealt with first, and that is made clear in various statements in the explanatory memorandum and the Harmer Report.  You deal with disputes about statutory demand first and then you preclude - this is the policy - arguments at the time of the hearing of the winding up application.  Now, with respect to the arguments of ‑ ‑ ‑

GUMMOW J:   Well, the mischief was that the winding up application hearings were disrupted by controversy over whether the demand was adequate and so on and so forth.

MR MARTIN:   Indeed.

GUMMOW J:   The old section 222 notice.

MR MARTIN:   Yes, that is right.  Now, here, the mischief is best overcome by allowing the time for the application to set aside under section 459G to be affected out of time and before an application to wind up is made.  That was the intention.  You should have a proceeding about whether the statutory demand should be set aside and then you should not be able to argue insolvency except with leave and there should be a second application for winding up confined to the sections there.  Now, the underlying policy works better, with respect, if you can extend under 459G applications by use of the power of 1322, or otherwise. 

We have made in our submission some reference to section 467A.  I do not need to repeat those.  The argument is - that is at paragraph 4.4.  The best statement about this appears in Bartex at 468 and 9, the passage that we have referred to, where it is simply said, any defect, large or small, ought to be able to be overcome by the application of 467A.  Now, either 467A is a specific provision in the context and can work to undo the injustice of

having your 459G application out of time or, alternatively, we would say, if that is not the case 1322 should apply.  If the Court pleases.

BRENNAN CJ:   Thank you, Mr Martin.  Mr Archibald.

MR ARCHIBALD:   If the Court please, we rely upon and adopt the somewhat detailed outline of submissions that we have already provided to the Court.  For the purposes of further expedition, we have prepared some supplementary submissions in writing which reflect our central response to the written outline provided to us by the appellants.  Might we provide that material to the Court?

BRENNAN CJ:   Yes.

DAWSON J:   Then you really, in those submissions, take up the point that was made to Mr Martin, that G is actually definitive of an application.  It does not prescribe that an application shall be made and then say it is to be made in a certain time.  Either you have an application as described by the legislation or you do not.

MR ARCHIBALD:   There is a temporal ingredient in the entitlement to apply to set aside.

DAWSON J:   Yes, part of the definition of an application.

MR ARCHIBALD:   Part of the definition, an ingredient, and if one is beyond that, one simply does not have an entitlement.  There is no subject matter which is susceptible of extension.

DAWSON J:   Yes, and that is the point you make there.

MR ARCHIBALD:   That is the point.  The point about a specific later provision against a general provision is one we have made in our original outlines, in paragraph 3 of this outline, and at the page we give in respect of the Texel reference we make there, your Honour Justice McHugh, at that point, Mr Justice Hayne referred to and relied upon the Hordern decision that was mentioned by your Honour.  So we say the word “only” means exclusively or not otherwise.  It has substantive work to do.  It excludes the possibility of any extension of time.  That is an ingredient of the grant by section 459G of the entitlement to apply to set aside the statutory demand, but outside that period, one has no entitlement and there is no subject matter which allows any possibility of extension, be it under section 467A or 1322 or any other provision.

The expression “only if” in subsection (3), in our submission, is particularly clear in that regard.  That expression precludes the possibility of any application being made in accordance with the section unless made “within those 21 days”.  There is a finite period of time commencing from a fixed point, and unless the application is made within that period, one cannot be in accordance with that section.  The same phrase “only if” appears in section 459R dealing with extensions of time, and in that section, the meaning and operation of that expression “only if” is abundantly clear.  It must have the same meaning in section 459G.

Both in subsection (2) of sections 459F and section 459R, there are express extension of time provisions within Part 5.4 of the Law.  That part is, therefore, able to be seen to have been drafted upon the basis that where extension of time is possible, a specific explicit provision is made within the part.  The absence of such a provision in relation to time for application to set aside the statutory demand is, therefore, telling and significant.

BRENNAN CJ:   Just as a mere matter of grammar, why is “only” in subsection (2) where it is rather than before the word “within”?

MR ARCHIBALD:   The chance of drafting style and no more, in our submission; no different in substantive effect by reason of its location.  The presence of the word shows a deliberative legislative endeavour to preclude the potentiality for any other period to apply.  To give to the word “only” the meaning that the argument for the appellants contend would strip it of any significance and render it entirely redundant and otiose.  So to give it substantive effect requires, in our submission, that it have the meaning and operation for which we contend and for which the Full Court found.

The operation of section 459F, in our submission, gives rise to no anomaly of the kind argued for by the appellant.  It is dealing with a separate subject matter, the period of compliance in a separate division, Division 2 of Part 5.4.  To extend the period for compliance is not to touch in any way or to extend the time for applying to set aside the application in Division 3.  Section 459F contemplates two circumstances, one in which a timely application to set aside is made, the other where no such application is made.  If no timely application is made, paragraph (b) operates and, inexorably, the period for compliance with the demand ends at the expiration of 21 days from the service of the notice, the same point of time by which one must, if at all, apply to set aside the demand. 

The other circumstance upon which section 459F(2) operates is where there is a timely application made under section 459G in accordance with 459G, and it will only be in accordance with 459G if it is made “within those 21 days”, the prescription of section 459G(3).  If such an application is made, there is either the automatic extension until seven days after that application is disposed of, subsection (2), or alternatively, if the Court makes an order having the result that the period expires on some different date.

DAWSON J:   What do you say about the argument that there is no time limit on application for an order that extends the period of compliance?

MR ARCHIBALD:   The Court can only make an order extending the period for compliance if there is a competent timely application under section 459G(2) already in existence.  The power conferred upon the Court by F(2)(a)(i) is auxiliary to that.  It is to cope with the position where there is a competent pending application.  It would be unjust and inappropriate while the demand is under challenge, and under competent challenge, to have the ineradicable presumption of insolvency arise in the meantime.  So the Court has the power itself as an auxiliary or incidental matter of the subsection G application to extend the time or, again, in aide of the exercise of the jurisdiction in respect of the setting aside application, a separate but related application could be made under that paragraph, but always in aide of and with a view to the resolution of the challenge to the statutory demand.  That produces no anomaly.  It avoids an injustice while such an application is pending.

DAWSON J:   It is curious, though, that there does not, on the face of it, appear to be a time limit for an application for an order extending the period for compliance, whereas the time limit is applied in relation to an application to set aside the notice.

MR ARCHIBALD:   It is clear that it may be made after the 21 days.  It is perhaps a little curious that there is no explicit statement, that it is incapable of being made at a point of time after the hearing of the application for winding up itself, but viewed as an auxiliary or incidental provision, it is not anomalous.  It is comprehensible and understandable.  If the Court pleases, those are our submissions.

GUMMOW J:   Mr Archibald, there is one matter.  In the New South Wales Court of Appeal, there is some discussion, which we may not have to get to, as to the exercise of jurisdiction on the winding up application to deal with abuse of process, to put it shortly, by injunctive relief and so on.

MR ARCHIBALD:   Yes.

GUMMOW J:   You do not say that jurisdiction is exhausted in any way by these provisions?

MR ARCHIBALD:   No, we do not.  We say it will only rarely be invoked, but only rarely will it be necessary or appropriate for it to be invoked.  Yes, we accept what is said in the Court of Appeal ‑ ‑ ‑

GUMMOW J:   Mr Justice Sheller deals with it, I think.

MR ARCHIBALD:   Yes, and said previously and originally, I think, by Mr Justice Hayne in Texel to the same effect.

GUMMOW J:   Yes, thank you.

MR ARCHIBALD:   If the Court pleases.

BRENNAN CJ:   Thank you, Mr Archibald.  Mr Rares.

MR RARES:   Your Honours, on the point about 459F(2)(a)(i), we would submit that the second type of application is for a case in which the Court considers the automatic extension given in (a)(ii) of seven days after the final determination of the matter.  The Court says, “Well, seven days after the final determination of this matter is not appropriate”.  In exercise of the power in the words, “or on an application by the company under this paragraph” under (i), you can grant a longer time for compliance, having regard to the circumstances of a timely application having been brought in accordance with 459G.  In other words, you have to have made the application and served it within the 21 days, but then the Court can control the period for compliance if it is not willing to let the legislature’s automatic extension of seven days after the hearing determination of the 459G application take effect.  That is what it covered.  It can say, “Well, having regard to the way a case had gone, it ought to be immediate or it ought to be longer”.

We would submit that in the discussion that your Honours, particularly your Honours Justice Dawson and Gummow, had with Mr Martin in relation to the definitional nature of section 459F(2), Justice McPherson puts it, we would respectfully submit, quite well in his dissenting judgment in the Cavetina decision 12 ACLC 768. At 773 in the second column at the bottom of the page, his Honour says:

It appears to have been assumed that the order -

which was made below in that case -

had the consequence of making the application to set aside the statutory demand effective for the purpose of s.459G.  I am not persuaded that that is so.  Extending the period specified in s.459G(3) for serving the copies did not mean that the application was made in accordance with s.459G.  It remained an application that was not “made in accordance with” the section because, even after the order was made, it was still the case that the copies were served not “within those 21 days”, but only within 23 days after the demand was served on 5 October.

In our submission, that demonstrates that when one is dealing with 459F(2) and an application in accordance with 459G, you really cannot extend the time, the section covers the matter.  In our outline, we have relied on what the majority of the Court said in Wilde, an Australian trade equipment company. Your Honours, we left with the registry, a bundle of our statutory materials, and there is a passage in the joint judgment of their Honours Justices Stephen, Murphy and Wilson with whom Justice Aickin agreed. It is 145 CLR 590.

That was a case in which an extension of time pursuant to the then Companies Act 1961 was granted for the registration of a statutory charge.  The time for doing that under the Act had expired and the order was later set aside as having been improperly made, and the question was whether the charge was effectively registered or not and the majority held that it had been effectively registered.  At page 603, their Honours deal with what we would submit the real problem Mr Martin’s submissions cannot grapple with.  At about point 5, their Honours say:

But in any event the consequence that will follow an order setting aside an earlier decision will vary from case to case.

And this is in a different category, but it is the words at the end of this passage at the bottom of the page that are the significant ones, in our submission, for this purpose:

So long as the earlier decision stands, and no stay is operative, it is a lawful decision and the action taken in reliance upon it is lawful.  It is true that from the moment it is set aside the order can no longer provide the lawful justification for further action, but whether what has been done can be undone will depend upon the availability of appropriate remedies, to bring about the appropriate relief.

Pausing there, there is nothing in the Corporations Law, in our submission, which entitles the Court, once the 21 days has gone for compliance with a statutory demand, to say:  the company should not be presumed insolvent under section 594C(2)(a).  It is a rebuttable presumption, but the purpose of the Harmer Report was to enable a company to be taken to be presumed to be insolvent and then the more stringent provisions on a winding up application under 459R and S would be applied.  Their Honours then go on to say:

If s.106 conferred on the court a power to remove a registration from the register then clearly on the facts of this case such action would be appropriate consequent on the order setting aside the extension of time.  But it is quite clear that s.106 does not empower the court to remove a registration as distinct from rectifying an entry:

Their Honours then refer to three cases.  The two ones are re Hanby, which is a decision of Mr Justice Gibbs in the Court of Bankruptcy, and re Hayes, which is a decision of Sir Laurence Street in exercising a bankruptcy jurisdiction:

provide illustrations where a judgment, although subsequently set aside, has nevertheless provided the occasion for an event of lasting significance, in these cases the commission of an act of bankruptcy.

And, in our submission, there is a parallel here that the legislature says:  if you do not comply with a demand within 21 days, you are presumed to be insolvent.  You can rebut the presumption, but the presumption is there, and there is nothing in the legislative context to which any of my friends have taken your Honours to allow that presumption to be undue, whereas if you make the application and file and serve the affidavits under 459G within the 21 days, then 459F(2) automatically extends the time while the Court deals with the matter.  So that, as Mr Justice McPherson points out, you cannot undo it and it is not made in accordance with 459G and, in our submission, this case also is a demonstration that the lasting consequence was intended in order that there be a speedy and expeditious disposition of the matters go on.

A similar point is made by Sir David Cairns in his Lordship’s judgment in the Slater Walker decision which is at the end of paragraph 3 of our outline.  Your Honours, what we seek to do in the outline, if I can just explain it briefly, is to draw a parallel.  It is not an exact analogy between the provisions of the Bankruptcy Act which provide for extensions of time in which - the legislature specifically excluded in section 33 of the Bankruptcy Act the power to extend the time for a bankruptcy notice, although that was the general extension of time provision, and then made specific provision in sections 41(6A) to 41(6C) of the Bankruptcy Act and your Honour Justice Gummow looked at that in a case of Carter just recently.

McHUGH J:   But it just restates the problem in another context, does not it?

GUMMOW J:   Yes, it is not a happy experience, section (6A).

MR RARES:   No, but (6A) is a little different from here because here the legislature is trying to make it very clear you must have the application on foot and served within the time. 

Your Honours, paragraph 717 of the explanatory memorandum, which we omitted from the outline but is in the materials that have been provided by us, refers to a penalty for not being timeous in making your application to set aside the demand being that you are then thrown back into making out a ground under section 459S to be allowed to contest the ground.

Your Honours, we, with respect, adopt what Justice McHugh put in relation to the Anthony Horden matter and that, in fact, is the quote we picked up in our submissions.  If your Honours were against the respondent’s contention and found that there was a discretion having regard to the possible injustices that might have been done, I think Justice Young in the Bartex Fabrics Case looks at that and says, for example, a company which is solvent might have, through inadvertence or as in this case the mistake of the solicitor in counting the time, exposed itself to these proceedings and triggered creditors’ rights such as, say, a secured creditor will normally have in his security documents that have failed ‑ ‑ ‑

GUMMOW J:   Well, security documents will just have to be drawn a little more carefully, that is all.

MR RARES:   If the security document, for example ‑ ‑ ‑

GUMMOW J:   Yes, I know the problems.

MR RARES:    ‑ ‑ ‑ provided that the creditor could appoint a receiver and the creditor did appoint a receiver on the day after the failure and then, later on there was an extension of time, there would be all sorts of commercial problems which, in our submission, tends towards interpretation in favour of the respondent’s position.

Your Honours, unless there is anything else, those would be our submissions.

BRENNAN CJ:   Thank you, Mr Rares, Mr Martin?

MR MARTIN:   By way of reply, may I say the following.  With respect to section 459F(2)(a)(i), both my learned friend’s submissions as to the meaning of that section cannot work if, for instance, the company only wants to extend the time for compliance with the statutory demand and does not want to set it aside, say, because he says we can pay in 28 days because we have money coming and here it is.  There should be no need, as both their submissions contend, to bring an application to set aside the statutory demand.  It should be simply an application for an extension.

Justice Gummow raised a question about abuse of process and an injunction to restrain the petition.  Can we make this observation: it is very curious, indeed, that the courts should have said in the various decisions that that power is available.  It depends upon the abuse of process and we ask rhetorically, how can it be an abuse of process if, truly, section 459G only requires applications to be brought within 21 days.  The court is saying, “But,” the person applying for an injunction, “this law says you must bring your application within 21 days.  There is no abuse of process.  You are forced on the true interpretation of the section to rely upon the leave provision on section ‑ ‑ ‑”

GUMMOW J:   I think what Mr Archibald was saying, Mr Martin, was that is right, but it would require some added factors which make it an abuse of process.

MR MARTIN:   Pardon me?

GUMMOW J:   I think what Mr Archibald was suggesting, and it is what was said in the Court of Appeal, is that that is right, but you would be looking to added factors which made this particular case an abuse of process in the special circumstances.

MR MARTIN:   Yes, sorry, I did not take, especially the Court of Appeal, to be saying any such thing.

GUMMOW J:   That is the universal discourse that is meant to be understood, I think.

MR MARTIN:   Pardon me, I did not understand.  Can I make one point about the so-called parallel with the bankruptcy legislation?  Section 115 of

the Bankruptcy Act makes it clear that the date of the act of bankruptcy is the effective date for the operation of the bankruptcy whereas under the Corporations Law, section 5(1)(3)(a) generally speaking makes the date of liquidation the date of the order; there are some named exceptions.

The effect of a presumption of insolvency under section 259C is somewhat different therefore, at least for that reason, to enact a bankruptcy.  It is only a rebuttable presumption of evidence and it is only relevant for the purposes of the statute in bringing an application.  It is rebutted automatically by the expiration of three months.  An application must be heard and determined within six months.  So, it has got a very limited operation and it is a rebuttable presumption of evidence and no more.  As the Court pleases.

BRENNAN CJ:   This appeal is dismissed.  The reasons for the judgment will be given at a later date.

AT 11.38 AM THE MATTER WAS CONCLUDED