Deputy Commissioner of Taxation v England No. Scciv-00-594

DEPUTY COMMISSIONER OF TAXATION v
RICHARD ANTHONY FONTAYNE ENGLAND
(AS LIQUIDATOR OF UB MINERALS INC (NEVADA))
[2001] SASC 146
Appeal from a Master

PRIOR J: This is an appeal from orders made by a master of this Court on 1 December 2000. The master ordered that proceedings commenced in the Federal Court of Australia in December 1996, dismissed by that Court in January 2000 for want of jurisdiction, be treated as a proceeding in this Court.
On 29 February 1996, this Court appointed the defendant liquidator of UB Minerals Inc (Nevada). In July 1996, the plaintiff lodged a proof of debt. At the end of October, the liquidator rejected it. An informal extension of time to 19 December was granted with respect to the exercise of a right of appeal. Instead of pursing that right in this Court, the plaintiff instituted proceedings in the Federal Court, lodging the appeal in the Registry on 19 December. The lodged documents were not stamped until 23 December.
The defendant challenged the validity of the Federal Court proceedings. In June 1999, the High Court found that the Federal Court lacked jurisdiction for claims of the kind sought to be pursued by the plaintiff in that Court[1]. On 24 January 2000, the Federal Court dismissed those proceedings for want of jurisdiction.
[1] Re Wakim exparte McNally (1999) 198 CLR 511
On 29 June 2000, the plaintiff issued these proceedings invoking the provisions of s 11 of the Federal Courts (State Jurisdiction) Act 1999 (SA). The validity of s 11 was established by a decision of the High Court earlier in that same month[2]. Section 11(2) authorised the plaintiff, as a party to a proceeding in which the Federal Court had dismissed proceedings relating to a State matter for want of jurisdiction, to apply to this Court for an order that those proceedings be treated as proceedings in this Court. Section 11(3) provides that if this Court makes an order under s 11(2) the proceedings concerned become and must be recorded by this Court as a proceeding in the court and, for all purposes the proceeding is taken as being brought in this Court on the day when the proceeding was first recorded as a proceeding in the Federal Court. Section 11(4) permits this Court to make ancillary orders considered necessary for the purposes of the proceeding being treated as, becoming and being recorded as, a proceeding in this Court.
[2] Residual Assco Group Limited v Spalvins (2000) 172 ALR 366
In Residual Assco Group Limited v Spalvins[3], the High Court said that any order made under s 11(2) resulted in a new proceeding to be issued out of the Supreme Court separate and distinct from the dismissed Federal Court proceedings. In this appeal the defendant says that before an order can be made in this Court an extension of time within which to bring the proceedings is required given that the appeal against the liquidator’s rejection of the proof of debt had to be lodged in 1996.
[3] (2000) 172 ALR 366
Before the master, both parties spoke of the court having a discretion as to whether an order be made under s 11. The master said that the plaintiff maintained that the discretion was very narrow, limited to ensuring that the action came within the definition of the various terms of the Federal Court (State Jurisdiction) Act. The defendant argued that the discretion was an unfettered discretion, subject to the usual qualification that it was to be exercised judicially. Besides the submission that the present application did not include an application for an extension of time within which to bring an appeal against the liquidator’s rejection of the proof of debt, reliance was also placed upon the whole range of events from the time of the rejection of the proof by the liquidator, through the several years of interlocutory skirmishes in the Federal Court and up to the making of the striking out order.
The master’s view was that where a Federal Court order had been made, the discretion as to whether an order be made under s 11 should only be exercised adversely to an applicant where there has been some significant reason which does not require a subjective evaluation of the evidence. The master said that if, for example, a cause of action pleaded could not possibly succeed and at the time when the relevant order was made there was an also an application to strike out the action for failure to disclose a cause of action, the discretion might properly be exercised adversely to the applicant. However, the master’s view was that it was not for him to endeavour to define the ambit of such matters. His view was that there was nothing in what was put to him on behalf of the liquidator which would come within such a concept. The master also said it was not appropriate to make a determination based on other matters relating to the way in which the proceedings had been conducted in the Federal Court in the application that was then before him. He therefore saw no reason why he should not exercise his discretion in favour of the plaintiff. He did so.
I think the master was plainly correct in saying it was not appropriate to make a decision on the application before him by reference to particular matters. Indeed, in my view, the power conferred upon the master was tantamount to a duty once it was established before him that a party to a proceeding in which a relevant order had been made, made an application for an order that the proceeding be treated as a proceeding in this Court.
By the grounds of appeal, the defendant says that the master erred in law in making an order pursuant to s 11(2) given his view that the plaintiff’s action was out of time. (Regulation 5.6.54(2) of the Corporations Law) The defendant also claims that the master erred in holding that the unfettered discretion in s 11(2) of the Act would only be exercised adversely to an applicant where there was some significant reason not requiring a subjective evaluation of the evidence. The defendant further says that the master erred in fact in finding that in order for the discretion to be exercised adversely to the applicant, in this case it would be necessary to make an objective evaluation of the matters raised and to take evidence.
In exercising his discretion, the defendant says that the master erred in failing to have any or sufficient regard to the knowledge and conduct of the applicant and the consequence of an order under s 11(2) on the insolvent estate of UB Minerals. Finally, the defendant says that, at the very least, the master should have imposed a condition to any order made pursuant to s 11(2) that all orders for cost made in favour of the liquidator in the Federal Court be treated as orders of this court, to be taxed pursuant to the Federal Court’s scale on the solicitor/own client basis and paid to the defendant with all other costs incurred by the liquidator in the Federal Court being taxed by this Court pursuant to the Federal Court scale on a solicitor/own client basis and paid to the liquidator.
As to the first ground of appeal, I agree with what Wicks J said in refusing to order that this appeal be argued before the Full Court. Any extension of time within which to appeal is not a proper question for a court considering an application under s 11(2). If that argument is to be pursued it arises after the s 11 application is dealt with and only with respect to the question whether the proceeding initiated within the Federal Court in 1996 is within the limitation period applicable by the terms of s 11(3)(b).
I reject the submission put by the defendant that the issue of these proceedings in June 2000 was in substance and reality an appeal purportedly instituted over three and half years after the rejection of the proof of debt. This Court had before it a specific application by a person claiming to be entitled to an order that the Federal Court proceeding be treated as a proceeding in this Court. The submission that an extension of time had to be sought before an order could be made in accordance with s 11(2) confuses the appeal sought to be pursued and the application before the master. The application gave rise to an order treating a proceeding in the Federal Court, in which a relevant order had been made, as a proceeding in this Court. It was not dealing with the appeal. That appeal is the proceeding, which because the court has made an order “becomes”, and has to “be recorded” by this Court as a proceeding in this Court[4]. Thus, any relevant limitation point is something to be pursued after the order is made. It is not a condition precedent to the making of the order sought and granted.
[4] s 11(3)(a)
Any concession that there is a discretion in the court with respect to the making of an order under s 11(2) fails to properly recognise that the phrase in s 11(2) empowering this Court to make an order is an example of “may” being imperative rather than a reference to a discretionary power. In Abebe v The Commonwealth[5], Gummow and Hayne JJ referred to the fact that where a statute gives a court a power to make an order the statute will often be construed as obliging the court to make the order if the occasion for its making is proved to exist. That seems to me to be the reality here, so that no real discretion arose at all once the occasion for the exercise of the power conferred by s 11(2) was established. In Abebe, reference was made to Ward v Williams[6] and the principle discussed in it. The same case was referred to by McHugh J in Malika Holdings Pty Ltd v Stretton[7]. Essentially, Ward v Williams identifies the fact that whilst permissive language is often used with respect to the powers conferred upon courts, that power often imposed a duty upon a court once the circumstances giving rise to the exercise of the power are made out. In Ward v Williams[8] the court cited the statement of Lord Cairns in Julius v Lord Bishop of Oxford[9]. His Lordship said that:
“where a power is deposited with a public officer for the purpose of being used for the benefit of persons who are specifically pointed out, and with regard to whom a definition is supplied by the Legislature of the conditions upon which they are entitled to call for its exercise, that power ought to be exercised, and the Court will require it to be exercised.”
[5](1999) 197 CLR 510 at 573 and Malika Holdings Pty Ltd v Stretton (2001) 178 ALR 218 at 225 [33]
[6] [1955] 92 CLR 496 at 507
[7](2001) 178 ALR 218 at 225 [33]
[8] [1955] 92 CLR 496 at 505 - 506
[9] (1880) L R 5 AC 214 at 225
Thus, whilst not construing the particular provision then before the High Court in Ward as one where such a duty arose, the High Court made plain that where powers are conferred on judicial bodies, usually for the enforcement of rights and the protection of interests, permissive language is often used, not because it is intended to give the tribunal a discretion to grant or refuse the remedy, but because, although it is intended or contemplated that persons interested will be entitled to the remedy the tribunal is empowered to give, it is also intended, or at all events taken for granted, that the existence of the interest and the validity of the claim to the remedy of the person seeking it will be for the tribunal to determine[10]. It is that principle from Ward v Williams that persuades me that the application called for an order treating a proceeding in the Federal Court in which a relevant order had been made as a proceeding in this Court once the terms of s 11(2) had been made out. Limitation points are not condition precedents to the making of the order at all. The reference to “if” at the beginning of s 11(3) does not give rise to a condition precedent to the making of an order under s 11(2). It speaks of the consequence flowing from it.
[10] Ward v Williams [1955] 92 CLR 496 at 507
An application under s 11 is not the occasion for a trial on the merits or into the previous conduct of litigation in the Federal Court. Likewise, the question of costs is properly left to adjudication with the merits of the proceedings. The plaintiff concedes that that was the effect of the order made by the master.
If, contrary to my view, a discretion properly arises, I refer to Supreme Court Rule 97.01 and indicate that, to the extent that any discretion arises with respect to the making the order made by the master, in considering the exercise of such a discretion afresh I would find no good cause to do otherwise than the master did. The circumstances relied upon by the defendant to found the exercise of an unfettered discretion to refuse the order sought do not warrant the favourable exercise of such a discretion given the history of the proceedings and the conduct of the parties.
The appeal is dismissed.

[2001] SASC 146

11 May 2001