Emanuele & Anor v Australian Securities Commission

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Adelaide No A23 of 1996

B e t w e e n -
ROCCO EMANUELE and LYNTON EMANUELE
Appellants
and
AUSTRALIAN SECURITIES COMMISSION
First Respondent
CARSIM PTY LTD (IN LIQUIDATION) and OTHERS
Second Respondents
THE COMMONWEALTH OF AUSTRALIA

Third Respondent

BRENNAN CJ
DAWSON J
TOOHEY J
GAUDRON J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON MONDAY, 12 AUGUST 1996, AT 2.15 PM

______________________

MR N.W. MORCOMBE, QC: May it please your Honours, I appear with MR A.L. DAL CIN for the appellants. (instructed by Cowell Clarke)

MR T.A. GRAY, QC: May it please the Court, I appear with MR N.D. BAMPTON for the Australian Securities Commission. (instructed by V.Malinaric, the Australian Securities Commission)

MR M.F. BLUE: May it please the Court, I appear for the second respondent. (instructed by Fisher Jeffries)

MR D.M.J. BENNETT, QC: May it please the Court, I appear with my learned friend, MS S.J. MAHARAJ, for the third respondent, the Commonwealth of Australia. (instructed by the Australian Government Solicitor)

BRENNAN CJ: Yes, Mr Morcombe?

MR MORCOMBE: May it please your Honours, this appeal concerns the interpretation of section 459P of the Corporations Law. Your Honours can find that section in the book of authorities which has been provided to you. Your Honours will see that in section 459P(1), it is stated:

Any one or more of the following may apply to the Court for a company to be wound up in insolvency -

and in paragraph (f) there is reference to “the Commission”. In section 459P(2) there is then a limitation in respect of some of the persons who may make the application and 459P(2) says:

An application by any of the following, or by persons including any of the following, may only be made with the leave of the Court -

and, in (d) “the Commission”. That limitation is further strengthened by section 459P(5) which goes on to state:

Except as permitted by this section, a person cannot apply for a company to be wound up in insolvency.

If your Honours would turn back several pages to section 459A, that is the power, or contains the power, which is then further referred to in 459P. 459A states:

On an application under section 459P, the Court may order that an insolvent company be would up in insolvency.

TOOHEY J: Mr Morcombe, at some stage can you tell us whether the seventh edition of the CCH print of Corporations and Securities Legislation reflects the state of the legislation for relevant purposes.

MR MORCOMBE: I will do that, your Honour. I am reasonably confident in saying at this stage that it does, but I will do the best to provide a more substantial answer.

TOOHEY J: Thank you.

MR MORCOMBE: Your Honours, sections 459A and P came into effect in mid-1993 and, substantially, they were new provisions in the corporate legislation. If your Honours turn back to L651, which is at the commencement of that same section in the book of authorities, your Honours will see a table of the chapters and parts, and it is handy to get an overview by looking at those pages. Your Honours will see on page L652 a heading, “Chapter 5 - External Administration”, and under that chapter I particularly refer your Honours to Part 5.3A, which deals with “Administration of a company’s affairs with a view to executing a deed of company arrangement”, 5.4 which deals with “Winding up in insolvency” and 5.4A, “Winding up by the Court on other grounds”. Your Honours, I will come back shortly to look further at that legislation, but can I give you a little more of the factual background of this appeal. It is common ground that the ASC did not seek or obtain leave from the learned trial judge when his Honour made the order for winding up. His Honour’s order commences at appeal book page 169.

KIRBY J: I received just before I came in here a notice of contention which raises a point that leave was presumably granted on an earlier application. Is that correct?

MR MORCOMBE: No, your Honour. Leave was neither sought nor granted on an earlier application. I understand the notice of contention has been filed my learned friend, Mr Bennett, in respect of the Australian Taxation Office but it will be our contention on this appeal that it was not competent for his Honour to grant an order for winding up by the Australian Taxation Office when he did because we say that the Australian Taxation Office similarly was prevented from making an application. I will come to that in a moment, your Honour. At appeal book, page 169 and 170, your Honours have the order that was made by his Honour Justice O’Loughlin on 30 August 1995 and, relevantly, I direct your Honours’ attention to paragraph numbered 1 which is:

The companies set out in Annexure A hereto......be wound up in insolvency.

Those are the 16 companies which are referred to in the judgment of their Honours in the Full Court and, relevantly, can I take you then over to the following page where at the end of the orders his Honour then made a declaration under section 445G(2) of the Corporations Law, that any deed of company arrangement entered into by any of the group A companies be void and is so void.

By way of background, your Honours, there were three groups that were relevantly before his Honour the learned trial judge and the Full Court. Special leave application has been limited to the group A companies only and they are the 16 companies which are listed on appeal book page 171. In the outline of submissions that was filed shortly before lunch, and I hope your Honours have, paragraph (1) deals with the locus of the appellants and it indicates that the two appellants are directors of each of those 16 companies comprising the appellants. In paragraph number (2) of my outlines, we say that on 27 June, the Australian Tax Office filed a notice of motion seeking an order that the group A companies be wound up and paragraph numbered (3), on 29 August, the ASC filed a notice of motion seeking an order that those same companies be wound up in insolvency.

The Full Court acknowledged that an order for leave had not been made and at appeal book page 218, point 2, their Honours in the Full Court found, commencing at line 20:

the requirement to obtain leave in section 459P(2) does not impose a condition precent to the jurisdiction of the Court and that a failure to obtain leave can be cured by an order nunc pro tunc.

And their Honours so ordered, and that is reflected at appeal book page 234, paragraph numbered 2, where their Honours ordered that:

The order of the primary judge made on 30 August be amended by adding thereto as paragraph numbered 7 an order that the Australian Securities Commission have leave nun pro tunc......to apply to wind up in insolvency the Group A Companies -

and the other companies. We need not worry about the other companies.

BRENNAN CJ: Can you tell me whether the ATO was bound by the deed at the time that it filed a notice of motion seeking the winding up order against the group A companies?

MR MORCOMBE: It was, your Honour, yes, whereas, of course, the ASC was not in that it was not a creditor.

BRENNAN CJ: No.

MR MORCOMBE: Your Honours, in paragraph numbered 7 of my outline of submissions, I have then referred to those findings by the Full Court and the orders that were actually made. I will skip over paragraph 6 of my outline for the time being but, importantly, in our submission, there was a deliberate decision by counsel for the ASC and the Australian Tax Office that the orders sought by the learned trial judge be made on the application of the ASC and not the ATO and, importantly, also that the sequence of orders be important because of the impact of that sequence on the relation-back period.

Your Honours, it is necessary to travel through the legislation and I want to take your Honours to that because it is new legislation so far as the legislation is concerned in respect of governing the corporations area, and could I ask your Honours to turn to section 435A of the first section of the volume of authorities that your Honours have.

KIRBY J: There is mention in the Full Federal Court decision of a predecessor section. Was there a requirement for leave in the predecessor sections, or not?

MR MORCOMBE: The Commission did not prior to 1993 have a right to apply for the winding up in insolvency.

KIRBY J: What about those who did have the right. Did they have to seek leave before 1993? It is often helpful to look at the legislative history to try to understand what the Parliament was trying to do.

MR MORCOMBE: Yes, your Honour. Prior to 1993 there was no equivalent of the deed of company arrangement, which was brought in with 5.3A of the legislation, which came into effect, in 1993. So, there was no equivalent to 459P which came in at the same time and in the same amending legislation. It was all a package which came in at the same time. There was no right in the ASC prior to 1993 in similar circumstances, and your Honours will see that as we travel, I hope relatively quickly, through the overview of the legislation.

Your Honours, in 435C at L 5197, that section deals with the commencement and the cessation of a period of administration. The administration of the company under the legislation ends upon the commencement of operation of the deed of company arrangement, so that the term “the administration” only has a limited life. As your Honours can see from the heading at page 5.3A, it is an “Administration of a company’s affairs with a view to executing a deed of company arrangement”. In 435C(2):

The normal outcome of the administration of a company is that:

(a) a deed of company arrangement is executed by both the company and the deed’s administrator.

And it envisaged in the legislation that the administrator’s duties will then cease upon the execution of that deed.

If your Honours then turn over to the next page your Honours will see a heading “Division 2 - Appointment of Administrator and First Meeting of Creditors”; then on L 5200, a heading for “Division 3 - Administrator Assumes Control of Company’s Affairs”; L 5202 “Administrator investigates Company’s Affairs”; L 5204 “Meeting of Creditors Decides Company’s Future”; L 5205 “Division 6 - Protection of Company’s Property During Administration”, that is prior to the execution of the deed. L 5214 “Division 7 - Rights of Chargee, Owner or Lessor”; L 5217 “Division 8 - Powers of Administrator”; L 5219 “Administrator’s Liability and Indemnity for Debts of Administration”; L 5222 “Division 10 ‑ Execution and Effect of Deed of Company Arrangement”. Relevantly, 444B(6):

When executed by both the company and the deed’s administrator, the instrument becomes a deed of company arrangement.

BRENNAN CJ: What was that?

MR MORCOMBE: Section 444B(6), your Honour. In 444D(1), that section deals with the “Effect of deed on creditors” and that provides that:

A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i).

Your Honours need not be troubled by that particular reference. It has been the case previously that the Australian Tax Office has considered itself bound by the deed. In 444E(1) that provides:

Until a deed of company arrangement terminates, this section applies to a person bound by the deed.

And in subsection (2):

The person cannot:

(a) make an application for an order to wind up the company.

So that, in our situation, the Australian Tax Office could not, in our submission, make an application for an order to wind up the company whilst that deed was on foot.

BRENNAN CJ: What is the date of the deed?

MR MORCOMBE: Your Honour, they varied amongst the 16, but all were prior to the presentation of the application by the Australian Tax Office and the ASC.

BRENNAN CJ: Nothing turns on the provisions of any deed?

MR MORCOMBE: Of the deeds, no, your Honour.

TOOHEY J: Does that mean, Mr Morcombe, that section 459P which, on the face of it, permits anyone who answers one of the descriptions that follows, to apply to the court for a company to be wound up is to be read subject to 444E(2)?

MR MORCOMBE: Yes, your Honour, we say that is the case. I will take your Honours to the discussion papers et cetera that led to the introduction of 5.3A, but can I say at this stage that the concept of 5.3A was to afford companies an opportunity of trading in an environment which they had not previously enjoyed, that is, they were to be protected from applications for winding up and the consequences that flow from that, unless the court, in its supervisory role, had given leave to give such an application. I am jumping ahead, but if I could go to the heart of our case, the question is: is there a supervisory role to be performed by the court as to the presentation of an application by the ASC? That is the first question. Clearly, in our submission, the answer is yes. The next question becomes when is that supervisory role to be exercised? It is to be exercised prior to the presentation of an application or can it be exercised after the event?

KIRBY J: Prior to the disposal of the application.

MR MORCOMBE: Prior to the disposal of the application. It is our case that the structure of the legislation is such that that protection should be afforded prior to the application being filed because of the mandatory procedures that then follow, such as advertising the fact of the presentation of the petition, the triggering of security documents, knowledge amongst other creditors of the application having been made, and we say that the structure of the legislation is such that that supervisory role should be exercised prior to the filing of such documents. We say it is a two-stage process. There was an absolute right given to creditors, but there is no such absolute right given to the ASC.

TOOHEY J: When you say “an absolute right given to creditors”, you mean - - -?

MR MORCOMBE: Sorry, in the absence of a deed of company arrangement there is.

TOOHEY J: Yes, I follow that. But given the presence of the deed, then section 459P must be read subject to the earlier sections.

MR MORCOMBE: Yes, your Honour.

TOOHEY J: And what about 459P(2) which requires leave? Would any of those persons ever meet the description of a person bound by the deed?

MR MORCOMBE: They may well in another capacity. It may be that a contributory or a director may also be a creditor of the company.

TOOHEY J: Yes, but qua the description that is here.

MR MORCOMBE: We would say no. It would appear not.

KIRBY J: These things would often have to be done with some degree of speed. I mean, there is an element of haste. It seems a trifle artificial to suggest that they have to bring it in a two stage - one on a Monday and one of a Tuesday.

MR MORCOMBE: Yes.

KIRBY J: Why cannot it all be done at once, given the urgency of a lot of these applications?

MR MORCOMBE: Because of the protection that is afforded, we say, in this legislation to protect the company.

KIRBY J: Well, Monday morning, Monday afternoon, then, would be all right?

MR MORCOMBE: Yes, so long as the court exercises its supervisory role which is clearly embedded in the legislation.

KIRBY J: Why cannot it do that at the same hearing?

MR MORCOMBE: Your Honour, we say it could not - at the same hearing?

KIRBY J: Ten o’clock and 11 o’clock?

MR MORCOMBE: Ten and 10.30, your Honour. The trigger for the consequences which we have identified is the filing of the application to wind up in insolvency. That is the trigger in security documents, advertisements and things of that nature, and we say that the supervisory role must necessarily be exercised prior to that. It could be 10 minutes before, but if the Court is satisfied, and has exercised that role, it can then grant leave. The entity wishing to make the application can then file their documents and they might get a hearing that afternoon.

KIRBY J: Why cannot it be inferred from the order that was made that the court was then giving leave?

MR MORCOMBE: Because, your Honour, the topic was never raised, and the order was never sought, and the order was never made, as a matter of fact.

TOOHEY J: Your argument is, is it not, that the jurisdiction of the court to entertain the application is dependent upon the grant of leave under section 459P(2) where that is relevant?

MR MORCOMBE: Precisely, your Honour, yes.

BRENNAN CJ: Why do you say “jurisdiction”?

TOOHEY J: That is going to be my next question.

MR MORCOMBE: Can I answer both your Honours. The best answer that I can give to that is found in the decision of this Court in the David Grant decision, which I intended to take your Honours to shortly. There was a distinction drawn between matters which are procedural and matters which create substantive rights, and we say that the legislation in this case is so strong, as it was in David Grant, that one cannot ignore the words only in 459P(2) and also 459P(5) which says you cannot make an application for winding up unless you have got your leave. We say that it is that structure which necessarily imposes a condition precedent to the creation of the jurisdiction for the court to be able to exercise any powers in a matter such as this.

TOOHEY J: I do not want to take you too far ahead of your argument, and if I am, by all means defer an answer, but are you equating what you call “substantive rights” with jurisdiction? I mean, if you are, then we can, perhaps, leave the discussion until you get to the David Grant Case and so on, but if there is a distinction to be drawn between the two concepts, the question that the Chief Justice just directed to you regarding jurisdiction might be something you need to deal with before you get much further down the track.

MR MORCOMBE: Yes. Your Honour, we say that section 459A refers to the power of a court to make an order, but it is on an application under 459P, and until you have a valid application under 459P, the court does not have the jurisdiction under 459A.

KIRBY J: It is a serious thing to take away the jurisdiction of a superior court to suggest that what seems or, at least, is arguably a procedural requirement is something which goes to the heart of its jurisdiction.

MR MORCOMBE: Yes, your Honour.

KIRBY J: You were saying something about triggering certain notices and so on. I would like to understand that. If you say that the application for leave actually triggers procedural requirements that have to be followed, that would suggest that it is a separate step.

MR MORCOMBE: No, your Honour. What I was saying was that the application for leave is necessary because the application for winding up triggers certain consequences and those consequences are identified in our outline of submissions.

KIRBY J: They can live just as easily with it being a procedural requirement, as it being something substantive going to jurisdiction.

MR MORCOMBE: It could be, your Honour, yes, and that is why our case comes down to a matter of statutory interpretation.

KIRBY J: I think in all these cases that is the ultimate duty of the Court, is it not, to try to find what Parliament was getting at?

MR MORCOMBE: Yes, your Honour. Certainly, that is our case. We say that there is some assistance to be gained by looking at some of the previous decisions, particularly those that are relevant to this type of an application for leave to wind up. I have not dwelt on those in our outline because this is new legislation which has not previously been the subject of a decision from this Court. There are Full Court decisions as to whether particular conditions precedent go to merely procedural matters or to substantive matters and upon that will depend whether an order nunc pro tunc could be made, but I have not dwelt on those because of the fact that at the end of the day this comes down to a matter of statutory interpretation of new legislation. We say that the best assistance that this Court could get in respect of that interpretation is its own decision last year in David Grant. We say that one, to a certain extent, could simply replace the section numbers in what his Honour Justice Gummow said in that case.

Your Honours, we were as far, I think, as L 5229. If I could just complete that overview. “Division 11” on L 5231 deals with “Variation, Termination and Avoidance of Deed”; and 445D refers to the grounds on which a deed could be terminated but, more importantly for our purposes, 445G deals with the circumstances where the Court may void or validate a deed, and in the case at bar his Honour Justice O’Loughlin, in fact, made a declaration under 445G(2), and that was the declaration at appeal book page 170 to which I took your Honours a moment ago. Whilst your Honours have those pages 169 and 170, I direct your Honours’ attention to the sequence of events and I will come to take your Honours shortly to the transcript of what occurred before his Honour as to why that sequence occurs as it did.

Your Honours, Division 12 on that same page deals with “Transition to Creditors’ Voluntary Winding Up”, and we can then relevantly proceed over to Part 5.4 which is L 5269, which is a part dealing with “Winding up in insolvency”. In it is contained section 459A. Your Honours will see on L 5271, 459G(2) which was the subject of the decision of this Court in David Grant and on page 5273 we then have section 459P and the relevant subsections (2) and (5). On L 5295 we have the commencement of Part 5.4A which is headed “Winding up by the Court on other grounds”, that is, on grounds other than insolvency. Your Honours will see in section 462(2)(e) that the Commission also has a right to apply for the winding up of a company on a ground other than insolvency, and that application can be made pursuant to section 464 which is towards the bottom of the page, which commences:

Where the Commission is investigating, or has investigated, under Division 1 of Part 3 of the ASC Law:

(a) matters being, or connected with, affairs of a company -

et cetera -

the Commission may apply to the Court for the winding up of the company.

That section has no application in the case at bar. There was no such application.

KIRBY J: There is no requirement for leave there in that sort of application?

MR MORCOMBE: That is right, your Honour. Well, there is - - -

KIRBY J: Well, it is “may apply to the Court”.

MR MORCOMBE: I am sorry, yes, your Honour is quite right.

KIRBY J: It does not have a two-step process.

MR MORCOMBE: That is right, your Honour, yes.

KIRBY J: Now, why would there be a differentiation in those two cases?

MR MORCOMBE: Presumably, your Honour, the legislation, or the legislators have drawn a distinction between the situation where the Commission may have already made investigations or be part way through investigations and has concerns about matters such as are referred to in 461 other than the insolvency of the company, and 461, of course, covers the traditional grounds on which an application for winding up could be made, other than insolvency including failure to comply with other statutory provisions. For example, in (e):

directors have acted in affairs of the company in their own interests rather than in the interests of the members as a whole - - -

TOOHEY J: What about (h)? How does that tie in with the earlier provision which you say is confined to an application based on insolvency?

MR MORCOMBE: Your Honour, we say they are strongly related and, in fact, there would be some situations I could envisage where the Commission may see fit to have investigations and, having had investigation or be part‑way through an investigation, could then under (h) have stated that in a report.

TOOHEY J: Yes, I appreciate that but, having done so, it would seem that if it then moved under Part 5.4A, leave is not required.

MR MORCOMBE: That is so, your Honour.

TOOHEY J: That is on the basis that it has reported that the company cannot pay its debts and should be wound up but if, in fact, it proceeds on the basis the company is insolvent, leave is required to bring the application.

MR MORCOMBE: The only distinction I can draw, your Honour, is the situation where the ASC has made its own inquiries and presumably the legislators are saying, “Well, if you’ve made your inquiries and you’ve prepared a report reflecting the results of that inquiry, then we’re not going to impose the supervisory role of the court”.

TOOHEY J: It is curious, is it not?

MR MORCOMBE: It is.

TOOHEY J: In a sense the Commissioner is in a better position if it seeks not to demonstrate insolvency but simply that on the basis of its own report it has concluded that the company cannot pay its debts.

MR MORCOMBE: It is curious and I cannot help your Honour any further than that but I agree with the thrust of what your Honour is putting to me that there is a thread there which seems odd.

BRENNAN CJ: But in one case the Commission has done the investigation and come to the conclusion of insolvency. In the other case it must satisfy the court of insolvency so that it is a question of who conducts the inquiry.

TOOHEY J: What the Chief Justice has said is, of course, quite right but there is still the rather odd position of the Commission, as it were, being prepared to satisfy the court of insolvency but, on your argument, needing the leave the of the court to approach the court for that purpose but if it wishes to proceed on the basis of its own report then it does not need the leave of the court to approach the court.

MR MORCOMBE: It would seem under the legislation, your Honour, that provided the Commission does its own investigation and provides a report, that would be sufficient to satisfy Part 5.4A.

TOOHEY J: Yes.

MR MORCOMBE: So it is in the alternative, bearing in mind, of course, that it would be a rare situation where the Commission would be a creditor.

TOOHEY J: True.

MR MORCOMBE: Your Honours, the next section to which I take you and the last one ‑ ‑ ‑

BRENNAN CJ: Can I just ask you one other question? I am sorry to delay you, Mr Morcombe. Applications under Part 5.4A, who can apply for a winding up order on the grounds specified in 461?

MR MORCOMBE: That is set out in 462(2), your Honour:

any one or more of the following may apply for an order.

BRENNAN CJ: Of course, yes, you showed us that. I am sorry.

MR MORCOMBE: That, of course, includes the creditors or contributories which includes the “just and equitable” ground in 461(k) which previously was not uncommon.

BRENNAN CJ: Does it include directors?

MR MORCOMBE: Not as such. You may have a situation where there is a director who is not a contributory.

BRENNAN CJ: Yes.

MR MORCOMBE: Interestingly, your Honour,. in 462(5) there is then a provision similar to 459P(5) which reinforces the word “only” in 459P(2).

KIRBY J: Is not that a bit against you in that it is required there, although there is not a leave requirement, which rather suggests it is just a legislative device to say you have got to do it in accordance with the section, which does not really say much.

MR MORCOMBE: It is my submission that the legislators have gone to considerable lengths to set out the requirement that unless you have got your leave, you cannot make your application.

KIRBY J: Normally, the getting of leave is a procedural step and there is a decision in New South Wales of Bates v McDonald which Justice McHugh gave in the Court of Appeal which lists the whole series of cases where courts have really had a bias against elevating procedural steps to steps which take away the validity of that which follows. Why is that not a proper approach to the problem?

MR MORCOMBE: Your Honour, at the end of the day it comes down to what the legislators have required ‑ ‑ ‑

KIRBY J: I realise that but in approaching it ‑ ‑ ‑

MR MORCOMBE: ‑ ‑ ‑ and it could be that the legislators may have decided, “Let’s make it a procedural step and not a substantive matter”, but it is my submission that the clarity of this drafting is so strong that it should not be interpreted as a mere procedural step.

TOOHEY J: Your argument may gain some force from the fact that section 460 which was originally part of, apparently, a winding up on whatever ground was repealed at the same time as Part 5.4 or at least the sections which now comprise 5.4 were introduced. In other words, a different scheme seems to have been formulated for winding up on the ground of insolvency.

MR MORCOMBE: Yes, your Honour. Section 460 previously provided winding up on the ground of insolvency. That was taken out. Section 5.3A was put in, 5.4 was put in - section 5.3A dealing with the deeds of company administration and the new provisions in 459 to replace the simple provision of 460.

TOOHEY J: It may take you no further than simply a view that there is a different structure for winding up on the ground of insolvency from winding up on other grounds.

MR MORCOMBE: We say there is a very clear intent to do that.

TOOHEY J: Yes, I understand your argument but all I am putting to you is that that could only be a first step in the argument that the requirement of leave is other than procedural.

MR MORCOMBE: Yes, your Honour, I agree with that. If I could take your Honours back then to paragraph 6 of my outline which makes the point that the order for winding up in insolvency was made on the ASC notice of motion at the request of counsel for both ASC and Australian Tax Office, and if I could take your Honours briefly, first to application book page 117 point 1.

BRENNAN CJ: Does this matter?

MR MORCOMBE: I need to give background as to why it was done this way, your Honour. It is not fundamental to my argument.

BRENNAN CJ: The question is simply one of what do the words in the section mean, is it not?

MR MORCOMBE: Thank you, I am happy to move on. Without taking your Honours to it can I simply make the point that paragraph 6 refers to paragraphs 513A and 513C which are relevant to the sequence of the orders which were made because it would affect the commencement date of the winding up if the deed of company arrangement was not declared void prior to the order for winding up being made. Your Honours, in my outline I have then referred to the legislative history and your Honours will find in the book of authorities, which has been provided under tab 5, the legislative history. It is called in the index “Legislative History of 459P” but, in fact, it goes back further to those sections which are included in my outline commencing with the Companies Act in 1962 and then the Code and then the law prior to 1993 and then, of course, we have looked at the current status. I do not intend to read those to your Honours.

KIRBY J: What is the point of it though, that this is a novel provision that has been deliberately and unusual provided and it is a departure from previous provisions? Is that the point you are making?

MR MORCOMBE: That is the point, your Honour, yes. The earlier legislation was amended from time to time cosmetically but in 1993 the legislators brought in a new scheme dealing with companies that were in an insolvent situation and, indeed, as your Honour Justice Toohey pointed out, restructured that part of the legislation to create a new 5.3A, a new 5.4 and then 5.4A was renumbered. Without taking your Honours to it I would refer your Honours to the Harmer Report which is included in the documents provided to you and in particular to paragraph 142 of that report but I will not stay to read it now.

Your Honours, in paragraph 10 of my outline I have referred specifically to the case of National Mutual Fire Insurance Co Ltd v Commonwealth of Australia (1981) 1 NSWLR 400, at page 408. This is an example of a Full Court decision which is favour of the approach that I am inviting your Honours to take in interpreting this legislation. There are other Full Court decisions which are in favour of the opposite approach and further to that, there are a number of single court decisions and in particular I would refer to - I will not take your Honours to those single court decisions but there are decisions on both sides of the fence and it is a question of approach. At the end of the day it is a question of the words used.

Could I refer your Honours in particular to the National Mutual Case at page 409 because it is our submission that the words used by their Honours at page 408F where the court said towards the bottom of the page, the paragraph commencing:

When the requirement of sub-s (4) is examined from this standpoint, unencumbered by reference to other and different procedural requirements, the question is not difficult to answer. There is no question of strict or substantial compliance. The action is commenced with leave or it is not. If it is commenced without leave, the proceeding is either a complete nullity or else it remains valid irrespective of whether or not leave is subsequently granted -

et cetera. It goes on:

I can see nothing to support the attribution of a legislative intention of the two last‑mentioned kinds. In my view the legislative intention properly to be garnered from the terms of sub‑s (4) and its place in the framework of s 6 is that a failure to obtain the leave of the Court in advance invalidates the action and renders it incapable of being revived by leave retrospectively given.

In this Court’s decision in David Grant (1995) 184 CLR 265 - and I think it is contained in section 10 of the book of documents held by your Honours -that was a case concerning, in particular, section 459G which provided that once a statutory demand was served on a company, that company under 459G may only make application within 21 days for an order, in effect, preventing the filing of an application for winding up. His Honour Justice Gummow in his judgment commencing at page 269 sets out the legislative scheme, refers to section 1322 of the law which provides a discretion to the Court to, in effect, grant a dispensation from compliance and at page 275 at point 9 his Honour says:

On the present appeals, the difficulty in construction arises, perhaps not so much from the particular text of either s 459G or s 1322, as from the interrelation between the two provisions in circumstances where the enactment of s 1322 preceded that of s 459G, and the earlier section is general and the later section specific in its operation.

His Honour then went on at the bottom of the page:

As a general precept, it is inappropriate to read provisions which confer jurisdiction or grant powers to a court by the making of implications or imposition of limitations not found in the express words of the legislative provision. Here, however, by a later and more specific provision inserted by the Law by the 1992 Act -

which came into effect in 1993 -

provision is made with respect to a particular class of application and there is attached a specific limitation as to the time within which an application may be made.

Going down towards the middle of the page:

In addition, the temporal requirements in sub‑ss (2) and (3) of s 459G operate to define the jurisdiction of the court in respect of an application to set aside a statutory demand. Before developing this point, reference first should be made to the source and nature of the jurisdiction involved.

On page 277 his Honour refers to sections 459G(2) and (3) attaching:

a limitation or condition upon the authority of the court to set aside the demand.

And, about six lines down:

Here, the phrase “[a]n application may only be made within 21 days” should be read as a whole. The force of the term “may only” is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G.

If I can pause there, in 459P, you have the same words in the same amending Act in the same part of the Corporations Law and he goes on to say:

An integer or element of the right created by s 459G is its exercise by application made within the time specified. To adapt what was said by Isaacs J in The Crown v McNeil, it is a condition of the gift.....that sub‑s (2) be observed and, unless this is so, the gift can never take effect. The same is true of sub‑s (3).

And in the next paragraph:

This consideration gives added force to the proposition which has been accepted in some of the authorities that it is impossible to identify the function or utility of the word “only” in s 459G(2) if it does not mean what it says, which is that the application is to be made within twenty-one days of service of the demand, and not at some time thereafter and that to treat s 1322 as authorising the court to extend the period of twenty-one days specified in s 459G would deprive the word “only” of effect.

Now, I have made the point before but again I remind your Honours that 459G did not have a provision equivalent to 459P(5).

KIRBY J: Did the Full Court have the advantage of this decision?

MR MORCOMBE: No, your Honour. This decision was handed down on 11 October. The Full Court was argued about five weeks after that.

KIRBY J: That is five weeks.

MR MORCOMBE: Yes. This decision was handed down on 11 October, Full Court argument was heard on 16 November 1995 - I was unaware of the decision - and the Full Court handed down its decision on 15 December 1995. Whilst your Honours have David Grant in front of you, could I take your Honours to several other parts of the judgment. At page 278 at about point 8 or 9 there is a paragraph commencing:

For these reasons, the requirement in s 459G that the application to the court for which it provides be made only within twenty-one days after service of the demand should not be treated as supplemented or qualified by the operation of s 1322(4).

And over the page:

Section 467A provides that an application under Pt 5.4 “must not be dismissed” -

et cetera, and then towards the bottom of that paragraph:

Therefore, there is no question of such an application being dismissed because of a defect or irregularity in connection with it.

His Honour then referred to the decision of Re J & E Holdings Pty Ltd and sets out a short quotation which says:

“The position is quite simply that unless the Court has a power to extend the time within which the application to set aside the statutory demand can be made, the plaintiff has no right to make it.”

His Honour then goes on to refer to further observations which were made in Re J & E Holdings about the consequences of an application for winding up being made and this comes back to my earlier point that we say there is a supervisory role to be conducted by the court in section 459P(2) and we say that clearly that supervisory role must be exercised prior to the filing of the application. His Honour Justice Gummow here refers to the consequences that flow from the filing of such an application and he does so, in my submission, in quite strong terms. In the third line he says:

In particular, reference was made to the drastic commercial consequences which may follow the issue of process for winding up and to the inability of a company, which for good reason had been late in filing or serving an application to set aside the statutory demand.....The damage to the commercial reputation of the company in the meantime might not be answered by the eventual success of the company in defeating the application to wind it up as insolvent. Further, default clauses in securities given by the company may have been so drawn as not to take full account of the new statutory scheme, with the consequence that floating charges may have crystallised.

I would go further than that in the case at Bar in that it is not uncommon for security documents to contain a provision calling in the whole of the debt and interest owing upon the presentation of an application for winding up of a company.

TOOHEY J: Mr Morcombe, can you direct us to those passages in which Justice Gummow uses the language of jurisdiction? I do not want you to read them but can you just tell us where that language is used?

MR MORCOMBE: Yes, I have not done that exercise ‑ ‑ ‑

GAUDRON J: Page 277, there is one at the top.

BRENNAN CJ: Page 276 point 5 also, I think. Perhaps your junior can attend to that while you proceed, Mr Morcombe.

MR MORCOMBE: Yes. Your Honours, in paragraph 12 we submit that an application is made when the documents are filed at court. We say that follows from the structure of the legislation to which I have already taken you but the three cases there cited assume that that is so. Those cases deal with limitation periods and assume that the relevant period commences upon the application being filed as opposed to an oral application being made in court. I cannot see that in any of those three cases the point has been argued but it would necessarily be so, in my submission, has to be so, that in terms of 459P “an application being made”, in my submission, necessarily means “the application being filed” ‑ ‑ ‑

KIRBY J: Well, your view is quite strict. Until you have the leave, you cannot file your application.

MR MORCOMBE: Yes. We say there is no scope within the structure of this legislation to suggest that an application being made means an application orally being made to the court based on documents that have previously been filed. We say the application is made at the point of filing the documents because of the structure of the legislation.

TOOHEY J: I do not want to go off on a tangent but, since you mentioned limitation of actions, I was thinking as you spoke of the statutory provisions, that no action may be brought, say, on a contract or in tort except within a period of X years. A court hears a claim or is faced with a claim for breach of contract or for damages in tort, no defence of limitation is raised by the defendant. Does that mean that nevertheless the court is without jurisdiction?

MR MORCOMBE: I do not have them at my fingertip, your Honour, I thought there was an authority to the effect ‑ ‑ ‑

TOOHEY J: No, I did not want the argument to get too bogged down in that discussion but I just wondered whether it provides any sort of analogy at all.

MR MORCOMBE: It is my understanding of the authorities that, even though the point is not raised by the parties, if the point occurs to the court, it of its own volition can raise that point but it then comes back to: if an order is made without jurisdiction, what is the effect of such an order? Is it void ab initio, is it voidable or does it simply stand as a competent order unless there is a subsequent order? We say that in a superior court such as the Federal Court, the order stands until such time as there is an order rescinding it. Some of the authorities which are later discussed in my outline touch on that point.

TOOHEY J: Yes, thank you.

KIRBY J: That is the foundation for your appeal to this Court. You have got to have an order that you can appeal against.

MR MORCOMBE: Yes, your Honour.

KIRBY J: At least for that purpose.

MR MORCOMBE: I do not say that only for that reason, but yes, your Honour is quite right. Your Honours, in paragraph 13 I have referred to the High Court decision of Cameron v Cole which is a 1943 decision, and there is dicta there of his Honour Chief Justice Latham at page 581 where his Honour was considering a bankruptcy matter, and I have also referred to a decision of his Honour Justice Young in Torsir. As to the decision in Cameron v Cole, I direct your Honour to that dictum at page 581 at about point 3 where his Honour said:

The court should, the proceedings still being pending, have applied reg 22, and if it were found that Cameron was a member of the forces when the petition was presented, should not have proceeded with the hearing of the petition, and should have dismissed the petition. The question was not argued, but the terms of reg 22 appear to require leave for the presentation of a petition to be granted, where necessary, before the petition is presented.

Now, it is different legislation but I draw some comfort from that and also I draw some comfort from the decision of Justice Young in Torsir which is in section 9 of the book of documents before your Honours and in particular to page 207 commencing at line 15.

KIRBY J: Is that dealing with this provision of the law? Has this question arisen in any other case in other courts of Australia?

MR MORCOMBE: Not that I am aware of, your Honour, no. It is not on all fours but his Honour there used quite strong language where he said, commencing at line 15:

Although there are situations where a claim can be made and validated by a nunc pro tunc order subsequently, usually, when a claim is made by a person without standing, despite s 81 of the Supreme Court Act it is an incurable defect and the proceedings must be dismissed.

And we adopt that terminology. We say that is what should happen in this case. Your Honours, in paragraph numbered 14 - - -

KIRBY J: Is there not a distinction between a proceeding brought by somebody who has no standing, no interest to move the court, and a proceeding which has been brought by somebody who, by the statute, has undoubted standing, had grounds and a basis and got the order but simply failed to take the procedural step of seeking the leave?

MR MORCOMBE: Your Honour, we say that the person in that second category is in no better position than the person in the first. They have no standing to bring the application until such time as that condition precedent is satisfied.

BRENNAN CJ: The ASC had no interest that was liable to be affected by the making of the order.

KIRBY J: But the principle you are advocating would have to be applied equally to those who did have an interest, apart from the ASC, because they are mentioned in the section.

MR MORCOMBE: Your Honour, can I amend that slightly by saying a live interest. In my submission, they do not have a live interest which is capable of forming the basis of an application to the court until such stage as they have convinced the court that it is appropriate for the application to be made. It is that protection mechanism which we say is at the forefront of the structure of the legislation.

KIRBY J: But those who can make the application in 459P(1) can include the company itself, a contributory creditor. They will have a very live interest. The Commission is in a slightly different position as a general supervisor of the industry, I suppose, but they will have a very real interest and the same principle that you are applying to the Commission would have to be applied to them: no leave; no jurisdiction.

MR MORCOMBE: Yes, I agree with that.

KIRBY J: One pulls back from such a consequence because of the ramifications, the undoing of things that are done under a court order of a superior court.

MR MORCOMBE: Yes, and I understand that reluctance, your Honour, but one cannot ignore the structure that is there by the legislation and the significant restructuring that took place in 1993. Your Honours, certain safeguards were put in place upon the granting of special leave to this Court.

KIRBY J: That cannot affect the legal question.

MR MORCOMBE: From a practical point of view, those undertakings substantially affect what would happen in practice.

KIRBY J: They soften it in this case but there are cases waiting in the wings where they may not have that softening.

MR MORCOMBE: Yes. I wish we were one of them, your Honour.
Your Honours, in the paragraph numbered 14 we make the submission that an order made on such an application as is this is not void but is voidable

giving rise to an unconditional right to set aside. I do not wish to take your Honours to those authorities.

Again, in paragraph 16, we say that upon an application for leave the Court must be satisfied there is a prima facie case that the company is insolvent and then must exercise its residual discretion, and we say that is the structure but there must be a valid application to start with.

In paragraph 18 - I have skipped over 17 but 17 is important and goes to the whole thrust of my case: that if the Court is to have a role it should not be an illusory role. It can only have a real role of supervision prior to the presentation of the application. In 18, we have referred to the consequences that flow from the filing of an application to wind up, and I have there referred to the decision of this Court last year. Paragraph E and, in particular, paragraph numbered 19, sets out the orders that we say should be made if the appeal is allowed. If the Court pleases.

BRENNAN CJ: Thank you, Mr Morcombe. Mr Gray.

MR GRAY: May it please the Court. The early history of this matter does have some significance. The process started with the directors resolving to have the companies placed in administration and that occurred on 23 March 1995 and is picked up at page 194 of the appeal book, line 30.

Following that, the Commonwealth issued petitions to wind up on the grounds of insolvency. That was the second step. That is referred to at page 195, line 20, of the appeal book. Then in about June or July 1995 a deed of company arrangement was entered into and that was over the opposition of the Commonwealth. It was carried on the vote of others able to vote. So that the application to wind up followed the directors’ resolution but preceded the deed of company arrangement.

In the Commonwealth’s application it sought orders that, in effect, set aside the administration because, of course, that had to happen before it could proceed to obtain an order to wind up. It was able to issue a petition but it could not proceed to obtain an order without, as it were, clearing away the deed. In that circumstance the Australian Securities Commission received notice of all those events. There is a need to lodge with the Commission the notice of winding up. There is a need for the deed to be lodged with the Commission.

There were numerous petitions before the court and one in particular became the vehicle that was used to allow the point to progress, and all that is dealt with in the Full Court’s reasons. But the Australian Securities Commission came into the matter first as amicus curiae and then it intervened. The intervention was under section 1330 of the Corporations Law and the Commission intervened in regard to all the petitions and by section 1330 it was deemed to be a party to those proceedings.

Now, if the Court pleases, section 1330 has been discussed in two authorities. It might be of some assistance to this Court. There is a decision of the New South Wales Court of Appeal in Australian Securities Commission v Ampolex (1996) 14 ACLC 80, and we have provided a photocopy of that. Your Honour Justice Kirby was a member of that court. Some short remarks were made about section 1330 intervention, in particular at page 84, right-hand paragraph, by your Honour.

The other authority very much to the same effect is a decision of Justice McClelland in Permanent Trustee v Dowd (1993) 11 ACLC 792, in particular at page 795, left-hand paragraph, dealing with the precursor section, 540.

BRENNAN CJ: What does this tell us, Mr Gray?

MR GRAY: The purpose of those is that it underscores the wide import of section 1330 and, in particular, that the ASC is deemed to be a party with all the rights of a party. The significance of that, if the Court pleases, if one then combines section 1330 with section 459P(1), one has the ASC intervening as a party in an existing and regularly issued application to wind up. The ASC never issued a winding up petition in its own right.

KIRBY J: But I think the issue is not whether you can become a party but before you get relief you have to get leave.

MR GRAY: Indeed, but if the Court pleases, there is a difference between, on the one hand, we would say, the ASC intervening in a regularly issued application and then as a partt to that application exercising the rights of a party on the one hand and issuing a petition in its own right.

BRENNAN CJ: Let me understand this. Do you say the Commission did not ever lodge an application with the court for a winding up and an insolvency?

MR GRAY: No, it did not. What it did was to move the court within an existing petition issued by the Commonwealth. That is what in fact happened.

BRENNAN CJ: Where is the originating document?

MR GRAY: The originating document, as far as the Commonwealth is concerned, is at page 1 of the appeal book. It is described as an “Amended Notice of Motion of the Commonwealth of Australia” - 27 June. But, essentially, it is setting out the gist of the Commonwealth’s initiating document in June 1995 and seeking to set aside the order setting up the administration and then seeking leave to issue winding up proceedings and to proceed to wind up.

BRENNAN CJ: This is an application by the Commonwealth of Australia, is that right?

MR GRAY: Yes.

BRENNAN CJ: So you have got the Commonwealth, the ATO and the ASC?

MR GRAY: Not at this - no. The Commonwealth is the same entity as the ATO for these purposes, it is one and the same, and the ASC intervened in this proceeding but did not issue a separate proceeding. There are numerous petitions and one was chosen, as the Full Court have indicated, to be the vehicle to allow the argument to proceed. So what has happened, if the Court pleases, is that the ASC has intervened and became a party in the Tax Office petition to wind up, then the ASC issued a notice of motion giving notice that it would move the court on 30 August or thereabouts for an order to wind up and then its counsel made that application orally pursuant to that notice within the Commonwealth’s petition.

TOOHEY J: Why did you need leave?

MR GRAY: The short answer is that leave was not needed, that this point has not been addressed before. It has come about, if the Court pleases, because of an argument that Mr Morcombe identified during special leave and has advanced today of saying there needs to be a separate application for leave preceding an application to wind up and it is really a question of having gone back over that that it was thought proper to draw this to the Court’s attention. If the correct characterisation of what has happened is that the ASC has on notice made oral application to wind up as a party within a regularly issued petition ‑ ‑ ‑

DAWSON J: Now, this is muddling two things up. Was the order made on the application of the creditor?

MR GRAY: No, the order was made on the oral application of the Australian Securities Commission within the petition of a creditor.

DAWSON J: It cannot be within the petition of a creditor. Either it is an application by a creditor or not.

MR GRAY: No. It was certainly an application by a creditor, yes.

DAWSON J: It was?

MR GRAY: Yes, there was.

DAWSON J: The order was made on an application by the creditor?

MR GRAY: Yes, and that is the application appearing at page 1 of the appeal book. That was the application that was lodged to wind up.

TOOHEY J: The argument against you does not so much go to the capacity of the court to make an order but the capacity of the court to entertain the application. Now, I take it what you are saying, Mr Gray, is that the court had that capacity by virtue of an application made by someone who did not need leave, namely, a creditor.

MR GRAY: Yes.

TOOHEY J: The Commission by virtue of its power to intervene under section 1330 could then, within the ambit of that application as a party, seek an order for winding up.

MR GRAY: Yes.

TOOHEY J: It rather tends to negate 459P(2) in so far as it refers to the Commission.

MR GRAY: It does in the circumstances of this case, and can I explain why? That the question of insolvency was never in issue. These companies were hopelessly insolvent. That was never in issue.

BRENNAN CJ: But the point that is in issue is this, is it not: section 1330(2) provides that:

the Commission shall be deemed to be a party to the proceeding -

and that is, going back to subsection (1):

any proceeding relating to a matter arising under this Law.

Now, the proceeding that was pending in which the Commission is deemed to have been a party is the proceeding commenced by the Commonwealth or the ATO, is that right?

MR GRAY: Yes.

BRENNAN CJ: And that was a proceeding in the nature of an application, inter alia, for winding up.

MR GRAY: Yes, your Honour.

BRENNAN CJ: And that was an application for winding up by a creditor which was itself restrained by 444E(2) from making the application to progress that application?

MR GRAY: Yes. The restraint was that he could not seek an order while.....was still existing. The application was legitimate but he could not advance it.

BRENNAN CJ: Well then, the question is was the application by the ASC an application that the application for winding up already made by the ATO should proceed, notwithstanding the ATO’s restriction under 444E(2) or was it an application made by the ASC on its own behalf under 459A?

MR GRAY: No, it is the latter. It was an application made by the ASC on its own behalf as a party.

BRENNAN CJ: On its own behalf under 459A?

MR GRAY: Under 459A, yes.

BRENNAN CJ: Well then, if it is under 459A, 459P comes into operation.

MR GRAY: It does, yes. When one asks the question, my learned friend wants to argue that 459P(2) requires there to be issued separately an application for leave and when that is granted then to issue an application to wind up.

BRENNAN CJ: What is wrong with that submission?

MR GRAY: Well, because the ASC was a party to a petition to wind up ‑ ‑ ‑

BRENNAN CJ: Another one, another procedure?

MR GRAY: Another proceeding. It had become a party to another proceeding and in that proceeding it then issued a notice of motion, giving notice that it proposed to move to wind up and did so in its own right.

BRENNAN CJ: Well, there is one application pending.

MR GRAY: Yes.

BRENNAN CJ: ASC became a party to that application.

MR GRAY: Yes.

BRENNAN CJ: And then gave a notice that it proposed to apply for a winding up under 459A, being a second application for winding up.

MR GRAY: Yes. It gave notice that it would move and then make an oral application before his Honour. What is being suggested against the Commission is that that was a fundamental jurisdictional flaw. It made the whole process an oddity.

TOOHEY J: Your argument would seem to go to power rather than jurisdiction. In other words, on your argument, jurisdiction was attracted by virtue of the original application for which leave was not required but query whether, if that be so, the court was empowered to make an order on the application of the Securities Commission other than by leave.

MR GRAY: Yes.

TOOHEY J: I say “query” because it would seem the argument then shifts from jurisdiction to entertain an application for winding up to power to order the winding up in the circumstances prevailing in this case.

MR GRAY: Indeed, and that could be a very critical difference if my learned friend’s argument about the whole process being a substantive flaw is good because, if one looks at the wording of 459P, one says, “Here there is an application before the court regularly issued”. A creditor issued an application, it is regularly issued and, by reason of section 1330, the Commission has become a party to that proceeding and then ‑ ‑ ‑

DAWSON J: But it could not proceed with that application any more than the Commonwealth could.

MR GRAY: No, it could not but there was, in fact, a regularly issued petition ‑ ‑ ‑

DAWSON J: So it made a different application.

MR GRAY: Yes.

DAWSON J: And that was an application for which it required leave.

MR GRAY: Well, if that is so, we would say that then it is properly characterised as procedural but it does, if the Court pleases, cut across entirely my learned friend’s submission that there must be an entirely different documentary process under 459P too because the Commission having become a party, there is little point in issuing another application to wind up.

TOOHEY J: Well, it is not even a question of whether it is of little point, is it? I mean, by intervening the Commission became a party to the proceeding before the court.

MR GRAY: Yes.

TOOHEY J: I am not sure that would have entitled the Commission to launch any further application other than through the mechanism of the Act.

MR GRAY: Well, if that is so then one has the Commission, properly before the court as a party, seeking then to make, as it did, an oral application to wind up having given written notice of that motion.

KIRBY J: But why is not the proper interpretation that the general power to intervene must bend to the particular power which puts an obligation of getting leave before particular relief is given and mentions the Commission as a specific person who must submit to that condition?

MR GRAY: Well, that obviously is a view that is open.

KIRBY J: But why is that not the correct view? Here is the particular as against the general.

MR GRAY: The difference is that by reason of section 1330, the Commission has become a party to a regular proceeding, so the idea that the Commission in some way is improperly before the court is not correct.

KIRBY J: It is not a question of being improperly before the court; it is a question of being entitled to certain relief. You are entitled to that relief so long as you put in train the statutory scheme which obliges you to get leave.

MR GRAY: If that is so, there is no question of, with respect, the Commission being properly a party before the court and having locus as a party before the court, there is no question, we would say, of the Commission having to issue separately another petition to wind up.

GAUDRON J: Well, I would have thought that there might be. I would have thought that winding up was a fairly solemn step and requirements of natural justice would need the ground to be clear and stated and the rules complied with.

MR GRAY: That was addressed in the case at Bar by Justice O’Loughlin who took the point that every relevant person had notice through the extensive notice given by the Commission. The issue about insolvency was not in issue. Nobody is arguing about that. Nobody is arguing the company is insolvent. It was just a moot point as to whether or not the Commission needed to obtain leave. What had happened in the case is that the concern of the Commission was that the administration procedure was being used to cover up a series of possible misdeeds which are set out in the Full Court’s judgment.

BRENNAN CJ: Well, we can understand very readily how this may have happened but that is not going to relieve us of the problem of resolving the operation of 459P(2).

MR GRAY: Well, I cannot advance the point any further other than to draw the Court’s attention to it and it does put, we would say, a possibly different complexion on it because the Commission is deemed to be a party with all the rights of a party and, for example, I think Justice McClelland’s decision I referred to does refer there to the intervening party, the ASC, pursuing a cross‑claim in different terms than was otherwise before the court. So it is not just a question of supporting or resisting other parties in their role; it is having all the rights of a party. The construction we would contend for is that it became a party under a 459P(1) procedure.

TOOHEY J: I suppose your argument could if found attractive lead to one of two conclusions. One is that leave was not required in the particular circumstances at all or, alternatively, if it was required, it was not as a condition precedent to the exercise of jurisdiction but to the making of orders at the behest of the Commission and to that extent these were procedural matters.

MR GRAY: Indeed. It would still leave open the question of the proper interpretation of 459P(2) in other circumstances but not in the instant case because of really the unusual way in which this whole matter arose. That is all I would wish to say on that point and draw that to the Court’s attention.

Could I then turn to the first major argument that we put and it is that section 459P is under the rubric of procedure rather than jurisdiction on substantive law and, if the Court pleases, we start by identifying section 459A as being the power of the court to make the order and 459P is talking about, as is obvious, who may make the application.

What stands out is that at first blush the Commission is within 459P(1), what are the identified persons with plots but it has to, before it can effect that locus, go through a particular process. We would characterise that process, with effect, as being a process of procedure, not of jurisdiction. It is identified the Commission is a party who will have locus if they follow through a certain procedure in regard to the jurisdiction of the court which is to be exercised pursuant to 459A. It is that characterisation that led the Full Court to distinguish the National Insurance Case of New South Wales where the very section itself that created a cause of action contained within it the particular limitation that was said to be substantive, formed part of the cause of action itself.

BRENNAN CJ: The problem might be that the distinction between procedure and jurisdiction that is not a dichotomy is not complete. It may be that 459A confers the jurisdiction and 459P(2) governs the question of the right of a person to obtain an order in the exercise of the court’s jurisdiction so that the court acts erroneously but within jurisdiction if it makes an order on an application of a person nominated under 459P(2) who has not obtained the prior leave of the court and any order so made can be set aside as of right.

MR GRAY: If the Court pleases, it is really the last qualification, “as of right”, that we would join issue with.

BRENNAN CJ: I am just saying in terms of the categories into which you put things, it may be that “jurisdiction” is not quite the right word.

MR GRAY: No, if the Court pleases, perhaps to approach the matter laterally one asks the question: what is the status of an order that has been obtained with a defect? And the answer, it is conceded, is that it is not void, it is voidable. That being so, the question then becomes: is there any reason of principle why, in particular circumstances, the court should not retain a jurisdiction to address that defect in an appropriate way? The circumstances of the case at Bar really spell out why it is desirable the court have such a jurisdiction because here we have a case where insolvency is undoubted and, in fact, the applicant has undertaken to the Court that should it succeed and should the Commissioner proceed not to wind it up, it itself will apply to have itself wound up. So we say we really are in a case that demonstrates the desirability of the court having a residual discretion to deal with defect.

KIRBY J: Yes, but you are concentrating on the particular facts of this case. Special leave was granted because of the importance of this for the administration of the law and the problem is that ultimately in all of these cases the court must get back to the interpretation of the statute and here there are three indicia that indicate strictness “only, but not otherwise and except as permitted shall not be made”. Now that is very strong statutory language. Add to that Grant’s Case which was not referred to and it seems to me, with respect, that you have some problems.

MR GRAY: If the Court pleases, to take those three points, your Honour Justice Kirby made the comment - I think my learned friend referred to section 462 and referred there to subsection (5) that also said it can only be made in a section that did not contain leave. So those words alone, when one compares those two sections, would not appear to carry the day. They would have a degree of equivocation about them.

KIRBY J: It is not just one of them, it is the combination of the three of them and Grant’s Case ‑ ‑ ‑

MR GRAY: Yes, Grant’s Case, if the Court pleases, we would like to make a number of comments about. The difficulty in Grant’s Case in utilising section 1322 arose because section 1322 was a general provision enacted prior to section 459G, the specific provision comprising what could be described as a mini Code on statutory demand procedure. The issues there were different to the issue now before the Court for that reason and that is where much of the court’s attention was focused because if one looks at the particular regime the Court is here concerned with, one has to look in particular at sections 467 and 467A.

Now, section 467A came into the legislation at the same time, the same amending Act, as section 459P and section 467(3) had been introduced in 1990 and forms part of the comprehensive review that occurred. So we would say that it would be an easy step to take that Parliament intended 459P to be read together with 467A and 467(3) and both those sections deal with dispensation with requirements or irregularities and neither of those sections were available to assist in Grant’s Case because 467A is predicated on an application to Part 5.4 and 5.4A and ‑ ‑ ‑

DAWSON J: But there is no question of any dispensation in this case, is there?

MR GRAY: Indeed, yes. The whole point of the nunc pro tunc order is through a different mechanism to effect just that.

DAWSON J: No, I mean any provision in the Act granting a dispensation, so when you look at the word “only” you look at it in the same light in each section as in Grant’s Case and in this case.

MR GRAY: We would put that a different way. We would say that here there is suggested to be a defect or an irregularity in that leave was not obtained before the Court made the substantive order, that is, in ordinary parlance, a defect or irregularity and falls within 467A’s language.

DAWSON J: You say the nunc pro tunc order was made under 467A.

MR GRAY: No, the argument I am putting is that when one reads 459P(2) in this particular part of the legislative scheme, one reads it with 467(3) and 467(A) and one can see that the legislation was providing a method for the defect or irregularity being cured under those sections. So hence, a recognition that is within the rubric of procedure that can be dealt with by dispensation rather than a jurisdictional matter which cannot be. In this particular case, the court chose the route of the slip rule and made a nunc pro tunc order which we say is another available procedural avenue to be used but these sections throw true light on the character of the legislation.

KIRBY J: Well, during the special leave application, Justice McHugh suggested that the importance of the case was to, as it were, send the signal to the courts of the country as to how this was to be administered. Given the tripartite indication of the legislature’s intention, why is it not better, leave aside the inconveniences for this case, that the scheme that the Act seems to be envisaging be carried out, namely, you have to seek the leave. The court has.....drastic steps, it considers those and then, if it grants the leave, you go on to make the substantive application. Why is that not (a) what Parliament has provided, and (b) the better administration of the law?

MR GRAY: If the Court pleases, on the subject of intervention argument, there is absolutely no doubt that Parliament has wanted the 459P(2) procedure followed through. At the same time the submission is put that Parliament through sections 467A and 467(3) has made it clear that there is a remaining residual discretion of the court to address a defect or irregularity.

BRENNAN CJ: So what you say is that the failure to comply with 459P(2) is a defect for the purposes of 467A(a), is that right?

MR GRAY: Yes, and accordingly the court in an appropriate case, that is one where there would be no substantial injustice, has a discretion to let the matter proceed. Now, that is simply a statutory way of dealing with the equivalent of the slip rule, a nunc pro tunc, as in essence another procedural route in an appropriate case to overcome the defect.

KIRBY J: I do not recall the Full Court relying on those sections.

MR GRAY: No, the matter was not addressed. In the Full Court the matter was addressed a different way. There were two applications before the Full Court. One was by the slip rule and a nunc pro tunc procedure and the alternative presented to the Full Court was by way of a cross‑appeal. The Full Court found the matter was under the rubric of procedure and used the slip rule nunc pro tunc procedure and in that event did not find it necessary to consider the cross-appeal and, as the Court is aware, we are seeking special leave to cross‑appeal before this Court to raise the same matter. If, in fact, this is a matter that cannot be dealt with procedurally the way the Full Court did as a matter of substantive or jurisdictional law, then we say it can be dealt with by way of appeal.

KIRBY J: Is this strictly a correct application of the so‑called slip rule? Is that not the correction by a judicial officer of a mistake that he or she makes as distinct from the correction by the appellate court by its powers?

MR GRAY: Yes, if the Court pleases, I will just let my junior check that but my recollection was it was being suggested that the Full Court would exercise all the powers of a single judge and, in particular, exercised those powers in this case. Justice O’Loughlin was invited to address the matter and he declined to but preferred the Full Court to deal with that. So the intent before Justice O’Loughlin to deal with it through the slip rule did not get off the ground. He took the view that it was then for the Full Court to deal with it but the provision in the Full Court that was relied on was the power of the Full Court to make every order that the trial judge could have made.

If the Court pleases, the point of going to 467A and 467(3) is to seek the interpretation of section 459P within the particular scheme and, to come back to your Honour Justice Kirby’s point, to draw the contrast with Grant’s Case. In Grant’s Case one was comparing a later specific provision with an earlier general provision and we say one of the distinguishing features with Grant’s Case is here the Court is looking at a scheme which, at the very same time as in 459P and a leave requirement, also introduces 467A for example, saying that if there was a defect or irregularity and it did not cause a substantial injustice, then one would not dismiss the application for that reason.

We would say that 467A is essentially a procedural matter akin with those other powers of procedure that allow a court to alleviate against a technical defect or irregularity. We put that as being a major ground for distinguishing Grant’s Case and, of course, as I have pointed out in Grant’s Case there, the appellant could not rely on 467A or the other section because there was not the necessary application before the Court.

In regard to the question of the characterisation of that legislation, at page 274 in the Commonwealth Law Reports, counsel appears there to have conceded that section 459G was not a matter of procedure. It is about point 7 on the page. It is the last sentence of the penultimate paragraph:

However, in oral argument, counsel for the appellants accepted there was a real difficulty in characterising the facts as involving merely a procedural irregularity.

So it does appear that at least the point was dealt with in that way by a concession, so that, we say, is a relevant comment to make about Grant’s Case. We say that Grant’s Case does not stand between the submissions we put to this Court for those reasons.

The other matter about it is that it is not surprising to find, perhaps in times of modern drafting, a clear expression. We say that the words “may only” quite clearly are underscoring the Parliament’s intention that this is an important matter that should be addressed but it does not follow from that that Parliament is intending it to be jurisdictional and, in every case, a defect or irregularity cannot be remedied.

Just because language of that sort is used, it does not follow that one would characterise it as substantive law. It can still be procedural just with Parliament giving a very clear direction about the importance that it thinks should relate to that procedure and it is undoubtedly important for the sorts of consequences that follow. But in this case, when one looks back at this case and knows that insolvency is not an issue, one can understand people’s minds perhaps not going right to this point. Nobody is arguing about insolvency of these companies. They are in debt to the extent of about $200 million. They had to go into their own arrangements for a director’s resolution, they had to. They could only do so on the basis that they were insolvent.

BRENNAN CJ: I think we appreciate that.

MR GRAY: If the Court pleases, for those reasons we say that Grant v Westpac is distinguishable and perhaps most importantly because of 467A.

If the Court pleases, if one was looking for a case that dealt with an equivalent of the section, it would be Testro’s Case we pick up in our outline of argument at page 3. In Testro’s Case (1965) VR 18, the Victorian legislation contained section 199 and, in particular, section 199 of the then Companies Act required the prior leave of the Court for a petition for the winding up of a company in respect of which an official manager had been appointed. It is a question whether that section applied to the petition by the Attorney-General and it was held that it did and leave had not been obtained and an order nunc pro tunc was appropriate. So we would say that it does represent, in principle, the same issue that is before the Court now that is concerned with ‑ ‑ ‑

KIRBY J: The language is not as strong. The language of the Act is not as strong.

MR GRAY: No. We would accept that and obviously there are grounds to distinguish it. On the other hand, in principle, it is a section that is close to the one in the case at bar and one, we would respectfully suggest, the Court could get some assistance from the reasoning of Justice Sholl. Essentially, his reasoning is from pages 32 to 35, and I will not stay to read that. He does rely on a litany of cases. Most of those are concerned with leave to proceed against a company in liquidation, and Justice Sholl draws on those cases over what he describes as a 70-year period and then proceeds to characterise this matter as a one‑off procedure and hence a defect in a regularity. In an appropriate case, then the discretion allowed for it to be the subject of a nunc pro tunc order.

As with the Full Court, we would invite that court to find assistance from that reasoning, but I do not need to go to it. The Court would be familiar with it and we simply adopt it as part of our argument. So they, in essence, are the submissions we put concerning the matter being one of procedure. At page 5 of the outline, paragraph 8, at the end of that particular section, we do put a proposition that there is an order of the superior court of record, the winding up order would stand until set aside, in effect. We do include in that paragraph the words “As an order of a superior Court of record which had jurisdiction to entertain the proceedings”. I think those words are unnecessary in the light of the remarks in Cameron v Cole, the High Court decision Mr Morcombe referred to. Cameron v Cole is footnoted on that page at 68 CLR and the reference at page 590 is in the judgment of Justice Rich. To like effect, Justice McTiernan at page 598 and Justice Williams at page 605, and Sir John Latham, whom my learned friend referred to, was in dissent and, essentially, he was in dissent in that case in that he took the view that the court below was not a superior court, it was an inferior court, so he was in dissent on that point. So his remark had to be read in that light and we would suggest that the Court is better assisted by the passages that we have invited attention to. There is a very good summary of all those passages - if I might just give the Court the reference - in the case of Starr v Trafalgar 8 ACLR 367, a decision of Justice Needham, at page 369, just as a point of convenient reference.

The power of the Full Court to deal with the slip rule process is section 28 of the Federal Court Act, the power that we rely on. That then is dealt with in some detail at paragraphs 9 and 10 of our outline, and I do not propose to add orally to that written submission. At paragraphs 11 to 13 we pick up sections 467(3)(b) and 467A and we suggest that they are an alternative way in which the court could have addressed the matter.

GAUDRON J: That the Full Court could have addressed the matter, but is not section 467A directed to the dismissal of proceedings?

MR GRAY: Yes. Essentially, my learned friend comes to that in saying that Justice O’Loughlin should have dismissed the ASCs application because it was incompetent being made by a party without locus. So that must be as a consequence of his position. If it is not to be dismissed, it should be acted upon.

GAUDRON J: Yes, but I am not too sure. You are suggesting that - this could only arise under your cross-appeal, can it not, to the Full Court?

MR GRAY: Yes, it can.

GAUDRON J: But it could only arise under the cross-appeal, I think.

MR GRAY: Yes, it can. It is now only raised in that way. Before Justice O’Loughlin nobody raised this point at all. It was simply passed without attention by anybody and the Full Court decided not to deal with the cross‑appeal because it took the view that it could use the procedural route. Paragraphs 14 through to 23 go really to the matters of general discretion, and in circumstances where Mr Morcombe’s client is saying that the court allows this appeal ‑ ‑ ‑

BRENNAN CJ: That is not really in issue, is it?

MR GRAY: It is not really an issue but, if the Court wished to have the background on discretion, it is set out there in detail and, again, I do not propose to stay with that. Can I then turn to the cross-appeal, if the Court pleases, on which we seek special leave and, of course, this is an alternate submission. We would say if one takes a step back from this whole process, the position is - and we accept the hypothesis that there was a substantive error of law that had occurred, then we would say it is plainly capable of being addressed by way of appeal.

We start with the proposition that had Justice O’Loughlin’s leave been sought, one could not seriously argue that he would not have granted leave because the necessary prerequisite of insolvence - a prima facie case of insolvency was undoubtedly made out. He made an order for winding up on that ground; a fortiori there must have been at the very least a prima facie case. So, plainly, if the point had been addressed, leave would have been granted. If it is a substantive error, in those circumstances, going to jurisdiction, even if the point was not taken below, then the Appeal Court can deal with it.

DAWSON J: So you appeal against his failure to make an order validly?

MR GRAY: Yes, we do, accepting that it was something that should have been drawn to his attention by the Commission and was not.

BRENNAN CJ: But how does one appeal against a failure to make an order that was not applied for?

MR GRAY: Because it is a matter that goes to the jurisdiction of the court and the Appeal Court is able to remedy that in circumstances where there has been a genuine oversight.

BRENNAN CJ: I do not understand that. I mean, if the problem is this: here is an order that is made that has to be set aside. It has to be set aside because no application was made for, and no order therefore was granted for, the giving of leave. But when it comes to the appeal, there is an appeal against the non-giving of leave because it was not applied for but it should have been given notwithstanding.

MR GRAY: Yes, indeed.

BRENNAN CJ: That sounds an extraordinary proposition to me.

MR GRAY: His Honour should not have proceeded to make the order he did without addressing leave.

BRENNAN CJ: That is right. He should not have proceeded to make the order that he did because no leave was there.

MR GRAY: That is so. So that is, we would say, if this is a substantive matter, that is an error on the face of what occurred. The Appeal Court has an ability to address that error, particularly in circumstances ‑ ‑ ‑

BRENNAN CJ: But the error is the making of the order of winding up. That is set right by setting aside the order for winding up. What else is there to do?

MR GRAY: Because, through oversight, his Honour did not address this particular point ‑ ‑ ‑

KIRBY J: But you did not tender the point. You can hardly blame the judge and come up on appeal from his orders if you do not ask for the substantive application. You are blaming the judge with your mistake.

MR GRAY: If one took the case of ‑ ‑ ‑

KIRBY J: He made no error. He simply dealt with the matter before him and overlooked a provision, but you did not ask him to deal with the ‑ ‑ ‑

MR GRAY: Your Honour, there is no attempt, as it were, to blame his Honour, that is not the point. We accept, as is very clear in the documents, that through oversight of the lawyers involved, the point was not taken before Justice O’Loughlin. We accept that but, at the same time, his Honour did proceed in error, no doubt in consequence of not having his attention drawn to that, but his Honour did make an error for that reason.

BRENNAN CJ: But the error that is remedied then on appeal is to set aside the order that he made, that is all.

MR GRAY: Yes, except the Appeal Court does have the ability to exercise the powers of the judge, what the judge would have done had the matter been drawn to his attention. If one takes the other situation of where a party who did not take a jurisdiction point, a point of law at the trial and wants to raise it on appeal, the cases are clear. If it goes to jurisdiction, absent some extraordinary circumstances, it can be raised, although it was not raised below.

BRENNAN CJ: Because there the court has done something which the court ought not to have done. It has exercised jurisdiction that it did not have.

MR GRAY: That is this case, if the Court pleases.

BRENNAN CJ: No, it is not. If one accepts the proposition that the court had jurisdiction but ought not to have made the order, then the order is set aside, that is all.

MR GRAY: But if one accepts the proposition that had the court addressed the leave question it would undoubtedly have granted leave in the order.....We put the submission that is an unusual matter. We accept that it is most unusual, but we see there is no reason why the Appeal Court, to do it justice in the particular circumstances, can have regard to that. Can I use another analogy? A plaintiff gets damages but fails to apply for interest, overlooks it, the lawyer has overlooked applying for interest. On an appeal, we would say the court would have the ability to address interest rather than saying to the plaintiff, “Your lawyer has made a mistake and, as a consequence”- - -

DAWSON J: Yes, but that is a situation where the court below had power to make such an order. Here, the court below did not have power on one view of it to make such an order and this Court, or any Appeal Court, can only make such an order as the court below could have made.

MR GRAY: If the Court pleases, it would follow from that that this is a substantive or jurisdictional matter. An appeal could not remedy it and we would respectfully submit that the Appeal Court’s powers are wide enough to address it in unusual circumstances. We would say the Appeal Court is not.....from dealing with it. We would say, in essence, through the reason it was not drawn to his Honour’s attention, he overlooked the point and made an order that should not have been made and, however one characterises it, he has made an erroneous step in that process, and that the Appeal Court has the ability to put itself in the position of the trial judge and take the correct step in an appropriate case.

In some cases, the Appeal Court could not do it because there would be matters of discretion to be gone into, so they would remit it back to the judge to deal with it afresh but, in this case, there is no doubt what he would have done. There is no doubt what the appropriate order is, and so the Appeal Court would make it and save the necessity for a further hearing before a trial judge.

TOOHEY J: You are really seeking an order by way of variation of the order made below, are you not, rather than anything else?

MR GRAY: Yes, that might be a safe way to put it.

TOOHEY J: I would not bank on it, but that is, in effect, what you are doing because you want to leave the order below extant but with, in effect, a variation, namely, that introduces any requirement for leave that may be necessary.

MR GRAY: If I could just use the case of Cameron as a loose analogy. In Cameron’s Case, the Court had annulled the sequestration order for the seaman concerned and the question was whether, having done that, another order could be made, and the High Court held that it could be.

BRENNAN CJ: Would you like to formulate the order that you are seeking?

MR GRAY: There would be two ways of handling it, if the Court pleases, two alternative ways. One would be to set aside the order of Justice O’Loughlin and, in lieu, remitting the matter. The Appeal Court deal with it itself because the facts are certain and the Appeal Court could grant leave and make the winding-up order. The other way would be to seek a variation nunc pro tunc. In other words, to seek a variation to grant leave and ‑ ‑ ‑

BRENNAN CJ: Just formulate the form of order.

MR GRAY: I will put it in these terms. It is really paragraph 27.2 of our outline. If the alternative, special leave be granted for the ASC to file and serve its notice of cross-appeal, allow the cross-appeal and vary the order of Justice O’Loughlin winding up the Group A companies in insolvency to include an express grant of leave.

BRENNAN CJ: How do you express the order that this Court should make to deal with the last part of the sentence?

KIRBY J: How could we expressly grant leave when we have not performed, and nor has anybody, the task of supervision and the consideration of the issues that are necessary by the law?

MR GRAY: If the Court pleases, it is always difficult to draft on one’s feet, but perhaps a better order would be that the ‑ ‑ ‑

BRENNAN CJ: Perhaps the difficulty is conceptual rather than positional.

MR GRAY: I would be happy, if I could have a moment, just to formulate that and perhaps give that to the Court later on, after Mr Bennett and Mr Blue have put their submissions?

BRENNAN CJ: Certainly, yes.

MR GRAY: If the Court pleases, they are the submissions we put in opposition to the appeal in this Court of the application for the cross-appeal.

BRENNAN CJ: Mr Bennett.

MR BENNETT: If your Honours please. I hand up the outline.

DAWSON J: We seem to have an outline, Mr Bennett.

MR BENNETT: Your Honours, may I start by just taking your Honours to section 459P itself, because there has been an assumption in the construction of that section which we would submit is erroneous. If your Honours go to subsection (2), your Honours see that provides that:

An application by any of the following.....may only be made with the leave of the Court:

What it does not say is “with the prior leave of the Court” and, really, that is a very short answer to the whole of the appellants’ case. Leave of the court has been given. It could have been given by the trial judge. It was in fact given by the Full Court.....what the trial judge was able to do and, leave having been given, the application was retrospectively brought with leave.

KIRBY J: The difficulty is subsection (5), is it not?

MR BENNETT: Subsection (5) does not prevent that. It is permitted by this section because leave was ultimately granted.

KIRBY J: Yes, but is not the scheme of it, is not the suggestion of (5) and its imperative language, that you have to get it before you are permitted - that is very strong language - to apply and the “apply” is normally the time you file your document.

MR BENNETT: Your Honour, let me accept for the moment, although we will have something to say about this later, that “apply” means when you file the document. So a person cannot do that except as permitted by this section, but it has been permitted by this section because, after the document was filed, permission was given, and so long as one can give the permission afterwards, then the section is satisfied. Your Honours, it is really the assumption that the word “prior” has to be there which has caused the problem which arises in this case.

We would submit that when one looks at the authorities on similar words elsewhere in this Act and its predecessor, it is quite clear that when the Act talks about things not being done unless leave is given, leave can be given later and that validates them or at least satisfies the requirement more accurately.

BRENNAN CJ: What happens if leave is not given later but the order has been made?

MR BENNETT: Then the order, your Honour, was made erroneously and the order is a valid order of the court and, like any order of a superior court, it is valid but it is tainted with error and if an appeal is brought out of time or in time and leave is not granted by an appellate court which has power to make the order that should have been made, then the appeal will be allowed and the order set aside, but the ‑ ‑ ‑

KIRBY J: Is not the difficulty with your doctrine or theory of the section that you then undermine the whole point of having a leave barrier because it is supposed to be there at the gateway and your view is, “Well, it doesn’t really matter. You can apply any old time for it”, whereas that is not what Parliament seems to have been getting at.

MR BENNETT: Your Honour, what was intended was, we would submit, not that one cannot present the petition unless one previously has leave but, rather, that the process should not occur unless at some point at which it can validly be done leave is given. The question is: at what point can it validly be done?

KIRBY J: But if it is done later, as the Chief Justice’s question suggested, the problem would be for a judicial officer that instead of focusing on the question of whether leave should be given at the gateway, the judicial officer would be necessarily concerned about all of the inconvenience of undoing that which has gone ahead without the provision of leave, which is not the scheme of the section.

MR BENNETT: Your Honour, on the hypothesis, all that has gone ahead is the filing of an application, the insertion of an advertisement and the filing of a few affidavits. That is all that has happened between the filing of the document and the oral application in court. That is not likely to influence a judicial officer in any erroneous way. Your Honours, the point is illustrated, if one looks at it, before I come to the other clues to construction in the other sections and the other cases, most vividly by the situation which occurs from time to time where a very urgent application has to be made.

Suppose funds are about to be remitted out of the country that afternoon, or within an hour or two, and one needs to go and see a judge in chambers and obtain ex parte orders or orders on exceptionally short notice. One needs, for example, a provisional liquidator ex parte. Now, to say one has to apply for leave, presumably on notice, gets an order for leave, then come back and make one’s ex parte application, would totally frustrate the whole procedure and it would be totally impractical. Suppose one has to do it in the middle of the night when a judge is ‑ ‑ ‑

GAUDRON J: On the application of the Commission? I mean, this is what we are talking about, Mr Bennett, the application of the Commission. Clearly, the Act postulates that the Commission is in a different position from a creditor.

MR BENNETT: Yes, the Commission may be the one who finds out about the intended transfer of funds, your Honour, by a number of routes, its various powers. Suppose it is the middle of the night. The judge has to be available 24 hours a day, but the registry is not. So the formalities concerned with taking out an order for leave might well be unavailable. We would submit that the ‑ ‑ ‑

BRENNAN CJ: Why do you speak about “taking out an order for leave” and say this is some major exercise? Why would not one apply: (a) for leave; (b) for an order?

MR BENNETT: Your Honour, I suppose theoretically one could, although that would be a fairly barren sort of formality in the example being given, but it ‑ ‑ ‑

BRENNAN CJ: I would have thought it would have overcome any problems that exist. In other words, you demonstrate to the judge, first of all, the interest or status that the ASC has when it is applying to become involved in the administration of this company’s affairs and, once the judge is satisfied of that, then the judge will make such order as might be appropriate on the merits.

MR BENNETT: That presupposes, your Honour, that the order for leave is made ex parte.

BRENNAN CJ: That is right.

MR BENNETT: But the order for leave, your Honour, is something which is a final order. Now, one can make interlocutory orders ex parte, like provisional liquidators. The real problem is with making final orders ex parte. So the judge is asked to make a final order ex parte so that he can then proceed with the interlocutory application that one wishes to make. It is a very unnatural and artificial way of doing it. We would submit it is far more natural to say, “Look, this Act has been construed for years that one can get leave nunc pro tunc”, and that is what the legislature did when it enacted this section. It took all that into account. If the officious bystander had said to the legislature, “Ah, but what about the urgent cases?”, they would have got the answer, “Oh, but you can always get leave nunc pro tunc, just like you can under the other sections”, and that, if I may, I will now come to. The section which has been traditionally ‑ ‑ ‑

BRENNAN CJ: It seems to come as a surprise to Mr Harmer who is not altogether unversed in these matters.

MR BENNETT: I am sorry, your Honour?

BRENNAN CJ: It would have come as something of a surprise to Mr Harmer, whose report we have been referred to, and who is not unacquainted with the problems of bankruptcy and company administration.

MR BENNETT: The report is neutral on the subject. The report does not address the specific problem of this case. It does not even really address the reasons for the inclusion of the Commission in 459P(2) if your Honour suggests that it is extending the powers of the Commission rather than reducing it, the powers previously having been merely to intervene.

BRENNAN CJ: I was looking at page 70 of the report in paragraph 142 under tab 5.

MR BENNETT: Mine do not seem to be numbered, I am sorry. This is tab 5 of the appellants’ ‑ ‑ ‑

BRENNAN CJ: Supplementary list of authorities of the appellants.

GAUDRON J: On mine it is behind tab 7.

KIRBY J: It is 70 of the actual report, the ALRC report.

BRENNAN CJ: It seems that they may not always be tabulated in the same way.

MR BENNETT: Yes. I have been handed it, your Honour.

BRENNAN CJ: There is a specific proposal here that these particular categories should have a capacity to apply and then, at the bottom, after listing the various categories, it is:

However, despite the limitation, the circumstances under which the NCSC -

which, I take it, is the forerunner of the ASC -

may apply will be broader than at present -

and so forth.

Leave of the court in such cases should only be granted if the court is satisfied -

et cetera. Now, does not that indicate that here is a specific proposal - and perhaps it does not govern the language, of course - that before the process should be put in train of advertisements and the rest which produce such disastrous consequences for a corporation, that the court has to be satisfied of this matter in order to allow these parties to put that process in train?

MR BENNETT: My submission is, your Honour, that the whole of that paragraph is equally consistent with the possibility of leave being granted in the hearing with the court taking all those steps, otherwise dismissing the petition. There is a discussion in the judgment of Mr Justice Young to which I will take your Honours of what he calls the “rogue petition”, the petition that simply should not be presented, and how that can be dealt with in a way which ameliorates consequences which might otherwise flow. Your Honour, we would submit that nothing in that paragraph requires that the leave be prior to the filing of the document.

BRENNAN CJ: But why would leave be required on that hypothesis, except on the footing that there is to be a protection of the corporation against the damaging process of issuing a petition?

MR BENNETT: Because, your Honour, it is protection against the more damaging effects of an order. It is saying that if the only person who is applying is the Commission and no creditor is seeking it and no one else is seeking it, then the court should be much more reluctant to make an order and should require to be satisfied that it is a case for leave.

Your Honours, if one takes one analogy, this Court, from time to time, makes an order adjourning an application for special leave to the hearing of the appeal and hearing the appeal and the application together. That has a legitimate purpose. That does not frustrate the requirement of special leave, and there are cases where that is a desirable and sensible course, and that is why the Court does it, but in those cases, the Court is quite able to consider at the hearing, even in a singular argument, whether or not it should grant leave and, if so, whether it should allow or dismiss the appeal. Your Honours, this is, we would submit, provision in the same sort of category.

BRENNAN CJ: Let me put this question to you, Mr Bennett. If one of the parties in subsection (2) made an application to the court without leave and were about to advertise it, would an injunction go to prevent the advertisement?

MR BENNETT: The injunction would not go as of right, your Honour, in my submission. The court would exercise its discretion and one thing it might well say is, “As a matter of procedural convenience in this case, we will require you to argue leave at this stage, and if we decide it is an appropriate case for leave, grant leave on the application you’ve made and you can then proceed; if not, dismiss it at this stage”. But it would not go to the court’s jurisdiction, nor would it be a matter which would require as of right the grant of an injunction.

May I just take your Honours to the other section. The other section is now section 471B, the section, unlike the one we are dealing with, with a very long history. Your Honours will see that that section provides:

While a company is being wound up in insolvency or by the Court or a provisional liquidator of a company is acting, a person cannot -

and “cannot” is one of the words which appears in 459P -

begin or proceed with -

So it draws the distinction between “begin or proceed with” -

(a) a proceeding in a court against the company.....except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

Yet even in relation to that section, the court has held that you can get leave nunc pro tunc.

There may be a question as to whether those cases continue to apply in the face of the words “begin or proceed with” but, assuming that those words were intended to overrule those cases, they are express words which have that effect which do not appear in 459P. The cases which dealt with that section we have referred to in paragraph 2 of the outline, and perhaps the easiest one to refer to is Sydney Formworks (1965) NSWLR 646 - that is the Butterworth series.

KIRBY J: I do not think there is any real doubt that the predecessor sections had a long history of construction in this way, but what is suggested is that the section was strengthened in this tripartite way and that, therefore, the earlier decisions do not really help very much.

MR BENNETT: Your Honour, the tripartite way does not insert the simple words which appear in 471B of “begin or proceed with”. If that was the intention, why did they not say so? Those words may make it very clear that one has to do it at an appropriate time. What they do not make clear is what that appropriate time is. There are various other sections - we have listed them in paragraph 4 - which use the words “begin or proceed with”. There are five of them, most of them in this area of the Act, and all of those talk about beginning or proceeding with, but nothing to that effect in 459P.

Indeed, 459P almost seems to draw a distinction at one stage between “make application” and “apply”. This is, in a sense, an alternative argument, but your Honours will see that there are sections which refer to the beginning. It says:

Any one or more of the following may apply -

459P(2) says:

An application by any of the following.....may only be made with the leave of the Court -

459P(5) goes back to:

Except as permitted by this section, a person cannot apply -

Now, the word “apply” on its own is quite appropriate to what takes place in court where someone gets up and says, “I apply for an order on the notice of motion or summons or petition already filed”. The other sections which talk about “making application” are dealing with making application in other contexts. For example, my learned friend referred to a case under section 459R and that refers to an application for a company to be wound up being determined within six months after it is made.

Clearly there, that is talking about the filing of the document, and my friend referred to cases indicating that. That is in the language of making an application and it may well be that there was a distinction intended in the word “apply” but, whether or not that is so, the primary submission is that nothing in 459P requires one to depart from the line of cases which have said that, “Where the Act says you can’t bring a proceeding against a company in liquidation without the leave of the court”, the courts have said, “One can do it nunc pro tunc”. If such a section had added, “except as permitted by this section, a person cannot proceed against a company in liquidation or bring a proceeding against a company in liquidation”, that would make no difference, because it is in accordance with the section if the leave is eventually granted. There is simply no requirement of policy which goes against that.

Now, my friend referred to the use of the word “only” and to David Grant, but that, of course, was dealing with a Code concerning statutory demands under 459Q. The statutory demands procedure lays down, like the bankruptcy notice procedure, a specific time limit after which a legal consequence follows. One can well understand in that context saying that, once that legal consequence has followed, one ought not to be able to reverse it by taking belatedly the step that would have prevented it occurring. It is rather like exercising an option out of time. The very nature of the option, the nature of the type of legal concept one is considering, makes it impossible that it can take place after the event.

In a temporal provision of that sort where a time is mandatory, one can well understand that after the event it is simply too late. But that is a totally different sort of case to the present one where, for the reasons we have given, there is no real reason why the leave cannot be given at a later stage.

GAUDRON J: To say that it can be given at a later stage, presumably contemporaneously with the pronouncement of the final order, is not to say that an appeal court can do the same thing.

MR BENNETT: That is a different point, your Honour. Our answer to that is very simply that the Appeal Court can do anything the trial judge ought to have done, and the mere fact that no application is made is not a reason why the trial judge was unable to make the appropriate order, and had it occurred to him or to anyone else, it would have been made. It is not a prerequisite ‑ ‑ ‑

GAUDRON J: It is a discretionary matter, however, as well.

MR BENNETT: Yes, and the Full Court ‑ ‑ ‑

GAUDRON J: ‑ ‑ ‑ and it is by no means an automatic thing; it cannot be.

MR BENNETT: No, your Honour. But for this Court to allow an appeal ‑ if your Honours are with me on the jurisdiction question, and the question then is whether the Full Court should have made the order granting leave, that becomes an appeal on discretionary grounds, which involves all the House v The King considerations and, indeed, it would involve a question of whether special leave should be revoked because there would be a real question of whether this Court would have granted leave solely to deal with an exercise of discretion.

So, if your Honours are with me on jurisdiction, in relation to the Full Court’s order granting leave, one must ask two questions: did it have jurisdiction to do it at that that stage and, if so, should it have done so? On the first question, we submit it had jurisdiction because it is able to make any order the trial judge could have made and it is not a prerequisite of the power to make the order that someone apply for it. Courts frequently make orders of that sort without anyone formally asking ‑ ‑ ‑

GAUDRON J: I do not know. It seems to me a very large step to say that it is a discretionary order where there are matters to be taken into account before an order is made for winding up, that it can be done afterwards. I mean, the horse has bolted, in a sense. It does not even look at though the discretionary factors are being properly exercised.

MR BENNETT: Your Honour, may I answer that this way. If one reads through his Honour’s judgment and looks at the facts of the matters which, of course, are not otherwise relevant to this appeal, and one goes through those of them which came to the Full Court ‑ because the point on which special leave was granted was only one of a large number of points dealt with in the Full Court ‑ if one reads the balance of those judgments and one then says, “What would one say on an application for leave?”, the application for leave becomes overwhelmingly one that one could almost not refute ‑ could.....refuse to grant.

GAUDRON J: Yes, but you are not focusing on the question. It seems to me that there is a real difference between giving leave contemporaneously with the making of an order for winding up, and the granting of leave nunc pro tunc after the order has been made. It is the impossibility of exercising the discretion as directed by the Act which suggests it cannot be done after the order for winding up has in fact been made.

MR BENNETT: The primary fact when exercising the discretion is referred to in 459P(3), and that is insolvency. There is no issue about insolvency here. The remaining issues are urgency, convenience, whether it is an appropriate case that the Commission should do it to get the benefit of a longer relation back period; matters of that sort. They are discretionary considerations, which, when one looks at the trial judge’s judgment, the very reasons that he made the order on the application of the Commission rather that the Commonwealth, were reasons which were discretionary, and were reasons which would have been equally cogent on the questions which would need to be asked.

May I just say this, your Honours, his Honour could have made orders on my client’s application if he had done one thing. If he had said ‑ and he probably could anyhow ‑ he set aside the deeds ‑ assuming that the orders were made immediately after, one second after the setting aside of the deeds, there was power to make the orders on our application. Certain matters may have followed in relation to which relation that period applied, as to whether the orders were made before or after the setting aside of the deed, and for that reason his Honour preferred to make it ‑ ‑ ‑

GAUDRON J: Yes, but that really points up what I have been putting to you. The discretion then becomes should the winding up order be confirmed? It is transmuted by the passage of time and your argument in this last regard emphasises that.

MR BENNETT: No, your Honour. The argument is intended to emphasise that the reasons for which the trial judge did what he did are exactly the same reasons for which the discretion would have been exercised to grant leave. That is the point I am making, and one cannot imagine any factor contrary to that, nor have my learned friends at any stage suggested one, which might have precluded that. It is clear that the failure to make it by his Honour was the result of the fact that no one adverted to the terms of 459P properly, at the hearing. That was a slip on the part of all parties, if one likes. There can be no doubt what would have happened if they had adverted to it. His Honour would have granted leave, and the considerations which would have been addressed to his Honour would be all those which appear in his judgment and which were the reasons for making the order on the Commission’s application rather than ours. That was apparent to the Full Court, which then exercised its discretion

Now, if your Honours are with me on the first two propositions, that the trial court has jurisdiction to grant leave nunc pro tunc and that the Full Court has power or jurisdiction to make that order that the trial judge could have made without it being applied for, the discretionary considerations are then very light, and to be able to overcome them and to get over the House v The King problems in relation to those discretionary considerations, in my respectful submission would put an impossible onus on my learned friend.

TOOHEY J: There is an aspect of this that you have not addressed, and I do not know whether it is of any importance but, when you speak of a nunc pro tunc order, are you embracing a situation where the application is made after the order for winding up itself was made or whether it suddenly occurs to the moving party that leave has not been granted?

MR BENNETT: No, your Honour. Nunc pro tunc normally relates to making the application at the time when the judge is about to make the order, or in the course of argument before the judge.

TOOHEY J: Yes, I appreciate that but does it go any further than that? You see, in response to Justice Gaudron’s question, you are saying the Full Court has the power to do what the primary judge could have done. The primary judge could have made an order granting leave had he been asked ‑ ‑ ‑

MR BENNETT: Yes; even if not asked.

TOOHEY J: - - - or even if not asked. But, does that power, on your argument, extend to an application for leave made after the order for winding up? It might only be a matter of five minutes or ‑ let us take the case where the order has been extracted.

MR BENNETT: Your Honour, if it is made within the time covered by the slip rule, clearly it can be done afterwards. If it is made after the period of the slip rule, there then arises the question whether the cases, on correction of judgments, would justify making it, and the answer is, probably not. But then, one has a different area of jurisprudence, and that is the powers of an appellate court to make such order as the judge would have made and one gets it that way.

We would put the granting of leave by the Full Court not as its granting leave nunc pro tunc but, rather, it saying, “This is an order the trial judge should have made and we substitute this for his Honour’s order. So, it, in effect, becomes his Honour’s order.

BRENNAN CJ: But, on the construction that you are putting on the section, there is no question of nunc pro tunc, is there?

MR BENNETT: That is so, your Honour. If your Honour accepts my ‑ ‑ ‑

BRENNAN CJ: It is only a question of nunc.

MR BENNETT: That is so, your Honour. If your Honours accept my ‑ ‑ ‑

BRENNAN CJ: Well, anytime by anybody.

MR BENNETT: Your Honour, the submissions in the alternative - there is quite a number in the alternative - if your Honours accept that proposition, I could have sat down after one minute but your Honours did not invite me to do so and I assumed I ought to put the other arguments. But certainly, your Honour, if your Honours accept that argument, the rest of it is unnecessary because the order is not nunc pro tunc, it is simply an order the Court has power to make. I was about to take your Honours to Torsir v Maxgrow ‑ ‑ ‑

BRENNAN CJ: How much longer do you expect to be, Mr Bennett?

MR BENNETT: I would think 10 to 15 minutes, your Honour.

BRENNAN CJ: How long will you be, Mr Blue?

MR BLUE: I will be approximately three minutes, your Honour.

BRENNAN CJ: Do you expect to be long in reply, Mr Morcombe?

MR MORCOMBE: No, your Honour, less than five.

MR BENNETT: I was going to add I would probably be shorter in the morning than I would be tonight where I had been able to refine the balance of what I had to say.

BRENNAN CJ: On that promise, Mr Bennett, we will adjourn until 10 o’clock tomorrow.

AT 4.40 PM THAT MATTER WAS ADJOURNED
UNTIL TUESDAY, 13 AUGUST 1996

[1996] HCATrans 234

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