Energy Equity Corp Ltd v Sinedie Pty Ltd

[2003] HCATrans 696

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P7 of 2002

B e t w e e n -

ENERGY EQUITY CORPORATION LTD

Applicant

and

SINEDIE PTY LTD

Respondent

Application for special leave to appeal

KIRBY J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON FRIDAY, 9 MAY 2003, AT 12.12 PM

Copyright in the High Court of Australia

MR M.J. McCUSKER, QC:   May it please the Court, I appear with my learned friend, MR N.D.C. DILLON, for the applicant.  (instructed by Clayton Utz)

MR D.M. STONE:   May it please the Court, I appear with MR T.J. CARMADY, for the respondent.  (instructed by Williams & Hughes)

KIRBY J:   Yes, Mr McCusker.

MR McCUSKER:   Your Honours, this is an application for special leave on one short point in respect of ‑ ‑ ‑

KIRBY J:   Yes, we saw you abandoned the other point.

MR McCUSKER:   Yes.

KIRBY J:   That was very wise of you.

MR McCUSKER:   Thank you, your Honour.  It is a short point ‑ ‑ ‑

KIRBY J:   I could see your deft, strategic hand at work here.  So we are down to the issue which the respondent concedes is a matter of public importance.

MR McCUSKER:   Of public importance, yes, your Honour.

KIRBY J:   But they say it may of public importance, but there is now a common rule throughout Australia, it is clear and everyone knows it and that has its own advantage and it reflects what the legislature has said.

MR McCUSKER:   Your Honour, that may on its face appear to be so, but apart from the Full Court of the Supreme Court of Western Australia, there have only been a couple of decisions in other courts which adopt the same approach.  The approach that was taken by this Court to the interpretation of section 459G, of course, as your Honours know, in Grant’s Case was that in order to enliven the jurisdiction of the Court to consider setting aside a notice of demand, it was necessary that there be an application made with supporting affidavit within a 21‑day period from the time of the service of the notice of demand.  That, it was recognised by the Court, could result in a harsh result in some circumstances but, nevertheless, that was the view taken of the effect of the legislation.

Since then, there have been decisions of State courts dealing with the question of what constitutes a supporting affidavit.  In some cases it has been held that the supposed supporting affidavit is not on its face sufficient to constitute a supporting affidavit as, for example, where there is a mere assertion that the debt is not owed without any elaboration at all.  There has been some debate as to how far the deponent must go in order to establish what is a supporting affidavit.

In this case, however, there is no such issue.  There is no contention that there was no supporting affidavit in order to enliven the Court’s jurisdiction.  The contention is simply confined to the question of whether, having enlivened the Court’s jurisdiction, the court which deals with the matter in order to determine whether there is a genuine dispute or an offsetting claim can consider, apart from the material in the original affidavit, any further material which may be filed in further affidavits after the expiry of the 21 days.  That, in our submission, should be left to the discretion of the court that ultimately determines the question of whether or not to set aside the notice of demand.  In that regard, a case of Missay is referred to in the footnotes to paragraph 6 of the respondent’s outline.

KIRBY J:   They were very small footnotes, Mr McCusker.  They were very small footnotes.  I had to get out my magnifying glass.

MR McCUSKER:   That is the respondent’s footnotes, your Honour, but I agree.

KIRBY J:   I will not take it out on you then.

MR McCUSKER:   Wait until we get to ours, your Honour, there are some small footnotes there, I am afraid.  But in this one, there is a footnote dealing with three cases.  One is Meadowfield, an unreported decision of the Full Court of the Supreme Court of Western Australia, where it was held that a genuine dispute was established by the original affidavit and the applicant was therefore entitled to file a further affidavit which supplemented the original affidavit.  That was not on this issue at all because the issue in this case that we seek special leave on is whether further affidavits may be filed, not merely supplementing the original affidavit on the points raised in the original affidavit, but further affidavits which deal with additional grounds for setting aside the application.

The next case on that footnoted list is Missay, a decision of Justice Mandie, a single judge in the Supreme Court of Victoria, where it was held that it was not open to the applicant to run one argument before the master and then, on appeal from the master, file further affidavits raising quite new issues.  One can understand the reasoning there.  It was far too late to file affidavits which sought to raise further issues.  In that case, that was the prime reason for the decision but, as a second ground, it was said by Justice Mandie that, in any event, the view taken was by reason of, I think, the decision in Grant’s Case, a further ground, a new ground could not be relied upon in any event after the expiry of the 21 days.

D & S, which is No 4 on our list – that is a single judge, Justice Perry, in the Supreme Court of South Australia – is a case in which it was held that no account could be taken by the court of a further affidavit filed out of time and raising a new ground.  But in that case, it was held that the original affidavit was not a supporting affidavit, so the jurisdiction was not enlivened.  In going back to Grant’s Case, Grant’s Case deferred to the ‑ ‑ ‑

KIRBY J:   Did you pass over Brentwood Terrace, Justice Lee?

MR McCUSKER:   I have passed ‑ ‑ ‑

KIRBY J:   That is between Missay and D & S.

MR McCUSKER:   I will come back to it, if I may, your Honour.  What I seek to say is that there is no decision of any Full Court, apart from the Full Court of the Supreme Court of Western Australia, dealing directly with this issue and certainly the issue has not been fully dealt with by other courts which have essentially followed the line which emanates, so they say, from what is implicit in the decision of Grant’s Case.  Now, your Honour, in Grant’s Case ‑ ‑ ‑

KIRBY J:   Does that not all go to show, as seems to be common experience in other areas, that you are going to get factual disputes in the application of a law such as this?  Is the affidavit in?  Does it reveal sufficiently the cause of action?  Is there enough in it?  Is there something new in the new affidavit?  And so on, or has there been an interlocutory application that in some way affects the affidavits?  I mean, there is a myriad of circumstances that can come up and ‑ ‑ ‑

MR McCUSKER:   Certainly, your Honour, but the short point here is crystallised in this way.  Here there was an application made within time, so the jurisdiction was enlivened, but the applicant sought to file a further affidavit, the problem having been, as is often the case, that there has been a change in management, so there is some difficulty in finding out what was going on in the company, a further affidavit after the 21 days which raised an entirely new issue and which was sought to be determined on the application to set aside the notice of demand. 

In Grant’s Case, your Honour, reference was made to the explanatory memorandum which gave rise to the new Part 4.5 in the Corporations Law.  An excerpt from that memorandum appears as No 15 in the bundle of authorities.  If I could take your Honours to that ‑ ‑ ‑

KIRBY J:   I thought there was an excerpt in the written submissions somewhere.

MR McCUSKER:   There is also an excerpt in the written submissions, your Honour, but it is more fully set out in, as I say, tab 15 of the bundle.

KIRBY J:   Yes.

MR McCUSKER:   The explanatory memorandum refers to the Harmer Report recommendations at paragraph 685 and noted, as the Harmer Report said:

that the existing, largely unregulated, procedure in relation to notices of demand too often produces disputes about the debt at the hearing of a winding up application.  The Report further noted that companies presently often need to bring injunction proceedings where a debt claimed in a demand is disputed.  The Report took the view that the legislation should specifically provide for the determination of disputed debt issues and other disputes in respect of a statutory demand.

KIRBY J:   Now, that is against you, is it not?

MR McCUSKER:   We say it is for us, your Honour, in this way, that if that ‑ ‑ ‑

KIRBY J:   But how can you turn water into wine?  It just seems to be dead against you.  It is ‑ ‑ ‑

MR McCUSKER:   We approach it this way, your Honour.  Suppose a company receives a notice of demand and puts in an application to set aside the notice with a supporting affidavit and therefore enlivens the court’s jurisdiction.  It then discovers well before the hearing date set for determination of the setting aside of the notice and with no prejudice at all that could be occasioned to the respondent a further basis upon which the notice should be set aside.  It is, in our submission, desirable that the entire question as between the parties of whether or not there is a disputed debt or an offsetting claim should be determined at that hearing, subject always to the discretion of the court that deals with the matter now that its jurisdiction is enlivened, subject to the discretion as to whether or not it is too late and in some way prejudicial.

KIRBY J:   I can understand that and it may be that it is desirable, but the question is, is it consistent with what the legislature enacted against the background of paragraph 685?  I mean, the present rule is harsh, but at least it is relatively clear.

MR McCUSKER:   Well, it is not clear, with respect, your Honour, because, having said how you must enliven the court’s jurisdiction to deal with the application to set aside, it does not say what the court may take into account on the hearing of the application.  It is totally silent on that as, indeed, it is on the question of what the contents of the affidavit must be, but that is not an issue here.  All we say is that once the jurisdiction is enlivened, there is no good reason in policy and certainly nothing to be found in the statute or the report of Mr Harmer which would suggest that the court should not be able at its discretion to admit further evidence for the purpose of, as paragraph 688 says, resolving:

disputes involving statutory demands, and to do so on the basis of the commercial justice of the matter –

Now, your Honours, going back to what Mr Harmer ‑ ‑ ‑

KIRBY J:   Mr McCusker, I was a solicitor for seven years and I would have thought there are ways to deal with this problem.  I mean, the whole point of this procedure is to get things moving quickly.  You should get the parties in, you should get all possibilities canvassed, you should file an affidavit which as far as possible foreshadows all avenues and, if you do that, one would think that normally a court is going to protect you.  It is the notion of coming back again for a second bite of the cherry that spins these things out.  That is what the statute is against.

MR McCUSKER:   Your Honour, let us suppose that we have got the notice of demand, an application to set aside with a supporting affidavit, so enlivening the court’s jurisdiction.  Let us suppose that a few days later the company, which is a large public company in the process of undergoing management change, discovers an entirely new basis on which the notice of demand ought to be challenged.  Surely it is consistent with the reasoning in the Harmer Report that that should be dealt with at the hearing.  There is no prejudice and there is no delay involved in that occurring.

To take the other view would mean that we are forced back in the position where, in respect of that claim which is discovered, the company would be obliged to take the old route of seeking an injunction in order to prevent the notice of demand being acted upon and so leading to liquidation proceedings.

KIRBY J:   Now, what is your textual argument?  I mean, I would like to see how you ground your flexibility in the text of the statute of the Corporations Act.

MR McCUSKER:   In terms of the Part 5.4 itself, your Honour?

KIRBY J:   Yes.  It is uncomfortable but ultimately we have to construe the section.

MR McCUSKER:   Yes.

KIRBY J:   I would like to see how you can get what appear to be inflexible words giving birth to a degree of flexibility.  Now, how do you do it by the words?

MR McCUSKER:   We do it in this way, your Honour, section  ‑ ‑ ‑

KIRBY J:   Where do we find the section?

MR McCUSKER:   Section 459G says no more than – 459G(3) says:

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

(a)  an affidavit supporting the application is filed ‑

KIRBY J:   Now, “only”.

MR McCUSKER:   Yes, “only if”.

KIRBY J:   We had a case like this a week or so ago and – it was a Western Australian case too, I think – the word “only” was missing.  It was the workers’ compensation – the abolition in Western Australia of pursuing claims at common law against your employer.  The word “only” was missing from the statute and that was used as a basis to give it a flexible interpretation.  Now, you have an “only” here.

MR McCUSKER:   We accept, your Honour, that it is inflexible so far as the time limit for commencing the application is concerned and with that application, there must be a supporting affidavit.  We have achieved that.  We say that from that point on the Part 5 point ‑ ‑ ‑

KIRBY J:   But the purpose of the statute is going to be destroyed if you can just file an affidavit any old time.  I mean, that is obviously not what the legislature was getting at.  You walk camels through the statute if you can do that.

MR McCUSKER:   With respect, no, because “any old time” would not be open in that if it were left to the court’s discretion, which it has generally and also under the Corporations Law itself elsewhere, then if it were left to the court’s discretion, it would not be a question of filing at any old time, but only if the court considered that it would be consistent with the intention of the legislature to allow the affidavit to be filed, that is, that there would not be any hold-ups, there would not be any delays and there would not be any prejudice to the respondent to allow a further affidavit to be filed. 

So it could not be filed, for example, on the door of the court just before the hearing.  But let us suppose it is filed on the 22^nd day, a day after the elapse.  What is the harm?  How is it in any way contrary to the policy behind the Harmer recommendations to allow that ‑ ‑ ‑

KIRBY J:   The answer to that is because if you allow a day, you allow a month, you allow two months, you allow seven months in particular circumstances and you allow the parties to come to courts and stretch it out by their applications and their interlocutory arguments about whether they should get in the door or not in the door.  That is the mischief to which the legislature by composing this section appears to have addressed itself.

MR McCUSKER:   However, that mischief is partly already there, your Honour, if it be perceived as mischief, in that once the application is made with a supporting affidavit, there may well be interlocutory applications, as there was in this case, for the purpose of getting directions as to the way in which the matter is to be dealt with.  There will be undoubtedly be in most cases further affidavits from the applicant and there may well be further affidavits which are permitted within the authorities as they presently stand, provided ‑ ‑ ‑

KIRBY J:   Is not the answer to this drawing on an area that I knew well once, the sort of ambit-type claims?  You make your claim as far as you can truthfully on your affidavit and then you have thrown the blanket out if you then bring your case within that.  Is that not the practical solution?

MR McCUSKER:   With respect, no, because the authorities dealing with the contents of a supporting affidavit make it clear that merely throwing out the blanket is not enough.  For example, to say, “I believe that there is an offsetting claim which exceeds the amount of the debt” ‑ ‑ ‑

KIRBY J:   No, I am not talking about that, but you have the clients in, you have told them this has to be done very urgently, you then spell out as far as you can the detail of every possible claim that you may have.  That seems to be the purpose of 459G.

MR McCUSKER:   But what if the case were, for example, the managing director of a company who has within his knowledge the entire facts who is

unavailable or has left and there is a new managing director?  There was a change of management here which, of course, can happen from time to time and there is an entirely new situation within the company.  It will take time, quite often well beyond the 21 days, in order to determine fully what the situation is as between the company and the alleged creditor.  That is the problem and there is no reason ‑ ‑ ‑

KIRBY J:   Yes, I can see the problem.

MR McCUSKER:   Yes, thank you, your Honour.

KIRBY J:   That is not the problem.  The problem is the language of 459G.

MR McCUSKER:   With respect, we say we have passed that hurdle.  That sets up a hurdle as to when and how you must make the application.  Once that is passed, there is ‑ ‑ ‑

KIRBY J:   But it is a multiple hurdle.  It is not just getting an application in and any old affidavit.  It is clear that it has to be supporting the application.

MR McCUSKER:   Yes, but suppose it does support the application as here ‑ there is no question about the jurisdiction not being enlivened – why should it not then be open to the court at its discretion to permit further affidavits which raise new matters?  Obviously, as a matter of discretion, that cannot go on forever and you would have to explain why they were not raised in the initial originating affidavit.  But if we overcome that hurdle, then, consistent with the recommendations of the Harmer Report, all of the disputed debt issues could be dealt with on the hearing of the application to set aside the notice, rather than leaving some matters in relation to the dispute to go back to the old way, which was said to be unsatisfactory, of dealing with it by issue of a writ and the claim for an injunction and all the problems attendant on that.  Your Honours, they are our submissions in support of the application.

KIRBY J:   Yes, thank you very much, Mr McCusker.  The Court will not need your assistance, Mr Stone.

MR STONE:   If the Court pleases.

KIRBY J:   As presented, the special leave point was prudently confined by the applicant to one.  This was the meaning and intended operation of section 459G of the Corporations Act.  That section provides for the setting aside of statutory demands made on corporations pursuant to section 459E.  The sections have been adopted in the law of all Australian States and Territories.  Correctly, the respondent conceded the public importance of the point.  Any determination of it by this Court would have operation throughout the Commonwealth.  Obviously the issue raised is potentially of large practical importance to the legal profession and the corporate and financial community.

There is an argument of inconvenience in the present application of section 495G which Mr McCusker for the applicant has made good, at least in some conceivable circumstances.  In complex transactions it will sometimes be difficult for a corporation within the 21‑day period to be in a position to support an offsetting claim following the service of the statutory demand and by an affidavit filed with the Court within that time dealing with that claim.  These and other points were, if I can say so, very well made for the applicant today.

On the other hand, given the language of section 459G, we are not convinced that there are reasonable prospects of success to warrant the grant of special leave in this case.  We take into account the history behind the legislation, its obvious purpose to promote speed and certainty, the terms of the explanatory memorandum and the current state of authority in intermediate courts which adopt an interpretation similar to that adopted in this case.  By such authority, the application of the law may, it is true, sometimes be harsh.  However, at least it is clear and certain and apparently in accord with the legislative purpose.

In a sense the great delays that have attended the dispute between the present parties may be the kind of mischief that the Parliament appears to have had in mind in adopting a short and somewhat arbitrary time limit as it did in section 459G.  It has not been shown that the Full Court of the Supreme Court of Western Australia erred.  Accordingly, special leave is refused.  The applicant must pay the respondent’s costs.

AT 12.35 PM THE MATTER WAS CONCLUDED