In the Matter of Merribee Pastoral Industries Pty Ltd; Australian & New Zealand Banking Group Ltd v Merribee Pastoral Industries Pty Ltd In the Matter of R J Gilbert Investments Pty Ltd; Australian & New Zealand...

[1998] FCA 203

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	NG 3176 OF 1997 NG 3177 OF 1997
NEW SOUTH WALES DISTRICT REGISTRY	NG 3178 OF 1997

IN THE MATTER OF:	MERRIBEE PASTORAL INDUSTRIES PTY LIMITED AUSTRALIAN COMPANY NO. 003 526 862 NG 3176 OF 1997
BETWEEN:	AUSTRALIAN AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) APPLICANT
AND:	MERRIBEE PASTORAL INDUSTRIES PTY LIMITED RESPONDENT

IN THE MATTER OF:	R J GILBERT INVESTMENTS PTY LIMITED AUSTRALIAN COMPANY NO. 000 528 585 NG 3177 OF 1997
BETWEEN:	AUSTRALIAN AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) APPLICANT
AND:	R J GILBERT INVESTMENTS PTY LIMITED RESPONDENT

IN THE MATTER OF:	WEST MERRIBEE PTY LIMITED AUSTRALIAN COMPANY NO. 001 351 739 NG 3178 OF 1997
BETWEEN:	AUSTRALIAN AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) APPLICANT
AND:	WEST MERRIBEE PTY LIMITED RESPONDENT

JUDGE:	HILL J
DATE:	11 MARCH 1998
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

On 15 October 1997 I ordered that Merribee Pastoral Industries Pty Limited, R.J. Gilbert Investments Pty Ltd and West Merribee Pty Limited, be wound up in accordance with the provisions of the Corporations Law and that Mr Berilla be appointed liquidator of the companies. There is no dispute between the parties that the companies are hopelessly insolvent. They owe the petitioning creditor in accordance with evidence before me today some $3,398,802.93. At the time proceedings had been heard in the High Court, inter alia, dealing with the constitutional status of the Corporations Law scheme testing jurisdiction, inter alia, of this Court.

At the request of the companies, I ordered that the orders which otherwise I made winding up the companies, appointing a liquidator and dealing with costs be stayed pending the delivery of the judgment in the High Court.  The orders refer to the judgment on the appeal from BP Australia Limited v the Amann Aviation Pty Limited (1996) 62 FCR 451. I gave leave to the petitioning creditor respondents to move to vacate orders in the event that the appeal was upheld by the High Court.

In the meantime, the High Court has now given judgment in the matter of Gould v Brown [1998] HCA 6 (2 February 1998). The Court was equally divided, a majority taking the view that the legislative scheme was invalid, a minority taking a contrary view. In accordance with the Judiciary Act the decision of the Court below prevailed with the consequence that the legislation was held to be valid.  That decision, while no doubt a decision of the High Court and binding upon me, is not a binding precedent of authority in the High Court:  Commissioner of Taxation (Cth) v St Helens Farm (ACT) Pty Ltd (1981) 146 CLR 336.

The companies have commenced proceedings in the High Court by a statement of claim issued 13 February 1998 seeking declarations, inter alia, that the legislative corporate scheme is invalid as is the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) and requesting the Court to quash the orders I have made in this Court for the winding up of the companies, the appointment of a liquidator and costs. The companies have, for reasons not quite apparent to me, not sought leave to appeal from my decision nor instituted an appeal against it in the Full Court of this Court or for that matter commenced proceedings by way of special leave to the High Court.

I have, in discussion with the legal representative for the companies, referred to the decision of the High Court in Cameron and Cole (1944) 68 CLR 571 and the difficulty which might arise if my judgment, being a judgment of a superior court, unappealed, remained, notwithstanding that the High Court was prepared to make a declaration that the corporate scheme was invalid. There would have to be some further proceeding whether before a Full Court of this Court or directly to the High Court with leave before my judgment could be set aside directly.

The companies seek to continue the stay which expires this afternoon on the basis that it would be able to proceed with its application to the High Court to deal with the constitutional issue.  The ordinary case seeking a stay where matters are on appeal to the High Court requires an appeal court (ordinarily for the matter does not usually arise before a first instance judge) to consider, among other things the status of the argument which might be put to the High Court, the question whether the subject matter of the appeal might be lost if the stay was not granted and matters which go to prejudice generally.

There is no doubt that the application has to be made in this Court rather than initially in the High Court:  Jennings Constructions Limited v Burgundy Royale Investments Pty Ltd (1986) 161CLR 681. Given that there was an equally divided High Court it is not difficult to say that the matter in the High Court is one of some complexity as to which the companies could not be said to have no chance of success.

It is particularly obvious that once a liquidator is appointed the liquidator, generally speaking subject to statutory exception, assumes the powers of the former directors and is in a position, inter alia, to instruct the solicitors appearing in the High Court proceedings, inter alia, to discontinue them.  That would have the consequence of totally frustrating the proceedings in the High Court. 

That is the only matter in my view which raises a substantial matter of prejudice in respect of the liquidation.  Otherwise from a practical point of view the liquidator, in accordance with the evidence, has been given a relatively small amount of money by the petitioning creditor to carry out appropriate investigations and it would be highly unlikely that much further would happen before the proceedings in the High Court were heard and perhaps even determined.

For this reason I sought to be advised whether the liquidator would be prepared to give an undertaking in essence that the proceedings could continue in the High Court, but subject of course to being sure that no question of cost liability could arise.  Insofar as the companies were insolvent no doubt an application for security for costs could be made in the High Court and if that Court considered it appropriate security for costs would be ordered.  It is difficult to see how the liquidator personally could become liable for any costs.

The liquidator for reasons of his own has refused to give an undertaking, inter alia, that the proceedings could be continued in the High Court.  In these circumstances it seems to me that to deny to the companies at this stage a stay could have a devastating effect on the proceedings which they have commenced in the High Court.  My only concern in the matter is the fact that no appeal has been lodged from my judgment at this stage.

However, an undertaking has been given by the companies that steps would be taken to ensure that an appeal or leave to appeal if the matter is to proceed directly to the High Court be instituted.  So if the High Court is in a position ultimately to deal both with the summons by way of declaration and the leave to appeal in appeal proceedings which, if the High Court took the view that the corporate law scheme was invalid, really involve it in having to set aside the order which I have made.

In these circumstances, I make the following orders:

1. I extend the stay by varying order 4 in the orders which I made on 15 October 1997 and extend the stay until 14 days after the proceedings by way of summons and statement of claim, dated 13 February 1998, have either been decided or otherwise disposed of by the High Court. 

1. I give liberty to apply on 14 days notice.

1. I order that the applicant pay the costs of today;  the respondent pay the costs of the motion.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill.

Associate:

Dated:            12 March 1998