Locker Group Pty Ltd v HEA Australia Pty Ltd
[2015] VSC 752
•18 December 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 01797
IN THE MATTER OF HEA Australia Pty Ltd
BETWEEN:
| AUSTRALIAN PRESSURE VESSEL HEADS (2011) PTY LTD (ACN 150 111 452) | Plaintiff |
| - and - | |
| HEA AUSTRALIA PTY LTD (ACN 104 888 397) | Defendant |
| - and - | |
| LOCKER GROUP PTY LTD (ACN 004 353 922) | First Interlocutory Applicant |
| - and - | |
| KNM PTY LTD (ACN 095 215 759) | Second Interlocutory Applicant |
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JUDGE: | Randall AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 August 2014 |
DATE OF JUDGMENT: | 18 December 2015 |
CASE MAY BE CITED AS: | Locker Group Pty Ltd v HEA Australia Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2015] VSC 752 |
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CIVIL PROCEDURE – Civil Procedure Act 2010 (Vic) s 29 – Corporations, application pursuant to s 459P of the Corporations Act – Duty of disclosure – Failure to serve application in accordance with order – Failure to disclose late service
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APPEARANCES: | Counsel | Solicitors |
| For the Defendant | Mr A P Rodbard-Bean | Marsh & Maher |
| For the First Interlocutory Applicant | Mr M J Galvin | Davies Maloney |
| For the Second Interlocutory Applicant | Mr A P Rodbard-Bean | Marsh & Maher |
HIS HONOUR:
This judgment concerns the extent of the powers of the Court under the Civil Procedure Act 2010 (Vic).
An originating process was filed on 16 April 2014 by Australia Pressure Vessel Heads (2011) Pty Ltd seeking to wind up HEA Australia Pty Ltd (‘the Company’) pursuant to s 459P of the Corporations Act 2001 (Cth) (‘Corporations Act’).
The first return of the winding up application was 14 May 2014. Counsel for Australian Pressure Vessel Heads (2011) Pty Ltd appeared but there was no appearance for the Company. I noted in other matters that negotiations were ensuing and that payment was expected within seven days. The further hearing was adjourned to 21 May 2014.
On 21 May 2014 Counsel for the plaintiff appeared and announced that Australian Pressure Vessel Heads (2011) Pty Ltd had been paid out and sought to be excused. Counsel for Locker Group Pty Ltd (a supporting creditor) (‘Locker Group’) appeared and advised the Court that it wished to be substituted as plaintiff. There was no appearance on behalf of the Company. Further, the Company had not filed a notice of appearance in accordance with r 2.9 and Form 4 of the Supreme Court (Corporations) Rules 2013 (Vic) (‘Supreme Court Corporations Rules’) and s 465C of the Corporations Act. Paragraph five of the Order of 21 May 2014 directed that the supporting creditor file and serve any interlocutory process seeking to be substituted as plaintiff by 4pm on 4 June 2014.
At 5.15pm on 3 June 2014, the interlocutory process filed on behalf of Locker Group (‘Locker Group’) and supporting material were posted to the Company at its registered office in Western Australia by placing the same in a prepaid addressed envelope in a letterbox situated at the document exchange in Melbourne. Bethany Anne Hartup, a law clerk in the employ of the solicitors for Locker Group, deposed in an affidavit sworn 4 June 2014 as follows:
I did on the 3rd June, 2014 serve the abovenamed Defendant company with a Form 1, a copy of the Interlocutory Process duly sealed with the seal of the Court and a copy of the affidavit of Colman Francis Maloney sworn on 28 May, 2014[,] the Affidavit of Andrew Kevin Menara sworn on 29 May, 2014 … by posting the said documents by ordinary pre-paid post enclosed in an envelope addressed to the registered office of the above mentioned Defendant company at 17 Casella Place, Kewdale, WA, 6105 by depositing the said envelope in a letter box situate at the Document Exchange Centre, Level 1, 179 Queen Street, Melbourne at approximately 5.15pm.
At approximately 5pm (Perth time) on 10 June 2014, the material served on behalf of Locker Group was received at the Company’s registered office. The documents were placed in a folder for the attention of the Company’s internal accountant.
On 11 June 2014 Gardiner AsJ made orders that included the winding up of the Company. Counsel appeared for Locker Group. There was no appearance for the Company.
On the same day in the afternoon, Perth time, the material in support of the application for substituted plaintiff and for the winding up order came to the attention of the Company’s accountant.
On 16 June 2014, an application was made by the parent shareholder of the Company to set aside the winding up order. It relied upon r 46.08 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (‘the Supreme Court Rules’) to set aside the winding up order, rather than s 482 of the Corporations Act to terminate the liquidation.
I set aside the winding up order together with the order sought in the interlocutory process to substitute Locker Group as the plaintiff. Consequential orders were made, including the following:
The hearing of any argument on who should ultimately pay the costs paid by the Interlocutory Applicant under paragraph 1 above [being the reasonable remuneration expenses of Messrs Glavas and Jess incurred in the liquidation of the defendant] is adjourned to … 16 July 2014 … .
During the course of the interlocutory application, the interlocutory applicant proffered an undertaking to pay $30,000 to Messrs Glavas and Jess and to pay $15,000 into its solicitors’ trust account to meet any further remuneration expenses of Messrs Glavas and Jess. The undertaking had not been offered as the ‘price’ to support the order made in favour of the interlocutory applicant setting aside the winding up order.
On the return date of 16 July 2014, Locker Group submitted for the first time that there was no jurisdiction to visit the remuneration and expenses of the liquidators upon any of the parties to the application. The matter was adjourned for full argument.
KNM Pty Ltd (‘KNM’), as second interlocutory applicant, filed an interlocutory process on 18 July 2014. Apart from costs, the application sought the following order:
Pursuant to s 29 of the Civil Procedure Act 2010, and by reason of the First Interlocutory Applicant’s (‘Locker Group’) contravention of s 18(d) of the Civil Procedure Act 2010, an order that the Locker Group pay to the Defendant and Second Interlocutory Applicant the remuneration and expenses of Messrs Glavas and Jess incurred in the liquidation of the Defendant, paid by the Defendant and Second Interlocutory Applicant to Messrs Glavas and Jess under paragraphs [1] and [2] of the orders of the Court made 18 June 2014.
The relevant paragraphs of my Order made on 18 June 2014 were:
3.The costs of Messrs Glavas and Jess of and incidental to the Interlocutory Applicant’s Interlocutory Application filed 16 June 2014 are costs in the liquidation of the Defendant.
4.Pursuant to rule 46.08 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) … the winding up order of the Defendant and the order for substitution of the Plaintiff by Locker Group … made by the Court on 11 June 2014 are set aside.
Termination of winding up
There is a difference between setting aside the winding up order pursuant to the Supreme Court Rules, and terminating the liquidation pursuant to s 482 of the Corporations Act. Section 482 operates on the basis that a winding up order has been validly made. That is not necessarily the same basis on which a winding up order is set aside pursuant to r 46.08 of the Supreme Court Rules.
Locker Group submitted that even upon the termination of a winding up there was no statutory power to order payment of the liquidators remuneration and expenses. In E-Fahkri, Re Elfah Pty Ltd (In Liq),[1] Finkelstein J set out three fundamental factors recognised by Megarry J in Re Calgary and Edmonton Land Co Ltd (In Liq)[2] to which Finkelstein J added the question of the public interest:
In Re Calgary and Edmonton and Land Co Ltd (In Liq) Megarry J set out most of the factors that the court must consider before making an order under s 482(1). First, I must consider the interest of the creditors. That presents no difficulty in this case. In the first place there are only two creditors. They do not object to a termination of the winding up. Second, even if those creditors had objected, little weight would be given to the objection because the parties have established that the creditors will, in due course, be paid in full.
I should also consider the position of the liquidator. He has a statutory right to receive his costs, charges and expenses in priority to other claims in the liquidation and he has a charge or lien over the assets over the company to secure the priority. Usually it would not be right to stay or terminate a liquidation unless the liquidator’s position is protected.
Then there are the members of the company. It is generally accepted that a stay or termination should not be granted unless each member consents (or perhaps does not object) to giving up his right to take the surplus assets on the completion of the assets. Here again there is no difficulty as the members are the applicants for the termination order.[3]
[1][2002] FCA 1469.
[2][1975] 1 WLR 355.
[3]At [5]–[7].
In Mercy & Sons Pty Ltd v Wanari Pty Ltd (Subject to Deed of Company Arrangement) (In Liq)[4] Austin J considered the liquidator’s interests, especially in relation to costs:
With respect to factors to be taken into consideration:
…
… the Court considers the interests of the liquidator, particularly with respect to costs.[5]
[4](2000) 35 ACSR 70.
[5]At [47]–[51].
Apart from recognising the liquidator’s lien or charge, the normal course upon termination is to extract an undertaking to meet remuneration and expenses of the liquidator. In Workers Compensation Nominal Insurer v Detailed Flooring Pty Ltd,[6] the winding up was terminated. Barrett J said:
The Court was asked to note certain undertakings of Mr Davis regarding payment of the liquidator’s fees and the debt and the legal costs of the plaintiff upon his ‘regaining control of the bank account of the defendant’. The Court will accept those undertakings, noting that they are not undertakings open to the objections discussed in Owners Strata Plan 70294 v LNL Global Enterprises Pty Ltd (2006) 60 ACSR 646 [where there had been discussion about the failure as to a party at arm’s length to provide an undertaking].[7]
[6][2010] NSWSC 1056.
[7][2010] NSWSC 1056, [45].
In Workers Compensation Nominal Insurer v Cladtrans Pty Ltd,[8] Yates J, on terminating the winding up, ordered that the company’s bank account be made available to the liquidator to make various payments including the liquidator’s proper remuneration and disbursements. There was no discussion as to the power to make such order which is understandable given that the applicant proposed that the payment be made.
[8][2013] FCA 996.
The ‘price’ (being the undertaking to meet the liquidator’s remuneration and expenses) has also been utilised in cases where the winding up order is set aside.
The position with respect to setting aside the winding up order
Examples of the extraction of a ‘price’ can be found in Deputy Commissioner of Taxation v Debut Developments Pty Ltd;[9] Deputy Commissioner of Taxation v Wylkian Pty Ltd;[10] and Deputy Commissioner of Taxation v Annesley Plant Hire Pty Ltd.[11] In each of these cases, where the defendant had failed to attend the hearing, the Federal Court set aside a sequestration order pursuant to O 35 r 7(2)(a) of the Federal Court Rules 2008 (Cth), which was superseded by, but substantively similar to, r 39.05 of the Federal Court Rules 2011 (Cth).
[9][2011] FCA 69 (‘Debut Developments’).
[10][2006] FCA 368 (‘Wylkian’).
[11][2010] FCA 755 (‘Annesley Plant Hire’).
In Debut Developments, voluntary administrators had been appointed. The director of the company thought that the voluntary administrators would attend to the appearance. There was some confusion and the voluntary administrator did not attend. After discussion as to the appropriateness, Besanko J said:
Whilst I still had some reservations about the utility of setting aside the order, I considered that it was in the interest of creditors that they have an opportunity to consider such a proposal and that it was appropriate to set aside the winding up order provided Mr Roberts paid the costs of the liquidator and certain costs of the plaintiff.[12]
[12][2011] FCA 69, [17].
In Wylkian, Emmett J said:
Ordinarily, as I have said, I would order the company to pay the costs of the liquidator. However, it seems to me that justice will be served if the question of the liquidators costs be reserved, on the basis that they should be paid either by the company or by the Deputy Commissioner. I tend to the view that, notwithstanding the evidence as to the communication in September 2005, the fault lies at the feet of the company. Nevertheless, until that question is investigated, I consider that it is inappropriate to make an order one way or the other. I would be disposed to order that the orders of 24 February 2006 be set aside on the terms that the company agree that, if the Court considers it appropriate when the matter comes on for hearing, the costs of the liquidator be paid by the company.[13]
[13][2006] FCA 368, [6].
In Annesley Plant Hire, it would appear from the judgment that there was no fault on part of the petitioner and, it was on the advice that the director had received from his accountant that an appearance was not necessary, which bought about the failure of the company to appear. As Finkelstein J said:
In that circumstance it is inevitable that the winding up order should be set aside. It is necessary that the liquidator’s costs and expenses be secured pending them being assessed. Appropriate undertakings have been given by Mr Annesley for that purpose.[14]
[14][2010] FCA 755, [26].
In Victorian WorkCover Authority (VWA) v Barroaghan Pty Ltd,[15] Warren J (as the Chief Justice then was) heard an application by way of appeal with respect to termination of a winding up order. The winding up had proceeded on the basis of non-compliance with a statutory demand in circumstances where a letter had been forwarded to the company by the authority advising that previous notifications were to be ignored. On the appeal, counsel for the appellant submitted that the winding up order was made because both counsel and solicitors for the authority were not aware of the matters that should have been disclosed by them to the Court. Warren J said:
[15][2001] VSC 413.
In the course of submissions on behalf of the plaintiff, Mr Sanger purported to make assertions from the bar table that at the time of the application for the winding up of the company the court was not informed of the circumstances described by Monaghan because both the counsel and the solicitors for the plaintiff were not aware of those matters. A number of opportunities were given to the plaintiff during the course of submissions to provide an explanation to the court as to why the matters described by Monaghan, in particular, the advice by the plaintiff to the company on 7 September 2001, had not been conveyed to the court. No explanation could be provided save for the ignorance of counsel and solicitors.[16]
…
Having considered the affidavits filed on behalf of the applicant, I am satisfied of a number of matters. First, that at the time the statutory demand and the other relevant matters came before the Senior Master on the winding up application there were significant matters that were not disclosed to the court. In my view the assertion of ignorance of the counsel and the solicitors is not sufficient to constitute an explanation as to why matters were not disclosed to the court. It behoved the plaintiff in the circumstances of this matter, given the seriousness of the consequences of the winding up of a corporation, to provide instructions such as to inform the court at the time of the winding up application of the circumstances relating to the revision of the premium that was the subject of the claimed debt. The only explanation forthcoming from the plaintiff was that those representing it on the occasion of the application for the winding up were not aware of the position. The explanation does not absolve the plaintiff of the conduct of the proceeding before the Senior Master.[17]
…
I am satisfied, furthermore, that in the circumstances of this proceeding it was a relevant premium were not disclosed to the Senior Master. It can be reasonably assumed, in my view, that if these matters had been disclosed to the court a different view may well have been taken with respect to the application for the winding up of the company.[18]
…
The relevant principles in relation to costs orders in circumstances such as the present were considered by Sheppard J in Colgate Palmolive v Cussens (1993) 46 FCR 225, 232–234. It seems to me that on all bases the plaintiff should be subject to the penalty of paying the costs of both the liquidation and the summons and interlocutory process. I am satisfied in view of the conduct of the plaintiff on the application for the winding up on 26 September 2001 and on the appeal and the interlocutory process that it should pay the costs of the applicant on an indemnity basis.[19]
[16]Ibid [16].
[17]Ibid [19].
[18]Ibid [23].
[19]Ibid [30].
It is readily apparent from what was set out by Warren J that her Honour was not addressed on the ambit of power contained in s 24 of the Supreme Court Act 1986 (Vic) (‘Supreme Court Act’), any provision of the Corporations Act or the principles in Colgate-Palmolive v Cussons Pty Ltd[20] when ordering that the costs of the liquidation also be paid.
[20](1993) 46 FCR 225.
In Kyriackou v Shield Mercantile Pty Ltd(No.2)[21], Weinberg J held that a bankruptcy notice, upon which sequestration was based, was invalid. Weinberg J determined that the bankruptcy order ought to be set aside. The issue became who should bear the costs of the official trustee who was the trustee of the bankrupt estate. Weinberg J said:
It would be quite wrong, in my view, to burden Mr Kyriackou, who is the successful applicant in this proceeding, with the costs of administering a bankrupt estate that should never have been made the subject of a sequestration order. Regrettably, that leaves the Official Trustee with no obvious and immediate recourse against either the appellant, or the first respondent. It also leaves him with what might be considered to be a legitimate sense of grievance. He may be out of pocket for doing no more than what he was required by statute to do.
It might be thought that the Act is deficient in failing to provide for the summary recovery by a trustee of the cost of administering an estate, and his or her reasonable remuneration, in circumstances where a sequestration order has had to be set aside. Perhaps the party responsible for those costs having been unnecessarily incurred, in this case the first respondent, ought to be summarily reliable for them…
In this case, a balance must be struck between the rights of the appellant, who should never have been made bankrupt in the first place, and the Official Trustee, who has simply done what the Act requires him to do. In my view, the particular circumstances of this case require that the balance tilts in favour of the appellants. It follows that the Official Trustee must bear his own costs and expenses of the administration unless he elects to institute proceedings to recover them: see generally Wenkart v Pantzer (2003) 132 FCR 204 at 207. That is a matter for the Official Trustee. It does not fall within the ambit of any costs order that can properly be made in relation to this appeal.[22]
[21][2004] FCA 1338.
[22]Ibid [40]–[43].
In Owners-Strata Plan No 23007 v Cross,[23] Edmonds J set aside a sequestration order rather than annulling the bankruptcy. Ms Cross was bankrupted in her absence on the first return date of a creditor’s petition. She was mentally infirmed and a patient of the psychiatric unit of Sutherland Hospital at the time of service upon her. I will say more about this case in relation to service hereafter.
[23](2006) FCA 900 (‘Owners-Strata Plan’).
Edmonds J said:
When this choice — as between an order that the sequestration order be set aside on the one hand and an order for annulment of the bankruptcy on the other — has come before the court on earlier occasions, the courts have consistently stressed that a balance must be struck between the rights of the applicant, who should never have been made bankrupt in the first place, and the Trustee who has simply done what the Act requires him to do… The rights of the petitioning creditor have never been referred to as a relevant factor, and understandably so.
This is not a case where the pendulum and balance tilts in favour of Ms Cross (compare Kyriakou) as against the Trustee; on the contrary, I have come to the firm conclusion that it would be totally unfair, indeed a miscarriage of justice, for Ms Cross to be saddled with any of the relatively considerable costs of the administration of her estate. While that may involve the invocation of some injustice on the Trustee, in the circumstances of this case it seems it must be tolerated in the face of an inability of the court to order the petitioning creditor to bear such costs: Kyriackou at [39] per Weinberg J. For present purposes, I am prepared to accept that as being the correct position, however, I do not think it is free from doubt. The powers of the court under s 30 [The General Powers of Courts and Bankruptcy] of the Act are expressed in extremely wide terms. In the circumstances of this case, it seems unjust to me that the creditor only has to pay the costs of the motion even though it also loses the registrar’s order as to costs of the petition.[24]
[24]Ibid [115]–[116].
The Federal Court decisions setting aside sequestration orders are applicable to the present case. Though the respective rules and principles are expressed differently, they do not diverge in purpose or policy.[25]
[25]See, eg, V R Dye & Co (a firm) v Peninsula Hotels Pty Ltd (in liq) [1999] VSCA 60.
Legislation
The court does not appear to have any statutory power to order the applicant for a winding up to pay the reasonable remuneration expenses of a liquidator in the event that the order is set aside or otherwise.
Pursuant to s 556(de) of the Corporations Act, a liquidator (falling under the category of ‘relevant authority’ as defined in s 556(2)) is entitled to his or her remuneration in the priority afforded by that subsection. ‘Deferred expenses’ as that expression is used in s 556(de) of the Corporations Act includes:
… in relation to a company means expenses properly incurred by a relevant authority, insofar as they consist of:
(a) remuneration, or fees for services, payable to the relevant authority;
…
Thus, a liquidator’s remuneration is recognised as an expense of the company in liquidation to be paid with the priority afforded by s 556.
Under s 473(3) of the Corporations Act, a liquidator in a compulsory winding up is entitled to receive such remuneration by percentage or otherwise as is determined:
·By agreement between the liquidator and the committee of inspection (if any);
·Failing determination in that way, by resolution of the creditors or, if no such resolution is passed, by the court.
The Court has limited powers to make orders in respect of the remuneration of liquidators. For the Court to have power, the liquidator must first convene a meeting of creditors for the purpose affixing the remuneration, giving proper details of the remuneration. If the meeting does not pass the resolution, the court has power to make an order under s 473(3)(b)(ii) of the Corporations Act.[26] In making any order under s 473, the court must have regard to the matters contained in s 473(10).
[26]See Australian Securities and Investments Commission v Rowena Nominees Pty Ltd [2003] WASC 112, [98].
A liquidator also has the right to be indemnified for ‘all proper expenses’ by the assets available in a winding up.[27]
[27]Burns Philp Investment Pty Ltd v Dickens(No 2) (1993) 31 NSWLR 280.
Rule 63.02 of the Supreme Court Rules confers upon the Court a general power and discretion as to costs under s 24 of the Supreme Court Act. It provides that ‘[t]he power and discretion of the Court as to costs under section 24 of the Act shall be exercised subject to and in accordance with this Order’.
Section 24 of the Supreme Court Act provides as follows:
(1)Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
Rule 63.02 of the Supreme Court Rules and s 24 of the Supreme Court Act are confined to ‘costs’ as that expression is used in the normal course to refer to the costs and expenses of litigation. The ambit of ‘cost’ does not extend to remuneration and expenses of a liquidation. Unless there is specific power such as referred to in s 24 of the Supreme Court Act in relation to the administration of estates, this Court does not have power under either the Supreme Court Corporations Rules or the Corporations Act to visit the remuneration expenses of the liquidator.
Disclosure
By way of general observation, it is not uncommon for more than 45 windings up, together with applications to set aside statutory demands, to be listed on any one day. After the filing of an originating process and the material in support thereof, the Court undertakes a process whereby the material filed in support of the application is considered to determine whether it complies with the Corporations Act, the Supreme Court Corporation Rules, and is generally in order. A checklist is produced. The checklist is available to the parties prior to the return date. If the checklist identifies matters to be addressed, the same can be attended to prior to or on the return date as appropriate. If the checklist demonstrates that the material appears to be in order, the plaintiff, in the absence of opposition, is entitled to seek a winding up order.
Management of the Corporations List on the day involves reliance upon practitioners. Even if the checklist does not reveal any obvious shortcomings, it is the practise of this Court to seek the assurance of practitioners that the material is in order and a winding up order may be made. If such assurance were not given, it would not be possible for the Associate Judge hearing the Corporations List to attend to the number of winding up applications listed on one day.
Dal Pont in Lawyers’ Professional Responsibility[28] characterises counsel’s duty in an ex parte application as one of candour. The author states:
The unique character of ex parte applications in an adversarial system requires the imposition of especial candour on behalf of applicants to avoid an abuse of the Court’s processes. An ex parte applicant, to fulfil this duty, must supply “the place of the absent party to the extent of bringing forward all material facts which that party would presumably have brought forward in his defence to that application”.[29] Lawyers on ex parte applications must therefore display the utmost fairness and good faith, and see that all relevant matters, for and against the application, are brought to the court’s attention.[30]
[28]Gino Dal Pont, Lawyers’ Professional Responsibility (Thomson Reuters, 5th ed, 2012).
[29]Thomas A Edison Ltd v Bullock (1912) 15 CLR 679, 682 (citations omitted).
[30]Dal Pont, above n 28, 557.
The classic statement of the duty appears in the judgment of Isaacs J in Thomas A Edison Ltd v Bullock, where his Honour stated:
Uberrima fides is required, and the party inducing the court to act in the absence of the other party, fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all the material facts which that party would presumably have brought forward in his defence to that application. Unless that is done, the implied condition upon which the court acts in forming its judgment is unfulfilled and the order so obtained must almost invariably fall. I add the word “almost” in deference to such an exceptional case as Holden v Waterlow. The obligation is stated by Turner LJ in that case to be to “state their case fully and fairly,” and so by Sugden LC in Dease v Plunkett - 4, where he said: — “The plaintiff had not fully and fairly disclosed the entire facts of the case”. Lord Cottenham LC, in Brown v Newall - 5, observes that the power to grant such an injunction should exist is indispensable, but, from the liability to injustice, must be exercised with caution. Then he says: — “The court can have no ground upon which it can proceed, in granting an ex parte injunction, but a faithful statement of the case.” The learned Lord Chancellor distinguishes between misstatement, or suppression likely to influence the court in acceding to the application, and that which is immaterial.
In England, the case of Brink’s Mat Ltd v Elcombe[31] provides a helpful summary of principles relating to the duty of disclosure:
[31][1988] 3 All ER 188 (‘Brink’s’).
In considering whether there has been relevant non-disclosure and what consequence the court should attach to any failure to comply with the duty to make full and frank disclosure, the principles relevant to the issues in these appeals appear to me to include the following.
(1) The duty of the applicant is to make “a full and fair disclosure of all the material facts”: see Rex v Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 KB 486, 514, per Scrutton L.J.
(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers: see Rex v Kensington Income Tax Commissioners, per Lord Cozens-Hardy MR at 504, citing Dalglish v Jarvie (1850) 2 Mac & G 231, 238, and Browne-Wilkinson J in Thermax Ltd v Schott Industrial Glass Ltd [1981] FSR 289, 295.
(3) The applicant must make proper inquiries before making the application: see Bank Mellat v Nikpour [1985] FSR 87. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.
(4) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application; and (b) the order for which application is made and the probable effect of the order on the defendant: see, for example, the examination by Scott J of the possible effect of an Anton Piller order in Columbia Picture Industries Inc v Robinson [1987] Ch 38; and (c) the degree of legitimate urgency and the time available for the making of inquiries: see per Slade LJ in Bank Mellat v Nikpour [1985] FSR 87, 92–93.
(5) If material non-disclosure is established the court will be “astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure … is deprived of any advantage he may have derived by that breach of duty”: see per Donaldson LJ in Bank Mellat v Nikpour 91, citing Warrington LJ in the Kensington Income Tax Commissioners’ case [1917] 1 KB 486, 509.
(6) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application. The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.
(7) Finally, it “is not for every omission that the injunction will be automatically discharged. A locus poenitentiae may sometimes be afforded:” per Lord Denning MR in Bank Mellat v Nikpour [1985] FSR 87, 90. The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms.
The summary set out in Brink’s has been cited with apparent approval by several Australian courts.[32]
[32]See, eg, Ezystay Systems Pty Ltd v Link 2 Pty Ltd [2014] NSWSC 180, Australian Football League v Hard On Sport Pty Ltd [2012] VSC 475; Liberty Financial Pty Ltd v Scott [2002] FCA 345; Dart Industries Inc v David Bryar & Associates Pty Ltd(1997) 38 IPR 389.
However, it is important to note that in Brink’s, Balcombe LJ agreed with Ralph Gibson LJ that notwithstanding that an ex parte injunction had been obtained without full disclosure, the court had a discretion to continue it, or to grant a fresh injunction in its place.[33] Of similar effect were the observations of Slade J, who said:
Particularly, in heavy commercial cases, the borderline between material facts and non-material facts may be a somewhat uncertain one. While in no way discounting the heavy duty of candour and care which falls on persons making ex parte applications, I do not think the application of the principle should be carried to extreme lengths.[34]
[33][1988] 3 ALL ER 188, 194.
[34]Ibid.
In Milcap Publishing Group AB v Coranto Corp Pty Ltd[35] Davies J dealt with an application to set aside an Anton Piller order that his Honour had previously made on the basis of non-disclosure. His Honour set aside the order, in doing so observed that:
When an ex-parte order is sought, the person seeking the order must be frank and disclose to the Court all the matters which, if put before the Court, might have an effect upon the Court's decision. The facts that should be disclosed go both to matters of liability and matters of discretion. If a fact is material in that it would be a matter to be taken into account by a Court in the making of the decision to grant an injunction or in the formulation of the order that is to be made, it is a matter that ought to be disclosed.[36]
[35](1995) 32 IPR 34.
[36]Ibid 35.
I further note that r 22 of the Victorian Bar Practice Rules[37] states:
A barrister seeking any interlocutory relief in an ex parte application must disclose to the court all matters which:
(a) are within the barrister’s knowledge;
(b) are not protected by legal professional privilege; and
(c)the barrister has reasonable grounds to believe would support an argument against granting the relief or limiting its terms adversely to the client.
[37]Victorian Bar Incorporated Practice Rules: Rules of Conduct and Compulsory Continuing Professional Development Rules (effective 22 September 2009).
Failure to draw a late service to the Court’s attention
In Owners-Strata Plan,[38] Edmonds J set aside a sequestration order rather than annulling the bankruptcy. Edmonds J observed that the sequestration order would not have been made if the defendant or her legal representatives made an appearance to bring the defendant’s circumstances to the Court’s attention, or if the plaintiff’s counsel had performed his duty by notifying the Court of the defendant’s circumstances:
[38](2006) 153 FCR 398.
Had she, or representatives on her behalf, been present on the day, or if her circumstances and the circumstances of service of the Creditor’s petition had been ventilated with the registrar on 9 August 2004 rather than being left buried in some affidavit of service, I have no doubt that the sequestration order would not have been made.
…
The fact is that Mr Bentley was the only person present before Registrar Tesoriero on 9 August 2004. He would not have been surprised at that. He certainly did not expect Ms Cross to be present. That he cannot remember what was said before the registrar on that day suggests to me that none of the relevant surrounding circumstances were brought to the registrar’s attention because he, Mr Bentley, was blinded by an obsession to ensure that whatever else happened, Registrar Tesoriero made the sequestration order on that day. As an officer of the Court, he had an overriding duty to do more — to draw to the Court’s attention Ms Cross’ circumstances and the circumstances under which she was purportedly served with the Creditor’s petition.[39]
[39]Ibid., at [112].
Section 109X authorises the service of documents on a company by post. The Corporations Act is a Federal Act. Accordingly, the ActsInterpretation Act1901 (Cth) applies together with the Federal Evidence Act 1995. Section 29 of the Acts Interpretation Act 1901 (Cth) sets out:
(1)Where an Act (in this case the Corporations Act) authorizes or requires any document to be served by post, whether the expression ‘serve’ or the expression ‘give’ or ‘send’ or any other expression is used, then the service shall be deemed to be effected by properly addressing, pre-paying and posting the document as a letter and, unless the contrary is proved, to have been effected at the time which the letter would be delivered in the ordinary course of post.[40]
(2)This section does not affect the operation of s 160 of the Evidence Act 1995.
[40]Emphasis added.
Section 160 of the Evidence Act 2008 (Vic) provides as follows:
Postal articles
(1)It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.
Accordingly, service of the application to be substituted was deemed to have been effected four working days after 3 June 2014 and was in breach of the order made 21 May 2014.
It was submitted on behalf of Locker Group that there had been full disclosure. The affidavit of service clearly set out the date of posting. Therefore the breach of the order of 21 May 2014 was appropriately brought to the court’s attention. I do not accept that submission. Even if it is accepted that the filing of the affidavit of service somehow excused counsel from complying with the duty to make full and frank disclosure pursuant to the principles set out in Brink’s Mat Ltd, the circumstances of this application are on a parallel with what is set out by Edmonds J in Owners–Strata Plan. In Owners Strata Plan, the affidavit of service set out all the material facts. However, Edmonds J found that the circumstances of the defendant had been buried in the affidavit and not otherwise brought to the court’s attention. In the same way, I determine that, albeit that the affidavit of service of the interlocutory process for substitution also set out at the time of posting, counsel did not discharge his duty to bring the late service to the Court’s attention. If such fact had been property disclosed to Gardiner AsJ, the winding up order would not have been made.
The ‘overarching purpose’ of the Civil Procedure Act 2010 (Vic)
I now turn to the Civil Procedure Act 2010 (Vic) (‘Civil Procedure Act’), a main purpose of which is to provide an overarching purpose in relation to the conduct of civil proceedings to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[41]
[41]Sections 1 and 7 of the Civil Procedure Act 2010 (Vic).
The second reading speech and explanatory memorandum does not provide any useful instruction on the application of the Civil Procedure Act. The Act, however, was recently considered by the Court of Appeal in Yara Australia Pty Ltd v Oswal.[42] The purpose of the Civil Procedure Act was described by Redlich, Priest JJA and Macaulay AJA as follows:
The statutory regime and the obligations that are imposed by the statute have not previously been considered in any detail at an appellate level. As the enforcement of the overarching obligations under the Act has been so little traversed, there is presently little to guide judicial officers as to the extent of the court’s powers and the means by which parties or their legal representatives can be penalised for any contravention. We have thus addressed some of these issues at greater length than would ordinarily be necessary when a contravention of the Act is under consideration.
The reforms introduced by the Act are described in Williams’ Civil Procedure as breaking new ground in Australia and “putting Victoria at the forefront of civil justice reform throughout the common law world”. The Act’s purpose was to reform and modernise the laws, practice, procedure and processes relating to civil proceedings in Victorian courts. The need to ensure that costs were reasonable and proportionate was a core objective of these civil procedure reforms. In respect of the “overarching obligation” provisions discussed below, the Act largely adopted the recommendations of the Victorian Law Reform Commission in its Civil Justice Report, published in May 2008. That Report was itself heavily influenced by Lord Woolf’s review of the civil justice system in England and Wales, in which he concluded that an unacceptable situation had arisen out of “unmanaged adversarial procedure”.
…
One of the main purposes of the Act is “to provide for an overarching purpose in relation to the conduct of civil proceedings to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute”. The Act provides for “overarching obligations for participants in civil proceedings to improve standards of conduct in litigation”, and “expanding the powers of the courts in relation to costs in relation to civil proceedings”.[43]
[42](2013) 41 VR 302 (‘Oswal’).
[43]Ibid [5]–[6], [8] (citations omitted).
The Court’s powers to enforce the ‘overarching purpose’
Section 8 of the Civil Procedure Act requires the court to give effect to the overarching purpose in the exercise of its powers, or in the interpretation of those powers, whether those powers are part of the Court’s:
·Inherent jurisdiction;
·Implied jurisdiction;
·Statutory jurisdiction; or
·Jurisdiction arising, or derived, from the common law or any procedural rules or practices of the court.
Section 9 of the Civil Procedure Act deals with the Court’s powers to further the overarching purpose. It relevantly states:
9 Court powers to further the overarching purpose
(1)In making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects—
…
(c)the efficient conduct of the business of the court;
(d)the official use of judicial and administrative resources;
…
(f)the timely determination of the civil proceeding;
…
(2)For the purposes of subsection (1), the court may have regard to the following matters—
(a)the extent to which the parties have complied with any mandatory or voluntary pre litigation processes;
…
(c)the degree of promptness with which the parties have conducted the proceeding, including the degree to which each party has been timely in undertaking interlocutory steps in relation to the proceeding;
…
(e)the degree to which each person to whom the overarching obligations apply has complied with the overarching obligations in relation to the proceeding;
(f)any prejudice that may be suffered by a party as a consequence of any order proposed to be made or direction proposed to be given by the court;
…
The Civil Procedure Act includes:
16 Paramount duty
Each person to whom the overarching obligations apply has a paramount duty to the court to further the administration of justice in relation to any civil proceeding in which that person is involved, including, but not limited to —
(a) any interlocutory application or interlocutory proceeding;
(b) any appeal from an order or a judgment in a civil proceeding;
…
17 Overarching obligation to act honestly
A person to whom the overarching obligations apply must act honestly at all times in relation to a civil proceeding.
18 Overarching obligation—requirement of proper basis
A person to whom the overarching obligations apply must not make any claim or make a response to any claim in a civil proceeding that—
(a) is frivolous; or
(b) is vexatious; or
(c) is an abuse of process; or
(d)does not, on the factual and legal material available to the person at the time of making the claim or responding to the claim, as the case requires, have a proper basis.
…
29 Court may make certain orders
(1)If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to —
(a)an order that the person pay some or all of the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation; (emphasis added)
Conclusion
There is a distinction between legal costs or other costs or expenses of any person referred to in s 29(1)(a) of the Civil Procedure Act. Given that the remuneration and expenses properly incurred by the liquidators were expenses of the company as referred to in s 556(de) of the Corporations Act, I conclude that s 29(1)(a) is sufficiently wide to give this court the imprimatur to order where such costs or expenses (remuneration) ought to lie.
In Oswal it was said: [44]
[22]The Act does not merely reaffirm the existing and inherent powers of the court but provides a powerful indication of the will of the Parliament about the values sought to be achieved by the way in which cases are managed in the courts and the balances that have to be struck…
…
[24]Section 29 was considered by Dixon J in Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd (No 4), his Honour concluding that the jurisdiction has both compensatory and punitive elements where there is a finding of contravention of an obligation. A number of judges at first instance have emphasised that the Act requires the Court to be proactive and innovative in its approach to achieve its objects….
[44](2013) 41 VR 302 (citations omitted)
I am satisfied that at the time of seeking to be substituted such application by Locker Group did not have a proper basis given the breach of the order with respect to service. Further, by the failure to bring the late service to the attention of the Court, it failed to discharge its ‘paramount’ duty to the Court. Accordingly, the powers set out in s 29(a) of the Civil Procedure Act are enlivened. I plan to be proactive in my approach and make the following orders:
1. Locker Group pay the reasonable remuneration and expenses of the liquidators.
2. To the extent that such remuneration and expenses have been paid, Locker Group reimburse the Company with respect to the same.
3. Locker Group pay the costs of an incidental to this application dealing with that issued.
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