Newtronics Pty Ltd v Gjergja
[2008] VSCA 117
•27 June 2008
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No 9760 of 2005
| NEWTRONICS PTY LTD (Receivers and Managers Appointed) (In Liquidation) (ACN 061 493 516) | Appellant |
| v | |
| GEORGIO SERGIO GJERGJA | First Respondent |
| and | |
| GARY ANDREW TESCHER | Second Respondent |
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JUDGES: | MAXWELL ACJ, DODDS-STREETON JA and OSBORN AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 13 May 2008 | |
DATE OF JUDGMENT: | 27 June 2008 | |
MEDIUM NEUTRAL CITATION: | [2008] VSCA 117 | |
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CORPORATIONS - (CTH) Corporations Law ss 1317HD(1)-(2), 1322(4)(d) – Whether six year limitation period specified in s 1317HD(2) of Corporations Law for corporation to commence recovery proceedings under s 1317HD(1) may be extended pursuant to s 1322(4)(d) – Whether unmodified limitation period jurisdictional - David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, Emanuele v Australian Securities Commission (1997) 188 CLR 114 and BP Australia Ltd v Brown (2003) 58 NSWLR 322 considered.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J W Burnside QC and | Holding Redlich |
| For the First Respondent | Mr A C Archibald QC and | Arnold Bloch Liebler |
| For the Second Respondent | No counsel appeared | Cornwall Stodart |
MAXWELL ACJ:
I have had the advantage of reading in draft the reasons for judgment of Dodds-Streeton JA. For the reasons given by her Honour, I too would dismiss the appeal.
DODDS-STREETON JA:
Introduction
The issue in this appeal is whether the six year limitation period prescribed by s 1317HD(2) of the Corporations Law 1989 (Cth) (‘the Law’) for a recovery action under s 1317HD(1) may be extended pursuant to the general power to extend time in s 1322(4)(d) of the Law.
The appellant, Newtronics Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (’Newtronics’), appeals from the judgment of a judge of the trial division delivered on 28 June 2007. Section 1317HD(1) of the Law, in force from 1 February 1993 to 1 March 2000, provided that a corporation could bring proceedings to recover profits or compensation for loss resulting from the contravention of a civil penalty provision. Section 1317HD(2) provided that ‘proceedings under this section may only be begun within 6 years after the contravention.’ The trial judge dismissed Newtronics’ application for an extension of time pursuant to s 1322(4)(d) to bring a proceeding under s 1317HD(1) against its former directors, the respondents, Giorgio Gjergja and Gary Tescher, based on their alleged breach of the duty to exercise care and diligence under s 232(4), a civil penalty provision. He also ordered the appellant to pay the respondents’ costs of the application.
Background
The respondents were directors of Newtronics, which carried on the business of designing, manufacturing and selling electronic controllers.
In late 1994, Newtronics supplied a customer, Seeley International Pty Ltd (‘Seeley’), with electronic components. Seeley subsequently alleged that the electronic components supplied by Newtronics were negligently designed and constructed and, when incorporated into Seeley’s airconditioners, caused a fire which burnt down three houses.
In a Federal Court proceeding issued in 1998, Seeley successfully sued Newtronics for damages. By a judgment given on 18 January 2002, Seeley was awarded $8.9 million plus interest (later fixed at $5 million) and costs (later fixed at $6 million).
In February 2002, Newtronics was wound up and a liquidator was appointed.
In December 2005, Newtronics issued a proceeding in this Court against the respondents. It alleged that the respondents, as directors, knew or ought to have known that the components it supplied to Seeley were defective or might fail, yet (in contravention of s 232(4) of the Law, and their general law duty as directors) they took no steps to rectify the position or to withdraw the defective product.
Newtronics alleged that, as a result of the respondents’ breach of statutory, common law and equitable duties, it suffered the loss incurred by the Federal Court judgment.
Newtronics alleged that as the respondents had contravened s 232(4) (a civil penalty provision under Part 9.4B of the Law), they were liable to pay compensation for the loss under s 1317HD(1) of the Law. The respondents contended that the statutory cause of action was barred because the six year time limit imposed by s 1317HD(2) of the Law for beginning proceedings under s 1317HD(1) had expired. Newtronics sought, pursuant to s 1322(4)(d), an extension nunc pro tunc of the limitation period prescribed under s 1317HD(2).
The legislation
Sections 232(4) and 1322(4) of the Law were enacted in 1990. Both provisions remained unchanged at the date of the alleged contraventions. Section 1317HD, however, was not yet in force in 1990. Its predecessor was, at that date, contained in s 232(8), which provided that where a corporation suffered loss or damage as a result of a contravention, it could recover from a court of competent jurisdiction. Section 232(8) did not, however, fix any time limit for the commencement of the recovery proceeding.
Section 1322 of the Law relevantly provided:
…
(4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Law, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
….
(d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Law or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;
and may make such consequential or ancillary orders as the Court thinks fit.
Part 9.4B of the Law (which included s 1317HD) was introduced by the Corporate Law Reform Act 1992 (Cth). Section 1317DA specified that s 232(4) was a civil penalty provision. Part 9.4B provided three avenues by which a company could recover compensation for loss occasioned by a contravention of a civil penalty provision.
Section 232(4) of the Law, as in force at the date of the respondent’s alleged breaches, provided:
In the exercise of his or her powers and the discharge of his or her duties, an officer of a corporation must exercise the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporation’s circumstances.
Part 9.4B of the Law contained the following relevant provisions:
Section 1317HD provided:
(1)Where a person contravenes a civil penalty provision in relation to a corporation, the corporation may, by proceedings in a court of competent jurisdiction, recover from the person, as a debt due to the corporation:
(a) if that or another person has made a profit because of the act or omission constituting the contravention-an amount equal to the amount of that profit; and
(b) if the corporation has suffered loss or damage as a result of that act or omission-an amount equal to the amount of that loss or damage;
whether or not:
(c) the first-mentioned person has been convicted of an offence in relation to the contravention; or
(d) a civil penalty order has been made against the first-mentioned person in relation to the contravention.
(2)Proceedings under this section may only be begun within 6 years after the contravention.
Section 1317HE provided:
Sections 1317HA, 1317HB and 1317HD:
(a) have effect in addition to, and not in derogation of, any rule of law about the duty or liability of a person because of the person's office or employment in relation to a corporation; and
(b) do not prevent proceedings from being instituted in respect of a breach of such a duty or in respect of such a liability.
Section 1317DA provided:
1317DA. Each of the following provisions of the Corporations Law of this jurisdiction is a civil penalty provision:
Subsections 232 (2), (4), (5) and (6);
Subsections 243ZE (2) and (3);
Subsection 318 (1);
Section 588G.
Division 2 of Part 9.4B provided for civil penalty orders. Under s 1317EA, the Court could make a civil penalty order if satisfied that a person had contravened a civil penalty provision. It could also prohibit the contravener from managing a corporation and impose a fine.
Section 1317EB provided that the Commission, its delegate or a person authorised by the Minister could make an application for a civil penalty order.
Section 1317EC provided:
An application for a civil penalty order may be made within 6 years after the contravention.
Section 1317HA provided that, on an application for a civil penalty order, the Court, if satisfied that the corporation suffered loss or damage as a result of the contravention, could order the contravener to pay the corporation compensation.
By s 1317HA(2), the corporation was (save in specified circumstances) entitled to intervene in a civil penalty application. By s 1317HA(3), an intervening corporation was entitled to be heard only if the Court were satisfied that the person had committed the contravention and only on the question whether the Court should make a compensation order.
A second avenue provided by Part 9.4B for a corporation to recover compensation for loss from contravention of a civil penalty order was in the context of criminal proceedings for an offence constituted by the relevant contravention. A civil penalty order application could be made in respect of the same contravention, but, by s 1317GB, it would be stayed until the criminal proceedings and all related appeals and review applications were finally determined or disposed of.
By s 1316 (included in Part 9.4 entitled ‘Offences generally’), a criminal proceeding in respect of an offence constituted by a contravention was required to be instituted within five years after the act or omission, or, with the Minister’s consent, at any later time.
By ss 1317GC to 1317GK, Part 9.4B provided for a number of contingencies arising from the interaction of a civil penalty application with criminal proceedings in respect of the same conduct.
Broadly, if, in the criminal proceedings,
(a)the person were acquitted, but was declared to have committed the offence; or
(b)there was no declaration that the person committed the offence or that the evidence in the committal proceeding would not satisfy a Court in an application for a civil penalty order;
then an application for a civil penalty order, which was stayed by reason of the criminal proceedings, could proceed or could otherwise be made and proceed as if the criminal proceedings had never begun.
Therefore, under the civil penalty application regime, a corporation could potentially, but not certainly, receive the benefit of an order for recovery (whether pursuant to its own intervention or otherwise) at a date later than six years after the contravention, because there was no time limit on when its intervention could occur ,or an order could be made, during the course of the civil penalty application. The absence of the word ‘only’ in the limitation provision (s 1317EC) indicated that s 1322(4)(d) could apply to extend the specified six years limitation period for a civil penalty application. Further, because a criminal proceeding could result in an indefinite stay of a civil penalty application which could, in various circumstances, ultimately be resumed or commenced, then a company could intervene, or a recovery order could otherwise be made in its favour, much later than six years after the conduct constituting the contravention.
Similarly, although a five year limitation period was prescribed by s 1316 for commencing a criminal proceeding, the Minister could allow a longer time, and the application for compensation under s 1317HB by the prosecutor, or perhaps an order of the Court of its own motion, could be made much later than six years after the occurrence of the contravening conduct.
The third route provided by Part 9.4B for recovery by a corporation in relation to the contravention of a civil penalty provision was that afforded by s 1317HD, which (unlike recovery in the context of a civil penalty application or criminal proceedings in respect of the contravention) was not limited to recovery of compensation for loss, but extended to the recovery of profit made because of the contravening conduct.
The Authorities
In Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia[1] (‘Anthony Hordern’), the High Court majority considered that a provision which conferred a power and itself specified the mode of its exercise, conditions and restrictions, excluded the operation of ‘general expressions in the same instrument’. Gavan Duffy CJ and Dixon J, in their joint judgment, stated that:
[1](1932) 47 CLR 1.
when [a section] expressly gives a special power, subject to limitations and qualifications, surely it must be understood to mean that the Court shall not exercise an unqualified power to do the same thing. When the Legislature explicitly gives a power by a particular provision which prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed, it excludes the operation of general expressions in the same instrument which might otherwise have been relied upon for the same power.[2]
Dixon J subsequently stated, in R v Wallis; Ex parte Employers’ Association of Wool-Selling Brokers & H V McKay Massey Harris Pty Ltd[3] (‘R v Wallis’), that:
…an enactment in affirmative words appointing a course to be followed usually may be understood as importing a negative, namely, that the same matter is not to be done according to some other course.
This applies especially when the power or duty conferred or imposed is qualified by some condition, limitation or direction.
[2]Ibid, 7.
[3](1949) 78 CLR 529, 550.
In David Grant & Co Pty Ltd v Westpac Banking Corporation[4] (‘David Grant’), the High Court held that s 1322(4)(d) of the Law did not apply to extend the time prescribed to apply to set aside a statutory demand pursuant to s 459G of the Law, which provided:
[4](1995) 184 CLR 265.
(1)A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2)An application may only be made within 21 days after the demand is so served.
(3)An application is made in accordance with this section only if, within those 21 days:
(a)an affidavit supporting the application is filed with the Court; and
(b)a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
Gummow J (with whom Brennan CJ, Dawson, Gaudron and McHugh JJ) agreed, stated:
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.
Paragraph (a) of s 1322(4) confers upon the court a broad authority to declare that any proceeding purporting to have been instituted under the Law is not invalid by reason of any contravention of a provision of the Law. Again, para (d) confers upon the court a broad authority to extend the period for the taking of any step under the Law or any step in relation to a corporation. 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 in the Law by the 1992 Act, 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. The imposition of such a restriction is consistent with the scheme of the 1992 Act.[5] (Citations omitted)
[5]David Grant & Co Pty Ltd v Westpac (1995) 184 CLR 265, 275-6.
His Honour concluded that the temporal requirements in subsections (2) and (3) of s 459G operated to define the jurisdiction of the court in respect of the application. They attached ‘a limitation or condition upon the authority of the court to set aside the demand’.[6] In such a setting, the word ‘may’ did not indicate that a discretion was conferred. Rather, it was necessary to read the relevant phrase as a whole. Gummow J stated that:
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 s459G. An integer or element of the right created by s 459G is its exercise by application made within the time specified.[7]
[6]Ibid, 277.
[7]Ibid.
Gummow J considered that the goals of the particular legislative regime supported the unmodified application of the time limit specified in s 459G(2). He observed that the statutory demand procedure required debtor companies to raise genuine disputes at an early stage in order to avoid the prolongation of proceedings due to alleged defects in the demand. Further, the consequences of the presumption of insolvency supported the conclusion that the time prescribed by s 459G ‘should not be treated as supplemented or qualified by the operation of s 1322(4)’.[8] He concluded that the prescribed time limit was an essential integer of jurisdiction.
[8]Above n 5, 278.
His Honour considered that the inclusion in the particular regime of specific provisions conferring an express power to extend time was ‘significant’.
In Emanuele v Australian Securities Commission (‘Emanuele’),[9] the ASC applied to wind up a group of companies in insolvency under s 459P of the Law. It failed first to obtain the leave of the Court, as required by s 459P(2) of the Law, which provided that an application by certain categories of person, including the ASC, ‘may only be made with the leave of the Court’.
[9](1997) 188 CLR 114.
Section 459P(5) provided that ‘[e]xcept as permitted by this section, a person cannot apply for a company to be wound up in insolvency.’
At first instance, despite the failure to obtain leave, winding up orders were made.
On an appeal by the companies’ directors, the Full Federal Court (which was not referred to the then recent High Court decision in David Grant) took the view that the requirement for leave was procedural. It granted leave nunc pro tunc and dismissed the appeal.
The appellants appealed to the High Court. They contended that, consistently with David Grant, the ASC lacked standing, which depended on advance leave. If the failure to obtain it could be cured retrospectively, the words ‘only’ and ‘cannot’ in s 459P would be deprived of effect.
The High Court majority (Toohey, Dawson and Kirby JJ) held that the failure to obtain leave was a procedural defect which could be cured pursuant to s 1322(4). Despite the similar language used in ss 459P and 459G, the former provision was not the source of a right of action and the High Court’s analysis in David Grant that the ‘temporal requirement [of s 459G] operated to define the jurisdiction of the Court’ was therefore distinguishable.
Toohey J (with whom Dawson J agreed) acknowledged a degree of conflict in the relevant authorities on provisions which prohibited the commencement of proceedings without leave.
One line of authorities, which his Honour preferred, was exemplified by Re Testro Bros Consolidated Ltd[10] (‘Testro’) in which Sholl J held that the requirement for such leave was aimed at conferring ‘control of a directory character on the court’, rather than ‘setting up an absolute bar like a statute of limitations’,[11] so that an absence of leave did not go to jurisdiction.
[10][1963] VR 18.
[11]Re Testro Bros Consolidated Ltd [1963] VR 18, 35.
Toohey J observed that the Federal Court’s power to make an order for winding up in insolvency was not conferred by s 459P. Other provisions were the source of the Federal Court’s jurisdiction. He stated:
Not only is s 459P(2) not a jurisdiction conferring provision, it does not create a cause of action or go to the relief that may be granted.[12]
[12]Emanuele v Australian Securities Commission (1997) 188 CLR 114, 128.
His Honour recognised ‘force’ in the submission that:
David Grant should be distinguished from the present case because it was decided in relation to a temporal provision which has certain consequences, whereas here there is a temporal requirement that the court be satisfied that it is prima facie an appropriate case to wind up a company and there is less a significance in whether that is done before or after leave is given.[13]
[13]Ibid, 131.
Toohey J observed that the case before him was more closely analogous to Testro than to David Grant. He cited[14] with approval Lindgren J’s statement in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd[15] that:
the distinction is between a situation in which there is a time limit within which the Court must be approached if an application for an order of a particular kind is to be made at all (s 459G), and a situation in which a proceeding is already under way and is subject to the Court’s control and in which a timely but deficient order has been made. [16]
[14]Ibid.
[15](1995) 61 FCR 385.
[16]Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385, 406.
Toohey J considered that s 459P(3) required the court to exercise a supervisory role. He also recognised that policy considerations (including the need to accommodate especially urgent ex parte applications for which it would be inconvenient to obtain leave beforehand) favoured a liberal view of the requirements of s 459P.
Dawson J agreed that s 459P of the Law did not confer jurisdiction on the Federal Court to make a winding up order. It only identified the parties who could apply and required that some parties must obtain leave. He stated:
[t]he failure to obtain leave was a mere defect or irregularity in the exercise of that jurisdiction. It did not affect the validity of the order made …[17]
His Honour observed that the defect or irregularity could be cured by granting leave nunc pro tunc ‘[s]ince the failure to obtain leave was procedural and did not go to jurisdiction’.[18]
[17]Emanuele v Australian Securities Commission (1997) 188 CLR 114, 125.
[18]Ibid.
Kirby J also considered that the failure to obtain prior leave was not fatal. He observed that the High Court’s approach in David Grant, whether properly characterised as jurisdictional or merely ‘insistent’, was ‘readily distinguishable’. While s 459P shared the ‘unusually emphatic’ language of s 459G, there were important differences.[19] Section 459G conferred private rights against companies and the explanatory material indicated that it was part of a complete code for which a degree of strictness was contemplated.[20] In contrast, s 459P did not confer private rights. The right to apply for an order arose elsewhere. The settled practice pursuant to the line of authority exemplified by Testro was well known to the drafters[21] and the requirement of the Court’s leave was properly viewed as ‘there for the superintendence of the proceedings by the Court’.[22]
[19]Ibid, 149-150.
[20]Ibid, 156.
[21]Ibid, 154-156.
[22]Ibid, 157.
In BP Australia Ltd v Brown[23] (‘BP Australia’), the Court of Appeal of New South Wales held that the time limit for a liquidator to apply under s 588FF(1) of the Corporations Act 2001 (Cth) (‘the Act’) for orders avoiding antecedent transactions (such as unfair preferences or uncommercial transactions) specified in s 588FF(3) could not be extended under s 1322(4)(d). Section 588FF(3) provides:
588FF(3) An application under subsection (1) may only be made:
(a) within 3 years after the relation-back day; or
(b) within such longer period as the Court orders on an application under this paragraph made by the liquidator within those 3 years.
[23](2003) 58 NSWLR 322.
In BP Australia, the liquidators of certain companies failed to make application to recover payments made in allegedly voidable transactions by a creditor within the three year period specified in s 588FF(3). Spigelman CJ (with whom Mason P and Handley JA agreed) observed that the reasoning in David Grant had been applied to s 588FF(3) (which made a comparable use of the word ‘only’) in several decisions at first instance.
The trial judge in BP Australia had, however, distinguished the case from David Grant on the basis of difference in the legislative policies underlying Part 5.4 and Part 5.7B of the Act. He had concluded that Part 5.7B did not constitute an exclusive code and the three year time limit was not an integral part of any wider legislative structure. It was not ‘an inescapable time limit regardless of individual circumstances’.[24]
[24]Spigelman CJ in BP Australia Ltd v Brown (2003) 58 NSWLR 322, 335 citing [34] of Austin J’s reasons in David Grant and Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, 401-402.
Spigelman CJ recognised that the relevant principle of statutory interpretation was that stated by Gavan Duffy CJ and Dixon J in Anthony Hordern and Dixon J in R v Wallis. He considered that, in one sense, the section to be construed on appeal was not s 588FF(3) but s 1322(4)(d). The flexibility conferred by s 1322 could, in some circumstances, be inappropriate, although, as a remedial provision, s 1322 was to be construed liberally and to be read down only where the specific power was intended to cover the field with regard to the sub-regime under consideration.
Spigelman CJ stated that:
… the use of the word “only” is not of itself determinative. (See, eg, Emanuele.) Its force is affected by the relevant statutory scheme considered as a whole, as the analysis in David Grant v Westpac shows.[25]
[25]BP Australia Ltd v Brown (2003) 58 NSWLR 322, 341.
His Honour considered that the fact that the time period identified in paragraph (a) of s 588FF(3) was subject to a specific power of extension under paragraph (b) revealed ‘a comprehensive provision for extension of time which, in my opinion, is intended to cover the relevant field to the exclusion of s 1322.’ [26]
[26]Ibid.
He also stated that where a ‘sub-regime’ made its own particular provision for flexibility, it was ‘particularly likely’ that the flexibility provided by s 1322 would be inappropriate.
On an analysis of the scope, purpose and legislative history of Part 5.7B, Spigelman CJ considered that the provision for extension in s 588FF(3)(b) was intended to cover the field.
He acknowledged that the position was not as clear as that in David Grant, because the various kinds of transactions subject to avoidance under Part 5.7B lacked a single overriding rationale. The principle of fairness was, however, central. The longer a transferee had retained a particular benefit, the more disruptive its forced surrender would be. His Honour observed that the Harmer Report[27] advocated a single time span and a new reduced limitation period of three years, which represented a substantial change to the pre-existing scheme and was part of a broader rebalancing of the conflicting interests involved.[28] He concluded that the policy considerations were not dissimilar to those arising with respect to periods of limitation generally.
[27]Australian Law Reform Commission, General Insolvency Inquiry, Report No 45 (1988) vol 1 (‘the Harmer Report’).
[28]BP Australia Ltd v Brown (2003) 58 NSWLR 322, 344.
The Judgment below
The learned trial judge considered the history of ss 1322, 232(4) and 1317HD. He observed that s 1322(4) was a general, curative provision which must operate in conjunction with other, more specific provisions of the Law. In analysing its interaction with s 1317DA(2), he relied principally on David Grant.
He observed that the High Court there held that ‘the force of the term “may only” [in s 459G(2)] is to define jurisdiction’ and considered that the prescribed time limit was an essential integer or condition of the new right conferred by s 459G.
The trial judge, while alive to other relevant factors, considered the text of s 1317HD(2) to be the starting point and the emphatic import of the word ‘only’, and its location, of ‘primary importance’.
He noted that the High Court in David Grant considered that, read in context, the word ‘only’ in s 459G(2) would be deprived of effect or utility if s 1322(4) authorised the court to extend the specified period. Therefore, it was to be read as ‘no application may be made unless’ within the prescribed time.
The trial judge observed that in David Grant, the High Court placed weight on the fact that Part 5.4 of the Law contained its own powers and procedures for mitigating hardship, and provided some scope for an extension of the application or a winding up order. It also considered the statutory consequences, which told against the application of the general extension power. His Honour noted that in BP Australia, Spigelman CJ considered that the word ‘only’ was not determinative in the context of a temporal limitation provision, and that the relevant statutory scheme demonstrated powerful policy reasons to limit the time to bring proceedings to the prescribed period. His Honour further observed that the majority in Emanuele endorsed a distinction between a jurisdictional limit and a procedural matter. He stated that:
[T]he task of the Court when considering a provision such as s 1317HD in a case such as the present is not limited to a textual analysis of the section. The Court is concerned with other matters, such as the role that the specific provision plays in that part of the Law in which it is found.[29]
[29]Newtronics Pty Ltd v Gjergja & Anor (Unreported, Supreme Court of Victoria, Byrne J, 28 June 2007) [26].
The omission of the word ‘only’ from s 1317EC (an analogous provision to s 1317HD in the same Part) and the terms of the Explanatory Memorandum[30] fortified the trial judge’s view that the time limit in s 1317HD(2) could not be extended.
[30]Explanatory Memorandum, Corporate Law Reform Bill (No 2) 1992 (Cth).
The Explanatory Memorandum also, in his view, supported that conclusion. It stated that s 1317EC was to provide that an application for a civil penalty order may be made within six years after the contravention. [31] In contrast, the Explanatory Memorandum stated of s 1317HD that:
An application may be made under the section irrespective of whether the person has been convicted of an offence, or a civil penalty order has been made, in relation to the contravention, but must be made within six years of the contravention. (emphasis added) [32]
[31]Ibid, [139].
[32]Ibid, [185].
His Honour also considered the fact that s 1322 was a prior, general provision told against its application to s 1317HD(2).
He acknowledged that the present case revealed a distinguishing feature from David Grant and BP Australia in that, unlike ss 459D and 588FF, Part 9.4B of the Law contained no provision to extend time or otherwise alleviate any hardship. While he acknowledged that it appeared ‘at first blush’[33] anomalous if s 1322(4)(d) applied to s 1317EC, but not to s 1317HD, ultimately he was not persuaded that a different legislative treatment of the limitation period was inexplicable or irrational.
[33]Newtronics Pty Ltd v Gjergja & Anor (Unreported, Supreme Court of Victoria, Byrne J, 28 June 2007) [29].
He concluded that a different approach to the extension or potential length of the time in which a recovery order could be made may be explicable because an application under s 1317EC could be made only by the Commission or a delegate of the Minister and could be directed towards protecting the commercial community against delinquent directors. In contrast, the corporation itself could initiate a proceeding under s 1317HD, without reference to any supervisory or government agency. It was therefore not surprising that such a civil or statutory right, additional to common law or equitable rights, was subject to a time limitation for commencing a proceeding to enforce it.
His Honour stated:
Unlike a criminal proceeding and a civil penalty proceeding under Part 9.4B, a proceeding under s. 1317HD is one brought essentially to resolve a dispute between the corporation and its director. These disputes are not restricted to claims by insolvent corporations or corporations under external administration. There is a good policy reason for bringing such disputes to an end so that each of the corporation and the director can focus on their commercial future. In general, this is an important reason for the imposition of a limitation period in any commercial dispute. [34]
[34]Paragraph [35] of the reasons for decision.
His Honour implicitly, if not expressly, took the view that the absence of any provision for extension or amelioration in Part 9.4B was not a sufficiently material ground for distinguishing the case before him from David Grant, with which it was otherwise substantially ‘on all fours’.
His Honour, in deference to the parties’ submissions, also considered the question whether, had an extension been available, it should have been granted. He concluded that he would not have exercised the discretion to extend time, due to a number of specified circumstances.
Grounds of Appeal
The Notice of Appeal states:
1.The Trial judge erred in concluding that s 1322(4)(d) of the Corporations Act is not available to extend the time fixed by s 1317HD(2) of the Corporations Law (as taken by the operation of section 1401(2) of the Corporations Act to be included in the Corporations Act).
2.The Trial Judge should have held that s 1322(4)(d) of the Corporations Act is available to extend the time fixed by s 1317HD(2) of the Corporations Law (as taken by the operation of section 1401(2) of the Corporations Act to be included in the Corporations Act).
3.The Trial Judge should have exercised his discretion under s 1322(4)(d) of the Corporations Act to extend the time fixed by s 1317HD(2) of the Corporations Law (as taken by the operation of section 1401(2) of the Corporations Act to be included in the Corporations Act) within which to commence this proceeding to the date of the Writ.
The appellant contended that the approach of the High Court in David Grant, Emanuele and other relevant authorities established that the words ‘may only’ did not necessarily exclude the application of s 1322(4)(d) to extend a time limit prescribed in a specific provision of the Law. Rather, the pre-eminent consideration was whether restriction to the time limit specified in the specific provision was consistent with its effective and harmonious operation within the discrete statutory regime as a whole. Even in relation to a limitation period prescribed in a provision conferring a right of action, the words ‘may only’ would not preclude the application of s 1322(4)(d) where the specific provision would otherwise operate capriciously.
Counsel for the appellant contended that, if David Grant established that compliance with a prescribed time limit were a precondition of the jurisdiction conferred by a particular provision, it nevertheless begged the question whether the prescribed time limit essential to jurisdiction should be read literally, or alternatively as subject to the application of the general power in s 1322(4)(d).
The appellant argued that in the present case, if s 1322(4)(d) did not apply, s 1317HD would operate anomalously and irrationally within the context of Part 9.4B. Of the three avenues established by Part 9.4B for a company’s recovery of compensation from a contravener of, inter alia, s 232(4) of the Law, s 1317HD alone would be subject to a draconian six year limitation period, with no possibility of extension irrespective of the merits of the claim or the reasons for delay. Unlike the legislative regimes considered in David Grant and BP Australia, there were no internal provisions for extension of the time limit in s 1317HD(2) or other amelioration in Part 9.4B. In contrast to the severity of an immutable limitation period under s 1317HD (if an extension under the remedial provision were unavailable), the other two avenues for recovery under Part 94B contemplated recovery over potentially much longer or extended periods.
The appellant submitted that, viewed in context, an absolute extinction of the right to recover under s 1317HD after six years, inconsistently with the potentially longer time spans available under the other two avenues, was capricious.
The appellant argued that a cause of action, such as that conferred by s 1317HD, was distinguishable from the application under s 459G considered in David Grant. Counsel submitted that it would be most unusual for a cause of action to be inexorably shut off at the expiry of the limitation period, with no potential for an extension. Such fundamentally different treatment of a proceeding under s 1317HD would generate considerable injustice, given that it, uniquely, conferred a right of action on the corporation, which could be incapable of acting within the prescribed time limit if the contraveners themselves maintained control. The fact that the commencement of proceedings under s 1317HD(1) was wholly dependent on action by the company thus aggravated the anomalous application of a strict time limit.
The appellant conceded that the use of the word ‘only’ in s 1317HD(2) was emphatic. It was not, however, determinative and the failure to employ the word ‘only’ in relation to another limitation period in the same Part (s 1317EC) was explicable by the fact that the Part itself provided for an exception (in s 1317GF(5)) to that time limit.
The respondents, in contrast, argued that, by its language and character, s 1317HD was on all fours with the provision analysed in David Grant and conferred jurisdiction in the relevant sense. The words ‘may only’ were used in the context of a temporal provision prescribing the conditions of the right. There was no valid distinction between the cause of action conferred by s 1317HD and the ‘new right’ the subject of consideration in David Grant.
The respondents submitted that the commentary in the Explanatory Memorandum indicated that (consistently with the omission of the word ‘only’ in s 1317EC) a different treatment of the time limits in ss 1317EC and 1317HD(2) was intended.
In my opinion, the authorities support the respondents’ construction.
The approach of the High Court in David Grant indicates that the emphatic prescription of a limitation period in the very provision which confers a right of action will ordinarily establish the jurisdictional character of the unmodified time limit, compliance with which is a pre-condition of the Court’s power. That reasoning could be seen as an application of the principle expressed by Dixon J in R v Wallis. It also accords with the distinction between jurisdictional and procedural conditions drawn by the majority in Emanuele, and Toohey J’s apparent attribution of a jurisdictional character to limitation periods prescribed in provisions which constitute the source of curial power.
Nevertheless, in David Grant, Gummow J considered a number of significant factors. Because all of those factors supported the conclusion that the specific time limit could not be supplemented by the general remedial provision, it was unnecessary to specify whether any particular factor was decisive or of greater weight. Gummow J did not, however, appear to consider that the words ‘may only’ sufficed, in isolation, to determine whether the general power of extension under s 1322(4)(d) applied. Further, he did not treat as absolute the broad principle that a subsequent specific provision, which both confers and regulates the exercise of a power, will exclude the operation of a prior, general power.
His Honour also gave considerable weight to other factors, including the character, goals and intended operation of the statutory scheme, as reflected in the Explanatory Memorandum , together with the interaction of its discrete provisions.
Gummow J’s jurisdictional analysis in David Grant thus appears ultimately to depend on its consistency with the effective operation of the provision in question, in accordance with significant policy goals. If that be correct, a capricious or irrational outcome could, as the appellants submitted, displace the view that compliance with the unmodified time limit specified in a section is an integer of a cause of action it confers.
The appellant was nevertheless unable to point to any case in which a temporal limitation provision using the words ‘may only’, or similarly emphatic language, was held to be subject to s 1322(4)(d). Emanuele, on which the appellant particularly relied, does not, on analysis, assist it. The majority in Emanuele distinguished David Grant (despite the similarity of language) essentially because the provision in Emanuele was not, on any view, the source of the Court’s jurisdiction to make an order and did not confer private rights of action, which arose elsewhere in the legislation. Rather, it was a provision dealing with leave. Toohey J acknowledged that consistency with the jurisdictional analysis in David Grant would require a different approach to a temporal limitation provision.
In summary, while, in my view, emphatic language (such as the phrase ‘may only’) is not, according to the High Court's approach, decisive in this context, its inclusion in a limitation period attached to the conferral of a right of action is a potent indication that the general remedial power in s 1322(4)(d) may be unavailable to supplement the prescribed period. A compelling demonstration that the exclusion of s 1322(4)(d) would defeat statutory goals, or subvert the intended operation of the provision within the sub-regime, would nevertheless displace that conclusion.
In my opinion, an analysis of s 1317HD within the context of its statutory sub-regime reveals only one material feature distinguishing it from the legislation analysed in David Grant and BP Australia. There is an absence of any internal provision for extension of the time to commence a proceeding under s 1317HD, either within s 1317HD itself or Part 9.4B in which it operates. In all other material respects, the present case is on all fours with David Grant.
As in David Grant, s 1317HD was a specific provision which post-dated the general remedial provision in s 1322. The language ‘may only’ in s 1317HD(2) is used in relation to the limitation period attached to a cause of action, within the provision that confers it. The peremptory language appears to have been used deliberately, as reflected by its omission from an otherwise analogous provision within the relevant Part. While the omission of the word ‘only’ from s 1317EC is consistent with the existence of the exception in s 1317GF(5), the language of the Explanatory Memorandum confirms that the distinctively mandatory operation of ‘only’ in s 1317HD(2) was intended. There is, in my opinion, no basis for distinguishing the cause of action conferred by s 1317HD from the ‘new right’ introduced by s 459G, considered in David Grant. Section 1317HD is the source of the Court’s power to make an order in, and the company’s entitlement to institute, the statutory recovery proceeding.
Further, I am not persuaded that the exclusion of s 1322(4)(d) from s 1317HD(2) would result in its capricious and unjust operation within Part 9.4B, or is otherwise inconsistent with statutory goals. Unlike Part 5.4, Part 9.4B does not embody a special scheme which depends on speedy determination of applications. In providing for various proceedings in relation to the contravention of civil penalty provisions, it nevertheless establishes limitation periods which are underpinned by the policy goals discussed by Spigelman CJ in BP Australia. There is, as the respondents contended, an obvious explanation for different treatment, springing from significant differences in relation to the nature of the proceedings, standing and the extent of the potential recovery under the various avenues provided by Part 9.4B. The first two avenues for recovery were public-interest oriented. The company had no standing to bring the proceedings in which an application for recovery could be made, and their commencement was outside the company's control. In contrast, the company alone was entitled independently to commence proceedings under s 1317HD. The character of the recovery action under s 1317HD was also different, because it extended beyond mere compensation for loss to include the recovery of profit, whereas under the first two avenues, recovery was limited to compensation for loss. The distinctions constituted a sufficient rational basis for different treatment.
Further, the potential variation in the time for seeking recovery under the various avenues depends not only on whether the applicable limitation period is extendable, but also on the fact that a compensation order may be sought at any time in the context of civil penalty applications and criminal proceedings. The potential differences in relation to time, said to be anomalous, spring partly from the inherent differences in the nature of the proceedings.
The incidental question arises whether the absence of a provision for extending the limitation period specified in s 1317HD(2), either within s 1317HD itself or elsewhere within the Part, compels the conclusion that s 1322(4)(d) applies. In my opinion, the absence of an internal provision for extension of time or amelioration, while significant, does not outweigh the considerations which support the exclusion of s 1322(4)(d).
In David Grant, while the existence of such a provision fortified the conclusion that s 1322(4)(d) did not apply, it was not, in itself, decisive.
In BP Australia, the existence of the internal provisions for extension was highly significant to Spigelman CJ’s conclusion that the sub-regime ‘covered the field’ and thus excluded s 1322(4)(d). Spigelman CJ nevertheless considered the specific provision in its total context, including the history and policy goals of the relevant Part.
While Spigelman CJ stated that an internal provision for extension rendered it likely that the application of s 1322(4)(d) would be inappropriate, he did not conclude that the absence of an internal provision for extension would, in itself, dictate the application of s 1322(4)(d) in every case.
The exclusion of the application of s 1322(4)(d) to s 1317HD is inflexible, but it is not intolerably harsh. Examples of limitation periods of both six years and lesser periods, which have been held to admit no possibility of extension, are not unknown. Further, by s 1317HE, s 1317HD had effect in addition to any rule of law about the duty or liability of a corporate office holder. It did not prevent the institution of other relevant proceedings. While the word ‘only’ has been omitted from the current provision analogous to s 1317HD (s 1317K of the Act), that is equally, if not more, consistent with a deliberate shift of policy, rather than recognition that the word ‘only’ previously had no effect.
Conclusion
In my opinion, s 1322(4)(d) does not apply to extend the limitation period specified in s 1317HD(2). The appeal should be dismissed.
OSBORN AJA:
I have read the draft judgment of Dodds-Streeton JA and for the reasons expressed by her I also agree that the appeal should be dismissed.
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