Pacific Commerce Finnce Ltd (in Liquidation) v Cleargate Pty Ltd

[1995] HCATrans 188

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B8 of 1995

B e t w e e n -

PACIFIC COMMERCE FINANCE LIMITED (in Liquidation)

Applicant

and

CLEARGATE PTY LTD

Respondent

Application for special leave to appeal

DAWSON J
TOOHEY J
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON THURSDAY, 22 JUNE 1995, AT 12.10 AM

Copyright in the High Court of Australia

MR J.D. EVANS:   May it please the Court, I appear for the applicant.  (instructed by Maxwell Mead & Young)

MR B.A. LAURIE:   May it please your Honours, I appear for the respondent.  (instructed by Murphy Podmore & Associates)

DAWSON J:   Mr Evans, in the court below there was some difficulty about your appearance, was there not?

MR EVANS:   Yes, there was.

DAWSON J:   And you were ultimately allowed to appear to represent the directors of the applicant company.

MR EVANS:   Yes.

DAWSON J:   Now, who do you seek to appear for here?

MR EVANS:   I seek leave to appear for the applicant company.

DAWSON J:   Why do you seek leave?

MR EVANS:   I seek leave because the directors of the company have directed that an application and an appeal to follow be made, subject to the leave of the Court.

DAWSON J:   The company is in liquidation?

MR EVANS:   Yes, your Honour.

DAWSON J:   And you have no instructions from the liquidator, I take it?

MR EVANS:   No, I do not, your Honour.

DAWSON J:   So what you are essentially saying is you seek leave to appear for the directors here?

MR EVANS:   No, sir, I do not.

DAWSON J:   For the company, rather.

MR EVANS:   If I may put ‑ ‑ ‑

DAWSON J:   Stop for one moment.  Who do you seek leave to appear for?

MR EVANS:   I seek leave to appear for the applicant company on the directions of the directors.

DAWSON J:   The company in liquidation.  Very well, without making any decision on that application ‑ ‑ ‑

TOOHEY J:   I am not sure that I understand this, Mr Evans.  The company is in liquidation; the liquidator is not involved, it would appear, in the making of this application.  The directors, you say, have instructed you to seek leave to appear, not on their behalf but on behalf of the company.

MR EVANS:   Yes, your Honour.

TOOHEY J:   What gives the company standing?

MR EVANS:   The company can only, in my respectful submission, have standing in so far as it has the authority of this Court to proceed or, if as it was sought in the court below, the authority of that court to proceed with the necessary appellate procedures.

TOOHEY J:   Because it is in liquidation?

MR EVANS:   Because it is in liquidation it is necessary that the ‑ ‑ ‑

TOOHEY J:   Yes, I understand that, but there seemed to me to be two questions:  one is the standing of Pacific Commerce Finance Limited itself.  Now, if it had standing and you were appearing for the company, presumably you would not need leave to appear, you would simply be appearing on behalf of the company but, in this case, the company, we are told, could not proceed with the application without the leave either of this Court or one of the courts below.

MR EVANS:   In my respectful submission, the directors require the leave of this Court to exercise their powers as directors under section 471A(1) ‑ ‑ ‑

DAWSON J:   That provides that the directors cannot function, except as a liquidator, during the winding up, except with the approval of the liquidator or the court.

MR EVANS:   Yes, your Honour.

DAWSON J:   There has been no approval of either of those, has there?

MR EVANS:   I am seeking that approval, as I sought it in the court below.

DAWSON J:   You are seeking leave to appear for the company.

MR EVANS:   But, your Honour, I seek that on the basis that the court would give power to the directors to pursue ‑ ‑ ‑

DAWSON J:   But you have not asked for it.  This Court is not going to consider an application for approval to function as a director, notwithstanding the liquidation.  So you come here without that approval.

MR EVANS:   Your Honour, it is difficult to know who has the power to grant that - which court, under what procedure.

DAWSON J:   Whatever court it is, it is not this Court, it is a court of first instance.

MR EVANS:   The big problem is that the court of first instance ‑ ‑ ‑

DAWSON J:   There may be a problem, but it is not an appropriate application to make to this Court and it is not an application I understand you to be making today.

MR EVANS:   I have not finished my submissions in this area.  The original hearing before the single judge was on a question of whether the company ought to be put into liquidation.

DAWSON J:   We are just considering the question of your standing at the moment, who you appear for and whether you are entitled to do so.

MR EVANS:   Yes, your Honour.

DAWSON J:   As I understand it, you ask for leave - whether leave is necessary or not - to appear for the company.  The company is in liquidation.

MR EVANS:   Yes, your Honour.

DAWSON J:   The directors have no approval to function, either from the liquidator or the court ‑ ‑ ‑

MR EVANS:   I seek that now, your Honour.

DAWSON J:   You have no instructions from the company or the liquidator.

MR EVANS:   I have it from the directors, acting on behalf of the company.

DAWSON J:   All right, but you have none from the liquidator.

MR EVANS:   None from the liquidator, no.

DAWSON J:   Then, where are your instructions to justify your appearing here today?

MR EVANS:   Your Honour, I wish to hand up copies of two affidavits which are completed by the secretary.

DAWSON J:   Mr Evans, I should direct your attention to section 477 as well which places the responsibility of bringing or defending proceedings on the liquidator.

TOOHEY J:   What would happen, for instance, if the application were refused with costs, or let us say the application for special leave to appeal somehow was granted and the appeal itself failed, who bears the order for payment of costs?

MR EVANS:   The directors have given instructions that they will bear the costs if costs are awarded.  I have that in the form of an affidavit with the documentation.

TOOHEY J:   But you still have to meet the problem of section 471A, do you now, because although you seek leave to appear, Mr Evans, it seems to me before you get to the question of your seeking leave to appear, that there is the more basic question of the power of the applicant to bring these proceedings other than through the liquidator, unless the court gives its approval.

MR EVANS:   What is sought here, your Honour, is that this Court would become aware of the directors’ express need and desire, on behalf of the company, the contributories and the creditors, to bring this application before the Court.

TOOHEY J:   But that is an anterior matter, is it not?

MR EVANS:   It is a necessary ‑ ‑ ‑

TOOHEY J:   If the approval of this Court is sought it is not by way of an application for special leave to appeal, it is an application for the approval of the Court, assuming this Court is the court for the purposes of section 471A.

MR EVANS:   It has this background that the Court of Appeal ‑ ‑ ‑

DAWSON J:   See, the point is this is an application for special leave to appeal, it is not an application for approval or anything of that sort.  That is all we have before us.

MR EVANS:   Perhaps if I invite the Court to consider this situation it may help to elucidate the matter.  In the Court of Appeal permission was granted for people who were classified as erstwhile directors ‑ ‑ ‑

DAWSON J:   Yes, and the court had some doubts about that and said it was certainly not to be taken as any precedent in any other place, and you do not seek to appear on that basis here.  Your seek to appear for the company appealing against a winding-up order.

MR EVANS:   I appear initially for the directors in their application for the Court to exercise its power to enable the company to appeal.

DAWSON J:   That is not the application which is before the Court, Mr Evans.  The application before the Court is an application for special leave to appeal against the decision below.

MR EVANS:   It certainly is that, your Honour, because the findings ‑ ‑ ‑

DAWSON J:   It certainly is that and nothing else.  So confine yourself to that, if you please.

MR EVANS:   Very well, your Honour.

DAWSON J:   In that application you seek to appear for the company.

MR EVANS:   On that application I seek to appear for the company, upon the directions of the directors and ‑ ‑ ‑

DAWSON J:   You seek to appear for the company, let us establish that first of all, is that not correct?

MR EVANS:   Yes, it is correct, your Honour.

DAWSON J:   And the company is in liquidation, is it not?

MR EVANS:   Yes, your Honour.

DAWSON J:   And you have no instructions from the liquidator?

MR EVANS:   Only from the directors.

DAWSON J:   And at the moment you have no approval of the Court to - the directors have no approval of the Court to function as such, that is correct, is it not?

MR EVANS:   Yes, your Honour, and I ‑ ‑ ‑

DAWSON J:   In that situation, with those facts established, what basis do you have for appearing for the company - or seeking leave, for that matter?

MR EVANS:   The directors have instructed me, through the solicitors acting for the company, to exercise the function of making application to this Court for leave to appeal to the High Court of Australia in respect of a judgment entered in the Court of Appeal in connection with the winding-up of the company.  The basic position is that unless the court below - the court below did not recognise that they were directors.  That is the first thing.  Without any argument being allowed on the matter, it assumed and held that, in effect ‑ ‑ ‑

DAWSON J:   We are not really concerned with the basis on which you were allowed to appear in the court below; we are concerned with the basis on which you seek to appear in this Court.

MR EVANS:   The basis on which I seek to appear, your Honour ‑ ‑ ‑

DAWSON J:  We have established that, Mr Evans; you seek to appear for the company which is in liquidation and you seek to do so on the instructions of the directors who have no approval to act as directors, notwithstanding the liquidation.  You have no instructions from the liquidator.  Now, we have established that position, have we not?

MR EVANS:   We had established that, your Honour, but I do not know whether we have established that this is not a proper application to be made to ask this Court to grant leave to appeal or to hear the application first.

DAWSON J:   We are not going to take it any further having established those facts in relation to your appearance, are we?  Those are the essential facts.

MR EVANS:   So long as it is recognised, your Honour, that the essential fact is that the directors, who claim to be directors, and this is certainly established by section 471A(3), those directors have been denied the opportunity of being heard as directors in the lower court, seek from this Court the power to proceed.

DAWSON J:   But you are not seeking leave to appear for the directors, as I understand the position we had reached.  You are seeking to appear for the company.

MR EVANS:   If that is the way that you understand it, then may I ‑ ‑ ‑

DAWSON J:   I do, and one could not understand it any other way.  The directors are not a party to this application.

MR EVANS:   The directors, your Honour, have directed that this application be made and that this Court ‑ ‑ ‑

DAWSON J:   The application I am speaking of is the application for special leave to appeal.

MR EVANS:   Yes, your Honour.  They have directed that that step be taken and that leave be sought from this Court to exercise that power to make that application.

McHUGH J:   We have no power to grant it, have we?

MR EVANS:   In my submission, under section 471A(1) this Court has the power.

McHUGH J:   We are not the court for the purpose of 471A.  I would have thought it was the Supreme Court of Queensland or the Federal Court.

MR EVANS:   The Supreme Court of Queensland have made it plain that its view of the law is that the directors, who claim to be directors, are not directors.  Now, if that is a matter which ought not to go before the High Court of Australia, then this assembly, if it is not a court, this body is entitled to say, yes, we feel this matter should go forward to the High Court because ‑ ‑ ‑

TOOHEY J:   Mr Evans, there is no application before us for approval for any proceedings to be brought and in the light of the section to which we have been referred, that power rests with the liquidator unless approval is given.  Now, I imagine, without being certain, that if there is an application for approval to whatever court is competent, the liquidator would be given notice of that, would he not, because he might wish to oppose the bringing of proceedings because of the effect it could have upon the company.

MR EVANS:   The liquidator made it known at a hearing on costs, where the directors were agreeing to pay costs as security, that he was not supporting in any way any application to reverse the decision appointing him liquidator and for the liquidation of the company.

TOOHEY J:   He still has to get approval from whatever court is competent to give approval and you would have to make an application, would you not, going through whatever procedures are required to get the approval of the court.

MR EVANS:   If this body has not got the power to ‑ ‑ ‑

TOOHEY J:   I did not say it did not have the power.  I am not familiar enough with the section.  I said whatever court is competent to give the necessary approval must nevertheless have before it an application in proper form for the granting of approval, service upon those parties, if there are such, who are entitled to be notified of the application, and the making of that application in the ordinary way.  Now, none of that is before us.

MR EVANS:   Your Honour, the basic provisions, as I understand it, of 471A(1) is that the directors cannot exercise any function without the order of the court.  What we seek here is that this Court would give such an order as would enable ‑ ‑ ‑

DAWSON J:   Mr Evans, it has been pointed out to you this Court cannot, that there is no application for approval by this Court, and that in any event if an application were to be made, certain procedures would have to be followed.  So we might as well not pursue that any longer.

McHUGH J: Section 471A(1)(b) says, “with the approval of the Court”, with a capital C. Court, with a capital C, is defined in the Act to mean “the Federal Court or the Supreme Court of this or any other jurisdiction when exercising the jurisdiction of this jurisdiction”. Now, if you want leave, then you have to apply to one of those two courts.

MR EVANS:   Is it understood from this, your Honours, that that leave must have been sought in the interim period from the time when judgment was delivered and the time when an application for leave to appeal expired?

DAWSON J:   It is not understood one way or the other.

MR EVANS:   Your Honours, I do appreciate the difficulties in front of us in attempting to pursue the course which I am instructed to pursue.

DAWSON J:   You really cannot add anything to what you have said already?

MR EVANS:   I really cannot, your Honour, no.

DAWSON J:   The Court will take a short adjournment.

AT 12.28 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.39 PM:

DAWSON J:   Mr Laurie, do you have anything to say about the matters which we have just debated, that is the appearance of Mr Evans?

MR LAURIE:   No, only with respect to a further application I may shortly make, your Honour.

DAWSON J:   Very well. Mr Evans, who purports to appear for the applicant company which is in liquidation concedes that he has no instructions from the liquidator. He says that his instructions emanate from the directors of that company but concedes that they have no approval under section 471A of the Corporations Law to function as directors.  He invites the Court to give that approval but this Court does not appear to have jurisdiction and, even if it did, it would not accept the invitation at this stage.  In the circumstances, Mr Evans has no standing to appear for the company which is the applicant on the record and, having regard to the material before the Court, the application is incompetent.  The application for special leave to appeal is therefore dismissed.

Do you have any application to make, Mr Laurie?

MR LAURIE:   Yes, thank you, I do, your Honour, and with the Court’s indulgence I might take a little time with it.  Costs are sought on the application but sought on an indemnity basis payable by the solicitors who have prosecuted this application.  It was never competent.  There were never instructions from the company to institute it and the effect is that the respondent has now, for the seventh time on relatively the same issues, been brought before a court and, on this particular occasion, clearly we ought never to have been here.

TOOHEY J:    When you speak of solicitors, Mr Laurie, you mean the solicitors on the record?

MR LAURIE:   The solicitors on the record.  They have, it seems, instructed Mr Evans as counsel to appear.  He has acted in accordance with his instructions.  I can take no issue with that, with respect.  However, the solicitors have brought, it seems, this application on behalf of a client who has not given them instructions.

TOOHEY J:   They are described on the face of the application book as town agent for Mr Evans.

MR LAURIE:   I am instructed that a notice of change of solicitors was filed yesterday and that Maxwell Mead & Young are the solicitors on record for the purported applicant.  I cannot take that matter further.  But the respondent is in a position where it has been brought to this Court on an application which was never competent and required representation which, in effect, was never required; sought approval from the Court in circumstances where there was no jurisdiction to grant; and inappropriate in any event.  If your Honours were not minded to grant indemnity costs, we would seek costs taxed on a solicitor and client basis which is, of course, a lesser rate.  But I do make the initial application.

McHUGH J:   That was the order that the Court of Appeal made in this?

MR LAURIE:   Yes, that is the case, your Honour.  The Court of Appeal in that case noting that the submissions which had been made were effectively bringing a matter back on a repetitive basis with no merit and absolutely no prospects of success.  I cannot take the submission further.

TOOHEY J:   Just on the question of the order made by the Court of Appeal, Mr Laurie, who were the costs ordered against?

MR LAURIE:   In that case they were ordered against two of the directors.

TOOHEY J:   Mr and Mrs Richardson?

MR LAURIE:   That is the case, yes.  In that instance, Mr Evans eventually was granted leave to appear on behalf of those two directors to prosecute the appeal, their Honours making the comment that they did not sanction that or make any comment either way about a right to appear in any other place and, indeed, there were comments in the judgment about perhaps that avenue having been unfortunate in the circumstances as they developed in the Court of Appeal and subsequently the solicitor and client costs order was made against what became the appellant in that court, namely two of the directors, it seems.

DAWSON J:   Mr Evans, you seem to be instructed by the firm of solicitors who are on the record as acting for the company, is that correct?

MR EVANS:   That is correct, your Honour.

DAWSON J:   Do you have anything to say as to this application?

MR EVANS:   Yes, I do, your Honour.  The directors of the company have made it plain in the instructions they have given to their secretary that they will bear the costs of this application.  In so far as it has gone they would certainly be most willing to be seen to be the persons obliged to pay the costs.  If the order is made in that way I would certainly not oppose it.

DAWSON J:   What do you say as to an order being made against the solicitors on the record for the applicant?

MR EVANS:   I would prefer that no such order be made, your Honour, and that the order be made against the directors who authorised the legal steps to proceed to this point.

McHUGH J:   But the ordinary rule is that if solicitors file process without the authority to do so that an order for costs are made against them.  Supposing the Richardson’s cannot pay for some reason, why should the respondent be put in that position?  The Richardsons can reimburse the solicitors.

MR EVANS:   That certainly would occur, your Honour.

DAWSON J:   The application will be dismissed with costs on a solicitor and client basis against the solicitors on the record for the applicant.

MR EVANS:   If your Honour pleases.

DAWSON J:   The Court will now adjourn.

AT 12.45 PM THE MATTER WAS CONCLUDED