Re Gunns Plantations Ltd (in liq) (recs and mgrs apptd) (No 3)
[2013] VSC 430
•20 August 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATONS LIST
RE GUNNS PLANTATIONS LIMITED (IN LIQUIDATION)
(RECEIVERS AND MANAGERS APPOINTED)
No. 3272 of 2013
| JOHN B SALMON & OTHERS | Plaintiffs |
| v | |
| WA BLUE GUM LIMITED | First Defendant |
| GUNNS PLANTATIONS LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) | Second Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5 August 2013 | |
DATE OF JUDGMENT | 20 August 2013 | |
CASE MAY BE CITED AS: | Re Gunns Plantations Ltd (in liq) (recs & mgrs apptd) (No 3) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 430 | |
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CORPORATIONS – Application to reopen reasons after delivery of judgment – Relevant factors to be taken into account in exercise of discretion to reopen – Whether applicant denied opportunity to be heard – Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | MA Robins SC with CJ Gunson | Foster Nicholson Jones |
| For the First Defendant | GT Bigmore QC with S Hopper and CR Brown | Johnson Winter & Slattery |
| For the Second Defendant | GJ Ahern | Arnold Bloch Leibler |
HIS HONOUR:
Introduction
In this matter I delivered judgment with written reasons on 16 July 2013.[1] The first defendant, WA Blue Gum (WABG), seeks an order that I exercise my discretion to order that the reasons for judgment be reopened. WABG seeks such an order so that it may argue that I should withdraw my finding that the forestry rights held by the second defendant – Gunns Plantations Limited (in liquidation) (receivers and managers appointed) (GPL) – and sub-leased to the growers, were scheme property and were therefore held on trust by GPL for scheme members for the reasons I gave in paras 133-150 of my Reasons.
[1][2013] VSC 365 (Reasons).
To properly address this application, I need to explain the issues in dispute and the part played by my reasoning in the challenged paragraphs. I will then examine the relevant principles to apply, and give my decision.
The issues involved
Relevantly, the plaintiffs (Mr Salmon and other land owners) sought:
(1)A declaration that, upon WABG becoming the responsible entity of any of the woodlot schemes, the rights, obligations and liabilities of GPL pursuant to the scheme in connection with the forestry grants by the plaintiffs in respect of those schemes shall become rights, obligations and liabilities of WABG pursuant to s 601FS of the Corporations Act 2001 (the Act).
(2)A declaration that, upon WABG becoming the responsible entity of any of the woodlot schemes, the arrears of forestry fees owed immediately prior to that time by GPL to the farmer grantors in connection with those schemes who are plaintiffs in this proceeding shall be liabilities of WABG pursuant to s 601FS of the Act.
The second declaration sought depended upon whether or not the responsible entity had a right of indemnity against the scheme property for the rents and fees it owed for leasing the forestry rights and in turn sub-leasing them to the growers.
The relevant provisions of ss 601FS and 601FT of the Act provided as follows:
601FS Rights, obligations and liabilities of former responsible entity
(1)If the responsible entity of a registered scheme changes, the rights, obligations and liabilities of the former responsible entity in relation to the scheme become rights, obligations and liabilities of the new responsible entity.
(2)Despite subsection (1), the following rights and liabilities remain rights and liabilities of the former responsible entity:
(a)any right of the former responsible entity to be paid fees for the performance of its functions before it ceased to be the responsible entity; and
(b)any right of the former responsible entity to be indemnified for expenses it incurred before it ceased to be the responsible entity; and
(c)any right, obligation or liability that the former responsible entity had as a member of the scheme; and
(d)any liability for which the former responsible entity could not have been indemnified out of the scheme property if it had remained the scheme’s responsible entity.
601FT Effect of change of responsible entity on documents etc. to which former responsible entity is party
(1)If the responsible entity of a registered scheme changes, a document:
(a)to which the former responsible entity is a party, in which a reference is made to the former responsible entity, or under which the former responsible entity has acquired or incurred a right, obligation or liability, or might have acquired or incurred a right, obligation or liability if it had remained the responsible entity; and
(b)that is capable of having effect after the change;
has effect as if the new responsible entity (and not the former responsible entity) were a party to it, were referred to in it or had or might have acquired or incurred the right, obligation or liability under it.
(2)Subsection (1) does not apply to a right, obligation or liability that remains a right, obligation or liability of the former responsible entity because of subsection 601FS(2).
Importantly for the declaration sought by the land owners, it was their contention that the outstanding liabilities owed by GPL for past rents and fees due to landowners for the forestry rights (which were sub-leased to the growers) were expenses for which GPL (as the former responsible entity) could have been indemnified out of the scheme property if it had remained the scheme’s responsible entity and thus did not fall within s 601FS(2)(d).
The land owners argued that the forestry rights leased by GPL were scheme property within the meaning of the definition of “scheme property” in s 9 of the Act, and thus GPL as the responsible entity would have been entitled to indemnify itself out of the scheme property for the rents and fees incurred in leasing the forestry rights. In particular, the land owners argued that the leases of the forestry rights were property acquired, directly or indirectly with, or with the proceeds of, contributions or money referred to in paragraphs (a), (b) or (c) of the definition. The land owners also argued, inter alia, that GPL as the responsible entity was entitled to indemnify itself out of the scheme assets for these expenses on the construction of the Constitution of the relevant schemes.
As discussed in my Reasons, GPL relied on an argument that involved the proposition that the forestry rights held by GPL (which were sub-leased to the growers) were scheme property, and that this supported the contention that GPL, as the responsible entity, would have been entitled to indemnify itself out of the scheme property.
GPL submitted that in Huntley Management Ltd v Timbercorp Securities Ltd,[2] Rares J held that leases (which were the subject of sub-leases to growers in circumstances similar to this case) were scheme property. GPL did not elaborate on the submission on why the leases were scheme property but it was apparent that it was its contention that the leases fell within the definition of “scheme property” in s 9 of the Act.
[2](2010) 187 FCR 151 (Huntley).
GPL relied on principles of general law to advance the argument that GPL, as the responsible entity, may have a right of indemnity over the scheme property for the rents and fees incurred in leasing the forestry rights (which were the source of the sub-leases to the growers).
WABG submissions on reopening
WABG submits that:
(a)it has not had an opportunity to make submissions in relation to the issues raised at paras 133-150 of the Reasons, which were not agitated at trial;
(b)WABG would be denied procedural fairness if it were not afforded an opportunity to address these arguments and issues;
(c)there has been a fundamental misunderstanding of the facts and/or law in paras 133-150 of the Reasons, which should not be allowed to remain unaddressed by the parties and/or unrepaired by the Court; and
(d)there may be substantial delay before any errors in the Reasons could be corrected on appeal, which may have a significant adverse effect on the growers’ ability to reconstruct their schemes.
WABG has outlined the submissions it wishes to make if my Reasons were reopened. WABG says that forestry rights were not contributed by GPL to the schemes. WABG says that the forestry rights are in the nature of a reversion (once sub-forestry rights are granted to the growers) and continue to be held by GPL. Further, WABG says that GPL continues to hold its reversionary interests throughout the life of the scheme. Accordingly, as WABG contends, the forestry rights are retained by GPL for the purpose of Note 1 to the definition of “scheme property” found in s 9 of the Act. WABG says that the only interests in the land that could be considered to have been contributed by GPL to the schemes were the growers’ sub-forestry rights.
The relevant principles
In Spotlight Pty Ltd v NCON Australia Ltd,[3] the Court of Appeal recently had cause to address the principles which apply to an application to reopen a case that has been closed and judgment reserved The court said that there must be exceptional circumstances to allow the reopening of a case which has been closed and in which judgment has been reserved. The court accepted that the overriding principle is that the court consider whether, taken as a whole, the justice of the case favours the grant to leave to reopen.
[3][2012] VSCA 232 (Spotlight).
The Court cited with approval the decision of Kenny J in Inspector-General in Bankruptcy v Bradshaw,[4] where her Honour identified, broadly speaking, four categories in which a court may grant leave to reopen: fresh evidence, inadvertent error, mistaken apprehension of the facts, and mistaken apprehension of the law. In Spotlight, the Court of Appeal recognised that these classes are not closed.
[4][2006] FCA 22 (Bradshaw).
In support of its argument that it has not had an opportunity to be heard on the issues raised in paras 133-150 of the Reasons, WABG relies on the High Court of Australia’s decision in Autodesk Inc v Dyason (No 2).[5] In that case, after judgment was delivered but before orders were made, the appellant sought to reopen the case on the grounds that it had not had an opportunity to be heard on a particular factual issue critical to the case, which concerned an alleged breach of copyright in a computer program.
[5](1993) 176 CLR 300 (Autodesk).
Justice Brennan and Dawson J both held that a court has jurisdiction to recall a judgment which it has pronounced, at least prior to the formal entry of judgment, if the judgment has been pronounced against a person who, without fault on the part of that person, has not had an opportunity to be heard as to why that judgment should not be pronounced.[6] The jurisdiction is to be exercised “sparingly”[7] or “cautiously”,[8] owing to the public interest in the finality of litigation.[9]
[6]Autodesk, 308 (Brennan J), 317 (Dawson J).
[7]Autodesk, 308 (Brennan J).
[8]Autodesk, 317 (Dawson J).
[9]See also Autodesk, 302 (Mason CJ).
Justice Brennan added a further observation about the opportunity to be heard, saying:[10]
A court should not pronounce a judgment against a person on a ground which that person has not had an opportunity to argue. However, a sufficient opportunity to argue a ground is given when the ground is logically involved in a proposition that has been raised in the course of argument before the court or is to be considered by the court as an unconceded step in determining the validity of a conclusion for which one of the parties contends. Of course, the precise ground which a court or judge assigns for a decision will frequently be formulated in terms different from the terms of a submission by counsel but, provided the ground has arisen in one of the ways mentioned, the court or judge may properly proceed to judgment without requiring the case to be relisted for further argument and without inviting supplementary submissions to be made.
[10]Autodesk, 308 (Brennan J) (citations omitted).
Justice Dawson recognised a court’s entitlement to dispose of a case upon a basis that appears correct to the court. His Honour said:[11]
In Wentworth v. Woollahra Municipal Council, the Court said:
”[T]he circumstances in which this Court will reopen a judgment which it has pronounced are extremely rare. The public interest in maintaining the finality of litigation necessarily means that the power to reopen to enable a rehearing must be exercised with great caution. Generally speaking, it will not be exercised unless the applicant can show that by accident without fault on his part he has not been heard.”
And it should be added that even though a party fails to present his case in a manner which is open on the pleadings and on the facts, a final appellate court with responsibility to determine the law cannot be precluded from disposing of a case upon the basis which appears to it to be correct. This is particularly so where matters not raised on appeal have been raised in the courts below. “Judges are more than mere selectors between rival views - they are entitled to and do think for themselves.” Saif Ali v. Sydney Mitchell and Co. per Lord Wilberforce.
[11]Autodesk, 317.
In Autodesk, the court confirmed that a case may be reopened where there is a misapprehension of fact or law by the court.
WABG also rely on the joint judgment of Mason CJ and Brennan J in Pantorno v The Queen.[12] This case involved a criminal trial. Their Honours said the following in relation to the right of a defendant to be heard:[13]
When the parties to an adversarial proceeding agree on a proposition of law and conduct their cases on that basis, their agreement does not bind the trial judge. If the judge determines the law to be different, he may apply the law as he determines it to be, but he must inform the parties of the view he has formed when that is necessary to give them an opportunity to address new issues arising from the judge’s departure from the proposition of law on which the case was conducted. Otherwise both parties are taken by surprise.
…
Failure to argue a point before a court of criminal appeal presents a considerable obstacle to an applicant who seeks special leave to argue it in this Court. Even if the point emerges clearly only when a court pronounces its judgment, it should be appreciated by counsel who receive judgment that they are under a duty to draw the court’s attention to issues which, in the light of the judgment, require further consideration by that court and to move the court to consider any such issues before the formal order of the court is perfected.
[12](1989) 166 CLR 466 (Pantorno).
[13]Pantorno, 473-474.
Has WABG been denied the opportunity to be heard?
The issue that WABG wishes to reargue is that I arrived at the conclusion that the forestry rights held by GPL (which were sub-leased to the growers) were scheme property, and that I arrived at that conclusion on the basis that GPL’s leases were “contributions of … money’s worth to the scheme.”[14]
[14]See Corporations Act 2001, s 9 “scheme property”.
The critical question I have to address on this application, therefore, is whether WABG has been denied the opportunity to be heard on the proposition that the forestry rights were scheme property because they fell within para (a) of the definition of “scheme property” in s 9 of the Act.
A central issue in the present case was whether or not the forestry rights held by GPL which it sub-leased to the growers were scheme property. GPL, relying on Huntley submitted that the leases of GPL were scheme property.
In Huntley, Rares J had held that (in a scheme not dissimilar to the Gunns scheme), the leases of land that Timbercorp sub-leased to growers were scheme property. His Honour held that ss 601FS(1) and 601FT(1) created a means of ensuring that rights to hold, and rights “in relation to” scheme property, pass to and vest in the new responsible entity.[15] His Honour held that it was necessary to identify the scheme and cited with approval Keane J in Mier v FN Management Pty Ltd[16] where his Honour said that an essential feature of a scheme is that persons contribute money or moneys worth to a “program or plan of action” constituted by the scheme and this property will be pooled to produce benefits for those who made contributions.
[15]Huntley, [49].
[16][2006] 1 Qd R 339, [24], [27].
WABG addressed the decision in Huntley. WABG addressed at some length whether or not the forestry rights were scheme property. In particular, WABG approached the matter from trust principles arguing that the forestry rights had not been settled on the responsible entity as trustee for the members of the scheme.[17] Importantly, WABG also submitted that forestry rights did not fall within the statutory definition of scheme property.[18] WABG said that the forestry rights had not been acquired from the pooled money. This, no doubt, was a reference to para (d) of the statutory definition in s 9 of the Act. WABG refrained from going to the other parts of the definition in s 9 to argue that they did not result in the forestry rights being scheme property and in particular did not address paragraph (a) of the statutory definition, nor Note 1 to the definition.
[17]Transcript, 474.
[18]Transcript, 478 lines 27-31.
WABG also addressed the issue that, in considering what was scheme property, one should look at the nature of the scheme from the factual matrix surrounding the scheme, including the commercial aspects.[19] This is important, as I had earlier raised with GPL this issue of identifying the nature of the scheme in its submissions. In substance, I had raised the issue that the nature of the scheme involved GPL contributing the forestry rights to the scheme.
[19]Transcript, 479 line 25 – 480 line 9.
During submissions, counsel for GPL raised the contention that the forestry rights were scheme property,[20] relying on the reasoning of Rares J judgment in Huntley. In an exchange between myself and counsel for GPL, and in the context of discussing what was the scheme property, the proposition was put that in ascertaining the scheme property, the nature of the scheme had to be identified and I said that one aspect of the scheme was that GPL would “tip in the land”(and later I said, “chip in the land”), being a reference to GPL contributing the forestry rights to the scheme as an essential part of the scheme.[21]
[20]Transcript, 417 line 17 – 418 line 9.
[21]Transcript, 447, line 31 – 448 line 29.
In that exchange, reference was made to submissions by counsel for WABG that in identifying the scheme, it was necessary to go to the prospectus, not to construe the relevant documents, but as a “commercial matter” to ascertain what the “deal” was.[22] The question was posed, “What was the deal [that] the growers were being offered?” I then said, in answer to that question, “We’ve got the land,” referring to GPL having the forestry rights, “We invite you to grow trees on them and pay us a fee,” referring to GPL’s invitation in the prospectus to the growers.[23]
[22]Transcript, 449 lines 1-3.
[23]Transcript, 448, line 28 – 449 line 7.
Accordingly, at that stage of the hearing, the issue was squarely raised that the forestry rights were contributed to the scheme by GPL and were part of the scheme and thus scheme property.
Further in that discussion with counsel for GPL, I again repeated the importance of ascertaining what the deal was and how it was necessary to look at “the prospectus and so forth.”[24] This was clearly a reference to whether the scheme involved the contribution by GPL of the forestry rights and thus the forestry rights becoming trust property and that at general law GPL would have a right as trustee to be indemnified out of the trust property for the rental it paid for the forestry rights.
[24]Transcript, 449.
Although, as mentioned above, WABG chose to address sub-para (d) of the definition of “scheme property”, WABG did not address sub-para (a) or Note 1 of the definition to dispute the issue raised that GPL contributed the forestry rights to the scheme in the context of ascertaining whether or not the forestry rights were scheme property.
In Autodesk, Brennan J said that “a sufficient opportunity to argue a ground is given when the ground is logically involved in the proposition that has been raised in the course of argument before the court.”[25] In this case, the proposition that GPL contributed the forestry rights to the scheme was raised. WABG could have sought to rebut that proposition, if it chose, by relying on Note 1 to the definition of “scheme property” in s 9 of the Act.
[25]Autodesk, 308.
In my opinion, WABG was not denied the opportunity to be heard on the issue of whether or not GPL contributed the forestry rights to the scheme and whether those rights thus constituted scheme property.
Would other issues be opened up if the case was reopened?
If there is any doubt about WABG being denied the right to be heard – which I do not believe there is – there are other problems about permitting the case to be reopened. If WABG were to be successful in its submissions that forestry rights were not contributions by GPL of money’s worth to the scheme, the court would be required to consider other arguments which, if upheld, may still lead to the conclusion that GPL’s liability for accrued rental obligations would become the liabilities of WABG (if WABG becomes the new responsible entity).
GPL contends that if I were to revisit my findings that the forestry rights were scheme property and conclude that they were not, then – nevertheless – there are at least two other arguments that I would need to rule on, which were advanced at the hearing and which may have led to the conclusion that GPL as the responsible entity would be entitled to indemnify itself out of scheme assets. As it was, I did not rule on both these arguments.
First, is the argument advanced by the land owners that the Constitution gave the responsible entity the right to an indemnity out of the scheme assets for the costs and expenses incurred as a result of the forestry rights deeds. I found it unnecessary to decide this issue in view of my finding that the forestry rights were scheme property.
Secondly, there was an argument put (which I did not address) that, irrespective of whether or not the forestry rights were scheme property, the responsible entity as trustee was entitled to indemnify itself for the costs and expenses incurred by it in making available to the growers the forestry rights, and that this would have included the costs and expenses of the forestry rights which were the source of those forestry rights leased to the growers.
Was there a mistaken apprehension of fact or law?
WABG submits that my finding that the forestry rights held by GPL and sub-leased to the growers constituted scheme property demonstrated a mistaken apprehension of the facts and the law in the judgment and, thus, fall within the categories in which leave to reopen might be granted so long as the justice of the case favours reopening.
Autodesk establishes that a case may be reopened if a mistake of law or fact is made by the Court.[26] Autodesk also establishes that it is a relevant consideration to have regard to the strength of the arguments that WABG wishes to put if the case were reopened.
[26]Autodesk, 303 (Mason CJ); see also Bradshaw, [24] (Kenny J).
On the basis of the submissions made by WABG, I do not consider that the alleged error is a clear misapprehension of law or fact by the court. Rather, as indicated above, it is a path of reasoning that I adopted (relying on matters submitted to me) to reach a conclusion which was sought by and argued for by the land owners.
In my view, the submissions as presently outlined do not have great weight. They fail to appreciate that what GPL brought to the scheme was the forestry rights. Without them, GPL would not have been able to sub-lease those rights to the growers. The forestry rights were a central component of the scheme, and without them there would have been no scheme.
WABG submits that this contribution of property is excluded as, if what a member contributes to a scheme is rights over property, the rights in the property that the member retains do not form part of the scheme property.[27] In this case, I have found that GPL contributed the forestry rights to the scheme. As part of the scheme it sub-leased the forestry rights to the growers. The sub-lease does not detract from the first proposition that the GPL contributes the forestry rights to the scheme.
[27]My emphasis.
It is not apparent to me on the material presently before me that at mistake of law or fact has been made.
Conclusion
I do not consider that WABG has established the exceptional circumstances necessary to reopen the case, and in my view the interests of justice do not favour reopening the issue of whether or not the forestry rights which GPL sub-leased to the growers are scheme property.
For these reasons, in the exercise of my discretion, I refuse the application of WABG to reopen the case to reargue the issue of whether or not the forestry rights made available by GPL to the growers were scheme property.
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