Rosedale Action Incorporated v Honourable Justice Finkelstein & Ors

[2007] HCATrans 201

[2007] HCATrans 201

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B7 of 2007

B e t w e e n -

ROSEDALE ACTION INCORPORATED

Plaintiff

and

THE HONOURABLE JUSTICE FINKELSTEIN

First Defendant

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Second Defendant

ROSEDALE VILLAGE NOMINEES PTY LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

Third Defendant

THE MEWS VILLAGE NOMINEES PTY LIMITED (IN LIQUIDATION)

Fourth Defendant

GREAT VICTORIA LONG TERM INVESTMENT HOLDINGS LIMITED

Fifth Defendant

ROSEDALE TALISKER INCORPORATED

Sixth Defendant

WESTERN RETIREMENT VILLAGE MANAGEMENT PTY LTD

Seventh Defendant

WILLIAM BALFOUR RANGOTT

Eighth Defendant

PETER LENNOX SHEILS QC

Ninth Defendant

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON MONDAY, 14 APRIL 2007, AT 11.35 AM

Copyright in the High Court of Australia

__________________

MR K.A.M. PITT, QC:   If your Honour please, I appear on behalf of the plaintiff.  (instructed by Sourris Solicitors)

MS F.M. McLEOD, SC:   If your Honour pleases, I appear with my learned friend, MR A.D. POUND, on behalf of the second defendant.  (instructed by Australian Securities and Investment Commission)

MR M.R.W. ROSER:   May it please your Honour, I appear on behalf of the third and fourth defendants.  (instructed by Blake Dawson Waldron)

MR B. LEVET:   May it please your Honour, I appear on behalf of the fifth defendant.  (instructed by Ann Kingham & Associates)

MR P. SHEILS, QC:   Your Honour, I am the ninth defendant. 

HIS HONOUR:   There has been a great deal of material provided, which seems to have been provided in breach of the orders that I made.  I made very distinct orders about when submissions would be filed.  Implicit in that, of course, would have been, I would have thought it would have been obvious to you, that any material which would be relied upon would have to be filed before the submissions were filed.  Now, ASIC filed an affidavit on Friday, I think, is that not so?

MS McLEOD:   Yes, your Honour.

HIS HONOUR:   Did that not contain a great deal of material that was readily available before then?

MS McLEOD:   In large part, no, your Honour.

HIS HONOUR:   Did it contain any material that was available before then?

MS McLEOD:   There was a chain of correspondence, your Honour.

HIS HONOUR:   Yes, I saw that, but what about the reports?

MS McLEOD:   The early report in the case of one scheme were available earlier.  The updated reports were exhibited to the affidavit as soon as they came to hand, your Honour.

HIS HONOUR:   But why was not the earlier report filed earlier?  You are the regulator.  You are the statutory regulator.  One expects litigation by you to be conducted in a model form.

MS McLEOD:   Yes, your Honour.

HIS HONOUR:   This material I did not have a chance of seeing.  I was not in my chambers on Friday.  I do not know what you expect.  Then further submissions have been filed, I do not think by you, but by others, which are out of time.

MS McLEOD:   In respect of our late affidavit, your Honour, I apologise for the lateness and the failure to exhibit the earlier receiver’s report.  It occurred to us that it was a matter that arose as being a significant factor towards the exercise of your Honour’s discretion and it must be filed after the filing of submissions, but not before, so in that respect I apologise, your Honour.

HIS HONOUR:   Why would it have to be filed after the submissions?  It was material upon which you wish to rely.  The discretion is always in issue in prerogative writs.

MS McLEOD:   Yes, your Honour.

HIS HONOUR:   I do not understand it, I really do not.  What about the other material that has been filed so late?

MR LEVET:   I filed three submissions this morning.  I apologise, your Honour, I have been ill.

HIS HONOUR:   Why did you do it?  We are very busy.

MR LEVET:   I understand that, your Honour.

HIS HONOUR:   It is just treating the orders as if they had not been made.

MR LEVET:   Your Honour, I have been ill for a number of weeks and I thought it was better to have something put to your Honour than do it orally.  I apologise.

HIS HONOUR:   Who wants to begin, then?

MR SHEILS:   Before your Honour embarks upon this there is a very short matter I would wish to clear up, if I may address you.  Your Honour, Mr Levet, in the adjournment, drew my attention to the transcript of my address to your Honour on 22 March last where I said something that may appear to reflect upon him and I have undertaken to clarify it.  What I said was:

I was not a party, I was not notified, I was not present, I was not aware that any application was to be made.

Further down I said of Mr Levet:

He was not acting for me, nor was he acting for the company of which I was the director.

Very clearly, Mr Levet was at all times acting for two companies of which I was the director, your Honour, and the statement that he was not so acting was obviously a mistake and I simply cannot understand why I said it and I apologise to him and to your Honour.  He was acting for the company of which I was a director, but I confirm that Mr Levet was not acting for me, he was only acting for those companies.

Although I was advised after ASIC made an application for costs against me personally that this application had been made, I was certainly not advised by ASIC or by anyone else that ASIC intended to make any such application and I was not represented in the proceedings in the Federal Court.  As I was not a party I could not instruct him to appear or act for me personally and I am sorry to have taken your Honour’s time and I apologise to your Honour and Mr Levet.

HIS HONOUR:   Thank you, Mr Sheils.  Ms McLeod, before we begin can you draw my attention, please, to any provisions which would enable any of the other parties to make an application to be heard in the Federal Court in matters relating to the receiverships?

MS McLEOD:   In terms of whether they were appropriate parties to be joined, your Honour?

HIS HONOUR:   Not only that, Ms McLeod, but if they had an interest in some piece of property that might in some way be affected.  Certainly what you just said, but is there anything further?

MS McLEOD:   The orders themselves contemplate that, your Honour. 

HIS HONOUR:   You may need a little time to look for that, Ms McLeod.

MS McLEOD:   I am directed by my learned junior to Order 6 rule 8.  I do not have a copy of it in front of me.  That is Order 6 rule 8 of the Federal Court Rules in relation to the joinder of parties to Federal Court proceedings.  His Honour contemplated the joinder of parties in his orders, as you will recall, of 28 November.

HIS HONOUR:   Yes, I am just looking for those orders, Ms McLeod.

MS McLEOD:   They are exhibit L to the affidavit of Ms Sourris.

HIS HONOUR:   Is there any one in particular, Ms McLeod?

MS McLEOD:   Order 23 in the Mews Scheme, with like order in the Rosedale Scheme, that:

The operation of orders 18 to 22 (inclusive) . . . is suspended until the investors in the Mews scheme are or one investor representing the remaining investors is joined as defendants or defendant as the case may be.

In fact, that is what has subsequently transpired, your Honour, by subsequent orders.  His Honour has joined a number of parties as

representatives of money’s worth or cash investors, if I can call them that, in the scheme.  Mr Warne is one of them and I should bring to your attention that Mr Warne has provided us with a copy of a letter to the Court which I hand up.

MR PITT:   I object to that, your Honour, or I foreshadow an objection to it.

HIS HONOUR:   Did you want to tender it as evidence, Ms McLeod, or what is its status?

MS McLEOD:   I am not tendering it as evidence on behalf of ASIC, your Honour.  I am bringing it to the Court’s attention because Mr Warne says he is impacted by these proceedings.

HIS HONOUR:   Wait a moment.  I suppose you should not tell me about it.  Well, let me just hear what the basis of the objection is.  What is the basis of the objection?

MR PITT:   Your Honour, the letter relates to the joinder of Mr Warne as a party to the proceedings in the Federal Court.  It is a letter which was dated ‑ ‑ ‑

HIS HONOUR:   Who is Mr Warne?

MR PITT:   Mr Warne was one of the investors, your Honour, in the scheme.

HIS HONOUR:   How many investors were there all told?

MR PITT:   I cannot tell your Honour, I am sorry.

HIS HONOUR:   There were different investors for each scheme.

MR PITT:   There were many different investors for each of the schemes.

HIS HONOUR:   All right, well you had better tell me what Mr Warne’s letter was about before I - I will need to know, will I not, before I can rule on it?

MR PITT:   Yes.  Your Honour, it was a letter dated 11 May 2007 from Arnold Bloch Leibler, and it recites that on 21 March 2007, which was the day before the matter was last before your Honour, Justice Finkelstein ordered in the Federal Court that Mr Warne be joined and various consequential orders relating to that.  The letter which my learned friend seeks to hand to your Honour then contains passages saying that

Mr Warne’s acquired rights to indemnification for costs that he has incurred hitherto would be quashed and he would be unjustly left out of pocket.

That, in order to inform your Honour about it, is the substance of what I see that it is for.  In my respectful submission there are several reasons why that ought not properly be received.  One is the simple lateness of it and the impossibility of our countering it.  Secondly, the fact that it must have been known at the time of the last proceedings that this was the case and yet it was not brought forward at that time, which would have ‑ ‑ ‑

HIS HONOUR:   What was the date of the letter?

MR PITT:   The date of the letter was 11 May, received by us this morning in the preparation room.  The date of the order joining Mr Warne was 21 March, which was the day before the last proceedings.

HIS HONOUR:   Well, I understand your objection, thank you.  Ms McLeod, do you need it for anything?  Does it advance matters at all?

MS McLEOD:   This letter was provided to ASIC after close of business on Friday, your Honour.

HIS HONOUR:   Yes, but I know that.  It is the date of it.  It is obviously very recent.

MS McLEOD:   Yes, and Mr Warne is not a party to these proceedings, so as to when he had noticed them ‑ ‑ ‑

HIS HONOUR:   Well, it does not add anything.

MS McLEOD:   Leaving that aside, your Honour, it does not add anything beyond this.  If your Honour has reference to the orders made subsequently to 28 November that I am about to take your Honour to, you will see that parties have been joined as representatives with rights to indemnification.

HIS HONOUR:   The fact that they have been joined is a matter of public record.

MS McLEOD:   Indeed, your Honour.  The fact that they have acquired rights to indemnification is on the record.  The fact that they have incurred those costs is not, but one could infer reasonably that in light of the order they have.  So, if your Honour is to exercise ‑ ‑ ‑

HIS HONOUR:   They would have incurred their own costs anyway.

MS McLEOD:   Yes, your Honour, and in light of your Honour’s discretion today, the question of whether third parties will be affected by grants of these orders is a relevant consideration.

HIS HONOUR:   All right, thank you, Ms McLeod.  I will not receive that letter.

MS McLEOD:   If your Honour pleases.  I was about to take your Honour to the subsequent orders.  The first is in ‑ ‑ ‑

HIS HONOUR:   The one at 23 is in relation to the Mews Scheme.  Is that right?  Paragraph 23.

MS McLEOD:   Yes.

HIS HONOUR:   Is there one made in relation to the other two schemes; each of the other schemes?

MS McLEOD:   Just one other scheme, your Honour, the Rosedale Scheme.

HIS HONOUR:   Yes, and there is a similar order, I take it?

MS McLEOD:   It is a similar order.  It is order 43 on page 13 of the order.

HIS HONOUR:   All right.  Thank you, Ms McLeod.

MS McLEOD:   I was about to take your Honour to the subsequent orders, if that is convenient, your Honour.  They are annexed to the affidavit of Ms Preziuso of 12 April 2007.  Exhibit MJP6 is an order of 21 December 2006.  That order was superseded, in effect, by an order contained in the next exhibit, MJP7, of 21 March 2007.

HIS HONOUR:   Yes.

MS McLEOD:   You will see by order 1, your Honour, there was an adjustment of the parts of the receiver’s powers that were stayed.  His Honour ordered:

The orders made on 21 December 2006 be recalled and in lieu thereof it be ordered:

(a)Order 23 of the orders made on 28 November 2006 be recalled and in lieu thereof it be ordered that:

23.The operation of orders 18 to 22 (inclusive) but not –

He has carved out various matters under (i), (ii) and (iii) –

be suspended until the investors in the Mews scheme are or one or more investors representing the remaining investors or groups thereof is joined as defendants or defendant as the case may be. 

He made a like order in respect of Rosedale.  Paragraph 2:

Peter Hastings Warne be joined as the seventh defendant both on his own behalf and as representing all members of the Mews Scheme (as defined . . . other than:

(a)those members who contributed only money’s worth as the consideration for their interest –

and two other parties.  He then joined Rental Fleets Australia.  He reserved liberty to apply to a Mr de Simone to be joined as a defendant on his own behalf and on behalf of a company.  Under paragraph 5 he indemnified – ordered the indemnity of Mr Warne:

out of the assets of the Mews Scheme against all costs necessarily and properly incurred.

Under paragraph 6:

John Montgomerie be joined as the ninth defendant on his own behalf and as representing all members of the Rosedale Scheme . . . other than those members who contributed only money’s worth –

gave a like indemnity out of the assets of the Rosedale Scheme against costs.

HIS HONOUR:   That really answers my question, thank you.

MS McLEOD:   Finally, your Honour, on 26 March – this is the next exhibit – MJP8, Mr Yeo of Pitcher Partners, who you may recall was the liquidator of GDK Financial Solutions, was joined representing those members who only contributed money’s worth.

HIS HONOUR:   Thank you, Ms McLeod.  All right.  Mr Pitt, anything you want to add to your written submissions?

MR PITT:   May I add this, your Honour.  May I inquire how long we have?  I did not know if we had the rest of the day or the rest of the morning only.

HIS HONOUR:   No, well, certainly not the rest of the day.  I have other commitments later today.  But you have filed fairly lengthy submissions, Mr Pitt. 

MR PITT:   Yes, I have, your Honour.  I only wanted to address the way in which I thought that the submissions of my learned friend had crystallised certain issues, and I really only wanted to address the principal issues if I may.

HIS HONOUR:   Certainly.  Mr Pitt, let me tell you what troubles me.  As you know, the relief in question is discretionary.  Were I to grant orders nisi, then there would be a very long delay in relation to the resolution of these matters.  There are plainly matters in dispute and whether there were possible conflicts or actual or potential conflicts arising out of the orders made by Justice Finkelstein with the orders of the Canberra Supreme Court is, in a sense, water under the bridge.  There has been a great deal of expense incurred.

Justice Finkelstein on the evidence before him certainly found cause for concern.  If I were to make orders nisi or, alternatively, even ask that a case be stated for the Full Court, this matter would be delayed for months.  That is not an attractive prospect, particularly as the matters are proceeding under the active supervision of Justice Finkelstein now.  That is a matter of grave concern to me and I am telling you that at the outset.

MR PITT:   Thank you.  If I may attempt to address it at the outset, your Honour, in my respectful submission, while they are matters of grave weight, there are even more significant matters and matters which outweigh those that your Honour has raised.  The more significant matter, in my submission, is that in the balance of all the things that have happened, the disadvantages to the corpus of the schemes, the disadvantages particularly in terms of incurred costs and the disadvantages in terms of the loss of assets and of advantages such as taxation advantages and the like, are all matters which very significantly outweigh the potential loss in simply a delay of the investigations.  As your Honour will have noted, there appears to have been no substantive step taken in the winding‑up other than investigation.  There is a great deal of effort and costs obviously, in my submission, going into that investigation.

HIS HONOUR:   You can understand that, Mr Pitt, because this was a scheme that was not registered and should have been.  So there has not been compliance with all the matters that the law says there should have been compliance with, so there really has to be an investigation.  Indeed, one would be complaining if action were taken without a proper investigation.  The source and destination of funds, all of those matters and those related matters would surely have to be investigated.

MR PITT:   Your Honour, if the matter was resolved in accordance with the orders of the Supreme Court in Canberra, it may be that other matters would have transpired, other courses would have been taken when a lengthy investigation of all of the entitlements at this stage - those are matters which, in my submission, might have been undertaken in a very different way if the course which had been directed by the ACT Supreme Court orders had eventuated, and that is that the liquidator under those orders make a distribution of the assets as required.

HIS HONOUR:   But the problem – there is a problem about that, too.  I know there is an allegation of a subtle form of duress, but that liquidator has resigned, voluntarily, in the end.  I know what is said about that, that there was pressure put upon him.  I am not expressing any view about that, but the truth is that he has resigned and according to Justice Finkelstein that was not surprising because nothing had been done by him.  That seems to be uncontradicted.

It is not as if you can simply revive the – I will call it the Canberra proceedings.  You would have to find another liquidator or reinstate the previous one and he would have to be willing to do it.  He would have to acquaint himself with everything that has been happening pursuant to Justice Finkelstein’s several orders, now.  That is obviously going to cost everybody a great deal of money and it is going to delay things further.

MR PITT:   Your Honour, in a pragmatic sense, that might be overcome simply by the appointment, for example, of the existing liquidators.  There may be very significant objections to that on the part of various of the parties and for various reasons, but that would be one way in which that problem could be overcome.  But, the framework, in my submission, under which they would be operating under the ACT Supreme Court orders would be radically different to that which is directed by Justice Finkelstein’s orders in the Federal Court.

HIS HONOUR:   That may be so, but it seems to be clear that Justice Finkelstein is keeping a close eye on this matter and parties are free to apply to him to be joined to participate, and some have.  He stayed any power that the receivers – he appointed receivers, did he not?

MR PITT:   He did, your Honour.

HIS HONOUR:   He stayed any powers that they might otherwise have to sell the principal assets without the consent of the Court, did he not?

MR PITT:   Yes, he did that, your Honour, but the – I am sorry, your Honour was proceeding on to say something.

HIS HONOUR:   No, you go ahead.

MR PITT:   In my respectful submission, what is happening is that there is an enormous amount of time and effort apparently being invested in the kind of winding‑up which is envisaged by the Federal Court orders and that might not be necessary under the ‑ ‑ ‑

HIS HONOUR:   You tell me that, but I am not prepared to make a finding.  You could hardly expect me to make a finding that what is being done under Justice Finkelstein’s orders is unnecessary and unduly complicated, particularly when Mr Pitt, the other person, the liquidator, under the Canberra orders had done nothing.  We are not talking about an orthodox, properly registered, properly regulated, properly supervised scheme.  We are talking about a scheme that was established and being conducted contrary to law.  Is that not right?

MR PITT:   It certainly was, your Honour, I accept, with respect, at the time that the ACT Supreme Court orders were made, but the very substance of our contention is that the position had been regularised by the winding‑up of the vast bulk of the Rosedale Scheme and effectively by all of the Mews Scheme by the ACT Supreme Court orders.

HIS HONOUR:   You say it had been done, the vast bulk of it, but I thought the liquidator had done nothing.  That is Justice Finkelstein’s order.  That is one of his findings rather, not his order.

MR PITT:   Yes, and I do not attack that, of course.

HIS HONOUR:   What you mean really is an order that would have completely disposed of the matter may have been made, but it had not been acted upon in any way, or not fully anyway.

MR PITT:   Not in the way that was envisaged by the Federal Court orders or in an ordinary company winding‑up, your Honour, but the evidence that is before your Honour includes the evidence of the rolling over of the investors’ shares into a New Zealand company.

HIS HONOUR:   That is a big worry, Mr Pitt, that the interests have gone offshore.  Why would that not be a matter of disquiet to the regulator?

MR PITT:   Well, I do not know that any of the material before your Honour addresses any particular disquiet about that.  I may stand to be corrected about that.

HIS HONOUR:   It makes me worried.  It has gone offshore.  I mean, has it been put beyond the reach of the regulator?

MR PITT:   Your Honour, the land is the substantial asset and it certainly is within the reach of all of the courts and regulators.

HIS HONOUR:   I understand that, but the prospect and the spectre of the possibility of New Zealand litigation as well is hardly attractive.

MR PITT:   Yes, well, in my submission, the most pertinent submission about that is that the evidence shows that the interests of the persons who are the investors in the Rosedale Scheme, which is when it was the subject of that process, are the same as the interests in the company, that the identity of the persons with the interests in the company are the same.  So that at least in respect of the ownership of the assets through that corporate structure, at least in that respect, there is no potential, one would have thought, for conflict or for litigation.

HIS HONOUR:   Is there any explanation in the material as to why it was taken offshore, why any aspect of the scheme was taken offshore?

MR PITT:   I will take a while to put my finger on it, your Honour, but in substance it is that the costs in Australia for incorporation of companies and the annual costs for registration and the annual costs for the filing of documents are many times here what they are in New Zealand and the process is much simpler there.

HIS HONOUR:   Assume that to be so, would you not need some sort of registration in Australia if there are activities being carried on here?  I do not know.  I am not asserting that.  Just as overseas corporations have to be registered in some form here, I would have thought that a scheme that would be registrable in Australia, if it were being conducted here but had been established offshore, I would have thought they did.  It would need to be registered anyway.  In any event, it may be that it would be within the relevant definitions.

MR PITT:   Of a managed investment scheme, your Honour?

HIS HONOUR:   Yes.

MR PITT:   Yes.

HIS HONOUR:   I mean, wherever it is incorporated the question is, is it a managed investment scheme in Australia?  I am not asserting this, Mr Pitt, but I would be surprised if you could put yourself beyond the reach of Australian regulation in respect of a scheme which was in substance an Australian scheme by simply taking part of it or registering companies offshore.

MR PITT:   I would accept that without reservation, your Honour, and I would also accept that it would be quite improper to try and place matters beyond the reach of the Australian regulators by a device such as that, but that, in my instructions, was not the purpose of such a course.

HIS HONOUR:   In any event, you proceed.  I understand what you say about that.

MR PITT:   Thank you, your Honour.  The principal differences and the principal issues, in my submission, relate to two matters.  One of them is the question of whether or not natural justice was accorded to the plaintiff by the proceedings that were taken in the Federal Court in the absence of the plaintiff as party without notice to the plaintiff of any formal kind, without the plaintiff being heard in relation to the matters and in a manner which and with an effect which affected the plaintiff’s interests.

HIS HONOUR:   Mr Pitt, just remind me precisely, if you do not mind, what the plaintiff – the plaintiff is Rosedale Action Incorporated, is that right?

MR PITT:   Yes, your Honour.

HIS HONOUR:   That is a partnership or a company?  What is it?

MR PITT:   It is an incorporated association, your Honour.

HIS HONOUR:   Incorporated where?

MR PITT:   In New South Wales, your Honour.

HIS HONOUR:   Who, in substance, are the members of the association?

MR PITT:   I do not know all of them, your Honour.  I know at least some reside in Queensland.

HIS HONOUR:   But what are they?  Are they people who want to occupy the premises when they are built or are they investors who have provided the money with a view to getting tax advantages and perhaps a return?  Who are they?

MR PITT:   I believe them to be investors, your Honour.

HIS HONOUR:   They are the investors, all right.  Is there anything to stop them now or have they applied to be heard before Justice Finkelstein?

MR PITT:   No, they have not, your Honour.  What was to stop them doing so was, in my submission, the potential difficulty of being heard as entities objecting to the course which was taken by Justice Finkelstein when he had already dismissed, rejected almost out of hand, applications to disqualify himself and where there had been a refusal, for example, to join Mr Montgomerie as an investor as a party to that application.

HIS HONOUR:   Has Rosedale made an application to be joined?

MR PITT:   No, your Honour.

HIS HONOUR:   Why not?

MR PITT:   For those reasons, your Honour, that is, the difficulty of making application to the very same judge who rejected the application to disqualify himself.

HIS HONOUR:   Against which you did not appeal.

MR PITT:   Against which there was no appeal.

HIS HONOUR:   You cannot conduct litigation on that basis, Mr Pitt, on the basis that you are not prepared to make a particular application because you would prefer another judge to hear it, particularly when you have already made an application.  Your only objection to the judge who is hearing the matter was the subject of an application for disqualification which failed and against which you did not appeal.

MR PITT:   Your Honour, the plaintiff here was not a party to those proceedings.  His only possible course of action – its only possible course of action would have been to apply to have been joined as a party to those proceedings and then to have lodged an appeal.

HIS HONOUR:   What was the basis of the application for disqualification?

MR PITT:   Indicated bias, your Honour?

HIS HONOUR:   Apprehended bias.

MR PITT:   Indicated apprehended bias, yes.

HIS HONOUR:   There has always been some question whether that is something against which you can appeal, but I think the better view is you can.  In any event, you did not seek to agitate that question whether it was an appealable point.  All right ‑ ‑ ‑

MR PITT:   No, as I say, the plaintiff was not a party and at the time had not been given notice of those proceedings.

HIS HONOUR:   Mr Pitt, when I was at the Bar, if I had been given a choice of judge in matters I might have exercised my choice differently from the hand that I was dealt from time to time, but you cannot say, once you have made an application to have a judge disqualify himself or herself, “Well, I am not going to have anything to do with that judge.  I am not going to take steps that are open to me because I do not agree with what that judge did or said”.  You are an experienced advocate.  You know that you cannot do that.

MR PITT:   I accept that, your Honour, with respect.  The significant thing here though, in my submission, is that there were the other matters which also are the subject of complaint and there is also the position that Justice Finkelstein had made final orders in the sense of declarations which are final orders.  They were not just interlocutory orders or of an interlocutory nature and it would be difficult for the plaintiff to intrude into those proceedings on that basis as well, in my submission.

HIS HONOUR:   You can appeal against interlocutory orders with leave.  You make your application for leave.  This Court has entertained appeals against interlocutory orders from time to time and it depends upon their impact and how good your case is.  There is certainly usually no right of appeal against interlocutory orders but applications are made and they are often granted.  You come here to get an order nisi.  One discretionary ground upon which prerogative relief may be refused is availability of alternative remedies, and you are coming to this Court really in a sense – I know this is collateral challenge – but in a sense trying to leapfrog the Full Federal Court, which this Court does not usually countenance.

MR PITT:   Your Honour, the nature of the breaches, that is a failure of nature, failure to record natural justice ‑ ‑ ‑

HIS HONOUR:   I understand what you say.  I read your written submissions and I understand what you say there, but ‑ ‑ ‑

MR PITT:   I do not know that I can advance it beyond those written submissions in that particular respect, your Honour, except to emphasise them as much as I can.

HIS HONOUR:   Yes, I understand that.

MR PITT:   Your Honour, with respect to the failure to accord natural justice, the issue of whether or not the plaintiff had standing has been raised by the second defendant and, in my respectful submission, it is manifest that the plaintiff was a person whose interests were adversely affected by the Federal Court orders.  The evidence is not that the plaintiff had a pecuniary or financial interest, but the evidence is that the plaintiff has effectively been put in the position of being found to be implicit or complicit in the running of an unlawful or illegal investment scheme.

That position transpires, in my submission, because, first of all, the plaintiff was a party to the ACT proceedings and was bound by the ACT orders and declarations, cannot collaterally challenge them, of course.  On the evidence, he was the manager and the investors’ representative in the Talisker Skye Partnership. 

As a result of the orders made in the ACT Supreme Court, the rights were defined.  As manager and executor he had no opportunity to challenge those and it then has the position where the Federal Court proceedings are brought in which there is an allegation made that the managed investment scheme is still proceeding on an illegal basis, notwithstanding the ACT Supreme Court orders, and in the Federal Court the declarations that are made include a declaration that part and parcel of the illegal managed investment scheme is the Talisker Skye Partnership of which the plaintiff was the manager and in which it was the investors’ representative under the agreement which constituted that partnership.

So that it is essentially, in my submission, a position where the plaintiff, having been found to be involved in those activities, has his reputation sullied in that sense.  In my submission, that is a clear interest which the plaintiff has.

HIS HONOUR:   I come back to the other point, Mr Pitt.  Why did not the plaintiff then apply in the proceedings before Justice Finkelstein to vindicate what you say was being lost or in prospect of being lost before Justice Finkelstein?  A lot of this looks as if it is self‑inflicted in the sense of the choice to abstain from participation because Justice Finkelstein would not disqualify himself.

MR PITT:   Your Honour, with respect, it was a choice to abstain from participation that was not open to the plaintiff at the time of those proceedings.  It was only after Justice Finkelstein had made all the declarations and the orders which are now complained of that that opportunity presented itself to the plaintiff.  So it was not a voluntary abstention, in my submission, in that sense.

HIS HONOUR:   There are no orders that were made, or there are no findings – are there findings made against Rosedale by his Honour?

MR PITT:   There were findings made by way of the declarations that – can I step back.  His Honour did not really make any findings which he described as findings of any substance.  His Honour recited a great deal of the factual material and then made declarations and he declared ‑ ‑ ‑

HIS HONOUR:   I thought he made some findings.  He said, for example, and there is no pagination on mine, about five or six pages into his judgment, “Notwithstanding the complex series of agreements” and so on, “the Mews Retirement Village did not get off the ground”.  Then he says what happened in relation to that.  Then, “There is no hope of the development going ahead”.  That is obviously a finding.  Then turning to the Rosedale Retirement Village ‑ ‑ ‑

MR PITT:   Yes.  I am sorry, I have been at cross‑purposes with your Honour.  Can I just say what I meant to say was that his Honour recited many facts, but did not actually characterise them as findings.

HIS HONOUR:   He does not have to. They are plainly findings – plainly findings.

MR PITT:   I am, with respect, content with that position, your Honour.  I was only raising it because my learned friend, Ms McLeod’s, submissions asserted that no findings were made with respect to the participation of the plaintiff and ‑ ‑ ‑

HIS HONOUR:   I will need a lot of persuasion about that because it seems to me that there are plainly findings, findings about who owned the property, who owned the adjoining property, what the contracts were.

MR PITT:   Most specifically, your Honour, that the plaintiff was the manager and the investor representative under clause 11 of the agreement of 28 March 2000 – April 2000.

HIS HONOUR:   Yes.

MR PITT:   My only worth in mentioning that, your Honour, was to ensure the position that there were effectively findings was established ‑ ‑ ‑

HIS HONOUR:   I know what you say.  You seek to take an advantage of that.  You say there were findings and they directly affected your client.

MR PITT:   Yes, your Honour.

HIS HONOUR:   But there are people who are always affected who initially are not going to be heard by a winding‑up order.

MR PITT:   His Honour Justice Finkelstein envisaged that to the extent of making provision for the investors to apply, but nothing in respect of other characters of person or other kinds of persons who ‑ ‑ ‑

HIS HONOUR:   But he did not make an order to the effect that they could not apply or that they would not have a right to participate.

MR PITT:   No, that is true, your Honour, but, in my submission, looking at the reality of it, what hope would the plaintiff have had of intervening after all if the orders and directs had been made by Justice Finkelstein.

HIS HONOUR:   What date did you apply to have Justice Finkelstein disqualify himself?

MR PITT:   Not the plaintiff, your Honour, but Mr Levet on behalf of another party applied on 22 ‑ ‑ ‑

HIS HONOUR:   But you never applied?

MR PITT:   We were not a party.  We never did.  We did not even know about the proceedings, your Honour.

HIS HONOUR:   All right.  Yes.  But you have been addressing me as if you had made the application.  I know Mr Levet told me that last time - I overlooked that – but you are addressing me as if you had made an application.  You never made one at all.

MR PITT:   I never made one at all, your Honour.  I personally was not involved.

HIS HONOUR:   Not even afterwards?

MR PITT:   The plaintiff was not involved.

HIS HONOUR:   But once you knew about the orders you never sought to make an application, then?

MR PITT:   No, your Honour.

HIS HONOUR:   The plaintiff in these proceedings has never made an application to Justice Finkelstein of any kind?

MR PITT:   No, your Honour.

HIS HONOUR:   Not to be joined, not to participate in any way and not to have his Honour disqualify himself?

MR PITT:   None of those.

HIS HONOUR:   All right.

MR PITT:   Your Honour, might I test the reasonableness of that position by saying what hope would the plaintiff have after all of the orders had been made, all of the machinery had been put in place, of going before Justice Finkelstein and saying, “Well, look, I apply to you effectively to overturn all of this because you have not heard and you did not give us the opportunity to put the matters that we now want to put” that is, that this is not – I am sorry.

HIS HONOUR:   Yes, you go ahead.

MR PITT:   Effectively, Justice Finkelstein was functus officio with respect to the declarations that he had made.  I cannot put to your Honour any basis on which I am aware that he could have been asked to revisit them.  Similarly, with respect to the findings which he had made.  The only appeal would have been to the Full Court of the Federal Court and that, in my submission, had grave difficulties for a person who had never been a party who would then have had to determine whether or not it was possible for them to apply to become a party and who faced the real difficulty that if they went down that road then additional time would be consumed by doing so with the possible risk of failure and the only eventual remedy being left to this honourable Court.  In those circumstances, as I understand it, the decision was made to come to this Court, your Honour.

HIS HONOUR:   Yes, all right.

MR PITT:   Was there a particular passage that your Honour was wanting to put to me?

HIS HONOUR:   Thank you, Mr Pitt.

MR PITT:   So that, in my submission, was the natural justice issue.  The other one, your Honour, was the full face and credit issue.  The Evidence Act, section 185, in our submission, controls the exercise of the powers of

the courts and it controlled the exercise of the powers of the Federal Court and it was effectively part of the jurisdictional controls over that court. It has a great similarity to section 118 of the Constitution in that respect, in our submission. The effective position was that the Federal Court orders cut across the substance of the ACT Supreme Court orders in a very real and significant way because it is common ‑ ‑ ‑

HIS HONOUR:   We have a limit on time.  You are really repeating what is in your written submissions now.

MR PITT:   May I just say this, your Honour.  In effect, the substantial asset of land in both of the schemes was in the Mews case all incorporated within the control and ownership of the Mews partnership ‑ ‑ ‑

HIS HONOUR:   The Rosedale land was subject to a mortgage to the Commonwealth Bank.  The Commonwealth Bank was about to exercise a power of sale on default, was it not?  The Commonwealth Bank was heard.  The Commonwealth Bank made an application to be heard and was heard, was it not?

MR PITT:   It was, your Honour, but the Commonwealth Bank was necessarily aware of it.  The plaintiff was not.

HIS HONOUR:   There has to be some time limit because if this were a special leave application it would be 20 minutes on each side.  Is there anything that is not in your written submissions that you think would assist?

MR PITT:   Not, your Honour, that I can put any further, except to emphasise that at the time that the matter came before the Federal Court the plaintiff was simply bereft of any opportunity to participate.

HIS HONOUR:   All right.  Thank you, Mr Pitt.  Yes, Mr Roser.

MR ROSER:   Your Honour, the third and fourth defendants do not wish to make any submissions at this stage, beyond I should say, supporting those submissions made by the second.

HIS HONOUR:   Thank you, Mr Roser.  Mr Levet.

MR LEVET:   Your Honour, I will be fairly brief.  What this Court is being asked to do by ASIC is to allow the Federal Court to ignore decisions of other courts and to relitigate matters where ASIC would like this to be done, in effect.  What has occurred before his Honour Justice Finkelstein is a de novo appeal where his Honour has revisited an issue which has already been dealt with to finality by the Supreme Court of the ACT.

HIS HONOUR:   Mr Levet, you were heard, were you not, before Justice Finkelstein?  Is that right?

MR LEVET:   That is correct, your Honour.

HIS HONOUR:   Fully heard and then you made an application for disqualification.

MR LEVET:   Yes, your Honour.

HIS HONOUR:   That failed.  Did you appeal?

MR LEVET:   Your Honour ‑ ‑ ‑

HIS HONOUR:   I do not mean just against the disqualification.

MR LEVET:   The parties whom I then represented ‑ ‑ ‑

HIS HONOUR:   I do not want an explanation at the moment.  Did you appeal?  Did you appeal against any of the orders made ‑ ‑ ‑

MR LEVET:   The parties whom I then represented intended to appeal, but prior to the time limited for appeal we were advised by those who Mr Pitt represents of this application.  Your Honour, we have only so many eggs to put in baskets and we did not appeal because of Mr Pitt’s application.

HIS HONOUR:   The answer is no and you have explained why.  All right, yes.

MR LEVET: Your Honour, in essence what has occurred is a de novo relitigation of the matters and that would be a matter of public concern, in my respectful submission. The section 118 full faith and credit, although it does not strictly apply to a Territory court, is in terms very similar to the section 185 full faith and credit. In the event that a court can simply ignore, which is in effect what has occurred here, the findings of another court on an identical subject matter, that is a very serious proposition and that is one which would weigh very heavily with you.

Your Honour expressed some concerns were your Honour to grant a decree nisi and they were concerns relating to substantially delay.  We would say that the answers to your Honour’s concerns are many.  One is quite simply that the public interest in courts affording full faith and credit to each other’s judgments outweighs any detriments that may or may not occur to particular litigants in a particular case.  There is a significant public interest in full faith and credit being afforded.

Secondly, from the point of view of the litigants themselves in this matter, yes, your Honour, there would be delay, there would be additional cost were your Honour to grant a decree nisi.  Then, your Honour, there is the “but” and the “but” is that there would be more delay and more cost were your Honour not to do so.  The history of this matter is such that your Honour might reasonably expect that this is a matter which ultimately, were your Honour not to grant a decree nisi, might come back before this honourable Court by way of a special leave application after the parties had expended still further dollars of their own and valuable Court resources.  So the answer to your Honour is I think twofold.  Firstly, that there is a public interest and, secondly, that the alternative is further delay and further cost.

Your Honour, on the issue of further delay and further cost, it gets very hard to unscramble an egg.  KordaMentha are currently in by virtue of the orders of his Honour and the longer they are in the greater the argument will become that they should remain.  In other words, in the event that this does not become the subject of a decree nisi, it is likely that whatever happens in other places, the effect of his Honour’s orders will be given effect to simply because of the increasing difficulty of unscrambling the proverbial egg.  Your Honour, one cannot have a situation where simply by virtue of incumbency of orders, in this case of his Honour Justice Finkelstein, that orders of another court could be set aside. 

Your Honour made the point that the previous person, Mr Rangott, who preceded KordaMentha, had done nothing and, your Honour, that is true, but arguably there was nothing that needed to happen.  The reason that the companies of which Mr Sheils was a director caused the matter to come before the Supreme Court of the ACT was on the evidence that Mr Sheils had formed the view that these were unlawful and unregistered managed investment schemes which needed to be regularised.  The illegality was totally removed by virtue of the orders of the Supreme Court of the ACT.  The unlawfulness of the unregistered managed investment schemes was regularised and therefore there was, in effect, nothing for ‑ ‑ ‑

HIS HONOUR:   Regularised by an order for their winding‑up and nothing was done.

MR LEVET:   No.

HIS HONOUR:   Something was done.  They have taken offshore.

MR LEVET:   Not the schemes, your Honour.

HIS HONOUR:   Well, what was taken offshore?

MR LEVET:   As I understand it, what was taken offshore was corporate entities who were, in fact, subservient to the schemes themselves, but once the schemes had been wound up the corporate entities who constituted, in effect, those schemes ‑ ‑ ‑

HIS HONOUR:   Why do you say the schemes were wound up?  An order was made for their winding‑up, a liquidator was appointed and the liquidator did nothing.  That does not sound to me like a regularisation or, indeed, a liquidation.  Liquidators inquire into matters.  They ascertain what the true position is and it seems, it is certainly so on the evidence, this liquidator did nothing.  Why he did or did not do anything remains unexplained, but he did nothing.  He certainly did not do the things that liquidators conventionally do.

MR LEVET:   Your Honour, there might well be a distinct difference between on the one hand winding up a scheme which ceased to exist by virtue of an order of the court and winding up the various corporate entities which are part of the scheme.

HIS HONOUR:   I am sure there is, particularly if it is an illegal scheme.  All the more need, I would have thought, for very close investigation.

MR LEVET:   Certainly, your Honour, I would not cavil with that at all.

HIS HONOUR:   Nothing was done, nothing.  No attempt to get the books of account, no attempt to ascertain who the creditors were, no attempt to ascertain who the investors were, the de facto shareholders, in a sense, nothing, and you tell me that it was regularised, that in some way then the illegality disappeared.  That cannot be right, Mr Levet.

MR LEVET:   Your Honour, the only other matters which I would seek to add to the materials I have placed before your Honour are these.  As to availability of alternative remedies – your Honour was to some extent critical of the plaintiff in these proceedings for not having availed itself of alternative remedies – we would say this.  One of the matters which is the subject of complaint is the refusal of his Honour to transfer the proceedings from his court to the Supreme Court of the ACT.

Now, your Honour, no appeal lies against that refusal.  There is no alternative remedy by way of an appeal.  The only thing that can be done in respect of that is the course that the plaintiff has taken in these proceedings, which is apply to this honourable Court.  Secondly, your Honour, one of the matters in respect of which his Honour did not make findings - your Honour, he did not make any finding as to precisely what the parameters were of the orders made by his Honour Justice Crispin.  He said at the end of the day, “Look, I do not understand what Justice Crispin’s orders are.  I do not think a liquidator can understand, or receiver can understand what they are.  I am going to make different orders, but I am leaving his undisturbed”.

HIS HONOUR:   All that means is that as and when any problems arise or an apparent or a conflict, or the potentiality of a conflict emerges, then at that stage the parties can come back before Justice Finkelstein to resolve the matter.  That is all that means.

MR LEVET:   But, your Honour, why not his Honour Justice Crispin?  That is the case ‑ ‑ ‑

HIS HONOUR:   I am not being critical of Justice Crispin, but the truth is that nothing was done pursuant to his orders except some aspect of the scheme, and whether that was done pursuant to his order or not I doubt, an aspect of the scheme was taken offshore.

MR LEVET:   Your Honour, his Honour Justice Crispin made orders.  It was open to ASIC to go before his Honour Justice Crispin and say, “We want you to supervise your orders in the following way”.  Indeed, once his Honour Justice Finkelstein became apprised that Justice Crispin was already seized of the matter, his Honour Justice Finkelstein could have simply said “I transfer this to his Honour Justice Crispin so that he can supervise and particularise the orders that he has made”.

Your Honour, on the one hand you can look at the problems that you say exist or one might say exist in relation to the orders of his Honour Justice Crispin and say, “In the circumstances of this particular case it is preferable that the matter be dealt with by his Honour Justice Finkelstein”.  That is one method of doing it, but that ignores, in my respectful submission, the general principle that courts should give full faith and credit to each other’s judgments.

HIS HONOUR: Mr Levet, Justice Crispin made consent orders on 12 August 2005. We know that by 2 November 2006 nothing had been done. For example, one of Justice Crispin’s orders was that Mr Rangott have all the powers outlined in section 477 of the Corporations Act so that he would wind it up as if – wind up the scheme as if it were a liquidation of a solvent company.  That inevitably involves an investigation of the accounts.  He had done nothing.  He had done nothing in 15 months and you are saying it should go back.  The orders had been ignored.  Orders had just been ignored.  Nothing had been done.

MR LEVET:   Your Honour, there are certainly tax and stamp duty advantages to investors of ‑ ‑ ‑

HIS HONOUR:   That may be so, but there had been nothing done pursuant to Justice Crispin’s orders in 15 months.

MR LEVET:   Your Honour, that may be the case but it ‑ ‑ ‑

HIS HONOUR:   It is the case.  It is the evidence.

MR LEVET:   Your Honour, what is important, in my respectful submission, is that there is no power for what in effect is a de novo appeal.

HIS HONOUR:   I understand the submission.  You are really repeating ‑ ‑ ‑

MR LEVET:   Yes.

HIS HONOUR:   Is there anything further?

MR LEVET:   No, unless I can assist your Honour further.

HIS HONOUR:   I do not mean to cut the parties off unduly quickly, but there has been a great deal of time spent on this matter, much more than for a special leave.  Is there something else you wanted to say?

MR LEVET:   Very briefly two things, your Honour.

HIS HONOUR:   Yes.

MR LEVET:   Very briefly, my client is not wedded to the idea of Mr Rangott – is wedded to the idea of Justice Crispin’s orders but not necessarily of Mr Rangott.  The other thing, your Honour, is that by virtue of the letter that was tendered from Mr Warne, or sought to be tendered from Mr Warne, the issue was raised by learned Senior Counsel for ASIC that parties who had subsequently been made parties by virtue of orders for his Honour Justice Finkelstein and who had been indemnified would lose the benefit of that indemnity were the matter returned to his Honour Justice Crispin, in effect.

Your Honour, certainly from the point of view of my client and I understand from those sitting at my left at the Bar table there would be no issue taken with fresh orders made in this or another court similarly indemnifying those persons.

HIS HONOUR:   All right, thank you, Mr Levet.  Mr Sheils.

MR SHEILS:   Your Honour, I have put in a written submission.  I do not think I can add to it.  I will simply repeat it.

HIS HONOUR:   Just tell me in outline what your ‑ ‑ ‑

MR SHEILS:   Your Honour, the submission was made by the second defendant that Mr Levet can be taken to have appeared for the ninth defendant.  He cannot, your Honour; that ignores Salomon v Salomon.  The ninth defendant was the director of other defendants, the companies.  He is not the companies.  He was not a party, he was not appearing.  No one appeared for him.

HIS HONOUR:   Let me accept that for present purposes.  What do you say should happen to this application, Mr Sheils?

MR SHEILS:   Your Honour, from the personal view of the ninth defendant, the order for costs should fail.

HIS HONOUR:   That is costs against you?

MR SHEILS:   Yes, your Honour.  Mr Levet could not have argued on my behalf in that matter because he would have been then arguing that his own clients pay the costs.

HIS HONOUR:   What about the substantial relief?  What is your attitude to that, Mr Sheils?

MR SHEILS:   The substantial aspect of the case, your Honour, is very clear, in my respectful submission, and it is this.  If this Court does not look at it, then it is giving not only ASIC but other courts a carte blanche to just ignore cases they do not like that have been decided and to go over to another court.  One might go to the Federal Court over a company, have them relitigate a matter from Sydney Supreme Court or go from the Federal Court back to Sydney Supreme Court and get them to relitigate it.  Once the parties knew that Justice Crispin had made his orders, the proper and only proper, in my respectful view, thing to do was to say, “Oh well, we’d better go back to Justice Crispin and finish this matter”.

HIS HONOUR:   But, Mr Sheils, you can see one of the things that troubles me about that.

MR SHEILS:   I can see them very clearly, your Honour.

HIS HONOUR:   Nothing had been done.  I mean, 15 months had elapsed.

MR SHEILS:   It is my understanding, your Honour, that what had been done was that the interests of the partnerships had been transferred to

interests in the companies in the form of shares and that the investors who were partners had become shareholders and ‑ ‑ ‑

HIS HONOUR:   But that seems to me to be running contrary to Justice Crispin’s orders because nothing should have happened without an investigation by the liquidator, and he had done nothing.

MR SHEILS:   All that would have to be investigated, I suspect, your Honour, and I would respectfully submit, is that the scheme was illegal; make it legal.

HIS HONOUR:   No.

MR SHEILS:   That is one way to dissolve an illegal scheme.

HIS HONOUR:   No, you do not satisfy an order for winding‑up by doing something to retrospectively, as it were, validate what was illegal in the first place.

MR SHEILS:   Indeed, your Honour, but this was not a case in which Mr Rangott was asked to wind up companies.

HIS HONOUR:   What about the interests of possible creditors?  The liquidator should have been protecting them too.

MR SHEILS:   All that happened was the scheme moved from being illegal to being legal and therefore the creditors still had a right to claim.

HIS HONOUR:   Anyway, I understand what your position on that is.  Is there anything you need to add?

MR SHEILS:   The shares were done of course before the winding‑up order.  I have nothing else to add, your Honour.

HIS HONOUR:   Thank you, Mr Sheils.  Ms McLeod, we do not need to rehearse everything you have said.  You have seen the matters that are troubling me.  What do you say about that?

MS McLEOD:   Can I address it this way, your Honour.  For your Honour to be satisfied there should be a grant of an order nisi today or referral to the Full Court, you should be satisfied of two things:  first of all, that there appears to be in the arguments that are raised jurisdictional error.

HIS HONOUR:   I know that and I know what you say.  You say there is no jurisdictional error.

MS McLEOD:   They appear to be ‑ ‑ ‑

HIS HONOUR:   Just tell me this.  Why did you not serve the plaintiff?  You did not serve the plaintiff, did you?

MS McLEOD:   We did not serve the plaintiff, your Honour.

HIS HONOUR:   Why did you not serve the plaintiff?

MS McLEOD:   There is no necessity to serve all of the parties, even all of the members, to a scheme on winding‑up, your Honour.  That is the first point.  His Honour contemplated that those ‑ ‑ ‑

HIS HONOUR:   What was the plaintiff’s precise role in all of this, according to you?

MS McLEOD:   The plaintiff’s role in the Federal Court proceedings?

HIS HONOUR:   No, in the scheme.

MS McLEOD:   According to the contractual documents, it was the partnership manager of the Talisker Skye partnership.

HIS HONOUR:   Plainly had an interest.

MS McLEOD:   The winding up ‑ ‑ ‑

HIS HONOUR:   As a manager it had an interest, is that not right, an interest in the fees, I would have thought, that might have been generated by the management of the scheme.  Is that so?

MS McLEOD:   The plaintiff was not a named party to the contractual documents.  That is the first issue.  It appeared to have been assigned or subrogated those rights subsequently to the creation of the scheme by reason of the flying minute that your Honour sees annexed to one of the affidavits.  I think it is Mr Benjamin Sheils.

HIS HONOUR:   I do not want to go – just tell me what it ‑ ‑ ‑

MS McLEOD:   So it was not clear that Rosedale Action Inc, the plaintiff here, had that claim to be a proper party before the Federal Court.  Can I just address the grounds this way, your Honour.  There appear to be two, perhaps three, grounds against us.  The first is that there was a denial of natural justice.

HIS HONOUR:   That is really what I was asking you about.

MS McLEOD:   It is said that the plaintiff had no formal notice, by which we understand it does not now assert it did not have notice of the proceedings; it just was not formally served.

MR PITT:   I am sorry, my learned friend is submitting further that - I certainly must say that that is not the plaintiff’s position.

HIS HONOUR:   No, I did not understand that to be your position.

MS McLEOD:   That is how I read their submissions in reply.

HIS HONOUR:   I understood your position to be you did not know about this until some subsequent stage, is that right?

MR PITT:   That is so.

MS McLEOD:   That is now how I read their submissions in reply in any event, your Honour.

HIS HONOUR:   Do not worry about how you read it.  That is their position.

MS McLEOD:   The second is in terms of the denial of natural justice, this ground of apprehended bias which, as your Honour has noted, they did not – the party who moved that complaint did not appeal from and took no further step in respect of. 

HIS HONOUR:   Mr Levet, yes.

MS McLEOD:   These arguments have all been canvassed before his Honour below, that is the power to intervene or somehow overtake the ACT orders.

HIS HONOUR:   I understand that.  What about the matters that concern me?  Are there any other discretionary matters that you think ‑ ‑ ‑

MS McLEOD:   There are, your Honour.  Some of them you have touched on.

HIS HONOUR:   Tell me about them shortly because you ‑ ‑ ‑

MS McLEOD:   In short order, the final orders were made on 28 November but have been subsequently revised and subject to direction and this application has been taken without exhaustion of the avenues of appeal.

HIS HONOUR:   I have raised those matters.

MS McLEOD:   Yes, you have and it is appropriate, your Honour, that the parties who assert they have a remaining interest either seek to appeal – they would now be doing that out of time – or seek to be applied to the proceeding under the supervision of Justice Finkelstein or pursue any alternative claims they may have against the receivers in separate proceedings.

HIS HONOUR:   All right.  Ms McLeod, just a couple of questions I want to ask you.  Why did you not go as soon as you found out to the Capital Territory court?

MS McLEOD:   The matter was raised in discussion with his Honour early on, your Honour, and during discussion there was no application to transfer the proceedings either by ASIC or by Mr Levet.  His Honour asked the question rhetorically, what is the utility or what would the utility be of adjourning the matter to the ACT Supreme Court.

HIS HONOUR:   When his Honour had had a full hearing, in effect, of it, I suppose.

MS McLEOD:   He had had at least a day or probably two days, I think, by the time that discussion had ‑ ‑ ‑

HIS HONOUR:   Was well advanced, all right.  That answers that question.

MS McLEOD:   There was no response in terms of utility, your Honour.  There was no matter put.

HIS HONOUR:   What do you say about the, it seems to me to be, inexplicable inactivity on the part of Mr Rangott?  Do you know anything?  Is there anything in the material about that?  I only want to know if there is something in the material which explains why he did not do anything.

MS McLEOD:   Yes, there is a letter that is annexed to an affidavit, the earlier affidavit of Ms Preziuso.  She in turn exhibits an affidavit that was before his Honour of Fiona Murray‑Palmer.  The course of correspondence between ASIC and that liquidator, in essence, ASIC set out in their letter, “Please confirm this is the position that you have done this and nothing more”.  Mr Rangott wrote back and said, yes, that is correct.  He then sent a letter asking to be – I think the term he used – removed from office and subsequently resigned.

HIS HONOUR:   I follow that.  Ms McLeod, was I right when I suggested to the parties the possibility or, indeed, the likelihood that, in fact, the fact that the proper liquidation obviously involves an investigation of the accounts.

MS McLEOD:   Indeed, that is quite clear from the Mier decision that we have set out in our submissions, your Honour.

HIS HONOUR:   Are there provisions for the registration of such – I mean, was it possible to take it offshore and avoid the corporations law?  It seems a very unlikely proposition.

MS McLEOD:   I do not know the answer to that, your Honour, but it would certainly be of interest, you would expect, to an external administrator that that ‑ ‑ ‑

HIS HONOUR:   Explanation for that being that you do not have to pay as much in the way of filing fees.  It does not seem to be a very good reason to take what is ‑ ‑ ‑

MS McLEOD:   I expect that would excite ASIC’s interest, your Honour.

HIS HONOUR:   Exactly.  All right.

MS McLEOD:   Can I just continue on with the summary of the discretionary matters, your Honour.  I am aware of the time.

HIS HONOUR:   Only cover any that I have not raised, please.

MS McLEOD:   Yes.  We already mention in our submissions the fact that the grant of orders will cut across the rights now of third parties, investors, creditors and people appointed as representatives to the actions.  Your Honour noted that the Commonwealth Bank sought to raise, after the making of the orders, its interests with Justice Finkelstein and his Honour heard and made revisions to the orders.  Each of the parties who has been joined as a representative, and even Mr de Simone, who has not yet been joined, have been heard and what is contemplated by his Honour’s orders is that there will be an orderly hearing and adjudication of further claims in the course of this winding‑up, your Honour.

HIS HONOUR:   I do not need to hear you any more, thank you.

MS McLEOD:   If your Honour pleases.

HIS HONOUR:   Thank you.  Is there some section I should be referred to?  Yes, Mr Pitt?

MR PITT:   I am sorry, I thought my learned friend had finished.

HIS HONOUR:   That is all right.  I have raised nothing and Ms McLeod has raised nothing that either was not in the written submissions with which you have had an opportunity to deal or was not raised by me.

MR PITT:   Thank you.  There was only one thing, your Honour, and that was the question of what could be done with the ACT position and Mr Rangott’s activity.  It would have been such a simple thing had anyone been concerned to go back to that court and say, “Well, please replace Mr Rangott”.

HIS HONOUR:   I understand that.  All right.  Thank you.  Were you going to refer me to a section?

MS McLEOD:   Yes, your Honour, just in respect of your Honour’s question about transfer of assets offshore.  For a scheme to be properly registered and conducted within the scope of the law the responsible entity to such scheme must hold an Australian financial services licence, but I perceive what our learned friends are saying is that by a reduction of the numbers and removal of the original promoters who were in the business of promoting schemes they say therefore the new scheme is somehow legal.  That does not deprive his Honour of the discretion to wind up the scheme in any event. 

HIS HONOUR:   No.

MS McLEOD:   If your Honour pleases.

HIS HONOUR:   All right.  Thank you.

This is an application for orders nisi under section 75(v) of the Constitution directed to a judge of the Federal Court, his Honour Justice Finkelstein. The relief claimed in substance is that orders made by his Honour for the winding‑up of unregistered managed investment schemes were made in excess of jurisdiction or otherwise were infected by jurisdictional error.

A number of bases are asserted for the establishment of the asserted errors, but in substance they come down to, I think, three:  first, that the plaintiff in particular, Rosedale Action Incorporated, was denied natural justice, in that orders were made by his Honour without giving that association an opportunity to be heard; secondly, in making the orders and declarations his Honour failed to accord full faith and credit to orders made by the Supreme Court of the Australian Capital Territory (Justice Crispin); thirdly, that the orders that were made by Justice Finkelstein were in conflict with the orders that were made by the Supreme Court of the Australian Capital Territory.

It should be pointed out at the outset that by the time his Honour Justice Finkelstein made his orders he was aware that orders had been made by Justice Crispin.  Indeed, he recited them in his reasons for judgment.  I need not repeat them here but I should perhaps briefly summarise them.  They were to the effect that a scheme, one of the relevant unregistered managed investment schemes, should be wound up and that Mr Rangott be appointed to wind up the scheme.

The orders made by Justice Crispin included an order that Mr Rangott have all the powers outlined in section 477 of the Corporations Act 2001 (Cth) and that he distribute, whether in specie or otherwise, the assets of the relevant partnership to the persons ultimately entitled to them.

The facts, as they were, established before Justice Finkelstein are fully set out in his judgment.  The only other one to which I would draw attention is that in the 15 months that have elapsed between the making of the orders by Justice Crispin and Justice Finkelstein respectively, the liquidator had done nothing.  He was asked what his attitude was when the matter was before Justice Finkelstein and he said that he wished to be removed.

It is the contention of the plaintiff, and those who support the plaintiff in these proceedings, that schemes that were admittedly illegal, in some way, notwithstanding the order for the winding‑up, became legal because certain things were done to that end including the incorporation or registration of one of the legal personalities involved in New Zealand.

The second defendant, the Australian Securities and Investments Commission, submits that none of the jurisdictional grounds are made out.  The Commission contends that there was no need for the plaintiff to be served or to be made a party, certainly on the state of the information reasonably available to the Commission at the time that it made its application to the Federal Court.

In that regard, the Commission says, the position is not dissimilar to the position that often obtains in ordinary corporate windings‑up or windings‑up of managed investment schemes, in short, that it is not possible always, certainly at the time of the application or, indeed, even on the hearing of it, to know the names of all of the parties who might be interested in the outcome of the winding‑up or, indeed, even in the question whether there should be a winding‑up.

The Commission says in relation to the other matters asserted to be matters of jurisdictional error that the reasons for judgment and also the orders made by his Honour Justice Finkelstein put beyond doubt any possibility of conflict between the orders of the respective courts because his Honour specifically excepted from the operation of his orders those that were made by his Honour Justice Crispin which, in any event, do not appear in any way to have been carried into effect. 

There were various supplementary or additional submissions made by the plaintiff and those who support the plaintiff’s applications, including that it was undesirable that matters be relitigated and that that was in substance what had occurred here once Justice Finkelstein embarked upon his hearing and made the orders that he did.  It was also put that Justice Finkelstein was, in effect, really conducting in the nature of an appeal from the judgment and orders of Justice Crispin. 

I do not have to resolve the jurisdictional points that have been raised because, in my view, there are overwhelming practical considerations which require me to exercise my discretion against the grant of an order nisi.  Those considerations are that, first, it seems plain that nothing had been done in accordance with the orders of Justice Crispin by the time that the matter came before Justice Finkelstein.  Secondly, the orders that were made by Justice Finkelstein have been carried into effect.  The receiver has been appointed; the receiver has made some reports; the receiver is actively undertaking the receivership.

The matter has been back before his Honour Justice Finkelstein more than once.  Parties who do have an interest in the matter can apply to Justice Finkelstein to be joined or to be heard and to press their interests and some of them have already done that, and have been made parties.  If the relief sought were to be granted, all or much of the time and expense involved in carrying out the orders of Justice Finkelstein would be lost and the winding‑up would be very much further delayed.

The complaint that parties were not given a hearing when they should have been given a hearing, as to the validity of which I make no finding, if it were a valid one could and should have been cured by a timely application to Justice Finkelstein and, no doubt, can be cured by an application to him now. 

It may be that some of the matters that were raised by the parties and, in particular, Great Victorian Long Term Investment Holdings Limited represented by Mr Levet, could and should have been the subject of an appeal.  There were really two explanations offered for the failure to appeal.  One of those is that an application had been made to Justice Finkelstein for him to disqualify himself.  Self‑evidently, that can neither explain nor justify a failure to appeal simply because it, the application was rejected.  The other explanation offered is that Mr Levet’s client became aware of these proceedings and did not want to incur the expense of appealing to the Federal Court.  That, too, was hardly a satisfactory explanation because a notice of appeal could have been filed in time but not pursued pending this application:  and, indeed, it may even be possible now to seek leave to file an appeal out of time. 

Again, as to the correctness of these matters, I do not have to reach any final decision.  The grant of prerogative relief is always discretionary.  The passage of time, the costs, the parties choosing to proceed in the way in which they have, and not to proceed as perhaps they might have done, some of the disquieting findings of fact made by Justice Finkelstein and not the subject of appeal, together with the possible impact upon third parties of steps taken pursuant to his Honour’s orders which might, if this matter were to proceed, need to be revisited are factors strongly arguing against the grant of relief sought.

As to the regularity of what had happened and what might happen in the future, the fact that the matter is now being regularised insofar as it can be, by an orderly winding‑up under the supervision of the Federal Court, are further matters which, as I earlier said, overwhelmingly require that there be no interference with the processes which the orders of Justice Finkelstein have directed be undertaken.  Accordingly, I would dismiss the applications for relief by the plaintiff.

MS McLEOD:   Your Honour, could I propose that the appropriate order then is that the application for an order to show cause dated 23 January 2007 be dismissed.  Your Honour may wish to make that order to note that that is without prejudice to the plaintiff’s rights in respect of raising those matters before Justice Finkelstein.

HIS HONOUR:   Thank you, Ms McLeod.  None of the matters that I have said, perhaps I should add this to my reasons.  The orders that I make of course can in no way foreclose such rights as the parties may have in the proceedings before Justice Finkelstein or, indeed, that they may otherwise have.

MS McLEOD:   That also preserves the position, I anticipate, in respect of any appeal or appeal out of time, your Honour, so ‑ ‑ ‑

HIS HONOUR:   Yes, quite.  I could not make an order as a single Justice of this Court that would bind the parties in that way.

MS McLEOD:   Indeed, your Honour.  Nevertheless, I think the clarification is useful.

HIS HONOUR:   Thank you, Ms McLeod.

MS McLEOD:   If your Honour pleases, I seek an order for costs on behalf of the second defendant following the event.

HIS HONOUR:   What do you say about that, Mr Pitt?

MR PITT:   Your Honour, the substantive points raised were, in my submission, of significant import and, although they were not successful, they failed on a matter of discretion, so it was a matter which, in my submission, was properly brought before the Court and I ask your Honour to contemplate an order that there be no order as to costs.

HIS HONOUR:   Mr Levet.

MR LEVET:   I do not seek to be heard, your Honour.

HIS HONOUR:   Mr Sheils.

MR SHEILS:   I do not seek any order for costs against the plaintiff.  Your Honour has not specifically said anything about my submissions but I will not say any more.

HIS HONOUR:   Thank you, Mr Sheils.  Mr Pitt, I just want to be clear about this.  Is it common ground – and I will ask Ms McLeod this too – that you were not served and that you did not participate in any way in the proceedings before the Federal Court?

MR PITT:   As I understand it, absolutely so, your Honour.

HIS HONOUR:   Is it common ground – the date - when you first became aware of the Federal Court orders?  Do we know that?

MR PITT:   I have specific instructions, your Honour, that the plaintiff, that is its officers, were first advised after the Federal Court orders had come into being.  Those are my instructions.  I sought those last night.

HIS HONOUR:   Was the plaintiff a party to the proceedings before Justice Crispin?

MR PITT:   Yes, it was, your Honour.

HIS HONOUR:   All right, thank you.  Ms McLeod.

MS McLEOD:   We do not know when the plaintiff became aware of the proceedings, your Honour.  We are told in the submissions in reply that the plaintiff was neither served nor made aware of the proceedings before judgment, would claim it was not aware of the proceedings at all until after they were concluded, but it does not now do so because it does not want to create grounds for evidentiary conflict.  There was an exchange of letters or emails recently, your Honour, where we sought information in respect of notice and we have had no answer other than that my learned friend Mr Pitt’s instructors would get instructions.  It is common ground that they were not served and did not participate in the proceedings in the Federal Court.

HIS HONOUR:   All right, thank you, Ms McLeod.

MR ROSER:   Your Honour, pardon the interruption.  I only rise very briefly also just to mention on behalf of the third and fourth defendants that they too would seek an order for costs of their proceedings, acknowledging of course that the involvement of the third and fourth defendants has been relatively limited in terms of supporting the submissions of the second defendant.

HIS HONOUR:   Did you have any reason to suppose that your interests would not be fully protected by ASIC in these proceedings?

MR ROSER:   The orders made by Justice Finkelstein did provide also for remuneration for the receivers and liquidators.  Those orders were attacked, or at least in part attacked, by the plaintiff’s application.  We certainly would not have drawn the necessary conclusion, your Honour, that the remuneration that might be obtained by the liquidators would necessarily – we could necessarily look to ASIC in that regard, given that generally they would have recourse to the assets of the receivership.

HIS HONOUR:   But ASIC would have had to have lost here for your remuneration to be in jeopardy.

MR ROSER:   Absolutely.

HIS HONOUR:   All right, thank you.  The orders I propose to make with respect to costs are these.  I am going to order that the application be dismissed, but that an order be made for the costs of the second defendant to be paid by the fifth defendant.  I do not propose to make any other orders for costs.

MS McLEOD:   By the fifth defendant, your Honour?

HIS HONOUR:   Mr Levet’s client.  The reason why I make those orders is that first of all I make no order against Mr Sheils because his presence and participation here has added nothing to the time or costs of the proceedings.  I make no order for costs against the plaintiff, even though the plaintiff has failed, because on the material I cannot be satisfied that the plaintiff has acted unreasonably in seeking the relief in the circumstances which remain unclear as to the plaintiff’s knowledge of the other proceedings and of the possible impact of the orders made by Justice Finkelstein against it. 

I make no orders for costs in favour of the third and fourth defendants, that is to say the receivers – I think that is correct, is it not – because their interests in these proceedings were in substance the same as the Commission, the second defendant, and it was most unlikely that their interests could in any way be adversely affected unless the plaintiff were to succeed against the second defendant.  It was always known, I might add, that the second defendant would be vigorously taking the stance that it has taken in these proceedings.  Clearly, Ms McLeod and gentlemen, I will have to revise those reasons but it is desirable that I give them extempore so the parties know where they stand and so that the receiverships will not be delayed.

MS McLEOD:   Indeed, your Honour.

HIS HONOUR:   Is there anything further?  Thank you.  Adjourn the Court.

AT 1.28 PM THE MATTER WAS CONCLUDED