Saraceni v Jones
[2012] WASCA 59
•16 MARCH 2012
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: SARACENI -v- JONES [2012] WASCA 59
CORAM: MARTIN CJ
McLURE P
NEWNES JA
HEARD: 14 & 15 DECEMBER 2011
DELIVERED : 16 MARCH 2012
FILE NO/S: CACV 113 of 2011
BETWEEN: LUKE SARACENI
Applicant
AND
MARTIN BRUCE JONES AS RECEIVER AND MANAGER OF NEWPORT SECURITIES PTY LTD AND AS AGENT OF THE MORTGAGEE IN POSSESSION OF 3517 ROAD, WILYABRUP
First-named First RespondentDARREN GORDON WEAVER AS RECEIVER AND MANAGER OF NEWPORT SECURITIES PTY LTD AND AS AGENT OF THE MORTGAGEE IN POSSESSION OF 3517 CAVES ROAD, WILYABRUP
Second-named First RespondentANDREW JOHN SAKER AS RECEIVER AND MANAGER OF NEWPORT SECURITIES PTY LTD AND AS AGENT OF THE MORTGAGEE IN POSSESSION OF 3517 CAVES ROAD, WILYABRUP
Third-named First RespondentMARTIN BRUCE JONES AS RECEIVER AND MANAGER OF MAYPORT NOMINEES PTY LTD
First-named Second RespondentDARREN GORDON WEAVER AS RECEIVER AND MANAGER OF MAYPORT NOMINEES PTY LTD
Second-named Second RespondentANDREW JOHN SAKER AS RECEIVER AND MANAGER OF MAYPORT NOMINEES PTY LTD
Third-named Second RespondentMARTIN BRUCE JONES AS RECEIVER AND MANAGER OF SEAPORT PTY LTD
First-named Third RespondentJOHN ROSS LINDHOLM AS RECEIVER AND MANAGER OF SEAPORT PTY LTD
Second-named Third RespondentCOMMONWEALTH ATTORNEY-GENERAL
Intervener
Catchwords:
Constitutional law - Chapter III - Judicial power of the Commonwealth - Referral of legal issue - Validity of s 596A and s 597 of the Corporations Act 2001 (Cth) - Power of court to summon a person before it for examination about the examinable affairs of a corporation in receivership or where property of a corporation is in the possession of a mortgagee or its agent and to conduct an examination - Whether power judicial when exercised on the application of a privately appointed receiver and manager or agent of a mortgagee in possession - Whether power analogous to examination powers historically exercised by courts in the winding up of companies - Whether power incidental to the exercise of judicial power - Chameleon doctrine
Legislation:
Companies (Western Australia) Code, s 541
Companies (Winding Up) Act 1890 (UK), s 7
Companies Act 1862 (UK), s 115, s 117, s 138
Companies Act 1893, s 157, s 159
Companies Act 1943 (WA), s 224, s 225, s 258
Companies Act 1961 (WA), s 249, s 250, s 274, s 367A, s 367C
Companies Act Amendment Act 1969 (WA)
Corporate Law Reform Act 1992 (Cth)
Corporations Act 2001 (Cth), ch 5, pt 5.2, pt 5.4B, pt 5.5, pt 5.6, pt 5.9, s 423, s 423(1), s 424, s 477, s 477(6), s 479, s 479(3), s 488, s 506, s 511, s 532, s 536, s 596A, s 596B, s 597, s 1321
Corporations Law, s 596A, s 596B, s 597
Joint Stock Companies Ordinance 1858, s 62, s 77, s 79, s 80, s 88, s 92, s 97, s 98, s 105
Joint Stock Companies Winding Up Act 1844 (UK), s 15
Supreme Court (Corporations) (WA) Rules 2004 (WA), r 7.10
Supreme Court Act 1935 (WA), s 155
Result:
Section 596A and s 597 of the Corporations Act 2001 (Cth) are valid
Category: A
Representation:
Counsel:
Applicant: Mr G R Donaldson SC &
Mr J C Vaughan
First-named First Respondent : Mr D F Jackson QC &
Mr M N Solomon
Second-named First Respondent : Mr D F Jackson QC &
Mr M N Solomon
Third-named First Respondent : Mr D F Jackson QC &
Mr M N Solomon
First-named Second Respondent : Mr D F Jackson QC &
Mr M N Solomon
Second-named Second Respondent : Mr D F Jackson QC &
Mr M N Solomon
Third-named Second Respondent : Mr D F Jackson QC &
Mr M N Solomon
First-named Third Respondent : Mr D F Jackson QC &
Mr M N Solomon
Second-named Third Respondent : Mr D F Jackson QC &
Mr M N Solomon
Intervener: Mr R Orr QC & Mr A Buckland
Solicitors:
Applicant: Jackson McDonald
First-named First Respondent : Blake Dawson
Second-named First Respondent : Blake Dawson
Third-named First Respondent : Blake Dawson
First-named Second Respondent : Blake Dawson
Second-named Second Respondent : Blake Dawson
Third-named Second Respondent : Blake Dawson
First-named Third Respondent : Blake Dawson
Second-named Third Respondent : Blake Dawson
Intervener: Australian Government Solicitor
Case(s) referred to in judgment(s):
Airservices Australia v Transfield Pty Ltd (1999) 92 FCR 200
Albarran v Companies Auditors and Liquidators Disciplinary Board [2007] HCA 23; (2007) 231 CLR 350
Ariff v Fong (2010) 240 FLR 300
Attorney‑General (Cth) v Alinta Ltd [2008] HCA 2; (2008) 233 CLR 542
Attorney‑General (Cth) v Breckler [1999] HCA 28; (1999) 197 CLR 83
Australian Forest Managers Ltd (in liq) v Bramley (1996) 65 FCR 16
Australian Securities and Investments Commission v Edge (2007) 211 FLR 137
Australian Security Estates Pty Ltd v Bluecrest Holdings Pty Ltd (in liq) (2002) 169 FLR 111
Boys v Quigley [2002] WASCA 99; (2002) 26 WAR 454
BP Australia Ltd v Amann Aviation Pty Ltd (1996) 62 FCR 451
Burt, Boulton & Hayward v Bull [1895] 1 QB 276
Byrnes v James (1889) 3 QLJ 165
Clutha Ltd (in liq) v Millar (No 5) (2002) 43 ACSR 295
Cominos v Cominos [1972] HCA 54; (1972) 127 CLR 588
Commissioner for Corporate Affairs v Harvey [1980] VR 669
Commissioner of Taxation of the Commonwealth of Australia v Linter Textiles Australia Ltd (in liq) [2005] HCA 20; (2005) 220 CLR 592
Dalton v New South Wales Crime Commission [2006] HCA 17; (2006) 227 CLR 490
Fardon v Attorney‑General (Qld) [2004] HCA 46; (2004) 223 CLR 575
Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570
Gaskell v Gosling [1896] 1QB 669
Gould v Brown [1998] HCA 6; (1998) 193 CLR 346
Hall v Poolman [2009] NSWCA 64; (2009) 75 NSWLR 99
Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486
Hartogen Energy Ltd (in liq) v Australian Gas Light Co (1992) 36 FCR 557
Highstoke Pty Ltd v Hayes Knight GTO Pty Ltd [2007] FCA 13; (2007) 156 FCR 501
Hilton v Wells [1985] HCA 16; (1985) 157 CLR 57
Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512
Hooper v Kirella Pty Ltd (1999) 96 FCR 1
Huddart, Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330
International Finance Trust Co Ltd v New South Wales Crime Commission [2009] HCA 49; (2009) 240 CLR 319
Kable v Director of Public Prosecutions (NSW) [1996] HCA 24; (1996) 189 CLR 51
Leeth v Commonwealth [1992] HCA 29; (1992) 174 CLR 455
Mijac Investment Pty Ltd v Graham (No 2) (2009) 72 ACSR 684
Momcilovic v The Queen [2011] HCA 34; (2011) 85 ALJR 957
Mortimer v Brown [1970] HCA 4; (1970) 122 CLR 493
Myers v Elman [1940] AC 282
New South Wales v Commonwealth [1990] HCA 2; (1990) 169 CLR 482
New Zealand Steel (Aust) Pty Ltd v Burton (1994) 13 ACSR 610
Nicholas v The Queen [1998] HCA 9; (1998) 193 CLR 173
Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission [1982] HCA 65; (1982) 152 CLR 460
Porter v Australian Prudential Regulation Authority (2010) 184 FCR 382
Prentis v Atlantic Coast Line Co (1908) 211 US 210
R v Davison [1954] HCA 46; (1954) 90 CLR 353
R v Hughes [2002] HCA 22; (2000) 202 CLR 535
R v Kirby; Ex parte Boilermakers' Society of Australia [1956] HCA 10; (1956) 94 CLR 254
R v Quinn; Ex parte Consolidated Food Corporation [1977] HCA 62; (1977) 138 CLR 1
R v Spicer; Ex Parte Australian Builders' Labourers' Federation [1957] HCA 81; (1957) 100 CLR 277
R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd [1970] HCA 8; (1970) 123 CLR 361
Re Anglo‑Moravian Hungarian Junction Railway Co; Ex parte Watkin (1875‑76) LR 1 Ch D 130
Re Compass Airlines Pty Ltd (1992) 35 FCR 447
Re Cordon; Ex parte James (1873-74) LR 9 Ch App 609
Re Excel Finance Corp Ltd; Worthley v England (1994) 52 FCR 69
Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674
Re Gold Company (1879) 12 Ch D 77
Re Metropolitan Bank Ltd (1880) LR 15 Ch D 139
Re Mineral Securities Australia Ltd (in liq) [1973] 2 NSWLR 207
Re New Tel Ltd (in liq); Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176
Re Socket Screw & Fastener Distributors (NSW) Pty Ltd (in prov liq) (1994) 51 FCR 599
Re Sons of Gwalia Ltd; Ex parte Love (2008) 218 FLR 49
Re TH Knitwear (Wholesale) Ltd [1988] Ch 275
Re The Broken Hill and Argenton Smelting Co Ltd (1893) 19 VLR 111
Re Wakim; Ex parte McNally (1999) 198 CLR 511
Rees v Kratzmann [1965] HCA 49; (1965) 114 CLR 63
South Australia v Totani [2010] HCA 39; (2010) 242 CLR 1
Spinks v Prentice (1998) 87 FCR 89
Sydlow Pty Ltd (in liq) v TG Kotselas Pty Ltd (1996) 65 FCR 234
Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332
Thomas Franklin & Sons Ltd v Cameron (1936) 36 SR (NSW) 286
Thomas v Mowbray [2007] HCA 33; (2007) 233 CLR 307
Visbord v Federal Commissioner of Taxation [1943] HCA 4; (1943) 68 CLR 354
Waterside Workers' Federation of Australia v JW Alexander Ltd [1918] HCA 56; (1918) 25 CLR 434
White v Director of Military Prosecutions [2007] HCA 29; (2007) 231 CLR 570
MARTIN CJ:
Summary
Mr Saraceni is the subject of an examination order made by the court pursuant to the powers conferred by s 596A of the Corporations Act 2001 (Cth) (the Act). He has applied to set aside the order for his examination. He asserts that s 596A, and the provision authorising the conduct of the examination (s 597) are invalid because they exceed the legislative power of the Commonwealth by conferring upon courts invested with federal jurisdiction pursuant to Ch III of the Australian Constitution, powers which are neither judicial in character, nor ancillary or incidental to powers which are judicial in character.
In each case, a legal issue has been referred to the court requiring a determination as to the constitutional validity of the statutory provision pursuant to which the examination order was made and the provision which authorises the conduct of the examination. I agree with McLure P, for the reasons she gives, that the legal issues referred to the court erroneously focus attention upon the status of the eligible applicant who applied for the examination order, when the relevant focus of attention should be upon the status of the corporation in respect of which the orders were made.
I agree with McLure P, for the reasons which she gives, that the issues referred to the court should be determined by declaring that the orders made by the court for the examination of Mr Saraceni in relation to the examinable affairs of a corporation in respect of which a receiver has been appointed to part of all of its assets, or in respect of which property of a corporation is in the possession of a mortgagee or its agent, constitutes an exercise of the judicial power of the Commonwealth validly conferred upon the court because the power is analogous to powers historically conferred upon courts.
However, unlike McLure P, for the reasons which follow, I would arrive at the same conclusion with respect to the constitutional validity of the statutory provisions pursuant to which the examination orders were made without reference to historical analogy, because the powers exercised by the court involve the exercise of judicial power, or powers incidental or ancillary to the exercise of judicial power.
The characterisation of judicial power
It is well established that the doctrine of separation of powers implicit in the structure of the Constitution denies the Commonwealth Parliament the power to confer non‑judicial powers upon a court - see for example R v Kirby; ex Parte Boilermakers' Society of Australia [1956] HCA 10; (1956) 94 CLR 254 (Boilermakers' case). The same doctrine denies the parliaments of the States the power to confer functions or powers upon State courts which are inconsistent with the integrity of those courts as repositories of Commonwealth judicial power - see for example Kable v Director of Public Prosecutions for New South Wales [1996] HCA 24; (1996) 189 CLR 51.
When a question arises as to whether the Commonwealth Parliament has exceeded its legislative powers by purporting to confer non‑judicial powers or functions upon a court, a number of considerations support the view that a broader, rather than a narrower approach should be taken to the characterisation of judicial power.
First, it is well established that 'no single combination of necessary or sufficient factors identifies what is judicial power': Attorney‑General (Cth) v Alinta Ltd [2008] HCA 2; (2008) 233 CLR 542 [93] (Hayne J).
Second, the High Court has consistently acknowledged that there are many powers which are not peculiarly and distinctly legislative, executive or judicial powers. In the Boilermakers' case, the majority observed 'how absurd it is to speak as if the division of powers meant that the three organs of government were invested with separate powers which in all respects were mutually exclusive' (278): see also Thomas v Mowbray [2007] HCA 33; (2007) 233 CLR 307 [10] ‑ [12] (Gleeson CJ). Many examples can be given of powers that are sometimes exercised legislatively, sometimes administratively, and sometimes judicially without infringing any constitutional requirement for the separation of powers - see Thomas v Mowbray [12] (Gleeson CJ).
Third, when a power is not peculiarly and distinctly legislative, executive or judicial 'it lies within the authority of the legislature to determine where its exercise shall be vested': Willoughby, The Constitutional Law of the United States (2nd ed, 1929) 1619 - 1620. Professor Willoughby's contention was cited with approval by Gleeson CJ in Thomas v Mowbray [11]. Gleeson CJ went on to make the following observations:
Deciding whether a governmental power or function is best exercised administratively or judicially is a regular legislative exercise. If … Parliament decides to confer a power on the judicial branch of government, this reflects a parliamentary intention that the power should be exercised judicially, and with the independence and impartiality which should characterise the judicial branch of government [12].
Fourth, where a power is not peculiarly or distinctly legislative, executive or judicial, it may take its character from the character of the body in which the power is reposed (the 'chameleon' principle). As Kitto J observed in R v Spicer; Ex Parte Australian Builders' Labourers' Federation [1957] HCA 81; (1957) 100 CLR 277, (Builders' Labourers' case):
Sometimes a grant of power not insusceptible of a judicial exercise is to be understood as a grant of judicial power because the recipient of the grant is judicial (305).
The reasoning process by which that conclusion is drawn was explained by Kitto J in similar terms to those later used by Gleeson CJ in Thomas v Mowbray [12]. In short, the conferral of a power upon a court supports an inference that it was the intention of the legislature that the power be exercised in accordance with the usual characteristics of judicial power, which in turn lends support to the characterisation of the power as judicial in cases of doubt or uncertainty (see Builders' Labourers' (305); Thomas v Mowbray [59] (Gummow and Crennan JJ)).
However, the chameleon principle must not be taken too far. The fact that the legislature chooses to confer a power upon a court cannot, of itself and without more, lead to the necessary conclusion that the power is properly characterised as judicial (Thomas v Mowbray [342] (Kirby J), [472] (Hayne J)). Otherwise the principles relating to the separation of powers implicit in the Australian Constitution, and enunciated in the Boilermakers' case, would have no practical application or effect.
Fifth, the notion of judicial power is not confined to what is sometimes characterised as the function which lies at its core - namely, the adjudication of existing rights and obligations by applying the law to facts determined by the court. As Dixon CJ and McTiernan J observed in R v Davison [1954] ALR 877; (1954) 90 CLR 353, these core characteristics are 'entirely lacking from many proceedings falling within the jurisdiction of various courts of justice in English law' (368). The examples given by their Honours include the administration of assets or trusts, the making of orders with respect to the maintenance and guardianship of infants, the exercise of powers of sale by way of family arrangement, the provision of consent to the marriage of a ward of a court or a minor, the administration of enemy property in times of war, declarations of legitimacy and the winding up of companies. Many of these examples of judicial power have characteristics which might be seen as more akin to administrative powers or functions. Another example given by their Honours in R v Davison is the well‑established power of a court to make rules regulating its own procedure, which has characteristics which might be thought to be more akin to legislative power (369).
The many examples of judicial power which do not involve the adjudication of existing rights and obligations, and the explicit recognition of the many powers which are not peculiarly and distinctly either legislative, administrative or judicial, and the chameleon principle, negate the proposition that judicial power is limited to what I have characterised as 'core' judicial power - namely, the adjudication of existing rights and obligations, augmented only by powers which are incidental or ancillary to that core power, or which are analogous to powers historically exercised by courts at or before the time of federation.
Sixth, because the Australian Constitution is a living instrument to be construed so as to accommodate inevitable changes in circumstances and practices, the characterisation of the powers allocated to the three primary branches of government must also take account of changing circumstances and practices. As the plurality observed in White v Director of Military Prosecutions [2007] HCA 29; (2007) 231 CLR 570:
The modern regulatory state arrived after 1900 and did so with several pertinent consequences. First, modern federal legislation creates rights and imposes liabilities of a nature and with a scope for which there is no readily apparent analogue in the pre-federation legal systems of the colonies. Secondly, any treatment today of Ch III must allow for what has become a significant category of legislation where a power or function takes its character as judicial or administrative from the nature of the body in which the Parliament has located it [48].
It is not hard to identify examples of functions or powers which have no ready analogue to functions or powers which existed at the time of federation. An obvious example is the power to issue an interim control order in respect of a person suspected of terrorist activities which was characterised as the exercise of judicial power in Thomas v Mowbray, notwithstanding that it did not involve the adjudication of existing rights and obligations and lacked any direct historical analogue. Other examples include the functions and powers exercised by the agencies which comprise what is sometimes called the 'integrity' branch of government, such as those exercised by the Corruption and Crime Commissions or equivalent which now exist in many jurisdictions, and which have no ready historical analogue in any branch of government. Sometimes the need to allow for changing circumstances and practices is accommodated by reliance upon historical analogues that are neither direct nor exact - see, for example, the observations of Gleeson CJ in Thomas v Mowbray [16] ‑ [17].
Seventh, policy considerations relating to the most appropriate repository of the relevant power are not irrelevant. Rees v Kratzmann [1965] HCA 49; (1965) 114 CLR 63 concerned the nature of the jurisdiction to be exercised by a court when supervising the examination of a former director of a company in liquidation. In that context, Barwick CJ observed:
The legislature has reposed in the judge presiding at the interrogation, the traditional judicial function of ensuring that the examination is not made an instrument of oppression, injustice or of needless injury to the individual (66).
In Gould v Brown [1998] HCA 6; (1998) 193 CLR 346, Kirby J relied upon these observations to support his conclusion that the power of examination there under consideration was at least incidental to the exercise of judicial power [327] ‑ [328]. More recently in Thomas v Mowbray, Gleeson CJ referred to the view he had expressed in Fardon v Attorney‑General for the State of Queensland [2004] HCA 46; (2004) 223 CLR 575 to the effect that powers which had the capacity to affect the liberty of an individual and erode human rights might be better reposed in the judicial branch of government so that they would be exercised independently, impartially and judicially to sustain his conclusion that the power to issue an interim control order was properly characterised as judicial power [17] ‑ [18]. By analogy, it might well be thought that the judicial branch of government is best placed to supervise the examination of a person with respect to the affairs of a corporation under external examination so as to ensure that the examination did not become an instrument of oppression or abuse, or was not used for an improper purpose, such as the gaining of an unfair forensic advantage, or any purpose extraneous to the purpose for which the power is conferred - see for example the cases which identify the proper constraints upon the exercise of such power, including Re Excel Finance Corp Ltd; Worthley v England (1994) 52 FCR 69 and Re New Tel Ltd (in liq); Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176 [252] (Lander J).
Eighth, the general effect of the preceding principles is that the legislative power of the Commonwealth Parliament will only be exceeded when it confers functions and powers on a Ch III court if those functions and powers, having regard to their purpose and the context of their exercise, are properly characterised as falling exclusively within either the executive or legislative branches of government, and therefore beyond the scope of judicial power. That is the question which must now be addressed in relation to the powers conferred upon the court with respect to the examination of persons in connection with the affairs of a corporation under some form of external administration by s 596A and s 597 of the Act.
The power to supervise an examination
It is clear that the power or function of supervising an examination or interrogation is not one of those powers which fall exclusively within one or other of the legislative, executive of judicial branches. It is a power or function often associated with administrative inquiries. However, as I have noted, it is a power which has also been described by Barwick CJ as a 'traditional judicial function' (Rees v Kratzmann, 66).
More recently, in Dalton v New South Wales Crime Commission [2006] HCA 17; (2006) 227 CLR 490, the majority (Gleeson CJ, Gummow, Hayne, Callinan, Heydon and Crennan JJ) roundly rejected a submission to the effect that the exercise of an investigative function or power was not an exercise of judicial power:
The proposition denying the investigative functions of courts should not be accepted. From a time well before federation, the courts of the Australian colonies, like those in England and elsewhere in the Empire, exercised a range of administrative and investigative functions. Provisions for the examination of judgment debtors, bankrupts, and officers of failed corporations are in point. In Cheney v Spooner, this Court upheld the application of the 1901 Act to an order by the Supreme Court of New South Wales under ss 123 and 124 of the Companies Act 1899 (NSW) which gave leave to the liquidator of a company in voluntary liquidation to summons a number of persons to attend for examination by the Master in Equity. The equity jurisdiction of the Supreme Courts with respect to bills of discovery (or preliminary discovery in more recent parlance) provides another instance of an investigative procedure. So also the courts of marine inquiry established in the Australian colonies. Likewise the next of kin inquiry in an administration suit, conducted in New South Wales by the Master in Equity [45].(citations omitted)
None of the parties to these proceedings suggested that it was beyond the competence of the Commonwealth Parliament to confer the power to order and conduct examinations in relation to the affairs of corporations upon an administrative agency. The Commonwealth Parliament has exercised that power in div 6 of the Australian Securities and Investments Commission Act 2001 (Cth). Nor was it suggested that the power to enact laws with respect to the examination of persons in connection with the affairs of corporations was beyond the legislative capacity of the Commonwealth Parliament. The only basis upon which it was asserted that the Commonwealth Parliament had gone beyond power was the conferral of the power of examination upon a Ch III court in relation to corporations which were under some form of external administration other than as a consequence of an order of a court.
So, in a context in which the power to order and supervise an examination is not one of those powers which is exclusively and distinctly capable of being performed by only one branch of government, the legislature has exercised what Professor Willoughby described as its authority to determine where the exercise of the power shall be vested by conferring a broad power of examination upon an administrative body (Australian Securities and Investments Commission), and a more constrained power (relating to companies under some form of external administration) upon the courts having jurisdiction under the Act. The critical question in this case is whether the legislature has exceeded that authority by conferring on a Ch III court powers of examination, which having regard to their purpose, and the context in which they fall to be exercised, are properly characterised as falling exclusively within the administrative powers of government, and therefore beyond the judicial power. In order to address that question, it is necessary to assess the powers of examination in the context of ch 5 of the Corporations Act.
Chapter 5 of the Corporations Act
Chapter 5 of the Act bears the heading 'External Administration'. It contains various provisions within its parts dealing with different species of external administration, including arrangements and reconstructions, the appointment of receivers and other controllers in relation to the property of corporations, the administration of a company's affairs with a view to the execution of a deed of company arrangement, voluntary winding up, and winding up by the court on the ground of insolvency or other grounds.
Part 5.1 - Arrangements and Reconstructions
Part 5.1 is concerned with arrangements and reconstructions. Various powers are conferred upon a court with respect to arrangements and reconstructions, including the power to grant approval to a compromise or arrangement, together with various other powers connected with the conduct of meetings of creditors and contributories. Although the provisions of the Act do not confine the terms of the schemes or arrangements that can be approved by a court under pt 5.1, duties are imposed upon persons appointed to administer a compromise or arrangement approved under the part (see for example s 415), no doubt because many of the schemes and arrangements approved by the court under this part will confer powers upon persons to administer the affairs of the corporation at least during the period of reconstruction or during the period covered by the scheme of arrangement.
Part 5.2 - Receivers and other Controllers of Property
Part 5.2 contains a number of provisions relating to receivers and other controllers of property of corporations. By s 9 of the Act, receivers, and receivers and managers of the property of a corporation are included within the definition of 'officer', as are administrators, or administrators of deeds of company arrangement, liquidators and trustees or other persons administering a compromise or arrangement. Accordingly, the various duties imposed upon officers of corporations by pt 2D.1 of the Act apply to those classes of external administrator. The term 'controller' is defined by s 9 of the Act to include receivers or receivers and managers of property of a corporation, and anyone else who is in possession or has control of the property of a corporation for the purpose of enforcing a charge. Accordingly, a mortgagee in possession, or the agent of a mortgagee in possession would fall within the definition of 'controller' for the purposes of pt 5.2 of the Act. However, such persons would not be 'officers' of a corporation for the purposes of pt 2D.
Section 418 prohibits certain persons from acting as receivers. The general effect of the section is to require that a person appointed as a receiver of the property of a company is independent of the company, and qualified to act as the receiver by reason of being a registered liquidator. Section 418A empowers the court to declare whether or not receivers or other controllers of property of a corporation have been validly appointed.
Part 5.2 contains various provisions relating to the powers, duties and liabilities of receivers and controllers. Many of the powers and duties are analogous to those conferred upon a liquidator by other provisions of ch 5 of the Act.
Section 420B empowers a court to authorise a controller of the property of a company to sell or dispose of that property even though it is subject to a prior charge that has priority over the charge on the property that the controller is enforcing.
Section 422 of the Act obliges a receiver or managing controller to lodge reports and provide information to ASIC in respect of certain matters. The section also empowers a court to direct a receiver or managing controller to provide such a report if it appears that the receiver or managing controller has failed to do so.
Section 423 confers upon the court a general power of supervision with respect to controllers (including receivers). It corresponds closely with the power of supervision of liquidators conferred upon the court by s 536 of the Act. That power was described expressed by the court in Hall v Poolman [2009] NSWCA 64; (2009) 75 NSWLR 99 as
a broadly expressed supervisory jurisdiction over the conduct of persons in control of the affairs of the corporation, in circumstances where normal market forces and the exercise by shareholders of their rights to control are attenuated or non-existent [53].
Section 424 of the Act empowers a court to give 'directions in relation to any matter arising in connection with the performance or exercise of any of the controller's functions and powers as controller'. It corresponds with the power of the court to give directions to liquidators conferred by s 479 of the Act.
Section 425 of the Act empowers the court to fix the remuneration of a receiver.
Section 429 obliges certain officers of a company to provide reports to controllers with respect to the affairs of a corporation, and s 430 empowers a controller to require the provision of reports on particular topics relating to the affairs of the corporation. Those powers and duties correspond with the powers and duties imposed with respect to the provision of reports to liquidators by s 475 of the Act.
Section 432 obliges controllers to lodge certain accounts at specified times, and corresponds with the obligations imposed on liquidators by s 539 of the Act. Section 434 empowers a court to order a controller to make good any default in the making or lodging of any return, account or other document, and corresponds with the power imposed upon the court with respect to liquidators by s 540 of the Act.
Section 434A empowers a court to remove a controller in the event of misconduct in connection with the performance or exercise of any of the controller's functions and powers. Section 434B empowers the court to remove a controller who has become redundant because the objectives of the controller's appointment have been achieved so far as is reasonably practicable (and with certain exceptions). These powers are analogous to the powers of the court with respect to removal of liquidators - see s 473 and s 503.
Part 5.3A - Administration with a view to executing a deed of company arrangement
The object of pt 5.3A of the Act is to provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chances of the company, or as much as possible of its business, to continue in existence, or, if that is not possible, in a way which results in a better return for the company's creditors and members than would result from an immediate winding up (s 435A). Under its provisions, an administrator may be appointed by the company's board, a secured party or by a liquidator or provisional liquidator. That administrator is given control of the company's business, property and affairs, and is authorised to carry on the company's business, or to terminate or dispose of all or part of that business (s 437A). During administration, the powers of other officers of the company are suspended (s 437C).
Section 437F renders the transfer of shares in a company made during administration void unless certain conditions are fulfilled, and gives various powers to the court with respect to the grant of authority to transfer shares during the course of an administration.
Section 438D obliges an administrator to lodge a report in certain circumstances, and empowers the court to direct the lodgment of a report if it appears that the administrator has not done so.
Part 5.3A also contains provisions relating to the convening of meetings of creditors by the administrator, and in that context, confers powers upon the court with respect to the extension of the periods specified by the Act (div 5).
Section 441D empowers the court to make orders limiting the powers of a chargee of company property on application by an administrator, and s 441A confers similar powers with respect to the rights of receivers of property of companies under administration. Further, once a company's creditors have resolved to enter into a deed of company arrangement, or the company has in fact entered into such a deed, the court may order secured creditors not to realise or otherwise deal with their security (s 444F).
Section 445D empowers the court to make an order terminating a deed of company arrangement in certain circumstances, and s 445B empowers a court to cancel a variation to a deed approved by a meeting of creditors per s 445A.
The specific powers conferred upon the court and to which I have referred are in addition to a general power conferred upon the court to make such orders as it thinks appropriate with respect to the operation of pt 5.3A (s 447A). Section 447B specifically empowers the court to make orders with respect to the protection of the interests of a company's creditors while the company is in administration, and s 447C empowers a court to declare whether or not an administrator has been validly appointed. Section 447D empowers the court to give directions to an administrator in respect of any matter arising in connection with the performance or exercise of any of the administrator's functions and powers, or in connection with the operation of, or in giving effect to, a deed of company arrangement. Further, s 447E confers upon the court the power of supervision of an administrator in certain circumstances.
Division 14 of pt 5.3A sets out the qualifications required of administrators which, like the provisions relating to the qualifications of receivers, are aimed at ensuring independence.
Section 449B empowers the court to remove an administrator, whereas s 449C empowers the court to appoint an administrator where a company is under administration but no administrator is acting.
Section 449E confers certain powers on a court with respect to the remuneration of administrators.
Parts 5.4 and 5.4A - Winding up by the court
Parts 5.4 and 5.4A of the Act relate to the winding up of corporations by order of the court, in the event of insolvency or on other grounds. As no party contends that it is beyond the power of the Parliament to confer upon the court a power to order and supervise the examination of persons with respect to the affairs of corporations ordered to be wound up by the court, it is unnecessary to consider the detailed provisions of these parts.
Part 5.5 - Voluntary winding up
Part 5.5 of the Act contains provisions relating to the voluntary winding up of a company. Section 493A provides that a transfer of shares in a company made after the passing of a resolution for its winding up is void unless certain conditions are satisfied, and confers upon the court a role in relation to the authorisation of such transfers. Other provisions of pt 5.5 give the court a variety of powers with respect to the appointment and removal of liquidators appointed to effect a voluntary winding up, and with respect to the remuneration of such liquidators (div 4). The court is also given powers in relation to such liquidators that are analogous to the powers conferred upon the court with respect to winding up following court order (s 511).
Part 5.6 - Winding up generally
Part 5.6 of the Act contains a number of provisions relating to winding up of corporations generally. Included amongst those provisions are provisions which confer powers and duties upon courts. However, it is unnecessary to consider those provisions in detail, as it has not been suggested in argument that the Parliament lacks the power to confer upon a Ch III court powers with respect to the examination of persons in connection with the affairs of a company that is being wound up.
Part 5.9 - The examination powers
It is in this context that pt 5.9 confers the powers to order and supervise examinations that are impugned in these proceedings. As the relevant portions of those provisions are set out in the reasons of McLure P, it is unnecessary to restate them here. It is, however, important to note that all parties to these proceedings accepted that notwithstanding the absence of any express words of limitation within the relevant provisions, they are to be read down so as to apply only when a company is under one or other of the forms of external administration dealt with by ch 5 of the Act - see Highstoke Pty Ltd v Hayes Knight GTO Pty Ltd [2007] FCA 13; (2007) 156 FCR 501; Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512, 521 (Gleeson CJ).
Chapter 5 - Summary and Conclusions
A number of conclusions are properly drawn from this regrettably tedious analysis of ch 5 of the Act.
First, the chapter deals with a number of different species of the genus of external administration. Those species have differing characteristics. Some involve the administration of a company for the purpose of reconstruction or rearrangement. Another involves the external administration of a company pending consideration of a deed of company arrangement aimed at either restoring the company or improving the return to its creditors and contributories. Others involve external administration by or on behalf of secured creditors. Others involve external administration as part of the process for the winding up of a company.
While the characteristics of different species of external administration obviously differ in some respects, there are also a number of unifying characteristics which result in their classification under the genus of external administration. First, as was observed by the Court of Appeal in Hall v Poolman, in every case of external administration, the normal governance structures of the company are either extinguished or attenuated to some extent [53]. Those governance structures normally involve the appointment by the members of the company of a board of directors responsible for the management of the affairs of the company in the best interests of the company as a whole and taking account of the interests of creditors. Suspension or removal of those usual governance structures and the vesting of all or part of the power to manage the affairs of the corporation in an external administrator creates issues and risks which are common to all forms of external administration.
Second, financial difficulty will be a common although perhaps not universal feature of the circumstances giving rise to external administration. Where the company is in financial difficulty, there will be a need to balance the competing interests of secured and unsecured creditors, contributories and employees. There is also a public interest in the maintenance of appropriate standards of fair dealing and propriety in the balancing of those competing interests.
Third, the court is given extensive powers of direction, supervision and control in relation to all forms of external administration covered by ch 5, irrespective of whether or not the particular form of external administration comes about as a consequence of a court order, such as an order for winding up. The analysis above supports the conclusion that there is little or no material distinction between the extent of the court's powers of direction, supervision and control as between the various forms of external administration covered by ch 5. No doubt this reflects a legislative intention that the special interests and risks which arise when a corporation (which is after all exclusively a creature of statute) goes into any form of external administration justify curial direction, supervision and control.
It is significant to note that the applicant does not suggest that it is beyond the legislative competence of the Commonwealth Parliament to confer upon a Ch III court the various powers of direction, supervision and control that are conferred by ch 5 in relation to companies under external administration. To the contrary, the only powers of the court that are impugned are the powers of examination conferred in pt 5.9, and then only in respect of corporations, the property of which is under the control of a receiver or mortgagee.
As it is not contended, nor could it be reasonably concluded that the many powers of direction, supervision and control conferred upon courts in respect of the various forms of external administration covered by ch 5 of the Act are anything other than the exercise of judicial power, I can see no reason for concluding that the power to order and supervise the conduct of an examination in relation to the affairs of a corporation under external administration is not also within the scope of judicial power, or at least incidental or ancillary to that power. That view is reinforced by a consideration of the purposes and scope of the power of examination, and by policy considerations of the kind identified by Barwick CJ in Rees v Kratzmann (66), and by Gleeson CJ in Thomas v Mowbray [17] ‑ [18].
The purpose and scope of the power of examination
In Rees v Kratzmann, the High Court held that an examination conducted pursuant to an order of the court under s 250 of the Companies Act 1961 (Qld) was not limited to matters to be addressed in a report of the liquidator. In Mortimer v Brown [1970] HCA 4; (1970) 122 CLR 493, the High Court held that the privilege against self‑incrimination had been impliedly abrogated by the same statutory provision. In that context, Kitto J referred to the heavy responsibility placed upon the court:
… for cases are bound to arise in which immense harm may be done, on the one hand to the person being examined, on the other hand to other individuals or to the community, by the allowing or disallowing of questions (496).
Referring to Rees v Kratzmann, Walsh J referred to the infringement of individual rights and injustice which could be caused by the power of examination, but observed that 'the provision was regarded as containing a safeguard against these evils, because it entrusted the control of the proceedings to a judge' (499).
Although s 597(12A) of the Act renders answers given by a witness in the course of an examination conducted under that section after a claim of privilege against self‑incrimination inadmissible in subsequent criminal proceedings against the witness, s 597(12) expressly abrogates the privilege against self‑incrimination. It follows that the observations made in Mortimer v Brown with respect to the importance of the role of the court when supervising an examination conducted pursuant to the section, by balancing competing interests and considerations when allowing and disallowing questions apply with equal force to examinations conducted under the Act.
In Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486, the High Court applied Mortimer v Brown, holding that s 541(12) of the Companies (New South Wales) Code abrogated the privilege against self‑incrimination. Like s 597 of the Act, s 541 specifically rendered answers given after a claim of privilege inadmissible in subsequent criminal proceedings, but provided no protection to the witness against the use in criminal proceedings of derivative evidence - that is, evidence obtained from other sources as a result of answers given by the witness during his or her examination. In that context, Mason CJ referred to the wide discretion conferred upon the judge supervising the examination to give directions as to the matters to be inquired into. His Honour observed:
In exercising this discretion the judge is confronted with a difficult task. He has to take account of the competing public and private interests. There are two important public purposes that the examination is designed to serve. One is to enable the liquidator to gather information which will assist him in the winding up; that involves protecting the interests of creditors. The other is to enable evidence and information to be obtained to support the bringing of criminal charges in connexion with the company's affairs: Mortimer v Brown (36) (496).
It is clear from the scope of ch 5, and the corresponding scope of an examination legitimately conducted under pt 5.9, that examinations conducted under the Part are not limited to the purposes identified by Mason CJ in Hamilton v Oades. However, it does not follow that examinations conducted under pt 5.9 do not serve any public purpose, or that the court has any less significant role in supervising the conduct of the examination, and deciding which questions shall be allowed, and which disallowed. In Boys v Quigley [2002] WASCA 99; (2002) 26 WAR 454, in the context of a case involving an examination in respect of a company in receivership, Anderson J observed:
There is, or may be, just as weighty a public interest consideration in the efficient and effective enforcement of securities issued by corporations as in the winding-up of insolvent corporations. In any given case, debenture holders may greatly exceed unsecured creditors, both in number and value, and there is nothing to say that debenture holders will ordinarily be better able to withstand a loss than the unsecured creditors of the same corporation. On another level, there is a public interest in facilitating commerce and therefore in protecting the interests of creditors who provide finance to corporations. Anyway, I would venture to say that it is in the interests of the company, its contributories and unsecured creditors that the receiver and manager effectively pursue the corporation's choses in action, even although he may be doing so primarily for the benefit of only one group of creditors [23].
Similarly, in Hong Kong Bank of Australia v Murphy, the Court of Appeal of New South Wales considered the scope of s 597 of the Corporations Law (NSW) which, like pt 5.9 of the Act, conferred a power upon the court to order an examination in respect of a variety of forms of external administration. Gleeson CJ, with whom the other members of the court agreed, observed:
As appears from its place in the legislative scheme, and from its terms, whilst s 597 has an important role to play in relation to companies that are being wound up, and liquidators or provisional liquidators will be amongst those who most commonly take advantage of its provisions, the operation of the section is by no means confined to liquidators. The statutory context of 'external administration', in which s 597 has its place, throws light on the purposes for which the power to order examinations (or to authorise persons to apply for examination orders) is conferred. Those purposes include the protection of shareholders and creditors and of interested members of the public. They are not, however, confined to the need for such protection in the case of winding up. Winding up is only one form of external administration. The scope of s 597 is wider (521).
In Evans v Wainter Pty Ltd, the scope of the power of examination conferred by pt 5.9 of the Act was considered by the Full Court of the Federal Court. Lander J, with whom the other members of the court agreed, identified the following legitimate purposes of an examination conducted pursuant to pt 5.9:
First, an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation.
Secondly, it assists the corporation’s administrators to identify the corporation’s assets, both tangible and intangible. It also allows the corporation’s liabilities to be identified.
Thirdly, the purpose is to protect the interests of the corporation’s creditors.
Fourthly, it serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation.
Fifthly, it assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations [252]. (formatting omitted)
Lander J made a number of observations with respect to the role of the court in confining the scope of the examination to purposes that were authorised by the legislation and did not amount to an abuse of process. His Honour gave, as an example of an illegitimate purpose, the purpose of using the examination as a dress rehearsal for the cross‑examination of a person in connection with a pending or proposed action [252].
This brief review of the purposes and scope of the power of examination conferred by pt 5.9 of the Act illustrates the important role of the court when deciding whether or not to order such an examination, and in supervising its conduct if ordered, in ensuring that the examination is conducted for a proper purpose, and does not become an instrument of injustice or oppression, balancing the competing considerations to which reference is made in the passages to which I have referred. The court's functions coincide closely with the function which Barwick CJ described as 'the traditional judicial function of ensuring that the examination is not made an instrument of oppression, injustice or of needless injury to the individual' in Rees v Kratzmann(66).
Policy considerations
Consideration of the role of the court in supervising the conduct of examinations conducted under pt 5.9 of the Act supports the view expressed in the cases to which I have referred, to the effect that there is much to be said for the conferral of the power of supervision of examinations conducted under pt 5.9 upon a court, and also supports the
proposition that the legislative decision to repose that power in a court carries an implication that the power is to be exercised judicially, which enhances its characterisation as an exercise of judicial power.
Conclusion
For these reasons, I would resolve the issues referred to the court for determination on the basis that the powers of examination conferred upon the court by pt 5.9 of the Act validly confer power upon a court to order and conduct an examination in respect of a corporation which is in receivership, or in respect of which property of the corporation is under the control of a mortgagee not only because of the historical analogue with powers traditionally exercised by courts at or before the time of federation, but also because the powers involve the exercise of judicial power, or at least powers which are incidental or ancillary to judicial power.
McLURE P:
Introduction
This application raises the constitutional validity of s 596A and s 597 of the Corporations Act 2001 (Cth). It was heard together with two other applications which were discontinued on 14 March 2012.
Section 596A requires a Court to summon a person to appear before it for examination about a corporation's examinable affairs. Section 597 relates to the conduct of the examination.
Legal issues were referred to this court for determination under s 43(1) and s 58(1) of the Supreme Court Act 1935 (WA). Notice under s 78B of the Judiciary Act 1903 (Cth) was given to the Attorneys‑General of the Commonwealth, States and Territories. The Commonwealth Attorney‑General has intervened in the application.
In broad terms, the issues as formulated are whether s 596A and s 597 confer on a court exercising federal jurisdiction non‑judicial power in contravention of Ch III of the Commonwealth Constitution where the power is exercised on the application of an 'eligible applicant' (authorised as such by the Australian Securities and Investment Commission (ASIC)), being:
(a)a privately appointed receiver and manager of the whole of a corporation's assets;
(b)a privately appointed receiver and manager of part of a corporation's assets; or
(c)a privately appointed agent of a mortgagee in possession of a specified asset of the corporation.
The relevant agreed background facts are as follows. The Bank of Western Australia Ltd (BankWest) holds various securities over assets of Newport Securities Pty Ltd (Receivers and Managers appointed) (Controllers appointed), Mayport Nominees Pty Ltd (Receivers and Managers appointed) and Seaport Pty Ltd (Receivers and Managers appointed). Mr Luke Saraceni is a director of those companies.
In accordance with its powers under the securities, BankWest has appointed the first respondents as receivers and managers of part of Newport's assets; the second respondents as receivers and managers of the whole of Mayport's assets; and the third respondents as receivers and managers of part of Seaport's assets.
In addition, BankWest has in its capacity as mortgagee entered into possession of certain real property owned by Newport. The first respondents have been appointed agents of the mortgagee in possession of the real property.
Each of the respondents applied to ASIC for and obtained 'eligible applicant' status in relation to the corporations the subject of their appointments. The respondents subsequently applied for and obtained ex parte orders from the Supreme Court of Western Australia for the issue to Mr Saraceni of examination summonses under s 596A of the Corporations Act. Mr Saraceni applied to set aside the examination summonses.
The issues referred to the court are in the following terms.
Is it beyond the constitutional power of the Commonwealth to require, alternatively, to empower, a court exercising federal jurisdiction to issue a summons under s 596A of the Corporations Act 2001 (Cth) and to conduct an examination under s 597 of the Corporations Act 2001 (Cth) on the application of an eligible applicant where:
1.(as to each of actions COR 120, 121 & 122 of 2011) the eligible applicant is a privately appointed receiver & manager? In particular, where the eligible applicant is a privately appointed receiver & manager, is s 596A of the Corporations Act 2001 (Cth) invalid because it confers a non‑judicial power on the court, the exercise of such an examination power not being ancillary or incidental to any judicial function or process?
2.(as to action COR 120 of 2011) the eligible applicant is a privately appointed agent of a mortgagee in possession? In particular, where the eligible applicant is a privately appointed agent of a mortgagee in possession, is s 596A of the Corporations Act 2001 (Cth) invalid because it confers a non‑judicial power on the court, the exercise of such an examination power not being ancillary or incidental to any judicial function or process?
It was either expressly or tacitly accepted by all parties that the examination powers in the Corporations Act involve a 'matter' arising under a law made by Parliament for the purposes of s 76 and s 77 of the Constitution.
Judicial power of the Commonwealth - preliminary observations
As the Corporations Act is a law of the Commonwealth, the Supreme Court of Western Australia was exercising federal jurisdiction in making the orders under constitutional challenge.
A State Parliament may confer non‑judicial powers on a court of that State, subject to the limitations arising from the doctrine in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51.
However, as a consequence of the separation of powers provided for in the Commonwealth Constitution, the Commonwealth Parliament cannot confer non‑judicial power on a federal court or a court exercising federal jurisdiction except where the power is incidental to the exercise of judicial power: R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254. Further, the judicial power of the Commonwealth cannot be conferred on bodies that are not federal courts or State courts vested with federal jurisdiction: Waterside Workers' Federation of Australia v JW Alexander Ltd (1918) 25 CLR 434.
In summary, the Commonwealth Parliament cannot confer upon a State court when exercising federal jurisdiction any function that is not within the judicial power of the Commonwealth or not ancillary to the exercise of judicial power: Gould v Brown (1998) 193 CLR 346 [59], [61], [115] ‑ [116]; Hilton v Wells (1985) 157 CLR 57, 67.
The full potential consequences of the dual aspects of the separation of judicial power are ameliorated by the fact that some functions can be conferred on courts or on another arm of government. Thus, there are functions that:
(a)can be conferred only on courts;
(b)can be conferred on courts or other (usually administrative) bodies;
(c)under the Boilermakers' doctrine, cannot be conferred on courts.
There is no exhaustive or even general definition of the judicial power of the Commonwealth. Nor is there a single combination of necessary or sufficient factors to bring a power within that concept: Attorney‑General (Cth) v Alinta Ltd (2008) 233 CLR 542 [93]. This stems in part from the role of history in the characterisation process and the fact that some powers take their character (as judicial or non‑judicial) from the body which is the repository of the power: R v Davison (1954) 90 CLR 353, 368 ‑ 369; Gould v Brown [33] ‑ [34], [66]. However, it is accepted by all parties that there will be a valid conferral of the judicial power of the Commonwealth if the power:
(1)satisfies the functional test of judicial power stated by Griffiths CJ in Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330;
(2)is relevantly the same as, or analogous to, a power historically or traditionally conferred on courts; or
(3)is incidental or ancillary to the exercise of judicial power.
The classical statement of judicial power by Griffiths CJ in Huddart, Parker is in the following terms:
I am of [the] opinion that the words 'judicial power' as used in sec 71 of the Constitution mean the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property. The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action (357).
As subsequently explained, the elements of the test are (a) a controversy between persons or classes of persons; (b) about existing rights and liabilities; (c) resulting in a final, binding and authoritative determination (one not open to review in any collateral proceedings). See R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361, 374; Fencott v Muller (1983) 152 CLR 570, 608; Attorney‑General (Cth) v Breckler (1999) 197 CLR 83 [46]. This is the 'core' of judicial power. There are also 'process' requirements to which I will return.
The examination power in pt 5.9 div 1 of the Corporations Act does not fall within the 'core' category. It is accepted by all parties that it will only be within the judicial power of the Commonwealth if it is relevantly the same as or analogous to a power historically or traditionally conferred on courts or is incidental to the exercise of judicial power. That is where the consensus ends.
Before going to these issues, it is necessary to describe the legislative scheme for the examination of persons about a corporation and the history of the exercise of such powers by courts.
Legislative framework and scope of examination power
The examination powers are in ch 5, pt 5.9 of the Corporations Act. Section 596A of the Corporations Act is a power coupled with a duty. It provides:
The Court is to summon a person for examination about a corporation's examinable affairs if:
(a)an eligible applicant applies for the summons; and
(b)the Court is satisfied that the person is an officer or provisional liquidator of the corporation or was such an officer or provisional liquidator during or after the 2 years ending:
(i)if the corporation is under administration ‑ on the section 513C day in relation to the administration; or
(ii)if the corporation has executed a deed of company arrangement that has not yet terminated ‑ on the section 513C day in relation to the administration that ended when the deed was executed; or
(iii)if the corporation is being, or has been, wound up-when the winding up began; or
(iv)otherwise ‑ when the application is made.
The term 'examinable affairs', in relation to a corporation is defined in s 9 to mean:
(a)the promotion, formation, management, administration or winding up of the corporation; or
(b)any other affairs of the corporation (including anything that is included in the corporation's affairs because of section 53); or
(c)the business affairs of a connected entity of the corporation, in so far as they are, or appear to be, relevant to the corporation or to anything that is included in the corporation's examinable affairs because of paragraph (a) or (b).
The term 'affairs' is widely defined in s 53 and 'business affairs' in s 53AA.
An 'eligible applicant', in relation to a corporation, is defined in s 9 to mean:
(a)ASIC; or
(b)a liquidator or provisional liquidator of the corporation; or
(c)an administrator of the corporation; or
(d)an administrator of a deed of company arrangement executed by the corporation; or
(e)a person authorised in writing by ASIC to make:
(i)applications under the Division of Part 5.9 in which the expression occurs.
(ii) …
'Officer' of a corporation is defined in s 9 to mean:
(a)a director or secretary of the corporation; or
(b) …
(c)a receiver, or receiver and manager, of the property of the corporation; or
(d)an administrator of the corporation; or
(e)an administrator of a deed of company arrangement executed by the corporation; or
(f)a liquidator of the corporation; or
(g)a trustee or other person administering a compromise or arrangement made between the corporation and someone else.
Section 596B is a discretionary power. It provides:
(1)The Court may summon a person for examination about a corporation's examinable affairs if:
(a)an eligible applicant applies for the summons; and
(b)the Court is satisfied that the person:
(i)has taken part or been concerned in examinable affairs of the corporation and has been, or may have been, guilty of misconduct in relation to the corporation; or
(ii)may be able to give information about examinable affairs of the corporation.
(2)This section has effect subject to section 596A.
A person who applies under s 596B must file an affidavit that supports the application which affidavit is not available for inspection except so far as the Court orders: s 596C.
A summons to a person under s 596A or s 596B may require the person to produce at the examination specified books in the person's possession that relate to the corporation or to any of its examinable affairs: s 596D(2).
Further, the Court may direct a person to produce, at an examination of that or any other person, books that are in the first‑mentioned person's possession and are relevant to matters to which the examination relates or will relate: s 597(9).
Notice of the examination must be given to as many of the corporation's creditors as reasonably practicable and (with specified exceptions) each eligible applicant in relation to the corporation: s 596E. Further, the Court may give directions about, relevantly, the matters to be inquired into and the procedures to be followed at an examination: s 596F.
An examination is to be held in public except to such extent as the Court considers that, by reason of special circumstances, it is desirable to hold the examination in private: s 597(4).
ASIC and any other eligible applicant may take part in an examination: s 597(5A). Further, the Court may put, or allow to be put, to a person being examined, such questions about the corporation or any of its examinable affairs as the Court thinks appropriate: s 597(5B). The witness is obliged to answer: s 597(7)(b).
A person is not excused from answering a question put to the person at an examination on the ground that the answer might tend to incriminate the person or make the person liable to a penalty: s 597(12).
In some circumstances, evidence given in an examination is not otherwise admissible. Section 597(12A) provides:
Where:
(a)before answering a question put to a person (other than a body corporate) at an examination, the person claims that the answer might tend to incriminate the person or make the person liable to a penalty; and
(b)the answer might in fact tend to incriminate the person or make the person so liable;
the answer is not admissible in evidence against the person in:
(c)a criminal proceeding; or
(d)a proceeding for the imposition of a penalty;
other than a proceeding under this section, or any other proceeding in respect of the falsity of the answer.
Subject to s 597(12A), the transcript of the examination is admissible in any proceeding against the witness: s 597(14). Any person can examine the transcript: s 597(14A).
Where the Court is satisfied that a summons was obtained without reasonable cause, the Court may order some or all of the costs incurred by the person to be paid by the applicant for the summons or any person who took part in the examination: s 597B.
The Corporations Act confers jurisdiction with respect to civil matters arising under the Corporations Act on courts, including the Federal Court and State Supreme Courts: s 1337B.
The power in s 596A and s 597 (the examination power) relating to the issue of a summons and the production of books is conferred on a 'Court', which is defined to include the Federal Court and the State Supreme Courts: s 58AA. It is clear from the examination provisions as a whole that the examination must be conducted before a Court: s 596D(1), s 596F(1), s 597(5B), s 597(7) and s 597(15).
Chapter 5 of the Corporations Act is headed 'External Administration'. It deals with arrangements and reconstructions (pt 5.1), receivers and other controllers of property of corporations (pt 5.2), administration of a company's affairs with a view to executing a deed of company arrangement (pt 5.3A), winding up in insolvency (pt 5.4), winding up by the Court on other grounds (pt 5.4A), winding up in insolvency or by the Court (pt 5.4B), voluntary winding up (pt 5.5), winding up generally (pt 5.6), recovering property or compensation for the benefit of the creditors of an insolvent company (pt 5.7B), offences (pt 5.8) and miscellaneous (pt 5.9).
The following points about the nature and scope of s 596A should be noted. First, with the authority of ASIC a receiver and manager (receiver) or an agent of a mortgagee in possession, or anyone else with a sufficient interest, is given standing to apply to the court to exercise its power to summon a person to attend for examination before the court. However, the court retains substantive control of the examination because of its power to give directions about the matters to be inquired into.
Secondly, the power of the court is not expressly conditioned on the relevant corporation being in liquidation or otherwise under external administration under ch 5. However, in view of its placement within ch 5, s 596A is to be read down to apply only where a company is in external administration: Highstoke Pty Ltd v Hayes Knight GTO Pty Ltd (2007) 156 FCR 501; New Zealand Steel (Aust) Pty Ltd v Burton (1994) 13 ACSR 610; Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512, 521 (Gleeson CJ). The examination power in its terms clearly extends to corporations in liquidation pursuant to a voluntary winding up. Reliance on s 511 is not required.
Thirdly, I have avoided language suggesting that a pt 5.9 examination is conducted 'by' the court. That is to avoid the (erroneous) impression that the court is itself conducting the examination. The court facilitates and supervises the examination conducted by the applicant and other interested parties with standing. The proceedings are adversarial, not inquisitorial. (Contrast the statutory language of the historical examination provisions referred to by Lockhart J in Re Compass Airlines Pty Ltd (1992) 35 FCR 447, 452 as inquisitorial.) The courts supervisory function is to be contrasted with the inquisitorial, investigative functions conducted by regulatory authorities such as ASIC, the Australian Competition and Consumer Commission and the Commissioner of Taxation. See Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission (1982) 152 CLR 460.
Fourthly, there is no requirement that the exercise of the examination power itself be for the purpose of, and lead to the making of, a judicial determination.
Fifthly, the status of the particular eligible applicant for the summons is not the central issue from a constitutional perspective. A contributory may be given standing to make an application: Re Gold Company (1879) 12 Ch D 77. The primary focus is on the type of external administration in issue (liquidation, receivership etc) and the nature and extent of the functions of the external administrator and the Court.
Sixthly, it follows from the second and fifth points that the purpose of an examination under s 596A is to aid the company under external administration, its creditors, members and the public, not to advance or advantage the interests of the applicant: Re Excel Finance Corporation Ltd (Receiver and Manager Appointed); Worthley v England (1994) 52 FCR 69, 91; Evans v Wainter Pty Ltd (2005) 145 FCR 176 [111] ‑ [143]; Hong Kong Bank (521). The court in Re Excel said:
[T]he fact that the purpose of the examination was to aid the ultimate recovery of the secured debt, by, for example, the ascertaining of the existence of assets, would operate to the benefit of the company by ensuring that it paid out the secured creditors and that there was then revealed what other assets (if any) were available for distribution to unsecured creditors (93).
Finally, although the purpose of the examination power is not to advance the interests of the applicant or their appointor, their interests in the company, which is the source of their standing, will ordinarily be a limiting criterion in the scope of their permissible examination of the witness. The scope of the examination as a whole will be determined by the interests of all persons entitled or permitted to participate in the examination.
The history of companies legislation in England
I am assisted on the subject of the history and development of companies and company law by the discussion in LexisNexis, Ford's Principles of Corporations Law (at 25 January 2012) [2.020] ‑ [2.300]. In England before 1844, a corporation aggregate (being a group of persons united for a common purpose) could be created only by the grant of a Royal Charter or a grant of incorporation by a private Act of Parliament.
Commercial developments in the 18th century necessitated the raising of large sums of capital and encouraged the solicitation of funds from the public. This led to the formation of large quasi‑partnerships known as joint stock companies. They were, in fact, unincorporated associations.
The many disadvantages associated with being an unincorporated association resulted in resort to the law of trusts. A large partnership would be constituted by a deed of settlement. A few of the partners would be appointed trustees to conduct the business on trust for the other partners in accordance with the terms of a deed (deed‑of‑settlement companies). The deed ordinarily provided that stockholders should be liable only to the extent of their contributed capital but this provision did not save stockholders from liability to third persons.
In 1844 the English Parliament passed legislation providing for incorporation by registration: Joint Stock Companies Registration and Regulation Act 1844 (UK) (7 & 8 Vict c 110). The Act did not exclude the personal liability of members for company debts. However, creditors had to exhaust their remedies against the company first.
Winding up of such companies was the subject of the Joint Stock Companies Winding Up Act 1844 (UK) (7 & 8 Vict c 111). The object of the Act was that if any incorporated joint stock company committed an act deemed to be an act of bankruptcy, a fiat in bankruptcy could issue against the company and be prosecuted in the court authorised to act in the prosecution of such a fiat in like manner as against other bankrupts. By s 15, the court authorised to act in the prosecution of a fiat in bankruptcy issued against a company was empowered to summon and examine on oath, before or after the adjudication of bankruptcy, any person capable of giving any information concerning the commercial dealings or trading, or any acts of bankruptcy, of the company. Public examination of a bankrupt by a court has a long history dating from 1542 (Bankruptcy Act 1542 (UK) (34 & 35 Hen 8 c 4)). The 1844 Act made no provision for the role or office of liquidator.
The limitation of the personal liability of members of corporations was provided for in the Limited Liability Act 1855 (UK) (18 & 19 Vict c 133).
The Joint Stock Companies Act 1856 (UK) (19 & 20 Vict c 47) provided for the appointment of 'official liquidators' for a court ordered winding up (s 88, s 90) and 'liquidators' for a voluntary winding up (s 104).
Following many years of reform after the 1844 Acts, English company law was consolidated in the Companies Act 1862 (UK) (25 & 26 Vict c 89) (the 1862 UK Act). The 1862 UK Act made express provision for compulsory examination. Section 115 and s 117 relevantly provided:
115.The Court may, after it has made an Order for winding up the Company, summon before it any Officer of the Company or Person known or suspected to have in his Possession any of the Estate or Effects of the Company, or supposed to be indebted to the Company, or any Person whom the Court may deem capable of giving Information concerning the Trade, Dealings, Estate, or Effects of the Company; and the Court may require any such Officer or Person to produce any Books, Papers, Deeds, Writings, or other Documents in his Custody or Power relating to the Company …
117.The Court may examine upon Oath, either by Word of Mouth or upon written Interrogatories, any Person appearing or brought before them in manner aforesaid concerning the Affairs, Dealings, Estate, or Effects of the Company, and may reduce into Writing the Answers of every such Person, and require him to subscribe the same.
Section 138 applied where a company was being wound up voluntarily. It relevantly provided:
Where a Company is being wound up voluntarily the Liquidators or any Contributory of the Company may apply to the Court … to determine any Question arising in the Matter of such Winding up, or to exercise, as respects the enforcing of Calls, or in respect of any other Matter, all or any of the Powers which the Court might exercise if the Company were being wound up by the Court; and the Court … if satisfied that the Determination of such Question, or the required Exercise of Power, will be just and beneficial, may accede, wholly or partially, to such Application, on such Terms and subject to such Conditions as the Court thinks fit.
Section 511 of the Corporations Act is the modern equivalent of s 138 of the 1862 UK Act.
The history of companies legislation in Australia
Most of the Australian colonies passed companies legislation based on the English model. The colony of Western Australia enacted the Joint Stock Companies Ordinance 1858 (22 Vict No 6) (the 1858 WA Ordinance) which was based on the 1856 UK Act. The Ordinance provided for limitation of liability (s 62). It also provided for voluntary and court ordered winding up. After the court had made a winding up order, it had the power to summon and question persons for the purpose of obtaining information on specified matters under s 79 and s 80 which are in the same terms as s 115 and s 117 of the 1862 UK Act. Section 97 of the 1858 WA Ordinance was to the same effect as s 138 of the 1862 UK Act. It also provided for the appointment of official liquidators '[for] the Purpose of conducting the Proceedings in winding up a Company, and assisting the Court therein' (s 92). Further, after the commencement of a voluntary winding up, a liquidator or liquidators had to be appointed 'for the Purpose of winding‑up the Affairs of the Company and distributing the Property' (s 105). The mandated active involvement of the court in the administration of the winding up was significantly greater than it is in modern times: see s 77, s 88, s 92, s 98.
The 1858 WA Ordinance was replaced by the Companies Act 1893 (56 Vict No 8) (the 1893 WA Act) which was based on the 1862 UK Act. Section 159 of the 1893 WA Act relevantly provided:
(1)[The] Court may, after it has made an order for winding up the company, summon before it the liquidator or any officer of the company or person known or suspected to have in his possession any of the estate or effects of the company, or supposed to be indebted to the company, or any person whom the Court may deem capable of giving information concerning the trade, dealings, estate, or effects of the company, and the Court may require any such liquidator, officer, or person to produce any books, papers, deeds, writings, or other documents in his custody or power relating to the company.
…
(4)The Court may examine upon oath … any person appearing or brought before it under this section concerning the affairs, dealings, estate, or effects of the company, and may reduce into writing the answers of every such person and require him to subscribe the same.
The examination power in s 159 also applied to a voluntary winding up: s 157.
Western Australian law relating to companies was consolidated and amended by the Companies Act 1943 (WA) (the 1943 WA Act). The court's power to summon witnesses for examination (in s 224) was similar to s 159 of the 1893 WA Act but was extended to apply at any time after the appointment of a provisional liquidator.
An additional power of examination was added. Section 225(1) relevantly provided:
When an order has been made for winding‑up a company by the Court, and the official liquidator has made a further report under this Act stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company, or by any director or other officer of the company in relation to the company since its formation, the Court may, after consideration of the report and any other relevant matters, direct that any person who has taken any part in the promotion or formation of the company, or has been a director or officer of the company, shall attend before the Court … and be examined as to the promotion or formation or the conduct of the business of the company or as to his conduct and dealings as director or officer thereof.
An examination power of this nature was first introduced in England in 1890 for a court ordered winding up: Companies (Winding Up) Act 1890 (UK) (53 & 54 Vict c 63), s 7. The examination powers in s 224 and s 225 of the 1943 WA Act also applied to a voluntary winding up (and voluntary winding up was extended from a members' winding up to include a creditors' winding up). Section 258 of the 1943 WA Act relevantly provided:
(1)The liquidator or any contributory or creditor may apply to the Court to determine any question arising in the winding‑up of a company, or to exercise … any of the powers which the Court might exercise if the company were being wound up by the Court.
(2)The Court, if satisfied that the determination of the question or the required exercise of power will be just and beneficial, may accede wholly or partially to the application on such terms and conditions as it thinks fit, or may make such other order or decree on the application as it thinks just.
In the 1960s, there was a move towards uniform State companies legislation. The legislation in Western Australia was the Companies Act 1961 (WA) (the 1961 WA Act) which came into force on 5 October 1962. Section 249 relevantly provided:
(1)The Court may summon before it any officer of the company or person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or any person whom the Court deems capable of giving information concerning the promotion, formation, trade dealings, affairs or property of the company.
(2)The Court may examine him on oath concerning the matters mentioned in subsection (1) …
(3)The Court may require him to produce any books and papers in his custody or power relating to the company.
However, in its long history it has never been a requirement that the examination power relating to companies in liquidation be for the purpose of and/or lead to, actually or potentially, the future exercise by the court of a power to make a final determination of any kind. Moreover, in a voluntary winding up there is no past exercise of judicial power which triggers the commencement of the winding up.
Of greatest significance for present purposes is the fact that the historic examination power did not depend on the existence of a past or future (intended or potential) judicial determination. That is, the court's examination power extended to compulsory and voluntary liquidators without distinction.
It is accepted, correctly in my view, that the current examination power in relation to the examinable affairs of a corporation in liquidation, whether as a result of a court order or otherwise, is within the judicial power of the Commonwealth.
It was contended that the examination power in relation to a corporation in receivership is not relevantly the same or analogous to the examination power historically exercised because: (1) the nature of the power itself is non‑judicial; (2) the power is well removed from the functional test of (core) judicial power; (3) the power is antithetical to the judicial process; (4) the power infringes individual rights and freedoms to a significant extent; and (5) there is no connection between the examination power and any existing, valid exercise of judicial power.
With one exception, the matters in (1) and (2) have little impact on the assessment of whether the examination power in relation to a corporation in receivership is analogous to the historical examination power in relation to a company in voluntary liquidation. The exception is where the power in issue would, but for historical considerations, be exclusively non‑judicial in character. A power in aid of investigation is not in that category. The assertion in (5) is correct. However, there is no connection between an exercise of the examination power in a voluntary winding up and any existing, valid exercise of judicial power.
It is also said the examination power infringes individual rights and freedoms to a significant extent. As noted by Windeyer J in Rees v Kratzmann, the common law is traditionally opposed to compulsory interrogations (80). He continued:
But, strong as has been the influence of this attitude upon the administration of the common law, of the criminal law especially, it must be admitted that in the Chancery Court it had less place: and in bankruptcy jurisdiction it has been largely displaced. For example, a debtor upon his public examination in bankruptcy cannot refuse to answer questions on the ground that the answers may incriminate him ... the purpose of the bankruptcy statute being to secure a full and complete examination and disclosure of the facts relating to the bankruptcy in the interests of the public. The provisions of The Companies Act reflect, it seems to me, the same idea. The honest conduct of the affairs of companies is a matter of great public concern to-day. If the legislature thinks that in this field the public interest overcomes some of the common law's traditional consideration for the individual, then effect must be given to the statute which embodies this policy (80).
Further, the legislature has reposed in the court exercising the examination power the traditional judicial function of ensuring that the examination is not made an instrument of oppression, injustice, or of needless injury to the individual: Rees v Kratzmann (66) (Barwick CJ). See also Thomas v Mowbray [17] (Gleeson CJ).
Mason CJ in Hamilton v Oades describes the examination powers as a 'system of discovery' (497). It is akin to procedures and powers exercised as a matter of course in curial proceedings. Their use reflects a balancing of public and private interests. The courts compulsory examination power has also been a fixture of the law relating to external administration of an insolvent's financial affairs for centuries. Incorporation with limited liability is a privilege, the quid pro quo for which is the provision of tools for securing transparency and accountability. Jessel MR in Re GoldCompany was dismissive of a rights‑based challenge to the power (82). It is impossible to accept that the common law's reluctance provides any proper foundation for refusing to bring within the judicial power of the Commonwealth examination powers relating to the affairs of a corporation in receivership.
It is also relevant in this context that the test for determining whether a law is repugnant to Ch III because of process considerations uses the historic processes of the courts as a yardstick: Thomas v Mowbray [111]; South Australia v Totani (2010) 242 CLR 1 [131], [134].
The analogy between the historic examination power in relation to companies in liquidation, particularly those in voluntary liquidation, and the current examination power relating to companies in receivership is very close. First, the subject matter of the current examination power is no wider than that historically conferred in relation to a company in liquidation. Indeed, the examination relating to a company in receivership is likely to be more confined because there must be a connection between the interests which give the receiver or any other eligible applicant standing and the scope of the examination (see [113]) and the matters relevant to a corporation in receivership are narrower than in a winding up. It will be narrower again when the receivership is confined to part of the property of the corporation. I have also concluded that the primary focus is not on the identity of the eligible applicant (see [111], [183]). It follows from these conclusions that the answer to the questions in the application will be the same regardless of whether the receivership relates to some or all of the corporation's assets.
Secondly, the nature and extent of the court's powers of control and supervision of receivers and liquidators are substantially the same. Accordingly, the fact that a receiver is privately appointed and not an officer of the court is not material. In any event, a receiver is in the identical position as a privately appointed liquidator in a voluntary winding up.
Thirdly, the purpose of the exercise of the court's powers in aid of investigation are relevantly the same. That purpose is (as with bankruptcy) to secure full and complete disclosure of the facts to enable the external administrator to perform their powers and duties (Rees v Kratzmann (80)) in the interests of the corporation, its creditors (secured and unsecured) and members (Re Excel).
Fourthly, there is a very substantial overlap between the statutory powers and duties of a receiver and liquidator.
Fifthly, the examination power facilitates the proper and timely performance of the administration of the winding up or other form of external administration of the corporation. That is an integral aspect of the Court's function in controlling and supervising that administration. The control aspect of the function is both facilitative (the examination power) and directive (s 423). They have been the functions of a court in the administration of a winding up of a company, both compulsory and voluntary, in English law and in the law of the colonies since before federation.
Finally, the extension of the examination power to corporations in receivership is simply a reflection of developments in the law providing for and regulating modern forms of external administration in much the same way as the historical examination powers in bankruptcy were extended to developments in the law relating to the existence and winding up of the newly created separate, artificial, corporate personality with limited liability. It is an appropriate power to confer on a court.
For these reasons the examination power in s 596A and s 597 in its application to a corporation to which a receiver has been appointed is analogous to the examination power historically conferred on courts in relation to corporations in liquidation. Accordingly, the examination power is within the judicial power of the Commonwealth.
Historical analogy - agent of mortgagee in possession
The inclusion of a mortgagee in possession (and its agents) in pt 5.2 of the Corporations Act flowed from a recommendation in the Harmer Report. The Harmer Report concluded that 'the exclusion of mortgagees and their agents other than receivers discriminates between differing methods of enforcing charges in a way which is difficult to justify' and that there is 'no logical reason for many of the provisions relating to receivers to distinguish between different methods of enforcing a charge and for the operation of those provisions to be confined merely to receivers' [187].
In the second reading speech for the Corporate Law Reform Bill 1992 (Cth), the then Attorney General said:
In relation to companies in difficulty, the Bill makes it plain that there are ways to deal with a company which is facing solvency difficulties that are more constructive and efficient than current remedies. It will ensure that receivers are accountable to shareholders and creditors for what they are doing while controlling a company. It says that mortgagees should not be able to avoid being accountable by taking possession of an asset through an agent rather than appointing a receiver.
See Commonwealth, Parliamentary Debates, House of Representatives, 3 November 1992, 2400 (Mr Duffy, Attorney‑General).
There is a very close correlation between the relevant functions and effect on the company of the appointment of, and the regulatory framework for, receivers and agents of a mortgagee in possession. The differences between them are not material for present purposes. My reasons for concluding that the examination power in relation to receivership is a historical analogue of the examination power in relation to companies in liquidation justify the same conclusion in relation to an agent for a mortgagee in possession.
Whether incidental to judicial power - receivership and agent of mortgagee in possession
The authorities establish that the incidental power is enlivened when the power in issue is non‑judicial but is incidental to the exercise of a principal or main judicial power. This test caters for the ordinary situation in which the exercise of a judicial power has occurred or will (or may) occur in pending or prospective proceedings. It is not well suited to the non‑mainstream categories of judicial power traceable back to the pre‑federation jurisdiction of English courts of equity referred to in R v Davison (368) where the function of the court relates to the process of administration. I have concluded that the examination power is judicial in character because it is an integral aspect of the judicial function of controlling and supervising the administration in question. For the purpose of considering whether the examination power is incidental, I will assume that the examination power is non‑judicial in character and focus on the specific powers said to be judicial rather than the function of which the powers form part.
The respondents and the Commonwealth contend that the examination power is incidental to the court's powers to control and supervise the conduct of a receiver and an agent for a mortgagee in possession. I infer that the control and supervisory powers include but are not confined to s 423, s 424 and (in relation to a receiver) s 1321 and they are the principal or main judicial powers to which the examination power must be incidental.
The first issue is whether the principal power must be within the core of judicial power (satisfying the Griffith 'functional' test) for an otherwise non‑judicial power to be incidental or ancillary to it. I see no basis in the authorities or in principle for so confining it. Indeed, the authorities are against the proposition. Gould v Brown is an example. The exercise by a court of its power to make a winding up order is not within the core of judicial power yet is uncontroversially judicial in character.
The next issue is whether, in order to be incidental, a power must be exercised for the purpose of and leading to the exercise of judicial power (whether or not in the same proceedings). I would also answer that question in the negative. Such an approach would exclude pretrial discovery as an incident of the exercise of judicial power.
Accordingly, the exercise of the inquiry power in s 423(1) to obtain information for the purpose of obtaining an order under that section would be incidental to the exercise of judicial power. Further, to invoke the examination power because the applicant reasonably believed that he or she may have the right to obtain relief in court from a prospective defendant would also be valid as incidental to the exercise of judicial power by analogy with the Federal Court's preliminary discovery power. However, as previously noted, the examination power under challenge is not conditioned on the past or future exercise of another specific power. At its widest, the purpose of the exercise of the power may be confined to obtaining information in order to carry out the administration in question.
The real issue in this case is whether the exercise of the examination power during the course, and for the purpose, of the external administration of the relevant corporation is incidental to the mere existence of the court's general control and supervisory powers. The Commonwealth says it is, relying on the judgment of the plurality in Gould v Brown. The submission is that the winding up order made by the court was not an essential element in the plurality's characterisation of the examination power as incidental to the exercise of judicial power. The Commonwealth relies on the following extracts from their judgment:
-The power to order the examination of witnesses in the course and for the purposes of a winding up and to conduct and hear such an examination has long been a power conferred on and exercised by courts exercising jurisdiction in the winding up of corporations [32];
-[I]t is the part which an examination plays in a winding up and the court's function in conducting the examination that determines whether the court is exercising judicial power [33];
-To the extent that the power to order and conduct examinations is available for exercise in the course and for the purposes of a winding up, it is an incident of the judicial power of winding up and has a judicial character [35];
-The powers available under ss 596A and 596B of the CorporationsLaw may be exercised to order and conduct examinations otherwise than in the course and for the purposes of a winding up [36].
Reliance is also placed on the description of the examination process given in the court below by Lockhart J (set out earlier) and the terms of the severed provision upheld by the plurality which is wide enough to include voluntary liquidation.
There is no express statement in the plurality's judgment that the existence of a winding up order was essential to their conclusion that the examination power was incidental to the exercise of judicial power. It is necessary to consider the contention from the perspective of principle.
The proposition advanced by the respondents and the Commonwealth would involve a departure from, and be an exception to, the requirement that there be a sufficient connection between the non‑judicial power and the exercise of an admittedly judicial power. At its widest that requires the examination power to be for the purpose of facilitating the actual, potential or possible exercise of a judicial power.
As previously discussed, the exercise by a court of a power for the purpose of and leading to the exercise of a judicial power can itself be characterised as judicial rather than incidental. However, there are some powers that are not exercised for the purpose of facilitating the exercise of a judicial power yet are incidental thereto. A preliminary discovery order is one example. Orders consequential upon the grant of principal judicial relief (such as orders for maintenance or a settlement of property following a decree for the dissolution of a marriage) are also incidental: Cominos v Cominos. As are orders facilitating the implementation or execution of a past exercise of judicial power.
However, in all cases the emphasis is on the exercise of judicial power. The closest analogy with the examination power is the exercise of investigative powers in aid of execution of judgments. However, the latter has a different purpose, being to underpin or support the authority of the judicial arm of government. That analogy would not extend to the mere existence of powers to control and supervise the administration.
If the plurality in Gould v Brown intended that a non‑judicial power could be incidental if unrelated (in purpose or otherwise) to the actual potential or possible exercise of a judicial power, it is reasonable to assume they would have fully expressed their reasoning for such a controversial conclusion. On my reading of their reasons as a whole, the references to examination 'in the course and for the purposes of a winding up' are intended to characterise the exercise of the examination power
partially by reference back to the winding up order that triggered the process that enlivened the examination power.
If the examination power in relation to the examinable affairs of a company the subject of an appointment of a receiver or agent of a mortgagee in possession is not for historical reasons judicial, it is not in my view incidental to the exercise of judicial power.
Conclusion
The issues posed for determination by this court wrongly focus on the status of the eligible applicant. I would answer the questions as follows. The exercise of power by the Court to issue summonses for examination under s 596A of the Corporations Act and to conduct an examination under s 597 in relation to a corporation in receivership and where property of a corporation is in the possession of a mortgagee or its agent under pt 5.2, constitutes an exercise of the judicial power of the Commonwealth and is within the power of the Commonwealth to confer on a Court.
NEWNES JA: I agree with McLure P.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: SARACENI -v- JONES [2012] WASCA 59 (S)
CORAM: MARTIN CJ
McLURE P
NEWNES JA
HEARD: ON THE PAPERS
DELIVERED : 1 MARCH 2013
FILE NO/S: CACV 113 of 2011
BETWEEN: LUKE SARACENI
Applicant
AND
MARTIN BRUCE JONES AS RECEIVER AND MANAGER OF NEWPORT SECURITIES PTY LTD AND AS AGENT OF THE MORTGAGEE IN POSSESSION OF 3517 ROAD, WILYABRUP
First-named First RespondentDARREN GORDON WEAVER AS RECEIVER AND MANAGER OF NEWPORT SECURITIES PTY LTD AND AS AGENT OF THE MORTGAGEE IN POSSESSION OF 3517 CAVES ROAD, WILYABRUP
Second-named First RespondentANDREW JOHN SAKER AS RECEIVER AND MANAGER OF NEWPORT SECURITIES PTY LTD AND AS AGENT OF THE MORTGAGEE IN POSSESSION OF 3517 CAVES ROAD, WILYABRUP
Third-named First RespondentMARTIN BRUCE JONES AS RECEIVER AND MANAGER OF MAYPORT NOMINEES PTY LTD
First-named Second RespondentDARREN GORDON WEAVER AS RECEIVER AND MANAGER OF MAYPORT NOMINEES PTY LTD
Second-named Second RespondentANDREW JOHN SAKER AS RECEIVER AND MANAGER OF MAYPORT NOMINEES PTY LTD
Third-named Second RespondentMARTIN BRUCE JONES AS RECEIVER AND MANAGER OF SEAPORT PTY LTD
First-named Third RespondentJOHN ROSS LINDHOLM AS RECEIVER AND MANAGER OF SEAPORT PTY LTD
Second-named Third RespondentCOMMONWEALTH ATTORNEY-GENERAL
Intervener
Catchwords:
Costs - Indemnity costs - Solicitor and client costs - Special costs - Meaning of 'reasonable costs incurred'
Legislation:
Legal Profession Act 2008 (WA), s 280
Rules of the Supreme Court 1971 (WA), O 66 r 11
Result:
Costs order construed
Category: B
Representation:
Counsel:
Applicant: Mr G R Donaldson SC & Mr J C Vaughan
First-named First Respondent : Mr D F Jackson QC & Mr M N Solomon
Second-named First Respondent : Mr D F Jackson QC & Mr M N Solomon
Third-named First Respondent : Mr D F Jackson QC & Mr M N Solomon
First-named Second Respondent : Mr D F Jackson QC & Mr M N Solomon
Second-named Second Respondent : Mr D F Jackson QC & Mr M N Solomon
Third-named Second Respondent : Mr D F Jackson QC & Mr M N Solomon
First-named Third Respondent : Mr D F Jackson QC & Mr M N Solomon
Second-named Third Respondent : Mr D F Jackson QC & Mr M N Solomon
Intervener: Mr R Orr QC & Mr A Buckland
Solicitors:
Applicant: Jackson McDonald
First-named First Respondent : Coulson Legal
Second-named First Respondent : Coulson Legal
Third-named First Respondent : Coulson Legal
First-named Second Respondent : Coulson Legal
Second-named Second Respondent : Coulson Legal
Third-named Second Respondent : Coulson Legal
First-named Third Respondent : Coulson Legal
Second-named Third Respondent : Coulson Legal
Intervener: Australian Government Solicitor
Case(s) referred to in judgment(s):
Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95
Re Bond Corporation Holdings Ltd (1990) 1 WAR 465
Saraceni v Jones [2012] WASCA 59
Spencer v Dowling [1997] 2 VR 127
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
JUDGMENT OF THE COURT: This court is called upon to construe a costs order made by consent on 16 March 2012 (the costs order). The costs order was formulated, and agreed to, by the parties following the delivery of judgment in Saraceni v Jones [2012] WASCA 59 (the proceedings).
The costs order provides that 'the Applicant pay the reasonable costs incurred by the Respondents in these proceedings to be taxed if not agreed'. The respondents have filed a bill of costs dated 1 November 2012 (the Bill).
On 21 November 2012 Registrar Bush made orders by consent that the following questions raised by the applicant be determined by the court as a preliminary issue on the papers, being:
(1)whether the costs order denotes indemnity costs (although not shifting the onus of proof), or in the alternative, solicitor and client costs; and
(2)whether the costs order allows the respondents to claim costs above the applicable costs scale item limit.
On 13 September 2011 Corboy J referred a special case for the opinion of the Court of Appeal. The Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (the Determination ) applies to the proceedings. Item 22 of the Determination applies to a special case, case stated (otherwise than by way of appeal) or trial of an issue and allows for 'such amounts as are reasonable in the circumstances' (the scale item).
The scale item is not capped. However, the maximum hourly and daily rates set out in the Table in cl 10 of the Determination would, absent an order to the contrary, apply in determining what was reasonable in the circumstances: Legal Profession Act 2008 (WA) (LPA), s 280; Rules of the Supreme Court 1971 (WA), O 66 r 11.
The Bill claims costs pursuant to the provisions of a costs agreement between the respondents and law firm Blake Dawson dated 14 September 2011 (the costs agreement). The respondents claim that the costs order allows for costs to be claimed pursuant to the costs agreement on (1) an indemnity basis; (2) a solicitor and client basis; or (3) a special costs basis.
Indemnity costs
In Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) the Court of Appeal summarised the well‑known principles applicable to the making of an indemnity costs order. Those well‑known principles provide the context in which the costs order is to be construed. Moreover, the standard order for indemnity costs is that 'X should pay all the costs incurred by Y except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that, subject to the above exceptions, Y is completely indemnified by X for its costs': Re Bond Corporation Holdings Ltd (1990) 1 WAR 465, 479.
The context, the conduct of the proceedings in the Court of Appeal and the terms of the costs order are inconsistent with an objectively determined intention to provide for indemnity costs.
Solicitor and client costs
The respondents contend that the expression 'reasonable costs incurred' in the costs order should be construed to mean costs on a solicitor and client basis not a party and party basis. Reliance is placed upon criticism in Dal Pont GE, Law of Costs (2nd ed, 2009) at [15.39] of the decision in Spencer v Dowling [1997] 2 VR 127. The Victorian Court of Appeal in Spencer construed the expression 'costs reasonably incurred' in Victorian equal opportunity legislation to mean party and party costs not solicitor and client costs. The criticism is not persuasive. There is little if any practical difference between the standard order for indemnity costs and an order allowing costs reasonably incurred on a solicitor and client basis. Neither construction finds support in the terms of the costs order.
Special costs
The respondents claim in the further alternative that a 'special costs interpretation' ought to be given to the costs order so as to allow the respondents to claim costs at hourly rates greater than those set in the Determination.
The power to make a special costs order is to be found in s 280(2) of the LPA. The court may make such an order if it is of the opinion that a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter. Special costs orders are routinely sought in this court and instantly recognisable as such. See Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95 [37] ‑ [49]. The terms of the costs order fall well short of supporting an interpretation that the maximum hourly rates provided for in the Determination be removed.
Conclusion
The preliminary issues should be answered in the negative. The respondents should pay the applicant's costs of this application to be taxed.
22
36
14