SC Capital Pty Ltd v Primebroker Securities Ltd; Cablerand Pty Ltd v Primebroker Securities Ltd
[2011] VSC 565
•7 November 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
No. 10548 of 2008
| SC CAPITAL PTY LTD (ACN 007 342 949) | Plaintiff |
| v | |
| PRIMEBROKER SECURITIES LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) (ACN 081 178 645) | Defendant |
No. 10549 of 2008
| CABLERAND PTY LTD (ACN 064 559 486) | Plaintiff |
| v | |
| PRIMEBROKER SECURITIES LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) (ACN 081 178 645) | Defendant |
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JUDGE: | DAVIES J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 31 October and 2 November 2011 |
DATE OF RULING: | 7 November 2011 |
CASE MAY BE CITED AS: | SC Capital Pty Ltd v Primebroker Securities Ltd; Cablerand Pty Ltd v Primebroker Securities Ltd |
MEDIUM NEUTRAL CITATION: | [2011] VSC 565 |
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PRACTICE AND PROCEDURE – Appeal lodged by non-party against decision of Associate Justice on application to set aside a statutory demand – Whether non-party a “person affected” for purposes of statutory demand – Meaning of “person affected” – Principles applied – John Alexander’s Clubs Pty Ltd v White City Tennis Club Limited (2010) 241 CLR 1 – Supreme Court (General Civil Procedure) Rules 2005 r 77.06(1)
PRACTICE AND PROCEDURE – Appeal from Associate Justice – Special leave to rely upon evidence not before the Associate Justice – Application to revoke special leave – Whether special leave should be revoked – Supreme Court (General Civil Procedure) Rules 2005 r 77.06(7)(b)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J. D. Elliot SC with Mr P. D. Corbett and Mr J. S. Graham | DLA Piper |
| For the Defendants | Mr N. J. O’Bryan SC with Mr H. N. G. Austin | Blake Dawson |
| For the Australia and New Zealand Banking Group Ltd | Mr A.C. Archibald QC with Mr D. J. Batt SC and Ms P. Neskovcin and Mr P. D. Herzfeld | Allens Arthur Robinson |
HER HONOUR:
The proceedings before me are appeals under r 77.06 of the Supreme Court (General Civil Procedure) Rules 2005 (“SCR”) from the judgment and orders of an Associate Justice given on 31 August 2009. The plaintiffs, which are the shareholders of the defendant (“PSL”), successfully applied to the Associate Justice under s 459G of the Corporations Act 2001 (Cth) (“the Act”) for orders setting aside statutory demands that the receivers of PSL had served on them. The grounds relied on by the plaintiffs in support of their application included that (1) the receivers had not been validly appointed to PSL and had no legal right to cause the demands to be served in the name of PSL[1] and (2) that they had an offsetting claim against the appointer of the receivers, the Australia and New Zealand Banking Group Ltd (“ANZ”), for wrongful conduct.[2] The Associate Justice held that the claim against ANZ was not an offsetting claim within the meaning of s 459H of the Act because the claim was not against PSL in whose name the receivers had served the demand and accordingly that the claim did not found a basis for setting aside the demands.[3] However His Honour did find on the evidence before him that the receivers were not validly appointed and set aside the demands on that ground.[4] The receivers have appealed the decision. ANZ has also appealed the decision, although ANZ was not a party to, and did not appear in, the applications before the Associate Justice. ANZ relies on r 77.06 of the SCR which provides that “any affected person” may appeal decisions of an Associate Justice to a judge of the Court.[5] ANZ claims that it is a “person affected” by the judgment given and orders made by the Associate Justice. The plaintiffs take a different view and have applied to have ANZ’s notices of appeal dismissed on the basis that ANZ is not an “affected person” and has no relevant interest in the appeals. The plaintiffs have also applied to have orders of the Court made on 16 July 2010 set aside. The Court had made orders:
[1]SC Capital Pty Ltd v Primebroker Securities Limited(In liquidation)(Receivers & managers appointed) (Unreported, Supreme Court of Victoria, Efthim AsJ, 31 August 2009) 16 [60]. It should be noted that in other matters of the orders of the Honourable Associate Justice Efthim made 31 August 2009 the reasons given in SC Capital Pty Ltd v Primebroker Securities Limited in proceeding S CI 2008 10548 apply to proceeding S CI 2008 10549.
[2]Ibid 31 [112].
[3]Ibid 32 [116].
[4]Ibid 34 [124].
[5] Rule 77.06(1) of the Supreme Court (General Civil Procedure) Rules 2005 provides that:
(a) granting special leave to PSL and ANZ pursuant to r 77.06(7)(b) of the SCR to rely in the appeals on affidavits or oral evidence not used or given before the Associate Justice (order 1);
(b) that ANZ’s appeals be heard together with the receivers’ appeal and with proceeding S CI 2009 8754 (“the receivers’ application”) (order 2);
(c) that evidence in any one of the proceedings be evidence in the others (order 3); and
(d) that ANZ have leave to intervene and be heard in the receivers’ appeals (order 4).
Orders 2, 3 and 4 were made by consent of the parties and order 1 was made at the request of the parties.
Before turning to a consideration of the arguments, the context in which the orders of 16 July 2010 were made should be explained. The receivers’ application referred to in order 2 was instituted by the receivers in addition to filing appeals in each proceeding. In that application in which ANZ and PSL are also parties, the receivers seek a declaration under s 418A of the Act that their appointment as receivers of PSL’s property was valid. In turn, the PSL interests (collectively the “Chimaera parties”), which include the plaintiffs, have commenced an action against ANZ, the receivers and two other individuals who were appointed by ANZ as mortgagees in possession of certain of PSL’s properties (“the damages claim”). In the damages claim, the Chimaera parties have raised the same allegations of wrongful conduct against the ANZ that the plaintiffs relied on to argue that they had an offsetting claim in the s 459G application. The wrongful conduct is alleged to include the invalid appointment of the receivers to PSL. The relief that the Chimaera parties seek includes a declaration that the appointment by ANZ of the receivers to PSL was invalid and damages against ANZ. The damages claim was not instituted until 15 July 2010, the day before the directions hearing in the appeals and the receivers’ application. At that directions hearing the Court was told about the filing of the damages claim. The parties wanted the Court to make directions in the proceedings before it but foreshadowed that it may be appropriate for the damages claim to be heard together with the appeals and receivers’ application. The parties put proposed orders before the Court, the terms of which are reflected in the orders that the Court made. The proposed orders included consent by all parties to the grant of special leave to ANZ and the receivers to rely on evidence in the appeals that was not used or given before the Associate Justice. It is to be noted that absent such an order, ANZ and the receivers would have been confined on the appeals to the evidence before the Associate Justice, although the appeals proceed as a re-hearing de novo.[6] The transcript of the directions hearing records that order 4 was consented to by senior counsel for the plaintiffs subject to reserving the right to make application at trial or at some other time for revocation of leave to intervene, if it later appeared that ANZ’s interest in the appeals was identical to that of the receivers.
[6]Supreme Court (General Civil Procedure) Rules 2005, r 77.06(7).
In the event, the appeals and the receivers’ application have been case managed for trial for hearing and determination together with the damages claim and two other subsequently issued and related proceedings. The trial of all of the proceedings was due to commence on 17 October 2011 but actually commenced on 24 October 2011 because of last minute matters that required attention to enable the parties to be ready for trial.
On 19 October 2011, the plaintiffs filed an application for orders setting aside paragraphs 1, 2, 3 and 4 of the orders of the Court made 16 July 2010 and for the dismissal of ANZ’s notices of appeal. The application was heard after the openings of the parties. The application has raised four principal issues for determination by the Court:
(a) whether ANZ has standing under r 77.06(1) of the SCR to bring the appeals as a “person affected” by the “judgment and orders” of the Associate Justice;
(b) whether leave to ANZ to intervene in the appeals should be set aside because ANZ does not satisfy the test for intervention;
(c) whether the orders granting special leave to rely on additional evidence should be maintained; and
(d) whether the Court should entertain the application to set aside the orders of 16 July 2010.
Issue 1: “person affected”
The meaning of the words “person affected” has been considered in numerous cases. Whilst the cases have variously described the test to be applied, it is clear that the words require the person to have a real and direct interest in the judgment or orders made in order to have standing to appeal.[7] It is also clear that a person can have a real and direct interest in a decision, although not a party to the proceeding. This is recognised in the rules of the Court which provide for the joinder of persons “who ought to have been joined as a party” to a proceeding.[8] The principle is evident. Any person whose rights will be affected by the orders sought in an action has the right to be heard to prevent injustice being done to that person.[9] In John Alexander’s Clubs Pty Ltd v White City Tennis Club Limited[10] the High Court recently affirmed that such a person is a “necessary party” to the proceeding.[11] In a joint judgment, the Court expressed the principle in terms that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined,[12] approving the test applied by the Full Federal Court in News Limited v Australian Rugby Football League Limited.[13] In News Limited v Australian Rugby Football League Limited[14] the Full Federal Court had adopted the test propounded in Pegang Mining Co Ltd v Choong Sam[15] by Lord Diplock. Lord Diplock, delivering the opinion of the Judicial Committee of the Privy Council had stated:
It has been sometimes said … that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between ‘legal’ and ‘commercial’ interests helpful. A better way of expressing the test is: will his rights against or liabilities to any party to the action be directly affected by any order which may be made in the action?[16]
In News Limited v Australian Rugby Football League Limited[17] the Full Federal Court observed that the test “involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected”.[18]
[7]See, eg, Attorney-General of the Gambia v N’Jie [1961] AC 617, 634-635 (Denning LJ); News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410, 523-5; John Alexander’s Clubs Pty Ltd v White City Tennis Club Limited (2010) 241 CLR 1; Dentry v Stott (1947) VLR 462; Miamo v Lehmann (1961) VR 690; Re Gasbourne Pty Ltd (1984) VR 801.
[8]Supreme Court (General Civil Procedure) Rules 2005, r 9.06.
[9]Pegang Mining Co Ltd v Choong Sam (1969) 2 MLJ 52, 55-56 (Diplock LJ) cited with approval by the Full Federal Court in News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410, 524.
[10](2010) 241 CLR 1.
[11]Ibid 46 [131].
[12]Ibid (French CJ, Gummow, Hayne, Heydon and Kiefel JJ).
[13](2010) 241 CLR 1, 46 [131] footnote 125.
[14](1996) 64 FCR 410.
[15](1969) 2 MLJ 52.
[16]Ibid, 55-56.
[17](1996) 64 FCR 410.
[18]Ibid 525.
In an appeal from a decision of an Associate Justice the principle is given effect to by giving non-parties the right to appeal as a “person affected”. In my opinion, the test for joinder is apt to be applied in the present case to determine whether ANZ is a “person affected” by the judgment and orders of the Associate Justice within the meaning of that expression as used in r 77.06 of the SCR. That is to say, have the rights or liabilities of ANZ been directly affected by the judgment given and orders made?
Senior counsel for the plaintiffs argued that the application under s 459G of the Act determined by the Associate Justice had no relevant legal effect on ANZ because the application did not finally determine any rights of the parties[19] and that therefore ANZ is not a “person affected” by the judgment and orders of the Associate Judge. The issue of ANZ’s standing to appeal as a “person affected” however is not to be determined according to whether any rights have been finally determined but by whether ANZ has a direct interest in the matters in controversy in the s 459G application as distinct from an interest that can be characterised as indirect or only consequential.[20]
[19]See Mibor Investments v Commonwealth Bankof Australia (1994) 2 VR 290.
[20]Ibid, News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410.
It is manifest in my view that ANZ has a direct interest in the s 459G application because the matters in controversy in that application are ANZ’s rights and liabilities. In issue before the Associate Justice was whether ANZ validly appointed the receivers to the property of PSL and whether the plaintiffs can establish that they have an offsetting claim by reason of alleged wrongful conduct of ANZ. ANZ plainly is a “person affected” by the judgment and orders of the Associate Justice because His Honour determined that ANZ had not validly appointed the receivers to PSL’s property. That is not some indirect or consequential affection. The determination was the very basis for setting aside the demands and the issues which will be re-agitated in the receivers’ appeals will again involve the determination of ANZ’s rights and liabilities as the foundation for the orders. Moreover, the orders setting aside the demands have directly impacted on ANZ’s rights as appointer of the receivers and as chargee to obtain the benefit of the statutory demand process employed by the receivers.
Senior counsel for the plaintiffs also submitted in support of the contention that ANZ is not a “person affected” that the statutory demand process in Part 5.4 of the Act did not envisage that there would be any other defendant in a s 459G application other than the person who served the statutory demand. Reliance was placed on the observations to that effect by Barrett J in Access Services Group Pty Ltd v McLoughlin..[21] It is apparent from a consideration of that case that His Honour’s observations were made in a very different context to the present case where the very foundation of the s 459G application comprised claims against a third party, viz ANZ. In my view, ANZ had the right to be joined and heard on the s 459G applications before the Associate Justice because of the grounds on which the plaintiffs relied to set aside the statutory demands. Furthermore the joinder of ANZ was the responsibility of the plaintiffs. It was not the responsibility of ANZ to apply for joinder.[22] The fact that ANZ was not joined and did not seek to be joined does not mitigate against the conclusion that the ANZ is a “person affected” for the purposes of r 77.06(1).
[21](2006) 201 FLR 16, 23 [30].
[22]News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410, 526.
Issue 2: leave to intervene
The plaintiffs seek the revocation of leave to ANZ to intervene which the Court granted at the request of the parties, contending that ANZ has not satisfied the legal test for intervention. They rely on Levy v The State of Victoria[23] in which Brennan CJ said:
[A]n indirect affection of legal interests enlivens no absolute right to intervene. The assumption is that the Court will determine the law correctly, so that the indirect affection of an applicant’s legal interests is simply the inevitable consequence of the exercise by this Court of its jurisdiction as the final Court in the Australian hierarchy. On that assumption, no undue prejudice is suffered by a person whose interests will be affected by the decision. The exercise of this Court’s jurisdiction to determine controversies between parties is not, and could not be, conditioned on allowing intervention by all those whose interests are susceptible to affection by the Court’s judgments …
However, where a person having the necessary legal interest to apply for leave to intervene can show that the parties to the particular proceeding may not present fully the submissions on a particular issue, being submissions which the Court should have to assist it to reach a correct determination, the Court may exercise its jurisdiction by granting leave to intervene …. Of course, if the intervener’s submission is merely repetitive of the submission of one or other of the parties, efficiency would require that intervention be denied.[24]
The test can be understood readily. It is not an efficient use of Court resources, or of the time and expense of the parties, for non-parties who may have an indirect interest in the outcome of a case to appear but not present any additional or further submissions which may bear on the Court’s determination.
[23](1996-1997) 189 CLR 579.
[24]Ibid 603-604.
The plaintiffs argued that ANZ has demonstrated no legal interest and that its interests in the appeals are identical to those of the receivers and that ANZ’s participation and submissions would be merely repetitive of the receivers. They submitted that there is no reason why the receivers and their legal representatives cannot adequately prosecute the appeals and fully present the submissions. The argument can be dealt with in short terms. Once satisfied, as I am, that ANZ has demonstrated that it is a “person affected” for the purposes of r 77.06, ANZ has an entitlement as of right to appeal and to appear at the appeal as a party. ANZ does not need to be joined as a party nor does it require leave to intervene. The order granting leave is probably otiose but revocation of that leave will not make any practical difference.
If I am wrong that ANZ is a “person affected” for the purposes of r 77.06, I would not, in any event, revoke the grant of leave. ANZ’s interest in the appeals is not identical to those of the receivers. Substantial allegations of fact have been made by the plaintiffs against ANZ which will be adjudicated upon in the appeals. In my opinion, ANZ ‘s involvement in the appeals is necessary to ensure that all questions in the appeals are fully and completely adjudicated upon. I accept the submission for ANZ that the leave order could equally have been expressed as an order for joinder pursuant to r 9.06(b) of the SCR.
Issue 3: special leave to adduce further evidence
Although the appeals proceed as re-hearings de novo of the applications before the Associate Judge, it is not open to the parties to adduce different evidence from that considered by the Associate Justice unless special leave to do so is granted.[25] Ordinarily the appeal will be decided on the evidence before the Associate Justice. If a party seeks to rely upon evidence not before the Associate Justice, that party must justify to the Court why it should be entitled to do so and will not be entitled to do so unless the Court grants special leave. In Brownport Management Ltd v Aqua-Tech 21 Pty Ltd[26] Hansen J (as his Honour then was) said in relation to the predecessor to r 77.06(7) (then r 77.05(7)):
It is important to bear in mind the reason why the requirement of special leave was introduced. It was introduced to stop the mischief of a party using the hearing before the Master as a dry run and, depending on the result, appealing and, on the appeal, filing additional affidavits to bolster its case in light of the arguments presented to the Master and the Master’s reason for decision. This became all too common an occurrence. It could cause vexation to another party in terms of time and costs, and it could take up an unreasonable amount of a Judge’s time when there might not have been an appeal if the case had been properly presented to the Master. In short, in many cases it constituted an unreasonable taking advantage of the fact that under r 77.05(7) an appeal is by re-hearing de novo.[27]
Ordinarily, special leave will not be granted unless the evidence is new or of a kind which was not or could not have been in contemplation when the case was before the Associate Justice.[28] It is important to bear in mind however that the circumstances in which special leave will be granted are not the subject of hard and fast rules.
[25]Supreme Court (General Civil Procedure) Rules 2005, r 77.06(7).
[26][2002] VSC 396 (31 July 2002, 11 September 2002).
[27]Ibid [39].
[28]Octagen Ink v Hewitt (No 2) [2011] VSC 373, [16]-[20]; Australian Management Consultants Pty Ltd v Direct Mortgage Funding Pty Ltd [2003] VSC 202, [21].
It was submitted for the plaintiffs that special leave should be revoked as it is apparent from the additional evidence that ANZ and the receivers now rely upon in the appeals that this evidence was available to be put before the Associate Justice. It was argued that the receivers and ANZ “chanced their arm and had a dry run on the affidavits that were put before [the Associate Justice]. Having so elected to proceed in that way before [the Associate Justice] they should not be permitted to bolster their case on appeal.”[29] It was also submitted that the “cross pollination” of evidence, being the evidence the ANZ and receivers will adduce in the damages proceeding as also evidence in the appeals and receivers’ application, “is simply unworkable” when regard is had to the principles to be applied on a s 459G application, including the Graywinter[30] principle.[31] It was also submitted that it is entirely inconsistent with the evident policy of Part 5.4 of the Act.[32] These submissions should not be accepted and, in my view, special leave ought not to be revoked.
[29]Outline of Submissions of SC Capital Pty Ltd and Cablerand Pty Ltd (19 October 2011) [36].
[30]See Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452.
[31]Outline of Submissions of SC Capital Pty Ltd and Cablerand Pty Ltd (19 October 2011) [38].
[32]Ibid.
First ANZ was not a party to the application before the Associate Justice. ANZ has not had a dry run and, as I have found ANZ, is entitled as a “person affected” to appeal and appear on the appeals with full rights. It follows inexorably that ANZ is entitled to put before the Court on the appeals the evidence on which it will rely in opposition to the plaintiffs’ application.
Secondly, I consider it relevant that there is now substantial litigation before the Court in several proceedings, which include the appeals, in which there are common and central issues in respect of which evidence will be adduced. The mischief referred to by Hansen J in Brownport Management Ltd v Aqua-Tech 21 Pty Ltd[33] has been overtaken by the way in which those proceedings have been made ready for trial and listed together for hearing and determination.
[33][2002] VSC 396 (31 July 2002, 11 September 2002).
Thirdly, although different principles are to be applied under a s 459G application, including the Graywinter principle,[34] they are considerations limiting the issues which may be agitated by the plaintiffs in the appeals. The parties will have full opportunity to put their submissions on how the additional evidence impacts on what I must determine on the appeals, including how that evidence fits into the scheme and evident purpose of Part 5.4 of the Act.
[34]Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452, 459-460.
If special leave is not revoked -
It was submitted for the plaintiffs that if the orders granting special leave are not set aside then the plaintiffs should have special leave to rely upon the evidence that is led at trial in the other proceedings in relation to the issue of the validity of the appointment of the receivers. That order was not opposed by the other parties and, in my view, it is appropriate for the order to be made.
Issue 4: Should the Court entertain the application?
Both ANZ and the receivers submitted that the orders should not be set aside because the circumstances have not changed from when those orders were made.[35] It was also submitted that it is a relevant factor that those orders were made by consent. I strongly doubt that the circumstances have changed in a material way justifying the Court reconsidering at trial the orders made on 16 July 2010. It is unnecessary to reach a firm view as I have, in any event, considered the merits of the application and concluded that the orders should not be revoked.
[35]Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc. (1981) 148 CLR 170; Hutchinson v Nominal Defendant [1972] 1 NSWLR 443.
Conclusion
The plaintiffs’ application by interlocutory process filed 19 October 2011 is dismissed.
…any person affected by any Judgment given or order made by an Associate Judge under any Chapter of the Rules of the Supreme Court may appeal to a Judge of the Court.
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