Spencer & Anor v Australian Securities and Investments Commission & Ors

[2006] HCATrans 663

[2006] HCATrans 663

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B28 of 2006

B e t w e e n -

RICHARD WILLIAM SPENCER

First Applicant

SILVANA PEROVICH

Second Applicant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

First Respondent

NEOLIDO HOLDINGS PTY LTD

Second Respondent

NEO LIDO PTY LTD

Third Respondent

Application for special leave to appeal

HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 8 DECEMBER 2006, AT 9.32 AM

Copyright in the High Court of Australia

__________________

MR J.A. DUNCAN:   If it please the Court, I appear for the applicants.  (instructed by Marler & Darvall)

MR P.R. FRANCO:   May it please the Court, I appear for the first respondent.  (instructed by Australian Securities & Investment Commission). 

MR DUNCAN:   The second and third respondents have filed submitting appearances.

HAYNE J:   Yes, thank you, Mr Duncan.

MR DUNCAN:   The applicants will confine themselves to what we consider to be the significant question of law that might arise out of this application, that is, the scope of the discretionary power of a judge to impose conditions on an applicant to wind up a company in insolvency pursuant to section 459P of the Corporations Act.  A copy of that section is with the material.  The applicants argue that the Court of Appeal’s judgment is authority for the proposition that a judge when exercising his or her discretion to grant to ASIC or another applicant which is permittable under the Act leave to apply to wind up a company in insolvency then the judge may not impose conditions having prospective effect. 

If I might take your Honours to page 71 of the application book, in particular, paragraph 11, which starts at about line 19, there is there set out extracts from Justice Keane’s judgment in the Court of Appeal with whom Justices Williams and Holmes agreed.  If I might take you to those extracts.  The first one is:

“For these reasons, I have concluded the assumptions by Fryberg J ……, that there was scope for some form of prospective judicial control of the allocation of the burden of those costs were unwarranted.”

More importantly, under that, your Honours:

“Considerations relating to the future control of the liquidation, if a winding up order is made, are not relevant to the discretion to grant or withhold leave to ASIC to apply for a winding up order under s459P.”

The applicants submit that these abstracts from the Court of Appeal’s finding that considerations relating to future control in a winding up order are not relevant to the discretion to grant or withhold conditional leave, that is, the conditions cannot have prospective effect.  It is this finding that the applicant seeks to agitate.  It is submitted that if such conditions can only apply to non‑prospective effect then there will be no need for the condition making power in subsection (4). 

May I take your Honours now to page 58 of the application book which is, in fact, part of the respondent’s outline but conveniently sets out some extracts from the judgment of this Court in Emanuele v Australian Securities Commission.  Here there is set out a passage from the Chief Justice’s judgment where the Chief Justice discusses the purpose, or a purpose, of the leave requirement in section 459P and makes reference to relevant parts of the Harmer Report.  In particular, near the bottom of the page, about line 31, of the application book reference is made to the requirement for leave as preventing “mischievous and possible harmful applications”.

Clearly, if an application is seen by a court to be simply mischievous or harmful, then the application could be refused and simply dismissed, and the mischief and harm could be averted, but if the court were to conclude or suspect that a winding up could or might be conducted in a mischievous or harmful way, surely the court should be empowered to impose conditions to guard against the mischief or harm, that is, with prospective effect. 

It is the applicants’ contention that if the Court of Appeal judgment is let to stand that such preventative conditions would not be available.  Further, while ASIC is the applicant in the winding up in question, it is but one of four categories of persons who require leave under section 459P(2) and who are potentially subject to the imposition of conditions under subsection (4).  The others are contingent creditors, contributor or a director. 

The section makes no distinction between ASIC, a contingent creditor, a contributory or a director.  It would appear, in our argument, your Honour, that it is more than logical that a court may see fit to condition an application by a contingent creditor, a contributor, a director or ASIC with the burden of costs of the winding up in appropriate circumstances where such a condition is seen appropriate to constrain a perceived mischief.

In saying that, I have found no precedent where such an order has been made, but this could only be done if subsection (4) permits conditions with prospective effect which may have effect in relation to costs burden which a judge in his or her discretion considers appropriate in the particular circumstances of the case.  Thus, it is submitted, to give subsection (4) any substantive effect the condition must be able to have prospective effect.  In other words, if the scope of subsection (4) was so limited to have no prospective effect, it would be difficult to envisage that subsection (4) would have any work to do whatsoever. 

The possible prospective effect of a condition in subsection (4) is, in fact, envisaged in the respondent’s own submission at page 59 of the application book where an example is given.  That is at about line 25 or the last line and a half of paragraph 16 where it has referred to a possible use is “imposing obligations of confidentiality”.  Surely this would be made hardly useful if such a condition would not have prospective effect. 

Your Honours, that is the main point of law that the applicants see as being a matter of law that is appropriate for the granting of special leave.  As far as prospects are concerned, the applicants also submit that there are reasonable prospects of succeeding in the appeal on the question of what considerations are found to have grounded the primary judge’s exercise of discretion.  The applicants understand the respondent’s case to be basically that the Court of Appeal’s decision is correct which, it is submitted, can be found – the primary judge’s decision was grounded solely on the irrelevant or inappropriate grounds which are conveniently set out at page 25 of the application book which is part of the judgment of the Court of Appeal.  There, at paragraph [40] about line 30, that is referred to as:

“the investigation of whether there has been any offence [of insolvent trading] and its further prosecution will necessarily be carried out using funds which otherwise could go towards the satisfaction of debts.”

The applicants say, your Honours, that that is not the case.  The substance of the applicants’ response is set out in the applicants’ reply and, in particular, we would refer your Honours to page 68 and 69 of the

application book where various extracts from the primary judge’s judgment are set out.  Particularly, if I take your Honours to the top of page 69 where it says:

“No question of protecting the assets of the company arose, since two sets of receivers have already been appointed ... I questioned whether there was any public interest then in incurring the further expense which would be involved in the appointment of a liquidator …

“I am concerned, because the result would be seem to be that the investigation of whether there has been any offence and its further prosecution will necessarily be carried out using funds which otherwise could go towards the satisfaction of debts.”

Then his Honour concluded:

“Apart from that concern, [it is submitted that this in the context should be read as if in the plural] it does seem to me to be a suitable case for the grant of leave.

In these circumstances, I propose to grant leave, subject to a condition that ASIC bear all costs of the liquidators and in the winding up.”

It is significant, your Honours, to note that that is a very wide condition and is not simply confined for future investigations or prosecution activities.  Your Honour, I have tried to cut to the quick this morning and, unless your Honours have any further ‑ ‑ ‑

HAYNE J:   No, thank you very much, Mr Duncan.  We need not trouble you, Mr Franco. 

No point of general principle would conveniently fall for consideration by this Court if special leave to appeal were to be granted in this matter.  An appeal against the orders made by the Court of Appeal would enjoy insufficient prospects of success to warrant a grant of special leave.  It follows that special leave to appeal is refused.  It must be refused with costs. 

The Court will adjourn to reconstitute.

AT 9.45 AM THE MATTER WAS CONCLUDED