Spinks and Ors v Prentice

[1998] HCATrans 431

Office of the Registry
  Sydney  No S 140 of 1998

B e t w e e n –

JOHN SPINKS, TRAVERS DUNCAN, ALLAN WELLS, GEOFFREY WHITE, WHITE CONSTRUCTIONS PTY LIMITED, WHITE INDUSTRIES AUSTRALIA LIMITED, WHITE INDUSTRIES PTY LIMITED, WHITE CONSTRUCTIONS PTY LIMITED, PDC CONSTRUCTIONS PTY LIMITED, PDC PLANT HIRE PTY LIMITED, WIL CIVIL AND MINING ENGINEERING PTY LIMITED, WHITE CONSTRUCTIONS PTY LIMITED, EXXON COAL AUSTRALIA LIMITED

Applicant

MAXWELL WILLIAM PRENTICE

Respondent

Application for a stay

GAUDRON J

(In Chambers)

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 23 NOVEMBER 1998, AT 9.30 AM

Copyright in the High Court of Australia

MR R.W. WHITE, SC:   If your Honour pleases, I appear for the applicants, with my learned friend, MR T.D. CASTLE.  (instructed by Malleson Stephen Jaques)

MR D.E. GRIEVE, QC:   May it please your Honour, I appear for the respondent.  (instructed by Deakin Graham & James)

HER HONOUR:   Yes, Mr White.

MR WHITE:   Your Honour, this is an application for orders to stay examinations of the first four applicants, the four individuals, which are scheduled to take place, as matters currently stand, from 3 December.

HER HONOUR:   The examinations are scheduled - - -?

MR WHITE:   Of the four individuals, yes.  And also to stay orders for the production of documents by the applicants which the Liquidator requires to be produced on 26 November.

The background to the application is contained in a chronology which I will take your Honour to briefly but the summonses and orders for production of documents were issued on 29 and 26 June.  They are initially returnable before the registrar in the Federal Court on 10 August at which point objection was taken to the jurisdiction of the Federal Court in the matter.  That was determined by the Full Court on 10 September, that objection, on which date the Full Court ordered that an interim stay, which had been granted, be lifted.  The presiding Justice, Justice Beaumont - - -

HER HONOUR:   Now, let me go back a little bit.  The summonses for examination, if I can call them that - they have probably another name by now - they were taken out in the Federal Court in Sydney?

MR WHITE:   Yes.

HER HONOUR:   It is, you say, a company incorporated in the ACT?

MR WHITE:   Yes.

HER HONOUR:   Carrying on business in the ACT?

MR WHITE:   Yes.

HER HONOUR:   Exclusively in the ACT?

MR WHITE:   I do not know that, your Honour.

HER HONOUR:   Yes, very well.  Thank you.

MR WHITE:   An application was filed for special leave to appeal to this Court on 30 September and, as your Honour knows, the Court has directed that that application, together with applications in a number of other matters, be listed for hearing in Canberra on 1 and 2 December, and counsel have been advised that they should be prepared to argue the substantive appeal on those days.

A stay was sought in the Federal Court.  As I was about to say, Justice Beaumont had directed that any further interlocutory application be listed for hearing before a single justice of that court.  He referred to either Justice Burchett or Justice Lehane who, with Justice Beaumont, comprised the Full Court which dealt with the matter.  But, as matters turned out, neither of their Honours was available.  The matter was dealt with, however, by Justice Einfeld who, on 4 November, refused the stay.  Unfortunately, his Honour's reasons are still not available and we have to make do with counsels' recollections, aided by such notes as there are.

HER HONOUR:   What is the principle, you say, should govern this Court in the application?

MR WHITE:   Taking it in two stages:  first, it is clear, we submit, that if the examinations are not stayed pending determination of the application, the subject matter of the litigation would be lost.  That will happen so far as objection is taken to the production of documents on 26 November and unless the Full Court can deal with the matter on 1 or 2 December, which is probably unlikely given the number of matters which will occupy the Court's attention on those days, then the examinations of the individual applicants will take place on 3 December, and their objection to that compulsive process would be lost.

That, we submit, enlivens the Court's inherent jurisdiction and directs one's attention to the four matters with which your Honour will be familiar in Jennings Constructions v Burgundy Royale.  First, we submit, that the prospects of obtaining special leave are sufficient to warrant a stay.  It is always an unenviable task to have to assess one's own prospects or to put submissions as to one's own prospects of success of obtaining special leave but the issues which are raised are undoubtedly of importance and the Court itself has directed that parties be prepared to argue the substantive appeal.

Secondly, in this case an application for a stay has been made to the court below.  Thirdly, there is no evidence that the respondent Liquidator will suffer loss by reason of a stay being granted until the determination of the application.

HER HONOUR:   Can I ask you a question?

MR WHITE:   Of course.

HER HONOUR:   I dare say this appears somewhere.  Is there any material as to the relationship of the applicants to the - which company is in liquidation?

MR WHITE:   White Constructions (ACT) Pty Ltd, which is not one of the applicants. 

HER HONOUR:   Do you appear for all of the applicants?

MR WHITE:   I appear for all of the applicants.

HER HONOUR:   Is there any material as to their relationship with the company?

MR WHITE:   No, except from what one can glean from the terms of the orders themselves and from the production of documents and from what my learned friend and I can tell your Honour, which I think is common ground, and that is in about October 1998 or until that date, at least, White Constructions (ACT) Pty Ltd was a subsidiary of White Constructions Limited, one of the applicants, and the shares at that time were transferred to one, Mr McAlary QC, and some of the documents which are sought in the order for production of documents, which is annexure C to the supporting affidavit of Mr Lewis, seek documents relating to that disposal of share holding.  Prior to that time, White Constructions (ACT) was part of the White Industries Group that basically carried on business as a builder.

HER HONOUR:   Is it common ground who John Spinks is?

MR GRIEVE:   Yes.

MR WHITE:   John Spinks is a director of White Industries Limited.

HER HONOUR:   And was he a director of White Constructions (ACT)?

MR WHITE:   He was but ceased to be so, unless the Liquidator contends otherwise, in about 1988.

MR GRIEVE:   Yes, that is right.

HER HONOUR:   Yes, thank you.

MR WHITE:   Your Honour, I was dealing with the third matter in Jennings Constructions v Burgundy Royale which is whether or not a stay would be likely to cause loss to the respondent and, we submit, there is no evidence that it would, and that the relevant question is, in any event, what loss would be suffered as a result of a stay, effectively, from the time when the orders were taken out, which was in late June of this year, until the determination of the application by this Court?  That, at least, is the longest time span at which one would be looking to see whether or not there might be loss caused, and we submit there is simply no suggestion or no evidence, at least, that there would be loss.

The fourth question is where the balance of convenience lies?  We would submit that, as in the matter of Gerah Imports v The Duke Group, the balance of convenience in this case clearly lies in favour of a grant of a stay which, if not granted, would deprive the applicants of the immunity and the exercise of the Federal Court's jurisdiction which they contend for.

HER HONOUR:   What do you mean "immunity"?

MR WHITE:   I was adopting the words of his Honour Justice Dawson.  I mean, in that context, that they, if they are correct, are not amenable to the jurisdiction of the Federal Court either to produce documents or to - - -

HER HONOUR:   Well, you say the Federal Court has no jurisdiction.

MR WHITE:   Yes.  I meant - "not amenable" would be a better expression.

HER HONOUR:   Yes.

MR WHITE:   Now, your Honour, the summons in question was filed on 18 November 1998 and in support of it I read the affidavit of Gregory William Francis - - -

HER HONOUR:   I do not think you need do that.  You can take that as read.

MR WHITE:   If the Court pleases.

HER HONOUR:   You do not have any objections to the affidavit?

MR GRIEVE:   No.

MR WHITE:   Is it convenient if I then conclude my submissions?

HER HONOUR:   Yes.

MR WHITE:   I do not think my friend has any evidence?

MR GRIEVE:   No.

MR WHITE:   Could I give your Honour a copy of Justice Dawson's judgment in The Duke Group Limited 119 ALR 401. It was another case of an examination where the applicants contested the validity of summonses requiring their attendance for examination. It involved no constitutional or jurisdictional issue as this case does. At page 403 of the report, after observing in the middle of the page that his Honour thought that it was the prospects of success in the application for special leave which was material, his Honour expressed the view, in the last paragraph on that page, that:

when one balances that relatively short delay -

which in that case was envisaged of about five weeks -

against the loss of immunity which the applicants seek to avoid by an appeal, the balance of convenience lies in granting the application.  No financial loss during that time to the respondent or any other interested party, if a stay is granted, has been demonstrated.

And so, we submit, in this case.  There the application for a stay failed but it failed because his Honour was not satisfied that the prospects of success were sufficient to warrant the grant of a stay.

Now, we have attached as annexure A to the supporting affidavit our summary of argument in this matter and without trying to pump our case, we invite your Honour's attention to that - - -

HER HONOUR:   Well, I do not think you need to go into that.

MR WHITE:   - - - to allow your Honour to assess the prospects of special leave.  That sets out in detail the matters which are raised.

HER HONOUR:   Yes.  Your summons just asks that the examinations be stayed but if you were to succeed, really, it should be the orders that are stayed, should it not?

MR WHITE:   Well, in paragraph 2 in relation to the - the answer to your Honour's question is yes.

HER HONOUR:   Are there orders?

MR WHITE:   There is an order for the production of documents which was made pursuant to section 597(9) of the Corporations Law for which a stay is sought in paragraph 2 of the summons, and there is a summons for examination which was issued pursuant to section 596B.

HER HONOUR:   Yes, and there has been no order as such.  That is just a summons.  I am not familiar with the entirety of the Corporations Law.

MR WHITE:   Section 596B talks about a summons being issued.  The registrar must have made a decision to issue a summons because it involved the exercise of a discretionary jurisdiction.  But the process in question is a summons rather than an order, as I understand it, if that answers your Honour's question.

HER HONOUR:   Yes, thank you.

MR WHITE:   If the Court pleases.

HER HONOUR:   Yes, Mr Grieve.

MR GRIEVE:   There is no challenge to the winding up order in this case and, in my submission, the matter - - -

HER HONOUR:   Well, perhaps, for obvious reasons.  These people were not parties to that proceeding, yes.

MR GRIEVE:   No doubt; that is right.  But they were, undoubtedly, former officers of the company and they are, therefore, amenable to the examination process, come what may.  If it is right to say - and I submit that it is - that the matter that lies at the heart of this litigation is the winding up, then that matter will continue regardless of the outcome of this appeal.  If that is right, then the Liquidator has a duty to investigate the affairs of the insolvent company.

The Burgundy Royale tests, in my submission, really are akin to the tests applicable to an application for an interlocutory injunction.  First, is there a substantial question to be tried and secondly, if there is, where does the balance of convenience lie?  In this particular instance, in my submission, minds may legitimately differ on the first question.  So far, four Federal Court judges have come to the view that there is nothing in it.  Now, of course, that does not - - -

HER HONOUR:   Well, they are bound by what has been said by this Court, are they not?

MR GRIEVE:   No doubt, although - - -

HER HONOUR:   In a decision which others contend has absolutely no precedent value?

MR GRIEVE:   That is right. But, at all events, so far the applicants have not had much luck.

HER HONOUR:   And did the court consider - I am not familiar with the judgment, but did the court consider the vesting of territory jurisdiction in the Federal Court?

MR GRIEVE:   Yes.  The question that the Full Court addressed in this case was whether or not the Corporations Law was a law made under section 122 or, perhaps I should be a little more precise:  whether the Corporations Act was a law made under section 122 for the purposes of section 77(ii) and they came to the conclusion that it was and that, therefore, the Federal Court had jurisdiction to deal with the matter.

HER HONOUR:   What, on the same basis that this Court has appellate jurisdiction under 122?

MR GRIEVE:   Yes.

HER HONOUR:   Well, that is an interesting question in itself.

MR GRIEVE:   Of course.  Ultimately, in my submission, the question boils down to what does one do, under section 15A of the Acts Interpretation Act?  Perhaps I should go back a step or two.  The applicants base their challenge, as we understand their argument, not upon the provisions that have, in fact, been invoked by the Liquidator in this case to convene the examinations.  Rather, they base their challenge, as I understand was so in Gould v Brown, on that part of the section which enables an extra winding-up examination to be conducted, for example, on the application of the ASC and they say that part of the section which enables the ASC to examine officers in a court involves that court carrying out a non-judicial function and is therefore beyond the capacity of a Chapter III court.  Ergo, so the argument goes, as we understand it, that part of the section is beyond power and so any reference to the Federal Court should be excised.

Now, that points up a constructional choice.  Does one excise the reference to "Federal Court" and "Family Court" from the Corporations Law altogether, which was, of course, favoured by your Honour in Gould v Brown, or does one simply read down those particular parts of the sections which purport to give to the Federal Court jurisdiction to conduct, for example, an examination on the application of the ASC?  That, ultimately, is a constructional choice and minds may legitimately differ as to which side of the border one should fall.  But, of course, if one falls in favour of the approach for which we contend, namely, that if those sections were ever to arise for consideration and were held to be invalid, that is to say, the sections dealing with applications for examinations by the ASC, then the constructional choice of excising them would be a readily available one, preserving the integrity of the Act otherwise.

However, if I can go back a few steps.  If the Burgundy Royale test really comes to this, "Is there a substantial questions and, if so, where does the balance of convenience lie?" - - -

HER HONOUR:   But is there not a substantial question as to whether territory jurisdiction can be vested in the Federal Court under section 122?

MR GRIEVE:   I would have to acknowledge that that is an arguable question.

HER HONOUR:   That is the first step in this.

MR GRIEVE:   That is the first step, that is right.  Then one comes - - -

HER HONOUR:   Certainly Justice McHugh, in Gould v Brown, suggested it could not be, did he?

MR GRIEVE:   That is right.

HER HONOUR:   Was emphatic about it.

MR GRIEVE:   That is right, very emphatic.  Very emphatic.  So, I would have to concede that there is a question but when one comes to the balance of convenience, in my submission, the scales tip all one way.  The reasons for that are these:  first, White Constructions (ACT) Pty Ltd is insolvent and that we apprehend to be common ground and beyond argument.  Ergo, if it were found that the Federal Court had no power to order its winding up, inevitably it would be ordered to be wound up by the ACT Supreme Court.

HER HONOUR:   No, the winding up order will stand, will it not, unless it is appealed?

MR GRIEVE:   It may be but that would not prevent a collateral winding up order being made in the ACT Supreme Court.

HER HONOUR:   Well, I do not know.  Why would not the order stand?  It is a winding up order that is an order of a superior court of record.

MR GRIEVE:   Quite, it would stand.

HER HONOUR:   It has not been the subject of an appeal, has it?

MR GRIEVE:   No, no.

HER HONOUR:   It has not been subject of an application to have it set aside?

MR GRIEVE:   No, no.

HER HONOUR:   Well, it would stand.

MR GRIEVE:   It would stand but that would not prevent a creditor suing for a complementary order in the ACT Supreme Court.

HER HONOUR:   Yes.  A winding up or examination?

MR GRIEVE:   Winding up.

HER HONOUR:   Why would you need a winding up - well, I think it might.

MR GRIEVE:   Pardon, your Honour?

HER HONOUR:   I think it might while an order stands.  You would hardly have two orders.

MR GRIEVE:   Perhaps so, but that is a matter of procedural nicety that could be overcome.  If it was inappropriate to have the company ordered to be wound up in the ACT, then at all events the ACT court could be prevailed upon to conduct an examination of these very officers in the winding up ordered by the Federal Court at the instigation of the Liquidator.  The point is that one way or another, sooner or later, these directors will inevitably be examined or these former directors will inevitably be examined.  Thus, with respect, it is wrong for my friends to say that the subject matter of the litigation will be forever lost if the stays are not ordered.

As I said earlier, the litigation is the winding up proceedings.  It is not the examinations, pure and simple.  That litigation will go on regardless and, with it, the examinations will go on regardless.  That being so, there is no - - -

HER HONOUR:   But there may very well be an overwhelming question of convenience, may there not?  Let us assume for the moment that it is held that the Federal Court cannot exercise original jurisdiction under 122.  It would be hopelessly inconvenient, would it not, to have part of the matter proceeding there if it is then to recommence afresh in the ACT Supreme Court?

MR GRIEVE:   Well, that would give rise to a fairly simple choice.  That choice would be to leave the winding up order stand in the Federal Court and invoke the ACT court's jurisdiction in aid.

HER HONOUR:   There is no challenge to that winding up order here.

MR GRIEVE:   No.  The alternative would be to stay the Federal Court winding up by way of application on the part of the Liquidator and make an application for winding up in the ACT independently to take that over or to, as it were, continue the winding up in the ACT where it had been left off in the Federal Court.  But one way or another, this company will be wound up and the Liquidator will discharge his duty to investigate its affairs by, among other things, having these documents produced and examining these former officers.  That is not said in terrorem, that is just a simple matter of future inevitability.  If that is right, then what our friends described as the subject matter of the litigation will not be destroyed by these examinations proceeding next week; quite to the contrary.  They will just go ahead next week instead of next year sometime.

HER HONOUR:   Yes, but the subject matter of the appeal is the test, is it, rather than the subject matter of the litigation? 

MR GRIEVE:   Yes.

HER HONOUR:   And the fact that you describe the winding up as the subject matter of the litigation, in one respect, tends to support the arguability of the applicants' position.

MR GRIEVE:   Yes, I understand what your Honour says and I really cannot put the point any other way without offending the rule against repetition but I do submit that there is a balance of convenience factor here.  Can I just add this one factual matter.  I do not know there can be any doubt about it.  Mr McAlary QC and his son were the transferees of the shares in October 1988.  They have been summonsed for examination and their examination is to occur on Thursday and Friday of this week, the 26th and 27th.  They have raised no objection to that proceeding.

The order for production of the documents has been made in aid of that examination as well as in aid of the examination of Spinks and others.  If this application were granted in totality, it would have the indirect effect of frustrating the examinations schedule for Thursday and Friday, so far as the documents are concerned.

If your Honour is against me on the balance of convenience point, so far as the examination of the individuals is concerned, I would nonetheless urge that your Honour reject the claim for a stay so far as the order for production is concerned.  That is a matter that we claim that were are entitled to.

HER HONOUR:   But on the other hand, you see, if you look at it from the other way, if it is all to start over again in the ACT Supreme Court, for example, then the balance of convenience might say that is a good thing that it does not go ahead on such and such a day.  At least if you look at it from the point of view of the resources of the courts, of the courts' time.

MR GRIEVE:   True, but it really is a matter of timing more than anything else.  We are bound to say, as matters stand, the Liquidator has a public duty to perform.  Conversely, the directors and former directors have an obligation to provide all relevant information to him as Liquidator in response to his legitimate inquiries.  It is rather odd, in my submission, for them to characterise this as some form of compulsory interrogation.  Really, it is just a means towards seeing them do what they are bound to do in any event. 

Finally, I would just mention that, as a by-the-way, my understanding - and I may be incorrect in this - from what was said in Court here a couple of weeks ago in the Amann matter, the examinations have all taken place in that case.  Now, that does not bear on the merits of this claim but - - -

HER HONOUR:   No, I think the examinations have been undertaken in relation to those parties who were parties in Gould v Brown but not these parties, not the new parties.

MR GRIEVE:   I thought the claimants in that case were Mr Amann and Mr Gould; the same Mr Gould but, be that as it may, it does not bear directly.

HER HONOUR:   Yes.  I think Mr Gould might have been but I do not think Mr Amann has.

MR GRIEVE:   Yes.  That is a by-the-by, I suppose.  Those are my submissions, your Honour.

HER HONOUR:   Yes, thank you, Mr Grieve.  Yes, Mr White.

MR WHITE:   May I just correct one matter which my friend put to your Honour in terms of the basis upon the Full Federal Court found that there was power to confer original jurisdiction on the Federal Court in Territory matters.  It based itself, as we understand the Full Court's judgment, not so much upon the plenary operation of section 122 to confer original jurisdiction on Federal Court as on the view that a law so made under section 122 was a law of the Parliament within the meaning of section 76(ii).  So that the basis upon which it found jurisdiction could be conferred was somewhat different, we apprehend.

HER HONOUR:   Well, that is - yes, I see - in conflict with Spratt v Hermes and Capital TV v Falconer.

MR WHITE:   Yes, they raise that issue.  Not quite the same ground as that upon which, for example, Sir Garfield Barwick and Justice Kitto and others expressed the view that original jurisdiction could be conferred on Federal Courts.  That probably does not take the question of a substantial issue or absence of a substantial issue much further but illustrates the interesting point which is involved.

So far as the balance of convenience is concerned, as well as the problems which would arise in matters proceeding in two courts, if it were found the Federal Court lacks jurisdiction, one difficult question which would arise if the examinations proceed but it is found that the Federal Court does not have jurisdiction to conduct the examinations, would be determining what was the status of answers or admissions made by examinees under a compulsory process to which they took objection. 

One can imagine all sorts of complications which the course which the Liquidator wishes to pursue were followed if the applicants were ultimately successful in their applications to this Court.  But quite apart from that, we submit that the argument that it is expedient that the examinations proceed, even if the court lacks jurisdiction to entertain them or to conduct them, rather, and that it is expedient that documents be produced even if the court lacks jurisdiction to order their production, is inconsistent with the rules of law and rules for the assignment of jurisdiction to courts which - and is an argument based on expediency which should only be permitted to prevail if there was something concrete, in terms of loss, which the respondent could point to and, of course, he does not.

As I think your Honour adverted to, there is no challenge to the winding up order.  My clients were not directors and have not been for some time directors at the time the winding up order was made and are in no position to appeal from the making up of the winding up order.

HER HONOUR:   Yes, thank you.

MR WHITE:   Unless there is anything further, if the Court pleases.

HER HONOUR:   Thank you.  Well, there is this, Mr White.  You have asked for a stay:

until the application for special leave.....is determined or, if such application is granted, until the substantive appeal is determined.

MR WHITE:   Yes.

HER HONOUR:   Now, as things presently stand - well, perhaps you can sit down for a moment, and I will just indicate my views in this matter.

As I see it, in this matter, the question really turns simply on convenience, there being no doubt that there is a substantial issue to be tried.  So far as concerns the issue of convenience, it seems to me in this way it must give way to the jurisdictional issues that arise.  If the Federal Court has no jurisdiction in these matters, the proceedings will be an exercise in inutility, perhaps also a nullity but giving rise to further questions as to the status of answers and admissions.

Accordingly, I would be prepared in the circumstances of this case to grant the application in terms of orders 1 and 2 but, Mr White, my inclination would be only to grant them until the application for special leave is determined.

Now, I say, if it is determined on - is it, Wednesday of next week?

MR WHITE:   Tuesday and Wednesday the matter is set down for hearing.

HER HONOUR:   Tuesday and Wednesday of next week.  Well, if it is determined against you at that stage, well, that is the end of the matter.  If it is determined in your favour, then you should renew the application then ‑ ‑ ‑

MR WHITE:   To the Full Court?

HER HONOUR:   Well, you can perhaps indicate at that stage and it may be referred to a single Judge.  But, equally, it may be that the Court does not

determine whether the application for special leave is to be granted or refused and simply reserving that issue until the final outcome.  But, perhaps, if I make the order in terms of orders 1 and 2 in the summons, but pending the determination of the application for special leave, if it is not determined on Wednesday next, then the parties can raise it if they wish to do anything further about it and, if leave is granted, then you will have to pursue it further.

MR WHITE:   Thank you, your Honour.  Your Honour could accommodate that then, I think, by deleting the words in each of paragraphs 1 and 2, "if such application is granted, until the substantive appeal is determined".

HER HONOUR:   Yes.  Now, one other thing:  costs of the summons to be costs in the special leave application?

MR GRIEVE:   Yes.

HER HONOUR:   Would that be appropriate?

MR WHITE:   I would ask for costs, your Honour.  This application was contested.

HER HONOUR:   Well, I know, that is why you are here, but I think the preferable course is to make it costs in the special leave application and it will abide the outcome of that.

MR WHITE:   If your Honour pleases.

HER HONOUR:   And I will certify for the attendance of counsel.

MR WHITE:   Thank you.

MR GRIEVE:   If your Honour pleases.

HER HONOUR:   The Court will now adjourn.

AT 10.07 AM THE MATTER WAS CONCLUDED