State of Queensland v Bank of Queensland and Anor

[2014] HCATrans 22

[2014] HCATrans 022

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B50 of 2013

B e t w e e n -

STATE OF QUEENSLAND

Applicant

and

BANK OF QUEENSLAND

First Respondent

BRETT RAYMOND STEVENS

Second Respondent

Application for special leave to appeal

CRENNAN J
KEANE J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO BRISBANE

ON FRIDAY, 14 FEBRUARY 2014, AT 1.25 PM

Copyright in the High Court of Australia

MR R.J. DOUGLAS, QC:  May it please the Court, I appear for the applicant.  (instructed by Director of Public Prosecutions (Qld))

MR T.P. SULLIVAN, QC:   May it please, the Court, I appear with my learned friend, MR M.J. DRYSDALE, for the first respondent.  (instructed by HWL Ebsworth Lawyers)

MR DOUGLAS:   Your Honour, there is a second respondent, but he has not appeared in any of the proceedings below and I have no expectation he will appear on this application.  The last page of the application book dictates that his solicitors, on the record, have been served.

CRENNAN J:   He is a person who might be liable to prosecution under section 52.

MR DOUGLAS:   Possibly, yes, your Honour.  He has been served with the – he has been a party all the way through.  He was a party in the Court of Appeal and as a matter of precaution, of course, he was made a party to this application.

CRENNAN J:   Thank you.

MR DOUGLAS:   Thank you.  Your Honours, in our submission, there are two legal issues in this case which render it apt for adjudication on appeal in this Court.  The first issue concerns the circumstances in which contravention of an order of a superior court founds the doctrine of illegality so as to defeat a transaction, or a dealing, sought to be vindicated by a moving party.  The moving party here, your Honours, was the respondent bank.  It made application under the Queensland Confiscation Act for what is described as an exclusion order in section 65 and following of the Act and it did so in respect of property which was then the subject of an extant restraining order made under that Act.

The subject property consisted of property over which it enjoyed a security interest and, ultimately, an order was made, at its behest, which not only so excluded that property from the restraining order, but as the Act requires, dictated the value of the amount of the exclusion.  Upon that application, your Honours, the respondent bank was obliged to rely upon a post‑restraining order dealing between itself and the client customer – a corporation associated with the second respondent – which resulted in the secured debt amplifying, by measure of something in excess of $300,000.  So that is, in effect, by that dealing, affected ultimately by the exclusion order which I have mentioned, the restrained property by that measure was diminished in value.

Your Honours, critically on this first point, the respondent was – it is not disputed – on notice at all times as to the existence of the restraining order, but it is also common ground.  It failed to take adequate measures such as to freeze the account – the account which existed in electronic banking facilities maintained by the respondent with its customer – and that permitted, in turn, the dealing by withdrawal to ensue after certain moneys were placed into that account.

CRENNAN J:   It is not in contest that that was inadvertence on the part of the bank.  Is that right?

MR DOUGLAS:   No question at all.  No question that that is the case.  I accept that and to make it absolutely clear, the corollary is, it was not an intentional act, accept that it was not an intentional act but it remains the case on the findings made by the primary judge, Justice Dalton, and confirmed by the majority in the Court of Appeal, indeed all the judges in the Court of Appeal, that in fact it entailed the bank not acting in a way that it should have acted in compliance with the order that it received and Justice Gotterson goes into some detail in that regard in his reasons.

KEANE J:   It was pretty clearly in contempt.

MR DOUGLAS:   Well, Justice Keane, we agree with that proposition.  It is said against us, this present proceeding, the subject of this application, was never one in which the State sought that the bank be dealt with by way of contempt.  That is so and, in fact, your Honours would be forgiven for thinking that the submissions that we make in this application are pregnant with the fact that we would seek perhaps to deal with the respondent bank by way of contempt.  But, if I am jumping ahead, if I may, in response to Justice Keane, the manner of reasoning of the majority in the Court of Appeal, in particular at paragraph [71] on page 37 of the application book, was such that it was expressed as a core part of the reasoning of the court that the Act, the Confiscation Act, as I have described it, was prescriptive as to ‑ in a sense that it codified all of the remedies consequential upon contravention.

So, Justice Keane, if I can put it squarely, one of the concerns we have and, indeed, it is part of the fabric of our argument upon the application, is that the reasoning of the Court of Appeal is such that it arguably mocked the ability of the State in this case, or in any other case, of a like character to deal with a respondent for contempt.

KEANE J:   I cannot see that, I must confess.  If one looks at section 52(3), which is the relevant provision, it is concerned simply to state the consequences of a dealing in relation to property.

MR DOUGLAS:   I accept that.

KEANE J:   It does not seem to me that it is purporting in any way to state exhaustively the consequences of a failure to comply with an order.  It certainly does not go anywhere near suggesting that the power of the court to deal with contempts of the court is in some way impliedly excluded.

MR DOUGLAS:   Justice Keane, again, I agree but we submit that the fabric of the reasoning certainly suggests as much and, with respect to our learned friends, there is a rather Delphic response to that by saying, well, contempt was never an issue in these proceedings.

As your Honours can see from our written outline on the application, we point to the preservation of the operation of the Uniform Civil Procedure Rules, the procedural statute in Queensland, in relation to proceedings under the Act.  This was a proceeding under the Act.  The restraining order was a proceeding under the Act and it is nonsense to suggest, with respect, as our learned friends do, that those provisions do not apply.  But we point to it, as I attempted to make clear, by reference to the reasoning of the court.

Your Honours, if I can just proceed, if I may, with my argument though.  We have pointed out the circumstances in which the bank came to be in possession of the order, and by inadvertence, to adopt your terminology, Justice Crennan, did not freeze the account.  The treatment of that issue by the court is to be found on page 35 of the application book, paragraph [65] in the judgment of Justice Gotterson, first full paragraph on that page, page 35 of the application book.  His Honour there says – pardon me for reading part of it and paraphrasing others:

To my mind, none of these cases –

and his Honour was referring to a series of cases which I and Mr Rolls put to the court in relation to the effect of orders of the court in relation to the operation of illegality, together with a case called Z Bank in relation to contempt –

To my mind, none of these cases stands as authority for a principle of general law that any transaction entered into in breach of a court order is void and unenforceable without regard for the character of the breach –

That was not our submission.  In fact, our submission was you do have regard to the character of the breach, and the character of the breach here entailed not intentional contravention but still contravention by a party, namely, the respondent bank, in circumstances whereby it had possession of the relevant facts consisting of the order but took insufficient steps in order to freeze the account.  If there was any doubt as to ‑ ‑ ‑

KEANE J:   I notice that Justice Gotterson says:

In the case of the careless contravener, the decision in Z Bank suggests that whilst that person may be liable to a civil penalty for contempt of the court, the transaction is not void and is not unenforceable by the person.

MR DOUGLAS:   Justice Keane, he does say that, and our learned friends embrace that in their outline, and yet it is quite wrong because if you look to the previous page of the application book, page 34, paragraph [64] and about the fourth sentence down, his Honour correctly by reference to that case identifies:

No question arose –

that is, no question arose in the case of Z Bank –

as to whether any transactions on the account were void or not.

What occurred in Z Bank’s Case was that the focus of attention was that of a central European bank described as “Z Bank” which had dealings with Bankers Trust, a well‑known banking institution in the UK, which did not have any notice and was never served with the relevant, in that case, Mareva order.  So, in fact, what his Honour is citing in the passage that you read to me, Justice Keane, from paragraph [65] on page 35 is an incorrect statement of the ratio or, indeed, any dictum in Z Bank.  If there was any doubt as to the fact of the majority in the Court of Appeal misstating our argument, in my submission, it is confirmed in the last sentence of paragraph [66], next paragraph down on page 35, where his Honour says this:

This approach seeks to infer from policy a legislative intention that any and every dealing in property in contravention of a restraining order made under the CPC Act –

that is the Confiscation Act –

is void and unenforceable.

Again, that was not our submission.  Our submission was, consistent with the authorities we develop, the Ocean Trawlers Case, following on from Sir Robert Megarry’s decision in Clarke’s Case was that one does have regard to the particular circumstances.  If the particular circumstances demonstrate, which unequivocally was the case in Clarke but ultimately found not to be the case in Ocean Trawlers, that there was no notice of the relevant order, then the remedy goes accordingly.

We submit this case falls into the category, for the purposes of illegality, of contravention of an order, a failure to comply with an order of a superior court in circumstances where the contravening party had notice, and very timely notice, of the fact of the order having been made.

KEANE J:   Mr Douglas, can I just ask you, your argument is based on section 52, is that correct?

MR DOUGLAS:   My argument is not based on section 52.  I am dealing with quite a discrete point at the present time, Justice Keane.  I am dealing with the first issue that I raised, which is that there is a proper legal issue for consideration as to whether there is an independent ground for illegality, quite apart from statute, whereby the contravening party has failed to comply with an order of a superior court.

Now, Justice Keane, just to be clear about that, it may well be in the application of the doctrine of illegibility it may be the case that it is necessary – if that first proposition is accepted – to have regard to the fabric of the statute which ultimately provides the genesis for the order which was, in fact, made and that might take us into the principles which were canvassed by Justice McHugh in the modern seminal –

CRENNAN J:   Your argument depends, does it not, on contesting the findings of Justice Gotterson that section 52 conveys a legislative intention that it deals comprehensively with the topic of contravention of a restraining order and it faces criminal and civil consequences.  You cannot get to your argument without contesting that, can you?

MR DOUGLAS:   Your Honour, I accept that if my first argument that I have canvassed – the first issue that I have canvassed with you – is a good one, it would still be necessary, certainly for the purposes of a full appeal, if special leave were granted, to deal with that issue, for the reason I have just indicated.  On that issue we have gone at some lengths in our outline of argument to indicate the fabric of what the argument is in that regard.

CRENNAN J:   Just on that point, if I may, for a moment.  Your written submissions at page 81 of the application book, which deal with the reasons why special leave should be granted, make the point in paragraph 27 that “there exists broadly analogous legislation” throughout the Commonwealth.  I wanted to draw your attention, Mr Douglas, in that regard to the provisions of the cognate Northern Territory forfeiture legislation.  I am not

sure whether you have them at hand, but you would not need to have them at hand for dealing with the point I am about to make.

MR DOUGLAS:   Certainly.  They have been put before you.

CRENNAN J:   Yes, it is in the book, of course.  Section 55 of the Northern Territory legislation deals with prohibited dealings and subsection (5) preserves expressly the power of contempt.  Then if you look at section 58 there is a provision that:

any dealing with property that contravenes [a restraining order] has no effect, whether at law, in equity or otherwise, on the rights of the Territory ‑

MR DOUGLAS:   Yes.

CRENNAN J:   On one view, that is a provision that is missing from the Queensland legislation.

MR DOUGLAS:   I accept that.  It is missing from the Queensland legislation but we submit, Justice Crennan, consistent with the judgment of the dissenting judge, that it is to be inferred from the legislation as the principles in the illegality cases allow, at least prima facie, to be inferred in the absence of express provision.  Your Honours, we accept, of course – I am sorry, your Honours.

CRENNAN J:   Finish your sentence, Mr Douglas.

MR DOUGLAS:   Thank you, if I could, I appreciate that.  Thank you.  We certainly appreciate that section 52 is a circumstance which deals with intentional wrongdoing, but we submit it deals – or potential contravention, but we submit it deals only with that and the particular wording of section 52 warrants close attention in that regard and it is to be found conveniently in the application book in the judgment of Justice Gotterson at the base of page 27.  If it please the Court.

CRENNAN J:   Thank you, Mr Douglas.  Yes, Mr Sullivan.

MR SULLIVAN:   Thank you, your Honour.  Your Honours, can I start by just turning to the legislation itself?  The source of the orders which were made can be found in section 28 and section 31 of the Act.  Section 28 allows the making of the application.  Section 31 deals with the power of the court to make it.  In addition to providing the source of the power for the making of the order, section 52 then provides for the criminalisation of an intentional contravention, so it expressly deals with the factual scenario of the contravention of the order itself.

Subsection (2) is a defence and, with respect, contrary to the written submissions by my learned friends, subsection 52(3) does not provide a defence.  It is a provision which is operative in relation to the validity or invalidity of the underlying transaction or dealing.  In that respect, as was noted by the majority, it provides disjunctive exceptions, one for sufficient consideration; the other where the transaction was in favour of a person who acted in good faith.  Now, that is to be contrasted, for instance, to section 63 of the Act where there is cumulative reference to a transaction or dealing:

in good faith, for valuable consideration, and in the ordinary course of . . . business ‑

It is clear that the legislature has dealt with not simply the jurisdiction for the making of the order, but also for the consequences of the most serious contravening of the order, that is, an intentional contravention and, even in those circumstances, the Act dictates by its terms when the underlying transaction or dealing is valid or invalid.

Your Honour Justice Crennan referred then to the course which the State would need to take in relation to an appeal, and we would agree with what your Honour has said.  That is, the course would need to traverse the reasoning or the conclusions of the majority on the operation of section 52(3) and, in that respect, we particularly point to paragraph [70] of the reasons on the fourth line where Justice Gotterson stated:

In particular, in legislating for avoidance of a dealing in property where there is intention to defeat a restraining order, the provisions of s 52(3) rather imply that the legislature did not intend that a dealing with property where there is no such intent also be void.

The proposition which the respondent puts forward is that that construction that the majority went through in relation to section 52(3) was correct.  They looked at the section.  The Act itself deals with the validity or invalidity.  Any imposition as the Crown would seek to do of a free floating public policy could not be one which is inconsistent with the operation of 52(3) and also the purpose and intention to be derived by consideration of its effect.

It is in that respect, and also by reference to – we would ask your Honours to have regard to [77] of the reasons of the majority at page 37 of the appeal record, particularly on the third line beginning “I have expressed my conclusion”.  We say that properly understood that was contextually what the majority was expressing.  They were having regard to the relevant issue which is the issue here, that is, the validity or invalidity of the dealing and the underlying transaction, not whether or not contempt proceedings could be brought, and it was with regard specifically to the wording in section 52(3) and its operation and the necessary inferences which are to be drawn from it that they arrived at their conclusion in relation to the operation of the doctrine of illegality. 

KEANE J:   Mr Sullivan, can I just ask you, what do you say to Mr Douglas’ point that the Court of Appeal did not address his argument by focusing on section 52?

MR SULLIVAN:   Which argument was that?

KEANE J:   Well, Mr Douglas seemed to be saying that the Court of Appeal did not address his argument because it focused upon the operation of section 52 and that his argument for illegality and hence voidness operated otherwise than by reference to section 52.

MR SULLIVAN:   Well, with respect, your Honour, my learned friend’s argument, as best I can recall, focused on the two single judge authorities, namely, Clarke v Chadburn and the Western Australian decision in Bank of Western Australia v Ocean Trawlers, but not with emphasis on what was being dealt with in those cases. 

They were both cases which dealt specifically with the notion of wilful disobedience.  So one can see at page 32 of the record, at paragraph [61], where there is the quote from Clarke v Chadburn, in the second paragraph of the quote the reference to “Wilful disobedience”.  That was a union which, not simply with knowledge and with a mistake, but deliberately went out and committed a breach.  As his Honour noted in paragraph [62], that is what his Lordship, in that case, was concerned with.

Then looking at Bank of Western Australia v Ocean Trawlers, in the quote which his Honour then sets out at page 33 of the record, the first paragraph but towards the bottom, the reference to wilful disobedience, defy and defiance, and that was the context of those cases.  The context here and the factual finding at first instance which was not appealed in the intermediate court was that the bank – I will just turn it up, your Honour – your Honour will see it at page 5 of the record, paragraph [15]:

By mistake, the bank did not freeze the account –

You will then see at paragraph [18] at page 6 ‑

It was not argued before me that there was a contempt of Court by the bank ‑

in this proceeding.  Then your Honour will see again in relation to this issue at page 8 of the record and also the findings made at paragraph [24], and also I should mention paragraph [20].  So the cases as they were put forward to the Court of Appeal in the intermediate court was in relation to a case of wilful breach and deliberate defiance of the court, which was not the situation with the bank.

KEANE J:   It needed to go the step further and say that because it was illegal, it was void because if they do not take that extra step, the transaction is effective.  It might be a contempt – indeed, it is a contempt because it is effective.  If it was not effective – if it did not actually achieve what it purported to do, there would not be a contempt.

MR SULLIVAN:   Yes, your Honour is correct.

KEANE J:   So their argument needs to be that the dealing in contravention of the order, though not in contravention ‑ ‑ ‑

CRENNAN J:   Of section 52(3).

KEANE J:   ‑ ‑ ‑not in contravention of section 52(1), is void.

MR SULLIVAN:   Yes.

KEANE J:   When one looks at section 52, one sees that 52(3) says that:

A dealing with property in contravention of subsection (1) is void –

and what the other side need to say is that, somehow or other, the Act which contains this provision also has the operation that a dealing with property that is not in contravention of section 52(1) is void.

MR SULLIVAN:   Yes.  Could I just take up what Justice Crennan raised right at the end with my learned friends?  Could I give your Honour some other references in the other legislation because it is quite wrong to say that there is a commonality with the legislation of the Commonwealth – quite to the contrary.  The Commonwealth, South Australia, Tasmania and the ACT each have specific provisions where there has been a commission of the offence which is – and they are not consistently – the commission of the offence is not consistent – but it gives a discretion to the Court to set aside the disposal.

CRENNAN J:   Mr Sullivan, we will not trouble you further.

MR SULLIVAN:   Thank you, your Honour.

CRENNAN J:   Yes, Mr Douglas, anything in response to Mr Sullivan?

MR DOUGLAS:   Yes, one issue only, your Honours, if I may?  At page 61 of the record in the dissenting judgment, commencing at paragraph [178] through to paragraph [180], page 61 of the application book, her Honour Justice Atkinson deals directly with the very argument which, I submitted to your Honour, the majority did not deal with squarely.  Those are my submissions by way of reply.

CRENNAN J:   Thank you, Mr Douglas.  Justice Keane will deliver the Court’s ruling in respect of this application.

KEANE J:   This application seeks to challenge the correctness of the view taken by the majority of the Court of Appeal that the dealing whereby withdrawals by the bank’s customer from an account with it enhanced the bank’s interest as mortgagee of land the subject of an order under the Act restraining dealings with land was not void for illegality.  It was common ground that in permitting the withdrawal which increased the bank’s interest in the land the bank did not act in contravention of section 52(1) of the Act.

Nothing in the Act suggests that a dealing might be void otherwise than under section 52(3).  The conclusion of the Court of Appeal is not attended by sufficient doubt to warrant the grant of special leave to appeal, given the uncontested finding of fact that the bank did not contravene section 52(1) of the Act.  It is evident that the State did not bring proceedings for contempt in respect of the bank’s honest but, nevertheless, lamentable failure to abide by the restraining order.  There is no reason to think it could not have done so.

Special leave should be refused with costs.

AT 1.56 PM THE MATTER WAS CONCLUDED