Stuart David Cowie v G D Pork Pty Ltd (in Liquidation) - [2022] WASC 301

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   STUART DAVID COWIE -v- G D PORK PTY LTD (IN LIQUIDATION) [2022] WASC 301
CORAM:   ACTING MASTER MCDONALD
HEARD:   21 JULY 2022
DELIVERED          :   6 SEPTEMBER 2022
PUBLISHED           :   6 SEPTEMBER 2022
FILE NO/S:   COR 117 of 2022
BETWEEN:   STUART DAVID COWIE
Plaintiff
AND
G D PORK PTY LTD (IN LIQUIDATION)
Defendant

FILE NO/S: COR 118 of 2022
BETWEEN: STUART DAVID COWIE
Plaintiff
AND
G D PORK HOLDINGS PTY LTD (IN LIQUIDATION)
Defendant

Catchwords:

Practice and procedure - Prosecutions commenced under Environmental Protection Act 1986 (WA) - Defendants in voluntary liquidation - Whether plaintiff requires leave nunc pro tunc to continue with prosecutions

Legislation:

Corporations Act 2001, s 471B, s 500

Result:

Application dismissed

Category: B

Representation:

COR 117 of 2022

Counsel:

Plaintiff	:	Ms G Mullins
Defendant	:	No appearance

Solicitors:

Plaintiff	:	State Solicitor's Office
Defendant	:	No appearance

COR 118 of 2022

Counsel:

Plaintiff	:	Ms G Mullins
Defendant	:	No appearance

Solicitors:

Plaintiff	:	State Solicitor's Office
Defendant	:	No appearance

Case(s) referred to in decision(s):

Burwood Council Pan Pac Investments Pty Ltd [No 2] [2019] NSWLEC 29
Cowie v Perth Demolition Co Pty Ltd [2019] WASC 476
Orr v LakeCoal Pty Ltd [2019] NSWDC 178
R A Ringwood Pty Ltd v Lower [1968] SASR 454
Snelgrove v Great Southern Managers Australia Ltd (in liq) (Receiver and Manager Appointed) [2010] WASC 51
Tate v Aarjets Pty Ltd atf the Jurgholme Trust [2010] QCA 243
WorkCover Authority of New South Wales (Inspector Maltby) v Josef & Sons Contracting Pty Ltd (in liq) [2002] NSWIRComm 226
Worksafe Western Australia Commissioner v Australian Countertop Pty Ltd (in liq) [2014] WASC 413

ACTING MASTER McDONALD:

The application

These applications, originally made under s 471B of the Corporations Act 2001 (Cth) (the Act), are for leave to commence and proceed with criminal proceedings against the defendant in COR 117 of 2022 and COR 118 of 2022.
The criminal proceedings relate to charges brought by the plaintiff under the Environmental Protection Act1986 (WA) (the EP Act) against G D Pork Pty Ltd (in liquidation), the defendant in COR 117 of 2022 and G D Pork Holdings Pty Ltd (in liquidation) the defendant in COR 118 of 2022, (the defendants).
The defendants are in liquidation and by originating processes filed on 27 June 2022, the plaintiff seeks to proceed with criminal prosecutions nunc pro tunc on conditions that:
(a)any costs order not be sought or made against the defendants; and
(b)any other monetary order not be enforced against the defendants without further leave of the court.
On 5 July 2022 the liquidators informed the plaintiff they did not oppose the applications on the conditions proposed.[1] Further orders were filed by the plaintiff on 20 July 2022 applying to amend the originating process in each action to seek leave, if necessary, pursuant to s 500(2) of the Act instead of s 471B, due to the winding up of the defendants being voluntary (the Amended Applications).
[1] Affidavit of Fiona Lavery affirmed 15 July 2022 FL2.

Background

The defendant in COR 117 of 2022 was the occupier and operator of a piggery. The defendant in COR 118 of 2022 was the owner of the piggery site.[2]
[2] Affidavit of Sally Louise Heitman affirmed 24 June 2022 (Heitman affidavit), [7].
On 13 October 2021 a prosecution was commenced in the Katanning Magistrates Court against the defendants and the sole director of both defendants, together comprising of 29 charges.[3]
[3] Heitman affidavit, [8].
The charges against the defendant in COR 117 of 2022 consist of alleged offences of:
(a)intentionally or with criminal negligence, emitting unreasonable emissions from the premises, or causing unreasonable emissions to be emitted from the premises, on various dates between 29 November 2017 and 16 December 2018 contrary to s 49(4) of the EP Act;
(b)being a person bound by an environmental protection notice, intentionally or with criminal negligence, failing to comply with a requirement contained in the environmental protection notice, on various dates in 2018, contrary to s 65(4a) of the EP Act.
The charges against the defendant in COR 118 of 2022 comprise of offences noted in (b) above and the charges against the director comprise of charges noted at (a) and (b) above.[4]
[4] Heitman affidavit, [11] ‑ [13].

Corporate status of the defendants

At the time the prosecution was commenced, the prosecuting agency (Department of Water and Environmental Regulation) operated on the understanding that the defendants were under external administration and the agency was not precluded from commencing criminal proceedings in accordance with s 440D of the Act.[5]
[5] Heitman affidavit, [14].
On 31 October 2018, the defendants were placed into administration, with Martin Jones and Andrew Smith of KPMG appointed as joint and several administrators.[6]
[6] Plaintiff’s outline of submissions filed 20 July 2022, [5] (Plaintiff’s submissions); Heitman affidavit, SLH ‑ 4 page 83, SLH ‑ 4 page 89 .
On 29 May 2019, Michael Ryan and Ian Francis of FTI Consulting (Australia) Pty Ltd were appointed joint and several liquidators of each of the defendants following a concurrent second meeting of creditors held on 8 May 2019.[7]
[7] Heitman affidavit, [15], SLH ‑ 3 page 84, SLH ‑ 4 page 89.
The ASIC current and historical company extract entries regarding the appointment of the liquidators in respect of each of the defendants, indicates that the liquidation was voluntary.[8]
[8] Heitman affidavit, SLH ‑ 3 page 84, SLH ‑ 4 page 89.

Section 500(2)

Part 5.5 of the Act contains provisions concerning voluntary winding up. Section 500 of the Act, contained within Part 5.5, provides as follows:
Execution and civil proceedings
(1)Any attachment, sequestration, distress or execution put in force against the property of the company after the passing of the resolution for voluntary winding up is void.
(2)After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.
(3)The Court may require any contributory, trustee, receiver, banker, agent, officer or employee of the company to pay, deliver, convey, surrender or transfer forthwith or within such time as the Court directs to the liquidator any money, property of the company or books in his, her or its hands to which the company is prima facie entitled. (emphasis added)

Issue – requirement for leave

The question arising is whether a prosecution is a proceeding which is an 'action or other civil proceeding' for the purposes of requiring leave under s 500(2) of the Act.
It is clear s 500(2) of the Act imposes a statutory stay on pending or contemplated civil actions against a company being voluntarily wound up. After the passing of the resolution for voluntary winding up under s 491, no action or other civil proceeding may be continued or commenced against the company except by leave of the court and subject to such terms as the court imposes. A grant of leave can be made subject to conditions directed at minimising interference with the orderly winding up of the company in liquidation.[9]
[9] Snelgrove v Great Southern Managers Australia Ltd (in liq) (Receiver and Manager Appointed) [2010] WASC 51 [27].
Section 500(2) is in similar terms to s 471B of the Act which provides that while a company is being wound up in insolvency or by the court, a person cannot begin or proceed with 'a proceeding in a court' against the company or in relation to property of the company or enforcement process in relation to such property except with the leave of the court and in accordance with such terms (if any) as the court imposes.
Section 471B concerns compulsory liquidation and s 500(2) concerns voluntary liquidation. Section 471B refers to 'a proceeding in a court' and it has been held this includes criminal proceedings.[10] In contrast, s 500(2) refers to 'no action or other civil proceeding' suggesting the word 'action' is confined to a proceeding which is a type of 'civil proceeding'[11] and does not include criminal proceedings.
[10] Worksafe Western Australia Commissioner v Australian Countertop Pty Ltd (in liq) [2014] WASC 413 [8] ‑ [9], cited with approval in Orr v LakeCoal Pty Ltd [2019] NSWDC 178 [7] ‑ [8].
[11] See Orr v LakeCoal [5].
The issue of whether s 500(2) of the Act includes criminal prosecutions arose in WorkCover Authority of New South Wales (Inspector Maltby) v Josef & Sons Contracting Pty Ltd (in liq) [2002] NSWIRComm 226. Her Honour Justice Schmidt had to consider whether leave was required to bring prosecutions for alleged offences under the Occupational Health and Safety Act 1983 (NSW). Her Honour's attention was drawn to Professor Keay's article entitled 'Criminal Proceedings Against a Company in Liquidation: Is Leave of the Court Required?' 17 CSLJ 4. Professor Keay’s view was that the phrase 'no action or other civil proceeding' in s 500(2) 'obviously means that leave is not required for criminal proceedings'.[12] Professor Keay was of the view, that although anomalous and without justification,[13] the different language used in s 471B and s 500(2) meant leave is required to bring criminal proceedings against a company in compulsory liquidation but not against a company in voluntary liquidation.
[12] WorkCover Authority of New South Wales v Josef & Sons Contracting (in liq) [6] ‑ [7], [12]; 'Criminal Proceedings Against a Company in Liquidation: Is Leave of the Court Required?' page 9.
[13] 'Criminal Proceedings Against a Company in Liquidation: Is Leave of the Court Required?' page 10.
Despite Schmidt J being of the view the distinction between the provisions was not so obvious, her Honour reached the same conclusion as Professor Keay and held that leave is not required to bring criminal proceedings against a company in voluntary liquidation for the following reasons:
(a)the construction of s 500(2) properly approached in the context of the provision made in s 471B leads to the conclusion that the legislature was seeking to give s 500(2) a different meaning to that in s 471B;
(b)section 440D(1) of the Act uses the same terminology as s 471B in that it refers to 'a proceeding in a court' but s 440D(2) expressly excludes criminal proceedings from its operation. Criminal proceedings are not excluded from s 471B and therefore leave is required under s 471B. If the same result had been intended for voluntary liquidation it would be expected the legislature would have used the same language as s 471B;[14]
(c)if the word 'action' in the phrase 'no action or other civil proceeding' in s 500(2) included criminal and civil actions, then 'other civil proceeding' appears to have no work to do unless it qualifies action (as well as the word 'proceeding') and would lead to the result that s 471B and s 500(2) have the same meaning despite the use of different language;[15]
(d)while 'civil proceedings' is not a term defined in the Act, the definition of 'civil matter' in s 9 is 'a matter other than a criminal matter,' suggesting that s 500(2) was not intending to encompass both civil and criminal proceedings;[16]
(e)the immediate predecessor to s 471B, s 471(2) of the Corporations Law within the Corporations Act 1989, included the phrase 'action or other civil proceeding' which is now located in s 500(2), it therefore being assumed that the change in s 471B, with the omission of any reference to civil proceedings, was deliberate and designed to bring about a different result than that now provided for in s 500; and
(f)it follows, from the use of the general phrase 'a proceeding in a court' in s 471B, that leave to pursue both civil and criminal proceedings is required in the circumstances to which the section is directed, namely involuntary liquidation. The different language in s 500(2) means leave is not required in the case of companies in voluntary liquidation, other than for civil proceedings.
[14] WorkCover Authority of New South Wales v Josef & Sons Contracting (in liq) [19] - [21].
[15] WorkCover Authority of New South Wales v Josef & Sons Contracting (in liq) [22].
[16] WorkCover Authority of New South Wales v Josef & Sons Contracting (in liq) [24].
Schmidt J acknowledged that some difficulty flows from the construction her Honour favoured in light of the interpretation of the predecessor to s 471B. Section 263(2) of the Companies Act 1962‑1966 referred to 'no action or proceedings shall be proceeded with or commenced' except by leave of the court. While the words are not identical to that in either s 471B or s 500(2) it had been held that s 263(2) did not require leave in relation to prosecutions or at least all prosecutions.[17]
[17] R A Ringwood Pty Ltd v Lower [1968] SASR 454.
In R A Ringwood Pty Ltd v Lower [1968] SASR 454, complaints had been laid against a company which, prior to the hearing of the complaints, had been voluntarily wound up. The appeal brought by the company against conviction on the basis leave was not obtained to proceed with the prosecutions pursuant to s 263(2) of the Companies Act 1962-1966, was dismissed as the complaints were not 'proceedings'.
In contrast, in both Worksafe Western Australia v Australian Countertop Pty Ltd (in liq)[2014] WASC 413 and Orr v LakeCoal Pty Ltd [2019] NSWDC 178, s 471B was held to apply to both civil and criminal proceedings and leave was required to commence or continue with criminal prosecutions.
In Tate v Aarjets Pty Ltd atf the Jurgholme Trust [2010] QCA 243, the Queensland Court of Appeal relied on R A Ringwood Pty Ltd v Lower to find leave was not required pursuant to s 471B to bring an appeal against the dismissal of a complaint for breach of a condition of a license granted under the Liquor Licensing Act 1985 (WA). McMurdo P said at [4]:
…the first respondent's insolvency is no bar to this application. Section 471B of the Corporations Act 2001 (Cth) which prohibits certain proceedings in respect of companies in liquidation without leave of the court has no application to a criminal proceeding of this kind.
In Cowie v Perth Demolition Co Pty Ltd [2019] WASC 476 [14], Allanson J, noting the conflicting authorities as to whether leave was required under s 471B to bring an appeal, observed that despite the cogency of the reasoning of the single judge authorities to which his Honour was referred,[18] determined the matter on the basis that if the appellant required leave, whether leave should be granted.
[18] Worksafe Western Australia Commissioner v Australian Countertop Pty Ltd (in liq) [2014] WASC 413; Burwood Council Pan Pac Investments Pty Ltd [No 2] [2019] NSWLEC 29.

Disposition

This application is under s 500(2) of the Act, not s 471B. I am persuaded by the reasoning of Schmidt J in Workcover Authority of New South Wales (Inspector Maltby) v Josef & Sons Contracting Pty Ltd (in liq) and find that leave is not required to commence and continue with the prosecutions. If there is any doubt whether leave is in fact required to bring or proceed with a criminal prosecution under s 471B, that only lends force to the view that there is no requirement for leave to proceed with criminal prosecutions under s 500(2) of the Act.
One possible reason for the distinction between the two provisions might be that companies, of their own motion, should not be able to hinder the commencement or continuation of a criminal prosecution by going into voluntary liquidation. However, I have not been referred to any extrinsic material that might support any such intention by the legislature.
In light of my conclusion, I do not need to deal with the question of whether leave can be granted retrospectively. Although in Cowie v Perth Demolition Co Pty Ltd Allanson J, in respect of an appeal, held that proceedings commenced without leave 'would be an irregularity, but would not make the appeal notice or the proceedings a nullity'.[19] There is no reason why the same would not apply to a prosecution commenced without leave if required.
[19] Cowie v Perth Demolition Co Pty Ltd [9].
If leave is required, the following circumstances would satisfy me leave should be granted:
(a)section 553B(1) of the Act provides that any penalty or fine imposed by a court is not provable in a company's insolvency. Accordingly, if the defendants are convicted of the charges, there will be no financial detriment to creditors of the defendants;
(b)by including conditions specifying that no costs order be sought or made against the defendants, and that no other monetary order be enforced against the defendants, addresses any concern that the defendants could be subject to adverse costs orders or other monetary orders;
(c)that no penalty will be paid does not, of itself, mean that charges are not in the public interest. In Worksafe Western Australia Commissioner v Australian Countertop (in liq), Master Sanderson acknowledged that in certain circumstances, what is important is not whether any penalty arising out of a charge is able to be paid, but that a prosecution be pursued and, if a contravention is proved, a conviction be recorded;[20]
(d)the defendants' alleged offending, if proved, constitutes serious examples of offending under the EP Act;[21]
(e)the public interest in recording a conviction, if proved, notwithstanding that no penalty will be paid, arises from the seriousness of the alleged offending and the need for general deterrence in order to communicate to others in the same or similar industries that if the EP Act is not complied with, they will be liable to prosecution and substantial penalties may be imposed;
(f)significant public resources were dedicated to the investigation of the alleged offences;[22]
(g)the liquidators originally consented to leave being granted subject to conditions.[23]
[20] Worksafe Western Australia Commissioner v Australian Countertop (in liq) [7].
[21] Heitman affidavit [22] ‑ [28].
[22] Heitman affidavit [30] ‑ [34].
[23] Affidavit of Fiona Lavery affirmed 15 July 2022 FL2.
Given I am of the view that leave is not required, I have no basis on which to make the conditions agreed to by the liquidators and the plaintiff.
After the hearing of the applications, at which the liquidators did not appear, I enquired with the plaintiff's solicitors whether the liquidators were on notice of the Amended Applications and if they sought to be heard on the issue of whether leave was required at all. On 26 August 2022 the plaintiff confirmed the liquidators neither consented nor opposed the Amended Applications.
I will make orders that the originating processes in COR 117 of 2022 and COR 118 of 2022 be amended to delete the reference to s 471B and insert s 500(2) of the Act. As leave is not required to proceed and continue with the prosecutions, the applications, as amended, against each of the defendants in COR 117 of 2022 and COR 118 of 2022 are dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TG
Court Officer
6 SEPTEMBER 2022