Sutton v Be Australia WD Pty Ltd (Subject to a Deed of Company Arrangement)

[2012] HCATrans 167

[2012] HCATrans 167

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S20 of 2012

B e t w e e n -

MARY SUTTON

Applicant

and

BE AUSTRALIA WD PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) ACN 093 054 623

First Respondent

ALAN JOHN HAYES

Second Respondent

ANTHONY MILTON SIMS

Third Respondent

Application for special leave to appeal

CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 22 JUNE 2012, AT 12.51 PM

Copyright in the High Court of Australia

__________________

MR D.L. WILLIAMS, SC:   May it please the Court, I appear with my learned friend, MS J.D. LITTLE, for the applicant.  (instructed by Petrine Costigan Lawyers)

MR C.R.C. NEWLINDS, SC:   If the Court pleases, I appear with my learned friend, MR D.R. SULAN, for the respondents.  (instructed by Clayton Utz Lawyers)

CRENNAN J:   Yes, Mr Williams.

MR WILLIAMS:   This special leave application raises for consideration two related questions of statutory construction of the Corporations Act 2001. The first concerns the concept of claims and creditors under Part 5.3A of the Act and the phrase “all claims” under section 553 of the Corporations Act.  The second concerns the proper ambit and scope of section 447A.

CRENNAN J:   In relation to the first issue, there is a high level of unanimity among the judges who considered that, is there not?

MR WILLIAMS:   There is, though we would respectfully submit that there has not been sufficient consideration of the amendments to the Corporations Act that followed the Harmer Committee Report and, in particular, the statement of objects and purposes in Part 5.3A of the Act, in particular, 435A(a).

CRENNAN J:   I think Justice Hayne certainly dealt with that in the context of Sons of Gwalia and it appeared to me that the judges in the courts below here were adopting the same approach in relation to section 553 and Part 5.3A.

MR WILLIAMS:   We would respectfully submit not.  In Sons of Gwalia the particular passage which we rely upon from Justice Hayne’s judgment dealt with the width of the ambit of the expression “claims” in 553, made specific reference to the legislative history and the genesis of the width of the expression.  What that case, however, was concerned with was the temporal element rather than the qualitative element that is contained within the expression “all claims”.  We submit that a proper consideration of the objects and purposes of Part 5.3A of the Act is relevant not only to the section 447A question but also to that which arises in connection with the question of whether Ms Sutton had a relevant claim at all.

In this case, the applicant contends that a pending but unadjudicated claim under section 106 of the Industrial Relations Act was either admissible to proof under a deed of company arrangement or capable of being treated as such pursuant to section 447A.  The particular claim with which we are concerned was made ‑ ‑ ‑

CRENNAN J:   If there was success on the first issue, there would be no need to go to 447A.

MR WILLIAMS:   Precisely.  If we win on either of those two issues, then we win the appeal.  But we submit that the questions that are to be considered in relation to those issues are interrelated because they very much turn on the objects and purposes.  This is a claim which was lodged four years before the company went into administration.  It was about to be heard three weeks after the company went into administration. 

Post administration the related parties of the company voted in favour of a deed of company arrangement.  Prior to the administration the applicant’s claim had been noted as at least a contingent liability in the financial accounts of the company.  Subsequent to the administration the applicant was admitted to vote at all the creditor’s meetings, including the one at which the deed of company arrangement was adopted.  It was only after the deed of company arrangement was put into place that the administrators took the view that she was not entitled to vote or to be a claimant in that pool.

The effect of the Court of Appeal’s decision is that the applicant is neither a creditor nor able to participate in any way in the deed of company arrangement. If the Court of Appeal’s construction is correct, there are two classes of claimants. First there is the classes of claimants that fall within section 553 of the Corporations Act, that definition of “all claims”, and, secondly, there is another class of claimants described, in some cases, as those with bare rights to make a claim.  Within that second class, however, there is a class of persons, such as the applicant, who have already asserted their claim and are waiting for it to be adjudicated.

Now, the first class of claimants receives the benefits and is subject to the burdens of the deed of company arrangement.  The second class of claimants neither receives the benefit nor is subject to the burdens of a deed of company arrangement.  Those second class of claimants are free to pursue their claims against the company notwithstanding the existence of a deed of company arrangement, albeit that at the end of the day there might be little joy that awaits them in terms of recovery. 

The reason that those second class of claimants are not bound by the deed of company arrangement is that section 440D of the Act binds all creditors and section 440E, being the statutory stay, does not bind them either because they are not persons bound by the deed.  So the acknowledged result of this construction of the relevant provisions is that the applicant stands outside the rubric of the deed of company arrangement and is free to proceed against the company.

CRENNAN J:   It is not hard to see, though, that there is a rationale obviously for distinguishing between creditors, including contingent creditors, on the one hand and persons who may have a bare expectancy on the other.

MR WILLIAMS:   We would respectfully submit that once a person who has what might be described as a bare expectancy has actually made their claim, they have invoked the jurisdiction of the court, then that turns what might have been described as a bare expectancy into something different.  We get support from that ‑ ‑ ‑

CRENNAN J:   What does it turn it into?

MR WILLIAMS:   A claim within the meaning of the ‑ ‑ ‑

CRENNAN J:   A contingent claim?

MR WILLIAMS:   Yes.  Either a present or a contingent claim.  The only contingency is whether or not there is going to be a successful judgment.  All the other facts, matters and circumstances that give rise to the claim have occurred.  They have occurred some years before.  The only thing that remains is success on the actual claim, in other words, a judgment.

KIEFEL J:   But from the point of view of a winding‑up, it delays the winding‑up on the basis of someone who does not have a recognisable right.

MR WILLIAMS:   It does not delay the winding‑up.  What it means is that a liquidator in a winding‑up or an administrator in the ‑ ‑ ‑

KIEFEL J:   Sets aside some funds or ‑ ‑ ‑

MR WILLIAMS:   No.  They rule upon the claim just as they ruled upon other claims that may have difficulty using terms of whether or not they are justified and what the proper amount to be attributed to them is.  They make a just decision about what is the value of that claim.  It is like an unliquidated tort claim for instance.  The liquidator’s job, or the administrator’s job is to determine what is to be permitted for that claim within the insolvency of the company and to the extent that there is a complaint about that determination, there is an appeal right, an appeal against the decision that the liquidator on the one hand or the administrator on the other hand makes.  So it does not delay things.  It merely brings into the administration, in the same way as all other claims, a question about what that claim is to be valued at.

KIEFEL J:   It is more than that, though, is it not?  It is not just a question of quantum.  It is not just a question of likelihood of success.  It is a question of whether or not a person making a claim can actually point to a right which has been vindicated in the courts.

MR WILLIAMS:   In most cases that have yet to proceed to a judgment, a person is asserting a right that is yet to be vindicated, that cannot be the ‑ ‑ ‑

KIEFEL J: That is not the case under section 106, which is a jurisdictional provision.

MR WILLIAMS:   It is a provision that gives both jurisdiction and power.  We would respectfully adopt the analysis of Justice Handley in the Majik Markets Case.  Your Honours will have seen there is a divergence of views between his Honour and another member of the court as to how one characterises that. 

KIEFEL J:   Jurisdiction to grant particular relief.

MR WILLIAMS:   Yes.  Justice Handley, at application book 61, line 40, expresses it in these terms:

Section 88F –

that is the predecessor section –

therefore creates substantive rights and since proceedings under the section comprise a suit or action . . . there is every reason for concluding that it gives rise to rights of action.

We rely upon that.  Then his Honour’s later consideration of the matter in Colley v Futurebrand, which is in the application book at pages 66 to 67, commences at line 30 on page 67:

Such legislation is a modern illustration of Sir Henry Maine’s statement that substantive law may be secreted in the interstices of procedure.

Then there is a reference to Justice Meagher’s views in Fisher v Madden.  Justice Handley then comes back to it at the top of page 68 and says:

Given that the only right expressly conferred by s 106 is a right to apply to the Commission for specific relief, a would be applicant, as Meagher JA said in Fisher v Madden ‘has the right to apply for an order, nothing more’.

Then his Honour in the next full paragraph says this:

The filing of an application under s 106 causes a right to accrue because the applicant acquires . . . a legally enforceable right to have the Commission hear and determine the application according to law. This is a new right, different from a mere right to take advantage of the section.

KIEFEL J:   It is a right of process, though, is it not?  It is a right to process.

MR WILLIAMS: Well, it is, but it is more than that. It is the act by which the jurisdiction is invoked and the power is then invested in the court – in the Commission that is – to make the order. In any event, we submit that these cases that have analysed the nature of a section 106 right are really somewhat beside the point because the real issue here is one of statutory construction, that is, what does the expression “all claims” mean in section 553 of the Act and what ‑ ‑ ‑

CRENNAN J:   “Creditor” mean in Part 5.3A.

MR WILLIAMS:   And “claim” used also in that part.  May I just remind your Honours of the way in which Justice Hayne put this.  It is in the applicant’s materials at page 65.  This is the quote from Sons of Gwalia.  His Honour commenced in paragraph 171 on page 64 by saying this:

What is meant, in s 553 by “debts or claims the circumstances giving rise to which occurred before the relevant date”? How does that expression apply in the present matters? Those questions have not previously been considered by this Court, or by any Australian intermediate court.

In construing the temporal limit –

So his Honour was recognising that that was the task in that particular case –

that is imposed by s 553, it is important to recognise the generality of other expressions used in s 553 in defining what debts and claims are to be admissible to proof. The section speaks of “all debts payable by, and all claims against, the company”.  It amplifies those expressions by the parenthetical reference:  “present or future, certain or contingent, ascertained or sounding only in damages”.  If the words of the section were not wholly sufficient (as they are) to indicate an intention to define provable claims very widely –

then it goes on to the statutory history.  What is important in connection with his Honour’s statements there is that his Honour was able to interpret the expressions with which we are concerned very widely by reference to an ordinary process of statutory construction, which he indicated was fortified by the relevant history.  What that relevant history involved from the Harmer Committee Report is the institution of a new fresh start philosophy for insolvent companies.  The statutory emanation of the objects is to be found at section 435A and what we submit is that is being overlooked in this case is subparagraph (a) of the objects of that part.  This is in 129 ‑ ‑ ‑

CRENNAN J:   Just give me a moment.  That is at 129 of the book.

MR WILLIAMS:   Yes, 129 of the materials:

The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a)maximises the chances of the company, or as much as possible of its business, continuing in existence; or –

so that is a primary purpose –

(b)if it is not possible for the company or its business to continue in existence – results in a better return for the company’s creditors and members –

et cetera.  The primacy given to subparagraph (a) reflects the Harmer Committee’s philosophy of a fresh start for companies.  If we have “all claims” defined in a narrow way, we have the real possibility of the statutory scheme and objects being undermined because the class of creditors, or claimants if I could put it that way, who are outside the rubric of the deed of company arrangement can continue their actions against the company, obtain a judgment, wind it up.  That is a process that would be inimical to the objects of the part because it would not give the company the fresh start that is envisaged.  Those matters are relevant, we would submit, both to this question of construction but also, if we are wrong about that, to the 447A point. 

In connection with these matters, we would submit this.  First of all, the questions that we are concerned with are questions of law of public

importance.  They involve the construction and purpose and objects of Commonwealth legislation.  None of the High Court’s decisions in Sons of Gwalia, Foots or IATA v Ansett determine the question with which we are concerned.  There has been a difference of judicial opinion as to the proper scope of section 447A.  That is to be found in the dissenting decision of Justice Young in this case, in the decision at first instance of Justice Palmer, in the decision of Justice Healy in Re Motor Group. (AB42) So we have a significant difference between senior judicial officers as to the proper scope of that section and, in particular, that section in the context of this case.

In those circumstances, not only for those circumstances but also because it is in the interests of justice to allow the claimant who had a claim ready to be heard to at least proceed with it, we would respectfully submit that this is an appropriate vehicle for the grant of special leave and those areas of judicial difference that appear both in relation to Majik Markets and Fisher v Madden and in relation to the Re Motor Group issue can be determined once and for all.  Those are our submissions.

CRENNAN J:   We do not need to call on you, Mr Newlinds.

The Court is not satisfied that there are sufficient prospects of establishing error in the construction in the Court of Appeal of certain provisions in the Corporations Act 2001 (Cth), particularly Part 5.3A and concerning the scope of section 447A. Nor are we persuaded that the interests of justice call for a grant of special leave. Accordingly, special leave is refused with costs.

AT 1.10 PM THE MATTER WAS CONCLUDED