The Australian Sawmilling Co Pty Ltd (in liq) v Environment Protection Authority

[2021] VSCA 294

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2020 0112

THE AUSTRALIAN SAWMILLING COMPANY PTY LTD (IN LIQUIDATION) (ACN 075 382 580) and ORS (according to the attached Schedule)	Applicants
v
ENVIRONMENT PROTECTION AUTHORITY	First Respondent
and
STATE OF VICTORIA	Second Respondent
and
ATTORNEY-GENERAL OF VICTORIA	Intervener

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JUDGES:	FERGUSON CJ, SIFRIS and KENNEDY JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	10 September 2021
DATE OF JUDGMENT:	28 October 2021
MEDIUM NEUTRAL CITATION:	[2021] VSCA 294
JUDGMENT APPEALED FROM:	[2020] VSC 550 (Garde J)

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CORPORATIONS – External administration – Liquidation – Application to set aside disclaimer of land by liquidators – Where liquidators were indemnified against environmental liabilities – Where respondents gave undertaking to limit liquidators’ liability for clean up costs to that recoverable through the indemnity – Whether setting aside disclaimer would cause prejudice to respondents grossly out of proportion to the prejudice to creditors – Prejudice to respondents because they could not recover clean up costs if disclaimer took effect – Whether judge erred in exercising discretion to set aside disclaimer – No error established – Corporations Act 2001 (Cth) s 568B.

ENVIRONMENT PROTECTION – Clean up of environmental hazard – Recovery of clean up costs against ‘occupier’ of land – Whether ‘occupier’ permits only single, exclusive person – Whether liquidators are occupiers – Duties and powers of liquidators – No error established – Environment Protection Act 1970 ss 1A, 1D, 1F(2), 1G(1), 1K, 4(1), 4(3), 62, 66B – Interpretation of Legislation Act 1984 s 37(c) – Corporations Act 2001 (Cth) pts 5.4–5.6 – Re Amerind Pty Ltd;  Commonwealth of Australia v Byrnes (2018) 54 VR 230, applied.

CONSTITUTIONAL LAW – Inconsistency of federal and state legislation – Commonwealth Constitution s 109 – Whether direct inconsistency between Environment Protection Act 1970 s 62 and Corporations Act 2001 (Cth) s 545 – Whether recovery of clean up costs makes liquidator ‘liable to incur any expense’ – No inconsistency arises where Corporations Act 2001 (Cth) s 545 not engaged – Scope of Corporations Act 2001 (Cth) s 5G(11) unnecessary to determine.

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APPEARANCES:	Counsel	Solicitors
For the Applicants	Mr P W Collinson QC with Ms E L-A Dias	Norton Rose Fulbright
For the Respondents	Mr P D Crutchfield QC with Dr C O Parkinson	Corrs Chambers Westgarth
For the Intervener	Ms R Orr QC (Solicitor-General) with Ms F I Gordon	Victorian Government Solicitor’s Office

FERGUSON CJ
SIFRIS JA
KENNEDY JA:

1. This is an application for leave to appeal the orders of a judge setting aside a disclaimer of property lodged by the liquidators (being the second and third applicants) (‘the Liquidators’) of the first applicant (‘TASCO’).  The disclaimer was lodged in respect of a property owned by TASCO, which is located at 300-400 Broderick Road, Lara in Victoria (‘the Land’).

1. Section 568B of the Corporations Act 2001 (Cth) (‘the Corporations Act’) relevantly provides that the Court may set aside a disclaimer only if satisfied that the disclaimer would cause, to persons who have, or claim to have, interests in the property, ‘prejudice that is grossly out of proportion to the prejudice that setting aside the disclaimer would cause to the company’s creditors’.

1. The judge found that TASCO’s creditors would receive no dividend, whether or not the disclaimer was set aside.[1]  However, his Honour found that the disclaimer would cause very substantial prejudice to the respondents (‘the EPA’ and ‘the State’).  This prejudice arises because, if the disclaimer took effect,[2] the respondents could not recover relevant clean up costs from the Liquidators as ‘the occupier’ of the Land under s 62 of the Environment Protection Act 1970 (‘the Environment Act’).[3]  Significantly, the respondents could not obtain recourse to a payment which the Liquidators would expect to receive (in the event that the clean up costs are recoverable from them) under the terms of an indemnity which had been granted to the Liquidators in respect of ‘environmental liabilities’ and expenses.  The indemnity was provided as a condition of their appointment.

   [1]EPA v Australian Sawmilling Company Pty Ltd (in liq) [2020] VSC 550 (‘Reasons’).

   [2]A disclaimer only takes effect when any application for an order setting aside the disclaimer is unsuccessful, or if no such application is made:  Corporations Act 2001 (Cth) s 568C(1).

   [3]Upon a disclaimer taking effect, the company’s rights, interests, liabilities and property in or in respect of the disclaimed property are terminated:  Corporations Act 2001 (Cth) s 568D(1). The company’s interest reverts to the Crown in the right of the State: Commonwealth Bank of Australia v State of Queensland [2018] FCA 1041, [4(b)] (Rangiah J).

1. The applicants challenge the judge’s decision to set aside the disclaimer. The primary ground is that the judge was wrong to find that the Liquidators were ‘occupiers’ for the purposes of s 62 of the Environment Act (proposed ground 1).  They also allege that the judge erred in finding that the disclaimer would cause prejudice to the EPA and to the State (proposed ground 2).  Further, they allege that the judge’s exercise of discretion miscarried (proposed ground 3).

1. For reasons expressed below, we have determined that these three proposed grounds are not established.

1. However, the applicants also raised a constitutional issue, namely that s 62 of the Environment Act is inconsistent with a provision of a Commonwealth law, namely s 545 of the Corporations Act. By reason of s 109 of the Commonwealth Constitution, it thereby followed that s 62(2) should be invalidated, with the result that no clean up costs are recoverable from the Liquidators, and the respondents’ claim of prejudice thereby fell away.

1. The applicants’ constitutional submission gives rise to proposed grounds 4 and 5, as well as a notice of contention whereby the respondents alleged that s 545 was not engaged in the first place. These matters also led to the intervention of the Attorney-General of Victoria who submitted that, even if there was an inconsistency, a proper construction of s 5G(11) of the Corporations Act[4] meant that s 545 would not operate to the extent necessary to preserve the operation of s 62(2) of the Environment Act. 

   [4]This subsection provides that ‘[a] provision of the Corporations legislation does not operate in a State or Territory to the extent necessary to ensure that no inconsistency arises between:  (a) the provision of the Corporations legislation;  and (b) a provision of a law of the State or Territory that would, but for this subsection, be inconsistent with the provision of the Corporations legislation.’

1. The precise inter-relationship between the proposed grounds will be explained further below. However, we have determined that the notice of contention should be upheld, given that s 545 of the Corporations Act is not engaged. It follows that no relevant inconsistency arises between s 545 of the Corporations Act and s 62 of the Environment Act, such as to invalidate s 62. It is also unnecessary to consider proposed grounds 4 and 5, or the proper construction of s 5G(11) of the Corporations Act.

1. The result is that, although leave to appeal will be granted, the appeal will be dismissed.

Background[5]

[5]This background is primarily based on agreed facts (the ‘Statement of Agreed Facts’ relied upon before the judge below, and the agreed ‘Summary for the Court of Appeal’ dated 22 April 2021).  It also contains unchallenged aspects of the Reasons.

1. TASCO is a company incorporated under the Corporations Act. On 14 March 2019, the Liquidators were appointed to TASCO pursuant to s 499 of the Corporations Act by way of a creditors’ voluntary winding up. 

1. TASCO has an issued capital of $2,650,000. Since 27 December 2018, the only shareholder of TASCO has been Dongwha Australia Holdings Pty Ltd (‘Dongwha Holdings’). TASCO also has at least four known creditors: Dongwha Holdings; Dongwha Australia Pty Ltd (‘Dongwha Australia’, which had been the only shareholder between 1 June 2012 and 27 December 2018);[6]  the State Revenue Office of Victoria;  and the Australian Taxation Office.

   [6]The transfer of shares from Dongwha Australia to Dongwha Holdings was undertaken for the purpose of putting TASCO into liquidation: Reasons [2].

1. TASCO is the registered proprietor of the Land.  The Land contains, and has since 2016 contained, large stockpiles of mixed construction and demolition waste, generated by a former licensee (C & D Recycling Pty Ltd (in liq)) who operated a materials recycling business.  The Land was leased until 2018, and by this time there was approximately 320,000 m³ of material in the stockpiles, posing a serious fire risk.  There was a fire in one of the stockpiles on 10 January 2018.

1. The Land was the subject of several proceedings in the Victorian Civil and Administrative Tribunal (‘VCAT’).  On 31 May 2018 VCAT made an enforcement order requiring, amongst other things, the development and implementation of a fire management plan, and rehabilitation plan, in respect of the Land.

1. Prior to their appointment, the Liquidators were on notice that TASCO was facing environmental issues relating to the pollution of the Land caused by its former licensee.  In this context, the judge found that Dongwha Australia entered into a deed of indemnity as an inducement to the Liquidators, and as a condition of the Liquidators accepting an appointment to TASCO.[7]  

   [7]Reasons [184], [200].

1. The deed of indemnity is dated 19 February 2019 (‘the Indemnity’).  Clause 4 relevantly provides that, subject to certain exceptions, if there is any shortfall in ‘Available Assets’, Dongwha Australia agrees to indemnify the Liquidators:

(a)               in an unlimited amount as to ‘Environmental Liabilities’;  and

(b)              for an amount limited to $500,000 (inclusive of GST) as to expenses, remuneration, and claims other than ‘Environmental Liabilities’.

1. Clause 1.1 of the Indemnity defines the following relevant terms:

Available Assets means property and assets of [TASCO] which are available to the Liquidators to pay Claims, Expenses and Remuneration.

…

Environmental Liability means any actions, proceedings, claims, suits, demands, payments, debts, costs, charges, expenses or losses incurred by the Liquidators … under any Environmental Law arising out of, or in connection with, the External Administration of [TASCO] or the proper performance by the Liquidators of their role as External Administrators of [TASCO].

1. The judge found that, upon appointment, the Liquidators took steps to secure the Land, undertook fire management remediation plans, and engaged with contractors.[8]  However, by mid-March 2019, the Liquidators determined that TASCO had insufficient funds to meet additional security requirements and fire protection costs of the Land.  Funds would be exhausted in six to seven weeks.

   [8]Ibid [108].

1. The judge found that the Liquidators put a comprehensive proposal to the EPA to develop remediation options and tender works to be funded by the State.[9]  Further to negotiations with the EPA, by correspondence of 3 April 2019, Mr Longley (one of the Liquidators) wrote to the EPA’s solicitors stating:

I refer to our appointment as joint and several Liquidators of the Company on 14 March 2019.  As Liquidators, we have assumed full control of the Company’s affairs, and the powers of the directors have been suspended.

[9]Ibid.

1. However, by letter dated 29 April 2019, the EPA told the Liquidators that, given, among other things, ongoing fire, health and environmental risks for the community, it had decided to exercise its power to enter the Land under s 55(1) of the Environment Act, and conduct a clean up of the Land under s 62 of that Act. Further, that it would proceed to do so without further notice. The letter also states that the EPA may recover from TASCO or the Liquidators, any reasonable costs incurred by it in conducting the clean up of the Land.

1. On 30 April 2019, the Liquidators made arrangements with the EPA in respect of the Land, at the EPA’s request, which included providing for the EPA’s security contractors to access and secure the Land.

1. Also on 30 April 2019, the Liquidators lodged with the Australian Securities and Investments Commission, a notice of disclaimer of onerous property dated 30 April 2019. This notice specified that the Liquidators (on behalf of TASCO) had disclaimed the Land, and that the Land met the description set out in ss 568(1)(c)-(e) of the Corporations Act (‘the Disclaimer’). The grounds for disclaimer were that:

(c)               the Land was unsaleable or not readily saleable;

(d)              the Land gave rise to a liability to pay money or some other onerous obligation;  and

(e)               it was reasonable to expect that the costs, charges and expenses that would be incurred in realising the Land would exceed the proceeds realised.

1. The parties agreed that the Land was unsaleable (both at 30 April 2019, and 3 June 2020), but had an ‘Estimated Value’ of $11,155,000 if the clean up work was completed.  The estimated costs to clean up the Land (‘Estimated Clean Up Cost’) exceed this Estimated Value.[10]

   [10]This amount was the subject of confidential evidence, but the judge noted that ‘it is likely that the clean up costs will be five times the value of the [Land] or more’: Reasons [30].

1. It is not known whether Dongwha Australia will be willing, or able, to satisfy a claim under the Indemnity with a value of, or exceeding, the Estimated Clean Up Cost.

1. On 14 May 2019, the respondents filed an application to set aside the Disclaimer under s 568B(2) of the Corporations Act.

1. By the time of the trial, the EPA had already incurred costs in cleaning up the waste stockpiles on the Land.

1. By orders made on 2 and 4 November 2020,[11] the judge set aside the Disclaimer upon the provision of an undertaking by the EPA and the State to the effect that the Liquidators’ liability would be limited to the amount recovered by them under the Indemnity (‘the Undertaking’).

   [11]The order of 4 November 2020 amended the undertaking, given there were typographical errors in the formulation recorded on 2 November 2020.

Proposed ground 1:  whether error in finding that the Liquidators are ‘occupiers’

1. Proposed ground 1 is as follows:

The judge erred in holding that the Liquidators are ‘the occupier of the premises’ owned by TASCO within the meaning of s 4(1) and s 62(2) of the [EnvironmentAct].[12]

[12]This proposed ground relates to what the judge referred to as Issue 1. The ‘six main issues’ are recorded at Reasons [53]. Issues 2 and 4 were not the subject of challenge in this Court.

1. The applicants also raise two specific questions of law in relation to this proposed ground:

1. Are liquidators or other persons controlling the affairs of a corporation which is ‘the occupier’ of premises also ‘the occupier’ of those premises within the meaning of s 4(1) and s 62(2) of the [Environment Act]?

2. Can there be more than one person who is ‘the occupier’ of premises for the purposes of s 62(2) of the [Environment Act]?

Statutory provisions

1. Turning first to the Corporations Act, pt 5.6 div 7A empowers liquidators to disclaim property in certain circumstances. Section 568(1) relevantly provides:

(1)Subject to this section, a liquidator of a company may at any time, on the company’s behalf, by signed writing disclaim property of the company that consists of:

…

(c)       property that is unsaleable or is not readily saleable;  or

(d)property that may give rise to a liability to pay money or some other onerous obligation;  or

(e)property where it is reasonable to expect that the costs, charges and expenses that would be incurred in realising the property would exceed the proceeds of realising the property; …

…

whether or not:

(g) except in the case of a contract — the liquidator has tried to sell the property, has taken possession of it or exercised an act of ownership in relation to it; …

…

1. Section 568B relevantly provides:

(1)A person who has, or claims to have, an interest in disclaimed property may apply to the Court for an order setting aside the disclaimer before it takes effect, but may only do so within 14 days after:

(a)if the liquidator gives to the person notice of the disclaimer, because of paragraph 568A(1)(b), before the end of 14 days after the liquidator lodges such notice — the liquidator gives such notice to the person; …

…

(2)       On an application under subsection (1), the Court:

(a)       may by order set aside the disclaimer; and

(b)if it does so — may make such further orders as it thinks appropriate.

(3)However, the Court may set aside a disclaimer under this section only if satisfied that the disclaimer would cause, to persons who have, or claim to have, interests in the property, prejudice that is grossly out of proportion to the prejudice that setting aside the disclaimer would cause to the company’s creditors.

1. Turning next to the Environment Act, its purpose is ‘to create a legislative framework for the protection of the environment in Victoria having regard to the principles of environment protection.’[13]  Those principles are set out in ss 1B to 1L.  The four most relevant principles are the ‘Intergenerational Equity Principle’, the ‘Polluter Pays Principle’, the ‘Shared Responsibility Principle’, and the ‘Enforcement Principle’.  These principles are expressed in the following terms:

   [13]Environment Protection Act 1970 s 1A(1).

The present generation should ensure that the health, diversity and productivity of the environment is maintained or enhanced for the benefit of future generations.[14]

Persons who generate pollution and waste should bear the cost of containment, avoidance and abatement.[15]

Protection of the environment is a responsibility shared by all levels of Government and industry, business, communities and the people of Victoria.[16]

Enforcement of environmental requirements should be undertaken for the purpose of —

(a)better protecting the environment and its economic and social uses;

(b)ensuring that no commercial advantage is obtained by any person who fails to comply with environmental requirements;

(c)influencing the attitude and behaviour of persons whose actions may have adverse environmental impacts or who develop, invest in, purchase or use goods and services which may have adverse environmental impacts.[17]

[14]Ibid s 1D.

[15]Ibid s 1F(2).

[16]Ibid s 1G(1).

[17]Ibid s 1K.

1. Section 4(1) contains the definitions which apply ‘unless inconsistent with the context or subject-matter’. They include the terms ‘occupier’ and ‘premises’. Both are defined in an inclusory manner as follows:

occupier in relation to any premises includes a person who is in occupation or control of the premises whether or not that person is the owner of the premises and in relation to premises different parts of which are occupied by different persons means the respective persons in occupation or control of each part;

premises includes messuages, buildings, lands, and hereditaments of every tenure and any machinery, plant, appliance, or vehicle used in connexion with any trade carried on at any premises and includes a ship[.]

1. Section 4(3) modifies the definition of ‘occupier’ and provides:

For the purposes of this Act, the definition of ‘occupier’—

(a)subject to paragraph (b), does not include a person being a financial institution and acting solely as a holder of a security interest in the premises, or as a mortgagee in possession, or which is, or appoints, a controller of the premises;

(b) does include a person being a financial institution when acting as a mortgagee in possession or which is, or appoints, a controller of the premises —

(i)for the purposes of the abatement of any environmental hazard in respect of the premises pursuant to a notice under section 31A, 31B or 62A;  or

(ii)having possession and day to day active management and control of the premises (other than in respect of pollution that occurred prior to the financial institution becoming mortgagee in possession or becoming or appointing a controller).

1. Section 4(3A) defines ‘controller’ in these terms:

In subsection (3), controller means a receiver, or a receiver and manager, of the premises, or anyone else who is in possession or has control of the premises for the purpose of enforcing a security.

1. Section 62 of the Environment Act is concerned with the abatement of pollution, and authorises the EPA to conduct a clean up in specified circumstances. Sections 62(1)-(3) relevantly provide:

(1)       Notwithstanding anything to the contrary in this Act, where —

(a)       pollutants have been … discharged;

(b)       a condition of pollution is likely to arise;  [or]

…

(d)any industrial waste … appears to have been abandoned or dumped; …

…

the [EPA] may conduct a clean up or cause a clean up to be conducted as the [EPA] considers necessary.

(2)The [EPA] may recover any reasonable costs incurred by the [EPA] in taking any action under subsection (1) from … the occupier of the premises on which anything referred to in subsection (1)(a) to (e) has occurred in any court of competent jurisdiction as a debt due to the [EPA] and when recovered is to be paid into the Consolidated Fund.

(2A) Reasonable costs includes labour, administrative and overhead costs determined on such basis as the [EPA] considers appropriate incurred as a result of or apportionable to any action taken by the [EPA] under subsection (1).

(3)If the [EPA] cannot recover costs under subsection (2) from the occupier of the premises on which anything referred to in subsection (1)(a) to (e) has occurred the costs become a charge on the property of the occupier or the land of which the premises forms part as the case may be …

1. Section 66B of the Environment Act is concerned with offences by corporations, partnerships, and unincorporated associations.  The applicants placed significant weight on this provision which relevantly provides for the following (in relation to corporations):

66B Offences by corporations and partnerships etc.

(1)If a corporation contravenes, whether by act or omission, any provision of this Act or a notice or a licence or permit under this Act, each person who is a director or is concerned in the management of the corporation is also guilty of the offence which relates to the contravention and liable to the penalty for that offence.

(1A)It is a defence to a charge brought under subsection (1) against a person who is a director or is concerned in the management of a corporation if that person proves that —

* * * * *

(b)the person was not in a position to influence the conduct of the corporation in relation to the contravention;

(c)the person, being in such a position, used all due diligence to prevent the contravention by the corporation;  or

(d) the corporation would not have been found guilty of the offence by reason of its being able to establish a defence available to it under this Act.

(1B)A person who is a director of a corporation or who is concerned in the management of a corporation may, by virtue of subsection (1), be proceeded against and be convicted of an offence in respect of a contravention referred to in that subsection, whether or not the corporation has been proceeded against or been convicted in respect of the contravention.

(2)When in any proceedings under this Act it is necessary to establish the intention of a corporation, it is sufficient to show that a servant or agent of the corporation had that intention.

(3)In respect of any proceedings for an offence by a corporation against this Act any statement made by an officer of the corporation is admissible as evidence against the corporation.

…[18]

Judge’s reasons[19]

[18]Subsections (4), (4A) and (4B) made similar provision in relation to partnerships and unincorporated associations.

[19]For ease of reference the judge’s findings will be extracted in relation to the applicable proposed ground.

1. The judge commenced by discussing the duties and powers of liquidators generally,[20] describing them as ‘an agent for the company occupying a position which is fiduciary in some respects and is bound by the statutory duties imposed by the Corporations Act’.[21]  Where a company is wound up in insolvency, or wound up voluntarily, a liquidator is required to ‘take custody or control of all of the company’s property’.[22]

   [20]Reasons [62]-[69].

   [21]Ibid [62].

   [22]Ibid [65]–[66], citing Corporations Act 2001 (Cth) s 474(1); Re Amerind Pty Ltd;  Commonwealth of Australia v Byrnes (2018) 54 VR 230, 246 [63] (Ferguson CJ, Whelan, Kyrou, McLeish and Dodds-Streeton JJA); [2018] VSCA 41 (‘Re Amerind’). 

1. His Honour cited cases which established that the appointment of a liquidator did not affect the beneficial ownership of the company’s property (absent a vesting order under s 474(2)[23]), but that it did result in a change of control over that property.[24]

   [23]This provision states that ‘[t]he Court may, on the application of the liquidator, by order direct that all or any part of the property of the company vests in the liquidator’.

   [24]Reasons [67]–[68], citing Federal Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) (2015) 257 CLR 544, 595 [163] (Gordon J); [2015] HCA 48; Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592, 620 [82]–[85] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); [2005] HCA 20.

1. His Honour then turned to the term ‘occupier’ as used in the Environment Act, noting the inclusive definition in s 4(1). He stated that ‘[i]t includes a person in occupation, whether or not the owner. It also includes ‘a person in control of premises, whether or not that person is the owner or in physical occupation [of the premises]’.[25]

   [25]Reasons [70].

1. His Honour stated that ‘the issue which arises for decision in this proceeding is whether the Liquidators subsequent to their appointment were persons in control of the [Land]’.[26]  His Honour considered the meaning of control in other statutory contexts, namely the Income Tax Assessment Act 1936 (Cth); the Customs Act 1901 (Cth); and the Confiscation Act 1997.

   [26]Ibid [72].

1. His Honour then turned to the Environment Act, noting authority that ‘the scope of clean up responsibilities … extends well beyond polluters’.[27] This authority related to s 62A, but his Honour noted that similar principles apply under s 62.[28]

   [27]Ibid [81]–[82], citing Sale Elderly Citizens Village Inc v Environment Protection Authority Victoria (2018) 55 VR 494; [2018] VSC 266; Yarra City Council v Metropolitan Fire and Emergency Services Board [2017] VSCA 194.

   [28]Reasons [83].

1. His Honour continued:

Section 66B(1) makes directors and persons concerned in the management of a corporation that contravenes the [Environment Act], whether by act or omission, guilty of an offence.  A liquidator may also be a person concerned in the management of a corporation.  To establish a defence, the director or person concerned in the management of a corporation must prove in substance that:

(a)the person was not in a position to influence the conduct of the corporation in relation to the contravention;

(b)       the person used due diligence to prevent the contravention;  or

(c)       the corporation was not guilty of the offence in the first place.

Given the wide net of ancillary criminal liability cast by s 66B, it is plain that liquidators have significant environmental responsibilities under the [Environment Act] in respect of the corporations for which they are appointed and exercise control.

However, it does not follow that because liquidators may have ancillary criminal liability under s 66B, they do not have civil liability under s 62(2). Each provision of the [Environment Act] must be considered in its own right to see whether it applies and takes effect.[29]

[29]Ibid [84]–[86].

1. His Honour noted a liquidator’s ability to disclaim unsaleable or onerous property, as a power to protect themselves and the unsecured creditors that they represent.  The procedural requirements to have a disclaimer set aside provided them further protection.[30]

   [30]Ibid [87].

1. His Honour considered that the purpose of the Environment Act is clear:  ‘to create a legislative framework for the protection of the environment in Victoria having regard to the principles of environment protection’.  His Honour recited features of ‘the Intergenerational Equity Principle’, ‘the Polluter Pays Principle’, ‘the Shared Responsibility Principle’, and ‘the Enforcement Principle’.[31]  He further noted that criminal and other liability for the clean up of premises was not confined to polluters but extended to:

(a) persons who fall within the definition of ‘occupier’ within s 4(1);

(b)financial institutions and receivers in the circumstances described in s 4(3); and

(c)corporations, directors, partnerships, unincorporated associations and their managers in the circumstances described in s 66B.[32]

[31]Ibid [88].

[32]Ibid [89].

1. His Honour considered the effect of including liquidators as an ‘occupier’, noting that liquidators would be responsible for compliance with abatement and clean up notices (ss 28B, 62A), the payment of reasonable clean up costs incurred by the EPA (s 62(2)) and the furnishing of information to the EPA (s 54).[33]  However his Honour considered that:

[this] is entirely consistent with the object and purpose of the [Environment Act] and the protection of the environment.  It would be contrary to the object and purpose of the [Environment Act] if clean up obligations were read down with the result that companies occupying or controlling land on which large quantities of waste had been dumped and abandoned could be placed in liquidation without any effective sanction to clean up the land or pay reasonable clean up costs.  Where constructional alternatives are available, the [Environment Act] should be construed to uphold clean up obligations, and not let clean up costs pass by default to the State.[34]

[33]Ibid [90].

[34]Ibid [91].

1. His Honour accepted that legal ownership of the Land remained vested in TASCO, and not in the Liquidators, in the absence of an order under s 474(2),[35] but reiterated that the statutory test of ‘occupier’ does not require ownership or possession.  It is sufficient if the person is ‘in control of the premises’.  Although the Liquidators were agents of TASCO, this did not alter the fact that they had control over the property of TASCO.[36]  The Liquidators’ custody and control of the property was entirely consistent with TASCO’s ownership.[37]

   [35]Ibid [92].

   [36]Ibid [93]. See also [95]-[96].

   [37]Ibid [94].

1. His Honour made specific reference to the Parliament adding ss 4(3) and 4(3A) to the Environment Act, so to exclude financial institutions from the definition of ‘occupier’ in certain circumstances.[38]  He observed that, while Parliament specifically limited the liability of financial institutions when they acted as mortgagees in possession or controllers, it did not legislate to remove or limit the liability of liquidators,[39] who, in any event, have the ability to disclaim unsaleable or onerous property.[40]

   [38]Ibid [99].

   [39]Ibid [100].

   [40]Ibid [101].

1. His Honour extracted a number of features of the Liquidators’ letter of 3 April 2019, and found that the Liquidators, upon appointment, ‘had both physical and legal control of the [Land]’.[41]

   [41]Ibid [106].

1. As indicated above, his Honour highlighted that, upon appointment, the Liquidators took steps to secure the Land, undertook fire management remediation plans and engaged with contractors.  It was also open to them to proceed with additional security or fire protection measures, or to have undertaken other works on the Land.  The fact that they chose not to do so did not mean that they did not have control over the Land.[42]

   [42]Ibid [109].

1. His Honour concluded:

Quite apart from their physical control, the Liquidators have the right and capacity to exercise legal control over the [Land]. They have comprehensive powers and authority over the property and affairs of TASCO including the [Land]. It is true that they act as agents for TASCO but this does not mean that they are not ‘occupiers’ under the extended definition in s 4(1) of the [Environment Act].  Their control is further demonstrated by their ability to disclaim the [Land] on behalf of TASCO.

The control of the Liquidators over the [Land] is undisputed and has been so since the date of their appointment.  There has been no physical or legal impediment to their control over the [Land].

I find as a matter of fact that the Liquidators have been in control of the [Land] from their appointment. Their control has subsisted to the present day, as under s 568C(1) of the Corporations Act a disclaimer is only effective when an application to set aside the disclaimer under s 568B is unsuccessful.[43]  

[43]Ibid [110]–[112].

1. His Honour also found that, in the interpretation of s 62(2), the singular (ie ‘the occupier’) is to be taken as including the plural.[44] There may be a multiplicity of persons who have the same relationship to land, and there was nothing which suggested an intention that there can only be one person who can satisfy the extended definition of ‘occupier’ in s 4(1) at any one time.[45]  The use of the definite article (‘the occupier’) did not detract from the fact that the singular includes the plural in the absence of any contrary intention.[46]

   [44]Ibid [117], citing Interpretation of Legislation Act 1984 s 37(c). This provision states that ‘In an Act or subordinate instrument, unless the contrary intention appears — words in the singular include the plural.’

   [45]Reasons [117].

   [46]Ibid [118].

Applicants’ submissions

1. The applicants submitted that the judge erred in finding that the Liquidators were ‘the occupier’ of the Land by reason of their ‘physical and legal control’ over it (at para [110]).  In written submissions, this was said to be an error having regard to the doctrine of separate legal personality, and construction of the Environment Act; the consequences of the judge’s construction; the text and context of the words in s 4(1) of the Environment Act;  the construction of the words ‘the occupier’ in the plural, rather than the singular;  and the purpose and principles of the Environment Act.

1. However, in oral submissions, the primary focus was on s 66B of the Environment Act. Briefly put, the submission was that, if Parliament had intended the words ‘the occupier’ to encompass liquidators and other agents of a corporation, such as a sole director, s 66B would be otiose because the liquidator (or sole director) would already be liable as an occupier. Further, the defences contained in s 66B would be rendered nugatory. Rather, the specific liability placed on directors by way of s 66B(1) (subject to the defences) showed that a sole director (or liquidator) cannot be an occupier.

1. In making this submission, the applicants thereby focused on the first two matters cited above ie first, that the role of a liquidator was akin to that of a sole director (being an agent of the company which had a separate entity);  and secondly, that the consequences of the respondents’ construction were ‘far-reaching’ (with particular focus on s 66B).

1. In terms of the role of a liquidator, the applicants submitted that his Honour failed to recognise that, when liquidators control the company’s property, they do not do so in a personal capacity.  Control over the company’s property, hence, remained with TASCO who was the ‘person’ who was ‘in occupation or control of the premises’ for the purposes of s 4(1). There were no words in the Environment Act which suggested that Parliament would intend mere agents to fall within the definition of ‘the occupier’ concurrently with the owner.

1. In oral submissions, counsel highlighted that the control taken by a liquidator was the control that the directors formerly possessed.  The liquidator should therefore be regarded as in the same position as a sole director, with no direct relationship with the company’s property. 

1. In relation to s 66B, the applicants submitted that, because the provision renders a sole director liable in respect of the company’s occupancy, a sole director is not otherwise an ‘occupier’. The word ‘also’ in s 66B supported this construction. Given that a liquidator was in a similar position to a director, and was also ‘concerned in the management of the corporation’, it followed that a liquidator would also not be an ‘occupier’. The defences afforded under s 66B would also be rendered nugatory if a director/liquidator was already liable under the other direct strict liability provisions (which applied to ‘occupiers’).[47] In oral submissions, counsel submitted that it would be bizarre if directors who in many cases would be there throughout the period when the pollution occurred that led to the occupier liability escaped liability if one of the defences in s 66B(1A) applied but that a liquidator, who almost always comes in after the pollution has happened, would not get the benefit of those defences because on the judge’s construction he is directly liable as the occupier.

   [47]For example, s 27(1)–(1B) (offences with respect to waste treatment by non-licensees); s 31A(7) (offence to contravene requirement specified in pollution abatement notice); s 48D(4) (offences concerning manufacture and sale of equipment).

1. The applicants submitted that the judge failed to consider the far-reaching consequences of his own construction, in finding that a broad range of persons could be included in the term ‘occupier’. Other such persons included court-appointed liquidators, administrators, shareholders, and certain employees. Parliament cannot have intended this, given that an occupier is liable for civil and criminal penalties, and may be directed to do onerous things. The applicants also cited s 62(3) which provided that, in the case of non-recovery, the costs incurred by the EPA can become a charge ‘on the property of the occupier or the land of which the premises forms part’. The applicants submitted that this would have the effect that personal property of liquidators could be the subject of a charge.

1. While the judge placed reliance on s 4(3) for his construction, the applicants submitted that the subsection actually provides further confirmation of Parliament’s intended regime for assigning responsibility to third parties expressly, and with limitations, and not by stealth. Therefore, while s 4(3)(a) excludes financial institutions acting solely as a holder of a security interest, or as a mortgagee in possession, from being ‘the occupier’, s 4(3)(b) provides that such persons are the ‘occupier’ in certain specific circumstances. It was illogical that Parliament could have intended liquidators to be liable in respect of past pollution, while mortgagees in possession were not.

1. Counsel also noted that s 55(1C) provides for the giving of a notice to the occupier, or if there is no occupier, to any person who appears from the appropriate records to be the owner of the land (prior to an entry by an authorised officer).  This assumes that a person can be an owner, but not an occupier.  This tended to point to a concept of control as a matter of fact (sometimes referred to as ‘de facto’ control), rather than control as a matter of law (sometimes referred to as ‘de jure’ control), given that an owner would always have control as a matter of law over their land.

1. The applicants also submitted that the judge construed the word ‘control’ in isolation from its text and context, contrary to relevant principles of statutory construction.  The word was used in a composite phrase ‘in occupation or control’, and the judge should not have isolated the word ‘control’, nor considered judicial statements about the meaning of ‘control’ in different statutory contexts.  They submitted that the phrase comprehended immediate and direct relationships, not an agent without a personal relationship to the premises.  In this context, it is the company that has the relationship of ‘control’, not its liquidators.

1. In written submissions, the applicants submitted that the words and context showed that Parliament intended the singular construction of occupier ie that there was a contrary intention for the purposes of s 37(c) of the Interpretation of Legislation Act 1984, and that TASCO was the only occupier. In oral submissions, however, counsel accepted that there could be a multiplicity of occupiers, but suggested that it was remarkable that the provisions were drafted as they were if a ‘collection of occupiers’ was intended (citing, for example, that there would potentially be multiple licence holders under s 19A).

1. Finally, in written submissions, various complaints were made as to how the judge wrongly ‘elevated’ environmental considerations, by, among other things, imposing liability on innocent liquidators, and by wrongly assimilating principles behind s 62(2) with those in respect of s 62A. In oral submissions, counsel suggested that environmental factors were simply not specific enough to deal with the relevant point of construction. Further, that s 66B already deals with environmental factors sufficiently insofar as liquidators are concerned.

Respondents’ submissions

1. The respondents submitted that the judge correctly held that the Liquidators had both control in fact and law of the Land, and were thus ‘occupiers’ as defined.  Upon appointment, control of the company vests in the liquidators, and they are obliged to take custody and control of the company’s property, although there is no change in the beneficial ownership of the property (absent an order under s 474(2)).  Therefore there was legal control.

1. In pursuance of their duties, the Liquidators also took steps to secure and take control of the Land.  The respondents cited the correspondence of 3 April 2019, which stated that the Liquidators had ‘assumed full control of [TASCO’s] affairs’.  Therefore, there was also control as a matter of fact.

1. The respondents submitted that the definition of ‘occupier’ is relational, and the relevant relationship is that of a person ‘in … control’ of premises.  It is an inclusory definition, and expands the meaning beyond its ordinary meaning.  The definition itself reinforces that a person ‘in … control’ need not be ‘in occupation’, or the owner of the premises.  In ordinary usage, control means control as a matter of fact, although it may also entail legal control.  Here it means something less than, and different from, ownership and occupancy.  The clear legislative intent behind ‘occupier’ is a relationship of control that is, at least, control as a matter of fact.  Here, however, there was both (citing the finding of the judge at para [106]).

1. The respondents highlighted that the overarching purpose of the Environment Act is to protect the environment, as reflected in the principles of environment protection set out at ss 1A to 1L. The principles — particularly the ‘Shared Responsibility Principle’ and ‘Enforcement Principle’ — favour a construction of ‘occupier’ which shares responsibility for protection of the environment, and thus a wide reading of ‘in … control’.

1. The applicants’ contention that the Liquidators are merely agents, and only control TASCO, which has control of the Land, fails for three reasons.  First, TASCO is the owner, and may be the occupier, of the Land, but this does not exclude the possibility that someone else controls the Land.  Secondly, the relevant criterion is a relationship of control to the premises, and there is no reason to exclude persons with control as a matter of fact.  Thirdly, the authorities and the Corporations Act refer to liquidators taking custody and control of a company’s property, not just the company itself.  That is a personal relationship of control of the company’s assets, distinct from the company’s control of its assets (legal control of the Liquidators).

1. Although in written submissions the respondents appear to have accepted, for the sake of argument, that a court-appointed liquidator, administrator and sole director may be in control of a company’s premises, counsel ultimately submitted that a sole director was not an ‘occupier’.  In any event, it was unnecessary for the Court to engage in speculation as to the limits of the concept of ‘control’.

1. In terms of s 66B specifically, the respondents made four submissions. First, liquidators are neither directors, nor involved in the management of a corporation — they are subject to statutory duties to get in the company’s property, and distribute it to creditors. Secondly, if a liquidator is an ‘occupier’, it is not surprising that he or she has principal obligations with which to comply (such as s 62A(1)), or that a failure to do so may constitute an offence. If the liquidator could not comply with those obligations due to a lack of funds, then the liquidator can disclaim the property, and the associated obligations will cease. Thirdly, it was suggested (in written submission) that a liquidator would not be charged and convicted under both the principal provision and s 66B(1). However, in oral submissions, counsel appeared to accept that there may be some scope for overlapping liability. Fourthly, s 66B(1) cast the net wider than persons having ‘control’ of the relevant premises, and extended to those concerned in management. The defences then go to such a person’s culpability. A definition of ‘occupier’ which encompasses a liquidator does not therefore render s 66B otiose.

1. Counsel also suggested in oral submission that, even if s 66B did not ‘sit happily’ with the definition of occupier, this would not be sufficient to remove the clear words ‘or control’ from the definition. In any event, a liquidator was not in the same position as a director. While a director was in control of the corporation, but not in control of its assets, a liquidator was in control of the company assets. Further, although a liquidator may be a person ‘concerned in the management of the company’, this was not ordinarily so, and was also not this case.

Analysis

1. It is necessary to begin with the usual principles of statutory construction.  These require consideration by the Court of the ordinary and grammatical meaning of the words used, taking into account both context and legislative purpose.[48]

   [48]R v A2 [2019] HCA 35, [32]–[37] (Kiefel CJ and Keane J), [124] (Bell and Gageler JJ).

1. However, before analysing the concept of an ‘occupier’ as used in the Environment Act, it is necessary to outline the role of a liquidator, particularly in terms of any ‘control’ exercised in relation to company property.

1. The judge’s summary of the general duties and powers of liquidators (at paras [62]–[69]) is correct.  In particular, as Tamberlin J said in Sydlow Pty Ltd (in liq) v TG Kotselas Pty Ltd, the office does not fit any precise legal category, but is a ‘hybrid composite’ with elements of fiduciary, trustee, agent, officer of the corporation and (in some instances) officer of the Court.[49]

   [49]Sydlow Pty Ltd (in liq) v TG Kotselas Pty Ltd (1996) 65 FCR 234, 238 (Tamberlin J).

1. Although, consistent with the above passage, it is usual to refer to the liquidator as an agent of the company, he or she is not in the position of a normal agent, as the liquidator is in effective control of the actions of the principal, and is also subject to overriding duties at law and pursuant to statute.

1. Insofar as the property of the company is concerned, the applicants suggest that control over the company’s property remains with the company, over which the liquidator exercises control.  However, as was stated by this Court in Re Amerind, the property ordinarily remains vested in the company, ‘albeit under the liquidator’s control’.[50]  It is true that, absent a vesting order, the property itself does not vest in the liquidator, since liquidation has no impact on the beneficial ownership of the assets.[51]  However, the liquidator still has control over the property of the company.[52]

   [50]Re Amerind (2018) 54 VR 230, 246 [63] (Ferguson CJ, Whelan, Kyrou, McLeish and Dodds-Streeton JJA); [2018] VSCA 41.

   [51]Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592, 612–3 [54] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ), 631–2 [121] (McHugh J); [2005] HCA 20; Re Middle Harbour Investments Ltd (in liq) [1977] 2 NSWLR 652, 659 (Bowen CJ).

   [52]Re Amerind (2018) 54 VR 230, 246 [63] (Ferguson CJ, Whelan, Kyrou, McLeish and Dodds-Streeton JJA); [2018] VSCA 41; Federal Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) (2015) 257 CLR 544, 595 [163] (Gordon J); [2015] HCA 48.

1. In considering the core functions of a liquidator it is also important to consider the liquidator’s powers and obligations under the Corporations Act.  These include:

·that the liquidator must take into his or her custody, or under his or her control, all the property which is, or appears to be, property of the company (s 474(1)[53]);

·that a liquidator may sell or otherwise dispose of, in any manner, all or any part of the property of the company (s 477(2)(c);  see also s 506(1)(b));

·that the liquidator must cause the company’s property to be collected and applied in discharging the company’s liabilities (s 478(1)(a));

·that, in a creditor’s voluntary winding up (as here), the company in general meeting must appoint a liquidator for the purpose of winding up the affairs and ‘distributing the property of the company’ (s 499(1));  and

·that, in a voluntary winding up, the property of a company must be ‘applied’ in satisfaction of the company’s liabilities equally, and, unless the company’s constitution otherwise provides, be ‘distributed’ among the members according to their rights and interests in the company (s 501).

[53]Section 474 appears in pt 5.4B ‘Winding up in insolvency or by the Court’ and applies ‘if a company is being wound up in insolvency or by the Court’.  There is an equivalent asset collection function for liquidators in a voluntary winding up:  Federal Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) (2015) 257 CLR 544, 595 [163] (Gordon J); [2015] HCA 48; Federal Commissioner of Taxation v Bruton Holdings Pty Ltd (in liq) (2008) 173 FCR 472, 488 [42] (Ryan, Mansfield and Dowsett JJ); [2008] FCAFC 184 (overturned in Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of Taxation (2009) 239 CLR 346; [2009] HCA 32, but not on this point). See also s 506(1)(b), cited in Federal Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) (2015) 257 CLR 544, 595 [163] (Gordon J); [2015] HCA 48.

1. The core function of a liquidator therefore is to collect, apply, and distribute company property.

1. Insofar as it is appropriate to compare this role with that of a director, directors are responsible for the management of the business of the company, and may exercise all the powers of the company (subject to the company’s constitution).[54]  Further, although there are cases which speak of directors having control of company property prior to a winding up,[55] given that a corporation must manifest its acts by the actions of human beings, the directors exert that control as an organ of the company itself.[56]  Therefore, before liquidation, it is really the company which is in control of its own property. 

   [54]Corporations Act 2001 (Cth) s 198A.

   [55]See, eg, Commissioner of Taxation v Macquarie Health Corp Ltd (1998) 88 FCR 451, 468–9 (Emmett J); Cassegrain v Gerard Cassegrain & Co Pty Limited [2013] NSWCA 454, [133] (Beazley P).

   [56]Black v Smallwood (1966) 117 CLR 52, 61 (Windeyer J); [1966] HCA 2, approved in MYT Engineering Pty Ltd v Mulcon Pty Ltd (1999) 195 CLR 636, 647 [21] (Gleeson CJ, Gaudron, Gummow and Hayne JJ); [1999] HCA 24. See also Shears v Chisholm [1994] 2 VR 535, 545, 625–6 (Phillips J).

1. Overall, then, although there is considerable overlap in responsibilities, a liquidator exercises a very specific statutory function that entails more direct control of company property, for the purposes of collection, application and distribution.  This takes the liquidator’s direct relationship with property beyond that of a director, whose core function is concerned with control of the company’s business (and not its assets).

1. Returning to the definition contained in s 4(1), an occupier includes a person who is in occupation or control of the premises whether or not that person is the owner of the premises.

1. The definition is therefore broad and inclusive.  Control and ownership are also very different concepts, with the former meaning, in ordinary usage, the power of ‘directing or commanding’.[57]

   [57]DPP v Ferguson [2006] VSC 484, [49] (Kaye J).

1. Three submissions of the applicants can be readily rejected in this context.

1. First, insofar as the applicants continued to submit that the definition of ‘occupier’ only permits a single, exclusive occupier, this fails, largely for reasons which the respondents identified. Section 37(c) of the Interpretation of Legislation Act1984 provides that the singular includes the plural, unless the contrary intention appears. No contrary intention was demonstrated. The applicant highlighted s 19A which, among other things, prohibits an occupier from doing an act in relation to scheduled premises, which is likely to cause an increase in waste, or a state of potential danger to the quality of the environment, without a licence. There is nothing in that provision which suggests that the obligation should be imposed on a singular occupier only. Further, the use of the word ‘includes’ in the definition of occupier, and the distinction between persons who are ‘in occupation’, or ‘in control’, readily suggests that there might be one person ‘in occupation’, and another person ‘in control’, of the same premises. To confine the definition to a single, exclusive occupier is also likely to produce absurdity, for example, where there are tenants in common, or multiple licensees. This would defeat the ‘Shared Responsibility Principle’, and undermine the purpose of the Environment Act.

1. Secondly, the judge was correct to seek to give meaning to the separate word, ‘control’.  A court construing a statutory provision must strive to give meaning to every word of the provision.[58]  No reason was advanced for ignoring the word ‘control’, which is separately included in the (inclusive) definition.

   [58]Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 382 [71] (McHugh, Gummow, Kirby and Hayne JJ); [1998] HCA 28, citing The Commonwealth v Baume (1902) 2 CLR 405, 414 (Griffith CJ); [1905] HCA 11.

1. Thirdly, we see no error in the judge’s consideration of environmental matters in the context of the Environment Act.  For reasons expressed already, it is appropriate to have regard to the purpose of the Act, which was to create a legislative framework for the protection of the environment, having regard to the principles of environment protection.[59] In particular, there was no error in making reference to, among other things, ss 62 and 62A, to suggest that the scope of recovery under the Environment Act is intended to extend beyond polluters.  There was also no error in suggesting that, where constructional alternatives were available, the Environment Act should be construed to uphold clean up obligations, and not let them pass by default to the State.

   [59]Environment Protection Act 1970 s 1A.

1. Returning to the language of ‘control’ of the premises, the language does not restrict the concept to either control as a matter of fact or matter of law.  The definition further expressly extends to a person in control or occupation ‘whether or not’ that person is also the owner of the premises.  In other words, it extends to a person in ‘control’, where that person is not an owner, nor in occupation.  Counsel for the applicants had some (understandable) difficulty with identifying who might be within this category, apart from a liquidator.  His ultimate suggestion was that it could cover a head lessor where there was a sub-lessee.  However, in ordinary circumstances, a head lessor would not have either occupation or control of the premises.  Moreover, even if a head lessor was included, there is no reason to not also include a liquidator. 

1. Thus, having regard to the principles set out above, a liquidator readily falls within the concept of someone in ‘control’ of the premises, who was ‘not’ otherwise an owner, nor in occupation.  On their face, the words of the definition therefore include a liquidator.  More particularly, those words readily apply to the Liquidators in this case, given the judge was satisfied that they had physical control, as well as legal control, over the Land in question.

1. However, it remains to consider whether any other parts of the Environment Act suggest that the meaning should be constrained, especially having regard to s 66B. The applicants placed much reliance on this section.

1. It will be recalled that s 66B is directed to the situation where a corporation contravenes a provision of the Environment Act, a notice, a licence, or a permit.  In such a situation, the section imposes personal liability on a director or a person ‘concerned in the management of the corporation’, in relation to the company’s contravention, subject to various defences.

1. Section 66B does not suggest that a more constrained concept of ‘occupier’ should be adopted which excludes a liquidator. The contention also involves a fundamental misunderstanding of the nature and operation of the various provisions, involving both civil and criminal liability and potentially both.

1. First, even if s 66B raises some issues, the applicants have failed to identify, or provide, any cohesive alternative construction of the definition of an occupier which could generally apply within the context of the Environment Act.  The simple suggestion that a liquidator should be excluded is insufficient, and effectively ignores the use of the word ‘control’. 

1. Secondly, the applicants have focused on one provision in the context of a lengthy piece of legislation. Even if there may be difficulties surrounding the application of s 66B, this is not sufficient of itself to ignore express words given in a broad, inclusive definition. This is particularly so, having regard to the ‘Shared Responsibility Principle’, and the ‘Enforcement Principle’.

1. Thirdly, this case is not concerned with s 66B at all, nor with the position of directors (who, for reasons given already, have a different role to that of liquidators). There is limited utility in examining hypothetical issues that do not arise for consideration.

1. Fourthly, insofar as there is some unfortunate consequence for a liquidator as a result of the potential application of s 66B, or otherwise, he or she has an entitlement to disclaim if he or she does not wish to be exposed to liability under the Environment Act.  Although the disclaimer was set aside in this case, this was done in somewhat unusual circumstances, on the basis of an undertaking that the Liquidators would not be exposed to liability beyond the scope of the Indemnity.

1. Finally, and in any event, the application or operation of s 66B, as properly construed, does not justify constraining the definition of an ‘occupier’ as suggested.

1. The fundamental problem with the applicants’ submission (which suggests that s 66B is unnecessary if the judge’s construction is adopted) is that it ignores the different functions served by different provisions of the Environment Act. Thus, the contravention provisions impose direct liability on those responsible for the contravention. This may be because that person has engaged in the conduct themselves, for example, by polluting waters,[60] and may include where that person is an occupier (for example, where the occupier has done an act, in relation to a scheduled premises, which is likely to cause an increase in emitted waste, without a licence[61]).  However, it also includes cases where an occupier is responsible for the contravention by reason of having requisite control over what is happening at the land (eg by being the occupier of a scheduled premises from which waste is discharged without a licence[62]). This may be compared with the function served by s 66B, which seeks to place ancillary liability on people (including directors) who may not be directly responsible (in a legal sense) for the contravention, but bear responsibility through their role in the management of a corporation which has engaged in a contravention.

   [60]Environment Protection Act 1970 s 39; see also, eg, ss 41, 42, 42A, 45.

   [61]Ibid s 19A; see also ss 30C, 55(6) (insofar as it applies to an occupier).

   [62]Ibid s 27; see also ss 48D, 53N.

1. Contrary to the suggestion of the applicants, then, s 66B is not rendered otiose by the construction of ‘occupier’ as adopted by the judge. Section 66B has application to contraventions beyond those committed by ‘occupiers’. It also has application to those concerned in the management of a contravening corporation, even if that person is not also an occupier of premises.

1. However, even if there is the possibility of an ‘overlap’, for example, where a liquidator was both an occupier, and involved in the management of a contravening corporation, this is also not contrary to the purposes of the Environment Act.  If a person contravenes a provision of that Act and also fails, by proper management, to prevent a corporation from contravening a provision, it may well be that two separate offences are committed.  However, ordinary sentencing principles, including those concerning concurrency, totality, and double punishment would apply to ensure that any penalty imposed would appropriately address the person’s criminality.  

1. The suggestion that the defences under s 66B would also be rendered ‘nugatory’ if the judge’s construction is adopted is also rejected. If a liquidator was liable solely by reason of his or her involvement in the management of a contravening corporation, he or she may defend the action on the basis that he or she was not really ‘in a position to influence’ the corporation’s conduct,[63] or that he or she ‘used all due diligence’ to prevent the contravention.[64]  However, such defences are not available if the liquidator is an occupier who has the direct control over the premises at which the relevant environmental damage has taken place.  In such circumstances, there is nothing incongruous about the liquidator being directly responsible for the contravention as an occupier.   

   [63]Ibid s 66B(1A)(b).

   [64]Ibid s 66B(1A)(c).

1. There is nothing absurd, then, about the operation of s 66B if a liquidator was held to be an occupier. That section does not provide a contextual basis for departing from the ordinary meaning of the words used in the definition of ‘occupier’, and does not justify the exclusion of the Liquidators as occupiers in this case.

1. It also remains to deal with some of the other specific provisions which were the subject of submission.

1. Insofar as s 4(3) is concerned, the respondents are correct that this tends to support the inclusion of a liquidator in the general definition of an ‘occupier’. First, it would be unnecessary to carve out a mortgagee in possession or a controller (which includes a receiver and/or manager) from the general application of the ‘occupier’ category for special treatment,[65] if those persons would otherwise be excluded from that category anyway.  This tends to confirm that the definition has broad application.  Secondly, although it may have been true that the provision was intended only to ‘reassure passive lenders’[66] (who may not otherwise be occupiers), s 4(3) also carved out mortgagees in possession and receivers and managers for special treatment by placing ‘limits’ on their liability.[67]  Although not identical, liquidators have a similar relationship of control, but without ownership.  The fact that Parliament has chosen not to similarly limit/remove the liability of liquidators tends to support the conclusion that liquidators were intended to be included in the definition of an occupier.

   [65]By excluding all liability under s 4(3)(a), then reimposing it in limited circumstances under ss 4(3)(b)(i)-(ii).

   [66]Victoria, Parliamentary Debates, Legislative Assembly, 31 March 1994, 772 (Geoff Coleman).

   [67]Ibid.

1. It is unnecessary to explore the precise ambit of s 55(1C).  It may well be that s 55(1C) does no more than enable an authorised officer to rely on ‘appropriate records’ in situations where that officer cannot readily determine that there is a person in occupation of the land.  It does not of itself suggest that legal control will be insufficient for the definition of occupier.

1. It is also unnecessary to explore the precise meaning of ‘charge on the property of the occupier or the land of which the premises forms’ for the purposes of s 62(3). The issue of whether this covers personal property of the relevant occupier does not shed light on the proper meaning of the concept of an ‘occupier’ of itself.

1. The fact that the judge’s construction of ‘occupier’ means that a liquidator might be directly liable under a number of provisions does not otherwise assist the applicants.  As indicated already, if a liquidator is in control of a premises where, for example, dangerous substances are stored, it is consistent with the Environment Act that he or she should comply with licensing requirements, as other occupiers also should.[68] The reading down of the word ‘occupier’ would in fact have many more ‘far-reaching’ consequences than any difficulties with s 66B, since it would limit the scope of the numerous contravention provisions which seek to impose direct liability on ‘occupiers’. As observed already, there is no reason why persons, including liquidators, should not be responsible for environmental damage which has occurred at land within their ‘control’.

   [68]Environment Protection Act 1970 s 27(1A). See s 20(1)(c).

1. For all of the above reasons, the judge did not err in holding that the Liquidators were ‘the occupier of the premises’ within the meaning of ss 4(1) and 62(2) of the Environment Act. 

1. Proposed ground 1 is not made out.  As the ground was arguable we will grant leave to appeal but dismiss the appeal.

Proposed ground 2:  whether disclaimer would cause relevant prejudice to the respondents

1. Proposed ground 2  is as follows:

The judge erred in holding that the disclaimer lodged by the Liquidators ‘would cause’ prejudice to the EPA and the State within the meaning of s 568B(3) of the Corporations Act 2001 (Cth).[69]

[69]This proposed ground relates to what the judge referred to as Issue 5.

Judge’s reasons

1. His Honour reiterated the test for setting aside a disclaimer under s 568B(3) as requiring his satisfaction that ‘the disclaimer would cause to persons who have or claim to have interests in the property prejudice that is grossly out of proportion to the prejudice that setting aside the disclaimer would cause to the company’s creditors’.[70]

   [70]Reasons [175].

1. He noted that two of the creditors were Dongwha entities.  The only other creditors were the State (for an undetermined amount of land tax) and the Australian Taxation Office (for PAYG estimated to be $10,358).  He accepted as common ground that TASCO’s creditors would receive no dividend, whether or not the disclaimer was set aside.[71]

   [71]Ibid [179].

1. His Honour quoted Chesterman J in Re Real Investments Pty Ltd, who stated:

[Section 568B(3)] compels examination of what the primary consequence will be to those interested in the property or contract and the creditors should there be a disclaimer.  Anything beyond direct consequences is to be ignored.[72]

[72]Re Real Investments Pty Ltd [2000] 2 Qd R 555, 565 (Chesterman J); [1999] QSC 089.

1. The judge (in the present case) said that this highlighted that the precondition to setting aside a disclaimer:

is concerned with the primary consequences of a disclaimer to those interested in the property and to the creditors.  It is the immediate and direct effect with which the precondition is concerned, not future potentialities or indirect consequences.[73]

[73]Reasons [181].

1. His Honour noted the Indemnity that was granted by Dongwha Australia to induce the Liquidators to accept appointment.[74]  As indicated already, he also found that the Indemnity was voluntarily given as a condition of the Liquidators’ acceptance of the appointment.[75]

   [74]Ibid [184].

   [75]Ibid [200].

1. He stated as follows:

The [Indemnity] was relied on by the Liquidators when they accepted their appointment.  There is no reason to doubt that it was executed in good faith, and will be honoured by Dongwha Australia as a subsidiary of Dongwha Korea.  There is no evidence which suggests that the unlimited indemnity in respect of environmental liabilities could not be met by Dongwha Australia if it were called on to do so.  I reject the Liquidators’ submissions that I should not be satisfied that the EPA and the State will suffer very substantial prejudice if recourse to the Indemnity is lost.[76]

[76]Ibid [185].

1. In accordance with s 568B(3), his Honour also considered the prejudice that setting aside the disclaimer would cause to the company’s creditors, but only in their capacity as creditors.  He rejected a submission that Dongwha Australia would suffer prejudice as a creditor, if the Indemnity was called on.  Its role as indemnifier was unrelated to its role as TASCO’s creditor.[77]

   [77]Ibid [187].

1. The only prejudice to the creditors that his Honour could identify was the delay in the finalisation of the liquidation.  Thus, his Honour was satisfied that the disclaimer would cause prejudice to the EPA and the State that was grossly out of proportion to the prejudice that setting aside the disclaimer would have on TASCO’s creditors.[78] 

   [78]Ibid [188].

Applicants’ submissions

1. The applicants noted that the discretion in s 568B(3) of the Corporations Act was not exercisable unless the Court was satisfied that the disclaimer would cause prejudice (within the meaning of the section) to the EPA and the State.  The judge correctly identified that it was ‘the immediate and direct effect’ with which the precondition is concerned, not ‘future potentialities or indirect consequences’.

1. The applicants submitted that the judge did not articulate what prejudice the disclaimer would cause to the EPA or the State. There could be no relevant and immediate prejudice to the State, since it has no power to recover clean up costs. In respect of the EPA, there was no evidence that it had yet sought to recover the (reasonable) clean up costs from the Liquidators or TASCO under s 62(2). Further, the EPA is not a party to the Indemnity, and there was no certainty that it would be satisfied by Dongwha Australia. This was only a ‘future potentiality’ which was speculative. They placed weight in so doing on the agreed fact that ‘it is not known whether Dongwha Australia will be willing or able to satisfy an indemnity with a value of or exceeding the Estimated Clean Up Cost.’ They also alleged that the judge erred in concluding that there was no evidence to suggest that the unlimited Indemnity could not be met by Donghwa Australia if it were called on to do so.

1. No oral submissions were advanced in support of this proposed ground.

Analysis

1. The suggestion that there was no prejudice to the State (which was apparently not raised before the judge) is without merit, given that s 62(2) provides that any costs recovered are to be paid into the Consolidated Fund.

1. The EPA has already incurred costs in cleaning up the waste stockpiles, and it is inconceivable that the EPA would not seek to recover its costs from the Liquidators as provided by s 62(2), if it is able to do so. The fact that it was not a party to the Indemnity is also not to the point. If the disclaimer was not set aside, the EPA could not claim against the Liquidators who had asked for, had the benefit of, and could call upon the Indemnity, which was granted specifically in respect of their potential environmental liabilities. In all practical respects, the Liquidators provide the means of access to the Indemnity. This is reinforced by the terms of the Undertaking.

1. Consequently, as identified by the respondents, the real issue is whether it was open to the judge to be satisfied that the Indemnity has real value that would be lost, if the disclaimer was not set aside. 

1. The finding of the judge was clearly open in the light of two matters.  First, given that the judge found that the Indemnity was an inducement and condition of the Liquidators accepting appointment, it was open for him to find that the Indemnity would be honoured by Dongwha Australia.  Secondly, financial statements lodged with ASIC on 30 April 2020 disclosed that Dongwha Australia had substantial assets.

1. The judge therefore did not err in holding that the disclaimer would cause prejudice to the EPA and the State, with the result that proposed ground 2 is not made out.

1. In our opinion the proposed ground is not arguable and leave to appeal on this ground is refused.

Proposed ground 3:  alleged miscarriage of discretion

1. This proposed ground is as follows:

The judge’s exercise of discretion to set aside the disclaimer pursuant to s 568B(3) miscarried.[79]

[79]This proposed ground relates to what the judge referred to as Issue 6.

Judge’s reasons

1. His Honour noted that there was no specific criteria for the exercise of the Court’s discretion to set aside the disclaimer, but that some assistance could be derived from the principles of environment protection contained in the Environment Act.  His Honour then referred to features of the ‘Intergenerational Equity Principle’, the ‘Polluter Pays Principle’, the ‘Shared Responsibility Principle’, and the ‘Enforcement Principle’.[80]

   [80]Reasons [196].

1. His Honour referred to the decision in Tubbs v Futurity Investments Ltd (‘Tubbs’),[81] where the liquidators disclaimed an industrial plant containing a toxic substance.  In that case, Hansen J held that:

if [the] disclaimer was allowed, it would mean that a voluntary liquidation was no more than a way in which the company in liquidation could avoid its regulatory obligations … It would be against public policy to pass this onus onto the Crown and may, indeed, be a way to avoid legal obligations.[82]

[81][1998] 1 NZLR 471.

[82]Ibid 479–80.

1. Similar reasoning was adopted by Young CJ (in equity) in the later decision of Sullivan v Energy Services International Pty Ltd (in liq) (‘Sullivan’),[83] in circumstances where a liquidator also sought to disclaim numerous barrels of contaminated waste, and where there was no appreciable prejudice to creditors (as they were all to be paid).[84]

   [83][2002] NSWSC 937.

   [84]Reasons [198]–[199].

1. His Honour noted that the relevant context was a voluntary liquidation, and stated:

The Court should be wary of disclaimers where environmental liabilities are to be passed onto taxpayers or innocent persons.  The Court should discourage the use of voluntary liquidation as a device to avoid environmental responsibilities, or to impose unwanted or unexpected burdens on the taxpayer.  Where there are opportunities open to recover the costs of environmental clean up, they should be taken unless outweighed by other factors.[85]

[85]Ibid [201].

1. It was common ground that the clean up costs would vastly exceed the value of the Land, and that TASCO had no other assets.  Loss of access to the Indemnity would cause the EPA and the State serious prejudice, whereas the position of TASCO’s creditors was unaffected if the Indemnity was called upon.

1. His Honour accepted that the Liquidators were not personally responsible for the contamination of the Land,[86] but noted that it was unlikely that the Liquidators would suffer any material prejudice, as they were protected by the Indemnity (including as to their remuneration), and were further protected by s 545 of the Corporations Act, and the respondents’ Undertaking.[87]  They would not be liable beyond the amount of clean up costs recovered under the Indemnity, and would receive their professional fees and expenses.[88]

   [86]Ibid [204].

   [87]Ibid [203].

   [88]Ibid [204].

1. His Honour also stated:

As to the position of insolvency practitioners generally, I do not consider that the exercise of my discretion to permit the EPA and State to recover clean up costs to the extent of the Indemnity would have any impact on their willingness to accept liquidation appointment.  Their legal and financial position is well protected by the Corporations Act.[89]

[89]Ibid [206].

1. He concluded that ‘the factors that favour the exercise of discretion substantially outweigh those that do not’, and determined to exercise his discretion to set aside the disclaimer.[90]

   [90]Ibid [207].

Applicants’ submissions

1. The applicants submitted that the judge allowed extraneous or irrelevant matters to guide or affect the decision, and failed to give sufficient weight to relevant considerations. 

1. First, they challenged the judge’s finding at para [201], and submitted that irrelevant matters were taken into consideration.  The judge relied on the principles of environment protection in the Environment Act, but none of those principles were a relevant consideration, because they were not germane to the facts, nor did they suggest that the Liquidators should be exposed to personal liability.  The decisions of Tubbs and Sullivan were both distinguishable, and concerned preserving corporate liability, not exposing liquidators to personal liability. The stated imperative that ‘where there are opportunities open to recover the costs of environmental clean up, they should be taken unless outweighed by other factors’ was an extraneous matter to the exercise of the discretion. It was contended that Parliament envisaged that clean up costs may not be recoverable, and provided for a charge in that event (under s 62(3)).

1. Secondly, the applicants submitted that the judge failed to consider the important public function of liquidators under the statutory insolvency regime.  This was a relevant consideration.  The judge’s decision will invariably create uncertainty and risk for liquidators, who may not be indemnified, or may be unable to disclaim property.  The prospect of protracted litigation alone will engender reluctance to take on liquidations.  Such outcomes are not in the public interest, and should have been given weight.

1. These written submissions were also not advanced in oral submissions.

Analysis

1. In accordance with the principles in House v The King,[91] for the applicants to succeed, they must show that some error has been made in exercising the discretion.  This may only be demonstrated if the judge acted upon a wrong principle, allowed extraneous or irrelevant matters to guide him, mistook the facts, or failed to take into account a relevant consideration.[92]  Alternatively, error may be demonstrated if the conclusion arrived at was not reasonably open in the circumstances.[93]

   [91](1936) 55 CLR 499; [1936] HCA 40.

   [92]Ibid 505.

   [93]This is the ‘residuary category’ of error in House v The King:  National Builders Group IP Holdings Pty Ltd v ACN 092 675 164 Pty Ltd (in liq) [2015] VSCA 260, [45] (Maxwell P and Kaye JA); Littore v Rabobank Australia Ltd [2016] VSCA 258, [32] (Maxwell P and Weinberg JA).

1. Notwithstanding that we have taken a different view as to the operation of s 545 (as will be explained below), the applicants did not demonstrate any error in terms of House v The King as alleged.

1. First, there are no specific criteria which limit the exercise of the discretion under s 568B of the Corporations Act.  Accordingly, the applicants must demonstrate that the environmental considerations cited were irrelevant, having regard to the subject matter, scope and purpose of the power being exercised.[94] The applicants did not demonstrate that this was so. Rather, s 568B(3) necessitated focus on the ‘prejudice’ which would be caused to persons who claimed to have interests in the property, ie the prejudice to the EPA and the State.[95]  Given this prejudice was constituted by a failure to recover costs properly recoverable under the Environment Act, environmental factors (which underpinned such entitlement) were clearly relevant.  The decisions of both Tubbs and Sullivan further support that environmental factors may be relevant to the discretion exercisable under s 568B (whether or not the resulting liability was corporate, or that of a liquidator).

   [94]Lo v Chief Commissioner of State Revenue (2013) 85 NSWLR 86, 89 [9] (Basten JA); [2013] NSWCA 180. See also Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24, 39 (Mason J); [1986] HCA 40.

   [95]The applicants did not argue that the EPA and State had no interest in the Land, as they had done below (pursuant to what the judge referred to as Issue 4).

1. Insofar as the applicants suggested that there was a failure to consider the important public function of liquidators in the statutory insolvency regime, the short answer is that the judge clearly considered this matter.  Thus the judge expressly considered that the exercise of his discretion to enable the EPA and State to recover clean up costs would not have an impact on the willingness of liquidators to accept appointments.  The gravamen of the complaint is really that the judge should have considered this matter in favour of the applicants.  However, this does not support the suggestion that there was a failure to consider a relevant consideration, nor does it constitute a proper ground for complaint under House v The King.

1. The applicants have failed to demonstrate that the judge’s exercise of discretion miscarried.  Given that the proposed ground is not arguable, leave to appeal on this ground is also refused.

Background to constitutional submission

1. Section 545 of the Corporations Act limits the liability of liquidators to incur expenses in relation to the winding up of a company, and provides:

545     Expenses of winding up where property insufficient

(1)Subject to this section, a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property.

(2) The Court or ASIC may, on the application of a creditor or a contributory, direct a liquidator to incur a particular expense on condition that the creditor or contributory indemnifies the liquidator in respect of the recovery of the amount expended and, if the Court or ASIC so directs, gives such security to secure the amount of the indemnity as the Court or ASIC thinks reasonable.

(3) Nothing in this section is taken to relieve a liquidator of any obligation to lodge a document (including a report) with ASIC under any provision of this Act by reason only that he or she would be required to incur expense in order to perform that obligation.[96]

[96]Emphasis added.

1. As highlighted above, the applicants submitted that, even if the Liquidators were ‘occupiers’, s 62(2) of the Environment Act must, by virtue of s 109 of the Commonwealth Constitution, be inconsistent with s 545 of the Corporations Act and, to that extent, invalid. This was because it was inconsistent for s 62(2) of the Environment Act to impose unlimited liability on the Liquidators, when s 545 of the Corporations Act effectively gave them immunity from or provided a cap to such liability.[97] The result was that the respondents’ claim of prejudice fell away, because the costs allegedly to be incurred under s 62(2) were not actually recoverable.

   [97]The judge referred to the issue of whether s 545(1) barred the EPA’s claim for clean up costs as Issue 3.

1. The judge found that s 545 of the Corporations Act was not engaged. Thus, although he found that the Liquidators had, or would ‘incur an expense’ under s 545(1), once the EPA demanded payment of the clean up costs,[98] he also found that there was ‘sufficient available property’ by reason of the availability of the indemnity.[99] However, he considered that, even if s 545 was engaged, there was no relevant inconsistency between s 62(2) of the Environment Act and s 545 of the Corporations Act.[100] The result was that s 62(2) was not invalidated.

   [98]Reasons [133].

   [99]Ibid [137]–[138].

   [100]Ibid [156]–[159], [166].

1. The applicants accepted that they needed to satisfy three requirements in order to succeed with their constitutional submission:

·first, that liability under s 62(2) of the Environment Act triggered the application of the words ‘liable to incur any expense’ in s 545(1) of the Corporations Act (as the judge found, and the subject of the respondents’ notice of contention);

·secondly, that there was not ‘sufficient available property’, and that the judge erred in holding that the Indemnity was ‘sufficient available property’ (the subject of proposed ground 4[101] and question of law 3[102]);

·thirdly, contrary to the finding of the judge, that there was an inconsistency between s 545 of the Corporations Act and s 62(2) of the Environment Act which invalidated s 62 (the subject of proposed ground 5[103] and question of law 4[104]).

[101]Proposed ground 4 is: ‘The judge erred in holding that the Indemnity is ‘available property’ for the purposes of s 545(1) of the Corporations Act 2001 (Cth).’

[102]Question of law 3 is: ‘Is a personal indemnity given to the liquidators of a corporation ‘available property’ for the purposes of s 545(1) of the Corporations Act 2001 (Cth)?’

[103]Proposed ground 5 is: ‘The judge erred in holding that s 62(2) of the Environment Protection Act 1970 (Vic) is not inconsistent with s 545(1) of the Corporations Act 2001 (Cth) and is not invalid for the purposes of s 109 of the Constitution.’

[104]Question of law 4 is: ‘Is s 62(2) of the Environment Protection Act 1970 (Vic) inconsistent with s 545(1) of the Corporations Act 2001 (Cth) and invalid to that extent for the purposes of s 109 of the Australian Constitution?’

1. A related issue was also the operation of s 5G(11) of the Corporations Act which applied in this case.[105]  This provides that a provision of the Corporations legislation (which includes the Corporations Act) ‘does not operate in a State or Territory to the extent necessary to ensure that no inconsistency arises’ between the provision of the Corporations legislation, and a provision of a law of the State or Territory. The Attorney-General of Victoria submitted that, even if there was inconsistency, the effect of s 5G(11) was to read s 545 as not applying in relation to the clean up costs that the EPA sought to recover under s 62. In so doing, she also invited the Court to find that two decisions supporting a more limited construction of s 5G(11) were plainly wrong (being HIH Casualty & General Insurance Ltd (in liq) v Building Insurers’ Guarantee Corporation[106] and Longley v Chief Executive, Department of Environment and Heritage Protection[107]). These cases suggest that s 5G(11) only operates in relation to certain provisions (that have ‘clear territorial attributes’).

   [105]All parties agreed that s 5G applied to the interaction between the Corporations Act and the Environment Act, because the relevant provision of the  Environment Act was a ‘pre-commencement (commenced) provision’ under s 5G(12), and met the criteria in item 1 of the table within s 5G(3). Section 5G(11) was said to be a ‘catch-all provision’, and so applied in this case, as none of ss 5G(4)–(10) were engaged.

   [106][2003] NSWSC 1083.

   [107][2018] 3 Qd R 459; [2018] QCA 32.

1. However, as the Attorney-General accepted, the issue of the construction of s 5G(11) would not arise if the Court held that s 545(1) was not engaged in the first place. It is therefore necessary to consider whether s 545 applies by reason of the matters raised in the notice of contention (the subject of the applicants’ ‘first requirement’, above).

Notice of contention: whether the Liquidators ‘incurred an expense’ under s 545 of the Corporations Act

1. The respondents filed a notice of contention, raising two grounds:

1. The trial judge erred in holding that the reasonable costs of the [EPA] recoverable by the [EPA] from the [Liquidators] pursuant to s 62(2) of the [Environment Act] are, or at least will be, an expense incurred by the [Liquidators] for the purposes of s 545(1) of the [Corporations Act].

2. Alternatively, the trial judge erred in failing to hold that s 545(1) of the [Corporations Act] would not operate so as to relieve the [Liquidators] from liability for the [EPA]’s reasonable costs recoverable from the [Liquidators] pursuant to s 62(2) of the [Environment Act].

Judge’s reasons

1. His Honour observed that there are many examples of the operation of s 545(1).[108]  He said:

As these decisions show, the effect of s 545 is that, apart from lodging documents, liquidators are not required to take action and incur expense if they cannot recover their expenses. Section 545(1) operates as a cap on expenditure protecting liquidators from the consequences of failing to carry out their duties where there is insufficient available property. A liquidator’s decision not to incur expenditure is subject to the oversight of the Court and ASIC under s 545(2).[109]

[108]Reasons [121]–[125], citing Great Southern Managers Australia Ltd (in liq) v Thackray (No 3) [2011] WASC 195; Re McDermott [2019] VSCA 23; ReMaloney;  Re ZYX Leaning Centres Ltd (in liq) (2016) 241 FCR 357; [2016] FCA 398; Re Lucas; Re Filestock Pty Ltd (in liq) [2017] FCA 1425; Australian Securities and Investments Commission v Wily [2019] NSWSC 521.

[109]Reasons [126].

1. His Honour cited various cases which gave wide scope to the concept of ‘expenses’, and which included statutory liabilities imposed on a company in liquidation.[110]

   [110]Ibid [128]–[129].

1. He also referred to various authorities which considered the concept of ‘incurred’ in the taxation area before stating the following:  

At the present time, clean up works on the [Land] have commenced but are not complete.  The total cost of the clean up works is yet to be established.  The EPA is yet to make a demand of the Liquidators in any amount.  Nonetheless it can be said that the Liquidators have incurred an expense albeit of uncertain amount, or at least will incur an expense when the EPA demands payment of the clean up costs.[111]

[111]Ibid [133].

Respondents’ submissions

1. The respondents submitted that the expenses to which s 545(1) is directed are those that arise as a consequence of taking actions, given the words ‘to incur’ any expense.  This is not apt to encompass the unilateral imposition of a liability separately arising by law.

1. This construction was said to be reinforced by ss 545(2) and 545(3). The respondents submitted that the use of ‘direct’ in s 545(2) suggests that the liquidator must be required to do something to incur the resulting expense.  It does not encompass a liability unilaterally and independently arising, without action by the liquidator.  If that had been intended, the legislature would have used language to the effect of ‘direct a liquidator to incur, or subject a liquidator to, a particular expense’. Section 545(3) clarifies that s 545 does not relieve a liquidator of any obligation to lodge a document (including a report) with ASIC. The liquidator is still required to take the action, even though it would cause the liquidator to incur an expense.

1. The respondents submitted that this interpretation is supported by the authorities applying s 545(1), and its predecessors. The classic cases involve a liquidator refusing to act (in commencing or prosecuting proceedings or otherwise) because there are no available funds. In those circumstances, the Courts have accepted that a liquidator has no positive duty to act, unless there are sufficient assets.

1. The statutory history was also said to be consistent with the respondents’ construction. The Victorian predecessor to s 545, being s 287 of the Companies Act 1961, was in structure and content materially similar to s 545(1) of the Corporations Act as it now appears.  It provided that ‘unless expressly directed to do so by the Registrar, a liquidator shall not be liable to incur any expense…’.[112]

   [112]Emphasis added.

1. Properly construed, then, s 545(1) does not speak to, or give immunity in relation to, liabilities arising independently and by operation of law. The liability of the Liquidators for the EPA’s reasonable clean up costs pursuant to s 62(2) of the Environment Act was such a liability.

Applicants’ submissions

1. The applicants submitted that the respondents’ contention was flawed, as it drew a distinction between expenses incurred by actions, and those incurred by inaction.  In oral submissions, counsel accepted that the provision can apply to liabilities where a liquidator ‘undertake[s] an action’, but that it is not limited to that situation.

1. The respondents’ construction was also said to be contrary to the case law in which statutory liabilities, such as rates and taxes, have been viewed as ‘expenses’ incurred in a winding up.  In Re Tulloch Ltd (in liq),[113] Needham J also found that the liquidator was entitled (under a predecessor provision to s 545) to a direction that ‘until he has assets available to him to do so, he would be justified in taking no action with respect to the keeping in repair of the company’s property … and the payment of rates and taxes in respect of the same’.[114] Rates and taxes on the property were in the same category as a s 62(2) liability.

   [113](1978) 3 ACLR 808.

   [114]Ibid 819 (emphasis added).

1. There has been no decision to the effect that the provision only applies where there is a need to take action to incur an expense.  One would expect to find other words if it was intended to limit the operation of the provision in this way.

1. Finally, if an ‘action’ was needed, it could be found in the Liquidators remaining in occupation of the Land, or alternatively in making payment of a debt that arises under s 62(2) of the Environment Act. It would also be possible for a court or ASIC to ‘direct’ a liquidator to remain in occupation of a property, or to pay a debt owed under s 62(2), and to so incur an expense in the course of doing so.

Analysis

1. As recognised by the judge, the concept of ‘expenses’ has been considered to have a wide meaning in the context of s 556(1)(a) of the Corporations Act (where it has been extended to rates and tax liabilities).[115] However, this says nothing about the phrase ‘not liable to incur’ in s 545(1).

   [115]Grapecorp Management Pty Ltd (in liq) v Grape Exchange Management Euston Pty Ltd [2012] VSC 112, [86] (Sifris J).

1. The taxation cases cited by the judge also arise in a different context.  However, in Hawkins v Bank of China (also cited by the judge), Gleeson CJ said that the word ‘incurs’ will take its meaning from its context, and is apt to describe, in an appropriate case, ‘the undertaking of an engagement to pay a sum of money at a future time’.[116]  This is consistent with the fact that the concept of ‘incurs’ involves some action on the part of the liquidator.

   [116](1992) 26 NSWLR 562, 572 (emphasis added).

1. Insofar as Re Tulloch is concerned, Needham J did give a direction that the liquidator would be justified in taking ‘no action’ with respect to the keeping in repair of the property, and the ‘payment’ of rates and taxes in respect thereof.[117]  However, it is respectfully noted that the direction made by Needham J was made without opposition, or any detailed consideration of the provision.[118]  His Honour therefore did not identify how the non-payment of a statutory liability came within the language of the statute.  His decision also appears to be against the weight of authority (discussed below), which suggests that the provision is concerned with the making of a decision by the liquidator as to whether or not to ‘incur’ a liability in the first place.

   [117]Relying on a predecessor provision to s 545: Companies Act 1961 (NSW) s 287.

   [118]The direction was given as part of final orders made subsequent to the delivery of reasons for refusing an application to disclaim.

1. Returning to the language of s 545, it is again necessary to have regard to the usual principles of statutory construction, already cited.[119]

   [119]See para [72].

1. According to the Macquarie Dictionary, the meaning of the word ‘liable’ is:

1.subject, exposed, or open to something possible or likely, especially something undesirable.

2.        under legal obligation;  responsible or answerable.[120]

[120]Macquarie Dictionary (online at 22 September 2021) ‘liable’.

1. The meaning of the word ‘incur’ in the same dictionary is:

1.to run or fall into (some consequence, usually undesirable or injurious).

2.to become liable or subject to through one’s own action;  bring upon oneself:  to incur her displeasure.[121]

[121]Macquarie Dictionary (online at 22 September 2021) ‘incur’.

1. The ordinary meaning of the provision is therefore that a liquidator is not to come to be ‘under [a] legal obligation’ through his ‘own action’, unless there is sufficient available property.  Such language does not extend to something that is imposed unilaterally, regardless of the liquidator’s own actions.  Rather, the evident purpose of the provision, consistent with the express words used, is to permit a liquidator to make an active informed choice about whether that liquidator will render himself or herself ‘liable to incur’ a liability, depending on whether there is sufficient available property.

1. The language of s 545 is also concerned about what expense a liquidator is ‘liable to incur’, not with the making of a payment of a pre-existing liability or obligation.  Contrary to the suggestion of the applicants, then, the making of a payment in respect of an existing liability does not involve a choice by the liquidator to expose himself/herself to a liability. 

1. This construction is also generally consistent with the cases.  For example, the cases refer to whether a liquidator is ‘obliged’ to incur an expense,[122] what a liquidator is ‘expected to do’,[123] and whether a particular activity ‘should be pursued’ by a liquidator.[124]  As Finkelstein J said in Jenkins v Jonkay Pty Ltd:

There are exceptions to the rule that the company’s assets should bear the costs.  Broadly speaking, if the liquidator acts unreasonably, recklessly or even negligently and his conduct leads to the unnecessary incurring of costs, those costs ought to be paid by the liquidator:  Re Beddoe;  Downes v Cottam [1893] 1 Ch 547; Mead v Watson (2005) 23 ACLC 718. In deciding whether the liquidator is acting unreasonably it is necessary to have regard to s 545 of the Corporations Act. Subsection (1) provides that ‘a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property’. (There are certain exceptions in relation to lodging of documents with ASIC: see s 545(3).) The effect of the section is that, apart from lodging certain documents, a liquidator is not required to do anything if he cannot recover his expenses. It means the liquidator commits no wrong in failing to carry out any duties.[125]

[122]Re Lucas;  Re Filestock Pty Ltd (in liq) [2017] FCA 1425, [7] (Derrington J); Great Southern Managers Australia Ltd (in liq) v Thackray (No 3) [2011] WASC 195, [48] (Le Miere J).

[123]Australian Securities and Investments Commission v Wily [2019] NSWSC 521, [83] (Brereton J) (emphasis added).

[124]Re Warner;  Re GTL Tradeup Pty Ltd (in liq) [2015] FCA 323, [70] (Farrell J).

[125][2007] FCA 858, [10].

1. Consistent with the express terms of the provision, the cases therefore suggest that s 545 is concerned with active decisions made by liquidators as to whether it is appropriate to ‘incur’ a liability in the light of the available funds.  It is not concerned with liabilities arising independently of the liquidator, and by operation of law. 

1. The liability in this case will not arise as a result of any decision by the Liquidators to become ‘liable to incur’ an expense. Rather, according to the express terms of s 62(2) of the Environment Act, the debt will arise because costs were ‘incurred’ by the EPA in undertaking the clean up. 

1. The judge therefore erred in holding that the reasonable costs recoverable pursuant to s 62(2) would be an expense which the Liquidators would be ‘liable to incur’ for the purposes of s 545(1).

1. The result is therefore that the notice of contention is upheld, although the overall result is not affected given that, as indicated already, the judge found that s 62(2) was not invalidated for other reasons.

1. Given that s 545 is not activated, it is also unnecessary to consider the other issues raised in relation to the constitutional submission, including proposed grounds 4 and 5.

Conclusion

1. There will be leave to appeal, but the appeal will be dismissed.

SCHEDULE OF PARTIES

BETWEEN:

THE AUSTRALIAN SAWMILLING COMPANY PTY LTD (IN LIQUIDATION) (ACN 075 382 580)	First Applicant
STEPHEN GRAHAM LONGLEY (in his capacity as liquidator of The Australian Sawmilling Company Pty Ltd (in liquidation))	Second Applicant
MELISSA JANET MARY HUMANN (in her capacity as liquidator of The Australian Sawmilling Company Pty Ltd (in liquidation))	Third Applicant
and
ENVIRONMENT PROTECTION AUTHORITY	First Respondent
STATE OF VICTORIA	Second Respondent
and
ATTORNEY-GENERAL OF VICTORIA	Intervener