Wilden Pty Ltd v Greenco Pty Ltd

[1998] HCATrans 383

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P47 of 1997

B e t w e e n -

WILDEN PTY LTD

Applicant

and

GREENCO PTY LTD

Respondent

Application for special leave to appeal

GAUDRON J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON THURSDAY, 22 OCTOBER 1998, AT 1.14 PM

Copyright in the High Court of Australia

MR S.J. CHESSON:   May it please the Court, I am a Director of Wilden Pty Limited and I appear on behalf of the Company.

GAUDRON J:   Yes.  Well, that is not objected to is it?

MR GRACE:   No, it is not objected to, your Honour.

GAUDRON J:   Yes, if leave is required, we give you leave to do that, Mr Chesson. 

MR D. GRACE, QC:   If the Court pleases, I appear with MR J.D. MACLAURIN, on behalf of the respondent. (instructed by Bennet & Co)

GAUDRON J:   Yes, Mr Chesson.

MR CHESSON:   Thank you, your Honour.  Unfortunately Mr Pringle could not be here.  He was to put up some affidavit material which was objected to by the other side but, unfortunately, I am not in a position to argue that so I am not requesting that.  I gave the Court an outline of my verbal submissions.  I will go through them if you ‑ ‑ ‑

KIRBY J:   We have the submissions and our practice is to read them and we have done that and we have considered what you and the respondent have to say.  So this is just your opportunity to say anything orally that is not in the reasons and if it is all in the reasons you can simply adopt the reasons.  That is to say, if they are all in your submissions, you can adopt the submissions.

GAUDRON J:   You have 20 minutes to put your application, yes.

MR CHESSON:    Thank you, your Honour.  I say that there are some significant things which have occurred in the last few days, which I would like to bring to your attention.

GAUDRON J:   Well maybe you cannot do that.  The only question ‑ ‑ ‑

MR CHESSON:    I think it bears on this matter that the pleadings were not complete at the time the Master heard the application.

KIRBY J:   That may be so, but we are hearing an application for you to have special leave to appeal from a decision of the Full Court of the Supreme Court of Western Australia.  We can only deal with that matter, we cannot deal with other extraneous questions.

MR CHESSON:    Yes, I simply wanted to inform you that the pleadings were still not complete.

GAUDRON J:   Yes.  Now the only question with which we are concerned is whether you can point to an arguable error of law on the part of the Full Court and if you can do that, whether it raises a matter of such importance that special leave should be granted.

MR CHESSON:    I have given you my written reasons.  I believe that if the Master or a single judge did not have the power to grant the relief which was sought of him, he ought to have had ‑ ‑ ‑

KIRBY J:   I saw a note on page 58 of the application book that the judgment debt has now, in fact, been paid, is that correct?

MR CHESSON:    That is correct.

KIRBY J:   So that this is really now - in so far as it is the purpose of the proceedings below, was to prevent the having to pay the judgment debt, it has lost that purpose?

MR CHESSON:    Well we would seek that the money be repaid into the custody of the solicitors to be held pending the decision in the other matter, which is what the Master had actually ordered and we see that if this appeal was to be successful, then that would be the outcome that those moneys would be paid back and held for security, depending on what occurred in the other matter.

KIRBY J:   The problem that you have, as it seems to me, is that this is a case where there are accepted legal principles and where there is no point of distinction on the accepted legal principle, there are points of argument about the particular facts and the exercise of discretions, but they are not matters which would normally engage our attention, because we could not possibly deal with reviewing every case with slightly different facts.

MR CHESSON:    Yes, I understand that, your Honour, but I think, in this particular circumstance, the judges of the Full Court went to the extent of drawing conclusions from the facts which were not exactly there on the facts and invented their own facts.  To the extent that it might be said that the position turns on the facts, I think that that is really stretching it a little bit far because it turns on the facts which were not there and those particular facts - if you would like me to go into them, I could assist you - for example, Judge Pidgeon said that there was every indication that the company was formed for the purpose of Graeme Green carrying on an electrical business, while the searches of the Securities Commission did not support that in any way whatsoever, because the company had been in existence some nine years prior to that circumstance, to Graeme Green going into the business.  So it was certainly totally against the evidence.  The company had been in existence for a long time.

There are other matters which were not supported by the facts, which the judges went to and really, I think – it is my personal opinion, of course – but if you have got a situation where the people in control of two companies:  one company and the other company have got their people behind control and they have got an investment in a third company, to allow them to shuffle the assets, not to pay the third company which has got 60 per cent other shareholders and to hold their assets to themselves for the purpose of putting extreme financial pressure on the third entity, I just cannot see any justice in that whatsoever, and I cannot see how that it should be the law of Australia.

GAUDRON J:   Well, whether it should or should be the law, the problem is that there are separate corporate structures.  Separate corporate structures have always been regarded as separate legal personalities, going back to the days of the East India Companies, and that is the legal principle which ultimately is in operation in this case.

MR CHESSON:    I understand that, your Honour, however the very principle of Canada Enterprises is to lift the corporate veil and go behind that position and, in this circumstance, the Full Court has taken a very limited view on the interaction between the companies, it has taken a very limited view of the people behind the two companies and has taken a very limited view on the Canada Enterprises.  Unless those exact circumstances are matched, you do not get up.  Quite frankly, this is just an open opportunity for the business community to do what they like with connected companies.

GAUDRON J:   Well, there are people who have been saying that about connected companies for centuries, I am afraid, Mr Chesson, and that is ‑ ‑ ‑

MR CHESSON:    Well, I understand that, but the Corporations Law says a little more than that, your Honour.

GAUDRON J:   Yes, but would you not have had to establish at least a prima facie entitlement to a set-off, in this case, as between the companies, before you could succeed?

MR CHESSON:    Well, Judge Pidgeon decided that it had to be something sought in an action.  The pleadings in the other action were not complete and were being held up by the other side.

GAUDRON J:   No, but would you not have to establish a prima facie right to set-off?

MR CHESSON:    The judge said that a liquidator could not obtain the assets, and I do not believe that that is correct, because a liquidator appointed to the one company would have been able to go through.

GAUDRON J:   Even if a liquidator could obtain the assets, that is a different question from your right.  You are not a liquidator, you are representing another creditor.  Your interests are not the same as a liquidator’s, because the liquidator would be looking to the whole body of creditors.

MR CHESSON:    Well, there was no evidence of any other creditors than us.

GAUDRON J:   No, but that does not help you, because it was up to you, I would have thought, to establish circumstances which enabled you to get - - -

MR CHESSON:    Well, that is the other complaint we make in that all of that information was in the hands of the other side and they did not produce it.  They did not present any affidavit or any material whatsoever to refute the suggestion that they were fiddling with these companies and ‑ ‑ ‑

KIRBY J:   See, the basic problem though, from our point of view and the point of view of this Court, is that the court below referred to the Canada Enterprises’ Case, acknowledged that it permitted the lifting of the veil, acknowledged that it permitted them to do this and then they took a different view from the Master and substituted their orders.  Now, they are a settled principle, you see, and we simply cannot review every application of settled principles.

MR CHESSON:    I understand that, but they said the Master did not have the jurisdiction and it would seem to us that the Master must have a far wider power, must have the jurisdiction, otherwise you have got the situation where the liquidator is there, he is trying to collect the assets and the people are still moving them away.

KIRBY J:   Where do they say that the Master had no jurisdiction?  What page is that?  Because the Master is a member of the Supreme Court of Western Australia, is he not?

MR CHESSON:   Yes, that is right.  I believe that Mr Pringle would have pointed to that in ‑ ‑ ‑

KIRBY J:   You see, the complaint before them was that the Master erred in law in his application of the discretion.  That is at page 24 of the application book.  That seems to acknowledge the jurisdiction, but to complain about an exercise of it.

MR CHESSON:    Page 25, your Honour says, at lines 7 to 8:

The first matter that is apparent is that a Master, in administering the rules relating to execution, would not have power to grant such equitable relief.  As I see it, it would be relief that would be required ‑ ‑ ‑

GAUDRON J:   Well that is talking about, what, equitable set-off?  I cannot find the passage that you are referring to.

MR CHESSON:   This is at page 25 of the appeal book, your Honour, at point 7, and it starts on the right-hand side.

The first matter that is apparent is that a Master, in administering the rules relating to execution, would not have power to grant such equitable relief.  As I see it, it would be relief that would be required to be sought in an action.

GAUDRON J:   Yes, but that is not talking about an indefinite stay.  Does the Act say there can be a grant of an indefinite stay, in the nature of equitable relief?  They are talking about different things.  Unfortunately, Mr Chesson, they are talking about special equitable considerations and they are not talking about the precise construction ‑ ‑ ‑

MR CHESSON:    Well, I think that is one particular point of the argument, your Honour, but it seems to me, under the order which was given by the Master, that parties had the opportunity to apply, to apply back to the Master and vent any of the matters that they thought that they could get the Master to reconsider.  It was not as though that was the end of it; they could go back to the Master.

KIRBY J:   Then they go back to Canada Enterprises, which is a matter of the exercise of jurisdiction, and they ultimately come to the view that the Master’s exercise of jurisdiction, under the rules, had miscarried.

MR CHESSON:    But, in coming to that conclusion, your Honour, at page 29, at point 8 of the reasons, firstly his Honour considered that there were:

different shareholders and it may well be a breach of duty –

and so on, and then he went on at point 9 to say:

there is no suggestion that the appellant company was formed for the purpose of evading a payment or for some artificial reason.

While we say that that is apparent, on the searches which were before him of the corporation’s situation, the corporation ASIC searches, in that immediately afterwards, in the following year, that that asset of the electrical business was transferred out of the family trust, the family trust company became insolvent, and that was on the company’s records.  Then he went on to the next point, which I complained of earlier, when he said:

There is every indication it was formed to enable Mr Graeme Green to carry on the electrical business under a separate corporate structure.

And there was no such indication whatsoever.  He has based it on a false premise.

The other matter which Justice Pidgeon based his conclusions on was a concession made by Mr Pringle to the effect that there was no way that the Greenco Company could be executed on, when the pleadings were not then complete, and it was open to include Greenco as a company in the other proceedings.

GAUDRON J:   Yes, but you had not done that.  What you might have done and what you might yet do, might give rise to different answers, but it was not done, and the matter had to be dealt with on the state of the matters, as they stood when the matter was before the Master.

MR CHESSON:   Well the Master did not think so, your Honour.

GAUDRON J:   Well, if the Master did not think so, then perhaps the Master was in error.

KIRBY J:   As the Full Court found.

MR CHESSON:    Well, they did not actually make that finding as a discrete finding.

KIRBY J:   Well, they found he was in error in that there were no special circumstances under the rule.  So they were applying the rule.  They accepted the rule; they accepted Canada Enterprises; they accepted they had the power; they accepted that the Master could provide the stay or provide you with relief, but they concluded there were no special circumstances - - -

MR CHESSON:    It was very unfortunate that the transcript of the Master’s hearing was not available, however, labouring under that limitation, the Full Court did not consider the fact that Bill Green, the father in this situation, was also a director of the company that the debt was owed to.  I think it is a very special circumstance where you have got one director, who has got a 40 per cent say in a company, who lends money to his own family trust and an associated company transfers the assets - everybody just sort of stand by and watch it happen?

KIRBY J:   I have a lot of sympathy for that and if I had been in the Full Court I am not at all sure that I would have disturbed the exercise of discretion of the Master, but we cannot sit here to review every decision on facts and settle legal principles by a Full Court, it just is not possible, and therefore there has to be something that is special or something that is different or unusual.

MR CHESSON:    Well I was pointing out that they overlooked the facts, your Honour.

KIRBY J:   Well, I have a lot of sympathy for what you say on the facts.  If you had got me in the Full Court, you might well have won the case, but we have got ‑ ‑ ‑

MR CHESSON:    Here is your opportunity to fix it, your Honour.

KIRBY J:   Well, unfortunately for you our role is different.  I sat for 13 years in a Full Court.

MR CHESSON:   I am sorry, I understood your role was justice ‑ ‑ ‑

KIRBY J:   It is justice, but it is justice according to law.

GAUDRON J:   What you have here, Mr Chesson, is primarily a discretionary power.  It is a discretion, however, which has to be exercised in the light of accepted legal principles.  Now, you have to show us that there is actual error of law, not in the Full Court’s appreciation of the issue, and not simply in overlooked facts or the like, but error of law and its appreciation of the issue.

MR CHESSON:    Well, I find it very difficult to swallow the fact that it was not taken care of properly, and that is why I am here, of course, but I also find it very difficult to swallow the fact that Judge Kennedy was the presiding judge in a former appeal related to the matter and sat as the presiding judge on that appeal.

KIRBY J:   Did you object to his Honour sitting?

MR CHESSON:    My senior counsel did not, your Honour.

KIRBY J:   Well, if you did not object, it must be taken, I think, under the authority of this Court, that you waived any objection you had, because how is a judge to disqualify himself if nobody objects.

MR CHESSON:    Well, I have had that situation in the Federal Court, your Honour, where the judge brought it to the attention that he had been on a related matter and he volunteered to step aside.

KIRBY J:   And I have done that too, but sometimes people overlook that they are involved or they do not believe that it is a disqualifying matter and if the party does not complain, well, they must take it that the parties accept that they should sit.  You were legally represented.  You could have sent a message that you would prefer that Justice Kennedy not sit, and you did not.  It is a bit late now to be complaining to us.

MR CHESSON:    It is a bit late for a lot of things, perhaps, your Honour. Anyway, those are my submissions, your Honours.

GAUDRON J:   Yes, thank you, Mr Chesson.  We need not trouble you, Mr Grace.

We are of the view that the proposed appeal in this matter does not enjoy sufficient prospects of success to justify the grant of special leave.  Accordingly, special leave is refused.

MR GRACE:   I apply for costs, your Honours.

GAUDRON J:   Mr Chesson, what do you say about that?

MR CHESSON:   I do not think I have any argument about that, your Honour.

GAUDRON J:   Yes, thank you.  It is refused with costs.

AT 1.35 PM THE MATTER WAS ADJOURNED