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Favelle Favco Holdings Pty Ltd v Southern Steel Suppliers Pty Ltd & Anor S116/1996 [1996] HCATrans 456 (15 November 1996)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S116 of 1996

B e t w e e n -

FAVELLE FAVCO HOLDINGS PTY LTD

Applicant

and

SOUTHERN STEEL SUPPLIERS PTY LTD

First Respondent

SOUTHERN STEEL SHEET & COIL PTY LTD

Second Respondent

Office of the Registry

Sydney No S125 of 1996

B e t w e e n -

VANDA RUSSELL GOULD, VANDA GOULD, RUSSELL GOULD, MALCOLM BEARD, RICHARD GEERSEN, JOSEPH SHLEGERIS, GREGORY RALPH, JOHN READ,

NEIL IRVING, JOHN LEAVER,

NIGEL STOKES, CONTINENTAL VENTURE CAPITAL LIMITED, CVC INVESTMENTS PTY LIMITED, GOULD RALPH SERVICES PTY LIMITED and GOULD RALPH AND COMPANY

Applicants

and

MARTIN RUSSELL BROWN in his capacity as liquidator of Amann Aviation Pty Limited (in liquidation)

Respondent

Applications for special leave to appeal

BRENNAN CJ

GAUDRON J

GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 15 NOVEMBER 1996, AT 11.29 AM

Copyright in the High Court of Australia

___________________

MR N. PERRAM: May it please the Court, I appear for the applicant in the Favelle matter. (instructed by I.S.P. Law)

MR F.M. DOUGLAS, QC: May it please the Court, I appear with my learned friend, MR P.J. DOWDY, in the matter of Gould v Brown, No S125 of 1996. (instructed by Henry Davis York)

MR S.D. ROBB, QC: May it please the Court, I appear for the respondent, Mr Brown, in the Amann Aviation matter, Gould v Brown. (instructed by Kalyk Nash)

MR A.P. SPENCER: May it please the Court, I appear for the respondents in the Favelle matter. (instructed by Tony Simons)

BRENNAN CJ: We will hear from Mr Robb first.

MR ROBB: May it please the Court. Your Honours, in the Amann matter there are two questions. The first question is common with the Favelle proceedings; the second is not. The first question is the question of whether the State Parliaments may validly confer State jurisdiction on a Chapter III court. May I deal with that matter first?

The public importance of that question cannot be gainsaid. It is obvious from a consideration of the consequences of what might happen if the jurisdiction is struck down that it is a matter of public importance. We say nothing more about that.

In relation to the question of whether the case has sufficient prospects of success, we do not wish to make any submissions about that either in relation to the first question. The learned judges in the Full Court gave reasons which were entirely consistent with the submissions put by the party that I represent. One may take the view that those reasons are persuasive. If one did not take the view, we - - -

GUMMOW J: Now, was there any consideration given at any stage to the effect, relevantly if any, of section 15C of the Acts Interpretation Act of the Commonwealth?

MR ROBB: As I recall it, no. Let me finish simply by saying that if your Honours were of a view that the point were arguable, somebody in my position could not sensibly expect to persuade your Honours to the contrary and so I would not say anything more about that.

There is one further qualification, though, I must put in relation to this first question. What was effectively argued before the Full Court was the legal question of the validity of the conferment of power. When I considered the applicants' summary of argument, it appeared from the statement of the special leave questions that the subject matter of special leave is not sought to be taken further than the - if I may called them - "theoretical" questions of the validity of the conferment of power.

I have to confess that I had only noticed when looking carefully today at the draft notice of appeal which is in the Amann matter at pages 147 and 148, that the orders sought in the draft notice of appeal are set out on page 148, and your Honours would see that order 4 is:

An order setting aside the Full Court's answers to the five questions referred to it by Black CJ and in lieu thereof, answering the questions as follows:

Your Honours, those questions are, with respect, suitable for a special leave application, if your Honours are so minded to grant it.

Question 2, however, is:

If no to each part of question 1 are the orders liable to be set aside and, if so, from what date?

Answer: Yes, 30 November 1992.

May I explain myself in this way: in the Amann matter Mr Brown was appointed as liquidator at the time of the winding up of Amann in November 1992.

GUMMOW J: Now, are both these matters concerned exclusively with the Corporations cross-vesting scheme?

MR ROBB: The answer to that question is truly yes.

GUMMOW J: Well, it should be simple.

MR ROBB: I suppose for more abundant caution, as I recall it - - -

GUMMOW J: The second question I want to know the answer to is are both of them concerned with winding up on the ground of insolvency?

MR ROBB: Yes. As I was saying, your Honour - - -

GUMMOW J: So, what, they bring into play, 459 of the Corporations Law?

MR ROBB: Yes.

GUMMOW J: And there is an investment, if that is the word, or a consent on the part of the Commonwealth in section 56, is it, of the Corporations Act?

MR ROBB: Yes.

GUMMOW J: And that is common to both matters?

MR ROBB: Yes. In the Amann matter, the winding up order has already been made and was made in November 1992. When the documents speak of the orders, they talk about the winding up order. In the Amann matter, in addition, orders were made for examining persons under the power granted to the Court to conduct examinations in the course of liquidations. They are referred to as the "examination orders".

The short point is this, your Honour: because the examination orders are executory, if the Court did give special leave and finds that there was no power to vest that jurisdiction in the Federal Court, then it would simply follow that the orders were invalid and that would be the end of the matter. In so far as the winding up order is concerned, then the effect of question 2 on page 148 is that the applicant would seek an order that if the Court gives special leave and concludes that the vesting of power was invalid, that it follows automatically that a winding up order made in November 1992 is void.

That particular question was, as I understand it, reserved by the Full Court. The court did not entertain any evidence or any submissions about what the consequence of a finding of invalidity would be in relation to the winding up order. Clearly, that being an executed order and various things having been done by the Liquidator, that raises somewhat large questions. The reason I raise this, your Honours, is simply to say this, that we respectfully submit that if your Honours are minded to grant special leave on the first question, your Honours should do so on a basis which allows the theoretical question of principle of whether there is a valid vesting of jurisdiction in the Federal Court to be dealt with on the appeal. It would follow, in relation to any executory orders, that if the Court found that there was not power, then that would be the end of the orders but in relation to the winding up order which is an executed order, that is a matter which was not argued, has not been dealt with on the facts and, we respectfully submit, would, in those circumstances, not be a convenient matter for your Honours' Court to deal with on an appeal.

If I may then pass to the second question, your Honours - I should say, in relation to the first question, it did appear from our reading of the applicants' submissions that they might not argue to the contrary of what I have just said in relation to the winding up order but it did seem, if I understood the draft notice of appeal correctly, that if your Honours simply gave special leave to appeal on the basis of the draft notice of appeal then, inadvertently, this other question may have been taken up and I thought I should raise that now rather than discover to my horror, between now and an appeal if it is to be held, that there is that question in the air.

If I may move to the second question. That is only a question that arises in the Amann Case. The argument is, as we apprehend it, that on the assumption that it is constitutionally valid for Corporations Law jurisdiction to be vested in the Federal Court as a Chapter III court, nonetheless, the attempt to vest in the Chapter III court a power to conduct insolvency examinations is invalid because that is not an exercise of judicial power.

GUMMOW J: That would have effect for the bankruptcy law, would it not, the Bankruptcy Act?

MR ROBB: Yes. Your Honours, I do not wish to make a long submission about that. Our submission is this: we submit - - -

GUMMOW J: You would have to consider the significance of Davison's Case.

MR ROBB: Yes, and if I may, without reading from it, the Full Court in a case in which your Honour Justice Gummow sat, the Socket Screw Case, did find that the power to conduct examinations in bankruptcy or winding up had long been accepted as being a part of or incidental to the judicial power.

BRENNAN CJ: You may as well read into the transcript the reference to the Socket Screw Case.

MR ROBB: Thank you, your Honour. I refer to Re The Socket Screw & Fastener Distributors (NSW) Pty Limited Case, (1994) 51 FCR 599, at page 603, where the Full Court said:

We add that the examination of officers of companies has long been regarded as a judicial function and the proper subject of judicial power. In R v Davison Dixon CJ and McTiernan J pointed out that the usual object of judicial power, the existence of a controversy between subjects or between the Crown and a subject, is entirely lacking in various proceedings nevertheless properly falling within the jurisdiction of various courts of justice.

Your Honours, may I conclude by submitting that this second question, which we respectfully submit is not attendant with sufficient doubt to justify special leave, is quite a separate question. If it is allowed as a special leave question, it is not without its complexities and will take some time to deal with the issue properly before your Honours' Court and we submit that your Honours would not regard the second question as being an appropriate issue for special leave, given the very long history of the exercise by courts of the power to conduct insolvency examinations incidental to the power that they have exercised since corporations were invented to wind up corporations. If your Honours please, they are our submissions.

BRENNAN CJ: Thank you, Mr Robb. Mr Spencer.

MR SPENCER: Your Honour, I have nothing to add, save to say that those issues that Mr Robb identified does not, of course, arise in the Southern Steel Case where there are no orders - - -

BRENNAN CJ: Yes. Mr Perram, what do you have to say on the question of the scope of the grant of special leave?

MR PERRAM: It does not affect the Favelle matter. The only issue in the Favelle matter is the validity of the cross-vesting scheme and the issue as to whether an examination summons involves an exercise of judicial power simply does not arise in the Favelle Case so the scope, we have nothing to say on.

BRENNAN CJ: Mr Douglas.

MR DOUGLAS: If it please the Court. On the first of the matters Mr Robb, that is question 2: we agree with him about that. In other words, it has not been dealt with by the court below and were we to be successful in the answers which we seek to question 1, the appropriate course we think would be for the Court to refer back to the Federal Court the question as to what happens to the order which has been made.

BRENNAN CJ: Then that would require an amendment of your draft notice of appeal, would it not?

MR DOUGLAS: It would, your Honour.

BRENNAN CJ: And the answer that should be given to question 2 would be, "No answer. Matter remitted to the Federal Court", is that right?

MR DOUGLAS: Yes, your Honour, that is right. So, if I could then deal with the other suggested limitation on the special leave point, that is our second point. It is true to say that at least since Davison's Case examinations by a liquidator of a company in liquidation before a court have been regarded as being incidental to the judicial power. But what we are dealing with here, if one looks at sections 596A and 596B are provisions of an entirely different character.

I hasten to say that mine is a situation in which the company was in fact wound up in the Federal Court and the examination summonses have been issued by the Federal Court but the power which is given by sections 596A and 596B of the Corporations Law are, in their widest ambit, not only related to companies in liquidation or under administration. There are effectively powers which enable any person who falls within the definition of an "eligible applicant" - and an "eligible applicant", for such an examination, means the Australian Securities Commission:

(b) a liquidator or provisional liquidator of a corporation; or

(c) an administrator of the corporation; or

(d) an administrator of a deed of company arrangement executed by the corporation; or

(e) a person authorised in writing by the Commission to make -

an application. So, that eligible applicant can apply for the summons and then, effectively, you can have an examination about the corporation's examinable affairs. The examinable affairs of a corporation are defined as, really, the affairs of the corporation. But the power in its widest extent really seeks to confer upon a Federal Court - that is a State Act seeks to confer upon a Federal Court a very wide administrative or executive power to conduct investigations. This power is conferred upon the judges of that court.

Now, it is only if those powers could be read down so as to apply to the more traditional situation, where you have - - -

GUMMOW J: You say that 596A and 596B are not solely adjuncts to a winding up administration?

MR DOUGLAS: Exactly, your Honour. But not only is there the aspects of it I have just mentioned but also, when one has regard to the co-operative nature of the scheme, the Federal Court could conduct an examination of company officers of a corporation which has been wound up in a State court and so that is an additional twist which we would say takes it outside the usual realm of a situation where you have a liquidation in a court and examinations being conducted as being matters incidental to that liquidation.

So, for that reason, as we would see it, it is a very important question, and when one looks at this Court's recent decisions such as Kable and Wilson, it is a matter which really cries out for special leave. So, we would very much resist any suggestion that that matter be excluded from the application which is made before the Court. If it please the Court.

BRENNAN CJ: What do you have to say to that, Mr Robb?

MR ROBB: Your Honour, my learned friend is correct when he says that the way those provisions are drafted, they are capable, on the face of them, of applying outside the context of a winding up. We would respectfully submit that the appropriate context in which to consider that question is if and when it arises on a factual dispute outside a winding up and not in circumstances where the power is actually invoked in the context of a winding up. That is all one would say on the subject, your Honours. If your Honours thought that, notwithstanding what I have just said, this was an appropriate vehicle for considering that whole question, then that is a matter for your Honours.

BRENNAN CJ: Mr Douglas, have 78B notices been given wide enough to canvass all aspects of this case?

MR DOUGLAS: Yes, your Honour.

BRENNAN CJ: Including those that you just referred to?

MR DOUGLAS: Yes, your Honour, they were raised below and they were argued and the Attorney-General was represented, both of the State of New South Wales and of the Commonwealth.

BRENNAN CJ: And in your proceedings, Mr Perram?

MR PERRAM: Yes, very broad 78B notices were sent.

BRENNAN CJ: Subject to the amendment of the notice of appeal ultimately to be filed pursuant to the grant of leave which is about to be made, special leave is granted in these matters. The amendment is in relation to the order sought in question 2 where the proposed answer is to be, "No answer. Matter remitted to the Federal Court".

AT 11.49 AM THE MATTER WAS CONCLUDED


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