State of Victoria v Sutton & Anor M63/1996 [1997] HCATrans 78 (14 February 1997)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M63 of 1996

B e t w e e n -

THE STATE OF VICTORIA

Applicant

and

JOHN DAVID SUTTON

First Respondent

CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION

Second Respondent

Application for leave to appeal

DAWSON J

GUMMOW J

KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 14 FEBRUARY 1997, AT 9.47 AM

Copyright in the High Court of Australia

MR D. GRAHAM, QC, Solicitor-General for Victoria: If the Court pleases, I appear with my learned friend, DR. I.J. HARDINGHAM, for the applicant. (instructed by the Victorian Government Solicitor)

MR S.C. ROTHMAN, SC: If the Court pleases, I appear with my learned friend, MR H. BORENSTEIN, for the first and second respondents. (instructed by R.L. Whyburn & Co)

DAWSON J: Mr Solicitor.

MR GRAHAM: If the Court pleases. This is an application for leave to appeal from a decision of the Full Court of the Industrial Relations Court.

DAWSON J: Your task is a little easier then.

MR GRAHAM: We so apprehend it, your Honour, and we rely upon what your Honour said in a sentence in Morris v The Queen [1987] HCA 50; 163 CLR 454, at 475, which is, no doubt, frequently cited in this context. Your Honour said:

Leave to appeal may be given where an applicant makes out a prima facie case of error.

We would simply observe that the early part of my learned friend's submissions for the respondents sets the test too high. In paragraph 3 it is suggested that:

The Court must, on the reading of the judgment, find an error which is manifest.

We say that that is not consistent with the practice of the Court or the statements which the Court has made as to the appropriate criterion.

The questions here arise from the provisions of clause 2 of an order- in-council made by the Governor in Council on 13 October 1987. Your Honours will have seen the terms - - -

KIRBY J: The scheme of the order seems to be that you cannot pay or dispose of funds without consent but then it provides that if you do, then it only becomes void at the option of the Custodian and this case just turns on whether you exercise the option, is that not correct?

MR GRAHAM: Your Honour, there are two points. What your Honour has articulated is the second of them. The first point, as we would say, is the question whether the - - -

KIRBY J: - - - the consent is mandatory.

MR GRAHAM: Yes.

KIRBY J: But if that were mandatory, what is the whole point of the option?

MR GRAHAM: The option then, your Honour, gives to the Custodian the ability to affirm or ratify a transaction which otherwise would be void abinitio. That is the construction for which we would contend and did contend.

KIRBY J: The alternative construction is that you should not do it without consent, but if you do, there is a scheme by which it can be disallowed and as I understand it, you argued before the Industrial Court only the first argument. You said you never got to the second argument of - - -

MR GRAHAM: With respect, that is not so, your Honour.

KIRBY J: I think that is what is said in the submissions of the respondent. They attach some written submissions of yours to confirm it.

MR GRAHAM: Yes. Your Honour, we say that the two points are interrelated. The first being the question of construction, namely whether the scheme of clause 2 is to provide for voidness subject to ratification or affirmation, whereas the respondents said the scheme of clause 2 is the disposition to be voidable subject to avoidance at the election of the Custodian.

DAWSON J: If that were so, there would be no point in the requirement of consent, would there, because it would always come down to whether the Custodian avoided the transaction or not?

MR GRAHAM: We would submit that the two branches of clause 2 work together. One provides for a prohibition without consent and the second branch goes on to provide for voidness in the absence of affirmation. That took the case to the second point, namely that on the construction which the judges of the Industrial Relations Court adopted, namely that the scheme of the clause was that the disposition was voidable and that there was no avoidance by the Custodian - - -

KIRBY J: This is a one-off provision of a single order-in- council unlikely ever to visit us again. It has gone through the Chief Justice of the specialised court, it has been heard by the Full Court. Why should the High Court of Australia be concerned in the meaning of this obscure order-in-council of the State of Victoria?

MR GRAHAM: Your Honour, I could not answer your Honour's question if this were an application for special leave to appeal except by agreeing with your Honour.

KIRBY J: You still require leave.

MR GRAHAM: That is true, your Honour, but then the test is as stated and we submit that there is a lower threshold. We say that there is a prima facie case of error; fairly arguable; not obviously right; a question upon which different minds may reach different conclusions and, accordingly, one in which the criterion is satisfied.

GUMMOW J: Now, you say it was sufficient manifestation of the exercise of the option by the Custodian to plead as was pleaded in the defence?

MR GRAHAM: Yes, your Honour, and to swear that he had not consented and there was an affidavit - - -

KIRBY J: No, but that is the consent point. Where does he actually exercise his power to avoid? Where do you say, apart from the pleading?

MR GRAHAM: Apart from the pleading, your Honour, two - - -

KIRBY J: Why did not Dr Sharp say, "I exercise my power" and then we would not have been troubled by this point?

MR GRAHAM: Your Honour, I can only agree with your Honour but that did not happen so the applicant falls back upon the pleading, the absence of consent and the inference to be drawn from contesting the proceedings throughout. That was the - - -

KIRBY J: Is it true that all of the members of the old BLF, whose property, in a sense, notionally the property of the BLF was, did join this new Union, the Construction Forestry Mining and Energy Union, all Victorian members went into the new Union because, if so, there is not very much merit in the suggestion that they should not get the property that belonged to their old Union?

MR GRAHAM: Your Honour, I am not 100 per cent certain on the answer to that. The terms of the transactions that were undertaken by the ongoing Union and the old BLF, Victorian Branch, were designed to bring about that result. The question whether that result had been achieved was hotly contested by a number of members or former members of the BLF who appeared in person before the Industrial Relations Court. As to whether the transaction swept up all the members effectively is one I do not think I am in a position to answer.

KIRBY J: I think it is said in the respondents' submission that most of them went into the new Union. It is probably legally irrelevant.

MR GRAHAM: Yes. Your Honour, just completing the answer to your Honour's question: there was no positive act of avoidance by the Custodian. There were simply the inferences to be drawn from the facts to which I have pointed. If, on the other hand, the construction for which we contend is correct, then one would be looking for a positive act on the part of the Custodian which amounted to an affirmation of an otherwise void transaction and there was no evidence of that either. So, your Honours, those are the points in this matter. I do not believe I can develop them further beyond what is said in our outline of argument.

DAWSON J: Thank you, Mr Solicitor. Mr Rothman.

MR ROTHMAN: If the Court pleases. We say, with respect, that Morris stands for the proposition that - and your Honour Justice Dawson's comments in Morris stand for the proposition - - -

GUMMOW J: It does not stand alone. There are decisions in the 1930s to the same effect.

MR ROTHMAN: Indeed, your Honour.

DAWSON J: I did not invent it then.

MR ROTHMAN: No, indeed, your Honour, but my learned friend relied on Morris and I am merely taking your Honour to your Honour's judgment - or the Court to your Honour's judgment in Morris. We say that the test is prima facie error, not an arguable case for prima facie error and that is really where we distinguish, but whatever the test be, we say it is met in this case. There is no prima facie error. Whether the first sentence of clause 2 voids - - -

GUMMOW J: Just tell me this, Mr Rothman. What is this point on page 4 of your submissions, paragraph 6, about the pleadings not being in evidence? What does that mean? It says:

Even if the pleadings were in evidence before the Court (which they were not) - - -

MR ROTHMAN: Your Honour, the point really is in expansion of this point. What occurred before his Honour the Chief Justice at trial was that we put my learned friends on notice that we said there had been no act voiding the transaction and if it was alleged that there was an act voiding the transaction it ought be put on affidavit and we would cross-examine on it. What was then done was - because there was a draft affidavit and it is in the application books at page 4 - that the affidavit of Dr Sharp was then redrafted in such a way that it made clear he regarded as a question of law that the act was void but he never acted to void it thus obviating our requirement to cross- examine. Indeed, that passage as to the argument on the question of law was ultimately ruled out by the court and there is no appeal against the exercise of the court's discretion or - - -

KIRBY J: You say the scheme of the order-in-council is that you should not do this without consent but if you do there is a scheme laid down for its avoidance but it requires the Custodian to positively turn his attention to whether or not to avoid and to make a decision in the exercise of discretion, considering all relevant circumstances, and that that did not happen here?

GUMMOW J: But there was no challenge to the retainer of the solicitor who put on the defence, was there?

MR ROTHMAN: No, your Honour, there was no challenge to the retainer but as the Full Court made clear, what was pleaded was a question of law, that is, the operation of the first sentence of clause 2 effected avoidance of itself of the transaction in question and, in my respectful submission, if it was ever alleged that there was an election under the second sentence, then it had to be a matter of evidence, that is, it had to be said, "I have acted to void by doing X", whatever "X" may be, and we would have cross-examined on it.

KIRBY J: It would have been rather easy for Dr Sharp to have done that, even in the course of the litigation, or the successor Custodian, to say, "Now, in accordance with this order-in-council, I avoid."

MR ROTHMAN: Indeed, your Honour.

KIRBY J: And it was never done in plain, frank terms. Now, whether or not the pleading amounts to avoidance, it is arguable that it does not constitute what was the kind of avoidance that was required, a conscious decision taking into account all the relevant circumstances. That is your argument?

MR ROTHMAN: It is, your Honour, and we say, with respect, that the submission at trial was to the opposite effect and we extract the submission that no occasion had ever arisen for the voidance.

KIRBY J: Well, not quite. The submission is that they are not called upon to get to avoidance because you did not have consent and they were running the argument that consent was absolutely imperative. Now, why is it not absolutely imperative. Why does not the lack of consent avoid the transaction?

MR ROTHMAN: Your Honour, that is a question of statutory construction. Their Honours looked at Yango; their Honours looked at Byrne and Frew, which has been extracted and given to the Court. It is ultimately a question of statutory construction. The natural meaning of the first sentence does not void it. When taken with the second sentence, if the first sentence voided it, the second sentence would then become either otiose or one would have to read the word "void" as "validate" or, as the Full Court did below, read in the words "if validated" or "unless validated".

GUMMOW J: I am not familiar with the Industrial Court Rules. Do they provide for affirmation on oath of pleadings?

MR ROTHMAN: No, your Honour.

GUMMOW J: They do not have to be sworn to?

MR ROTHMAN: No, your Honour. That essentially is the point, your Honours.

DAWSON J: Yes, you cannot take it much further than that, can you, Mr Rothman?

MR ROTHMAN: No, your Honour.

DAWSON J: The Court need not trouble you in reply, Mr Solicitor. There will be a grant of leave to appeal.

AT 10.01 AM THE MATTER WAS CONCLUDED