Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2008] HCATrans 33 (6 February 2008)

Last Updated: 7 February 2008

[2008] HCATrans 033

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M123 of 2007

B e t w e e n -

AUSSIE VIC PLANT HIRE PTY LTD

Appellant

and

ESANDA FINANCE CORPORATION LIMITED

Respondent

GLEESON CJ
KIRBY J
HAYNE J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 6 FEBRUARY 2008, AT 10.20 AM

Copyright in the High Court of Australia

MR J.M. SELIMI: May it please the Court, I appear for the appellant. (instructed by Starnet Legal Pty Ltd)

MR D.G. COLLINS, SC: If the Court pleases, I appear with my learned friend, MR N.A. FRENKEL, for the respondent. (instructed by Gadens Lawyers)

GLEESON CJ: Yes, Mr Selimi.

MR SELIMI: May it please the Court. For more than 10 years corporations in this country have been denied justice by reason of a misinterpretation of the relevant provisions of the Corporations Act which are in question in this appeal.

KIRBY J: So you rest your whole case on justice, do you?

MR SELIMI: It is a good starting point, your Honour.

KIRBY J: Yes, it usually is a good starting point, but maybe a little wobbly in your case if you read Justice Ashley’s reasons. I thought you were dealing with a matter of construction that had divided the courts, a technical question rather than the justice of the case.

MR SELIMI: Yes. The only reason I refer to the notion of justice, your Honour, is that one of the essential elements of justice is that every person, be they natural person or illegal person, is entitled to the benefit of the correct construction and application of the law. My submission from the outset is that the majority of their Honours in the court below applied a construction which, in my respectful submission, is incorrect and in respect of which two of the members of the Court of Appeal did not agree that it was in fact the preferable construction.

Justice Ashley and Justice Nettle both indicated that the preferable construction to be placed upon the Act was indeed that which was advanced by the appellant and, indeed, accepted and applied by President Maxwell and her Honour Justice Neave. However, both Justice Nettle and Justice Ashley declined to apply the preferable interpretation by reason of their Honours’ desire to conform to a construction which their Honours in fact did not believe was the correct construction to be placed, in any event.

KIRBY J: That is a little unfair to their Honours, is it not? They simply conform to what this Court has said an intermediate court should do in the Marlborough Case.

MR SELIMI: That raises an interesting question itself, your Honour. In my respectful submission, as indeed President Maxwell and Justice Neave said in their dissenting judgment at paragraph 75 of their Honours’ judgment which appears at pages 319 to 320 of the authorised report, being [2007] VSCA 121; 63 ACSR 300. Their Honours said:

As Nettle JA points out, the Livestock Traders interpretation has stood for more than 10 years. Its correctness has been assumed, both at first instance and on appeal, throughout that period. For the reasons we have given, however, we consider that the interpretation is clearly wrong and should no longer be followed. It is an interpretation which can lead to injustice, as this case illustrates. There being no considered decision of an intermediate appellate court on the question, we regard ourselves as free – indeed, bound – to apply what we consider to be the correct interpretation.

That, of course, is in contradistinction to the approach adopted by Justice Nettle and also Justice Ashley where, indeed, Justice Ashley referred to this notion of tangential authority bearing on the question and, of course, Justice Nettle also referred to the dicta in the Full Federal Court.

However, the question which arises, in my respectful submission, is to what extent should an intermediate appellate court in this country follow dicta of a previous intermediate appellate court in circumstances where that previous intermediate appellate court was not indeed called upon to decide the very question of interpretation raised in this case, and you might - - -

GLEESON CJ: I am not sure how that question arises. You have special leave to appeal to this Court and you are now before this Court. The question is, what is the true construction of the Act, is it not?

MR SELIMI: It certainly is. That is the ultimate question and, indeed, I am mindful of what your Honour Justice Kirby said most recently in the case of Foots v Southern Cross Mine Management where your Honour indeed indicated at paragraph 96 of the judgment, which at present is reported at [2007] HCA 56, a decision of this Court of 7 December last year:

To the extent that advocates and courts continue to address themselves to judicial remarks (often obiter dicta) in earlier cases, they run the risk of failing to perform their proper functions as the Constitution envisages within the integrated Judicature of the Commonwealth -

Now, in my respectful submission - - -

HAYNE J: So can we get to the Act?

MR SELIMI: Yes.

HAYNE J: That is where we start.

MR SELIMI: That certainly is the correct starting point for any analysis in respect of statutory interpretation, it is the language of the statute itself. Perhaps if I can turn to that directly, your Honours.

KIRBY J: Is it relevant at all for us to look, maybe not immediately, but at the predecessor to the statutory provisions in the Corporations Act, or not?

MR SELIMI: In my submission, in terms of - - -

KIRBY J: I did not see that in the written submissions. Is there any place – perhaps you should do what Justice Hayne said and look at the Act and I will save that one up for you later on.

MR SELIMI: Yes. The only point I would make about the previous provisions, your Honour, is this. It is quite proper, particularly in light of the modern purposive approach to construction of statutes, and, indeed, consistent with the Acts Interpretation Act section 15AB, it is quite proper to have regard to the mischief which particular legislation was designed to address. In that respect it is, of course, significant to have regard to the history of legislation.

What is significant about the previous legislation, your Honours is that there was no separate procedure for the setting aside of statutory demands. Commonly, contractual disputes in relation to whether a debt was or was not owing were raised during the course of the hearing of the winding-up application itself, which led to interminable delays with the imposition of contractual disputes in the winding-up process itself. Indeed, that was one of the chief reasons for the introduction of the Corporate Law Reform Act which included this special scheme.

GLEESON CJ: Is it a good idea to identify the question of construction?

MR SELIMI: Yes.

GLEESON CJ: Is the question of construction whether section 70 applies to section 459(f)?

MR SELIMI: Yes, your Honour, that is the question of construction. In my submission, it is a critical question to be asked, particularly in circumstances where, with great respect to Justice Jenkinson in Livestock Traders and all of the judges who have subsequently applied the Livestock Traders’ interpretation, it is a question which should be looked at with great care.

HAYNE J: Maybe so, but the question of whether section 70 applies in the fashion indicated is affected by, perhaps governed by, section 6(1), is it not?

MR SELIMI: Yes, your Honour. Indeed, I was going to refer your Honour to that section. Section 6(1) indicates:

The provisions of this Part have effect for the purposes of this Act, except so far as the contrary intention appears in this Act.

My submission at the outset is that there is no contrary intention for the purposes of section 6(1) such that section 70 does not in fact apply to the provisions in question in this case. In fact, if I may also refer your Honours, as indeed I propose to in due course – it is particularly important in terms of a proper construction of section 459F(2)(a)(i) of the Act, which of course is the primary critical provision in this case, to have regard to the definition of “extend” which appears in the dictionary section of the Corporations Act. Section 9 defines the word “extend” as follows:

Unless the contrary intention appears . . .

“extend”, in relation to a period:

(a) includes further extend -

which, of course, is particularly apposite here in terms of the facts of this case, and –

(b) has a meaning affected by section 70.

So, in my submission, on a proper construction of the Corporations Act having regard to the definition of “extend”, and indeed specifically incorporating the meanings affected by section 70, it is all the more reason for accepting the correctness of the interpretation placed upon the Act by the dissenting members of the Court of Appeal.

The key point, your Honour, is this. Justice Jenkinson in Livestock Traders applied the reasoning of this Court in David Grant and held that section 70 was not applicable and, indeed, relied substantially upon the reasons of this Court in David Grant in so concluding. Likewise, if I can turn directly to the decision of Justice Chernov who, in truth, was the only member of the majority who - - -

HAYNE J: Again, you are about to dive into what judges have said about the Act. Just understand what provisions of the Act are in play.

MR SELIMI: Yes, certainly. If I may return to - - -

HAYNE J: Section 459F is in play because it is that provision that fixes when a company is taken to fail to comply with a statutory demand. Is that right?

MR SELIMI: Yes, correct.

HAYNE J: Do we need not also to have regard to 459C and 459G. Section 459C is important because it is that which identifies the consequence of failure to comply. Is that right?

MR SELIMI: For the purposes of the applications specifically mentioned in subsection (1), yes.

HAYNE J: Which include, relevantly, an application to wind up an insolvency - - -

MR SELIMI: Correct, pursuant to section 459P - - -

HAYNE J: - - - which is the kind of application we are concerned with.

MR SELIMI: Yes.

HAYNE J: The only consequence of failure to comply is a shift in the burden of proof. Is that not right? The only consequence of failure to comply with a statutory demand is identified in 459C(2) and (3). It is presumed insolvent, but you can always come along and say, “Well, that may be the presumption, but have a look at our balance sheet. We are solvent”.

MR SELIMI: Strictly speaking, that is correct. However, the whole point of this appeal, with respect, is this. A corporation should not have to face the consequences prescribed in section 459C if, in fact, the statutory demand which is the trigger mechanism for the entire scheme should have been set aside at first instance. That, indeed, gives rise to the second question which arises in this case, that is, the utility point. That is irrespective of the proper construction of section 459F(2)(a)(i). Was there any utility in considering the merits of the appeal irrespective of whether time may or may not have been extended? My submission, your Honours, is that a corporation should not have to face the consequences prescribed and, indeed, should not have to, as your Honour puts it, rebut the presumption of insolvency.

GLEESON CJ: By “the consequences” do you mean having to show that it is solvent?

MR SELIMI: Yes.

GLEESON CJ: A corporation should not have to show that it is solvent.

MR SELIMI: In circumstances where the statutory demand should be set aside the trick - - -

GLEESON CJ: That is the sort of thing a corporation has to show every time it wants to borrow some money from its bank, is it not?

MR SELIMI: Yes, but, your Honour, the question here is, should a corporation be compelled to divulge its financial details to the world, as it were, all as a consequence of a statutory demand which activates the entire scheme? My submission, your Honours, is that if the - - -

HAYNE J: Which is why we need to then go into 459G because the demand process contemplated by 459E and F has an amelioration in Division 3 of Part 5.4, 459G and following, where you can apply to set aside, you can raise questions of disputes or offsetting claims, but you may do so within the very limited time.

MR SELIMI: That is precisely what David Grant decides, but David Grant was decided for the simple reason that the argument that was sought to be raised by the appellant in that case was completely contrary to the express, clear legislative policy underlying section 459G(2) which was to compel corporations to raise disputes promptly. Indeed, there was no section, that is, no provision in section 459G, in respect of which section 70 could operate. The temporal operation of section 70 of the Act can only operate in circumstances where there is a power prescribed by the Act in respect of which section 70 can operate. Indeed, in David Grant itself - - -

GLEESON CJ: What is the reference to that, Mr Selimi?

MR SELIMI: Yes, pardon me. In David Grant, in the concluding - - -

KIRBY J: It is [1995] HCA 43; (1995) 184 CLR 265.

MR SELIMI: Yes, I beg your pardon. Thank you very much, your Honour. The particular page is page 278 which was, in my submission – perhaps I should say from 276 to 278 but the relevant point is this. His Honour Justice Gummow in that case, of course, set out the relevant provisions of section 459G and was particularly conscious of the specific time limits created by section 459G and at page 278 his Honour said:

These reasons lead also to the rejection of the reliance by the appellants upon ss 70 and 467A of the Law.

The critical part is this, your Honours:

Section 70 provides that, where the Law “confers power to extend the period for doing an act”, an application for the exercise of the power may be made and it may be exercised even if the period has ended. However, the Law does not confer a power to extend the period within which an application may be made under s 459G.

That, indeed, was one of the principal reasons why David Grant was decided as it was, the key point being, in 459G(2) it was clear that an application to set aside may only be made within the 21-day period.

There was no power created by section 459G to extend that time. Hence, there was no provision which could attract the operation of section 70. In contradistinction, in this particular case the key point is that section 459F(2)(a)(i) does in fact confer an express power upon the court to extend and, indeed, further extend the period within which one may comply with the Act. Hence, that directly attracts the operation of section 70 of the Corporations Act.

GLEESON CJ: Your argument is that David Grant is distinguishable because section 459F(2) gives you a foot in the door?

MR SELIMI: Yes. Not simply a foot in the door, with respect, but the other important point is this. The clear legislative policy of section 459G was to address the mischief which Parliament had indeed identified relying on the Harmer Report in particular that disputes in relation to winding-up proceedings were interminably delayed by the interposition of contractual disputes during that very process. Hence, Parliament created a two-stage process, the first of which was the setting aside process in relation to demand, and the second process being the winding-up process. The new provisions were designed to ensure that the contractual disputes, if you like, were not interposed in the winding-up process. The provisions were clearly designed to compel parties, as indeed indicated by paragraph 689 of the explanatory memorandum which is set out at page 270 of the decision of Justice Gummow in that case. Paragraph 689 quite clearly indicates that disputes in regard to the statutory demand ought be brought:

at an early stage –

the key words –

rather than after winding up proceedings have commenced.

To allow an extension of time within which to make an application to set aside a statutory demand would be completely contradictory, inconsistent, to that legislative policy, whereas, in my submission, Justice Nettle in fact was perfectly correct – somewhat ironical that I rely upon a member of the majority in this case. But the point is four members of the Court of Appeal - - -

KIRBY J: You have made that point.

MR SELIMI: Yes, and Justice Nettle, in particular, noted that the procedural regulation of the proceeding has been left to the court. The court is vested with the jurisdiction to extend time within which a corporation may comply with the statutory demand and, indeed, that is perfectly consistent with the doctrine of separation of powers. The Parliament has prescribed the relevant legislation and it has empowered the court to extend the time for compliance in order to ensure that indeed commercial justice may well be promoted. Might I indicate that my submission is it is a complete fallacy to suggest that Parliament intended to create a scheme which was intended to wreak unjust consequences. Parliament relied upon - - -

KIRBY J: The other argument is that the justice, if we are talking about that, is a justice to the public, to investors, to small contractors who deal with insolvent companies, and with all the other people out there, and that that requires urgency of action and speed and not going back once things have happened. That is the other side of justice. But could I have your help in analysing 459F and how you say that the provisions there are to be distinguished from the provisions that were considered in David Grant.

MR SELIMI: Yes, your Honour.

KIRBY J: I would like, as Justice Hayne asked earlier, that you start really with the statutory construction, which is our problem.

MR SELIMI: Yes, certainly, your Honour. The first point to note, in terms of David Grant and section 459G – if I can take your Honour to section 459G, because frankly this is where the authorities have taken the wrong turn, to use the words of Justice Ashley.

KIRBY J: That is what I would like you to demonstrate, if you could, by reference to the text. That is really the starting point in the case.

MR SELIMI: It should also be the ending point, if the words of the statute govern. Section 459G(2), which was the section considered in David Grant, stated:

An application may only be made within 21 days after the demand is so served.

That provision is perfectly unambiguous and, indeed, the result followed, necessarily, in David Grant. I would interpolate there, however, that section 459G does not contain a power to extend time. If one turns to section 459F, however – subsection (2) being the critical provision – subsection (1) states:

If, as at the end of the period for compliance with a statutory demand, the demand is still in effect and the company has not complied with it, the company is taken to fail to comply with the demand at the end of that period.

Subsection (2) elaborates upon the meaning of the “period for compliance” and defines it as follows:

The period for compliance with a statutory demand is:

(a) if the company applies in accordance with section 459G for an order setting aside the demand:

(i) if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand–the period specified in the order, or in the last such order, as the case requires, as the period for such compliance -

It was that provision, that particular subsection which had application in this case, your Honours, because, of course, the learned Master at first instance, indeed, exercised the power pursuant to subsection (2)(a)(i) on the determination, that is, upon the determination of the hearing of the application under section 459G. Master Efthim, of course, heard the application under section 459G and dismissed it.

Concurrently, however, he, in accordance with an application pursuant to section 459F(2)(a)(i), extended the time for compliance and subsequent to that time, of course, subsequent to that decision being handed down, the appellant filed an appeal within a prescribed period of time which subsequently came on for hearing before Justice Whelan who refused to exercise the power which, I submit, existed by virtue of section 459F(2)(a)(i), the key point being, your Honours, as indeed recognised in David Grant itself, section 459F(2)(a)(i) clearly contemplates that there may be multiple extensions of time granted in aid of the hearing of the application to set aside a demand.

Indeed, in accordance with that legislative policy, the key point is the legislative policy of conferring a power to extend the time for compliance is in aid of the hearing of the application for the order under section 459H, that being the setting aside of the statutory demand, and, indeed, as held by President Maxwell and Justice Neave, it is also in aid of the hearing of an appeal arising from a decision of the Master at first instance. So, in my submission, the words appearing after “459G” in subparagraph (i), that is, “or on an application by the company under this paragraph”, quite clearly that is in contradistinction to an application being made upon the conclusion of the hearing of the application under section 459G. There is a clear, in my submission, unambiguous express power to extend time even after the Master at first instance has dismissed the application. In my submission, it is quite simple and quite unambiguously indicated by Parliament that in circumstances, for instance, where a corporation exercises a statutory right of appeal pursuant to the rules of the court, in those circumstances it is perfectly just in order to ensure that the appeal is not rendered otiose and nugatory, it is perfectly just for a judge upon the hearing of the appeal to extend the time for compliance even if the previous period for compliance has lapsed. That effectuates the legislative policy of this specific provision and, in my submission - - -

KIRBY J: Well, your point is that whether the judge does extend it or not, whether the justice of the case requires it be extended, if the power is there it has to be exercised by reference to the existence of the power and not the denial of the power.

MR SELIMI: Precisely, your Honour. Indeed, Justice Ashley made the point in his judgment that the mere fact that one recognises the unambiguous existence of an express power does not necessarily mean that the power ought be exercised. Whether the power, as a matter of justice in terms of the peculiar facts of the case should be exercised, is a question quite obviously of discretion and the judge can decide to exercise it or not in terms of the intrinsic merits of the case.

But, in my submission, to effectively deny the existence of an express power created by Parliament explicitly, and to misapply David Grant, which dealt with a completely different legislative provision, has led to a miscarriage of justice in numerous cases in the past, as indeed in this case. I use the word “justice” in the sense that everyone is entitled to an application of the law, a correct interpretation of the law and, indeed, I read with great interest your Honour Chief Justice Gleeson’s remarks in a speech delivered by your Honour at the Judiciary of the Commonwealth of the Bahamas on 4 January 2008 entitled, “The Role of a Judge in a Representative Democracy”. Indeed, during the course of that paper your Honour said that it is “grossly illegitimate” for a judge to misinterpret legislation. Now, the point I make, your Honours, is that in this particular case we had four justices in the Court of Appeal - - -

HAYNE J: Before you embark on that - - -

KIRBY J: That is the third time.

HAYNE J: - - - stay with the Act.

MR SELIMI: Yes, all right. Now - - -

HAYNE J: No, just a moment. An argument which I suspect you may have to meet is this. An argument for the contrary intention to the application of section 70 seems to be that 459F(1) has already been engaged, if you like, has already bitten, by the time the application for further extension is made. That is, the argument against you is one which says section 70 cannot apply because the company is already to be presumed insolvent. It is to be presumed insolvent because the period for compliance has expired. What is the answer you make to that argument?

MR SELIMI: The answer is this. Section 459C, which creates the presumption of insolvency, itself is subject to the definition of what a company fails to do to comply with the statutory demand as defined by section 459F.

In other words, whether there has been a failure to comply must be taken to mean a failure to comply within the meaning of the period of compliance as defined by subsections 459F(2)(a)(i) and (ii). So, in my submission, the argument that has been mooted or may be put by the respondent and, indeed, has been put, suffers from circularity in reasoning, in my submission. In my submission, section 459F simply states:

the company is taken to fail to comply with the demand at the end of that period.

But the question begs itself, what is that period? Now, that period is the period of compliance as defined in paragraph (a) of the Act.

HAYNE J: But your argument has to be, does it not, that there is explicit reference to the last such order?

MR SELIMI: Yes, or in the last such order - - -

HAYNE J: Section 70 contemplates that the last such order may be made before or after time of compliance.

MR SELIMI: That is precisely the case, but even one step further, section 9 is extremely significant in terms of the definition of “extend” because it states two things. It includes “further extend” and (b) have a “meaning affected by section 70”. Section 70 sheds light on the circumstances in which the power may be exercised. It is quite obvious the power to extend the period for doing an act may be exercised even if the period or the period as last extended has ended.

GLEESON CJ: Is it a part of your argument that the power to grant an extension of time nunc pro tunc granted by section 70 will almost always be exercised in circumstances where some consequence of some kind has attached to the failure to act within time?

MR SELIMI: It may. However, whether it applies depends on whether there is a section in an Act which confers a power to extend the time for doing an act. So section 70 has no application where the Act does not confer a power to extend the period for doing an act. That is the very basis of David Grant. There was no power to extend the period for filing an application to set aside a statutory demand under section 459G in contradistinction to the power to extend the period for doing an act within the meaning of 459F. The doing of the act is the payment of a sum of money in respect of the statutory demand.

So that if upon the conclusion of an appeal, for instance, hypothetically – let us say the appellant was heard on its merits before Justice Whelan, Justice Whelan could have extended the time for compliance with the statutory demand for such time as his Honour saw fit to allow a reasonable indulgence in respect of the payment of a statutory demand in circumstances where the appellant has simply exercised a right of appeal.

GLEESON CJ: The question may be, when you seek to repel the argument that subsection (1) has already bitten, – that would usually be the case, but is this, in this legislative context, the kind of consequence that is meant to be irreversible?

MR SELIMI: In my submission, it is not meant to be irreversible and, indeed, in terms of answering that specific question one must have regard to the words of the statute and the words of the statute in subsection (2)(a)(i) quite clearly contemplate multiple potential extensions of time. The words “the period specified in the order” being perhaps the order of the Master at first instance, “or in the last such order, as the case requires” which may well be, for instance, the time period set by a justice hearing the appeal, upon the conclusion of the appeal.

So the point, your Honour, in my respectful submission, is that Parliament has in section 459C tied the presumption to the definition of section 459F. Section 459F is inherently elastic, it is flexible. So if Parliament has envisaged that orders may be made extending the period for compliance even after the lapse of a previous period, then the exercise of that power may well operate, indeed does operate to undo the prima facie consequence of a failure to comply with a first order, but that is precisely what Parliament has envisaged. The procedural regulation of an application to set aside a statutory demand and any procedural regulation upon the filing of an appeal has been left with the Supreme Court. Parliament has not sought to intrude or to do violence to the doctrine of separation of powers by purporting to limit the period of time within which an application may be made to extend the period for compliance.

KIRBY J: That would not be an interference with the separation of powers. That would be a particular exercise of the separation of powers. Parliament is saying courts have the right to extend, but in the particular urgent circumstances and public policy reasons of the company insolvency, we are going to limit the time in which the court can extend time.

MR SELIMI: Indeed. I accept that wholeheartedly, your Honour. Indeed, that is precisely what Justice Ashley referred to in terms of Parliament’s intention in section 459R(2) of the Act, which is a very important provision to have regard to when considering the proper construction of section 459F(2)(a)(i). If Parliament wished to confine the period within which an application for an extension of time to comply may be made, Parliament could have done so. In section 459R, which states “Period within which application must be determined”, this, of course, is an application for a company to be wound up in insolvency:

(1) An application for a company to be wound up in insolvency is to be determined within 6 months after it is made.

Now, your Honours, section 459F does not contain a similar provision, or 459G for that matter, does not contain a similar provision. Parliament could have said, if it wished, an application by a company to set aside a statutory demand must be determined within three months after it is made. It could have said so. It did not. Likewise, in subsection (2):

The Court may by order extend the period within which an application must be determined but only if . . .

(b) the order is made within that period as prescribed by subsection (1) –

that is, six months after it is made –

or as last extended under this subsection, as the case requires.

But that particular provision – subsection (2)(b) – quite clearly contemplates that the order for an extension must be made within the period as last extended.

GLEESON CJ: Mr Selimi, the question I am about to ask I do not think goes to the heart of either argument, but I would just like to understand the context at the moment. Is it right to say that, where an application is made under section 459G, the kinds of issue that will arise in that application are indicated by 459H and 459J?

MR SELIMI: Yes.

GLEESON CJ: So there may be an issue about whether the debt is owing or there may be an issue about whether there is a counterclaim that exceeds the amount of the debt - - -

MR SELIMI: Or a set-off, yes.

GLEESON CJ: There may also be an issue about whether there is some defect in the demand, which causes a substantial injustice.

MR SELIMI: Yes, correct.

GLEESON CJ: That is the kind of issue that will be litigated under section 459G.

MR SELIMI: Indeed. Might I add, your Honours, in terms of the day-to-day practice in running these applications under section 459G, it is not a particularly difficult hurdle to meet – that is to satisfy that there is a genuine dispute in relation to the existence of a debt.

GLEESON CJ: I was wondering, in that context, whether a consideration that might have been influential in the reasoning of some of the judges who have looked at this in the Court of Appeal in the present case was that the kind of issue that will be litigated under 459H or 459J might sometimes give rise to a substantial appeal point. They seem to have been impressed by the consideration that an unappealable refusal to extend the time pending the determination of that appeal point will produce the practical consequence that the decision at first instance is, for practical purposes, unappealable.

MR SELIMI: Yes.

GLEESON CJ: Is that part of your argument?

MR SELIMI: Your Honour, my argument is that in terms of the proper construction of section 459F(2)(a)(i) and section 70 which is attracted in this case, my submission is that a judge hearing an appeal arising from the original determination of an application under 459G must - in order to ensure that the appeal is effectively exercised and given effect, that is - have the power to extend the time for compliance with the statutory demand. Now, it may well be as, your Honour as indicated – well, the effect of the authorities in terms of Livestock Traders has effectively been to make the original determination unappealable.

HAYNE J: That depends, does it not, on how that stream of authority in Wilson v Church culminating in Erinford Properties and other such cases would be engaged. Wilson v Church is, I think, 12 Ch D, which speaks of the grant of relief to ensure preservation of a right of appeal. Now, you see some reflection of that in this Court in Burgundy Royale (No 1) 161 CLR, but the central contention that you are presently addressing is one which would have to take account of the undoubted power of a court to preserve the utility of a right of appeal and the authorities which govern when that jurisdiction should be exercised.

MR SELIMI: Yes, your Honour, but my submission - - -

HAYNE J: So that if a company has an arguable case - true it is resolved at first instance against it, but raising a substantial point – it would be open either to the court from which the appeal is brought or the court to which the appeal is to be brought as of a right to make interim orders that would preserve the subject matter of the appeal.

MR SELIMI: Yes, indeed, your Honour. Indeed, that is the very crux of the reason why the application for an extension of time is made.

GLEESON CJ: The best example I can think of of a case that would raise the problem Justice Hayne mentioned is this. Suppose there is an application under 459G and the ground of the application is a denial of the existence of the debt.

MR SELIMI: Yes.

GLEESON CJ: Suppose the issue concerning the existence of the debt is an issue of law on which the primary judge is bound by the authority of an appellate decision and the person challenging the debt really wants an opportunity to challenge the correctness of the appellate decision. In other words, it is a case where the person challenging the existence of the debt is bound to lose, or very likely to lose, at first instance on a legal ground, but there is an arguable point of law that will be the subject of an appeal. Now, in that circumstance, if the person applying under 459G fails to persuade the primary judge to grant an extension of time under 459F, for example, until 14 days after the determination of the appeal, the practical consequence will be, will it not, that the appeal will have no utility.

MR SELIMI: The practical consequence depends upon whether (a) the power of extension is granted but, secondly, depends upon the power of the court to consider the intrinsic merits of the appeal whether or not the period for compliance has expired. That is the second point of the appeal in this case, your Honours, which I will address in due course. But my submission, your Honours, is that a corporation must have the legal right, indeed must have the right to effectively exercise a statutory right of appeal. Now, in this case what I would bring to your Honours’ attention is quite simply this. An appeal to a judge in this case, to Justice Whelan in particular, was not confined to an error of law.

GLEESON CJ: Yes, the present case might not provide the most vivid example of the kind of problem that I was intending to advert to, but from the point of view of the construction of the statute, all you have to do is point to some vivid example.

MR SELIMI: In my submission, that is a vivid example, and, in my submission, Parliament has well recognised and, indeed, created a flexible - in terms of the procedural regulation of this application under section 459G, Parliament has not sought to circumscribe the period of time within which an application may be made to extend the time for compliance. It has not even limited the period of time within which an application to set aside the statutory demand must be determined.

GLEESON CJ: In the example I gave, even where the right of appeal was rendered practically nugatory, the debtor is not shut out from contesting the debt, is it?

MR SELIMI: Your Honour, the answer to that is generally, yes, he is or it is, rather, unless leave is granted to the contrary.

GLEESON CJ: On the hearing of the winding-up proceeding?

MR SELIMI: Yes, but that is only if leave is granted and one need only look - - -

HAYNE J: Section 459S.

MR SELIMI: Correct, 459S(1), and in terms of the practical difficulties of getting leave, well, I need not go there. The point, however, your Honours, in my submission, is that in terms of the critical question of construction before this Court a proper interpretation, indeed, the very interpretation referred to by four members of the Court of Appeal is that which ought be upheld by this Court.

KIRBY J: That is the fourth time you have said that, but you do have to grapple, do you not, with Justice Chernov’s reasons? Justice Chernov was the only judge in the Court of Appeal who embraced what I might call the Jenkinson approach and he said, “The trouble with your submission is, it is too old-fashioned. You are back there in the ark just looking at the statutory language. You are not applying what the High Court has repeatedly said is the modern way of looking at things, to look at its purpose, to look at its history, to look at the way it all fits together and if you look at the way it all fits together, this all has to happen quickly because unless it does, public interests and small people dealing with insolvent companies will lose out and, therefore, the pressure is on and that is how you should construe the statute, therefore it is spent”. What is your answer to that? You have to answer it because very clever judges have supported that over the years.

MR SELIMI: The answer to that question, in my submission, raises an anterior question and that is, what was the mischief and what was the purpose of bringing in a separate scheme for dealing with disputes in relation to alleged debts.

KIRBY J: Where do I find the best description? Is it in a textbook of what the pre-existing regime was? The other judges will probably know all that, but I do not and I would like to be familiar with what the previous scheme was. Is it in the Harmer Report? Is it in the ALRC Report?

MR SELIMI: Well, it is in the Harmer Report, but - - -

KIRBY J: Do we have extracts from the Law Reform Commission Report, or not?

MR SELIMI: I do not think your Honours do.

KIRBY J: Well, I think we may need those or at least reference to them. I think we can get them, but I would like reference to where Mr Harmer and the Law Reform Commission dealt with this, because it may be that that gives us a very good clue as to what the mischief was.

MR SELIMI: Your Honours, Justice Gummow in David Grant - - -

KIRBY J: He set out the explanatory memorandum. I realise that. You have taken us to that, but anterior to that was the Law Reform Commission Report on company insolvencies?

MR SELIMI: Yes.

KIRBY J: If you do not have that now you can perhaps send it in. I do not want to hold you up. You can send a note with the leave of the Court on that. I think you are being tendered gifts. There is an old Greek saying about this, or Roman saying, that you should perhaps consider. I think the other side might have extracts from the Harmer Report.

MR SELIMI: Your Honour, the Harmer Report, which of course was the Law Reform Commission Report No 45 headed “General Insolvency Inquiry”, undertook an investigation of the inadequacies of the previous legislation which ultimately led, of course, to the preparation of the explanatory memoranda. In my submission, the explanatory memoranda is relevant to have regard to in addressing the question of the proper construction, if indeed it is suggested that there is any ambiguity. Secondly, of course, consistent with the modern approach to construction - - -

KIRBY J: We know all that. The extract from the explanatory memoranda in Justice Gummow’s reasons in David Grant, was that - - -

MR SELIMI: That is at page 270.

KIRBY J: - - - addressed to a 459G or to the whole package?

MR SELIMI: It was essentially addressed to - - -

KIRBY J: See his Honour says at the top of 270 of David Grant [1995] HCA 43; 184 CLR 265, it:

became Div 3 of Pt 5.4 (ss 459G-459N).

So he is not addressing himself to 459F, which is the one that is before us.

MR SELIMI: That is precisely my submission, your Honour. My submission is, what has happened in this case - - -

KIRBY J: All right. That is established. David Grant was about 459G but we are about 459F. Where are the explanatory memoranda or the Harmer Report provisions in relation to 459F, which is our concern?

MR SELIMI: Yes, 459F is dealt with at paragraph 149 of the Harmer Report, in particular, the recommendation in relation to the periods for compliance, which reads:

A company should be able to apply to set aside a statutory demand before time for compliance with it expires. The application should have to be supported by an affidavit setting out the reasons for objection. Once the application is filed, time for compliance should be automatically extended by seven days or until such later time as the court determines.

There is no, as it were - - -

KIRBY J: Sudden death provision.

MR SELIMI: That is correct but, more so, there is no literature, there is no discussion as to the policy reasons underlying the need for an extension of time and the like. My critical submission, in answer to the - - -

KIRBY J: Do you have the explanatory memorandum provisions in relation to 459F? If you do not, say so and we can give you time to put them before us.

MR SELIMI: The explanatory memorandum in relation to 459F, paragraph - - -

KIRBY J: You are doing this on the run.

MR SELIMI: No, no, I have it front of me, your Honour.

KIRBY J: I realise that, but this requires very careful examination of the text.

MR SELIMI: Yes. Paragraph 684 of the explanatory memoranda - - -

KIRBY J: Do we have that? Has that been put into the Court papers or not?

MR SELIMI: No, your Honours.

KIRBY J: I think you should do a copy of it, if I can say so for myself, before you leave the Court building.

GLEESON CJ: Could you just give us a hint about what is in it?

MR SELIMI: Yes. It essentially states as follows, your Honour - - -

KIRBY J: We are tantalised.

MR SELIMI: Yes.

684. 459F(2) provides for periods within which the demand must be complied with. Generally, the period will be 21 days after the demand is served. Where, however, a company applies in accordance with proposed section 459G for an order setting aside the demand, the period is that specified in a Court order extending the period for compliance or otherwise, the period ending 7 days after the application to set aside the statutory demand is finally determined or otherwise disposed of.

So, your Honours, the provisions relied upon by the respondent and, indeed, by the various judges who have applied the Livestock interpretation are based essentially upon the provisions in the explanatory memoranda which more specifically relate to section 459G, that is, the mischief to be addressed is to create a two-tiered system, the first system which requires that disputes be brought at an early stage, that is, promptly, rather than at some later period.

KIRBY J: Why does not that same policy apply to 459F? This is all urgent stuff. It has to be dealt with quickly.

MR SELIMI: But your Honour there is a distinction.

KIRBY J: It is not just your interests. There are investors, there is the public, there are the contractors and employees.

MR SELIMI: Yes, but the mischief that this legislation was designed to address was having the winding-up proceeding itself interminably delayed by raising contractual disputes during the course of the winding-up proceeding itself. Hence, the underlying policy of section 459G was to create an inflexible time limit within which disputes might be brought promptly. But the Act did not go that step further and state after a dispute has been brought promptly it must be determined within a fixed period of time.

The great leap – the leap that the respondent is seeking the Court to make is to extend the specific legislative policy underlying 459G to 459F. In my submission, that ought not be accepted because it means that it completely, with respect, seeks to curtail or inhibit the jurisdiction of the Supreme Court to properly consider matters that are brought before it within time limits that are not even specified in the Act, within time limits that are not even specified in the explanatory memoranda.

CRENNAN J: Can I ask you this. You have said before that one necessary consideration is the preservation of the utility of an appeal, and I think you have referred to a statutory right of appeal. Justice Chernov seems to approach the matter on the basis that, once the period for compliance or any extension given has expired, there is no determination of any rights but simply the presumption of insolvency. As he reads the scheme, once that occurs, the next chance for the company to contest the demand is on the winding up. As you have pointed out, under 459S, leave may be given in relation to that. It probably turns on whether or not a contest about the statutory demand is relevant to the issue of insolvency.

MR SELIMI: Yes, your Honour, but if I may address, as indeed I must, the reasons of Justice Chernov, in my submission, with great respect to Justice Chernov, Justice Chernov’s analysis and conclusions are based upon a misinterpretation of the plain and unambiguous provisions of section 459F(2)(a)(i).

CRENNAN J: Just getting back for a moment, though, to the specific question I asked you, his reading of the scheme is premised on the proposition that there is no determination of rights once the period of compliance or any extension given has expired.

MR SELIMI: Yes, there is no determination of rights. Indeed, that goes back I think to what Justice Hayne had held in a case of Mibor previously.

CRENNAN J: Yes.

MR SELIMI: But my submission, however, your Honour, is that in terms of the question of statutory interpretation, the question is does the Act of Parliament confine the period of time within which a corporation may make an application to extend a period for compliance with the demand?

CRENNAN J: But just before we get to that, where do we find the statutory right of appeal in respect of a decision like Master Efthim’s?

MR SELIMI: The right of appeal is provided under Order 77.05 of the Supreme Court Rules, your Honour, which provides that - - -

KIRBY J: You better speak into the microphone please and identify that section again.

MR SELIMI: I beg your pardon. To answer your Honour’s question, the right of appeal is conferred by rule 77.05(1) of the Supreme Court (General Civil Procedure) Rules 2005.

KIRBY J: It is not an order, it is just that rule, is it?

MR SELIMI: Well, it appears in Order 77, your Honour, but the relevant provision is Order 77.05:

(1) Subject to paragraph (2), any person affected by any judgment given or order made by a Master under any Chapter of the Rules of the Supreme Court may appeal to a judge . . .

(7) The appeal shall be by re-hearing de novo of the application to the Master but each party may –

et cetera.

CRENNAN J: There is no need to keep reading it. I understand what your argument is.

HAYNE J: Now, as to appeals as of right and preserving the subject matter, it would be necessary to consider the application of Wilson v Church (No 2) (1879) 12 Ch Div where, at least a view of the authority is that a court should, absent special circumstances, such, for example, if an appeal appears not to be bona fide, make such order for staying proceedings under a judgment appealed from, here extend time, as would prevent the appeal if successful from being nugatory. See the further discussion of Wilson v Church in Erinford Properties v Cheshire County Council [1974] Ch Div 261, the decision of Justice Megarry about granting interlocutory injunction pending appeal where the primary judge refuses injunction simply to preserve the subject matter of the appeal.

MR SELIMI: Yes, indeed, your Honour. That policy is quite clearly upheld by President Maxwell and Justice Neave in this case.

HAYNE J: It would mean that, absent application to preserve the subject matter of the appeal and absent success in that application by obtaining an order extending time, once time has gone, there is an engagement of 459F(1). That is the knife in the napkin that you need to deal with.

MR SELIMI: My submission in relation to that, your Honour, is that 459F(1) does not in any way form some obstacle to the appellant per se, because 459F(1) is simply a general provision which in turn depends upon the definition of the period for compliance in subsection (2) of that provision.

HAYNE J: You have made your submissions about that and I think I understand them.

MR SELIMI: If I may address Justice Chernov’s reasons briefly, Justice Chernov, at page 326 of the authorised report at paragraph [92], dealt very briefly with the application of section 70 of the Act. In my submission, it is obvious that section 70 really lies at the heart of this entire appeal – that being whether the temporal operation of section 70 can or cannot be attracted. In paragraph [92] his Honour very briefly deals with section 70 by saying:

I also think that neither ss 70 nor 1322(4)(d) enables the court to do so -

that is to extend time after it has expired. His Honour simply says, with great respect:

I say that essentially for the reasons that were given by Gummow J in David Grant for concluding that the provisions do not apply to permit an extension of time that is prescribed by s 459G(2).

That is the extent of his Honour’s reference to section 70. In my respectful submission, it is quite obvious from the footnote which his Honour gives - footnote 121 – his Honour is there referring to the reasons given by Justice Gummow at pages 275 to 278 of David Grant. Most of that discussion by Justice Gummow – in fact all of it – dealt with the construction of section 459G(2). More particularly, as I have already indicated to your Honours, what Justice Chernov has failed to refer to, with great respect, is the concluding paragraph of Justice Gummow’s judgment at page 278 which says in respect of section 70:

the Law does not confer a power to extend the period within which an application may be made under s 459G.

Once one realises – or accepts – as indeed four members of the Court have in the court below, that section 459F(2)(a)(i) does in fact create a power to extend the period for compliance even on multiple occasions, the reliance upon David Grant is completely inapplicable. In my submission, if one is true to the commandment that the words of the statute govern, then one must not ignore section 70. The temporal operation of section 70 is to give life to section 459F(2)(a)(i) and to enable, consistent with fundamental policy purposes, a corporation to exercise a right of appeal which otherwise would be rendered nugatory.

KIRBY J: Why, on your theory, did the Court in Grant hold that section 70 did not have that operation in 459G?

MR SELIMI: Expressly because section 459G did not contain a power to extend the period within which an application may be made under section 459G.

GLEESON CJ: I thought it went further. I thought in subsection (2) he had denied the existence of any such possibility. The words “may only”.

MR SELIMI: Yes, your Honour is perfectly correct. Yes, for those reasons. Now, what I would refer to your Honours in relation to Justice Chernov – I have dealt with the relevant sections of his Honour’s judgment in my written submissions. However, paragraphs [89] and [90] quite clearly expose the fallacy of his Honour’s assumptions. His Honour states at paragraph 89 of his Honour’s judgment:

It is apparent that a recurrent motivation for the changes recommended by the Harmer report in respect of statutory demands was the confinement to the prescribed times of any disputation concerning the validity of the demand.

Now, if by that his Honour is meaning the confined prescribed time of 21 days within which an application may be brought, then that is perfectly correct. But the words, “disputation concerning the validity”, are much broader than what indeed the explanatory memoranda refer to. Likewise, paragraph [90] of his Honour’s judgment, his Honour says, after referring to David Grant:

Thus, the legislation specifies, in quantitative terms, the limited period within which the validity of statutory demands can be challenged in court in the first instance, and for the disposition by the court of a winding-up application.

There quite clearly is a limited period within which it may be challenged, and there are self-executing time limits for taking steps to set aside the statutory demand. However, there are no specific unalterable time limits, as it were, in relation to section 459F of the Act.

What I would emphasise finally in relation to this point is that even in the case of David Grant the principal submission that was accepted unanimously by the court in David Grant was the submission made by a Mr Archibald, QC at page 267 that:

The aim and effect of Pt 5.4 of the Law is that once a demand is made, there is a specified and immutable outer limit of time for raising any dispute as to the debt upon which reliance is placed.

That quite obviously was a correct submission. There was a specified and immutable outer time limit, but the High Court in David Grant was not called upon to consider the proper construction of section 459F. Indeed, on the contrary. Indeed, quite interestingly even the respondent’s counsel in David Grant made reference at page 268 of his argument:

As the legislation has specific provisions concerning the extension of time (eg ss 459F(2)(a)(i) and 459R(2)), the omission of such a provision in connection with s 459G is a clear indication that the twenty-one day period is deliberately rendered immutable.

There is no such similar immutability in connection with 459F(2)(a)(i) and, in my submission, it has been completely erroneous to misapply David Grant in the course of the last 10 years.

GLEESON CJ: Mr Selimi, I have just been looking at that Federal Court case of Vista Commercial Construction (1997) 79 FCR 288. Was that on a slightly different point, that is to say, whether the power to extend time to the extent to which it exists depends upon the existence of a concurrent challenge under 459G?

MR SELIMI: That is correct, your Honour, it did.

GLEESON CJ: Did Justices Burchett, Hill and Emmett express an opinion bearing on the question with which we are concerned?

MR SELIMI: No, your Honour.

GLEESON CJ: Thank you. Is there Federal Court authority on the question with which we are concerned, that is, the application of section 70 to section 459F?

MR SELIMI: There is Federal Court authority and, indeed - - -

GLEESON CJ: Is that Justice Ryan?

MR SELIMI: Justice Jenkinson is the first case, Livestock Traders.

GLEESON CJ: And Justice Ryan, but has the Full Court of the Federal Court considered this?

MR SELIMI: Not specifically, no, and, indeed, President Maxwell and Justice Neave and, indeed, Justice Ashley and Justice Nettle have all acknowledged that there has been no decision of the Full Federal Court dealing with the proper interpretation in terms of its facts, in terms of ratio decidendi, there is no decision of the Full Federal Court on point.

GLEESON CJ: How does that other issue with which Vista was concerned, that is to say, whether you need, as it were, a base in 459G before you can make an order under 459F, affect the present case? Was there in the present case at all material times a challenge under 459G?

MR SELIMI: There was, your Honour, at all material times there certainly was.

KIRBY J: Did Justice Ryan follow Justice Jenkinson?

MR SELIMI: Yes, your Honour.

KIRBY J: Or did he say, as Justice Chernov did, that that is the correct construction of the policy and language of the Act?

MR SELIMI: As I recall, your Honour, Justice Ryan followed Justice Jenkinson.

KIRBY J: What is your attack on Justice Jenkinson’s reasons? Is there anything additional to be said? Do not forget Justice Nettle said specifically “But whatever I think of this, this has been around for 10 years. Parliament has not changed it and if it is to be altered it should be altered by Parliament or by this Court”. It is a long time for a ruling to be around and for Parliament not to have changed it in an Act that is quite frequently amended and it is not a tiny little Act. It is an Act with a lot of detail in it.

MR SELIMI: Yes, your Honour, in terms of Justice Nettle’s approach to the matter, it is quite important to note that Justice Nettle did not subscribe to the views in Livestock Traders and, in fact, at paragraphs [119] through to [121] his Honour, in fact, entirely rejected the reasoning in Livestock Traders.

KIRBY J: Justice Jenkinson was an experienced judge. What was the line of his reasoning? Is it anything different from what we have already seen, or not?

MR SELIMI: The essence of Justice Jenkinson’s reasoning was summarised and set out by President Maxwell at paragraph [41] of President Maxwell’s judgment. Indeed, Justice Chernov essentially adopted the reasoning of Justice Jenkinson in Livestock Traders in terms of this concept of unalterability of time. Paragraph [41] of President Maxwell’s judgment which appears at page 311 of the authorised report sets out the relevant provisions of Justice Jenkinson’s judgment and his Honour President Maxwell then says at paragraph [42], which I respectfully adopt:

With great respect to his Honour, we consider that both the reasoning and the conclusion are erroneous. The analysis overlooks the critical distinction between ss 459G and 459F(2)(a)(i) to which we have referred, the former containing no power to extend time, the latter containing an express power to do so. It was simply not correct to posit – as his Honour did – that ss 459F and 459C(2)(a) “premise unalterability of the time as at which a company is to be taken to have failed to comply with a statutory demand once the period for compliance has ended at a time when the demand is still in effect”. When s 459F(2)(a)(i) is read with s 70 – as it must be – it can be seen that the Act’s premise is the alterability of that time.

Likewise, Justice Nettle dealt with that point.

GLEESON CJ: Well, before you pass there. They seem - the point they were making is that as a matter of legislative history, section 459F was put into the Act in the light of, as they would infer, the pre-existence of section 70.

MR SELIMI: As his Honour President Maxwell says – this is paragraph [43] of President Maxwell’s judgment and Justice Neave:

It is true, as his Honour pointed out, that s 70 is a general provision and that it pre-dated the enactment of s 459F, a more specific provision dealing with the time for compliance with a statutory demand. But, far from justifying a conclusion that s 459F is therefore toe be regarded as unaffected by s 70, those circumstances entail the opposite conclusion. When a specific provision like s 459F(2)(a)(i) , conferring a power to extend time, is inserted into an Act which already contains a general provision like s 70 dealing with powers to extend time, parliament must be taken to understand and intend that the general rule established by s 70 will apply to the specific instance constituted by paragraph (a)(i). This conclusion is inescapable once it is recognised that para (a)(i) confers a power of precisely the kind contemplated by s 70. Had it been parliament’s intention that s 70 should not apply to para (a)(i), express provision to that effect would have had to be made.

Now, I might interpolate there, your Honours, as I have indicated in my submissions in reply, section 33(1)(c) of the Bankruptcy Act contains an express exclusion of an application to extend the time for compliance with a bankruptcy notice. So if Parliament wanted to give rise to the same effect in the Corporations Act with respect to statutory demands, it could quite easily have done so. I deal with that point in my written submissions in reply. There is an express exception in section 33(1)(c) which is the analogous provision, general provision, equivalent to section 70. There is an express exception to extensions of time to comply with bankruptcy notices in section 33(1)(c) of the Bankruptcy Act.

Now, likewise, Justice Nettle was at pains to note in his Honour’s rejection of the submissions of the respondent - Justice Nettle said at paragraph [121] of his Honour’s judgment at page 335:

The respondent’s third point third point is an argument that the decision of the High Court in David Grant . . . established that the time limits imposed by Pt 5.4 of the Act permit of no extension. I do not think that is so. David Grant established that the time limit imposed by s 459G(2) is “an essential integer” of the right of application established by s 459G(1) or, to put it another way, that the time of making of the application is of “the essence of the provision”. Once such an application is made, the scheme of the Act appears to be that procedural regulation of the application, including the extension of time limits, is governed by the provisions of the Act, such as s 70, which apply generally to applications.

Interestingly there, his Honour refers, in footnote 163 to the recent decision of this Court in Gordon v Tolcher [2006] HCA 62; (2006) 231 ALR 582, where this Court, constituted by Chief Justice Gleeson, Justices Gummow, Hayne, Callinan and Heydon, considered a different set of provisions – section 588FF – but in the course of which reference was made to:

after the institution of an application the procedural regulation of the conduct of a matter is left for that particular state or territorial procedural law which is to be picked up by s 79 of the Judiciary Act.

In my submission, likewise consistent with Justice Nettle’s reasoning, after the institution of an application under section 459G, the “procedural regulation of the conduct” of that particular proceeding is vested in the hands of the Supreme Court which may exercise the very power conferred upon it by Parliament. If I may now turn briefly to the second point of this appeal, which is the so-called futility or utility point - - -

KIRBY J: May I get it clear, your application for orders is that we declare that the Supreme Court of Victoria and Justice Whelan and the judges of the Court of Appeal have the power and jurisdiction to decide what the merits require in the case and remit the merits to the Court of Appeal. Is that correct?

MR SELIMI: Yes.

KIRBY J: Is that not what we would normally do?

MR SELIMI: Yes, your Honour.

KIRBY J: Do you understand the respondent to oppose that? There is no notice of contention, I think, is there?

MR SELIMI: No, there is not, but the simple point – I did not wish to make any substantial submissions.

KIRBY J: Only Justice Ashley dealt, really, with the merits, if you can call it that.

MR SELIMI: That is so, but the second ground of appeal, if you like, which is referred to in the notice of appeal - - -

KIRBY J: You want us to decide the merits.

MR SELIMI: No, certainly not.

KIRBY J: I should think that would be the furthest thing you are wishing.

MR SELIMI: No. That is not my submission, your Honour.

The second point of the appeal, as indicated in paragraph [2] as being one of the central issues arising under the appeal, I make it clear in my written submissions that the second point will not arise if the Court upholds the first point, being the statutory construction point. The correct interpretation of the Act is that which was adverted to by four members of the Court of Appeal. My submission is this Court should adopt what was regarded as a preferable construction - - -

GLEESON CJ: The argument you are coming to now is an alternative argument.

MR SELIMI: Correct.

GLEESON CJ: And it is?

MR SELIMI: It is adequately summarised, and, indeed, I do not intend to ad lib the point. In the court below, in the Court of Appeal, President Maxwell summarises the approach that I took. Of course, I argued the point before their Honours below. At paragraph [56], page 315, President Maxwell and Justice Neave said:

Counsel for Aussie put at the forefront of his submissions an argument that, even if the time for compliance had expired and could not be extended, the company could not be denied a hearing of its appeal on the merits or – if the appeal were successful – the fruits of that success. That is, if on appeal the application to set aside the statutory demand succeeded, then the appeal court must be able to undo any consequences which had followed upon the failure of that application at first instance. Counsel for Aussie relied on the principle that a successful appellant is entitled to restitution, that is, to be restored to the position he would have been in had the correct decision been made at first instance.

Then reference is made by President Maxwell and Justice Neave to the case that I relied upon in part, in addition to the authorities referred to footnote 63, the cases of course being the first decision, Commissioner for Railways (NSW) v Cavanough [1935] HCA 45; (1935) 53 CLR 220 and the decision of the High Court in Commonwealth v McCormack [1984] HCA 57; (1984) 155 CLR 273 at 276 to 277. Then, of course, reliance was placed on Guss v Johnstone. So the submission, your Honours, that was put in the court below, indeed it was the first submission. It was the submission that I put at the forefront of my argument in support of the appeal.

GLEESON CJ: Now, I just want to be clear. I understand how, in support of the argument that you have been developing up to the present, you rely upon the need to preserve the utility of the rights of appeal.

MR SELIMI: Yes.

GLEESON CJ: But what you are now coming to is an alternative argument which is put on the assumption that the argument you have put so far is wrong. Is that so?

MR SELIMI: Correct.

GLEESON CJ: The hypothesis on which we are considering this argument is that section 459F(1) has, to use an expression that was used earlier, “already bitten”.

MR SELIMI: Yes, correct.

GLEESON CJ: Is it then this alternative argument that in some way the appeal court can by its order override the effect of 459F(1)?

MR SELIMI: In my submission, an appeal court exercising its appellate jurisdiction can set aside a statutory demand on its merits and the effect of that pursuant to section 459K is that upon the setting aside of the statutory demand it would have no effect. Section 459K of the Act states:

A statutory demand has no effect while there is in force under section 459H or 459J an order setting aside the demand.

Now, my submission, your Honour, is that in order to render effective the exercise of an appellate jurisdiction, an appellant pursuant to the right of appeal prescribed by the Supreme Court Rules, must have the right to challenge the correctness of the decision at first instance and if that decision at first instance being the decision of the Master is set aside, that is, the appeal judge finds, “I find there is a genuine dispute in relation to the existence of this debt” or “I find that there is an arguable set-off or counter-claim”, if the appeal judge is of that view, pursuant to his right to conduct a rehearing on a de novo basis pursuant to the Rules of court, then it is incongruous to suggest that the erroneous decision of the Master should be permitted to have any effect and, indeed, quite contrary to section 459K of the Act, to even contemplate such a consequence.

GLEESON CJ: There seems to me a measure of inconsistency between this argument and the argument about rendering rights of appeal nugatory. As I understand this present argument, it is that regardless of what has happened in relation to the matter of extensions of time, if an application under 459G goes on appeal and the Court of Appeal ultimately makes an order setting aside a statutory demand, for example, because it concludes the debt was not owing, then that will undo the effect of 459F(1).

MR SELIMI: Yes, that is correct, your Honour. However, the separate point that I make in relation to the second ground of appeal is that even if – of course, I do not resile from the policy underlying the need to have a power to extend time for compliance is to ensure that an appeal is not rendered nugatory or rendered otiose, but my second submission, an alternative submission, is that even if for the sake of argument a court does not have the statutory power to extend time pursuant to section 459F(2)(a)(i) of the Act together with section 70 of the Act, my submission is that the appellate jurisdiction of any superior court would be rendered otiose if it could not set aside the erroneous decision and deal with the consequences of any such order setting aside.

Indeed, consistent with Cavanough’s Case, once an order of the Master is set aside it no longer exists and the consequences flowing from that order likewise ought no longer exist consistent with section 459K. It really goes back to Lord Cairns in the case of Rodger, which is referred to in the The Commonwealth v McCormack at page 276. In a joint judgment constituted by their Honours Justices Murphy, Wilson, Brennan, Deane and Dawson, reference was made to the following at page 276:

“Restitutio in integrum is the right of every successful appellant”: per Lord Field in Cox v Hakes. An appellant who has satisfied a judgment for the payment of money is entitled, on the reversal of the judgment, to repayment of the money paid by him with interest -

Then reference is made to Lord Cairns upon which I rely.

KIRBY J: But hang on, if you do not have a right of appeal, you do not get to considering the merits. So, do you not have to overcome the impediment that has been thought to exist and if you do that is that not sufficient for you to win the appeal?

MR SELIMI: It would be sufficient, your Honour, but my submission is in the alternative, that is, in all of these cases dealing with Livestock Traders interpretation it has never been submitted – the submission that I am putting as the alternative argument has never been put, that is, as a matter of fundamental principle an appellate court, irrespective of the proper interpretation of the Act, provided there is a right of appeal, and in this case there was - - -

KIRBY J: But you would not get to that. The court would say, “You have a right of appeal but you did not exercise it in time, go away”.

MR SELIMI: But we did.

GLEESON CJ: No, I think you are assuming that section 70 does not apply to section 459F.

MR SELIMI: On the alternative, correct.

GLEESON CJ: Yes, and you are saying “I do not care about section 459F”.

MR SELIMI: Yes.

GLEESON CJ: “I care now about section 459G and I made an application to set aside a demand”.

MR SELIMI: Correct.

GLEESON CJ: “The application has failed”.

MR SELIMI: Yes.

GLEESON CJ: “Forget about extending time for complying with the demand, I want to appeal against my failure on my section 459G application”.

MR SELIMI: Yes.

GLEESON CJ: Your next step is, “If I succeed on my appeal, that is, if I succeed in getting an order that the notice of demand be set aside, I do not care whether time was extended or not”.

MR SELIMI: Precisely, and that is exactly how I put it before the Court of Appeal below and only President Maxwell and Justice Neave dealt with that submission in the way in which I put it as encapsulated in paragraph 56 of the judgment. Justice Chernov, nor did Justices Nettle or Ashley, did not deal with this alternative, separate and distinct argument. It goes back to his Lordship Lord Cairns:

“ . . . one of the first and highest - - -

GLEESON CJ: What page of 155 CLR are you now reading?

MR SELIMI: I am referring to page 276, your Honour.

GLEESON CJ: Thank you.

MR SELIMI:

“ . . . one of the first and highest duties of all Courts is to take care that the act of the Court does no injury to any of the Suitors, and when the expression ‘the act of the Court’ is used, it does not mean merely the act of the Primary Court, or of any intermediate Court of appeal, but the act of the Court as a whole, from the lowest Court which entertains jurisdiction over the matter to the highest Court which finally disposes of the case.”

GLEESON CJ: How was this in play before the Court of Appeal in Victoria in the present case? Had you appealed against the refusal to set aside the notice of demand?

MR SELIMI: Yes, we had appealed to Justice Whelan. It was an appeal de novo.

GLEESON CJ: Yes, but was it part of the appeal to the Court of Appeal?

MR SELIMI: Yes.

GLEESON CJ: That is to say what I might call – if I may use this expression – the merits of the application to set aside the notice of demand were in play in the Court of Appeal, were they?

MR SELIMI: The notice of appeal before the Court of Appeal, the first two grounds of the notice of appeal to the Court of Appeal raise this very issue, that is, the judge at first instance should have considered the merits of whether the demand should be set aside or not, irrespective of whether time for compliance could be extended. They were the first two grounds of appeal filed in the Court of Appeal, and those grounds are encapsulated in paragraph [56] of President Maxwell’s judgment. So putting aside this fine statutory interpretation point, we appealed to the Court of Appeal, as indeed President Maxwell indicated.

At the forefront of my submissions, even if time could not be extended, if the appeal were heard on its merits in terms of setting aside the original determination under section 459G, then consistent with the authorities to which I have already referred your Honour, we – that is the appellant – ought to have been entitled to the benefit of that order on appeal, such that there is no binding determination in relation to section 459G.

The matter is then remitted to the primary judge to consider on its merits because Justice Whelan - in this case, your Honour – did not consider the merits at all. The whole appeal was, as it were, hijacked by this preliminary objection to the competency of the appeal. The appeal was dismissed as incompetent without any consideration of its merits, and my submission was, in the Court of Appeal below, that that is simply not correct.

The appellate court, Justice Whelan at first instance, should have considered for himself whether the application under section 459G should have been allowed at first instance on its merits. Now, his Honour, with great respect, did not go into the merits at all because his Honour was of the view that there was no utility in doing so.

CRENNAN J: That is because in his view section 459F had already attached?

MR SELIMI: Yes, that is correct, your Honour.

CRENNAN J: That is the reason for finding the appeal incompetent.

MR SELIMI: That is correct, your Honour, but my submission is that in terms of effectuating the appellate jurisdiction of a judge on appeal from a master, whether the statutory demand was spent necessarily presumes that the statutory demand is a valid statutory demand, and if in fact a judge of the Supreme Court exercising his right of review on a de novo basis is of the view that the demand should be set aside on its merits, then the learned justice can set aside the statutory demand himself.

GLEESON CJ: Now, whether your argument is right or wrong, is this a fair way of putting it, it is one thing to say that the 459F(1) consequence having attached cannot be detached by an exercise of the power under section 70, but it is a different thing to say that the consequence under section 459F(1) will continue to have legal effect if an appellate court finds that the notice of demand should have been set aside and then makes an order setting aside the notice of demand.

MR SELIMI: That is precisely the submission.

GLEESON CJ: Or, to put it another way, it is not too late for an appellate court to make an order setting aside a notice of demand simply because there has never been an extension of time under 459F.

MR SELIMI: That is correct, your Honour, and I respectfully adopt – that is precisely how I put it, and, indeed, that is consistent with what this Court said in Guss v Johnstone, albeit in the context of the Bankruptcy Act and, indeed, that was constituted by your Honour Chief Justice Gleeson, Justices Gaudron, McHugh, Kirby and Callinan and at paragraphs [62] and [63], being the critical parts, if I can refer your Honours to that, at page 893 of 74 ALJR 884 their Honours in a joint judgment said:

There are examples of cases where appellate courts have considered, on their merits, appeals against decisions under provisions corresponding to ss 40(1)(g) and 41(7). It is true that there is no statutory grant of power to annul an act of bankruptcy, or to extend the time for compliance with a bankruptcy notice other than in a case where the conditions of s 41(6A) have been satisfied. Suppose, however, that it had been demonstrated to the Full Court that the decision at first instance was based upon an error of law, perhaps involving a misapprehension as to the test to be applied in considering whether the judge was satisfied within the terms of the statute. In such a case, the Full Court may well have set aside the declaration.

[63] We are unable to accept that whenever, in a proceeding under ss 40(1)(g) and 41(7), a judge at first instance has determined that he or she is not satisfied of the matter referred to in s 41(7), and has declined to interfere with the process initiated by a creditor, no appellate reversal of that decision, whether by the Full Court or by this Court, can alter the consequences of the decision.

My submission, your Honour, is that there is nothing surprising about what the unanimous Court said in Guss v Johnstone. It is simply exercising the appellate jurisdiction of the Court and the consequences follow as a simple result of the setting aside of the impugned order.

In my submission, there is no relevant distinction between the bankruptcy provisions and the Corporations Act. An application to set aside a bankruptcy notice can be made, for instance, on the basis that there is an application to set aside the judgment at first instance and the like. Likewise, an application to set aside a statutory demand can be made if there is a genuine dispute in relation to the existence or otherwise of a debt.

What is important in terms of a distinction to be drawn between the Bankruptcy Act and the Corporations Act, a fundamental distinction to be drawn between the two Acts is one which in fact is favourable to the appellant and that is, under the bankruptcy legislation you cannot request the official receiver to issue a bankruptcy notice unless there is a judgment of a court in relation to a debt. You then request the issue of a bankruptcy notice. The official receiver issues a bankruptcy notice. It is served. The person has 21 days within which to comply with the bankruptcy notice or can apply to have that bankruptcy notice set aside.

The difference in the Corporations Act is that any person can serve a statutory demand upon a corporation without a judgment. That makes it all the more important to ensure that rights of appeal are not rendered nugatory or otiose, because there is no judgment of any court as we stand here today which says that Aussie Vic owes the respondent anything. There has been no adjudication of that right.

So in circumstances where an appellant exercises the statutory right to have a demand set aside and then exercises a statutory right of appeal from the Master, in my submission, it is all more the reason in the absence of any prior judgment to ensure that the construction of the Act is not such as to render the appeal otiose.

HAYNE J: Just a matter of detail which does not alter the substance of your argument, but the source of the right of appeal is, I think, more accurately identified as rule 16.5 of the Supreme Court (Corporations) Rules 2003. Rule 16.5 then engages mutatis mutandis rule 77.05 of the
General Rules, but I think the root is found in the Corporations Rules, not the General Rules.

MR SELIMI: Yes, I am indebted to your Honour for that. In terms of mutatis mutandis, of course, Justice Nettle used that phrase in paragraph [119] where his Honour concluded in relation to a further argument:

that it would be futile to extend time after time has expired –

His Honour did not accept that submission. His Honour said:

In my view the answer to it is –

mutatis mutandis, the same as Justices Deane and Ellicott gave in Streimer v Tamas. If it please the Court.

GLEESON CJ: Thank you, Mr Selimi. Yes, Mr Collins.

MR COLLINS: If the Court pleases, can I depart from what I had intended to do and go, as a result of some encouragement of the Court, directly to the language of the relevant provisions and make submissions not based on an implication of limiting words in section 459F(2)(a)(i) about when the power to extend time can be exercised, but on whether there is a contrary intention disclosed by the operation of the provision of Part 5.4 and whether the exercise of that power could have any effect?

Can I do so, not in a void but by reference to the facts of this case and rather than go to the more extensive facts referred to in the example given in the written submission, rely on only two facts. The first fact is that on 4 July 2004, the time for compliance with the statutory demand, as extended by the order made by Master Efthim on 20 June 2006, expired at 4.00 pm on that day, at that time the statutory demand was still in effect. I suppose that is the second fact. The third is that, as at the same date, there was no compliance with the statutory demand.

The second fact I am going to refer to in examining the operation of the provisions and making submissions on their construction is that on 21 August 2006, that is within three months after the earlier date, when the time for compliance with the statutory demand had expired, the respondent made an application under section 459P for the company to be wound up in insolvency. For the reasons identified by Justice Hayne in the discussions with my learned friend, section 459F(1) cannot be construed in isolation from section 459C(2)(a), not only for the general reason that it must be construed in its context – and is very obviously part of the relevant context being part of the same statutory code introduced by Part 5.4, but because that is the very purpose of section 459F(1) – to determine whether or not the statutory presumption arises under section 459C(2)(a).

Can I then turn to the language of section 459F(1). If, as at the end of the period for compliance with the statutory demand and on the first date I have referred to – 4 July 2006 – that time, as determined in accordance with section 459 subsection (2)(a)(i), was the time for compliance in accordance with the last order extending time, that being the order of Master Efthim.

So as at that time, that is 4.00 pm on 4 July 2006, the period for compliance came to an end, the second phrase is the demand is still in effect. The demand was still in effect because it had not been set aside. We know that is the proper construction because you go to the terms of section 459K and it provides:

A statutory demand has no effect while there is in force under section 459H or 459J an order setting aside the demand.

There was no such order. So the demand still being in effect, that condition is satisfied, and the company has not complied with it, that was the fact on 4 July 2006 at 4.00 pm, being the relevant time, the company is taken to fail to comply with the demand at the end of that period. So there are no difficult questions of ambiguous construction of terms, it is simply applying the literal meaning of the language of the statute, and applying that literal language of the statute, the consequence is a fact. The fact is that at 4.00 pm on 4 July 2006 there had been a failure to comply with the statutory demand as defined by section 459F(1).

Can I then turn to the construction of section 459C(2):

The Court must presume that the company is insolvent if –

the first question of fact arises under the statute –

during or after the 3 months ending on the day when the application was made -

The relevant date on the facts of this case is the date of the application made by the respondent under section 459P, that date being 21 August 2006, so that is the relevant inquiry. It is a temporal inquiry as to whether within that period (a) the company has failed, in the past tense, during the preceding three months from the relevant date, being 21 August 2006, as defined by section 459F directing us back to the question of fact to be determined in accordance with section 459(1), but as at the relevant time, being the period preceding the application “to comply with a statutory demand”. We know that that the answer to that question is yes, for the reasons that I previously referred to, by simply applying the literal terms, the literal language, of section 459F(1).

KIRBY J: But the experience of humanity is that people get out of time. District Court and, no doubt, County Court lists on Fridays are packed with people who have to go along there to get extensions of time because there has been a slip and, therefore, for default of time or for other default a question arises as to whether a court has a power to extend and generally if you give that power to a court, especially a superior court, it is given a very broad ambit to cover the myriad of circumstances that apply to it. So why should one not take that view in this case, including out-of-time applications? I mean, we used to have them in the Court of Appeal of New South Wales every Monday. I have got out of time when I was a solicitor. I have written it up. I was a most conscientious solicitor. I realise that in this case the appellant says it did bring its appeal within time, but the primary judge, holding himself bound by past authority, would not really get to the merits.

MR COLLINS: The application by way of appeal was made within time. The application for an extension of time was not made within time. It was made on, I think it was, 26 July, a couple of days before the hearing of the appeal before Justice Whelan.

KIRBY J: Obviously somebody had slipped and thought that the first application was enough.

MR COLLINS: Yes.

KIRBY J: These things happen. Lawyers are fallible.

MR COLLINS: Yes, such as people slip up and do not make the application in time under section 459G.

KIRBY J: You really have to embrace Justice Chernov’s theory, have you not, that the whole scheme of the Act is designed to encourage speedy and prudent and vigilant attention to your rights and if you fall out, well, there are public interest reasons why that is then strictly held against you.

MR COLLINS: We do two things. Certainly, we do that and we come back to that shortly and demonstrate how that is consistent with the operation of section 459C(2)(a) and other circumstances, for example, the failure to make application within time. Perhaps on a simpler level, because your Honour’s proposition, with respect, that it is a slip rule does not take into account, with respect, the fact that it is a substantive presumption of insolvency that arises by operation of the section.

The answer to your Honour’s question is perhaps, accepting the facts that I have relied upon for my argument as to what the proper construction is, your Honour’s argument would have to be that because after there had been a failure to comply and after the issue of the application and despite the fact that there can be no doubt that as at 4 July at 4.00 pm the statutory presumption arose, provided the application for insolvency was made within three months, and just as it was clear that once the application was issued and benefit of the statutory presumption clearly attached and just as it is clear on whatever construction is sought to be made of the language, as I stand here now making the submissions to the Court, the respondent has the benefit of that statutory presumption that is attached.

KIRBY J: That is so but the request is to, as it were, out flank the statutory presumption and go back and attack it at the jugular at the beginning.

MR COLLINS: But, with respect, it cannot be done at the beginning because that time has passed.

KIEFEL J: But the statute itself provides that the presumption can be overcome. What has occurred is an alteration of the onus.

MR COLLINS: That is true.

KIEFEL J: That is subsection 459C(3).

MR COLLINS: But that is not merely procedural. It is intended to have an operation to facilitate, consistent with the scheme of act, that once the fact I have referred to has occurred, that is the fact in answer to the inquiry that subsection (2)(a) directs the Court must embark on that factual inquiry, that once that fact occurs and that is the answer to the inquiry, that then the application being made within the specified period of three months that the application will proceed without delay and uncertainty arising by reason of issues that could have been raised prior to the attachment of the assumption in an application to set aside the statutory demand, save for the determination of the ultimate question which is the solvency of the company and only then with leave and only if it is relevant to the determination of that ultimate question.

GLEESON CJ: Mr Collins, this question does not relate directly to the circumstances of the present case, but suppose you have a case where an application is made under section 459G to set aside the demand upon the ground referred to in section 459J(1)(a), that is the ground “of a defect in the demand” causing “substantial injustice”.

MR COLLINS: Yes.

GLEESON CJ: And, suppose, the application fails at first instance and the judicial officer at first instance declines to grant an extension of time to comply with the demand and there is then an appeal and the appellate court at a time after the events you describe have occurred, the appeal court decides that there is a defect in the demand causing substantial injustice, is the effect of your argument that the Court of Appeal can do nothing about it?

MR COLLINS: Yes.

KIRBY J: It is a surprising effect, is it not, in this day and age?

MR COLLINS: With respect, no, it is not, because - - -

KIRBY J: It sounds a little bit like Bleak House.

MR COLLINS: It is not, with respect.

KIRBY J: Given the infinite variety. I mean, you may well win on the merits, having read Justice Ashley’s case, I could well understand, but that has not ever really been got to.

CRENNAN J: There is a tiny issue in the sense if you are right, you have to postpone the contest about the validity of the statutory demand, if the appellant is right, you have it straight away in respect of it and there would be an argument, would there not, that there might be some advantage, however you describe it, in permitting that earlier rather than later?

MR COLLINS: No, with respect, that would not be the result. The result would be that the presumption immediately arose and just as under section 459G, the attachment of the presumption, meaning that it proceeds, however harsh the unalterable time at which the presumption arises is - - -

KIRBY J: You sound as though you are addressing the High Court of the Meads and the Persians.

GLEESON CJ: In the example that I gave, when, if ever, would the issue about the alleged defect in the notice of demand causing substantial injustice be determined? Would it be a matter in play on the hearing of the winding-up application?

MR COLLINS: Only if it was relevant to the solvency of the company under section 459S, and then if it could be demonstrated, the Court being persuaded that that was a sufficient basis for leave, which if it was relevant to solvency in those circumstances we would submit it would be, well then it could be raised. So you would not be entirely shut out, but the application would still proceed on the basis of the statutory presumption and on the basis that the issue that could have been raised, or was raised unsuccessfully, to set aside the statutory demand - - -

GLEESON CJ: So the consequence is that a defective demand – that is the hypothesis I am making - will be the foundation of a presumption of insolvency and unless the defect in the demand is otherwise relevant to the insolvency, it will not be a matter with which the court determining the winding-up proceedings will concern itself.

MR COLLINS: That is so, and it would only be if the court took the view that the winding up of an insolvent company was inconsistent with the intended operation of the Act and what is in the interests of the statutory scheme for the winding up of insolvent companies, that that would be a harsh or surprising result.

GLEESON CJ: All against a background where if the company is not insolvent it has the capacity, with leave, is that right, to demonstrate that that is so?

MR COLLINS: Without leave they can always demonstrate their solvency because that is really effectively - - -

GLEESON CJ: Solvency will always be in play.

MR COLLINS: Yes.

GLEESON CJ: In fact, solvency will always be the real issue.

MR COLLINS: It is the real issue, yes. If it is relevant to that issue, well, then leave will be granted, with respect, except in exceptional circumstances it would seem. That seems to be the whole purpose of the ability that there can be leave in those circumstances.

HAYNE J: My memory of what was said in Harmer is no doubt defective, but I have a memory of Harmer saying, in effect, that a purpose of the provisions was to focus the application for winding up upon solvency and not other issues.

MR COLLINS: Yes.

HAYNE J: I would be very grateful to have reference to Harmer and whether yet again my memory proves entirely wrong.

MR COLLINS: I think the paragraph your Honour is referring to, which I hope was included in our list of authorities, is not perhaps quite that clear, but properly understood in that way, and it is referred to in a number of the decisions. I will come back to that in a moment.

HAYNE J: Do not trust my memory, Mr Collins. I do not, why should you?

MR COLLINS: I do know the paragraphs and I just have not found it. My learned junior will identify it.

GLEESON CJ: Defects in notices of demands are a bit like defects in bankruptcy notices. When it came to things like calculating the interest owing, it was almost impossible to get it right in some circumstances.

MR COLLINS: It is true. The paragraph deals with that. It was intended to, or part of the provisions was to avoid arguments about technical defects, but it does go on to say – and I will make sure it is correct by identifying it in a moment – that once the winding-up application is commenced, they should be able to proceed in an orderly and timely fashion and not then be subsequently delayed by issues that relate to the statutory demand, that is the effect of it.

We say that is consistent with the statutory regime or code. In answer to the proposition that it seems odd that there is no provision for extension of time which might result in the presumption of insolvency arising from a defective notice, that is not nearly so severe as the consequences of section 459G. That is part of the same code indicating the statutory intention that, once it attaches, the presumption does arise notwithstanding that that might be so.

If I could come back to section 459G to demonstrate that, which is aided by, again, the decision of this Court in David Grant – and I will come back to a specific provision in a moment – but section 459G(2) means that:

An application may only be made within 21 days after the demand is so served.

It does not matter how good the reason for the failure to comply with the notice. It may be that the sole director, who had the intention and did everything he could to give instructions to a solicitor, suffered an aneurysm and collapsed and was in a coma for five days and therefore could not take the steps necessary to ensure the application was made. It could be that the grounds for an application, if it could be pursued, were extremely strong and had a high probability, almost a certainty, of succeeding. But although that is so, we know, because this Court has decided it, that the court would not have jurisdiction to entertain an application seeking to set aside the statutory demand.

One of the reasons for doing so, as Justice Gummow observed in his reasoning, was that you have to look, as well as the precise language in which that section is expressed, or subsection, at how it relates to section 459F and section 459C and the period can only be extended if an application is made in accordance with 459G. The application would not have been made in accordance with 459G having being made outside the time prescribed so the consequence then occurs by reason of the operation of section 459F(2)(b). The application not having been made in accordance with subsection 459G(2), a failure to comply with the demand occurs.

Again, the relevant fact that the court has to enquire into for the purposes of determining whether the statutory presumption arises by operation of section 459C(2)(a) and the answer to that factual enquiry will be just as it is in the example I have given, that the statutory presumption does arise, because the answer to the relevant factual inquiry will be yes. That is notwithstanding the statutory demands may have been defective. There may have been very genuine grounds for dispute.

KIRBY J: But all presumptions in law are a form of fiction and a court looking at a statute where there is a presumption against all the possibilities that it sees on a Monday or Friday morning; somebody is on the plane in Indonesia which overruns the runway and crashes and is the only person who can give – and is in hospital for weeks and cannot take action. I mean, courts are courts of justice. Once you are in the judicature and come to courts, you normally expect that they will look at substantive justice and Parliament by conferring jurisdiction on courts is taken to accept that that is what courts do and should do. So if we balance the presumption against the reality and experience of everyday life – I would hesitate to ask you if you never got out of time. I did once as a solicitor, I never forgot it, and I was very conscientious.

MR COLLINS: But the consequences of being out of time are prescribed by the statute, and it is not a question of whether it is just - - -

KIRBY J: Are they prescribed inflexibly?

MR COLLINS: Yes, with respect, they are and certainly are in respect of 459G. That has been considered by this Court and decided.

KIRBY J: Yes, but that is said to be special and different and distinguishable - - -

MR COLLINS: Well, it is different.

KIRBY J: - - - and Justice Gummow was careful in his reasons to relate David Grant only to G.

MR COLLINS: I accept that and I accept that it is distinguishable, clearly so, but in terms of the statutory code, it is an answer to the proposition that your Honour advances for the purposes of testing our argument that, can it be that the proper construction is that a meritorious appeal – because an application to set aside was wrongly refused, can it be in those circumstances the presumption will nevertheless arise, because surely that cannot be what the legislation intended? Now, the answer to that is it can have intended that because to intend that is not nearly so harsh and unlikely as the consequences that arise in respect of the failure to make application with time under section 459G because 459G you do not even get off the mark. You do not get any opportunity, however good your excuse for delay - - -

KIRBY J: That is because of express provisions in that section.

MR COLLINS: Yes.

KIRBY J: Whereas here you do not have those express provisions. On the contrary, you have section 7 in play and section 9 definition in play which expressly say that Parliament has turned its attention to the fact that the application itself may be made out of time.

MR COLLINS: But, with respect, they do not say that the application of those provisions have the effect that the statutory presumption does not arise or can have that effect. Our submission is that, although it is different language, just as the language in 459G(2) perhaps more clearly has the consequence that a defective demand can give rise to the statutory presumption, we say similarly the application of the express language of the statute has the same consequence.

HAYNE J: There are two elements of that argument to which I think some attention may need to be given perhaps after the adjournment or perhaps before. First, your argument is one which assumes that in 459F(2)(a)(i) the expression “last such order” is to be identified at a time other than the time of application for winding up.

MR COLLINS: It depends whether your Honour means the times of application consistently with the terms of section 459C(2). It is the date of making application by the originating - - -

HAYNE J: Section 459C(2) fixes a period of time ending on the date of application for winding up?

MR COLLINS: Yes.

HAYNE J: Prima facie, one would look to identify the last such order when it is spoken of in 459F(2) as an order made at any time before the date of application for winding up.

MR COLLINS: If that was so, we would still succeed in the facts of this case because there had been no order to extend time prior to the making of the application.

HAYNE J: That is the root of the complaint made by the appellant, that he had not been able on appeal to the single judge from the Master to procure that result. Leave that aside for the moment, I understand how, in the events that have happened, there has been no compliance. But the second point I want to inject into the debate is that compliance with the demand may have to take account of the fact that the demand has a temporal element. Yes, it is a demand for money, but under 459E(2)(c) the demand has a temporal element. That then invites the question of whether there is not at least a difficulty, tension, incongruity in dealing with that temporal element of an identified demand after it has expired in a way that would lead to the conclusion that there has been no failure to comply with that demand having as it does a temporal element. Those are two matters which I think need some consideration in the course of argument.

MR COLLINS: Should I commence that now? It is quarter to 1.

GLEESON CJ: Yes, commence, now.

MR COLLINS: Your Honour, the answer to both the questions is, again in the express language of the relevant sections. Your Honour’s first proposition is that perhaps the time at which there has to be a failure to comply for the presumption to arise is – construing section 459C(2) – perhaps the proper construction is the date when the application is made, the facts of this case being 21 August 2006 but, with respect, that is not the question raised by the express terms of the provision.

The question is if – so that the question is has there been – during or after the three months ending on the day when the application was made? So the question is, has there been on any day during that period? It is not whether as at the time when the application has been made there is non-compliance. There is two answers and the second element really goes to the second question your Honour formulated by reference to section 459E(2)(c). So, the statute expressly provides when there has to be a failure to comply and it does not ask whether there has been a compliance. That is a relevant distinction between the language of this section and the language, for example, of section 40(1)(g) of the Bankruptcy Act. There it is a question of does not comply so the question is, is there compliance.

Here it is not a question whether there is compliance because clearly if the time is extended it then gives a further opportunity to comply. The question is whether there has been a prior failure to comply within the relevant period, being the period to which the section by its express language directs the question to be addressed to. So that again coming back to the case because it is not a question whether on the date of the application there is non-compliance, or there is failure to comply, it is whether during or after the three months, so whether at any time or on any date during that period, there has been in (a) it is expressed the company failed, past tense, the company did something in the past, an event has occurred.

GLEESON CJ: A related question – we may come back to this also after lunch – is what is the content of the concept of setting aside a demand under section 459G?

MR COLLINS: The answer to that, with respect, is in sections 459H and 459J.

GLEESON CJ: All right. We will adjourn until 2.15, Mr Collins.

AT 12.47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.19 PM:

GLEESON CJ: Yes, Mr Collins.

MR COLLINS: If the Court pleases. Can I respond to some questions that arose during this morning, firstly, in response to your Honour Justice Hayne’s question. I think the relevant passages in the explanatory memorandum were those that are referred to by Justice Chernov in his judgment in paragraph 89 that appears at page 86 of the appeal book and at paragraphs 665 and 689 of the explanatory memorandum which are referred to in our list of authorities and are available. A good context in which to consider them, it is submitted, is the judgment of Justice Chernov because he then goes on to refer to, helpfully with observations made by Justice Gummow, in David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 at 270 and quotes the following passage in paragraph 89 of his judgment, that is Justice Chernov’s judgment:

“The provisions of the new Pt 5.4 constitute a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly.”

Earlier he quoted from the relevant passages in the explanatory memorandum. Firstly he quoted from paragraph 665 of the explanatory memorandum after his own words:

To that end, the legislation sought to provide for the speedy resolution of –

and then the quote commences –

“disputes in relation to the existence or amount of a debt ... in a way that will not impede the resolution of an application for the winding up of a company in insolvency”.

Then later quoted from paragraph 689 of the explanatory memorandum:

the scheme “provides a means of dealing with statutory demands in such a way that an alleged defect in [it] does not have the effect of prolonging proceedings leading to the commencement of a winding up, by requiring debtor companies to raise genuine disputes at an early stage, rather than after winding up proceedings have commenced.”

Those passages are not as clear as they might be expressed but they do indicate a scheme divided into two parts. The first is the statutory scheme relating to statutory disputes and there can be three outcomes. One is compliance with the statutory demand before the expiry at the time for compliance, the demand spent. The second is the statutory demand is set aside before the time for compliance. It is set aside. It is spent. There is no subsequence operation by operation of section 459K. The third, if neither of the first two occurs, is that there is a failure to comply in the time for compliance.

Once that occurs, the statutory scheme provides for a statutory presumption and contemplates the commencement of a winding up application within three months of that date, section 459C(2)(a) and consistent with that scheme, that once that has commenced, with the view that the winding up application will then proceed in a timely and orderly fashion without the interposition of disputes or delays has resulted disputes that could have been raised within the timeframe and the scheme provided for challenging the statutory demand, save for the exception or, as it has sometimes been referred to, the safety net provided by section 459S.

So that, broadly speaking, that is the code. It is to move forward disputes about the statutory demand to the period prior to a failure to comply and then once a failure to comply has occurred, the procedure for statutory demands and challenge them is spent, has no further operation. You move on to the winding-up application with a timeframe and with the provision of a statutory presumption. So that the disputes that could have been raised earlier cannot, therefore, delay and be interposed save if they are relevant to solvency.

HAYNE J: The passages I had in mind were, I think, paragraphs 137 and 157 of ALRC 45, in particular, at paragraph 137 where the Commission was discussing its recommendation to abolish the deeming effect of a statutory demand, that a company was deemed unable to pay its debts and supplant it with a presumption:

The Commission’s approach, coupled with provisions which are designed to overcome defects in notices of demand, will more clearly permit the court to exercise a discretion in relation to defective notices of demand and may avoid winding up proceedings against a company being dismissed for technical or minor defects when the company is clearly insolvent.

Then in 157:

The Commission recommends that proceedings for winding up in insolvency should not be affected by reason of a defect or irregularity in proceedings unless the defect or irregularity is such that the court concludes that there has been substantial injustice and that it cannot be remedied by an appropriate order (such as an adjournment or order for costs).

MR COLLINS: Yes, and they are consistent, of course, with the provisions of sections 459H and 459J which are the provisions which we go to answer your Honour the Chief Justice’s question as to what is the substance of the basis upon which or grounds on which a statutory demand would be set aside. I will not read them but they are set out – and then there is the – the limitations are set out there and to achieve the objectives that are referred to in the explanatory memorandum and in section 459J(1) power to set aside demand:

On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or –

the general provision –

(b) there is some other reason why the demand should be set aside.

GLEESON CJ: What does the court do in the ordinary case where it is satisfied there is a genuine dispute?

MR COLLINS: It sets aside the demand or it can modify it in accordance with the provisions in 459H.

GLEESON CJ: Sends it off to litigation, in effect.

MR COLLINS: I am sorry, your Honour.

GLEESON CJ: It goes off to be litigated, in effect.

MR COLLINS: Yes, that is true, rather than to proceed to winding up or if it is set aside you then do not have the argument about the debt in winding-up applications.

GLEESON CJ: What if waiting in the wings there is another creditor? Under this scheme can the other creditor be substituted?

MR COLLINS: Not at that stage because there is then no winding-up application and that is why it is done in this orderly fashion where disputes about the statutory demand are to be determined and, we would submit, determined finally in the terms in which it has been interpreted in Buckland and, if you like, the blind comes down on that phase of the statutory scheme once there has been a failure to comply and then you move on to the winding-up application itself.

The language is entirely consistent throughout it, as you would expect in what is a statutory code because that is consistent then with the language used in section 459K that once the statutory demand and the application to set aside has been dealt with, section 459K provides:

A statutory demand has no effect while there is in force –

but not prior thereto –

under section 459H or 459J an order setting aside the demand.

GLEESON CJ: Your argument may be right but it is, is it not, that this is a distinct phase of the proceedings which is to be completed before the application for the winding up is made?

MR COLLINS: Yes. Once you reach the stage at which the winding up application is to be commenced, that is within three months of a failure to comply – which really is premised, as Justice Kenny found, in the Gears Case, is implicit that, once it has occurred – it is not that it is unalterable before it has occurred prospectively but once a failure to comply has occurred on the expiration of the period for compliance and the consequence then attaches under section 459C(2)(a), that time is unalterable as a consequence.

GLEESON CJ: Yes. That is tidy but it becomes a bit messy if somebody appeals against a decision under section 459G, does it not?

MR COLLINS: No, it does not, with respect, because of the construction of section 459F(2)(a)(ii) accepted by the Court of Appeal of Victoria in Buckland which is it is finally determined on the hearing at first instance notwithstanding an appeal.

GLEESON CJ: No, I meant to ask you, your theory is that there is this phase, the statutory demand phase, it comes to an end and the next phase is the application for winding up.

MR COLLINS: Yes.

GLEESON CJ: But what if there is an application to set aside the notice of demand under 459G, an appeal against a refusal to set aside the notice of demand which takes six months to come on and be heard?

MR COLLINS: Buckland operates unless there is an extension of time before the time for compliance expires. In that situation the decision at first instance will operate so that it will be seven days after the decision at first instance unless there is an extension of time before the expiration of that period. So that the appeal, as was decided in Buckland, will have no utility because the statutory presumption will have occurred.

GLEESON CJ: So the judicial officer against whose decision the appeal is brought can, in practical effect, render his or her decision unappealable by refusing to extend time pending the hearing of the appeal.

MR COLLINS: Unless, before the time for compliance expires, some other judicial officer grants the application for an extension of time, yes.

HAYNE J: Which is where the Wilson v Church principle becomes engaged; that you should not refuse the extension if there is an appeal as of right unless the appeal would be frivolous, vexatious or there would be some other powerful reason to refuse extension.

MR COLLINS: Yes. So if the application for extension of the period for compliance was made before the seven days after the decision in first instance or such longer period as it had been extended to when the application was dismissed, then provided there is an arguable appeal normally for the reason that - - -

HAYNE J: Step one is, is there an appeal as of right? Now, there is an appeal as of right from a Master to a single judge and there is an appeal as of right by rehearing de novo.

MR COLLINS: Yes.

HAYNE J: Absent special reason to conclude that the exercise of that right of appeal was somehow for improper purposes or otherwise flawed, would you accept that extension should go until the hearing and determination of that appeal?

MR COLLINS: With respect, no, consistent with the statutory scheme and that there is no automatic extension by reason of appeal and that is the only, with respect, consistent construction with the decision in Buckland, then it would only be – it is like leave to appeal from an interlocutory decision.

HAYNE J: No, not leave. This is appeal as of right.

MR COLLINS: That is so but whether it needs to be protected so that you would construe the section so that that right of appeal was not rendered nugatory or restricted improperly by the statute, it would be a matter of construction of the statute and it is our submission on the proper construction of the statute the legislature has provided that unless you obtain the extension of time before the period for compliance has expired, then you will lose that right of appeal because the statutory consequences will attach in a way that cannot be undone. But it does not operate in a way that is entirely hostile but the proposition that rights of appeal properly exercise the bona fide reasons when there is an arguable appeal should be preserved because there is a mechanism to do so but it requires application to be made promptly, consistent with the statutory scheme, and unless there is demonstrated to be a bona fide appeal that has prospects of success that would be the principle discretionary consideration, it is submitted, the power to extend time would not be exercised and if it was not exercised, then, as Buckland decides, the appeal would have no utility because it would be futile because the statutory regime relating to the statutory demand having come to an end, the consequences attaching, you move on to the winding up phase.

With respect, there is nothing harsh or unfair about that in a way that is inconsistent with the statutory scheme. That was the legislative intention. I come back, that is the only construction of the Act consistent with the decisions which are not challenged in David Grant and in Buckland. David Grant, the decision of this Court, and Buckland, the decision of the Victorian Court of Appeal. Otherwise, the mere exercise of the right of appeal effectively means there must be an extension of time unless you can demonstrate abuse or something of that nature. It is driving a cart and six horses through section 459 if - - -

HAYNE J: The difficulty, Mr Collins, is one of history that I should reveal. It was a principal motive for the establishment of the corporations list in the Supreme Court of Victoria so that the appeals from Masters were brought on on the Friday next after for their determination. It is a matter of history which is probably utterly irrelevant.

MR COLLINS: Yes. Perhaps I should take the Court to the passage in Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2003] VSCA 85. The relevant passage is at paragraph 9 and it is the last two sentences of that paragraph in the judgment of Justice of Appeal Phillips with whom the other members of the court agreed:

There can be no occasion, in my opinion, for adopting a construction of s 459F(2)(a)(ii) that would require that the consequence prescribed by sub-s (1), having once attached, should then be undone because of the exercise of some right of appeal. Once that consequence attached, it remain attached (as indeed Gummow, J was disposed to suggest in David Grant, albeit in a slightly different context).

GLEESON CJ: Is this [2003] VSCA 86?

MR COLLINS: Yes.

GLEESON CJ: What paragraph was that?

MR COLLINS: VSCA 85, and it is paragraph 9 in the judgment of Justice of Appeal Phillips.

HAYNE J: I suspect we have the costs.

GLEESON CJ: I see. We seem to have a different - - -

HAYNE J: I think we have the costs judgment, not the substantive judgment in which the solicitor for the appellant I think was ordered to pay them personally, was he? Yes.

MR COLLINS: I think that might have been referred to in the appellant’s list of authorities, but our list of authorities refers to [2003] VSCA 85.

KIRBY J: We have got 86.

MR COLLINS: I refer to that paragraph which is consistent with the argument that we advance, as is the passage in David Grant, which I will go to.

KIRBY J: Is that exactly the same as Justice Jenkinson’s reason?

MR COLLINS: No, it is not. I do not know that I understand your Honour’s question. Are you referring to the reason given by Justice of Appeal - - -

KIRBY J: Justice Phillips.

MR COLLINS: It is, but in a different context, because in Buckland there had been no extension of time nor an application for an extension of time relevantly. So the appeal was on the grounds whether the determination at first instance where there was a right of appeal constituted the final determination. The decision addressed the language of 459F(2)(a)(ii) which extends the period for compliance until seven days after the final determination.

The reasoning of the court was, well, it had only been extended until that time and therefore the appeal from the failure to set aside the statutory demand was futile because there would be no utility in it. The consequences attaching by operation of section 459C(2)(a) attaching, there being no mechanism for them to be undone, it had the consequence that your Honour the Chief Justice was asking me about. That is the end of the matter.

Justice Jenkinson’s reasoning was different because he was dealing with the paragraph that we are dealing with, that is section 459F(2)(a) where there is an application to extend time and whether there is power then to extend time and whether there would be utility in doing so if the consequences have already attached. The reasoning is the same insofar as it says once the consequences have attached they cannot be undone.

Perhaps before going to the passage in David Grant it is relevant to address the second question that Justice Hayne directed to me before lunch and that is the relevance of the period for compliance with the demand as required by section 459E(2)(c) and whether that gives rise to some tension or inconsistency. It is submitted it does not because it is consistent with section 459G(1) which requires the application to set aside a statutory demand to be made within the period for its compliance.

It is consistent with section 459F(2)(b) which has the effect that if there is neither compliance within the time required by section 459E(2) and nor is there an application to set it aside within the time period, which is the same set out in section 459G(2), then the statutory presumption of insolvency attaches by reason of the failure to comply with the demand at that time by operation of section 459C(2)(a). It is also consistent because if, within that timeframe, the application is made within the 21 days, so therefore in accordance with section 459G(2), then section 459F(2)(b)(ii) will operate so that by reason of the application having been made the time for compliance will automatically have been extended without any application for extension by operation of the provision until seven days after the application “is finally determined”, which means determined at first instance, as construed in Buckland.

Then the statutory consequence will only fail to attach at that time if the application has been set aside if, before the expiration of the seven-day period, either when the order setting aside is made or otherwise on application by the court, before the expiration of that period. So that again it is a consistent and structured code which operates in the way that we submit and all the timeframes fit comfortably with each other, which was one of the features that led Justice Gummow to his conclusion in David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 that I should now go to. The passage I wish to go to commences at the bottom of page 277 where his Honour made the observation:

In addition, the question whether s 459G is supplemented by a power to extend the time for making an application thereunder should be considered in the light of the consequences upon the presumption of insolvency under s 459C(2). That presumption is an important element of the scheme of Pt 5.4.

If your Honours were then to go to the paragraph that commences about halfway down the page:

These matters emphasise the importance of s 459G as an integral part of the particular scheme established by Pt 5.4. Paragraph (d) of s 1322(4) empowers the court to make an order where the period concerned ended before the application to extend it is made. An application to set aside the demand made not within the twenty-one days specified in s 459G but within another period allowed pursuant to an order under s 1322(4), could not modify what otherwise would be the operation of the definition of the “period for compliance” with the statutory demand set out in s 459F(2).

Consistent with the construction I have just taken the Court through:

That in turn would not change the answer to the question posed under s 459C(2) as to whether the court must presume the company to be insolvent because it had, within the period there specified, failed “as defined by s 459F” to comply with the statutory demand.

For these reasons –

and I accept not the only reasons. His Honour, of course, had regard to the particular language of the section –

the requirement in s 459G that the application to the court for which it provides [must] be made only within twenty-one days after service of the demand should not be treated as supplemented or qualified by the operation of s 1322(4).

So central to the reasoning was the scheme of the Act and that the scheme of the Act provided in a consistent way upon the expiration of the period for compliance and the period for making an application to the statutory demand and then the operation of section 459F for a point in time which was then unalterable at which the consequences attached by operation of section 459F(2) and the stage was reached where, whatever the merits of the explanation for the failure to comply with the time limit or whatever the merits of any prospective appeal or application if it is under section 459G, that position became unalterable once the presumption had attached. It had attached the answer to the statutory question, the question posed which is whether the condition upon which it attaches had been satisfied, was yes.

That is entirely consistent with the argument we advance and it is not an argument based on reading into section 459F(2)(a)(i) words of limitation such as the express words in section 459R. We say it is the consequence of the operation of the provisions in accordance with their literal terms. So that an extension of time cannot have the effect of undoing the statutory demand, that once there has been a failure to comply, as defined in section 459F, the operation of the statutory demand is spent and therefore there is nothing upon which section 70 could operate so as to have any effect once that time is reached.

So it is quite a different argument to implying or reading into a section granting a power to extend time words of limitation. It is recognising that the section in which that power is implied – because it is not expressly granted but the language of the section implies that there is power to do it because it refers to orders being made but it operates in such a way that there would then be no effect if it were extended after that time. There cannot be a power to extend time in circumstances where there would be no effect. That is the argument and, in our submission, that also addresses the observation validly made by our learned friend that express words such as those used in section 459R could have been included but were not. It addresses that point.

Can I then move on to address the Court on the proposition that that is the consequence of section 459. I do so by reference to the decision of Justice Sheppard in Streimer v Tamas. What we say about Streimer v Tamas broadly is the passage that Justice Nettle referred to as being applicable mutatis mutandis cannot be simply adapted to this provision for the reasons given by Justice Chernov. You are dealing with a provision that is expressed in different language in a different statutory context. It is not the argument we wish to advance in this Court that the view expressed by Justices Deane and Ellicott is incorrect. We do not need to do so and it does not arise. It simply does not determine what the proper construction of the provisions we are concerned with in the Corporations Act mean.

The relevance of Justice Shephard’s decision is the way in which he concluded that section 33 of the Act had not applied in the form of the Bankruptcy Act before the amendments introduced that were the subject of consideration in that decision and a long line of Australian authority and an English Court of Appeal decision in which it was found that, although section 33 – and I will take you to the provision shortly – had provided a general power to extend time even after time for compliance had expired, that did not enable time for compliance with a bankruptcy notice to be extended after it had expired because it could have no effect because you could not annul an active bankruptcy.

Now, that is the same argument we rely upon in respect of section 70 of the Act, effectively. We do not have to argue whether or not his conclusion was correct on the construction of section 41(6A) of the Bankruptcy Act because it is a very different provision in a very different statutory scheme.

If I could then go to Streimer v Tamas [1931] ArgusLawRp 35; (1981) 37 ALR 211 and go to page 217, and at line 21 his Honour refers to the decision of King v Henderson and identifies the provisions of the Bankruptcy Act in the form that then applied. Section 33, as it then was, provided the court with power to extend time:

before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act for doing an act or thing or abridge any such time -

and that that had been in identical form to the section 27(2)(c) of the 1924 Act. Then his Honour pointed out that:

Since the amendment effected in 1980, s 33(1)(c) of the 1966 Act - the current Act - has been as follows:-

“The Court may –

...

(c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under the Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time.”

So that the amendments excluded the operation of section 33(c) and then introduced a specific provision dealing with the extensions of time for compliance with bankruptcy notices, and it was that section the subject of argument in the case. But for my purposes I wish to draw attention to section 33 as it was before that amendment, which was in similar terms to section 70 of the Corporations Act and the line of authorities his Honour refers to about the application of that section, which was in similar terms to section 70. That commences at page 218 in the second paragraph on that page where his Honour observed:

Courts exercising bankruptcy jurisdiction both in England and Australia early recognized the necessity for a procedure to enable debtors to test the validity of bankruptcy notices, for example in cases where it was alleged that there was an irregularity, bad service or payment of the debt. Notwithstanding the silence of the legislation on the point, it was decided that an application could be made to set aside the bankruptcy notice and that the court would, in an appropriate case, extend the time for compliance therewith until the application to set aside had been disposed of. The court considered that it had power to extend time by reason of the provision of s 33 of the Act or its predecessor –

corresponding to section 70. The next sentence is the one that we rely upon:

But the authorities required that the application for extension of time be made and dealt with prior to the time limited for compliance or any previously granted extension thereof.

That was because, despite in its terms section 33 permitted an extension of time after the time for compliance had extended, because the act of bankruptcy would otherwise have occurred, it could not operate to undo what had occurred, just as we submit an extension of time after the attachment of the statutory consequences of a failure to comply cannot be undone. There is a long list of authority that his Honour then considers, consistent with that proposition, that extends into page 219. Then I draw particular attention to the decision of the English Court of Appeal that is referred to by his Honour at page 219, line 21, the case of:

It is Re a Debtor (No 6864 of 1980), The Times newspaper, 21 May 1981.

The decision has been required in the Weekly Law Reports which I will provide to the Court:

There it was held that there was no power under s109(4) of the Bankruptcy Act 1914 (UK) to extend the time for allowing a debtor to file an affidavit relating to a counter-claim, set-off or cross demand against his creditor after 10 days, when, by virtue of s 1(g) of the Act the debtor had committed an act of bankruptcy, nor was there power to extend the 10 day period fixed by s 1(1)(g). Section 109(4) of the English Act is in similar terms to s 33(1)(c) of the Australian Act as it was prior to the amendment effected in 1980.

and, as I have observed, similar to section 70 –

It empowers the court to extend time for doing any act either before or after the expiration thereof. A difference between the two provisions, which I consider to be immaterial, is that the English provision does not contain the words, “if this Act does not expressly provide to the contrary” before the words “after the expiration thereof”.

Eveleigh LJ is reported as saying that the question was whether the court had power to extend time in such a way “as to cancel or revoke that act (the act of bankruptcy) or deem it never to have occurred. If the court extended time it would be refusing to recognize the consequence which Parliament had said should ensue. Once there was a failure to satisfy the court of a counter-claim it was properly to be seen as a condition which had been fulfilled and had given rise to the consequence that an act of bankruptcy had been committed”. The decision in Re a Debtor is in line with the Australian authorities.

It is consistent with the argument we advance as to why section 70 does not have effect once the time for compliance has been reached and there has been a failure to comply. His Honour’s conclusion in that particular case which we do not rely on because his was a dissenting view on the construction of whether there was power to extend under section 41(6A) but it is relevant in terms of how the conundrum arises and is expressed. It starts at line 35 on page 221:

One consideration persuades me, however, that the appellant’s submissions should be preferred to those of the respondent. It is the fact that there is not to be found in the Act any express power, in circumstances such as here exist, to annul or set aside the act of bankruptcy which has been committed.

Just as there is now power to set aside the consequences of the attachment of the statutory presumption under section 459C(2)(a) –

That was the consideration relied upon by Lukin J in the passage earlier cited from his judgment in Re Grace, supra, and was also the matter relied upon by Eveleigh LJ in Re a Debtor. In that respect the Act in its present form is no different from what it was before the amendments came into force. Whether one says that upon the proper construction of sub-s (6A) there is no power to act after time has expired or whether one says, although there is power, it is pointless to exercise it because one cannot undo the act of bankruptcy which has, by force of s 40(1)(g), been committed is a matter which I find it unnecessary to determine; although, by reason of the existence of a special sub-section dealing with extensions of time in relation to bankruptcy notices, I tend to favour the former view.

So the process of reasoning consistent with a long line of authority on a provision very similar to section 70 is on all fours with our argument as to why section 70 does not apply and have the effect contended by the applicant. I do not propose to read the passages referred to in Justice Sheppard’s judgment from Re a Debtor [1981] 1 WLR 1205, but I have copies to provide to the Court.

The question then is, well, that being said, what of the conclusion of the majority in Streimer at page 215 commencing at line 10 and down to line 31:

We do not accept the proposition that, in the absence of an independent power to annul an act of bankruptcy, an order extending the time for compliance with the requirements of a bankruptcy notice would be futile if it were not made within the time initially fixed for compliance or some persisting extension thereof. The power conferred by s 41(6A) is a power to “extend” the previous period of time. It is not a power to establish a new, distinct and independent period of time for compliance. The effect of an order extending the time for compliance, which is made after the expiry of the time originally fixed and any previous extension thereof, will be to enlarge the overall time allowed for compliance with the result that what would otherwise have constituted an act of bankruptcy no longer does (cf Esso Research and Engineering Co v Commissioner of Patents [1960] HCA 31; (1960) 102 CLR 347 at 351). Ignoring any transitional problems where special considerations may be applicable, this does not mean that s 41(6A) operates so as retrospectively to divest rights to rely upon an act of bankruptcy which would otherwise exist. What s 41(6A) does is to modify, by the introduction of a contingency, the actual and potential rights and liabilities resulting from failure to comply with the requirements of a bankruptcy notice within the time allowed by the notice in a case where, within that time, one of the two conditions specified in the sub-section has been fulfilled.

In response to the suggestion that those observations can be applied mutatis mutandis to section 459F(2)(a)(i), as Justice Chernov concluded, that just does not start to address the problem that we are dealing with a different provision differently expressed in a different statutory context and it cannot operate in the way suggested in this passage because it is inconsistent with the language of the statute for the reasons that have been advanced. A specific factual question is posed by the section and when that question is answered, it has the consequence that the respondent contends for.

It is futile to start embarking upon an argument as to whether this conclusion is correct, but we do not have to challenge the correctness of the conclusion of their Honours in that case and we do not, but we point out, as Justice Ashley did, some striking differences. There was no statutory scheme for dealing with statutory demands. The legislature had failed to act on the recommendations in the Harmer Report to introduce a corresponding code in the Bankruptcy Act. The critical provisions that we rely upon, being sections 459F and 459C and their interrelationship, have no corresponding provisions in the Bankruptcy Act. There is no provision corresponding to section 459S, so that it is an entirely different statutory context.

So the arguments that we advance based on the provisions of Part 5.4 of the Corporations Act could not apply to the Bankruptcy Act. It is a different code. Just to give an example, I have emphasised that section 459C operates by reason of a past fact, not a failure to comply, that is, a non-compliance, but the fact that there has been a failure to comply at an earlier time. That can be contrasted, for example, with section 40(1)(g), the operative provision in the Bankruptcy Act which.....an act of bankruptcy occurs if the debtor does not comply with the requirements of the notice. So that if the time within which compliance can occur is extended, then there could be compliance. It is quite a different thing to see whether there could prospectively be compliance.

The question on the construction of these provisions favoured by Justices Deane and Ellicott could operate and section 459C which asks a question, has within a previous period there been a failure to comply as defined, which requires addressing the specific language of section 459F in that context. They are our submissions on the construction of sections 459F and 459C.

I then move to address the order that the appellant seeks in the notice of appeal. I am sorry, I have not dealt with one thing, which was your Honour Justice Gleeson’s question about whether there was any consideration of the construction issue in any decision of the Full Federal Court. There has been, although not in the context of a ratio, but there have been obiter observations in Vista Commercial v Commissioner of Taxation (1997) 79 FCR 288. At page 296G – in fact, at the paragraph commencing halfway between points F and G the Court noted:

As noted earlier, there have been a number of judgments of single judges of this court which have considered generally the question of extending time for compliance after the hearing of the application to set aside has concluded.

There is reference to Livestock and the decision of Justice Jenkinson. Then the observation is made in the last two lines of the page:

That there could be no utility in extending the time for compliance with a demand, once the time for compliance had passed, and no jurisdiction to do so would seem self-evident.

That was that Court’s observation. In Equuscorp Pty Ltd v Perpetual Trustees WA Limited [1997] FCA 1366; 25 ACSR 675, the court, without really considering the arguments either way, observed at line 43:

Provided an application for an extension is brought before the expiry of the period fixed for compliance, that period can be further extended even if the s459G application has been determined -

A number of the single judge decisions and the High Court decision in David Grant are then cited, but there is no consideration of the arguments in that case.

KIRBY J: Will you give me the citation of that again.

MR COLLINS: It is [1997] FCA 1366; 25 ACSR 675 at 701, commencing at line 43. What can be said is that the decisions in the Court of Appeal go through the previous authority in a comprehensive way.

KIRBY J: You only carried one.

MR COLLINS: We only carried one there.

KIRBY J: On the merit.

MR COLLINS: No judge who considered it had formed a view other than the same view as Justice Jenkinson until that time. Justice Kenny had not simply adopted the reasoning that Justice Jenkinson had considered it separately, as had Justice Ryan. We have referred to the relevant passages in our written submission and they are also referred to in the Court of Appeal judgment. We accept that ultimately they are arguments and reasons that inform the court as to what the proper construction is, rather than determining it, unless the matter was so finely balanced that the court said, “It’s so finely balanced, we can see no reason to depart from previous authority”. But there would have to be, it is accepted, a very fine balance indeed once we are in this Court. I wish to move on to the second question. The question does arise because of the terms - - -

KIRBY J: Is there any discussion in any of the Company Law Reviews about this problem? One would have thought that this is the type of matter that would excite some young academics.

MR COLLINS: Not that we have discovered.

KIRBY J: Assume ones comes to a point where there are arguments both ways, as the very learned judges who have considered it have come to different views, what works best in the company law situation? Is it to reserve residual powers to allow individual justice, or is it to have a strong rule in defence of a high public policy of corporate solvency?

MR COLLINS: The legislature formed a clear view about that, it is submitted, which is clear from the provisions in the Code – for example section 459G.

KIRBY J: But is a “clear view” differentially expressed?

MR COLLINS: With respect, no. A consistent legislative intention operating consistently through the regime - you have the statutory regime and once a time for compliance has been reached with an extant notice and it is not complied with, that is it – the statutory presumption.

KIRBY J: Are there any articles on Justice Jenkinson’s original decision?

MR COLLINS: Not that I am aware of - - -

KIRBY J: What is happening to the young academics nowadays?

MR COLLINS: There has not been a controversy about it, your Honour. Can I take the Court to the notice of appeal which is at page 125 of the appeal book and under the orders sought at page 126, the third order sought - - -

KIRBY J: You do not have a notice of contention on, have you?

MR COLLINS: No, I have not.

KIRBY J: You have not sought to get us to have a plunge into Justice Ashley’s consideration of the merits and say all of this is a waste of time, in this case it is entirely futile and - - -

MR COLLINS: We do.

KIRBY J: You do? How can you do that without a notice of contention?

MR COLLINS: Because it arises on the orders sought by the appellant, with respect, and the notice of contention is not required, because we do not say the Court of Appeal was required to determine that question.

HAYNE J: But do you seek to uphold the orders made below on a ground other than - - -

MR COLLINS: We do, but we do not say that the court erroneously failed to find it. The Court of Appeal was not asked by our learned friends to make the order that our learned friend asked this Court to make. In the Court of Appeal our learned friend asked for the matter to be sent back, and so the question of whether or not there was any substance in the appeal or whether it was hopeless arose on the question of whether there was substantial injustice on the question of whether leave to appeal should be granted. So it arose in that context and was fully argued as to whether there was any merit in the Court of Appeal but in that context.

Now, we do not say the court erroneously failed to decide it, so the operation of the rule relating to notice of contentions does not rely and even if it did, it is procedural and the justice of this case, it is submitted, does require the question to be determined if the Court can do so without improper inconvenience to the Court and consumption of its time. We would accept if it is a matter that there are weighty arguments either side, the Court would send back, but - - -

KIRBY J: Is that not the correct relationship between the High Court and the intermediate courts on a matter of this kind where for years there has been a line of authority and then suddenly it is questioned and it involves a consideration of detailed facts and it has not yet been done except by Justice Ashley and Justice Nettle I think agreeing with Justice Ashley.

MR COLLINS: He did not agree with him on that point. He did not address it. The only member of the Court of Appeal who addressed whether there were any prospects of the appeal succeeding was Justice Ashley, but it is only being considered by two judicial officers. Master Efthim said there is no genuine dispute - - -

KIRBY J: But it was not by the corporate decision of the Court of Appeal because of the different streams that they went in.

MR COLLINS: No, that is true. It has not been determined.

KIRBY J: No.

MR COLLINS: But this Court is in a position to determine it, just as Justice Ashley said the Court of Appeal was. All the relevant material is there. It is not as though you have finally determined the matter of the debt or the validity of the statutory demand. As Justice Hayne observed in Mibor, it does not require and warrant lengthy consideration. You have the advantage that there are detailed consideration of what the actual material was and why the contentions of the appellant that there was an arguable appeal, it was not a finely balanced thing. I will just take you to some of Justice of Appeal Ashley’s conclusions at appeal book 107, paragraph 135:

Aussie was only deprived of the opportunity of advancing a hopeless contention that there was a genuine dispute about the existence or amount of the debts the subject of the demand; or that it had a genuine offsetting claim. To deprive Aussie of that opportunity would work no injustice, still less substantial injustice.

136 This Court is equipped and is able to reach the conclusion which I have just expressed.

KIRBY J: But if it is hopeless, why would this Court grant special leave, and if that is the line this Court goes down, that is a reason for revoking special leave. Instead of giving a lot of obiter on – what is that?

MR COLLINS: With respect, no. Special leave was granted notwithstanding those observations and without examining whether the application for an extension of time and whether the application - - -

KIRBY J: It was granted to let this Court resolve a matter on which the Court of Appeal had divided and in respect of which there was a decade of fairly settled authority.

MR COLLINS: Of course, that was the special leave question that attracted this Court’s attention.

KIRBY J: I must admit I am affected by the fact that Justice Nettle and Justice Ashley ultimately decided the case on the basis of the settled authority and that it should be left to this Court to resolve it. On that footing, armed with the decision of the President and Justice Neave, the proper course in the absence of a notice of contention seems to be for us to resolve the point of principle then send it back to the Victorian courts. That is respectful of their right to decide matters of substance which have not yet been decided.

GLEESON CJ: Are you not embarking on a contention that the judgment ought to be upheld on the ground that the court below has failed to decide some matter of fact?

MR COLLINS: With respect, it has erroneously failed to decide.

GLEESON CJ: Yes, it has failed to decide a matter of fact.

MR COLLINS: But there was no error in failing to do so in the Court of Appeal.

HAYNE J: You are injecting a word into the rule, Mr Collins, which is not there – “has erroneously decided, or has failed to decide”.

GLEESON CJ: “[H]as erroneously decided” comma, I think, “or has failed to decide” comma.

HAYNE J: Yes. You are sliding two thoughts together, I think. The rule is 42.08.5:

has erroneously decided, or has failed to decide, -

You are at least alleging there has been a failure to decide, are you not?

MR COLLINS: But they did not need to. It was not before them, and the question here is an appeal seeking an order, amongst other things, that the extension of time be granted. That is the application. The material is all before the Court. If our learned friend – we have a statutory demand that is dated March 2006. There could be no criticism - - -

GLEESON CJ: We will not deal with this argument in the absence – there being no notice of contention, we do not think that this argument arises for our decision.

MR COLLINS: As the Court pleases. That only leaves for me to address the contention that even if our contention is accepted that there is no power to extend time, that there would still be utility in considering the appeal from the decision refusing to set aside the statutory demand and we submit there would not be, for the reasons advanced, that is, that you could not disturb the presumption of insolvency and the appeal would therefore have no utility. That conclusion is entirely consistent, whereas the appellant’s contention is entirely inconsistent with the decision of the Victorian Court of Appeal in Buckland at the conclusion of paragraph 9 that I have taken the Court to, and would mean that effectively, contrary to the decision in Buckland as well, an appeal effectively extended the time even though that was contrary to the statutory provision.

Thirdly, it is inconsistent with the prospective operation of section 459K which is if an order is set aside it only operates while the order setting aside under section 459H or 459J operates, so the statutory demand would still have had effect until that time.

The decisions such as Wilson v Church and Erinford cannot give the court power to undo what arises by operation of the statute because it does not arise by reason of any error of the court - the statutory presumption - it arises by the operation of the Act. Unless there are any other matters that the Court would wish me to address, they are our submissions.

GLEESON CJ: Thank you, Mr Collins. Yes, Mr Selimi.

MR SELIMI: Just very briefly in reply, your Honours. My learned friend submits that section 70 does not have effect once the time for compliance has expired. In my submission, such a submission is entirely inconsistent with the plain meaning and effect of section 70 itself. The time for compliance may be extended even after the expiry of a previous period of time and that is clear from the very definition of the word “extend” which specifically incorporates section 70 within the definition section.

Secondly, your Honours, in my submission, my learned friend referred somewhat selectively to the decision of this Court in David Grant, in particular my learned friend referred to page 278, the second paragraph, but omitted reference to the second part of the second paragraph – this is at page 278 where their Honours – in that case his Honour Justice Gummow - dealt with the text of section 459F. But what Justice Gummow was mindful to note after setting out the effect of section 459F was:

On the other hand, if an order has been sought setting aside the demand, the period may be a longer one, as detailed in sub-pars (i) and (ii) of par (a). However, this will only be so if, in the terms of par (a), the company itself “applies in accordance with section 459G” -

which, of course, is precisely what the appellant did. Of course, secondly, your Honours, it is quite clear from his Honour’s judgment from page 277, it is quite clear, in my respectful submission, that it was germane to the High Court’s decision in David Grant that the statutory scheme within Part 5.4 contained its own powers and procedures for the court to extend time thereby introducing a degree of flexibility to mitigate hardship or unfairness which may otherwise result from a strict application of section 459G, and in that regard I rely upon the passage at page 277 where Justice Gummow said in the second-last paragraph:

Further, it is significant that the scheme established by the new Pt 5.4 itself contains specific provisions conferring upon the court an express power to extend time. First, the court may make an order extending the period for compliance with the statutory demand. If the company applies “in accordance with section 459G” to set aside the demand, then an order extending the time for compliance may be made. The order may be made either on the hearing of the application under s 459G or on an application by the company under par (a) of s 459F(2). Such an extension may itself be extended on further application (par (a)) -

which is precisely what my client has done, with great respect.

Finally, your Honours, if I may refer, or perhaps penultimately, if I may refer to the judgment of President Maxwell and Justice Neave where their Honours dealt with this concept of undoing of consequences and unalterability, at paragraphs [53] and [54] at page 314 of the authorised report their Honours said:

The construction which we consider must be given to para (a)(i) and s 70 does mean that the consequence prescribed by s 459F(1), having once attached, may subsequently be undone, because of an exercise of the power to extend the time for compliance. The present case can be used to illustrate this point. The time for compliance, as extended by the master, expired on 4 July. At that point, the effect of s 459F(1) was that the company was taken to have failed to comply with the statutory demand. If, subsequently, in aid of the hearing of the appeal, the judge had exercised the power under para (a)(i) to extend the time for compliance, that consequence would have been undone. This follows from the words “the last such order” in para (a)(i). The putative order made by the judge would have been “the last such order” and the date fixed by that order would have become the relevant date for the purposes of s 459F(1).

Finally, their Honours concluded at paragraph [54]:

That this “undoing” may occur is simply the consequence of the operation which must be given to para (a)(i) when read with s 70. It is no function of this court to decide whether the “undoing” of the s 459F(1) consequence is a good or a bad thing, when parliament has enacted provisions which, unambiguously, enable that to occur. Were it necessary to decide, however, we would have thought that the “undoing” of the consequence was entirely unobjectionable, given that the putative extension of time enables the company to pursue its ordinary appeal rights in respect of its application to set aside the statutory demand.

Finally, your Honours, in relation to this question of Buckland, Buckland, of course, dealt with the proper construction of section 459F(2)(a)(ii) rather than (i), and it was in that context that their Honours concluded, in particular President Maxwell and Justice Neave, at paragraph [55]:

In Buckland, by contrast, the court was considering two competing interpretations of the phrase “finally determined”, in (a)(ii), one narrower and one broader. The court preferred the narrower interpretation, so as to avoid the “undoing” of the s 459F(1) consequence. No such question arises in this case.

So their Honours did not need to address the question of whether Buckland had been correctly decided. However, my learned friend submitted to your Honours that Buckland was not challenged. In fact, that is not correct. The grounds 5 and 6 of the notice of appeal to the Court of Appeal, which is at page 49 of the appeal book, directly challenged Buckland, but their Honours felt no need to reverse Buckland or to consider its correctness because it dealt with an entirely different subsection.

GLEESON CJ: Thank you, Mr Selimi.

MR SELIMI: If it please, your Honours.

GLEESON CJ: We will reserve our decision in this matter and we will adjourn until 10 o’clock tomorrow.

AT 3.32 PM THE MATTER WAS ADJOURNED