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High Court of Australia Transcripts |
Last Updated: 7 November 2011
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S167 of 2011
B e t w e e n -
ACN 078 272 867 (IN LIQUIDATION) (FORMERLY ADVANCE FINANCES PTY LIMITED)
First Plaintiff
ACN 087 623 541 (IN LIQUIDATION) (FORMERLY CIVIC FINANCES PTY LIMITED)
Second Plaintiff
and
COMMISSIONER OF TAXATION
First Defendant
THE FEDERAL COURT OF AUSTRALIA AND JUDGES THEREOF
Second Defendant
Office of the Registry
Sydney No S210 of 2011
B e t w e e n -
GARY BINETTER
Plaintiff
and
COMMISSIONER OF TAXATION
First Defendant
THE FEDERAL COURT OF AUSTRALIA AND JUDGES THEREOF
Second Defendant
Applications for an order to show cause
HEYDON J
TRANSCRIPT OF PROCEEDINGS
AT SYDNEY ON WEDNESDAY, 2 NOVEMBER 2011, AT 9.28 AM
Copyright in the High Court of Australia
____________________
MS R.L. SEIDEN: Good morning, your Honour, I appear with my learned friends, MS S. KAUR-BAINS and MR N. KULKARNI, for the plaintiff in both matters. (instructed by Signet Lawyer Pty Limited)
MR M.L. BRABAZON, SC: May it please the Court, I appear with my learned friend, MR A.J. O’BRIEN, for the first defendant in both matters. (instructed by Australian Government Solicitor)
HIS HONOUR: Let us deal with affidavits first. You rely on the affidavit of Mark Craig Douglass - - -
MS SEIDEN: Yes, your Honour.
HIS HONOUR: - - - which was sworn on 10 May 2011.
MS SEIDEN: That is correct and, your Honour, if convenient, I read that in both proceedings.
HIS HONOUR: Do you object to any part of it, Mr Brabazon?
MR BRABAZON: No, your Honour.
HIS HONOUR: Do you wish to cross-examine Mr Douglass?
MR BRABAZON: I do not, thank you, your Honour.
HIS HONOUR: The other one you rely on is Melissa Care, an affidavit sworn on 6 October 2011?
MS SEIDEN: Yes, thank you, your Honour.
HIS HONOUR: You rely on - - -
MS SEIDEN: In both proceedings.
HIS HONOUR: Shall we take the stay affidavits as well?
MS SEIDEN: Yes, if convenient, your Honour.
HIS HONOUR: There we have Judith Emily Sutton, affirmed on 25 October 2011.
MS SEIDEN: Yes, thank you, your Honour.
HIS HONOUR: And Melissa Care of 26 October 2011.
MS SEIDEN: That is correct, thank you.
HIS HONOUR: Gary Robert Binetter of 25 October 2011.
MS SEIDEN: Thank you, your Honour.
HIS HONOUR: Do you rely on those in both proceedings?
MS SEIDEN: That is correct.
HIS HONOUR: Do you object to any parts of those last four affidavits?
MR BRABAZON: No, your Honour, and I do not require any of the witnesses for cross-examination.
HIS HONOUR: Thank you.
MS SEIDEN: Your Honour, there is one further piece of evidence that the plaintiffs rely upon and that is the liquidator’s consent, which was filed on 29 June 2011 and it is not part of an affidavit.
HIS HONOUR: I note that.
MS SEIDEN: Thank you, your Honour.
HIS HONOUR: Mr Brabazon, you I think rely upon the affidavits of Tristan Cleary. The first was affirmed on 26 September 2011.
MR BRABAZON: Yes, your Honour.
HIS HONOUR: Do you object to any part of that, Ms Seiden?
MS SEIDEN: No, your Honour.
HIS HONOUR: And you do not want to cross-examine Mr Cleary?
MS SEIDEN: No, thank you.
HIS HONOUR: The second one is again Tristan Cleary, an affidavit of the same date in the other proceedings?
MR BRABAZON: Your Honour, there are two identical affidavits made 26 September 2011 in both proceedings. If it is convenient I read either one of them, but - - -
HIS HONOUR: The first one we took is sufficient for all purposes. Very well, well that one is taken as read and we need not bother about the other one. That leaves us with Tristan Cleary’s affidavit, affirmed on 28 October 2011.
MR BRABAZON: Yes, your Honour, and that is in the stay.
HIS HONOUR: Do you object to any part of that?
MS SEIDEN: No, your Honour.
HIS HONOUR: That concludes the evidence then.
MS SEIDEN: Yes, it does, your Honour.
HIS HONOUR: Very well. I have read, I may say, all that evidence and I have read the very helpful written submissions of both sides.
MS SEIDEN: If I could perhaps hand up an outline of argument, a road map, if your Honour pleases. I have given my learned friends a copy. I think, your Honour, perhaps, I formally ought to read the amended applications to show cause filed in court on 12 September 2011 and the summons seeking a stay filed 26 October 2011 in each of proceedings 167/2011 and 210/2011.
HIS HONOUR: I have read those documents.
MS SEIDEN: Thank you, your Honour.
HIS HONOUR: Let me just take a minute or two to glance through your outline.
MS SEIDEN: Certainly, thank you.
HIS HONOUR: Yes.
MS SEIDEN: Thank you, your Honour. If it is convenient if I could take your Honour to the evidence, without labouring any points, just to make a few observations? If I could take your Honour please to the liquidator’s consent?
HIS HONOUR: I remember it well, but I cannot actually lay my hand on it. Maybe you could deal with it without me actually looking at it?
MS SEIDEN: Yes certainly, your Honour. The words of the consent are that:
I MAX DONNELLY, of Level 13, 225 George Street, Sydney in the State of New South Wales Liquidator for the Plaintiffs –
and these are the important words –
consent to the Plaintiffs bringing these proceedings.
The consent was filed and it is dated 29 July 2011, which postdates the date for filing of the applications to show cause in the proceedings for the companies. The plaintiffs contend that the consent, in those words, is nevertheless read to be both prospective and retrospective. In a case of - - -
HIS HONOUR: Can I just interrupt? I do not think any point is taken about that. I think that, as I understand it, the first defendant accepts that there is consent for the bringing of the proceedings, but disputes that it extends to the stay application.
MS SEIDEN: Yes, but the first defendant appears to make a point of the fact that the consent was obtained later and it was not clear to the plaintiffs whether, in fact, a point was being made on the substantive proceedings. But I certainly take your Honour’s point that the first defendant is making an issue of the consent for the stay.
HIS HONOUR: Mr Brabazon, you take no point, do you, on the capacity of the companies to bring the proceedings and argue the case today, even though they did not get the consent before they instituted the proceedings?
MR BRABAZON: No, your Honour. It is, as your Honour summarised it a moment ago to my learned friend.
MS SEIDEN: Thank you, your Honour. With respect to the stay, your Honour, the plaintiffs contend that the stay is necessary to protect the subject matter of these proceedings. As an interlocutory matter in these proceedings it was apt for the plaintiffs to bring the proceedings, but, in any event, Mr Gary Binetter seeks the same relief in the stay and there is no question as to his standing. It is accepted that the liquidator’s consent was not sought for the bringing of the stay application.
Your Honour, if I could turn to the affidavit of Mark Craig Douglass. At paragraph 6 it is highlighted that the companies were originally incorporated in April 1997 as finance companies and at paragraph 9 they were deregistered in November 2006. At paragraph 11, the proceedings Nos 44 and paragraph 12, 41 of 2010 the Commissioner sought orders pursuant to section 601AH(2) of the Corporations Act to reinstate those entities and upon reinstatement have the entities wound up. Mr Gary Binetter was granted leave to be heard in those proceedings and that leave is at exhibit 4, which I do not need to take your Honour to.
At paragraph 16 it is noted that on 16 December Justice Jagot delivered judgment in those proceedings and if I could take your Honour briefly to the orders? They are exhibit 5. Unfortunately, your Honour, the exhibits are not paginated, but it is I think page 22 of the evidence.
HIS HONOUR: Yes, I have exhibit 5.
MS SEIDEN: Thank you, your Honour, and the third page in are the orders that were made. The one that I have is for Civic Finance and the first order is that the registration of Civic be reinstated. It is immediately apparent then, looking at the orders, that prior to this time the companies were obviously still deregistered. Then order 4:
Upon reinstatement of the registration –
the ACN, which was formerly Civic –
be wound up.
Order 5 –
Max Donnelly of Ferrier Hodgson, an official liquidator, be appointed liquidator -
Orders 4 and 5 are what the plaintiffs refer to as the winding-up orders that they seek quashed by these proceedings. Your Honour, it is immediately apparent that the company was not a party to these proceedings and that the company did not exist at the time that these orders were made.
There have been two constructions of the order in the series of proceedings that have led to the plaintiffs bringing these proceedings. The first is that either the order purports to wind up a non-existent company and that is that the order has simultaneous effect and that the companies are being reinstated in a different form to that which they were in before deregistration, which the plaintiffs contend, particularly for the reason that section 601AH(5) exists cannot be the proper construction of the order. The second construction is that there is a moment in time when the companies are first reinstated and then wound up and that second construction leads to the plaintiffs’ second point, which was the wrongful denial of natural justice.
Either construction, the plaintiffs contend, discloses jurisdictional error. The first, the wrongful assumption of jurisdiction, concerns the nature and scope of the winding-up jurisdiction and it is contended that that is limited to winding up a company. If I could take your Honour back to the substance of the affidavit. The orders were stayed - this is at paragraph 16 on page 4. The orders of Justice Jagot were stayed until 4.00 pm on the first return date of the leave to appeal.
The affidavit states that it was for a period of 21 days from the date to enable Gary Binetter to file and serve an application, but the stay application was conditional that if an application for leave was filed the stay extended until the first return date. That is apparent from exhibit 7, order 2.
Mr Binetter applied for leave to appeal the orders of Justice Jagot and Justice Perram dismissed that application on the basis that Mr Binetter had no standing to bring the leave to appeal. His Honour did not consider the merits of the appeal. There was no right of appeal from that decision of Justice Perram, it being an interlocutory decision of the Federal Court. Paragraph 20 of the affidavit discloses that “On 4 March 2011, the orders made by Justice Jagot” on 16 December “were finally entered”, but it was not until 11 March - which is at paragraph 24 - that the companies were actually reinstated to the register.
At a time before the companies were reinstated Mr Binetter sought leave to be heard in the original proceedings to set aside the winding-up orders on the basis that the companies had been denied procedural fairness. Her Honour held that first Mr Binetter did not have standing to make such an application, but, in any event, the companies’ rights had not been affected because they were not in existence at the time the orders were made and they, in effect, came into existence in a different form than they had been before they had been deregistered.
Relevantly, your Honour, as far as the plaintiffs apprehend it the Commissioner does not now contend that the orders were simultaneous, but in the event that they maintain that submission the plaintiffs contend that that reading of the order is not open for the reasons that I will take your Honour to in a moment.
Mr Binetter sought leave to make an application on behalf of the companies to appeal the decision of Justice Jagot and to have the winding-up orders set aside. That application was dismissed by Justice Stone in a decision on 21 October, on the basis that there were no reasonable prospects of having the winding-up orders set aside for the reason that section 601AH(3) gave the court power to make the winding-up orders against a non-existent company when a company was also being reinstated. Relevantly, your Honour, that submission had not been propounded by either of the parties before her Honour and her Honour did not have the benefit of the plaintiffs’ submissions that a construction was not open that section 601AH(3) gave the court power to make such winding-up orders.
Your Honour, that takes me then to the next affidavit. The next affidavit, which is Melissa Care of 6 October 2011 - and I will go to this very briefly, your Honour. It is to demonstrate that the companies have now filed objections to the tax assessments that have been issued since they have been reinstated and to demonstrate that these objections have reasonable prospects and that the objections directly contradict the Commissioner’s contentions that there is an underlying debt and include probative evidence to support the plaintiffs’ position. The exhibits to Ms Care’s affidavit - if I could take your Honour to volume 1 - - -
HIS HONOUR: Just for the record I should indicate that the exhibits, both to Ms Care’s affidavit and Mr Douglass’, are in evidence and will be known by the exhibit numbers assigned to them in the affidavit.
MS SEIDEN: Thank you, your Honour.
HIS HONOUR: Now, I have volume 1.
MS SEIDEN: If your Honour would turn to tab 17. It is an objection for the company that was formerly Civic Finance Pty Ltd for the tax year 30 June 1999. At page 7 your Honour will see at paragraph 12 that:
The Commissioner was not satisfied that there was a loan between Civic and –
an Israeli bank for the reason that loan contracts were not provided and the apparent loan was uncommercial. At paragraph 15 the taxpayers assert that the “Assessment is excessive” for the reason that “There was a loan”. Your Honour, the Commissioner has assessed advances of money from an Israeli bank, which the plaintiffs contend were advances of a loan, as if it was income, previously undisclosed income.
The Commissioner has also denied deductions for interest paid to the Israeli bank on the basis that there was no loan and it was not necessarily incurred for the purposes of carrying on a business. The plaintiffs deny the Commissioner’s contentions and assert that it was a genuine loan for business purposes. At page 11 is a summary of the documentary evidence that has been provided to the Commissioner to support the objection, including a loan agreement and some correspondence and some internal bank documents. If I could take your Honour to page 19 of that tab there is the example of the loan application and on page 20 correspondence from the bank regarding interest. Page 21, an internal bank document regarding the loan.
At page 30, your Honour, there is the decision of Senior Member Taylor in a case recently determined in the Administrative Appeals Tribunal concerning a taxpayer and loans from Israeli banks where the Commissioner had contended that the loans were not genuine and the fact that there was a paucity of loan documentation and that the loans do not appear to have a commercial flavour was rejected by Senior Member Taylor. I should inform your Honour that that decision is subject to appeal. In the objection for Civic there is also some oral evidence, several witnesses as to the existence and terms of the loans between the bank and Civic and at page 12 - - -
HIS HONOUR: Of which tab?
MS SEIDEN: I am still on tab 17, your Honour. There is a list and summary of that oral evidence, much of which is very similar to the evidence that is disclosed in the decision that I took your Honour to at page 30. Your Honour, there are similar applications for all of the relevant years, similar objections.
If your Honour turns to tab 23 there is an objection for the company formerly known as Advance Finances Pty Ltd for the year ended 30 June 1998. The Commissioner contends again that advances of money from the bank to Advance were undisclosed income and the plaintiffs contend that those advances were merely loan funds. The Commissioner has also denied deductions of interest on the basis that they were not properly payments of interest and not incurred in deriving assessable income.
Again, there is significance documentary evidence. At page 12 there is a list of the documentary evidence to support the existence of the loans and at page 13 a description of the oral evidence. The Commissioner has the affidavit of Mr Emil Binetter, which your Honour does not have. It is referred to in this affidavit. It is several volumes. Your Honour will pick up from the paragraph numbers that it is an affidavit of significant size.
At page 20 of that tab, your Honour, there is a letter from Advance to the bank concerning the terms of the loan, at page 21 a loan application, at page 22 an internal bank record of the loan - I am not taking your Honour to all of the documents. This is merely to demonstrate to your Honour that the evidence that has been put before the Commissioner is probative and it is a significant objection, which the plaintiffs contend has a significant prospect of being determined favourably.
Page 20 of that tab shows that the loans were repaid in 2005 and page 31 - there is a statutory declaration from a bank officer which commences at page 32 which says at paragraph 2 that the bank lent money to Advance Finance and that at paragraph 6 the loans were repaid in full in June 2005 after the repayment of the loans, approximately a year later that Advance was deregistered. Unless your Honour had any further questions about the objection - - -
HIS HONOUR: I understand the general point you wish to make about the objections. Did the liquidator consent to those objections being made?
MS SEIDEN: He did, your Honour.
HIS HONOUR: Is that in evidence?
MS SEIDEN: Yes, your Honour, that is in the affidavit of Ms Care. It is exhibit 1. It is tab 1.
HIS HONOUR: I see. Thank you.
MS SEIDEN: Thank you, your Honour. Your Honour, there was another application - before I leave Melissa Care’s exhibits. It is at volume 2. I ought to have taken your Honour to that. That is at tab 39. Once the companies were reinstated the companies made an application to defer the due date for payment under the assessments, pursuant to section 255-10 of the Taxation Administration Act and that application is behind tab 39. That application is, because of the winding up, otiose and the Commissioner has responded to the deferral request in those terms, but the Commissioner’s response is not before your Honour.
HIS HONOUR: The only response is a letter requesting a copy of the authority from the liquidator, but you say that there were later events that - - -
MS SEIDEN: Yes, your Honour. In any event, your Honour, I think the intervening of the winding up has meant that the Commissioner now has a debt provable in the winding up and, therefore, an application to extend the due date under the assessment has, I believe, been overtaken by the fact of the winding up, your Honour, which is one of the matters that the plaintiffs point to as going to the exercise of the Court’s discretion and why the granting of the quashing of the winding-up orders would have utility. Your Honour, that was the evidence in relation to the substantive proceedings.
If I could quickly take your Honour to the evidence on the stay application: first, the affidavit of Ms Sutton and the exhibit JS1, the last paragraph of the letter from Max Donnelly:
I confirm that my lawyer in Israel is acting under my power of attorney to conduct certain enquiries –
in Israel and –
I expect full cooperation from Mr Binetter.
That is evidence that the liquidation is proceeding in the sense that the liquidator, unless prohibited from doing so, is taking steps in the liquidation. Mr Binetter in the stay affidavit – excuse me. I am sorry, your Honour, I had the wrong affidavit. Before I leave the affidavit of Ms Sutton, paragraph 3 of that affidavit provides that:
The Commissioner of Taxation is the only creditor –
in the winding up and the Commissioner is the one funding the liquidator in relation to investigations being carried out.
If I turn now, your Honour, to the affidavit of Mr Binetter. He deposes to the fact that he has had a conversation with Ms Ophira Perry, an officer of Israel Discount Bank where Ms Perry states that she has received letters from an Israeli law firm who say they act for the liquidator and Gary informs her that he is aware a liquidator has been appointed but not that letters were sent. He asks for a copy of the letter and Ms Perry declines and she says:
I am letting you know as a courtesy since your father was a former customer of the bank. This must be very serious because I have never seen anything like this.”
Mr Binetter at paragraph 5 deposes to his:
fear that unless the investigations being carried out by the liquidator in Israel are stayed that –
the reputation of the companies and his father will be lost and the possibility of doing business in future with the banks will be made more difficult and that confidentiality between the companies and the Israeli banks will be lost if the winding up is set aside. The liquidator will nevertheless still have the documents. At paragraph 7 he notes conversation with another bank officer who reflected that the Binetters were:
very good customers, we hope we can do some business in the future.”
So there was some goodwill too to be destroyed. The affidavit, your Honour, of Melissa Care 26 October discloses further that the liquidator is taking steps. The letter behind MC1 notifies Mr Gary Binetter that investigations have been made of Israel Discount Bank and Mercantile Discount Bank. Your Honour, Israel Discount Bank was the lending bank for Civic Finance and Mercantile Discount Bank was the lending bank for Advance Finance. These Israeli banks do not recognise the appointment of the liquidator. They want a court order to that effect which the liquidator estimates would cost US$30,000 and as an office holder he requests that Mr Binetter sign the letter on the next page. The letter requests Mr Gary Binetter to say in the second paragraph that the liquidator has:
full access to all books and records of the Companies, and all banking information held by any domestic or international bank –
and with respect to the representation that the liquidation requires the bank to provide any international bank records to the company perhaps goes too far and is a question of Israeli law. He also asks Mr Binetter to say that he is:
no longer legally able to perform or exercise any function or power as an officer of the Companies; those functions and powers have been assumed by Mr Donnelly –
which ignores the fact that Mr Binetter, with leave pursuant to section 471A of the Corporations Act or the liquidators’ consent, may perform some functions.
The last page, MC2, requests that Mr Binetter sign a questionnaire and deliver all books. So the liquidation is certainly proceeding. Your Honour, that is the plaintiffs’ evidence. If I could take your Honour now to the outline of oral argument. Your Honour mentioned that you had seen the submissions. May I inquire, did that also include the submissions in reply?
HIS HONOUR: The plaintiffs’ reply filed on 31 October 2011, yes.
MS SEIDEN: Thank you. The plaintiffs rely on those written submissions as well as this oral address. As your Honour has seen the orders, the plaintiffs challenge the Federal Court’s power to make a winding-up order against two deregistered companies upon reinstatement to the register. The plaintiffs contend that such orders evince both a wrongful assumption of jurisdiction and a denial of natural justice. As to the first jurisdictional error, the Corporations Act gives the Federal Court power to wind up companies. If I could take your Honour to – does your Honour have a folder of authorities?
HIS HONOUR: Yes. I have two large folders of authorities and I also have the Act itself.
MS SEIDEN: Yes, thank you, your Honour.
HIS HONOUR: Do you want me to go to Chapter 5?
MS SEIDEN: Yes please. Section 459P(1):
Any one or more of the following may apply to the Court –
and these are the important words –
for a company to be wound up in insolvency –
I will bring your Honour back to this section at a later part of the address with respect to a creditor but for now if your Honour could move please to section 461(1):
The Court may order the winding up of a company if:
. . .
(k) the Court is of opinion that it is just and equitable that the company be wound up.
The definition of “company” is found in section 9:
“company means a company registered under this Act –
and then there are several subparagraphs which are not relevant for these purposes. At the time of the making of the winding-up orders neither Advance nor Civic was a company. If I could take your Honour now to section 601AD(1):
A company ceases to exist on deregistration.
There is a note:
Note: Despite the deregistration, officers of the company may still be liable for things done before the company was deregistered.
It is submitted this note points towards sections such as 588G which specifically deals with directors’ liabilities. The Acts Interpretation Act section 13(3) currently provides that a note is not part of the Act, however the Acts Interpretation Amendment Act 2011, which comes into effect on 31 December 2011, will alter that position and from that date everything that goes from the beginning of section 1 to the end of the Act will be part of the Act, including notes. However, it is submitted that the current position is that that note is not to be read as part of the Act.
That note takes significance, your Honour, from Justice Stone’s decision that there was no reasonable prospects for the plaintiffs to successfully have the winding up set aside on the basis that her Honour held that 601AD(3)(b) had the requisite power for the Federal Court to wind up a company and her Honour looked to this note for guidance. So if I could take your Honour to 601AH.
HIS HONOUR: Your said 601AD(3). Do you mean 601AH(3)?
MS SEIDEN: I did, thank you, your Honour.
HIS HONOUR: Yes, I have that.
MS SEIDEN: Her Honour Justice Stone – I am sorry, I have confused myself and the Court. The note that is at 601AD(1), I apologise, is relevant to historical context which I will take your Honour to in a moment, and the note at 601AH(3) is the note that her Honour Justice Stone relied upon in the recent Binetter decision. Her Honour held that subparagraph (b) that the Court may “make any other order it considers appropriate” if an order for reinstatement has been made was wide enough to encompass a winding-up order and the Commissioner adopts that submission. That is the submission, your Honour, that the parties did not contend for before Justice Stone and her Honour did not have the advantage of the plaintiffs’ submissions. If I could take a step back, your Honour, to 601AH(2):
The Court may make an order that ASIC reinstate the registration of a company if:
(a) an application for reinstatement is made to the Court by:
(i) a person aggrieved –
which is a very wide ambit, or –
(ii) a former liquidator of the company –
The Commissioner has suggested that the references in this section are references to a former company. However, the plaintiffs dispute that and contend that these references are in fact to a company in existence. It is not a reference – if I take your Honour back to subsection (2):
The Court may make an order that ASIC reinstate the registration of a company –
is not a reference to the registration of a former company because a former company has never been registered. One can only reinstate the registration of a company, both grammatically and factually correct.
HIS HONOUR: You cannot reinstate the registration of a company which exists. You can only reinstate the registration of a company which once existed but has ceased to exist because of deregistration.
MS SEIDEN: Indeed, and what one is reinstating is something that did exist when the company did exist.
HIS HONOUR: Is not the Commissioner’s argument simply that the definition of “company” in section 9 often means what it says, or applies, to use the word “company” that at least in parts of 601AH it cannot do that because it is talking about the making by the court of an order about something which does not then exist but will exist once ASIC has, in effect, complied with the order and effected the reinstatement.
MS SEIDEN: Yes, and the plaintiffs’ submission in that regard is what did exist previously was the registration of a company and that is all that can be reinstated. It is perhaps clearer when one looks at subsection (2)(a)(ii):
a former liquidator of the company –
It is clear that there could never have been a former liquidator of a former company. The liquidator could never have been a liquidator of a former company. So all that can be – the application can be made is by a former liquidator of a company and it is talking in a present tense when the company was, in fact, in existence.
HIS HONOUR: So just because a company ceases to exist – if you said to Mr Donnelly “Look, five years ago you were the liquidator of some company”. He said, “Yes, I was. It now ceases to exist because it has been wound up”. He would not be saying anything untrue if he said “I was the former liquidator of that company”.
MS SEIDEN: Indeed, and that is the submission that the plaintiffs are perhaps very poorly trying to put, that it is not, in fact, a reference to a former company in the way that it is written in that section and, therefore, cannot be used as a reason to widen the scope of the expression “company” in Chapter 5, and that “company” is limited to the meaning it has in section 9 and that is a company currently registered under this Act. It is instructive also that the definition in section 9 is that a “company” means a company and it is not an inclusive definition but a restrictive definition. Your Honour, 601AH(3) that I have taken your Honour to must be read in context with 601AH(5) which provides that:
If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered.
Justice Stone in the recent decision held that that was a reference to continuity of existence and not continuity of form. However, the plaintiffs contend that the “as if it had not been deregistered” is plainly intended to mean that a company comes back into existence in the same form as it had been prior to deregistration.
There are several cases dealing with the situation where a company was in external administration on deregistration and then coming back into existence and the courts have grappled with “does one need to formally appoint a liquidator again or does he automatically continue?” If I could take your Honour to tab 42 of the plaintiffs’ authorities, there is a decision JP Morgan Portfolio Services of Justice Stone. At paragraph 7 her Honour notes that:
There are conflicting authorities as to whether a liquidator of a company who was in office at the time the company was deregistered is automatically reinstated –
Then at paragraph 8 in the quote from Justice Barrett – I am sorry, Justice Hamilton – in the second paragraph of that extract:
In view of the continuity that s 601AH(5) is intended to produce (which, in my view, entails continuity of that aspect of the company’s characteristics which causes it to be in the course of winding up), the orders that the court makes should, in each case, put beyond doubt the ongoing tenure of the original liquidator.
In other words, because a company was under external administration when it was deregistered, when it comes back into existence, as if it had never been deregistered, it also comes back into existence under external administration and therefore something has to be done about appointing a liquidator because subsection (5) does not provide for the automatic reinstatement of a liquidator.
So whilst there might have been a dispute about whether a liquidator is automatically reinstated, there can be no dispute that section 601AH(5) provides that a company comes back in the same form as it was in deregistration. I am reminded that that extract, in fact, was Justice Barrett in the Ramantanis Case.
It is for the reason that the company comes back into existence in the form it was in on deregistration that the plaintiffs contend an order of the court was necessary to change the status of Advance and Civic on reinstatement to a company under external administration, those companies not having been under external administration on the date they were deregistered.
Your Honour, Justice Stone’s decision is at tab 65. At paragraph 15 her Honour points to subsections 601AH(2) and (3) and the note to the subsection giving the example that:
the Court may direct ASIC to transfer to another person property vested in ASIC –
Her Honour, in paragraph 16, notes that the “note is not part of the Act” but may provide “guidance” and her Honour notes that:
In the absence of an order such as is postulated in the note, the property of the company would, on reinstatement revest in the company and not in ASIC: s 601AH(5). If the court order could not take effect until after reinstatement (by however short a time) then an order in the terms given in the example could never have effect, as it would be the company that would have to transfer the property not ASIC.
Her Honour uses that note to construe subsection (3)(b) as being wide enough to make an order to wind up the company even though it does not exist. However, the note, in the plaintiffs’ respectful submission, does not point to something that is being done against the company at a time when the company does not exist. At the time that the note is operative the property is vested in ASIC, so any order is an order against ASIC and not the company.
As your Honour has seen from the history in these proceedings, there is a time lag between the making of an order for reinstatement and the actual reinstatement to the register and, therefore, there is time for this note to have effect between that time. Therefore, the note has work to do without giving it the wider significance that her Honour has done so. At paragraph 22 her Honour notes that subsection (5) does provide for:
continuity of existence not continuity of form however, in the absence of any contrary order, continuity in form would follow reinstatement.
At 25 her Honour found that it was open to the court to make the winding-up orders under that section. However, sections such as 601AH(3)(b) are not new to the courts and those sections have traditionally been interpreted as being for providing consequential or ancillary orders and certainly to be read in the context of the particular subsection.
Your Honour, the plaintiffs dealt with that in the reply at paragraphs 22 to 33 and if I could take your Honour to those paragraphs, just to highlight a number of factors. In the footnote to paragraph 23, footnote 12, we have collected some of the authorities that section 601AH(3)(b) is to be given a limited operation and that such orders are merely consequential orders and the quote in the footnote from Justice Barrett that:
“Viewed in its context, s. 601AH(3)(b) is a provision allowing the court to make ancillary or supplementary provision of a facilitating kind conducive to the full and orderly attainment of the objects to be achieved by a reinstatement –
It is uncontentious, I would have thought, that the words of an Act take their meaning from other words in the same section or subsection. At footnote 13 the plaintiffs have cited the authority referred to in Pearce and Geddes 6th Edition. Subsection (3)(b) is a general provision which must have regard to subsection (5) and it is submitted that subsection (3)(b) ought not be used to contravene the natural result in subsection (5) that a company comes back into existence in the form that it was in. At paragraph 28 the plaintiffs cite Justice Lindgren in Stork ICM v SFS:
I do not think, however, that s 601AH(3)(b) empowers the Court to make an order denying to a reinstatement the retrospective effect provided for in s 601AH(5).
His Honour was not talking about the same but it is by analogy that it is submitted that section 601AH(3)(b) cannot be interpreted as giving the court power to alter the status of a company on reinstatement, particularly when that status of the company is dealt with in Chapter 5 and not Chapter 5A under the winding-up provisions.
The fact that the winding-up order was said to be conditional upon reinstatement, does not, in the plaintiffs’ respectful submission, improve the position. Jurisdiction must exist at the time when the orders were made. If this is not the case, then a court could make an order conditional upon an enactment of a Bill that would be said to be effective when the Bill – when the Act comes into pass. That cannot be so and it is submitted that the time when this Court looks at whether the order to wind up was effective must be the time at which the order was made and at that time there was no company to be wound up.
Under previous legislation there was express power to wind up a company without reinstatement. If I could take your Honour to tab 8, section 574(1)(a) of the Corporations Law provided that:
the liability (if any) of every officer –
continued, notwithstanding the dissolution of a company. This subsection (a) is an important proviso in the historical analysis and in the plaintiffs’ contention it is these words that granted the court jurisdiction in the early cases to wind up a company that had not been reinstated, and it was for the historical anomaly that at the time there was a point when a creditor, despite this liability, a creditor had no standing to reinstate and therefore the courts were prepared to assume jurisdiction to wind up. That anomaly is now gone, but in any event this section has now gone. Subsection (b) on the next page provides:
nothing in this subsection affects the power of the Court to wind up a company the registration of which has been cancelled.
In a case I will take your Honour to in a moment that was held to be an express provision granting the court power. Your Honour would notice also subsection (3):
If a person is aggrieved by the cancellation of the registration of a company, the Court, on an application –
may reinstate that company, and again, it has the very wide ambit, “a person is aggrieved”. In the very old legislation the standing to reinstate was limited, certainly in the UK, not in Victoria. I will take your Honour to that. If your Honour could now move to tab 39.
HIS HONOUR: I have that.
MS SEIDEN: At page 89, about point G, Justice McLelland notes that:
par (b) of s 574(1) –
which I just took your Honour to –
constitutes legislative authority for ordering the winding up of a deregistered company without ordering reinstatement –
At the next page 90 about point F, his Honour was considering whether to make a winding-up order as well as ordering reinstatement and was not inclined to, although his Honour noted there was “power in the Court to do so”. In other words, power under that current legislation to make the simultaneous order because of the:
proviso (b) to s 574(1) the winding up proceedings were properly commenced without the company having been reinstated.
Absent that provision, no proceedings could be commenced against the company. The company did not exist.
If I take your Honour to tab 35, that is the explanatory memorandum to the Bill that repealed the old section 574, and that is apparent from Chapter 15.1, and the new Chapter 5A and current Act replaces the old provisions, including section 571. The Company Law Review Act, the Act that repealed that section is to be found behind tab 3, and it is section 393.
The historical analysis indicates why it is not necessary for a company to be wound up simultaneously with reinstatement and that it is a convenient course to first reinstate and then subsequently wind up. The historical analysis also indicates how it was that the courts derived jurisdiction to wind up without first reinstating. However, it is submitted that that jurisdiction has now been repealed with the repeal of section 574.
If I could take your Honour to tab 36. Before I commence the historical analysis, if I could perhaps give your Honour an overview. There are four relevant time periods and the first is pre-1880 when courts had no power to reinstate a dissolved company. In 1880 the equivalent of paragraph 574(1)(a) is introduced – I apologise. In 1880 amendment was introduced with power to reinstate the company and there was a proviso as there was in paragraph (a) of 574(1)(a).
However, in England at the time a creditor had no standing to reinstate the company. The creditor was given such standing in 1900. In 1928 in the UK express provision to wind up the company without reinstatement, the equivalent of 574(1)(b) was introduced. So if I could take your Honour to tab 36 which demonstrates the pre-1880 position. This is the case of Pinto Silver Mining decided in 1878 and at page 283 of the decision Lord Justice James at about point 5/6 on the page noted that:
The first point raised is whether the Court has any jurisdiction to make a winding-up order after a dissolution of the company under a voluntary winding-up, and I much doubt whether there is any such jurisdiction.
Justice Cotton noted at page 284 that the:
conditions of sects. 142 and 143 of the Act have been complied with –
I will take your Honour to those sections in a moment, but once those conditions have been complied with and the company is dissolved there is:
no jurisdiction to make such an order after the expiration of the three months; for the company has ceased to exist –
that follows from dissolution, the fact of dissolution. On page 285:
If it were necessary to decide the point, I should be disposed to hold that the Court has no jurisdiction to make a winding-up order after the expiration of three months from the close of a de facto voluntary winding-up.
This case was followed in London Caledonian Marine Insurance Co (1879) 11 Ch 140. I do not need to take your Honour to that. If I could take your Honour to the actual provision at the time which is at tab 9. The relevant provision is 143:
The liquidators shall make a return to the registrar of such meeting –
which is referred to in 142 –
having been held, and of the date at which the same was held, and on the expiration of three months from the date of the registration of such return the company shall be deemed to be dissolved -
There was no power in that Act to reinstate once a company had been dissolved. The position changed in 1880 and the relevant legislation is behind tab 10 at page 52. It is section 7(4):
At the expiration of the time mentioned in the notice –
the same provision –
the Registrar may, unless cause to the contrary is previously shown by such Company, strike the name of such Company off the register –
But then there is a proviso after the colon –
Provided that the liability (if any) of every director, managing officer, and member of the Company shall continue and may be enforced as if the company had not been dissolved.
This is the proviso, in the plaintiffs’ submission, that gave the court jurisdiction to wind up without reinstatement for the reason that at this period in subsection (5) it is apparent that a creditor had no standing to reinstate the company:
If any Company or member thereof feels aggrieved by the name of such Company having been struck off the register in pursuance of this section, the Company or member may apply to the superior court –
but not a creditor. If I could take your Honour then to tab 37, the decision In re Anglo-American Exploration and Development Company, and the headnote of the case discloses that:
At the date of its dissolution certain arrears of calls on its shares were due.
The way to enforce the calls was through the articles of association but the company was deregistered. At page 102 the argument of the counsel for the petitioner is set out. He notes that the:
Companies Act, 1880, preserves the liability of every director, managing officer, and member of a company struck off the register under the section, notwithstanding the company is dissolved.
It is what I referred to, your Honour, as the proviso. Then the counsel says:
The liability must have been preserved to enable creditors to obtain payment, and they can only do so by means of a winding-up order.
That is for the reason that a creditor did not have standing to first reinstate the company. Then at about point 8 on the page:
I shall probably make the order –
and then at page 103:
the usual winding-up order against the company –
was made. So it is apparent that counsel’s submission that this was the only way to give the proviso effect was to wind up the company at the suit of the creditor, notwithstanding that there had not been a reinstatement. The commentators of the day have picked up that case and that reasoning. At tab 26 at page 653 of the extract from Buckley, The Companies Acts, the commentary after the proviso at subsection (4) states:
It would seem, then, that a company might be wound up under these circumstances notwithstanding dissolution: there is no other way for a creditor to enforce a member’s liability.
So the proviso, the words after the colon, are being read to give the court jurisdiction to wind up “notwithstanding dissolution” for the reason that a creditor had at the time no standing to reinstate, and that provision would have been otiose if a creditor could not enforce the liability of the company. That analysis has been reiterated. I take your Honour to tab 30 at page 781 at about point 2 on the page:
It is suggest in Buckley (9th edition, at p. 527), that the proper course in the case of a defunct company whose name has been struck off the register is first of all to get the company’s name restored to the register, and then to petition, and it is pointed out that the order in Anglo-American Exploration and Development Co. was made on a creditor’s petition, and that at that time a creditor could not apply to have a company’s name restored to the register – no doubt this would usually be the wider course – but having regard to the fact that the liability of every director managing director and member is expressly preserved by the section , it would seem not to be absolutely necessary.
Your Honour, in 1900 an amendment was made, which is seen at tab 11, which gave the creditor standing to reinstate the company. It is suggested that after this amendment was made there was no need for a company to be wound up without reinstatement. The creditor was competent to apply to have the company reinstated. You can see under the heading “Defunct Companies” in the first column at the very end, subsection (2):
after the words “or member,” in each place where they occur, shall be inserted the words “or creditor,” –
Your Honour can see the full text of that section behind tab 12. Subparagraph (5) still contains the proviso after the colon, and subsection (6) now provides that:
If a company or any member or creditor thereof feels aggrieved –
that person may make an application to have the company reinstated. Tab 27, again an extract from Buckleys, referring to the addition of these words at page 691, about point 4 of the page:
Before these additions it was held that the proper course for an “aggrieved” creditor to take was to petition for a winding up order, though there were obvious difficulties in doing so where there was no company in existence -
He refers in the footnote to the Anglo-American Case “where the question of service was considered”. Obviously one of the inconveniences of winding up a company that does not exist is questions of service, and it is submitted by the plaintiffs that contrary to the Commissioner’s contention the most inconvenient course is to allow a company to be wound up without first being reinstated, and by far the most convenient course is to have the company reinstated before any order is made against it.
Since the amendment of this section he –
the creditor –
should, no doubt, apply hereunder before presenting his petition.
So once the creditor was given standing, it was held that the appropriate course was to ensure a company was reinstated before being wound up. Similar comments are made behind tab 29 at page 610 in the footnote (r):
The liability –
which is what I have been referring to as the proviso –
could formerly only be enforced by a creditor by obtaining a winding-up order before he could apply to have the name of the company restored to the register –
At tab 30 at page 765 a similar point is made in the footnote (l) that since the 1900 amendments, a creditor can:
petition for the company’s name to be restored, and possibly the Court would not now allow a creditor to petition for a winding-up order, until he has got the name of the company restored to the register –
So it is submitted that prior to 1880 there was no power to reinstate a company and therefore no power to wind up a company that did not exist. After 1880 the ability to reinstate existed but not for a creditor and this explains the cases where a winding-up order is made before subsection (b) which became section 574(1)(b) was enacted. That section, your Honour, came into being in 1928 and that is to be found in tab 13. Section 99 refers to:
The amendments specified in the second column of the Second Schedule –
and the next page, fourth paragraph:
At the end of subsection (5) there shall be inserted the words “and that nothing in this subsection shall affect the power of the court to wind up a company the name of which has been struck off the register.”
This is the provision that Justice McLelland in the United Case referred to as the “express provision” to wind up a company that did not exist. However, historical analysis indicates that in fact it was the equivalent of what is subsection (a) that prior to the enactment of that section had given the courts jurisdiction to do that but, in any event, both the equivalent of 574(a) and (b) had now been repealed.
Now, if I could take your Honour to tab 33, at footnote (i) again is a similar analysis, that prior to the amendment that gave a creditor standing to wind up, a creditor could only enforce the rights against the member by “obtaining a winding-up order”, and it is noted that:
This presented difficulties, and that Act enabled a creditor to apply for an order that the name of the company be restored to the register. The proviso would appear to be intended to empower the Court to wind up a company without first restoring it to the register.
Your Honour, the final position in the UK is effectively section 353 which is behind tab 15 at page 210. You can see the genesis of section 574 in subsection (5)(a) and (b) that the proviso, the liability of every director is still maintained and:
nothing in this subsection shall affect the power of the court to wind up –
That provision has had various section numbers. It is now in the United Kingdom Companies Act 2006 which is behind tab 7, as section 1000(7). So the position in the UK is now very different to the position in Australia. Australia no longer has that provision. The position in Australia - in New South Wales the first occurrence of these provisions is to be found in the 1936 Act which is behind tab 17. New South Wales adopted the UK position at that time.
Now, of course, by then all of the relevant amendments were in place, and at page 410 your Honour will see that the provision was enacted very much in the form that it is in section 574(1). That provision can be traced through to section 574 which, of course, has now been repealed. The position in Victoria was very similar with one interesting difference. We have prepared a note on the Victorian position that assists, but I can take your Honour to tab 19 which is the position in 1896. If your Honour would go to page 63, section 160. The Victorian Act adopts the English Act including the proviso:
Provided that the liability (if any) of every person shall continue and may be enforced as if the company had not been dissolved.
That proviso became 574(1)(a). That was in the Victorian Act in 1896, although it did not make its way into New South Wales until 1936. What is interesting is section 161. In Victoria the position was that a creditor immediately had standing to reinstate:
If any company or member or creditor thereof feels aggrieved by the name of such company having been struck off the register . . . the company or member or creditor may apply to the court –
So before the enactment in the UK in Victoria the creditor had standing to reinstate. So the problems that actually occurred in the UK because the proviso existed, yet there be no way for a creditor to have the benefit of the proviso was not a problem in Victoria. Then behind tab 20 is the later amendment. Eventually Victoria can be traced through to section 574 and as we know that has now been repealed. Your Honour, I will provide the note on the Victorian position shortly.
The position then, as the plaintiffs contend, is that since the repeal of section 574 and the enactment of Chapter 5A of the Corporations Act, there is no power for a court to wind up a dissolved or deregistered company without first restoring its name to the register. The historical analysis explains the anomaly and why courts in the UK were prepared to assume jurisdiction to wind up a company that was not first deregistered at the suit of a creditor because it was the only way for the proviso in what became paragraph (a) to be given effect. That problem has now entirely gone away with the enactment of Chapter 5A and the ability of a person aggrieved to reinstate the company. There is now a very wide ambit. There is not a limited class of persons who can reinstate the company.
The note that I took your Honour to earlier in 601AD is not equivalent to the proviso that was in the earlier sections and it can be given meaning without the court having to wind up a company that does not exist. That is the note, your Honour, that points to the continuing directors’ liabilities. What was important in the earlier provisions was there was a liability of members and the liability of the members could not be enforced without reinstating the company, and since the creditor did not have standing to do so the courts held that the proviso – making the liability exist was wide enough to read it that way, and that problem simply is not here in the current legislation.
Your Honour, unless your Honour had some questions on that section. Thank you, your Honour. With respect to denial of natural justice, the applicants contend that, if on a proper reading, the court has the power to wind up a company that is not yet reinstated there is a breach of natural justice. The plaintiffs contend that that in itself should point towards a construction of the court’s powers as not being that wide, for the reason that unless there was clear legislative intendment to breach natural justice the provision should not be read to give the court jurisdiction to wind up the deregistered company.
Leaving that aside, the plaintiffs contend that if such an order can be made the plaintiffs’ rights were affected by the winding-up order and their status changed on reinstatement and that change is sufficient to demonstrate a denial of procedural fairness. If I could take your Honour to John Alexander which is behind tab 46, and at paragraph 133, the relief that was claimed that is said to have affected Walker Corporation was that:
a constructive trust and a transfer of the land subject to the trust of the Club so as to make the interest transferred indefeasible on registration – directly affects the interests of any other person, like Walker Corporation, claiming an interest in the land, because orders in the Club’s favour would, to a corresponding extent, be detrimental to those other persons.
So it was a case that orders sought to be made against Walker Corporation who was not a party affected Walker Corporation’s rights. At paragraph 137 it is noted:
that if a court makes an order affecting a person who should have been joined as a necessary party, while the order will not be a nullity, that person is entitled to have the order set aside, and is not limited merely to seeking the favourable exercise of a discretion, whether or not the person in question becomes a party. As a general proposition this submission is correct.
At 138 it is noted that:
the Court of Appeal majority erred, not only in electing not to exercise a discretion in Walker Corporation’s favour, but also in treating it as a matter of discretion at all and in treating the question of joinder, rather than the question of setting aside the orders, as decisive. If there is any exception to the principle relied on (which it is unnecessary to decide in this case), it can have no application –
here. In this case, the mere fact that section 601AH(5) provides that the company on reinstatement comes back as if it had not been deregistered indicates that the company’s rights were affected by the winding-up orders. The status of the company changed from being a status of a company not under external administration to being a company under external administration. To the extent that it is necessary to show that the plaintiffs were nevertheless denied an opportunity, that opportunity was the opportunity to actually engage in the Part IVC process.
As your Honour has seen, the company has now, through the liquidator, the consent of the liquidator, lodged an objection to the assessment. That option was not available at the time of the hearing before Justice Jagot because the company did not exist. The assessments had not been served and the ability to engage in the Part IVC process was not available. The most that the director could do was foreshadow that if the companies were reinstated such an application would be made.
If I could take your Honour to tab 43, the ability to engage the Part IVC process is important for the reason that the Part IVC proceeding is a relevant consideration on the winding up and it is something that the companies were deprived of engaging in. In the Broadbeach decision at paragraph 13 it is noted that:
Notwithstanding the presumption of insolvency that would apply under s 459C(2)(a), in written and oral submissions to this Court the Commissioner made an important concession. This was that upon the hearing of such winding up applications the court might properly have regard to whether the taxpayer had a “reasonably arguable” case in proceedings under Pt IVC of the Administration Act, if those proceedings then still be on foot; questions of the kind canvassed in General Steel Industries Inc v Commissioner for Railways (NSW) might arise.
Then at paragraph 62, the last couple of sentences:
But such a consideration –
That is the progression of Part IVC proceedings –
if it were supported by evidence of the state of progression of the Pt IVC proceedings, would be relevant in the operation of Pt 5.4 of the Corporations Act, if at all, at the later stage of the hearing of any winding up application. There should be no re-exercise of the discretion –
Had the companies existed it is plain that the Commissioner would have issued assessments and objections would have been filed enabling the court to take the existence of the Part IVC proceedings into account on the winding-up application. All that Justice Jagot was able to do was consider a possible foreshadowed application. There is also the possibility that had the objections been lodged they may have been upheld before the winding-up application was heard and therefore it would have been impossible for her Honour to have found that the company was insolvent.
The plaintiffs also rely on the existence and the foreshadowing of the Part IVC applications on the insolvency, the question of insolvency, but, your Honour, that is a different point. The first point that the plaintiffs contend is that they were denied the opportunity to actually engage in the Part IVC process.
They were also denied a possibility of seeking relief under section 255-10 of the Taxation Administration Act. Section 255-10 is behind tab 6 and I have copies of section 5.5 of the Income Tax Assessment Act (1997). If I could take your Honour first to tab 6, 255-10 of the Taxation Administration Act provides that:
The Commissioner may, having regard to the circumstances of your particular case, defer the time at which an amount of a tax-related liability is, or would become, due and payable –
Section 5.5 of the 1997 Act provides at subsection (1) that:
This section tells you when income tax you must pay for a financial year is due and payable.
The note directs attention to the fact that:
The Commissioner may defer the time at which the income tax is due and payable, see section 255-10 -
So an application to defer the time affects directly whether an assessment is due and payable and because the companies did not exist they were not able to actually make that deferral application at a time when Justice Jagot was determining the winding-up application. So the plaintiffs contend that two valuable rights were simply not afforded the companies at a time when the winding-up application was made: the ability to engage the Part IVC process and the ability to seek relief to defer the time at which the tax debt became due and payable.
Further, your Honour, the plaintiffs contend that there is a second reason why procedural fairness has been breached and that is because orders against the company have been made and there is no ability to appeal. Your Honour recalls that Mr Binetter sought leave to appeal and was held by Justice Perram to have no standing and there was no right of appeal against that decision. Justice Stone refused leave for the director to bring an appeal in the name of the company. Had an appeal been competent the plaintiffs contend that Justice Jagot, with respect, fell into appealable error, on a number of grounds. The first is her Honour erred in relying on section 177 of the Income Tax Act - - -
HIS HONOUR: If I could just interrupt.
MS SEIDEN: Certainly.
HIS HONOUR: You are relying on these appealable errors of Justice Jagot, not as supporting a writ of certiorari now, but as showing the value of the opportunity that was lost because the companies did not have a right of appeal?
MS SEIDEN: Indeed, for two reasons: first, to show that there was detriment to the companies not being a party to the proceedings. Had they been a party they would have had an appeal as of right to the orders of Justice Jagot and, therefore, on the breach of procedural fairness it is relevant that they were not joined as a party. They lost the ability to appeal. So the plaintiffs contend that that was a valuable right because her Honour fell into appealable error.
The plaintiffs also contend for the latter, that this is relevant to the exercise of the court’s discretion, that it is not futile to make the orders quashing the winding-up orders because once the plaintiffs are a party they can engage the Part IVC process and ensure that these errors either do not occur again or, if they occur, there is a right of appeal. If I could take your Honour then to section 177 of the 1936 Act - your Honour is well familiar with these sections -175:
The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.
Section 177:
The production of a notice of assessment, or of a document under the hand of the Commissioner . . . shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC . . . that the amount and all the particulars of the assessment are correct.
The particulars of the assessment, your Honour, are the taxable income and the tax payable. If I could take your Honour to section 44 to demonstrate what her Honour Justice Jagot did with respect to section 177 and it is to be recalled that at the time her Honour was determining this notices of assessment had not been issued. The Commissioner had foreshadowed that once the companies were reinstated he would issue the assessments. The fact of deregistration had precluded him from issuing an assessment.
There was a period in the history where the company, Advance, had been reinstated and the Commissioner had used a window of opportunity to serve a notice of assessment, but that reinstatement, which was administratively done through ASIC, was set aside and the company was again deregistered, which meant that the company was deemed never to have - the deregistration to have taken place from the 2005/2006 date, in which case the service was invalidated and her Honour Justice Jagot declined to validate the service. So at the time your Honour can take it that there were no notices of assessment served during the proceedings.
At page 4 of her Honour’s decision, at the very bottom of the page, paragraph 8 her Honour notes the submissions “According to the Commissioner”, and then lists the Commissioner’s submissions. At page 7, paragraph 5(1) her Honour noted the submission that:
the Commissioner is a contingent creditor of Advance and Civic.
This is relevant, your Honour, for the reason that sections 459P and 461 require an applicant to be of a certain category, including a creditor or contingent creditor. Unless the Commissioner was a creditor or contingent creditor he did not have standing to make the applications to wind up under 459P or 461. Her Honour notes the submission that:
the Commissioner is a contingent creditor of Advance and Civic. A contingent creditor is “a person towards whom under an existing obligation the company may or will become subject to a present liability upon the happening of some future event or at some future date” . . . The existing legal obligation is that of Advance and Civic in the form of taxation liabilities which pre-date the assessments and which will mature into an obligation to pay a finite and quantified debt on service of the notices of assessment. The contingency is service of the notices of assessment which is practically certain to occur -
Mr Binetter submitted, and that is recorded at paragraph 11 on page 9, that:
the Commissioner cannot rely on ss 175 and 177 of the Income Tax Assessment Act as the notices of assessment had not been served -
and there is then cited Batagol and Prestige Motors to the effect that an assessment does not come to fruition until there has been service of an assessment. Until there has been service of a notice of assessment anything done or thought in the Commissioner’s office does not rise to the height of being an assessment. The submission was that:
the Commissioner cannot rely on the conclusive evidence provisions, the Commissioner must prove the existence of an actual tax debt underlying the assessments before it can be concluded that the Commissioner is a creditor or contingent creditor.
At paragraph 13 her Honour accepts that the evidence of Mr Binetter was not irrelevant. Nevertheless, her Honour accepted the Commissioner’s submission that:
neither the scheme of the taxation legislation nor the practical reality of the Commissioner’s intention to serve the notices of assessment may be disregarded. There is not a mere possibility of service on reinstatement . . . The Commissioner intends to serve the notices as required in order to complete the process of assessment.
Then on the winding-up application at paragraph 35, her Honour notes that:
For the reasons given above I am satisfied that the Commissioner is a contingent creditor –
and leave is required –
The tax liabilities are contingent in the sense that they accrue on service of the notices of assessment and are subject to objection under Pt IVC of the Taxation Administration Act. The evidence discloses the Commissioner’s intention to serve . . . On service the tax liabilities will become present debts . . . Sections 175 and 177 of the Income Tax Assessment Act will operate.
It is submitted that her Honour relied on 175 and 177 precipitously and the notices of assessment not having issued yet, those sections did not have force or effect and that first the Commissioner had to prove the existence of the liability in the usual way by putting forward evidence. The due date would become contingent on the notices of assessment. But to be a contingent creditor he first had to establish that there was a debt and it is submitted that cannot be done by looking to the future and saying, well, in the future an assessment will issue and then sections 175 and 177 will operate.
Her Honour also noted at paragraph 36 - and this is relevant to whether or not her Honour applied the insolvency test to looking at the commercial reality and it is submitted that her Honour did not:
The fact that Gary Binetter has indicated a willingness to fund the Pt IVC rights of the companies if their registration is reinstated, but not if a liquidator is appointed, cannot dictate the position on the winding up applications. There is no basis for any suggestion that the liquidator, if funded, would not pursue rights of the companies as considered proper and appropriate at the time. Further, the various options presented by Gary Binetter as precluding any finding of insolvency (such as requesting a deferral of the due date . . . pending the completion of the Pt IVC process, or seeking a stay of recovery proceedings) are unpersuasive. None of those steps involve a challenge to the assessments.
It is submitted that a deferral of the due date challenges directly the due date on the assessment and whether or not any amount is owing, even in the face of sections 175 and 177. Her Honour noted that:
The same considerations indicate . . . just and equitable –
grounds for winding up. The Commissioner had to be a contingent creditor. That is at paragraph 38. If I could take your Honour to Futuris, which I will hand up to your Honour.
HIS HONOUR: Thank you.
MS SEIDEN: This case is relevant for two reasons. It indicates the seminal position that Part IVC has in the tax legislation. At paragraph 10:
the system provided by Pt IVC being, as to the Federal Court, a law supported by s 77(i) of the Constitution, the contestability of assessments made by the Commissioner is not confined to that measure of judicial review for jurisdictional error which is provided by s 75(v) of the Constitution –
At paragraph 25 there are limits to which section 175 and, by analogy, 177 does not reach –
The section operates only where there has been what answers the statutory description of an “assessment”.
At paragraph 49 on page 163 there is a quote from Batagol v Federal Commissioner of Taxation:
after describing “assessment” as a process with the consequence that a specified amount will become due and payable . . .
“The idea coincides with that which Isaacs J expressed in Federal Commissioner of Taxation v Hoffnung & Co Ltd in relation to war-time profits tax when he said: ‘If an assessment definitive in character is made, it assumes that, so far as can there be seen, a fixed and certain sum is definitely due, neither more nor less. In short, it ascertains a precise indebtedness of the taxpayer to the Crown’. On this construction of the Act nothing done in the Commissioner’s office can amount to more than steps which will form part of an assessment if, but only if, they lead to and are followed by the service of a notice of assessment.”
In the absence of a notice of assessment being served it is submitted that 175 and 177 had no operation. At paragraph 64:
The evident policy reflected in the terms of s 177(1) is the facilitation of proceedings for the recovery of tax –
in which case they facilitate conclusive evidence. At paragraph 65:
In recovery proceedings s 177(1) operates to change what otherwise would be the operation of the relevant laws of evidence -
therefore, a limit on the evidence and not a mechanism by which the Commissioner can prospectively demonstrate conclusive liability.
The last point, your Honour, in relation to appealable error is the test of insolvency and it is submitted that the appropriate test is to apply a commercial approach. Tab 41 has the decision of Leslie. At page 466, about point 5 on the page:
The question of fact –
as to insolvency –
as to whether a company is unable to pay its debts as they fall due, is to be decided as a matter of commercial reality in all the circumstances . . .
The question of solvency must be assessed, as the parties agreed, at the date of the hearing. But this does not mean that future events are to be ignored.
The fact that the plaintiffs have had foreshadowed an application to defer the due date is something which directly went to the heart of the assessment and it is submitted that her Honour erred in not taking that into account in determining whether or not the companies were solvent. Further, the foreshadowing of the Part IVC objections was another factor that could have weighed upon whether or not the companies were actually insolvent. As the decision in Broadbeach makes plain that is a relevant factor to take into account at the winding-up stage.
Your Honour, the plaintiffs submit that the errors that have been pointed to constitute jurisdictional errors. The decision in McJannet is, the plaintiffs contend, almost on all fours with this - if I could take your Honour to tab 40. In that case orders were made and the jurisdiction was to make orders against an amalgamated organisation. At 643, about point 2 on the page, it is noted that the relevant section:
requires the amalgamated organisation – in this case the Alliance – to take such steps as are necessary to ensure that the amalgamation is fully effective and sub-s (2) empowers the court to make orders to ensure that sub-s (1) is given effect. But it was the Alliance which sought orders under s 253X, not directed to itself but to the ATAUE. The ATAUE was not –
as the Court decided –
any part of the amalgamated organisation –
Therefore, the section had no application to that entity, it not being an amalgamated organisation. At page 644, at about point 2, it was noted that:
The errors made by the Federal Court –
in making orders in that section which required orders to be made against an amalgamated organisation, making those orders against an organisation that was not an amalgamated organisation –
confined to error as to the existence of jurisdictional facts or error of law within the exercise of jurisdiction. They involved error of law about the nature and scope of the jurisdiction conferred by s 253ZC and error of law about whether the ATAUE was within the reach of the jurisdiction conferred by s 253X. The result of those errors was that the exercise which was undertaken by the court lay wholly outside the scope of either s 253X or s 253ZC and amounted to a wrongful assumption of jurisdiction in circumstances where none existed –
It is submitted that in this case the court, in making orders, not against a company for winding up, acted wholly outside the jurisdiction of the court to make winding-up orders. Just in the same way that orders were made – purported to be made against an organisation that was not an amalgamated organisation the court has purported to make orders against an entity that is not a company. At page 653:
Where the jurisdiction of a federal court is made by the Parliament to depend upon the actual or “objective” occurrence of some fact, event or circumstance, then the judges thereof will be subject to prohibition under s 75(v) if they wrongly decide that question . . . “want of jurisdiction” and “excess of jurisdiction” interchangeably, but the real question is whether there has been a breach of the legislative conditions which, pursuant to s 77 of the Constitution, so define the ambit of the powers or authority of the Federal Court.
In this case it is submitted that sections 461 and 459P of the Corporations Act, which were the sections that her Honour Justice Jagot purported to make the winding-up orders under, were limited to making winding-up orders against a company at a time when neither Advance nor Civic was a company. A similar result – support for the plaintiffs’ contention that the errors contended are jurisdictional errors – can be found in Kirk which is behind tab 45. At page 574, three examples are given of an inferior court acting beyond jurisdiction by:
entertaining a matter . . . outside the theoretical limits of its functions and powers . . . (a) the absence of a jurisdictional fact; (b) –
which is not relevant here –
disregard of a matter . . . and (c) misconstruction of the relevant statute thereby misconceiving the nature of the function which the inferior court is performing or the extent of its powers in the circumstances of the particular case.
In the plaintiffs’ contention in this case absence of a company – a company is a jurisdictional fact and the absence of a company indicates that the court misconstrued the extent of the powers, the winding-up powers. At paragraph 74 it is noted that:
the errors of construction of s 15 of the OH&S Act –
in Kirk, which was not identifying a particular set of acts or omissions, resulted in the tribunal –
misapprehending the limits of its functions and powers. Misconstruction of s 15 of the OH&S Act led the Industrial Court to make orders convicting and sentencing Mr Kirk and the Kirk company where it had no power to do so. It had no power to do that because no particular act or omission, or set of acts or omissions, was identified at any point in the proceedings –
and your Honour concurred in the orders in that case and that is at paragraphs 113 and 114. With respect to allowing Mr Kirk to give evidence in the case against him, your Honour held was a jurisdictional error:
The trial judge had jurisdiction to decide whether to fine the appellants after a trial conducted in accordance with the rules of evidence. He did not have jurisdiction to decide whether to fine the appellants after a trial –
which was not conducted in accordance with the rules of evidence. It is submitted that by purporting to make orders against a non-existent entity the Federal Court exceeded its jurisdiction, such that it was a jurisdictional error. With respect to the breach of natural justice, it is also submitted that that led to jurisdictional error and the authorities are collected in the plaintiffs’ submissions. The plaintiffs have today, in oral outline, attempted to demonstrate the detriment that existed as a result of not being a party to the winding-up orders.
With respect to denial of natural justice, it is contended that the plaintiffs need only demonstrate that a denial of natural justice deprived them of a possibility of a successful outcome and for the reasons alluded to earlier, particularly the absence of being able to engage in the Part IVC process and being a party with appeal as of right, was a detriment.
Those two factors also go to the question of discretion and whether the court is satisfied that there has been a jurisdictional error, whether in the interests of the court’s discretion the relief sought ought to be granted and the plaintiffs simply repeat the submissions made in relation to natural justice on that, save there is a further consideration and that is the public interest.
If I could take your Honour to tab 38 – R v Hibble; Ex parte The Broken Hill Proprietary Company - if I could take your Honour to page 463. This case is relevant for the proposition that a writ of prohibition will lie even though the proceedings in the Federal Court have ceased for the reason that there is still something for the court to prohibit, but also for the exercise of discretion. At about point 5 on the page:
The real object of the writ was not merely to prevent an individual being vexed by an order which might affect him in his person or property, made by a person or tribunal assuming to have jurisdiction to make such an order, but having no such jurisdiction, but also to prevent any person or tribunal from assuming a jurisdiction which has not been conferred on him or it . . . If, on the other hand, the issue of the writ be regarded as intended to keep an inferior Court within the limits of its jurisdiction, it should never be too late to get rid of what might be regarded in the future as a precedent for the exercise of a jurisdiction which is not really justified by the law.
In our opinion, so long, at any rate, as a judgment or order made without jurisdiction remains in force so as to impose liabilities upon an individual, prohibition will lie to correct the excess of jurisdiction.
Justice Starke at page 492:
It is clear law, however, that whenever the want of jurisdiction appears on the fact of any proceedings prohibition will go after judgment . . . But there are some cases in the books showing that the Courts have refused . . . They rest, in my opinion, upon the futility of any action being taken by the Court.
I have endeavoured to outline to your Honour this morning why the plaintiffs contend there is no futility in making the orders sought and at page 493:
wherever the Legislature entrusts to any body of persons other than the superior Courts the power of imposing an obligation upon individuals, the Courts ought to exercise as widely as they can the power of controlling those bodies of persons if those persons admittedly attempt to exercise powers beyond the powers given to them by Act of Parliament.”
Finally, your Honour, tab 52, R v The Judges of the Federal Court of Australia; Ex parte the Western Australian National Football League, the then Chief Justice Barwick noted at page 202 at about point 3:
An appeal, even when lack of jurisdiction may afford a ground of appeal, cannot be a substitute for prohibition, nor its existence an inhibition on the exercise of the power to grant prohibition. How far, if at all, the existence of such a right may affect the exercise of the discretion to grant the writ will be discussed later.
That comes up at page 204.
Prohibition to restrain the commencement or continuation of proceedings is an appropriate remedy to be granted for manifest want or excess of jurisdiction.
Here, in any event, the plaintiffs have sought to exercise any possible appeal rights by leave and have been unsuccessful and therefore there ought to be no factor against them on that ground. At page 204:
I have no doubt that if this Court were convinced that neither of the prosecutors is a trading corporation within the constitutional power granted by s. 51(xx.) –
in other words, if there was jurisdictional error in this case –
it could grant prohibition to the Federal Court . . . But the question whether the Court should do so is a different matter.
. . . It is for the public interest that tribunals of limited jurisdiction be confined within that jurisdiction. A judgment given or an order made in a matter which is outside the limited jurisdiction of the tribunal giving or making it, from which the parties do not appeal, may become a precedent. The public interest is that such a decision or order should not be allowed to stand: Bodenham v Ricketts. It is for this reason that a stranger may obtain prohibition.
So, your Honour, in addition to the utility that the plaintiffs point to it is submitted that the public interest also favours the granting of relief in the event that there is jurisdictional error. Your Honour, I have the note on the Victorian position, if I could hand that up.
HIS HONOUR: Thank you.
MS SEIDEN: I do not need to take your Honour back to it. It just sets out the legislative provisions in Victoria. Your Honour, with respect to standing, I have really, I think, dealt with that earlier this morning. That leaves the submissions on the stay and the plaintiffs rely on the written submissions, but if I could highlight a couple of points.
The plaintiffs contend that a stay in this case - the submissions were filed on 31 October. The relevant considerations have been taken from Jennings Construction v Burgundy Royale Investments and Marks v Federated Ironworkers’ Association on the basis that this Court has inherent jurisdiction to grant a stay to preserve the litigation – preserve the subject matter of the litigation.
The evidence I took your Honour to this morning discloses that the liquidator is taking steps and it is submitted that once the steps are taken they are irreversible. There is also a risk of loss of reputation and possible business damage. In terms of the relevant principles, whether there is a substantial prospect that the application to this Court will be successful, the plaintiffs obviously rely on the submissions made earlier that there has been jurisdictional error and that there are reasons favouring the discretionary grant of the remedies sought.
As to whether the applicant has taken the necessary steps to seek a stay, that has been done and her Honour Justice Stone declined to grant the stay, but in doing so held that the prospects in these proceedings were not unreasonable.
The next consideration is whether the grant of stay will cause loss to the respondent. It is submitted that the Court has no evidence upon which to be satisfied that there is potential of loss to the respondent and it is submitted that the stay application is obviously for a very short time in the context of the dispute, recalling that these companies were deregistered in 2006. Therefore, the plaintiffs contend that the balance of convenience lies in maintaining the status quo. Your Honour, they are the plaintiffs’ submissions.
HIS HONOUR: I will take an adjournment until noon and return then.
AT 11.40 AM SHORT ADJOURNMENT
UPON RESUMING AT 11.59 AM:
HIS HONOUR: I need not trouble you, Mr Brabazon.
There are two proceedings before the Court: S167/2011 and S210/2011.
In S167/2011 the plaintiffs are two companies. The first company is ACN 078 272 867 Pty Ltd (in liq). It was formerly called Advance Finances Pty Ltd and will be referred to below as “Advance”. The second company is ACN 087 623 541 Pty Ltd (in liq). It was formerly called Civic Finance Pty Ltd and will be referred to below as “Civic”. The companies have filed an amended application for an order to show cause why writs of certiorari, mandamus and prohibition should not be issued to the Federal Court of Australia. The primary relief sought is certiorari to quash orders which Jagot J, a judge of that court, made on 16 December 2010 (Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2010] FCA 1411) and 11 March 2011 (Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2011] FCA 219).
The orders of 16 December were orders that the two companies be reinstated to the register and thereupon placed into liquidation. The orders of 11 March 2011 were orders dismissing with costs an application by a former director of the two companies, Mr Gary Robert Binetter, seeking to set aside the winding-up orders. In S210/2011, Mr Binetter has filed an amended application to show cause which is similar to that filed by the companies in S167/2011.
In each proceeding the second defendant, which is described as “The Federal Court of Australia and Judges thereof”, has filed a submitting appearance.
The background is as follows.
On 21 April 1997, Advance was incorporated. Mr Gary Binetter was appointed a director. On 17 May 1999, Civic was incorporated. Mr Gary Binetter was appointed a director. One of the other directors of both companies was Mr Emil Binetter, Mr Gary Binetter’s father. The activities of the companies allegedly centred on borrowing money from banks in Israel, namely the Israel Discount Bank and Mercantile Discount Bank, and on-lending it to other entities.
The income tax returns for the two companies in the years from incorporation until 2006 showed nil taxable income. Those returns were said to be self-assessments prepared by accountants without source documents and in reliance on information provided by Mr Emil Binetter. Neither company paid any income tax. On 31 July 2006 and 8 September 2006, the Australian Taxation Office (“the ATO”) wrote to the then solicitors for Advance and Civic and stated that the ATO intended to audit a number of entities associated with Mr Emil Binetter.
Five days after the last letter, on 13 September 2006, Advance and Civic each lodged an application with the Australian Securities and Investments Commission (“ASIC”). Each application was an application for the relevant company to be deregistered administratively under the Corporations Act 2001 (Cth) (“the Corporations Act”). ASIC was given no notice of the impending audits. The ATO was given no notice of the applications.
Those applications succeeded. In her judgment of 16 December 2010, Jagot J found that Civic was deregistered on 25 November 2006 and Advance on 26 November 2006: Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2010] FCA 1411, [7](6).
From the respective dates of deregistration, Mr Gary Binetter ceased to be a director of the companies.
The ATO did not become aware of the deregistrations until Mr Emil Binetter was interviewed, pursuant to statutory power, on 27 April 2007.
By 2009 the ATO had formed the view that certain of the tax returns of the companies were incorrect and that but for the deregistrations tax would be owing once notices of assessment were served.
On 20 January 2010, the first defendant, the Deputy Commissioner of Taxation (“the Commissioner”) filed an application and supporting affidavits in proceedings NSD41/2010 in the Federal Court of Australia. The Commissioner sought orders, inter alia, that ASIC reinstate Civic to the register pursuant to s 601AH(2) of the Corporations Act and that on reinstatement Civic be wound up and a liquidator appointed. The application and affidavits were served on the four persons who had been directors at the time Civic was deregistered, namely Gary Binetter, Emil Binetter, Lisa Michelle Binetter and Debbie Anne Binetter.
On 20 January 2010, similar documents were filed in proceedings relating to Advance in the Federal Court – NSD44/2010. They were served on the persons who had been directors at the time Advance was deregistered, namely the same four former directors of Civic.
Each of the proceedings was listed for directions on 12 February 2010. On 9 February 2010, the then solicitors for the former directors of Civic and of Advance informed the solicitors for the Commissioner that on 12 February 2010, applications would be made for orders that the directors be joined or be heard. On 12 February 2010, District Registrar Wall, without opposition from the Commissioner, granted leave for Gary Binetter to be heard. He was not joined as a party in either proceeding. Directions were made for the filing of evidence and outlines of submissions.
On 19 August 2010, Jagot J refused an application by Mr Gary Binetter to be joined as a party.
On 16 December 2010, Jagot J, after a hearing held between 30 November and 2 December 2010, made the orders requested: Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2010] FCA 1411. At that hearing Mr Gary Binetter was represented by two counsel. He called what Jagot J described as “extensive” evidence. He cross-examined witnesses called by the Commissioner. He put lengthy and sophisticated submissions opposing the reinstatement and the winding up of Advance and Civic.
On 17 December 2010, Jagot J stayed execution in order to enable Mr Gary Binetter to apply for leave to appeal and be joined as a party to any appeal.
On 4 March 2011, Perram J delivered two decisions.
In the first, Perram J held, after a hearing on 1 March 2011 at which Mr Gary Binetter was represented by two counsel, that leave should not be granted to him to appeal against Jagot J’s orders of 16 December 2010: Gary Robert Binetter v Deputy Commissioner of Taxation [2011] FCA 184. He concluded that Mr Gary Binetter had no standing to appeal. The risks posed to him as a former director arising from any investigations by the liquidator and possible proceedings against him were insufficient to make him aggrieved by the winding-up orders.
The second decision of 4 March 2011 concerned an application by counsel on behalf of Mr Gary Binetter for a continuation of the stay of Jagot J’s orders pending an application for special leave to appeal to this Court: Gary Robert Binetter v Deputy Commissioner of Taxation (No 2) [2011] FCA 207. Justice Perram considered that no appeal lay to this Court from his decision refusing leave to appeal. He did this because his refusal to grant leave to appeal was an exercise of the jurisdiction described in s 25(2)(a) of the Federal Court of Australia Act 1976 (Cth) and s 33(4B)(a) of that Act provides that no appeal lies to the High Court from a judgment of the Federal Court in the exercise of its appellate jurisdiction if the judgment is a determination of the kind mentioned in s 25(2). Hence, there was no available proceeding to which the stay application could be seen as incidental. The right to appeal is a creature of statute and that controversial statutory restriction on the right to apply for special leave to appeal to this Court has brought about these applications for constitutional writs in the original jurisdiction of the Court.
On 9 March 2011, Jagot J heard an application on behalf of Mr Gary Binetter which was presented by senior and junior counsel. The application was that the winding-up orders of 16 December 2010 be set aside on the ground that the companies should have been joined as parties to the winding-up proceedings. On 11 March 2011, Jagot J dismissed that application: Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2011] FCA 219. She rejected the submission that there was a temporal gap between the operation of the orders for reinstatement and the operation of the winding-up orders. Thus it could not be said that in that interval there were existing companies, the rights of which would be affected by the winding-up orders.
On 11 March 2011, the companies were reinstated on the ASIC company register.
On 16 March 2011, Mr Gary Binetter instituted further proceedings in the Federal Court of Australia for orders under the Corporations Act to permit him to institute proceedings in the names of Civic and Advance, including applications to set aside the winding-up orders and to seek leave to appeal against Jagot J’s orders of 16 December 2010 on behalf of Civic and Advance. Those proceedings were argued over two days. Mr Gary Binetter was represented by two counsel. On 21 October 2011, Stone J dismissed the application: Binetter v Commissioner of Taxation [2011] FCA 1195. She rejected a submission that the Federal Court had no power to wind up a company while it was deregistered. She also rejected other submissions which had already been considered by Jagot J. She considered that Jagot J’s reasoning was not attended with sufficient doubt to warrant its reconsideration.
On 24 October 2011, Mr Gary Binetter applied to the Federal Court for a stay of the winding up of Civic and Advance until this Court determined S167/2011 and S210/2011, which proceedings had been on foot for some time. The matter was listed before Stone J. She dismissed an application to disqualify herself on grounds of apprehended bias. She accepted that Mr Gary Binetter’s standing in this Court to set aside the winding-up orders gave him standing to seek a stay in the Federal Court. She saw little damage to Mr Gary Binetter’s interests if a stay were refused and she saw a stay as causing greater prejudice to the liquidator. She, therefore, refused the application: Gary Robert Binetter v Commissioner of Taxation (No 2) [2011] FCA 1214.
On 14 March 2011, three days after the companies had been reinstated, the Commissioner served on the liquidator of the companies notices of assessment, notices of amended assessment and penalty notices issued by the Commissioner to the companies. On 12 May 2011 and 6 October 2011, objections signed by Mr Gary Binetter were lodged. In oral argument the plaintiff submitted, while going through some of the material, that the objections had significant prospects of success. On 13 May 2011, the company sent letters to the Commissioner seeking deferral of the due date for payment of the alleged tax liabilities.
Proceedings S167/2011 were instituted in this Court on 10 May 2011. Proceedings S210/2011 were instituted in this Court on 16 June 2011. On 29 July 2011, the liquidator consented to the institution of S167/2011. The lateness of that consent was not relied on by the Commissioner in opposition to the proceedings.
On 3 August 2011, a summons for directions was filed. The proceedings which initiated S167/2011 and S210/2011 were not served on the Commissioner until 4 or 5 August 2011. In the case of S167/2011, that was just within the period of 90 days from issue stipulated as the permissible period for service in rule 25.01(g) of the High Court Rules. Service was effected only after complaint by the solicitors for the Commissioner. They learned of the filing of the documents only after the court notified them of the proceedings on 23 June 2011. Their request for the documents was initially refused and not complied with for six weeks. The summons for directions was heard on 12 September 2011 and directions were made for the filing of evidence and submissions.
On 10 October 2011, the plaintiffs filed outlines of submissions contending that certiorari lay to the Federal Court of Australia in the original jurisdiction of this Court for non-jurisdictional error of law on the face of the record: see the plaintiffs’ outline of submissions in S167/2011, [19] and [46]-[49].
On 25 October 2011, the Commissioner indicated that he proposed to issue notices under s 78B of the Judiciary Act 1903 (Cth) in that regard on the basis that there was a matter involving the interpretation of the Constitution: first defendant’s submissions [4] and [12]-[20]. At a directions hearing on 31 October 2011 the necessity for this was obviated when the plaintiffs indicated that they would abandon the point, as they did in their reply filed on that day: [1].
Before Jagot J the plaintiffs had argued against the reinstatement of the companies. They do not do so in this Court. In this Court their complaints are instead directed solely to the making of the winding-up orders.
The plaintiffs made two substantive points. One concerned jurisdictional error in relation to the deregistration of the companies. The other concerned jurisdictional error in the sense of a breach of the rules of natural justice.
The plaintiffs submitted that Jagot J only had jurisdiction to wind up the companies if they existed. They advanced a submission which depended in part on a particular construction of her orders. That construction was that she wound up the companies at a time when they did not exist because they had been deregistered and not yet re-registered. In that lay one aspect of the jurisdictional error. The plaintiffs pointed out that up to 30 June 1998, s 574(1)(b) of the Corporations Law provided that “nothing in this subsection affects the power of the Court to wind up a company, the registration of which has been cancelled”.
They also pointed out that McLelland J said that this gave legislative authority to wind up a deregistered company without ordering reinstatement: Re Williams United Mines Pty Ltd (1992) 29 NSWLR 88 at 89, see also 90. They submitted that s 574 had been repealed and that no equivalent provision had been enacted. They submitted that this removed any legislative authority of the kind to which McLelland J had referred.
The plaintiffs traced the history of s 574(1)(b) through United Kingdom enactments from before 1880 and New South Wales enactments from 1899. They also relied on the somewhat different history of the legislation in Victoria. The plaintiffs submitted that the history showed that inconvenient results could be produced when creditors sought a winding up without first restoring the company to the register. Hence, Jagot J had no jurisdiction to make orders winding up the companies until they had actually come back into existence by being restored to the ASIC register.
The central question is: what is the true interpretation of s 601AH of the Corporations Act and one set of the winding-up provisions on which Justice Jagot relied, namely ss 459A and 459P? It is not necessary to consider the other set – ss 461(1)(k) and 462(4). Section 459A provides:
On an application under section 459P, the Court may order that an insolvent company be wound up in insolvency.
Section 459P provides in part:
(2) An application [to wind up a company in insolvency] by any of the following, or by persons including any of the following, may only be made with the leave of the Court:
(a) a person who is a creditor, only because of the contingent or prospective debt . . .
(3) The Court may give leave if satisfied that there is a prima facie case that the company is insolvent, but not otherwise.
Section 601AH provides in part:
(2) The Court may make an order that ASIC reinstate the registration of a company if:
(a) an application for reinstatement is made to the court by:
(i) a person aggrieved by the deregistration; . . . and
(b) the Court is satisfied that it is just that the company’s registration be reinstated.
(3) If the Court makes an order under subsection (2), it may:
(a) validate anything bound between the deregistration of a company in its reinstatement; and
(b) make any other order it considers appropriate.
. . .
(5) If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered . . .
The Commissioner was an aggrieved person for the purposes of s 601AH(2)(a)(i) and a contingent or prospective creditor for the purposes of s 459P(2)(a), or so Jagot J found.
The plaintiffs relied on the definition of “company” in s 9 of the Corporations Act as meaning “a company registered under this Act”. They stressed the word “registered”. They also stressed the word “company” in ss 459A and 459P. The plaintiffs submitted that on the day when the winding-up orders were made, the plaintiffs did not exist and were not registered under the Act. However, the definition in s 9 does not apply if “the contrary intention appears”. A contrary intention appears from s 601AH, for all references to “company” up to the time of reinstatement are references to a company which is not registered under the Act because it has been deregistered.
There is nothing in s 601AH, either appearing from the express words or by necessary intendment, which prevents an order for the winding up of a company being made under s 459A with effect from the time when the company is reinstated pursuant to a s 601AH(2) order and there is nothing in s 459A which prevents the winding-up order being made with effect from the date when the company is reinstated pursuant to the s 601AH(2) order. Once reinstatement took place pursuant to s 601AH(2) orders, the companies were companies within the meaning of the Act and were liable to be wound up under orders which, though made earlier, did not come into operation until reinstatement took place.
The reliance by the plaintiffs on the repeal of s 574(1)(b) does not support their position. If the plaintiffs’ submissions were correct, the repeal would have worked a revolution. Yet the plaintiffs pointed to nothing in the legislation, the Explanatory Memorandum to the Company Law Review Bill 1997, or the Second Reading Speech which suggested that the function of the repeal was to prevent an application being made and granted simultaneously to order that the registration of the company be reinstated by ASIC at some future date and, upon reinstatement of the registration on that future date, that the company be wound up.
Contrary to the plaintiffs’ construction of Jagot J’s orders referred to earlier, that is what those orders did. The orders conformed with the terms of s 601AH. The orders were that the registration of each company be reinstated in the future and that at that moment in the future the company reinstated would be wound up. Up to the time when those orders were made the companies had no existence. They only came into existence on their later reinstatement and the winding-up order took effect only at that time.
There is one other argument of the plaintiffs which should be referred to. The plaintiffs submitted that s 601AH(5) provides that when a company is reregistered it comes back into existence in the same form as it was on deregistration. The plaintiffs relied on JP Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu [2008] FCA 433; (2008) 167 FCR 212. In fact s 601AH(5) does not provide that the company comes back into existence in the same form. Rather it provides that it is taken to have continued in existence as if it had not been deregistered. That does not preclude a court order being made so that its new form will differ from its old in that its new form will be as a company in liquidation.
Before turning to the second substantive point of the plaintiffs which was concerned with natural justice, there is one final submission of the plaintiffs that is relevant in that respect. The plaintiffs submitted that the construction of s 601AH operating against them was erroneous because it had the effect of denying them natural justice. It is true that it is relevant in construing legislation to analyse what impact a particular construction would have on natural justice. However, the language of s 601AH is sufficiently clear to lead to the conclusion that it has excluded natural justice, at least in a sense.
The second substantive point made by the plaintiffs turned on the submission that if, contrary to their first submission, there was power to order the winding up of an unregistered company on its reinstatement, the winding-up orders changed the status of the companies and thus affected their rights or interests. They submitted that the winding-up orders should not have been made unless the companies had been given an opportunity to be heard. Since they had not been heard, they were entitled to have the orders made. The plaintiffs relied in particular on Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571 at 580; [1944] HCA 5 and John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19.
It is true that from the time of the reinstatement, but for the winding-up orders, the companies were taken to have continued in existence as if they had not been deregistered: s 601AH(5). It is also true that the winding-up orders changed that status. But at the time when the merits of making both the reinstatement and the winding-up orders were being debated, the companies did not exist. Indeed, they did not exist until the reinstatement orders were complied with. Thus the companies had no standing to participate in that debate. The failure of the plaintiffs’ first substantive submission means that it was open to Jagot J, notwithstanding s 601AH(5), to make a winding-up order changing the former status of the company on reinstatement.
At first sight there may appear to be a certain theoretical unfairness in this outcome. But in reality there was no unfairness as a matter of substance. An ample opportunity was given by Jagot J to a person who did exist and whom she treated as a person interested, namely Mr Gary Binetter, to participate fully in the hearing. There is no reason to suppose that he lacked the ability to perceive, and give instructions to his lawyers about, every consideration bearing on the companies’ interests in the proceedings before Jagot J.
As part of the plaintiffs’ submission that the Federal Court wrongly assumed jurisdiction to wind up the companies at a time when they did not exist because they had been deregistered, the plaintiffs submitted that the correct course would have been for orders to be made that the companies be restored to the ASIC register of companies. Only then would the Federal Court have had jurisdiction to order that the companies be wound up. In the proceedings during which the winding-up orders were thereafter applied for, the companies would have had standing to be heard. Thus both the first substantive point and the second substantive point raise the common question of whether there was a denial of procedural fairness. That question also relates to discretion, for the relief sought by the plaintiffs is discretionary.
A question which goes to discretion, and perhaps to the second substantive point as well, is whether conferment on the plaintiffs of an opportunity to be heard could have made a difference. That is a relevant question on an appeal from a trial where there was a denial of an opportunity to make submissions: Stead v State Government Insurance Office [1986] HCA 54; (1986) 161 CLR 141. The plaintiffs advanced the following submissions - plaintiffs’ outline of submissions dated 10 October 2011, paragraph 43:
“The Plaintiffs contend that they do not have to establish in this Court that the opportunity to be heard would have made a difference albeit they have to show that there was a denial of procedural fairness. In SAAP v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 24; (2005) 228 CLR 294 at [84] per McHugh J and at [210] and [211] per Hayne J and at [174] per Kirby J, their Honours determined that if a decision (in that case, of the [Refugee Review] Tribunal) is invalid for want of procedural fairness (in that case, failure to give a person the opportunity to comment on adverse material) then there is no reason to withhold discretionary relief. The Plaintiffs adopt that position in this case.” (footnote omitted)
The SAAP case was a very different case. A citizen of Iran -“A” - and her younger daughter applied to the Refugee Review Tribunal for review of a decision by a delegate of the responsible Minister refusing to grant them protection visas. The hearing was conducted by video link, the applicants being in South Australia and the Tribunal member and others, including the applicants’ migration agent, being in Sydney. The Tribunal took evidence from A’s elder daughter in the absence of A. The Tribunal then raised with A information about matters of which the elder daughter had given evidence which were adverse to A. The Tribunal decided to affirm the delegate’s decision, in part because of the elder daughter’s evidence. McHugh, Kirby and Hayne JJ held that the Tribunal had failed to comply with the obligation created by s 424A of the Migration Act 1958 (Cth) (“the Migration Act”) to supply the information in writing.
The plaintiffs relied on the following passage in McHugh J’s reasons for judgment at 323-324, [84]:
If the decision of the Tribunal is invalid for want of procedural fairness, there is no reason to withhold discretionary relief. There is nothing to suggest that the conduct of the appellants warrants the refusal to exercise the discretion. There is no suggestion of delay, waiver, acquiescence or unclean hands. Whether the first appellant was in fact deprived of a relevant opportunity to deal with the adverse material received by the Tribunal from her eldest daughter should not affect the discretion to grant relief.
The plaintiffs also relied on what Hayne J said at 355 [210] – [211]:
The Minister submitted that no relief should be granted to the appellants. It was contended, in effect, that the course of events at the Tribunal was such that the first appellant (at least by her migration agent) was aware of what the eldest daughter said and had sufficient opportunity to meet it. Lying behind that submission might be thought to have lurked the suggestion that because the first appellant is illiterate in any language and the second appellant is a young child, giving of notice in writing to them in accordance with s 424A would have served no practical purpose. Whether or not that was a proposition that did lie behind the submission that relief should be refused on discretionary grounds, the submission should be rejected.
For the reasons given earlier, the decision reached by the Tribunal is invalid. There is no basis, in this case, on which the undoubted discretion to refuse the relief sought could be exercised against its grant. There has been no suggestion of delay, waiver, acquiescence or other conduct of the appellants said to stand in their way.
After quoting what Gaudron J said in Enfield City Corporation v Development Assessment Commission [2000] HCA 5; (2000) 199 CLR 135 at 157 [56], Hayne J continued at 355 [211]:
Even if the considerations advanced by the Minister were relevant to considering whether relief should go for jurisdictional error constituted by a want of procedural fairness (a question I need not examine) they are not considerations that bear upon whether certiorari should go to quash what is found to be an invalid decision.
The plaintiffs also relied on Kirby J’s agreement with Hayne J on this point at 346 [174].
These passages are not to be taken to overrule the authorities which hold that the grant of the relevant relief is discretionary. They do not purport to do so. They deal with the reasons why in the particular circumstances of that case the discretion was not exercised against the grant of relief. In that regard it is important to note Hayne J’s use of the expression “in this case”. There is a radical difference between non-compliance with a statutory requirement operating in relation to refugee claimants and the circumstances of the present case. The majority in the SAAP case stressed the importance of compliance with the mandatory obligations created by s 424A of the Migration Act: see McHugh J at 321-322 [77], Kirby J at 345-346 [173] and Hayne J at 353-354 [204]-[208].
Given that Mr Gary Binetter was given an extensive hearing in which he put fully to Jagot J the arguments against winding up, a key question remains. Even if Jagot J erred in ordering the windings up from the date of reinstatement but before the companies had been reinstated, what difference would there have been if she had proceeded in the manner urged in this Court by the plaintiffs and heard from them before making the winding-up orders? A decision about the duties of the Refugee Review Tribunal in dealing with refugee claimants who may not speak English and may be of limited capacity to deal with administrative procedures in a country which is to them foreign in many respects has little to say about the problem created by the present circumstances. The present circumstances, on the plaintiffs’ case, involve drawing a distinction between what Mr Gary Binetter said, or could have said, to Jagot J, and what the companies could have said to her. The distinction is extremely tenuous, to the point of invisibility, in view of the fact that Mr Gary Binetter was, for practical purposes, the organising brain behind the companies, at least in relation to their dealings with the ATO and in relation to the Federal Court proceedings. He is a legal entity having separate existence from the companies as legal entities, and his interests may differ from theirs in some ways, but he put, or could have put, everything which they could have put on their own behalf.
The plaintiffs deny that. They contend that, by reason of the course taken by Jagot J, they have lost an opportunity which Mr Gary Binetter could not have taken up. The submission depends on the view that a desirable course of events immediately after the reinstatements would have been:
(a) service of the ATO assessments on the companies;
(b) lodgement of objections to the assessments pursuant to Part IVC of the Taxation Administration Act 1953 (Cth) (“the TAA”) in similar terms to those lodged by Mr Gary Binetter on 12 May and 6 October 2011;
(c) proceedings contesting any unsatisfactory objection decision in either the Administrative Appeals Tribunal or the Federal Court of Australia.
The first two steps which the plaintiffs contend should have taken place before the winding-up applications were heard have in fact taken place after the winding-up orders took effect. The third can take place in future. Mr Gary Binetter, while opposing the making of the winding-up orders, did not seek an adjournment along the lines now advocated by the plaintiffs. The plaintiffs submit, however, that the progress and merits of the process under Pt IVC of the TAA would have been relevant to the determination of the winding-up applications.
In support of that proposition they cited Deputy Commissioner of Taxation v Broadbeach Properties Pty Limited [2008] HCA 41; (2008) 237 CLR 473 at 484 [13] and 497 [62] (particularly the second last sentence). The citations are inapposite to the present problem. That an existing Pt IVC process would be relevant in a winding up does not establish that winding up must be delayed until a Pt IVC process which has not been instituted could be invoked.
The plaintiffs went on to submit that whether the companies should have been put into liquidation depended on whether debts from them to the ATO were due and payable. Whether they were due and payable depended on their due date. What the due dates might be would depend on whether the ATO complied with requests by the plaintiffs to defer the dates. The plaintiffs submitted that if the hearing of the winding-up applications had been listed only after the reinstatment applications had been decided, it would have been open to the companies to seek an adjournment of the hearing pending determination of the objections and of applications for a deferral of the due dates.
The plaintiffs also submitted that it might have been the case that by the time the winding-up applications were heard, the Commissioner acting within a reasonable time and expeditiously would have determined the objections or requests for deferral in the plaintiffs’ favour. With respect, these submissions are to some degree fanciful. The objections may succeed. It is entirely speculative whether they will.
The background against which the winding-up orders were made was suspicious in the sense that those responsible for deregistering the companies did not tell the ATO about what they were doing and did not tell ASIC of the ATO’s intentions.
In those circumstances, an outcome pursuant to which a liquidator is in charge of the companies’ affairs and property rather than the former controllers is not irrational. Nor is it irrational that the winding-up orders and the appointments of a liquidator came into operation immediately on the reinstatements being made without any interval of time within which persons other than the liquidator might be able to deal with the assets of the companies adversely to the legitimate interests of the ATO.
The plaintiffs submitted that as a result of not having had an opportunity in their own right to be heard before the winding-up orders were made, they were deprived of the valuable right to appeal as of right against the winding-up orders. There is one sense in which that is not so. The liquidator could have consented to an appeal by the plaintiffs had he thought it right to do so.
The plaintiffs also advance various arguments to the effect that Justice Jagot made other errors of law in deciding to make the winding-up orders. The process by which constitutional writs are granted is not an alternative to the appellate process. The alleged errors do not go to jurisdiction. However, the plaintiffs relied on the alleged errors for different purposes. They did so to show the value of what was lost by not having a right of appeal, and to show that on the issue of discretion granting relief in these proceedings is not futile. The latter point is defeated by the plaintiffs’ failure on the first substantive point they raised. As to the former point, the value of a right of appeal in circumstances where applications for leave to appeal have in fact failed is low.
Despite the detail and learning of their arguments, both the plaintiffs in S167/2011 and the plaintiff in S210/2011 fail to establish the grounds necessary for the relief they seek. Each proceeding should be dismissed. Mr Gary Binetter should pay the first defendant’s costs in S210/2011. The first defendant made an application that he should also pay the costs of the first defendant in S167/2011. That application should be granted because he is the moving force behind S167/2011 and in those circumstances, it is wrong that other persons interested in the assets of the companies should be responsible for the costs which have been incurred as a result of the tactical decisions he has made to institute and continue those proceedings.
That brings us to the stay judgment. Now, Ms Seiden, you still want a stay, do you?
MS SEIDEN: In light of your Honour’s orders, there would not be the basis - - -
HIS HONOUR: You can seek leave to appeal against it in a Full Court.
MS SEIDEN: If your Honour would perhaps grant a stay for just 24 hours just so that I can seek instructions.
HIS HONOUR: Do you oppose a stay for 24 hours, Mr Brabazon?
MR BRABAZON: Yes, your Honour. I oppose a stay for that period. I apprehend that my friend is seeking a stay of the winding-up orders rather than of your Honour’s judgment.
HIS HONOUR: That is my understanding, too.
MR BRABAZON: Yes. The status quo is that the liquidation, the winding-up is on foot, therefore, a stay of the winding up now would change the status quo. The onus is on the party seeking a stay to demonstrate a case for it and the respective plaintiffs have not demonstrated that their interests would be materially affected by the winding up continuing for the short period of the proposed stay. I can expand upon that further if need be, your Honour, but that, with respect, should be sufficient to dispose of the presently sought stay. Thank you, your Honour.
HIS HONOUR: The plaintiffs have applied for a stay of the windings up for 24 hours in order to seek instructions in relation to the possible further conduct of the proceedings in this Court. The first respondent opposes a stay for 24 hours.
On 26 October 2011, summonses were filed, each with three affidavits in support, seeking a stay of the windings up until the determination by this Court of the two proceedings. Those summonses were filed on the understanding that there might be a significant interval of time between the determination of the proceedings and the time when the summonses were filed.
The stay in S167/2011 is sought in the name of Advance and Civic. Those companies rely on the consent given by the liquidator to the institution of S167/2011 as consent to bring a stay application. The liquidator’s consent was “consent to the plaintiffs bringing these proceedings”, not to the bringing of an application staying the winding-up orders. To hold that consent to the bringing of proceedings entailed consent to every interlocutory step which a plaintiff might choose to embark on would be an extreme holding in view of the many dangerous and potentially expensive interlocutory steps available to determined litigants.
There is evidence in the form of a letter of 27 October 2011 from the liquidator to the solicitors for the Commissioner that he has not consented to the bringing of a stay application. There is also evidence in the form of a letter dated 21 October 2011 from the liquidator to those solicitors that on that day he did not consent. No application has been made for the Court to approve the bringing of the stay application pursuant to s 471A(1A)(d) of the Corporations Act. Hence s 471A(1) of the Corporations Act prevents Advance and Civic making the stay application in S167/2011.
What of Mr Gary Binetter, who applies for a stay in S210/2011? He submitted that the relevant considerations could be grouped under five heads. One is whether the Court is satisfied that a stay is required to preserve the subject matter of the litigation. A second is whether there is a substantial prospect that the application to the Court, which would in effect be an application for leave to appeal, would be successful. The third is whether he has taken the necessary steps to seek a stay from the court in which the matter had been pending. The fourth is whether the grant of a stay would cause loss to the first defendant and the fifth concerns where the balance of convenience lies.
The first defendant pointed out that the status quo is that the liquidation is on foot. To stay it for 24 hours is to change the status quo and he submitted generally that the plaintiffs had not demonstrated that their interests would be materially affected for the short period of the proposed stay. Those submissions are sound. It follows that the subject matter of the litigation is unlikely to be damaged if a 24 hour stay is refused. It is invidious to comment on the prospects of success of an application for leave to appeal. It is true that the plaintiffs took steps before Stone J to seek a stay of the liquidation proceedings and that is relevant to the third matter on which they rely.
That leaves the last two questions, whether the grant of the stay would cause loss to the first defendant and where the balance of convenience lies. There is evidence to the following effect. On the 3 October 2011, Mr Gary Binetter was rung by a manager of the Israel Discount Bank asking him to call Ophira Perry, another manager. When he rang her, he was told that the bank had received letters from an Israeli law firm acting for the liquidator. He asked for the letters. She declined to provide them. She said, “I am letting you know as a courtesy since your father was a former customer of the bank. This must be very serious because I have never seen anything like this.”
It is certainly the case that the liquidator is, through a lawyer in Israel, making certain inquiries. The Commissioner is funding the liquidator and is the only creditor in the winding up. The liquidator is also seeking the co-operation of Mr Gary Binetter with the liquidation. In consequence of the evidence, Mr Gary Binetter has given evidence that he fears that unless the liquidator’s investigations are stayed, the companies and his reputation as a director of the companies will be severely harmed with:
(a) Israel Discount Bank because the liquidator’s inquiry suggest impropriety and illegality on the part of the companies and their directors; and
(b) “the wider banking community in Israel, which is small, and bankers talk, so the fact of a liquidator from Australia making inquiries will be viewed suspiciously”.
He also fears that confidentiality between Advance and Civic on the one hand and “the Israeli banks” on the other will be lost. He claims that before Civic repaid the Israel Discount Bank and Advance repaid Mercantile Discount Bank, his father, Advance, Civic and he himself had a good name with “the Israeli banks”. He wishes to borrow from “Israeli banks” as his father had done in the past for property development. He fears that future actions by the liquidator may harm the business relationship between “Israeli banks” on the one hand and Advance, Civic and other companies with whom he is associated on the other.
In HVAC Construction (Qld) Pty Ltd v Energy Equipment Pty Ltd [2002] FCA 1638; (2002) 44 ACSR 169 at 182 [48] French J, as he then was, said that the power to grant a stay of a liquidation is to be exercised with caution so as not unduly to delay the liquidator or hinder his or her capacity to carry out the duties imposed by statute. He said that there was therefore a clear onus on the applicant to make out a positive case.
Even if all other conditions necessary for the grant of a stay were satisfied, it should be refused for the following reasons.
The companies have been in liquidation for nearly a year. The evidence does not demonstrate a real risk that, if a stay is not granted, the companies or Mr Gary Binetter will suffer prejudice or damage beyond that which, if any, they have already suffered. The “clear onus” to make out a “positive case” of prejudice has not been discharged. Advance and Civic have been deregistered since November 2006. They have not been trading and have no known assets, subject to whatever the investigations of the liquidator uncover. The prospect of them being revived by Mr Gary Binetter as vehicles for unspecified “future business investments” is speculative. That is particularly so since the companies were deregistered when he was a director, and were only reinstated pursuant to orders by Justice Jagot which he opposed. Mr Gary Binetter has applied to this Court as a stranger, not as a party, to the orders said to be in excess of jurisdiction. His private interests are relatively indirectly affected.
On the other hand, to stay the winding up will impede the liquidator’s investigations into the affairs and assets of the companies. Mr Gary Binetter submitted that there was no evidence of this, but in this particular case I think that judicial notice may be taken of it. To grant a stay now pending the hearing of an application for leave to appeal and then the hearing of the appeal itself would be to maintain that state of affairs, that is to say an impeding of the investigations for some considerable time. To compel the liquidator to terminate his investigations now and resume them later will add to the cost of the liquidation and will also potentially prejudice those investigations. That is because, once commenced, it is important that a line of inquiry continue to be pursued, lest witnesses, evidence or information become unavailable whether through the active conduct of people responding to the fact of the investigation or to the fact of its suspension or otherwise or any other cause. The detriments associated with a 24 hour stay are less, but real.
The applications for a stay are dismissed. Mr Gary Binetter should pay the costs of them for the reasons given in the earlier judgment delivered this morning.
The Court will adjourn.
AT 12.56 PM THE MATTERS WERE ADJOURNED
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