Grant Samuel Corporate Finance Pty Limited v Fletcher & Ors; JPMorgan Chase Bank, National Association & Anor v Fletcher & Ors [2014] HCATrans 167 (15 August 2014)

Last Updated: 18 August 2014

[2014] HCATrans 167

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S64 of 2014

B e t w e e n -

GRANT SAMUEL CORPORATE FINANCE PTY LIMITED (ACN 076 176 657)

Applicant

and

WILLIAM JOHN FLETCHER AND KATHERINE ELIZABETH BARNET AS LIQUIDATORS OF OCTAVIAR LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) AND OCTAVIAR ADMINISTRATION PTY LIMITED (IN LIQUIDATION)

First Respondent

OCTAVIAR LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)

Second Respondent

OCTAVIAR ADMINISTRATION PTY LIMITED (IN LIQUIDATION)

Third Respondent

Office of the Registry
Sydney No S69 of 2014

B e t w e e n -

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (ACN 074 112 011)

First Applicant

J.P. MORGAN SECURITIES AUSTRALIA LIMITED

Second Applicant

and

WILLIAM JOHN FLETCHER AND KATHERINE ELIZABETH BARNET AS LIQUIDATORS OF OCTAVIAR LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) AND OCTAVIAR ADMINISTRATION PTY LTD (IN LIQUIDATION)

First Respondent

OCTAVIAR LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)

Second Respondent

OCTAVIAR ADMINISTRATION PTY LTD (IN LIQUIDATION) (ACN 101 069 390)

Third Respondent

Applications for special leave to appeal

FRENCH CJ
BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 15 AUGUST 2014, AT 10.03 AM

Copyright in the High Court of Australia

____________________

MR A.J.L. BANNON, SC: If it please the Court, I appear with my learned friend, MR P.M. KNOWLES, for Grant Samuel in S64. (instructed by Watson Mangioni Lawyers)

MR C.R.C. NEWLINDS, SC: If your Honours please, MR S.M. NIXON and I appear for the JPMorgan applicants in matter number S69. (instructed by Corrs Chambers Westgarth Lawyers)

MR B.A.J. COLES, QC: If your Honours please, I appear with my learned friends, MR P.J. DOWDY and MR A.K. FLECKNOE-BROWN, for the liquidators and for the companies in each application. (instructed by Henry Davis York)

FRENCH CJ: Yes, Mr Bannon.

MR BANNON: Your Honours, this case gives rise to a very short but very important point. If the Court of Appeal’s endorsement of the use of the variation rule is correct, it may be expected to be capable of being used, and being used as a fairly standard procedure, in years to come to enable multiple extensions well beyond and after the three-year period specified in section 588FF(3).

The issue, which we say is worthy of consideration of this Court, is whether the effect of the picking up of the variation rule is to produce a substantive inconsistency with the precondition to the existence of the right to bring proceedings. This Court has already considered in Gordon v Tolcher the issue as to whether or not – or at least in passing – the time limit forms part of the essence of the right, and confirmed that it does. That appears from the extract from this Court’s decision at 75 of the application book in paragraph 57 of her Honour the learned President’s reasons.

What we submit is that the majority in the Court of Appeal has misused or misinterpreted Gordon v Tolcher, and used it as a licence to apply, with respect, we say, in a rather mechanistic way, section 79, or the authority of Gordon v Tolcher to say that it will pick up the procedures – 79 can pick up the procedures for the purposes of dealing with a 588FF(1) application without considering the substantive impact of that. The point is well exposed by a comparison of the reasons in the first instance of the learned President, which - - -

FRENCH CJ: Just before you go to that, can I ask you, to what extent is the significance of the questions you want to agitate confined by the characterisation of the question in the present case at paragraph 160 on page 106 in Justice Macfarlan’s – that is to say, that it is all about the original application before Justice Hammerschlag?

MR BANNON: It is not dependent upon that, and really, the President’s reasons proceed on the basis that the application was the relevant application.

FRENCH CJ: But this is not just a case about a right of extension, as it were, being at large, or a power to extend under the rule being at large.

MR BANNON: No – well, in the sense that if the substantive effect of the power of extension is to allow in a substantively new application for extension after the first one, and which we say that that is what it is, and that is what the President found, then that has the wider ramifications. The effect of that is not only would it apply in this rule, under the uniform code or the District Court or wherever, but the licence to have a large number of rules, which would not be even as confined as they are in rule 36.16 – it would be a licence, and to permit a liquidator with new evidence to say “I know I said that last time, and I need an extension of three years, or one year, now things have changed”.

One can understand an impetus from one side of the ledger to say that is a benefit to some people, but we say that conflicts with – in other words, the likelihood of rules such as this continuing to exist and, indeed, potentially proliferate, is not an illusory likelihood, but we say fundamentally, it conflicts with what appears to be the legislative purpose of subsection (3).

BELL J: Just going back to your application, you support the President’s reasons, but in addition your third ground is the subject matter of the Chief Justice’s question?

MR BANNON: That is right, yes.

BELL J: All right.

MR BANNON: One can look at it a couple of different ways, but whichever way one looks at it, one is asking the question “what is the substantive effect of what occurred here?” If it is “the substantive effect involves”, one takes the rule, because one can accept that the rule will have a legitimate application, potentially, at least, to vary an earlier extension, provided the variation takes place within the original three-year period provided under subsection (1). It is conceivable that section 79 would still have some work to do to pick up the rule in part, but not efforts, as her Honour analysed - - -

BELL J: Is the third ground a distraction? It is labelled number 4, but it is ground 3 on page 119.

MR BANNON: I think that, perhaps worded in that way, it is. There is another potential way of approaching it, which is to say – we have not really developed this in the submissions, but substantively we have said the application which was made before Justice Ward was the substantive application. One view of subsection (3) is it is when you actually go to court and make the application, rather than any filing date. That would be an open view, and that has actually been held in another piece of legislation recently by a five Bench court in a patent case, but in a different legislation, so it is conceivable.

Your Honour, to be fair, it is a potential distraction, but I do not think, to the extent it is still there, it will in any way distract from what we say is the fundamental point that is a substantive consideration of it, and to the extent it veers away from that substantive consideration, it should be rightfully jettisoned and not worthy of the consideration of the Court. I prevaricate a little bit because there may be potential for it to be relied upon, in that sense.

Very briefly, we say that the analysis, starting at page 85 of the application book, which appears in her Honour’s reasons at paragraphs 89, 90 and 91, which is effectively what I have described – namely, it is a substantive new application on new evidence – is to be contrasted with the approach of, firstly, Justice Macfarlan, which starts at effectively the top of 104 and goes through to 156, the effect of which is really to say it is a procedural provision, therefore, it applies. There does not seem to be any consideration at all, at least explicitly, of section 79.

The attempt in paragraph 155 at the bottom of that page to squeeze it in by analogy to Gordon v Tolcher is, we respectfully submit, not a successful attempt; perhaps an implicit recognition that there is a bit of a difficulty here. Equally, if one goes to Justice Gleeson’s reasons at 109 – it

is really 170 and following – it seems to be it is a procedural provision, and thereafter, no explicit consideration of section 79. We submit it is a matter worthy of consideration of this Court. As I say, it is brief, but very important.

FRENCH CJ: Thanks, Mr Bannon. Yes, Mr Newlinds.

MR NEWLINDS: Your Honour, we say the analogy with Gordon v Tolcher misfires. Gordon v Tolcher was a case that determined that if the federal legislation provides for an application to happen at a certain time or in a certain way, that if one can identify that that application happened in that way or within that time, then the federal legislation is being complied with, and thereafter, what happens to the case is a matter for the local court’s rules, and there can be no inconsistency, and therefore they are picked up.

That was a case about an application. Your Honour probably appreciates that the particular rule said that if nothing happened to the case after it was filed in the District Court in a certain time, it was “deemed to be dismissed”. The very next rule said that upon an application in the same case, it could be un-dismissed. Therefore, it is easy to appreciate why the result of that case was that this is the same application, and it was filed in time, and all we have here is a District Court rule dealing with what happens to it on its merry way along to finalisation. But the one thing we know about that deemed dismissal is that it was not final, because the very same rule allowed it to be reinvigorated; that is Gordon v Tolcher. The other thing – Gordon v Tolcher, of course, expressly, we say, endorses Chief Justice Spigelman’s statement from BP v Brown. Everyone, all the judges who looked at this case in - - -

FRENCH CJ: That was about 1324, was it?

MR NEWLINDS: It was about 1324, but the starting point is to properly construe the section. It is an authoritative statement as to the proper construction of the particular piece of federal legislation that we are talking about. Where we suggest people go wrong is to read Justice Spigelman’s reasons to be talking about an application, but the purple passage speaks in terms of one single and determinative extension; not one single and determinative application, one single and determinative order. That is his Honour’s construction of the application.

Therefore, the question – and it will come up in argument – of whether this is the same application or a different application really does not resolve the issue. The real question is, is the amended order that is made as a result of the amended application, is that the same order? No matter how much people tie themselves in knots to try and rationalise a way why it is, it is just not. It is an amended - - -

FRENCH CJ: Well, you say, in any event, 588FF, properly construed, shuts out 79?

MR NEWLINDS: Absolutely. It does not allow any rule to be picked up that allows a different result. That is the simple point, and whether it is a procedural rule or a non-procedural rule is totally irrelevant. Court rules are generally procedural, so to say that this is picked up because it is procedural completely begs the question, of course it is procedural. The real question is, does it conflict with the piece of federal legislation that the State court is dealing with? That is where we say Justice Macfarlan’s reasoning goes wrong.

Justice Gleeson analyses the matter by saying it is all really one matter and, once again, that may be accepted, but it just begs the question, what is happening in this matter as a result of this decision is that you are getting a second order. Whilst everyone agrees that Chief Justice Spigelman is right, and that the proper construction of the federal Act is you have one single and determinative extension, what has happened is that the words “single and determinative” have now been qualified in a way that there is a single and determinative extension subject to any application that might be made pursuant to the State court’s rules.

BELL J: That submission reads Chief Justice Spigelman’s statement into the text.

MR NEWLINDS: It does. If you go back to the Act, we say – the point I am starting with, the proposition that Chief Justice Spigelman’s construction is correct, is that that is the conclusion of all three judges in the Court of Appeal. Mr Coles did make a submission – and I suppose if leave was granted, this submission would be alive on appeal – he did not make the submission that Chief Justice Spigelman was wrong; the way he put it is Gordon v Tolcher puts a qualification. So it is really the Gordon v Tolcher analogy, and for the reasons I have explained, whilst maybe arguable, that just does not get there.

The reason special leave should be granted is not just because this is a section that has wide day to day application, it is also because if this decision is right, someone – and this Court, appropriately – needs to explain what this qualification to “single and determinative” really is. In my respectful submission, it is a very good candidate for special leave. It has good prospects of success. It is important on a daily basis and, in our respectful submission, could be resolved easily within one day. If the Court pleases.

FRENCH CJ: Yes, Mr Coles.

MR COLES: If your Honours please, special leave should be refused, in our respectful submission - - -

FRENCH CJ: Your first submission will be it will take longer than a day, I suppose.

MR COLES: No, I think I could assure your Honours that it would complete within a day, but I want to seek to persuade your Honours that such an allocation need not be made. The question, your Honours, whether the provisions of subsection (3) of section 588FF otherwise provide so as to preclude are, of course, irreconcilable. The relevant provisions of the Civil Procedure Rules, including the variation rule, is ultimately one which requires attention to the provisions of section 588FF(3) itself. Your Honours have seen it; one place you might find it, for the purposes of the brief remarks I am about to make, will be at page 61 where, in paragraph 11 of Justice Beazley’s judgment, the learned President sets out the text. What your Honours see is that:

An application under subsection (1) –

that is to say, a substantive application for relief in relation to a voidable transaction, must be made – or can only be made within the relevant three-year period, or, importantly, (b):

within such longer period as the Court orders on an application under this paragraph made by the liquidator during [that three year] period.

Importantly, your Honours, subparagraph (b) reveals two things. The first, as recognised by this Court already, it makes provision for an application, and the content of that application is the necessity for filing within the three-year period the application. That is as far as the requirement of the statutory provision goes – I will come in a moment to remind your Honours what this Court said in Gordon v Tolcher about the significance of that.

The second point immediately apparent, though, from subparagraph (b) is that the longer period is the longer period that the court orders. One first makes one’s application; that is the essential feature, the making within the three-year period of the application. After that, as this Court said in Gordon v Tolcher, it is a matter for the court which hears the application – not necessarily within the three-year period – and hearing the application makes an order, not necessarily an order identified within or supported by evidence within the three-year period.

What is crucial, what is essential and what is a feature of the gift which, to paraphrase the Court’s earlier decision, the court supplies is that the application be so filed. After that, it is a matter at large for the purposes of the court, and so seen, there can be no irreconcilable tension between the relevant civil procedure rule and the only significant content of subsection (3), namely, that you must make your application as liquidator within the three-year period, because such matters as the court thereafter ordering, provided the application is so filed within the mandatory and essential period, are matters for the court and are consistent with the preservation and the picking up by section 79 of the Judiciary Act of the Civil Procedure Rules. After all, those Rules are designed to supply a coherent body of practice, procedure and general court principle in the administration of federal proceedings where the federal legislation conferring jurisdiction, as it does on the State or Territory court, does not make out a provision.

Can I remind your Honours that in paragraph 32 of the Court’s judgment in Gordon v Tolcher [2006] HCA 62; (2006) 231 CLR 334, their Honours identified in paragraph 32 that importantly, reading from the middle of the paragraph:

Section 588FF evinces a two-fold legislative intention. First, conferral of federal jurisdiction is left to –

other parts of the Corporations Act. But secondly, and we would say most importantly –

subject to any operation of other provisions of the Corporations Act, after the institution of an application the procedural regulation of the conduct of a matter is left for that particular State or territorial procedural law which is to be picked up by s 79 –

and if your Honours just conveniently go over to – much the same was repeated in paragraph 40 of the Court’s judgment in the same report. Accordingly, they say:

s 588FF is dealing, as an essential aspect of the regime it creates, with the period within which the application must be made –

and omitting a few immaterial words –

Thereafter, and subject to any other relevant provision . . . the conduct of the litigation is left for the operation of the procedures of that court. These procedures will vary . . . The scheme of the Corporations Act is not to impose a direct federal and universal procedural regime. Rather, s 79 of the Judiciary Act is left to operate according to its terms –

Importantly, if one just goes back for a minute to the text of section 588FF(3), focusing on (b), one sees, as was done in the present case, the necessity for the essential requirement that the application be made by the liquidator within the three-year period. Thereafter, it is left at large what the court will order.

It necessarily follows, in our respectful submission, compellingly, the one thing that will follow, provided the application is filed within the three-year period, is that the court may or may not for that matter make an order. That, however, does not depend, as I have suggested, on evidence that has to be filed within that three-year period. This is not like an application, for example, to set aside a statutory demand where Parliament has made it very clear it wishes to fix the events by reference to which that application is made to the very period within which the application is required to be made; quite the contrary. We would respectfully say that that important comparison rather tells against the approach Justice Beazley took about taking into account conceptions of - - -

FRENCH CJ: There is a kind of sponginess about timeframes that lets a 79 pick-up of UCPR in?

MR COLES: Yes, and as accepted, even by the learned President, for example, the CPR must be available to pick up, by slip rule means, mistakes. It must be available to come back into play if an appeal is allowed. It must be available if somebody else comes along who did not know about the order being made and seeks to set it aside. It must be available, in short, whenever it is necessary for the court to reveal and adjust its process of making orders, and here the important point which Mr Bannon raised – or seemingly important point, namely, that if section 79 was allowed to operate by picking up, the relevant rules were taken to be correct. This would supply some unqualified licence for liquidators to make endless and iterative applications for extensions of time until heaven only knows when – with respect, utterly ignores or overlooks the judicial control and the necessary - - -

FRENCH CJ: Well, that is picked up in the judgment, I think, is it not?

MR COLES: That is right. In our respectful submission, the applicants in this case have not identified, apart from a general aspiration to prefer what they say is substance over form, or suggestions of unbridled licence in the administration of the Corporations Act or similar matters, or invocation of, as we have respectfully suggested, rather out of context judicial observations taken particularly from statements by Chief Justice Spigelman

– what is lacking in this application is a coherent and definitive explanation as to why it can be said that section 588FF(3), dealing as it does with the single essential feature of the time within which one makes an application and leaving it to the court thereafter must, nevertheless, necessarily provide otherwise for the purposes of excluding from the pick-up process of section 79 the relevant Civil Procedure Rules.

FRENCH CJ: This is all to say simply that the Full Court got it right?

MR COLES: Yes.

FRENCH CJ: Yes, all right, thank you. Yes, we will not need to hear reply. There will be a grant of special leave in each matter, and I take it the estimate is agreed at one day?

MR BANNON: Yes.

FRENCH CJ: Thank you. The Court will now adjourn to reconstitute.

AT 10.28 AM THE MATTERS WERE CONCLUDED