Opes Prime Stockbroking Ltd (In Liquidation) (Scheme Administrators Appointed) (ACN 086 294 029) & Anor v Stevens & Ors [2014] HCATrans 259 (14 November 2014)

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Opes Prime Stockbroking Ltd (In Liquidation) (Scheme Administrators Appointed) (ACN 086 294 029) & Anor v Stevens & Ors [2014] HCATrans 259 (14 November 2014)

Last Updated: 18 November 2014

[2014] HCATrans 259

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S137 of 2014

B e t w e e n -

OPES PRIME STOCKBROKING LTD (IN LIQUIDATION) (SCHEME ADMINISTRATORS APPOINTED) (ACN 086 294 029)

First Applicant

OPES PRIME GROUP LIMITED (IN LIQUIDATION) (SCHEME ADMINISTRATORS APPOINTED) (ACN 120 372 223)

Second Applicant

and

ALUN PETER STEVENS

First Respondent

PETER JOSEPH GILOOLY

Second Respondent

QBE INSURANCE (AUSTRALIA) LIMITED

Third Respondent

Application for special leave to appeal

CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 14 NOVEMBER 2014, AT 9.30 AM

Copyright in the High Court of Australia

____________________

MR B.W. WALKER, SC: May it please the Court, I appear with my learned friend, MR J.A. REDWOOD, for the applicants. (instructed by King & Wood Mallesons)

MR N.C. HUTLEY, SC: If your Honours please, I appear with my learned friend, MR C.L. LENEHAN, for Stevens and Gilooly, the first and second respondents. (instructed by Norton Gledhill and K & L Gates)

MR G.G. McARTHUR, QC: If your Honours please, I appear for the added party, QBE Insurance. (instructed by Wotton & Kearney)

CRENNAN J: Thank you.

MR WALKER: May it please the Court. May I take you to page 28 of the application book, where in paragraph 4 of our written submissions in-chief we designate topics or issues (A) to (E)? You will see that there are three or four, depending upon your division, important provisions referred to among those five issues, in order of importance. No doubt, they start with section 118 of the Constitution, but it has to be said that that has been behind something of a cloud until now in these proceedings. Not in the sense that it has not been observed, but rather than it has not been the subject of explicit argument, no doubt recognising the state of authorities at first instance.

That obviously leads to and informs the very important practical implications of a proper meaning of section 11 of what I am going to call “the cross-vesting scheme”. You will see that there is also called in aid, but still not to the forefront, section 79 of the Judiciary Act, which I mention mainly because it highlights, in our submission, the substantive significance of the true jurisdictional issues that are raised by the current application. Then, of course, we come to one of New South Wales’ favourite provisions, section 6 of what we will call the Law Reform (Miscellaneous Provisions) Act 1946 - - -

CRENNAN J: Whilst we do not doubt that the question of the interpretation of section 6 is important, how does it arise directly in this application, Mr Walker?

MR WALKER: Directly, it does not, of course, and that is one of the reasons I have put it last. In forming - - -

KIEFEL J: Speaking for myself, I have to say I am a little confused because the issue in paragraph (A) on page 28 asks what I suspect is the key question for the parties for whom you appear but, nevertheless, you assert in your written submissions that section 6 continues to apply despite cross-vesting, so what is the point?

MR WALKER: That is contested completely.

KIEFEL J: So it is a question of there being some – it is a question of concern that the matter needs to be put to rest, is that it? We are not getting into the advisory opinion area that Mr Hutley has referred to?

MR WALKER: Not at all. There is already a concrete controversy about whether the Victorian Supreme Court has jurisdiction to entertain an application under section 6(4) by dint of a number of matters – the institution of the transferred proceedings in New South Wales, query the governance of the insurance policy as a matter of its proper law by the law of New South Wales – I say query because that has not yet been established – and the Victorian proceedings, pending proceedings where, of course, the identity and involvement in the proceedings of the parties is critical. If section 6 applies, then an application can be made for the insurer to be joined by way of the statutory action to enforce the charge, and joined, then the insurer participates in its own right in the substantive liability proceedings. That is a question of, its participation is now a live issue. It is concrete, there is nothing advisory or hypothetical about it.

CRENNAN J: Is this because of the debate about whether the Victorian Supreme Court is exercising its jurisdiction under section 4(3)? Is that what you are saying, that that follows from that debate?

MR WALKER: Yes, and that is the debate upon which the parties are at daggers drawn. It is said against us that by reason of the decision for now, as his Honour put it, by Justice Ball, against us in New South Wales, that the time was not appropriate now to grant leave to enforce the statutory charge. It is said that once and for all – that has a once and for all effect by reason of the arbitrary circumstance that these are liability proceedings which have been transferred under the cross-vesting scheme.

CRENNAN J: Does not Justice Ball – the rhetorical movement of his judgment from paragraphs 25 to 26 is really to say, accepting everything you say, I will approach this not like Schultz, but by weighing up the competing considerations, like the old forum non-convenience type of exercise, and finds against, does he not?

MR WALKER: Yes, but can I go - - -

CRENNAN J: In other words, in an orthodox sense, why should we be satisfied that there is a sufficient basis for the grant of special leave?

MR WALKER: For these reasons. Going to page 12, where that mode of approach can be seen, in paragraph 25, the statements by his Honour in justification of the approach are, in our submission, completely misplaced concerning the nature of a section 6 right and its sole means of enforcement.

CRENNAN J: Well, you do not agree with the description “procedural or substantive”.

MR WALKER: Quite so. In our submission, there is undoubtedly both; when a statute provides a right and a remedy that is exactly what you would expect.

CRENNAN J: If I can speak just colloquially in a sense, that is pure Schultz, is it not, paragraph 25?

MR WALKER: Not quite – well, if it is, it has misunderstood the point of those observations in Schultz, and perhaps I am saying, yes, it is pure Schultz, but that is the error. I am not saying Schultz is erroneous, far from it, but what I am saying is that in Schultz, by reason of the fact that an impartial exercise of judicial discretion is in question, it was identified as an error to place a peculiar or governing weight on one party’s loss of an advantage or suffering of a disadvantage without taking into account that which would cancel it out, the exactly correlative and commensurate opposite effect. Section 6, bearing in mind that it brings in a person who is not a party to the liability proceedings being transferred, is an entirely different conceptual state. There is no disadvantage to the insured unless we are to see the insured as the cat’s paw of the insurer, which would be wrong – at least wrong in legal principle.

KIEFEL J: What is the difficulty in a practical sense of bringing proceedings under section 6 against the insurer once it is known whether or not there is liability?

MR WALKER: That the insurer will not be involved so as to be bound by every step – not just substantive finding – in the proceeding.

CRENNAN J: What about Justice Ball’s point about unnecessary costs if you do not reach a point where it seems appropriate to have joinder for one reason or another? Going back to the whole rationale for the section in any event?

MR WALKER: Your Honour, Justice Ball did not find that we failed to fit what might be called the orthodox three point test for the discretion, the favourable exercise of discretion under section 6. The fact of unnecessary cost is, of course, a very handy and appropriate summary of a conclusion that could have been reached but, in our submission, his Honour did not reach that by saying that these are costs that need not be incurred. We have here a claim in the liability proceedings which, if successful, will greatly exceed the likely resources, so his Honour thought of either the insured’s personally or the insured’s with the benefit of the indemnity. In our submission, it is - - -

CRENNAN J: There are no other claims which would affect - - -

MR WALKER: None known.

CRENNAN J: No.

MR WALKER: None known, yes. It is for those reasons, in our submission, that it cannot be said that this is a case where there was, as it were, an excessive or irrelevant burden being sought to be placed on the insurer, who obviously has a real concern in these proceedings, not least because we know that they are funding defence costs. Rather, his Honour in 25 has, as it were, by an erroneous adaptation to the rather different position presented by section 6 against an insurer – non-party to the present liability proceedings – called in aid the notion that one man’s meat is another man’s poison, and that simply does not apply in relation to section 6 against the insurer, so far as the insured is concerned. It is for those reasons, in our submission, that it cannot be said that there was not an error in failing actually to decide rather than an assumption on a false basis - - -

CRENNAN J: You are saying the decision had to have been made at that stage, are you?

MR WALKER: Yes, because his Honour has made an assumption on a false basis concerning the nature of the section 6 enforcement - - -

CRENNAN J: Is that the error for special leave purposes?

MR WALKER: In order to get into what I will then call a Schultz approach, which is to say that the transfer decision needs to be informed by proper considerations and not informed by irrelevant considerations, that is the point at which – as we have put in our written submission – the matter arises. There has simply been a failure, completely, by his Honour to engage with the arguments concerning the continued application of section 6. It is to be recalled that down at first instance the parties were opposite in their proposition. One party was saying, if there is transfer, section 6 is gone, and they mean that compendiously, that is, the right plus the remedy; the right gone because it can never be the subject of a remedy. As your Honours know, we dispute that because section 6 contains provisions which independently operate, such as the good discharge before notice, and the effect in insolvency.

KIEFEL J: What has QBE said about section 6?

MR WALKER: QBE’s position about section 6 is that – as we understand it – it is not available for us to enforce in the Victorian Supreme Court.

KIEFEL J: But they have undertaken to pay in the event that liability is established.

MR WALKER: Yes, and that, of course, as your Honours will appreciate, involves two qualifications. The first is that which is noted by his Honour, and noted in the written submissions, that in a not unusual way there are reservations that they - - -

KIEFEL J: On the present state of facts, et cetera.

MR WALKER: They are called conventional, and appropriately so. The second is - - -

CRENNAN J: We always seem to get back to one of Justice Kiefel’s points, which is that in some sense the best argument against the grant of special leave is contained in your own submissions, paragraph 39 onwards.

MR WALKER: I thought it might be so, your Honours.

CRENNAN J: Now, I know – yes.

KIEFEL J: It seemed fairly persuasive, Mr Walker.

MR WALKER: I am sorry, your Honour?

KIEFEL J: That is your problem, it is quite persuasive.

MR WALKER: Yes. Your Honours – and I should make this clear – there are two other issues that it would be disingenuous not to note. Neither, we think, is right for special leave, but we urge nor are they a reason not to grant special leave, because they do lie in the future, as everything does in any case involving pending litigation. The first is what might be called the defence costs issue, where as your Honours know, there is a difference between obiter in New South Wales in the Chubb decision and ratio in New Zealand in the Bridgecorp decision. It need hardly be said, given the figures in question in this case and the likely scale of the litigation, that that is a very large issue between the parties, and it raises, obviously, an issue of general importance concerning the operation of an important scheme, but that is not - - -

CRENNAN J: It is still down the track, is it not? In a sense it does not - - -

MR WALKER: I mention it because - - -

CRENNAN J: - - -overcome the whiff of being hypothetical, at this stage, in this Court – the question about section 6.

MR WALKER: Your Honours, I understand why that is raised. We resist that character as follows. The defence costs issue is not simply hypothetical at this point – it does not exist. I raise it because it is the elephant in the room as to the commerciality of the contest at the Bar table. If defence costs were not expenses reducing the indemnity over which the charge is available, then I suspect the issues at the Bar table would either go away or would be rather different.

It is not, as I say, simply hypothetical, it just does not exist as an issue at the moment. The joinder question, which is regardless of whether the obiter in New South Wales or the ratio in New Zealand should be the law concerning the diminution of the charge amount by the expenditure of defence costs, that issue is concrete now because it affects who will participate in the liability proceedings. That is not an issue by definition that can await some future event. It will be too late. After it is all - - -

CRENNAN J: There was a special leave application in Chubb, was there not, I think, which was withdrawn something along those lines?

MR WALKER: Your Honours will have seen a reference in our written submissions. The matter was sought to be brought to this Court, but it never came to it. I do stress that I have raised it because it would be silly not to recognise that it is a reason why all this matters, but rather than rendering anything hypothetically, it really only underlines the commercial concreteness of understanding who it is who is going to participate as a party in these proceedings in Victoria, and in defence of what interest.

Now, the second matter that I need to draw to your Honours’ attention is something that my friend and I – if I can hand up this copy to your Honours – bearing in mind the aspects of the substantive liability sought to be enforced in the proceedings, it was, we think – forgive my tentativeness, but that is our tentative submission – there may have been a failure at first instance to appreciate that it was under 1337H that the application needed to be made and the effect, of course, is on the appellate structure. It would not be a decision of the Court under the provision that made available the Schultz route to this Court. Whether that makes any material difference to the outcome of the reasoning below, we doubt, but we draw it to attention. I confess - - -

CRENNAN J: As a distinction from the precise situation in Schultz.

MR WALKER: Yes, that is right. For our part - - -

CRENNAN J: So this is a section 13 point, in a sense?

MR WALKER: Yes. For our part, we draw it to attention because it seems to have been overlooked. We do not think it makes any difference to the material merit. The fact is, there is an order of the Supreme Court which has effected a transfer. It stays operative unless and until disturbed. If it is not disturbed, then doubts about its correctness are simply that, they are matters for academic discussion only.

Having completed by reference to two matters which ought to be drawn to the Court’s attention, the first, of course, your Honours already appreciated, the second, perhaps needed to be exhumed, can I return to what we say is the reason why far from being hypothetical this is now concrete? It is the transfer, vulnerable by reason of a failure to consider the effect of the transfer on the availability of the section 6 remedy, and on the argument against us on the existence of the section 6 right which renders this, as it were, a matter that ought to be attended to at the beginning because it will, of necessity, be too late at the end.

It can never be fixed by any appellate progression if it is not attended to now. That is in the nature of a provision which provides the footing for a party to be joined to proceedings. It is in the nature of such a provision that it has its operation only at one point in the temporal sequence of litigation. It is not able to be remedied except by the horrendous prospect – horrendous prospect in this kind of commercial litigation – of it rendering it necessary to order a complete new trial, differently constituted as to the parties, if there is a disagreement at the end of the day concerning that

joinder issue. That, in our submission, would be a crying shame. May it please the Court.

CRENNAN J: Yes, Mr Hutley? What do you say about the second issue? The sort of wrong court issue, if I can put it that way?

MR HUTLEY: Your Honour, the wrong court issue leads – at the moment, as my learned friend said, there is an order in place of a superior court which is valid until set aside. If your Honours were to take this up and then to find error in relation to the cross-vesting motion, your Honours then could not exercise – would have to reconsider it under a different Act and the Act which, as we see, if that is what occurred and that is correct, there should have been appeal to the Supreme Court in New South Wales from Justice Ball’s decision because there would not be a preclusion of an appeal if the exercise of the power had been on the wrong basis, and should I say - - -

CRENNAN J: You were not in the section 13 paddock?

MR HUTLEY: Quite. Yes, exactly. Your Honour, neither my learned friend nor I were in it at first instance, but I am told that this question was raised with his Honour. After his Honour had reserved, the point arose, and there was some communication with his Honour’s associate chambers which was copied, I understand, to my learned friend’s side, but the point went no further. Now, that is just a difficulty which exists which may mean that were your Honours to take it up, what happens if there is error, what happens after that? Your Honour, that is what we say about that. So we say it is a – it tends to indicate that the vehicle is not a particularly good one to determine any question in relation to cross-vesting.

More fundamentally, we say, is that the cross-vesting point is really defeated by paragraph 26 in Justice Ball’s reasons at page 13 in the application book. In other words, he made an assumption, should he be wrong in his original approach at 25, to which my learned friend has addressed his submissions – 23 to 25 – and said if I am wrong and I do bring it to account, I would still consider that the appropriate forum is Victoria for very good reasons, namely, the only reason that the application was being brought in New South Wales was to get access to section 6 because every other factor militated in favour of Victoria - there was a few bits and pieces - but essentially it was a Victorian case. The insurer had admitted liability, subject to the conventional reservations; in other words, if the sky falls in, we could change our view.

KIEFEL J: Well, I take it that weighed fairly heavily with his Honour.

MR HUTLEY: Yes, because there would be – one of the important points to note is that the insured’s here have assets, significant assets, and there are claims much above their assets together with the indemnity. So you would have the prospect of the insured’s being there, incurring costs – they would have to, to protect their own interests – the insurer being there, running a case, protecting its interests, complete duplication of costs, the insurer incurring its own costs and also, we would say, having to indemnify for costs the insured’s, in circumstances against the theoretical possibility – totally theoretical possibility – that another claim could come out of the woodwork, even though as his Honour observed - - -

CRENNAN J: Absolutely nothing at the moment - - -

MR HUTLEY: Nothing at the moment and time has - - -

CRENNAN J: - - -that affects the cover?

MR HUTLEY: Exactly – time has passed, such that time limitations effectively would have kicked in for all that could be conceived – I do not say anything about actual equitable claims, but short of that, no indication and no basis for thinking that this would just be a pure, futile, waste of money against a theoretical possibility. Now, make the assumption that - - -

KIEFEL J: Speaking as a theoretical possibility, why do you say section 6 is extinguished by the cross-vesting?

MR HUTLEY: Your Honour, I have not been briefed to advance that argument. I understand that that is an issue, and your Honour - - -

KIEFEL J: Well, your side does contend to that effect.

MR HUTLEY: I understand that, yes, that is the position. I have not come here – let it be accepted that - - -

CRENNAN J: It gets back to Justice Kiefel’s point that in the sense the best point against the grant of special leave is contained in the applicant’s paragraphs 39 onwards.

MR HUTLEY: I accept the force of your Honour’s, with respect, observation. There is a very - my learned friend’s answer to that is to say, well, it will all be down the track but, of course, there is a very simple way to test it. You can test it immediately by seeking leave to appeal from – which he has already sought – pursuing his leave to appeal from the judgment refusing joinder, because that is in the Victorian Supreme Court.

If the point is alive, namely, that upon transfer under the Cross-Vesting Act, section 6 evaporates, that must be an answer to any joinder in Victoria, so the Full Court – the Court of Appeal in Victoria would not be capable of exercising the power. That could be advanced and developed very quickly in a one day appeal in the Court of Appeal, and should the Court of Appeal come to the view which I understand our side will advance, then there would be a case which was wholly ripe for your Honours to entertain on a special leave application which would throw up directly the cross-vesting point - - -

CRENNAN J: Plus the wrong court point.

MR HUTLEY: Plus the wrong court point, plus the section 6 points, because it would be in the context of a construction of section 6 of the Act. Now, that – rather than, as it were, the attempt to float this up on, really, in a sense, discretionary judgments, where against the - - -

CRENNAN J: For a proleptic indication of the section 6 point.

MR HUTLEY: Exactly. In circumstances where the likelihood, on the section of the cross-vesting point, the Court would take the view that his Honour Justice Ball advanced at paragraph 26 - it is unnecessary to answer this question because even if it were right this is so wholly a Victorian matter, we will transfer it down there in any event and await what happens in Victoria. That is, in essence, why we say that there are roots to bring this to a determination. They are more appropriate. Your Honours would then be assisted by judgments at appellate level that have considered all the points across the range, and then your Honours can deal with it when it is concrete.

At the moment, it is really just a debate about whether there was an error on an exercise of discretion, and that is particularly on the joinder point, where his Honour said this three point test, this three points is not the be-all and end-all, and when one looks at the Act, that must be right and, therefore, it is really just a submission that his Honour erred in wrongly exercising the discretion – a matter of no interest to this Court. If your Honours please, those are our submissions.

CRENNAN J: Anything in reply, Mr Walker?

MR WALKER: Yes, briefly. Your Honours, the argument, of course, in our paragraphs 39 and following is an argument which is not merely contested, but one which we will not be able to advance except in - in relation to the transfer – except on an appeal from the order that has been made.

KIEFEL J: Or in proceedings brought after liability is established.

MR WALKER: But brought where, is the difficulty. It has to be - - -

KIEFEL J: What is the problem with bringing against the insurer in New South Wales?

MR WALKER: The wording of the provision that refers to “in the same court”. I do not want to be put in the perverse position of arguing against the position that we have expounded in paragraphs 39 and following, which would be an answer to Justice Kiefel, but if we cannot appeal this, then the transfer is an accomplished fact. It is not a mere exercise of discretion, the so-called assumption said to be favourable, but in a most barbed way to ask in paragraph 26 of Justice Ball, is an assumption that nowhere poses the notion of the loss of section 6 irrevocably by transfer against the so-called inconvenience of it remaining in New South Wales, it having been properly commenced in New South Wales.

CRENNAN J: Those matters can be ventilated, can they not, in the context of moving up the hierarchy in Victoria, because the section 6 point will be contested - and the section 4(3) point, as we have mentioned earlier. They will all be part of the contest, will they not?

MR WALKER: After a great deal of litigation, and litigation costs have been incurred, and before joinder, substantively, of the insurer.

CRENNAN J: We do understand the timing point.

MR WALKER: Yes. May it please the Court.

CRENNAN J: Whilst the question of the interpretation of section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) is important, it does not appear to us that there is sufficient doubt about the decision below to warrant a grant of special leave. Special leave to appeal is refused with costs.

AT 10.01 AM THE MATTER WAS CONCLUDED