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Bow Ye Investments Pty Ltd (In Liq) v The Director of Public Prosecutions (Vic) [ 2009] HCATrans 333  (11 December 2009)

Last Updated: 17 December 2009

 [2009] HCATrans 333 

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M73 of 2009

B e t w e e n -

BOW YE INVESTMENTS PTY LTD (IN LIQUIDATION) ACN 077188 160

Applicant

and

THE DIRECTOR OF PUBLIC PROSECUTIONS (VICTORIA)

First Respondent

BOW YE INVESTMENTS PTY LTD

Second Respondent

BOW-FUD PTY LTD (DEREGISTERED)

Third Respondent

LEONG MEI FONG/BENTENG KIARRA SDN BHD

Fourth Respondent

LEONG JEET YUI

Fifth Respondent

WILLIAM TANG (AKA TANG KOK SONG)

Sixth Respondent

ROBERT LOH

Seventh Respondent

Application for special leave to appeal

CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 11 DECEMBER 2009, AT 11.21 AM

Copyright in the High Court of Australia

__________________

MR J.F. BLEECHMORE: If the Court pleases, I appear on behalf of the applicants. (instructed by Brand Partners)

MR N.J. O’BRYAN, SC: If the Court pleases, I appear with MR C JUEBNER for the first respondent. (instructed by Director of Public Prosecutions (Vic))

CRENNAN J: Yes, Mr Bleechmore.

MR BLEECHMORE: Your Honours, the issue here, the question which we submit is a special leave question of general importance, is whether there is constitutional, direct or operational inconsistency between the underpinning sections of the Confiscation Act 1997 (Vic) which supported, underpinned, founded these restraining orders and the winding-up provisions in the Corporations Act 2001. We say that there is direct conflict for two reasons.

First of all, the restraining orders simply freeze the liquidation, as we say, and prevent the liquidator actually completing the winding-up by paying the creditors or by admitting the claims of the creditors, admitting the debts and determining a dividend in paying the creditors. The two sections of the Act which we say indicate that that is part of the process of winding-up are section 501 and section 506(3). I should add to what I have said as to the first point that it is impossible for the liquidator to obey both laws. He is restrained from paying a dividend to the creditors, and to pay it to state trustees - - -

KIEFEL J: His Honour the primary judge held that the performance of the liquidator’s duties is subject to procedural interference with the leave of the court in any event and, moreover, his Honour found that there was no inconsistency between the rights of the creditors under the Corporations Act and the interests that are restrained under the Confiscation Act because if the DPP is correct, the dividends in issue are, in fact, not payable to creditors and the liquidator has no obligation to pay them. If the creditors are right, the dividends are genuinely payable and the underlying basis of the restraining order will fail away. That is the critical point, is it not, that this is an interim restraint where these matters have yet to be determined unless you can show that there is an inconsistency or that only one position can maintain? His Honour’s view is correct, is it not?

MR BLEECHMORE: With great respect, no, your Honour, because for the rights of the creditors to prove their debts in the liquidation, have them adjudicated upon by the liquidator and have a determination and then be paid a dividend, in substitution for that, this restraining order requires them, in effect, to make an application under the State Act which, as the Court of Appeal said, was substantially the same process and did not alter or vary or impair their rights. But, with the greatest respect, we say it clearly does because under the State Act the creditors are now required to make an application for an exclusion order, required to do that within thirty days or to get leave for an extension of time to serve the Director and then to establish, among other things, that the property was either not tainted property or if it was, that the interest was acquired not knowing that it was tainted property and in circumstances such as not to excite any reasonable suspicion that it was.

CRENNAN J: But the real point is that the restraining order does not prevent the liquidator from fulfilling his duties under the Corporations Act because the liquidator, as I understand the facts, can declare a dividend and can pay the dividend, albeit to the State trustees.

MR BLEECHMORE: With the greatest respect, your Honour, he is restrained from paying the debts of the company. That is part of the winding-up process. The fact that he can pay to State trustees does not take it any further. He is in exactly the same position, we would submit, as a restraint upon the assets of the company in his hands. It is a device to make it look, we would say, as though someone has been paid and it has been submitted by our learned friends that the State trustees holds those funds on trust for the creditors and in that sense they have been paid, but that clearly cannot be so because - - -

KIEFEL J: This is not truly an inconsistency point, but, in any event, the Confiscation Act does not affect the right of the creditors to assert their entitlement to the dividend as declared by the liquidator.

MR BLEECHMORE: No, they can do that. That is open to them, but the way in which - - -

KIEFEL J: So that is the position of the creditors. Is not what you have to look at the position of the liquidator in relation to the inconsistency arguments?

MR BLEECHMORE: With respect, no, your Honour, because the test is whether the operation of the Act has changed, not whether the function of the liquidator, which is only part of the operation of the Act, is altered or varied or detracted from, to use the lapidary expression that seems to be still accepted as the real test. We say that the rights of the creditors are altered because they are then subjected to a regime in making their claims which alters their rights and varies them and detracts from them because it requires them to establish matters which it would seem, on the surface of it, are matters beyond their knowledge. So they would sustain a far greater burden if they have to resort to the State Act.

It is the kind of intersectional inconsistency that we have in the case of Deborah Wardley, the female pilot who was not able to get a job with Ansett because of the operation of the Equal Opportunity Act (Vic). There is prima facie directing consistency here, we would say. The real question is whether – and this was not directly adverted to either by the judge of first instance or the Court of Appeal – the Commonwealth Act must be viewed against the general background of the general law, which includes the State law. We would respectfully submit that that is the question.

It is not a question of whether the liquidator has completed his function because we would say, with respect, he has not and that the judgment of her Honour, with which the two other judges in the Court of Appeal agreed, was wrong in mischaracterising the process and by saying things such as that the dividend was restrained in the hands of the creditors or that they had been paid. The reality is that the liquidation is frozen at this particular point in time and is not able to be completed. Final accounts are not prepared at the time when the dividend is declared. They are prepared when, as section 509(1) says, at the time - - -

KIEFEL J: But to say that a restraining order has an effect is to assert the obvious. To identify the effects that a restraining order – that it has some effect on liquidation does not mean that there is an inconsistency. It has to be more than that.

MR BLEECHMORE: We would say, with respect, that it does. It is in the same position as the equal opportunity board requiring Ansett to employ Deborah Wardley and - - -

CRENNAN J: But the restraining order affects, as I understand it, dividends and any surplus and the creditors have an opportunity under the exclusion provisions to make whatever claims they wish to make where that money is reposing with the State trustees.

MR BLEECHMORE: That is clearly so, but the process by which they may do so, the fact that there is an avenue open, is not an answer to the question. The question is, what is the avenue and is it one that entails an alteration or variation or detraction from their rights, and the operation of the federal law? It clearly does here, and the question is, well, that is an acceptable inconsistency because, as Justice Stephen said, as I recollected, in the Wardley Case - - -

CRENNAN J: Just to interrupt you for a moment, their rights are ultimately to have the dividends which belong to them paid and have their entitlements in relation to the surplus paid. That is their right.

MR BLEECHMORE: That is their right and it is their right to make a claim to the liquidator to have that adjudicated upon and to be paid, yes. That is what is interfered with by these orders in the same way as an order of an Equal Opportunity Board requiring Ansett – or in another case, Goulden, this is the same situation, the Anti-Discrimination Tribunal in New South Wales ordering AMP to provide insurance to a totally blind person because not to do so would be to discriminate against that person. In circumstances where the federal law provided or enabled the insurance company to use its discretion in terms of fixing premiums and risk and discriminating, in effect, there is a clear collision. But the Court in that case said that by the State law the insurance company was effectively precluded from making its decision and that is exactly, with greatest respect, what is happening here. The liquidator is unable, effectively precluded, from giving effect to his decision.

CRENNAN J: I just cannot see that in circumstances where the State trustees will hold these moneys on trust.

MR BLEECHMORE: But they do not hold them on trust, your Honour.

CRENNAN J: But effectively they do, do they not?

MR BLEECHMORE: The State trustees have no legal ownership of the funds. They are in the position of a stakeholder. If they did hold them in trust - - -

CRENNAN J: They cannot dispose of them. Their retention of them is subject to the rights of the creditors and the contributories, surely?

MR BLEECHMORE: Yes, they are in exactly the same position as if the liquidator was holding them. It does not take it any further. It is restraining the liquidator, in effect, because he is required to put them in the hands of a stakeholder, not on trust for the creditors, so you cannot say that the creditors have been paid.

CRENNAN J: The creditors can make their application for exclusion from the restraining order and the moneys, whether they be dividends or surplus, would be released if they are entitled to them.

MR BLEECHMORE: Yes, but to do that involves subjecting themselves to a different and more onerous regimen and alters their rights. So, it involves a shift in our understanding of the constitutional principle of inconsistency to say, well, it does not matter if their rights are altered or varied or detracted from, as long as they have some rights or, as long as they have an avenue to pursue the ultimate goal, it does not matter that it has changed. With the greatest respect, that is inconsistent with an understanding of the nature of constitutional inconsistency which has been developed over many generations.

In particular, there is the salient difference that they have to establish either that it is not tainted property, matters which creditors, on the face of it, in Malaysia and Singapore, who have lent to this company, may have no knowledge of at all and they would need to establish in circumstances where there would be not aroused reasonable suspicion that the property was tainted property. So that it cannot be gainsaid is, in fact, a different process that alters the operation of the federal law and imposes a more onerous and different regimen upon the creditors which, for reasons quite apart from the one that I have outlined, they may wish not to pursue but are now being compelled to pursue as a result of the intersection of State and federal law.

Your Honour, I had indicated that the decision, if I may say so with the greatest respect, failed to deal with the ultimate question of whether the law should be seen against the background of the State law, including the State law in relation to confiscation of tainted property, and that the law should be seen as subject to that. So that the distribution of dividends to creditors should be seen as subject to the operation of State laws restraining dealings with tainted property. That is the question. It can be seen in the Court of Appeal, the judgment, if I may say so with respect, is unsatisfactory in that that issue is not directly addressed in that way. For example, in paragraph 69 of their Honours’ judgment, which is at page 55 of the application book, your Honours, her Honour says in line 5 in paragraph 69:

The liquidator is not restrained from paying the monies.

We would say that in fact, he is –

He is able to declare a dividend and pay that dividend, albeit to the State Trustee.

We make the point again that to pay the State trustee, not on trust, because it is not on trust, does not advance the position from that in which he is himself restrained. Her Honour says –

He is able to declare a dividend and pay that dividend, albeit to the State Trustee. Following payment of the dividend, any surplus may be distributed to the members according to their rights and interests –

Well, that is not so either because the liquidator, among others, is restrained from doing that. In paragraph 80, which is at page 59, her Honour says:

The liquidator declares a dividend and, if necessary, a surplus. He then proceeds to distribute the dividend and surplus, if any, to the members according to their rights and interests in the company. Thus the monies are placed in the hands of the members –

With great respect, we say that is simply a mischaracterisation of the position. That is precisely what the liquidator is restrained from doing, placing the moneys in the hands of members. If, in truth, the State trustees held the money on trust for them, well, then that would be so but we say it is - - -

CRENNAN J So your point really all centres on the need for the creditors to make an application under the exclusion provision?

MR BLEECHMORE: We say that puts them in a completely different position and therefore alters the operation of the federal Act, yes. Even though there is an avenue there, nonetheless their rights are altered and

varied. That needs, with great respect, if I may say so, to be faced squarely and for it to be said that these laws are subject to the background of the general law, including these laws, rather than to say that the moneys are in the hands of the members and that therefore the process of liquidation is not interfered with or altered and is complete at the time when the restraint takes effect, liquidation is complete because, with great respect, that is not so. Then in paragraph 84 her Honour says:

Once the liquidator, under the Corporations Act, has admitted a proof of debt the relevant sections of the Confiscation Act come into operation to restrain the property in the hands of the creditors.

It has never got to the creditors. It is restrained in his hands and, as I have said, it is not taken any further in ordering that he pay to State trustees. Then her Honour refers to the exclusion order and I have said several times what the difference is there. In paragraph 68, her Honour says, at page 54:

Nothing inhibits the power to deal with, by way of restraint, the dividend because it presupposes the winding up is concluded. The ‘dividend’ in these circumstances is the distribution of the property of the company applied to meet the liabilities admitted as debts by the liquidator. The dividend and surplus, if any, is declared at the point when the liquidator is ready to render the final accounts and pay those validly recognised as the creditors and members with rights and interests in the company.

As I have pointed out, in fact, section 509(1) of the Act refers to the final accounts as taking place at the point in time when the affairs of the company are fully wound up and the property of the company has been disposed of. The liquidator cannot make final accounts until the property the company is disposed of and if he is restrained from dealing with it, except to pay the State trustees, then it is not the stage to render final accounts and the liquidation has not been completed.

Finally, your Honours, as I have indicated, the real question is whether in a case such as this where there are two laws operating in entirely different fields and it is clear law that there can be operational inconsistency where they deal – even if the State law has commendable policy reasons underpinning it, but the approach of the High Court in that situation has been to say that one must see the Commonwealth law, a general law, expressed in very general terms as operating in this field as being operating in the background of all of the general law, including the State law, and that is the issue and, with great respect, the issue here has not been dealt with in that way in its process to this application. As your Honours please.

CRENNAN J: Thank you, Mr Bleechmore.

The application does not give rise to a question of public importance suitable to a grant of special leave and the interests of justice do not require such a grant. Special leave to appeal is refused.

MR O’BRYAN: We seek the costs of the application, your Honours.

CRENNAN J: On what basis, Mr O’Bryan?

MR O’BRYAN: On the basis, your Honours, that we are entitled to those costs and this is a liquidator who has brought this proceeding and all previous proceedings. He has lost at every turn, but has persisted. He has a fund of money which he has been expending to conduct this litigation - - -

KIEFEL J: He raises a question, though, about whether or not, because it is proceedings connected to the Confiscation Act, that the usual order cannot then be made.

MR O’BRYAN: Can I hand to your Honours a copy of a decision of the Court of Appeal made just a couple of days ago in connection with that matter which, for obvious reasons, is not in the bundle of authorities?

CRENNAN J: Yes. I notice no costs seem to have been ordered in the Court of Appeal.

MR O’BRYAN: They have now, your Honours, two days ago as a result of this decision.

CRENNAN J: I see. Thank you.

MR O’BRYAN: There was, your Honours, up until – in fact there are two recent decisions, this one a couple of days ago and a case of Ali shortly earlier. I do not think we need to take your Honours to Ali because it is to the same effect, but very recently, your Honours, the Court of Appeal has accepted - - -

CRENNAN J: I see at page 3 they considered the question that has been raised before us on the applicant’s written - - -

MR O’BRYAN: Indeed. It is exactly the same point and the court has now stated in both decisions and in this case unanimously that the provision to which my learned friend refers and relies upon has no application towards the costs in favour of the Director. That is this case, your Honours, and we submit that costs ought be paid, having regard to the history of this litigation, having regard to the nature and character of the applicant’s position, he being a liquidator, although ironically you would think, your Honour, that he was in fact making the argument on behalf of those respondents who have not appeared in this case. In fact, they have not appeared at any level below and there must be real doubt as to whether, in truth, they exist. One of them of course is identified in the appeal book as no longer existing.

KIEFEL J: We probably do not need to go into that.

MR O’BRYAN: No. We seek the costs for those reasons, your Honours.

CRENNAN J: Mr Bleechmore, do you resist this application?

MR BLEECHMORE: Yes, we do, your Honours.

CRENNAN J: On what basis?

MR BLEECHMORE: On the basis that section 133A governs the situation.

CRENNAN J: Yes, I see.

MR BLEECHMORE: And that this application was at its basest one which comes within the ambit of the words of section 133A(2)(a) because what my client did was to make an application to prevent a restraining order being made.

KIEFEL J: But in any event the matter before this Court, the application is brought under section 35 of the Judiciary Act, is it not? Why would the Confiscation Act apply?

MR BLEECHMORE: Because I appear here in order to prevent a restraining order being made.

CRENNAN J: Yes, thank you. We are of the view that it is appropriate that special leave be refused with costs.

AT 11.45 AM THE MATTER WAS CONCLUDED